City of Canyonville Oregon Retaliates Doubling Water Bill in Lieu of Taxes

City of Canyonville Oregon Slaps School Doubles Water Bill in Lieu of Taxes                                                   

Whistle-blower says it is now target of retaliation

Canyonville Christian Academy (CCA), the private school that blew the whistle on its city government, now believes it is a target of retaliation. While the city is apparently settling with other wronged churches and non profits it is making CCA the exception.

Two years ago, during an in-house audit, CCA stumbled onto the fact that it was being charged double water rates and surcharges on its sewage bill. The extra charges had been ongoing for almost forty years. The total amount of overcharges has been estimated as close to $200,000. When CCA confronted the city it was told that the practice was justified by a city ordinance that levied double water charges on all churches and non-profits "in lieu of taxes." They were also required to pay surcharges for sewer usage. According to some news reports, the government of Canyonville had found a back door way to tax churches and the tax-exempt. Curiously, the municipal code seemed to exempt mosques, synagogues, Masonic temples, and Jehovah's Witnesses kingdom halls from the sewer surcharges.

In June, 2011, CCA asked the city to stop the double charges. It pointed out that for years it was subsidizing much of the water bill for downtown Canyonville. But CCA's request was ignored. In October, 2011, the school offered to settle for a small fraction of the over-payments. By the school's calculations they would be letting the city keep almost $160,000 in improper charges. CCA's offer was refused.

Meanwhile, month by month, the surcharges continued. When the school asked one of the city councilmen, why the city continued to do this, he answered, "Because we can."

"I should point out that at no time have we asked for refund money from the city," says Roger Shaffer, a CCA board-member and spokesman. "We did not want to be a burden for them. We felt it could be resolved by giving the school credits toward future water use."

After eight months of seeking to resolve the situation and continued double billing by the city, on February 24, 2012 CCA sought to resolve the matter in court. Within less than 60 days the city responded. The school was allowed to have a sit-down meeting. "What confronted us was stunning," says CCA president, Doug Wead. "The city had consulted with three firms from Eugene, Oregon. Lawyers from two of the firms were present. We were told that the city ordinance calling for double water bills had been changed. Making our court test moot. And then we were given the bad news."

According to the new policies of the city, neither CCA nor any of the other churches and non profits in Canyonville will henceforth be charged double for their water but there would be new changes that would exclusively effect CCA. Beginning in June, 2012, each room of CCA's dormitories would be treated as "an apartment" or "condominium." Beginning in June, CCA will be paying almost double the water bill they had been paying before they blew the whistle. According to the school's calculations the new charges will likely amount to $240,000 over the next ten years.

CCA believes the newly announced increased charges assessed against the school are a retaliatory punishment for exposing an illegal scheme.

"I think it is important for people to know that we applaud the city for changing its policy," says Roger Shaffer, a CCA board member. "We also, just want to be treated fairly as well."

The city of Canyonville still insists that is policy of double charges for water to churches and non profits was legal. It offers no explanation for why, if it was legal, it has now abandoned the forty year practice and why it has sought settlements with $40,000 in refunds to other churches and non profits in the city. CCA says that it was been unable to find another city in the United States that has instituted a similar city ordinance, nor has it found any public official who will agree that the practice in Canyonville was proper. As to the new charges, which CCA believes to be retaliatory, the school says that it has not yet found another city government that treats rooms in boarding schools or university dormitories, without water or sewage connections, as apartments or condominiums.

On May 16, 2012, CCA asked to resolve the issue in mediation. It is still awaiting a response from the city.

A timeline on the Canyonville City Water Controversy:

A) In 2010 the present CCA administration was shocked to discover that they were subject to double water fees and substantially elevated sewer charges by the City of Canyonville and that these costs were imposed solely on the basis of our non-property tax paying status. Of course, these rate and fees structures also applied to the public school, churches, and others who were exempt from certain taxes under the law.

B) After due diligence and careful study, CCA came to the conclusion that the actions of the city were not allowed under Oregon law and our constitutional protections that provide citizens with equal rights and treatment under the 14th amendment. Our due diligence included talking with the Oregon Attorney General, a state legislator, multiple mayors from Douglas county, and a number of law firms. None of the many people we consulted advised us that city could devise a double tiered rate scheme for goods and services based solely on the tax exempt status of the academy and other water users.

C) In June of 2011, CCA filed a letter merely requesting that the city provide us with the legal justification for their rate structure and we briefly stated Oregon case law showing that the excess utility charges might be open to debate. We chose this route because of the complexity of the case, 40 years of overcharges involving hundreds of thousands of dollars, and possible constitutional law issues. For matters like this, we felt we needed professional legal counsel to guide us through the process.

D) The city did not reply to our request in a timely fashion. But after several months, we were offered a settlement that was equal to appoximately one half of one year of our peak excess charges. Given that we had presented case law that was not refuted supporting our position and that the school had been subject to the overcharges for a very extended period of time, the board of CCA felt the city setlement offer was not a serious attempt to fairly resolve the matter.

E) In October 2011 CCA made what we felt was a generous offer to settle the matter and avoid future legal costs for the city and the school. The amount was a small fraction of the overcharges of the last six years. The city council rejected our offer to resolve the matter.

F) In January 2012 CCA was presented a letter from one of the city's three law firms that have worked on this case. The letter clearly stated that the position of the city was they believed CCA's case had no merit.

G) From June of 2011 through the January letter of 2012 the city continued the double water billing and sewer surcharges. (These charges continued up through the April 1 statements.)

H) At this point we were still paying unjust charges and it appeared that the city contended these charges should go on forever, the city is not responding to the legal issues, the city does not acknowledge there is anything wrong with the ordinances, and the matter has seen virtually no movement in nearly seven months. Based on these factors, the CCA board felt they had no choice but to file suit and attempt to resolve the matters in court.

I) After many months of inaction, within less than 60 days after the suit was filed the city had repealed the ordinances in question and was now offering settlements to the seven churches in town, the South Umpqua School District and the other affected parties.

J) However, at the same city council meeting (April 16) where water/sewer ordinances were replaced, a new ordinance (number 616) was approved by the council members

that would reclassify CCA's three dormitories as if they were condominiums or apartment houses. This means that after nearly 100 years of classifying CCA as a school that included dorms as an integral part of our functions, we were now to be radiacally reclassified in a scheme designed to explode what the city would charge us for sewer fees.

Each dorm room is now going to be treated as if it were a full family apartment.

Like typical dorm rooms at the University of Oregon or Oregon State University, our rooms are essentially bedrooms with a study desk. Many of our rooms are for a single students and they do not have water going in or out, as a condo or apartment certainly would have.

15 of our dorm rooms will be charged $43.00 per month plus overage charges for use above 1,200 cublic feet per month. Each additional bedroom will be charged $27.02.

This means that a 100 square foot room at CCA will now be treated the same as a three-bedroom house with two baths.

CCA's calculations show that ordinance 616 will raise our sewer fees by an estimated $240,000 over the next ten years.

K) For 88 years the City of Canyonville accepted CCA under the definition of a school.

Just minutes after removing the unjust charges that CCA questioned, the city council voted to make our school a 60-unit apartment complex attached to a restaurant. (To be logically consistent, the city has notified us that our school cafeteria will no longer be treated as a cafeteria but it will be treated as free-standing commercial restaurant.)

L) Based on our historical useage levels, each CCA dorm consumes approximately four times what a typical equivalent dwelling unit (EDU) or home would use. Under the new ordinance, each full-sized dorm will now be charged sewer fees that are equivalent to approximately 20 homes. This means that our sewer rates will be roughly 5 times what a typical family pays for the same quantity of service. We believe that reasonable citizens will find this to be unjust and we also contend that it is likely that the courts will find it is not permitted by Oregon law.

M) The settlement offers provided to the schools, churches, and others cover only the last two years of overpayments, going back to June 15, 2010. However, CCA has never been presented with statutes or compelling legal agruments limiting settlements to this time frame. We feel a little like someone checking out at Wal-mart who has given a $20 bill to the cashier for a $7.99 item. We would like to have whatever change (refund) we are entitled to. And in the spirit of good community relations, we offered in October 2011 to settle for far less than our overpayments.

N) On May 16 CCA offered to the city to resolve the matter in mediation. This is currently under review by the city and we have not yet received an answer.

O) At no time has CCA ever asked for a refund check from the city. The school has always offered to accept any settlement the city might offer in the form of credits to future utility bills.

P) Spokespersons for the city have repeatedly indicated that the city was fully justified in their water & sewer rates and fees. With all due respect, CCA would point out the following:

1) The offending ordinances have now been replaced.

2) The city has now made more than $40,000 in settlement offers to the affected parties.

3) At no time has the city ever used the defense of naming other cities, water, or sanitary districts that have similar rate structures.

4) In our due diligence, CCA was unable to find a single expert that believed it was permissible to base a rate structure solely on the tax status of organization.

5) Had CCA not filed suit, it appeared to us that the city fully intended to carry these unjust charges indefinitely into the future.

Q) CCA understands that providing water and sewer service is an expensive proposition and we are perfectly willing to pay a fair and equitable share of these costs. However, board members have a fiduciary responsibility to protect the school from unjust and excessive charges. At this time our board members believe the many years of excess charges based on our tax status were probably unjust and the law may provide for redress. Also, we believe that the new dorm charges at least have some appearance of being retaliatory and they will result in charges that are vastly in excess of what would be justified by our actual level of usage.

R) This does not pretend to be an exaustive listing of the issues involved in this matter. There are a great number of items not referenced in the above list that will need to be resolved at some point.

Among these are possible errors in billing by the city, years of charges to CCA for a home not connected to the school, excessive sewer cublic foot rates for schools and churches, and multiple buildings on CCA's east campus use septic systems but are billed for sewer fees, and other issues.

Some Additional Information From a CCA Boardmember:

** In the January letter from the city and at the April 17 meeting with city lawyers and others, CCA was threatened with $53,500 in back charges for water and sewer fees that were based on alleged errors in Canyonville's billing.

These new charges may go back as far as 15 years,this is while the city is contending that non-profits are limited to asking for only the last two years of overpayments. We understand that matters of "statute of limitations" will be decided by law, but as a matter of equal treatment and fairness under the law, two years vs.15 years is hardly equitable.

** The city has had THREE Eugene law firms working on the case. Only two were represented at the April 17 four hour negotiating meeting with the city.

** When the city council passed a new water ordinance on April 16, along with eliminating the unjust double water charges, they retroactively (ex post facto) increased water rates on CCA and other property tax exempt entities back to March 15.

This rate increase (33.3% on both line and cubic foot usage charges) does not apply to other water users until June 15.

As this elevated rate is only applied to the property tax exempt users, the discrimination against churches, the public school, CCA, and others continues another three months.

** Because of the treatment of cubic foot charges, some CCA dorm rooms will actually be subject to highier sewer fees than a family of eight living in a four-bedroom house with 2 1/2 baths.

They will both pay a $43 base sewer charge while the home will be exempt from any cublic foot overuse fees, a fee we will be subject to on all dorm rooms.

** On Feb. 14, 2011, the Cow Creek casino & RV park had a water line break and the city provided them with water at no charge. This was reported in the March 21, 2011 city council minutes. There was no indication of the time frame required to fix the break or the number of cubic feet of water that was provided. The Cow Creek Band did not ask for any relief from water charges but the city council voted to provide the water at no charge "as a goodwill gesture."

When CCA went before the council in November of 2008 asking for relief on sewer charges related to two water line breaks, CCA's request was denied. As the water from the breaks clearly flowed into the ground and the city did not provide sewer treatment for this water, the payments to the city constituted a windfall profit. CCA asked for $5,000 relief and presented evidence of more than $25,000 in unearned sewer fees paid to the city.

** 30 days after CCA filed the letter of complaint in June 2011, the City of Canyonville quit posting agendas to their website. 90 days after CCA filed the complaint, the city quit posting council meeting minutes. This continues.

The city no longer regularly posts meeting and agenda notices on the website or the News-Review (the local daily newspaper). Citizens are now expected to check the post office bulletin board and sort through the notices for yard sales and misisng cats.

** We received the new water/sewer billing today (June 1) - and the city continues to bill CCA for the councilman's house.

** [This is based on a conversation during Memorial Day weekend between councilman Ed Parker and Pam Watkins, a former CCA board chairman.]

A point of offense to the city leaders has been that CCA first came to them through a letter from our legal counsel and did not come directly to them. This is a point of offense and may deserve a reply.

1) CCA believed the probems to be highly tangled (decades of overcharges involving hundreds of thousands of dollars and involving very complex legal issues - perhaps even constitutional matters). CCA's board felt their fiduciary responsibility to the school required them to obtain professional legal counsel.

2) At each step in this process, including this initial step, CCA is following the advice of counsel. For the board of a small school to spend thousands on legal counsel and then not follow this professional and experienced advice would be irrational.

3) When an officer of the Seventh Day Adventist Church & Elementary School, and a former official of the city, approached the city on several occasons over the past five years concerning the water/sewer rate issues, he felt the city was unwilling to take a serious look at his complaints.

4) When CCA approached the city for relief in late 2008 for massive unearned sewer fees, we found the city unwilling to even consider a token refund. But when the Cow Creek Band has a similar line break, the council voted to provide them with free water, even though the Indians did not ask for gratis water. The council minutes state "...the emergency water [was provided] at no charge to the tribe as a good will gesture."