This matter is generally before the court on the petition of Old Town Lofts Condominium Association (petitioner), filed under ORS 305.580and ORS 305.583, seeking a declaration that a fee levied by the City of Portland (respondent) is either invalid or subject to the limitations of Article XI, section 11b of the Oregon Constitution (Measure 5).
Petitioner is an Oregon nonprofit corporation. Petitioner is the "association of unit owners," acting pursuant to ORS chapter 100 (the Condominium Act) with respect to a building in the City of Portland that contains 60 residential condominium units and one commercial condominium unit (the building). That building is located in the Downtown Business District of respondent and is served by one water main. Petitioner is engaged in "property management activities" as that term is defined in section 6.06.020(H), a portion of the Code of the respondent, adopted as Ordinance No. 182925 (the Ordinance). The Ordinance imposes a "Property Management License Fee" (the fee) on property managers for the privilege of engaging in "property management activities" in the Downtown Business District. Portland, Or Code §§ 6.06.01, 6.06.02(H). The license fee does not apply to a dwelling unit that is owner occupied and has its own separate water service. However, in the case of a multi-unit condominium building, the fee applies unless the dwelling units have separately metered water service. Portland City Code § 6.06.212.
Is the fee a "tax" for purposes of Measure 5?
As to the issue presented by the motion for partial summary judgment of petitioner, there are no disputed material facts. In addition to opposing the motion of petitioner on the merits, respondent has also asserted that petitioner does not have the requisite standing to initiate this proceeding. The court will address that issue before addressing the merits of the Measure 5 challenge.
ORS 305.580 and ORS 305.583 together provide that an "interested taxpayer" may petition this court for a determination of the application of Measure 5 to any tax, fee or charge. An "interested taxpayer" is defined as including any person subject to the tax, fee or charge in question. ORS 305.583(2). Although the determination of this case on the merits may involve a determination of whether the fee is,
The fee in question here is a "tax" for purposes of Measure 5 if it is "imposed by a governmental unit upon property or upon a property owner as a direct consequence of ownership of that property." Or Const, Art XI, § 11b(2)(b). Accordingly, there must be:
Id.
In this case the second element does not appear to be at issue. Neither party argues that the fee creates or imposes an in rem obligation to be collected, if necessary, through foreclosure of a lien on property created pursuant to the Ordinance. There remains the question of whether the fee is an imposition by a governmental unit upon a property owner as a direct consequence of ownership of "that" property.
It is as to the remaining element of the constitutional definition of a "tax" that the parties diverge. Petitioner maintains that the realistic economic situation is that respondent, a governmental unit, has imposed a fee upon it as an association but that, by operation of Oregon statutes regarding condominium ownership, that fee must be paid by the individual unit owners. Petitioner therefore concludes that the fee is a charge imposed by respondent upon each unit owner as a direct consequence of ownership of that owner's condominium unit.
Respondent argues that the fee, while concededly imposed by a governmental unit, is imposed not on any unit owner but rather on the corporate entity known as the
As an initial matter, the fee is not, in fact, imposed on any unit owner. The fee is only imposed upon persons who engage in property management services. See Portland, Or Ordinance 182925 (June 17, 2009). The record shows that the only such person in this case who fits that description is the petitioner association. Further, if the fee was not paid when due, respondent would have no cause of action against any unit owner for collection and would have no lien against any unit, or any element of common property, to secure ultimate payment of the fee.
Nor, in fact, is any fee imposed by respondent upon the unit owners. That is not to say that there is not an ultimate economic burden attributable to the fee and borne by the unit owners. However, to the extent the unit owners have some ultimate responsibility for the economic burden of the fee, that is a consequence of the Condominium Act and the contractual relationships that the unit owners and petitioner have created. See ORS 100.475. That burden is not a direct consequence of the actions of respondent. Importantly, the constitutional text specifies that there must be a direct relationship between ownership of property and a liability for a charge made against that property. Or Const, Art XI, § 11b(2)(b). The court is of the opinion that while the economic burden of the fee may fall on the unit owners, it
Petitioner has attempted to "cut through" the foregoing analysis by arguing that the laws of the State of Oregon require the unit owners to pay the fee. Petitioner sets that obligation directly next to the fee obligation created under the Ordinance and then draws a "direct line" and a "direct consequence" between unit ownership and the fee. Petitioner's argument is not, however, supported by a close reading of the Condominium Act. ORS 100.475(1) provides for personal liability of a unit owner, but the liability exists only with respect to "assessments *** by the association of unit owners." This is consistent with the definition of an "assessment" under ORS 100.005(1), that states that an "assessment" is "any charge imposed or levied by the association of unit owners on or against a unit owner or unit," in accordance with the bylaws or declaration or the provisions of the Condominium Act. (Emphasis added.) However, nothing in the Condominium Act requires that any particular unit owner pay any particular charge or amount in respect of a liability incurred by the association of unit owners. The liability is created only by reason of actions and agreements of the declarant and the unit owners through the declaration and the bylaws applicable to the condominium. See also ORS 100.530(1) (subject to the provisions of the declaration, common profits and expenses are allocated in accordance with interests in common elements).
The construction of Measure 5 that has thus far been applied by our Supreme Court is fully consistent with the foregoing analysis. In Roseburg School District v. City of Roseburg, 316 Or. 374, 851 P.2d 595 (1993) the Supreme Court was faced with a construction of the very same constitutional language from Measure 5 that is present in this case. Observing that the voters who passed Measure 5 by initiative intended to severely limit the power of
Here, the court cannot conclude that the fee in question is imposed on the unit owners of units as a direct consequence of the ownership of property. Any economic burden borne by the owners is, at best, an indirect consequence of the ownership of a unit. Nor is it the case that all residential condominium owners have even an indirect responsibility for the fee by reason of being members of an association of unit owners. If units are separately metered or served by separate mains, the fee is not applicable to a residential unit. Additionally, an association of unit owners is not directly liable for the fee if it chooses to contract with a third party for the type of services, the performance of which attracts liability for the fee. As with the fees in Roseburg and Knapp, not all owners are responsible for payment of the fee, and the fee is therefore not imposed as a direct consequence of ownership of property. See Roseburg, 316 Or at 381; Knapp, 342 Or at 275-76.
The motion of petitioner for partial summary judgment is denied and the case will be continued for further proceedings as appropriate. Now, therefore,
Costs to neither party.