Duke Energy Ohio, Inc. v. Cincinnati , 2015 Ohio 4844 ( 2015 )

[Cite as Duke Energy Ohio, Inc. v. Cincinnati, 2015-Ohio-4844.]
IN THE COURT OF APPEALS
FIRST APPELLATE DISTRICT OF OHIO
HAMILTON COUNTY, OHIO
DUKE ENERGY OHIO, INC., : APPEAL NO. C-140763
TRIAL NO. A-1301131
Plaintiff-Appellee, :
O P I N I O N.
vs. :
CITY OF CINCINNATI, :
Defendant-Appellant. :
Civil Appeal From: Hamilton County Court of Common Pleas
Judgment Appealed From Is: Affirmed
Date of Judgment Entry on Appeal: November 25, 2015
Strauss Troy Co., LPA, Matthew W. Fellerhoff and Emily T. Supinger, and Duke
Energy Office of the General Counsel and James E. McLean, Jr., for Plaintiff-
Appellee,
Paula Boggs Muething, City Solicitor, Terrance A. Nestor, Deputy City Solicitor, and
Andrew W. Garth and Jessica L. Powell, Assistant City Solicitors, for Defendant-
Appellant.
Please note: this case has been removed from the accelerated calendar.
OHIO FIRST DISTRICT COURT OF APPEALS
SYLVIA S. HENDON, Presiding Judge.
{¶1} This is a utility relocation case. We are asked to determine who is
responsible for the relocation costs incurred by plaintiff-appellee Duke Energy Ohio,
Inc., (“Duke”) when it was required to relocate its utilities to accommodate
defendant-appellant the city of Cincinnati’s (“City”) streetcar project. The trial court
granted judgment in favor of Duke after determining that the City was responsible
for the associated relocation costs.
{¶2} Because the trial court correctly determined that the City was
responsible for the relocation costs, we affirm that court’s judgment.
Facts and Procedure
{¶3} Planning and development for the streetcar project began in 2007,
after the City conducted a streetcar feasibility study. In October of 2007, the City
passed a resolution expressing its desire to move forward with the streetcar project.
Original plans for the streetcar called for it to be privately owned and operated. But
in May of 2010, after the City applied for and received a federal grant, the City
deemed the streetcar project a public improvement project and contracted with the
Southwest Ohio Regional Transit Authority (“SORTA”) to operate the streetcar
system.
{¶4} According to the City’s current plan, the streetcar will run on a 3.6-
mile loop throughout downtown Cincinnati, from The Banks riverfront development
to Over the Rhine, on fixed tracks permanently installed in the roadway. Installation
of these tracks and related infrastructure necessitated that various utility companies,
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including Duke, relocate underground utilities that were located in the public right-
of-way.
{¶5} Duke, a provider of gas and electric services to Cincinnati and the
surrounding geographic area, has an extensive network of underground utilities.
These utilities were originally placed underground in the public right-of-way
pursuant to franchise agreements with the City. These franchise agreements were
executed in the 1800s and have long since expired.
{¶6} The City originally took the position that the utility companies were
not responsible for their own relocation costs. But it changed its position when the
streetcar project shifted from being privately owned and operated to being owned by
the City. In February of 2011, the City sent letters to all affected utilities informing
them that they were required to relocate their underground utilities in the public
right-of-way at their own expense. Duke, however, maintained that the City was
responsible for its relocation costs.
{¶7} Despite its position that the utilities were responsible for their own
relocation costs, the City attempted to negotiate cost-sharing agreements with all
affected utilities in an effort to prevent construction delay and to manage potential
litigation risk. The City had budgeted approximately 16 million dollars for utility-
relocation costs. It was able to reach agreements with Time Warner Cable,
Cincinnati Bell Telephone Company, Level 3 Communications, Duke Energy
Generation Services, DTE Energy Services, the Department of Sewers, and Greater
Cincinnati Water Works. But Duke rejected the City’s offer to pay approximately six
million dollars towards Duke’s anticipated 15 million dollar relocation costs.
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶8} On September 26, 2012, during the course of negotiations with Duke,
the City passed Ordinance No. 349-2012. This ordinance enacted Chapter 722 of the
Cincinnati Municipal Code, titled “Management and Control of the Use of the City
Right-of-Way.” Section 722-4 concerned the relocation of facilities in the right-of-
way, and it provided that
Within fifteen (15) days following written notice from the city a
provider shall, at its own expense, temporarily or permanently remove,
relocate, change or alter the position of any facilities in the right of way
whenever the city shall have determined that such removal, relocation,
change or alteration is reasonably necessary for any one of the
following reasons: (A) the need to construct, repair, maintain,
improve or use the right of way or public property; (B) the
construction, reconstruction, repair, maintenance or installation of
any public improvement in or on the right of way; (C) the public
health, safety, and welfare requires it; or (D) for the efficient
operations of the city or other governmental entity in or on the right of
way.
{¶9} After enacting this right-of-way ordinance, the City sent a letter dated
November 1, 2012, to Richard Hicks, Duke’s project manager for the utility-
relocation work. The letter included the final plans for “the public improvement
project.” It informed Hicks that the included plans constituted final notice from the
City, and that, in accordance with the newly enacted Cincinnati Municipal Code 722-
4(c), Duke had to relocate its utilities in the right-of-way at its own expense.
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶10} On January 30, 2013, the City and Duke entered into a “Cooperation
Agreement.” This agreement provided that the parties would seek a declaratory
judgment in the Hamilton County Court of Common Pleas to determine who was
responsible for the cost of relocating Duke’s utilities. The agreement specified that
the declaratory-judgment action would address the following issue and no other: “To
what extent does the City, if at all, bear legal responsibility for the costs of relocation
of Duke Energy facilities in connection with the Cincinnati streetcar project?”
{¶11} The agreement further provided that, pending the trial court’s
adjudication, Duke would perform the relocation work at its own expense. The City
was required to place 15 million dollars in an escrow account, and the agreement
contained a detailed account of how that money would be disbursed to Duke should
the trial court rule in favor of the utility company.
{¶12} On February 14, 2013, Duke filed a complaint for declaratory judgment
in the Hamilton County Court of Common Pleas. The complaint stated that Duke
was seeking a declaration from the trial court that City Ordinance No. 349-2012 “as it
relates to relocation costs for the streetcar project, is invalid and that the City is
required to pay the costs associated with the relocation of Duke Energy Ohio’s
utilities, necessitated by the City’s streetcar project.” The City filed a counterclaim
seeking a declaration from the trial court that “[t]he City bears no legal responsibility
for the costs of relocation of [Duke’s] facilities in connection with the Cincinnati
streetcar project and, accordingly, [Duke] must, at its sole cost, relocate its facilities
as required by the City.”
{¶13} The parties filed competing motions for summary judgment, along
with a joint stipulation of facts. The trial court held that the City had the authority to
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OHIO FIRST DISTRICT COURT OF APPEALS
construct a streetcar system, and that it had properly enacted Cincinnati Municipal
Code Chapter 722 under its home-rule authority. But it determined that the
construction of a streetcar system was not a legitimate use of the City’s police power,
because it did not bear a substantial relation to the public’s health, safety, morals, or
general welfare. And it concluded that, because construction and operation of the
streetcar system was a proprietary function, the City was responsible for the costs of
relocating Duke’s utilities.
{¶14} The City has appealed. It raises three assignments of error challenging
the trial court’s declaration that it was responsible for the cost to relocate Duke’s
utilities.
Standard of Review
{¶15} Although the parties had filed complaints for declaratory judgment,
the trial court adjudicated the controversy by granting summary judgment to Duke.
This court has previously questioned the advisability of resolving a declaratory-
judgment action by summary judgment. See Cincinnati v. Harrison, 1st Dist.
Hamilton No. C-130195, 2014-Ohio-2844, ¶ 22. But we have held that, when both
parties elected to address the issues raised by cross-motions for summary judgment,
demonstrating that both parties believed that there were no genuine issues of
material fact, the trial court was free to render judgment as a matter of law. Id.
Here, the parties submitted a joint stipulation of facts to the trial court, and the trial
court’s decision fully declared the rights and responsibilities of the parties going
forward.
{¶16} We review a trial court’s grant of summary judgment de novo. See
Grafton v. Ohio Edison Co., 77 Ohio St. 3d 102, 105, 671 N.E.2d 241 (1996).
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Summary judgment is appropriately granted when there exist no genuine issues of
material fact, the party moving for summary judgment is entitled to judgment as a
matter of law, and the evidence, when viewed in favor of the nonmoving party,
permits only one reasonable conclusion that is adverse to that party. See State ex rel.
Howard v. Ferreri, 70 Ohio St. 3d 587, 589, 639 N.E.2d 1189 (1994).
Cincinnati Municipal Code 722-4
{¶17} In its first assignment of error, the City argues that the trial court erred
when it failed to declare that the City’s relocation order under Cincinnati Municipal
Code Chapter 722 was a valid exercise of the City’s home-rule authority.
{¶18} The Home Rule Amendment is found in Article XVIII, Section 3, of the
Ohio Constitution, and it authorizes municipalities “to exercise all powers of local
self-government and to adopt and enforce within their limits such local police,
sanitary and other similar regulations, as are not in conflict with general laws.” See
In re Complaint of Reynoldsburg, 134 Ohio St. 3d 29, 2012-Ohio-5270, 979 N.E.2d
1229, ¶ 21. The requirement that regulations not be in conflict with general laws
pertains only to regulations enacted pursuant to a municipality’s local police power,
and not a municipality’s power of local self-government. Id.
{¶19} Ordinance No. 349-2012 enacted Cincinnati Municipal Code Chapter
722 to regulate the use of the City’s right-of-way. The City contends that the
ordinance was a valid exercise of its home-rule authority, because it involved an
exercise of local self-government. But it also argues, in the alternative, that should
this court find that enactment of the ordinance did not involve an exercise of local
self-government, then the ordinance was a valid exercise of local police power not in
conflict with general law. Duke contends that application of the right-of-way
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OHIO FIRST DISTRICT COURT OF APPEALS
ordinance to utility relocation for the streetcar was not a valid exercise of either the
power of local self-government or local police power. But it argues, in the
alternative, that if the ordinance was a valid exercise of local police power, then it
was in conflict with the general law established in R.C. 4939.04.
{¶20} The Ohio Supreme Court has established a three-part test for home-
rule analysis. The first step is to determine whether a municipality’s ordinance
involved an exercise of local self-government or an exercise of local police power.
Id. at ¶ 24. An ordinance is created under the power of local self-government when it
relates “solely to the government and administration of the internal affairs of the
municipality.” Beachwood v. Cuyahoga Cty. Bd. of Elections, 167 Ohio St. 369, 148
N.E.2d 921 (1958), paragraph one of the syllabus. Conversely, an ordinance is
enacted under the local police power “if it has a real and substantial relation to the
public health, safety, morals or general welfare of the public and is neither
unreasonable nor arbitrary.” Downing v. Cook, 69 Ohio St. 2d 149, 150, 431 N.E.2d
995 (1982).
{¶21} The City argues that the preamble to Ordinance No. 349-2012,
enacting Cincinnati Municipal Code Chapter 722 and its right-of-way regulations,
indicates that the ordinance was a valid exercise of the city’s power of local self-
government. We are not persuaded. The preamble to the ordinance states that “the
City of Cincinnati’s management, regulation, and administration of its public right of
way with regard to matters of local concern is a valid exercise of the power of local
self-government.” Despite this assertion, the remainder of the preamble to the right-
of-way ordinance indicates that it was enacted in furtherance of the city’s local police
power. The preamble states that
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WHEREAS, Council finds that the City’s streets must be managed in
order to provide for the public welfare through safe, timely, and
efficient transportation of persons and goods and thereby promote the
long-term sustainable growth of the city; and WHEREAS, Council
desires to promote the management [of] the right of way in a manner
that fosters long-term, multi-modal public transportation options in
addition to private automobiles * * *; and WHEREAS, modern public
transportation improvement projects support the sustainable
transportation planning and expansion of the region’s public transit
network over time and thereby provide reliable and affordable
transportation options for persons throughout Greater Cincinnati.
{¶22} These stated goals relate more to the public’s health, safety, morals,
and general welfare than they relate to the administration of the municipality’s
internal affairs. We find that, based on the language in the preamble and the terms
of the ordinance itself, that Ordinance No. 349-2012 involved an exercise of the city’s
local police power. See Reynoldsburg, 134 Ohio St. 3d 29, 2012-Ohio-5270, 979
N.E.2d 1229, at ¶ 37 (holding that a similar ordinance was enacted as an exercise of a
municipality’s police powers, not as an exercise of local self-government). Having
made this determination, we now proceed to the second and third steps of the home-
rule analysis to determine whether the city’s right-of-way ordinance is in conflict
with a general law. Id. at ¶ 24.
{¶23} Duke contends that Cincinnati Municipal Code 722-4(c), the section of
the ordinance imposing relocation costs upon the utility provider, is in conflict with
the general law established in R.C. 4939.04(A)(1). This statute provides that “[a]
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OHIO FIRST DISTRICT COURT OF APPEALS
municipal corporation shall provide public utilities or cable operators with open,
comparable, nondiscriminatory, and competitively neutral access to its public ways.”
We need not determine whether R.C. 4939.04(A)(1) is a general law, because we find
that it is not in conflict with Cincinnati Municipal Code 722-4(c). For purposes of a
home-rule analysis, to determine whether a conflict exists between a local ordinance
and a general law, we must consider “whether the ordinance permits or licenses that
which the statute forbids and prohibits, and vice versa.” See Reynoldsburg at ¶ 50,
quoting Struthers v. Sokol, 108 Ohio St. 263, 140 N.E. 519 (1923), paragraph two of
the syllabus. Cincinnati Municipal Code 722-4(c) deals with determining whether a
utility company is responsible for associated costs when utilities in the right-of-way
must be relocated. Whereas R.C. 4939.04(A)(1) delineates the manner in which a
municipal corporation must proceed when providing access to its public ways.
Neither regulation permits what the other forbids, or vice versa.
{¶24} The City’s enactment of Cincinnati Municipal Code Chapter 722 was a
valid exercise of its local police power under the Home Rule Amendment to the Ohio
Constitution. But that determination does not complete our analysis, as the City
would suggest. The Home Rule Amendment allows municipalities to adopt
regulations in furtherance of the municipality’s local police powers. It follows that
such regulations cannot be applied outside of the scope authorized by the Home Rule
Amendment. When applied, an ordinance, statute, or regulation enacted as an
exercise of local police power must bear a real and substantial relation to the public’s
health, safety, morals, or general welfare. See Reynoldsburg at ¶ 25. So, under
Cincinnati Municipal Code 722-4(c), the City could only require Duke to relocate its
utilities at its own expense to accommodate the streetcar project if such an order
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OHIO FIRST DISTRICT COURT OF APPEALS
furthered the local police power by having a real and substantial relation to the
public’s health, safety, morals or general welfare. We now consider if it did so.
{¶25} The City’s motivations for constructing a streetcar system were clearly
conveyed in Resolution No. 59-2007, which was passed to express the City’s desire to
move forward with the planning of a streetcar system. This resolution provided as
follows:
WHEREAS, a streetcar system within the City of Cincinnati will create
much needed jobs, outside investment, increased revenue for all
Cincinnati neighborhoods; and
WHEREAS, streetcars have a fixed rail infrastructure, which implies
permanence, creating a significant catalyst for redevelopment and an
expected 14:1 ratio of economic impact to investment for the
community; and * * *
WHEREAS, streetcars can be easily integrated into the built urban
environment using relatively low-impact construction techniques; and
WHEREAS, streetcars will take Cincinnati to the next level of growth
and help the City to become a City where people chose to live; and
WHEREAS, by connecting people and places, the proposed streetcar
system will create a vibrant cityscape and provide a convenient
amenity that is attractive to residents * * *.
{¶26} The City argues that the streetcar system is a public improvement
project that will supplement existing transportation services, and that it accordingly
bears a substantial relation to the public’s safety and welfare. But Resolution No. 59-
2007 clearly indicates that the City’s predominant motivation and purpose for
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implementing a streetcar system was the belief that the streetcar would spur
economic development in the City. The Resolution makes no mention of providing
the benefit of multimodal transportation to the City’s residents.
{¶27} Later resolutions and ordinances passed by the City reference the
City’s expressed purpose of providing additional transportation to its residents. For
example, Resolution No. 32-2012, which concerned the appropriation of property for
the construction of a streetcar maintenance and operations facility, provided that the
streetcar system was “a public transportation improvement project that will
supplement existing transit service in downtown Cincinnati, enhance public transit
options between the City’s two major employment centers, * * * and serve as a key
step toward integrating existing and future transportation and transit systems.”
{¶28} And Ordinance No. 348-2012, which concerned the issuance of
$15,000,000 of public-transportation-improvement bonds for the streetcar system,
provided that “the Streetcar System and other regional public transportation
improvement projects will enhance the region’s transit network by providing reliable,
efficient, and sustainable public transportation options for a growing number of
persons throughout Greater Cincinnati.” This Ordinance further provided that “this
Council desires to promote the use of City streets in accordance with a sustainable,
multi-modal public transportation network that will promote long-term growth,
economic well-being, and livability within the City.”
{¶29} These later pieces of legislation were passed well after the City had
been embroiled in discussions with Duke, and after the City had drafted its Streetcar
Management Plan, which became effective on December 13, 2010. We find
Resolution No. 59-2007 to be the best indicator of the purpose of the streetcar
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system and of the City’s related order for Duke to relocate its utilities. And that
purpose was to spur economic development, not to protect or promote the public’s
health, safety, morals and general welfare.
{¶30} Michael Moore, Director of the City’s Department of Transportation
and Engineering, testified in a deposition that the streetcar was a transportation
project that would support the ability of people to circulate in downtown and Over
the Rhine. He acknowledged that the streetcar would create a significant economic
benefit, but explained that any such benefit was ancillary to the project’s purpose of
providing transportation benefits. Christopher Eilerman, assistant to the city
manager and project manager for the streetcar, likewise testified in a deposition that
the main purpose of the streetcar was to move people from various areas of the city
to other areas. He testified that the streetcar is designed to have a high level of
accessibility for persons with mobility issues, because the streetcar platform is the
same height as the floor of the streetcar itself. Eilerman further explained that the
streetcar was designed to provide a much quicker ingress and egress for passengers,
because it has multiple doors that open at the same time.
{¶31} While the record arguably reveals that construction of a streetcar
system could provide some fringe benefit to the public’s health, safety, and welfare, it
is devoid of evidence that the streetcar system bears a real and substantial relation to
the public’s health, safety, morals, and general welfare.
{¶32} Because the City’s order for Duke to relocate its utilities at its own
expense to accommodate the streetcar system was not a valid exercise of the City’s
local police power, we hold that the trial court did not err in failing to declare that
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Cincinnati Municipal Code 722-4(c) imposed the cost of relocating its own utilities
upon Duke. The first assignment of error is overruled.
Common Law
{¶33} In its second assignment of error, the City argues that the trial court
erred by finding that the common-law rule of utility relocation did not apply. It
contends that the trial court should have applied the long-standing principle of
common law that “when a utility company makes use of the public right of way, the
municipality may require the company to relocate its equipment at its own cost when
the public welfare so requires.” See Perrysburg v. Toledo Edison Co., 171 Ohio
App.3d 174, 2007-Ohio-1327, 870 N.E.2d 189, ¶ 16 (6th Dist.).
{¶34} Because we have already determined that the record contains no
evidence that the streetcar project bore a substantial relation to the public’s general
welfare, we hold that the trial court did not err in rejecting this common-law rule.
Rather, the trial court correctly applied the rule of law established in State ex rel.
Speeth v. Carney, 163 Ohio St. 159, 126 N.E.2d 449 (1955). In Speeth, the Ohio
Supreme Court considered whether utility owners had a right to reimbursement
when forced to relocate facilities to accommodate the construction of a
governmentally-owned subway system. Speeth at 177. The court held that “[i]n the
absence of contract to that effect, there is no power in a governmental subdivision to
require public utilities in its public streets to relocate facilities at their own expense
to accommodate the proprietary public utility operations of such subdivision.” Id. at
paragraph six of the syllabus. The court then reiterated that “the operation of a
governmentally owned transit system is a proprietary and not a governmental
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function.” Id. at 178, citing Cleveland Ry. Co. v. North Olmstead, 130 Ohio St. 144,
198 N.E. 41 (1935).
{¶35} Speeth is directly on point and is controlling law on this issue. The
City argues that Speeth is distinguishable, because it held that the operation of a
governmentally-owned transit system was a proprietary function, whereas the case at
hand involves the construction of a governmentally-owned transit system. We find
this parsing of words to be misleading.
{¶36} First, the main point of law derived from Speeth is, as quoted above,
that a governmental subdivision cannot require public utilities to relocate facilities at
their own expense to accommodate the proprietary utility operations of the
subdivision. Id. at 177-178. The proprietary utility operations at issue in Speeth were
the construction, not the operation, of a subway system. The court made clear that,
in the utility relocation context, once a governmental subdivision is found to be
engaged in a proprietary function, it is to be treated in the same manner as if it were
a private utility company seeking relocation of utilities. Id. at 178.
{¶37} Second, after reaching this conclusion, the Speeth court went on to
state that, “[i]n line with this doctrine, this court has held that the operation of a
governmentally owned transit system is a proprietary and not a governmental
function.” Id. The Speeth court relied on this quoted language to further support its
conclusion that the construction of a subway system was a proprietary utility
operation. We read Speeth to stand for the proposition that both the construction
and operation of a governmentally-owned transit system are proprietary functions.
This reasoning comports with the precedent established in Barberton v. Miksch, 128
Ohio St. 169, 190 N.E. 387 (1934), paragraph two of the syllabus, holding that “[i]n
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the construction and maintenance of a system for supplying water to its inhabitants,
a municipality acts in a proprietary capacity.”
{¶38} Applying this law to the case before us, we hold that because Duke was
required to relocate its underground utilities to accommodate the construction of the
streetcar system, a proprietary utility operation of the City, the City cannot require
Duke to bear its own expenses incurred in the relocation. The second assignment of
error is overruled.
Takings Law
{¶39} In its third assignment of error, the City argues that the trial court
erred when it based its judgment on takings law. This argument is overruled. The
trial court did reference takings law in its opinion, but it clearly based its decision on
both the law established in Speeth and on whether the City’s order for Duke to
relocate its utilities at its own expense pursuant to Cincinnati Municipal Code
Chapter 722 was a legitimate use of its police powers.
Conclusion
{¶40} Because the City’s order for Duke to relocate its utilities at its own
expense to accommodate the streetcar system was not a valid exercise of the City’s
local police power, Cincinnati Municipal Code 722-4(c) could not serve as a basis for
imposing upon Duke the cost to relocate its own utilities. Under the controlling law
in Speeth, the City was responsible for the costs incurred by Duke to relocate its
utilities to accommodate the governmentally-owned streetcar system.
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{¶41} The trial court did not err in granting summary judgment to Duke or
in granting Duke’s motion for declaratory judgment. The judgment of the trial court
is affirmed.
Judgment affirmed.
CUNNINGHAM and MOCK, JJ., concur.
Please note:
The court has recorded its own entry on the date of the release of this opinion.
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