Could Klamath County and the City of Klamath Falls swap funds, with the county providing road money for city streets and the city providing general funds to reopen jail pods?
Subject
Klamath County DA Office
Plain-English summary
Klamath County had closed two of its three jail pods because of a county general fund shortfall. The City of Klamath Falls (which sits inside the county and is the county seat) was about to fund its city streets entirely from general funds, leaving city restricted road money unused. The two governments came up with a swap: the county would send county road fund money to the city for city streets, and the city would send the same amount of unrestricted general funds back to the county to reopen jail pods. Net cost to either side: zero.
The AG declined to bless the deal as a generic "swap" because no statute authorizes that. But the AG worked through whether each side of the transaction was independently legal.
On the county-to-city side, two statutes mattered. ORS 368.722 and ORS 373.260 let counties spend forest reserve money on city streets and bridges under intergovernmental agreements with detailed terms. ORS 294.950(2) lets counties share state gas-tax revenues with cities inside their boundaries, capped at the amount the county actually raised within those city limits. So the county could legally do its half.
On the city-to-county side, the AG looked first at the city's home rule charter, which gives the city all the powers the constitution allows municipalities. The city could reasonably conclude that paying for jail operations served public safety. The AG cited Burt v. Blumenauer for the principle that broad grants of municipal authority should be construed broadly. The city's charter also has a "nonessential services" provision (section 48) that the AG did not analyze in depth but flagged as a hurdle the city would have to clear. Statutes like ORS 169.030 and ORS 190.010-190.130 also let cities and counties enter intergovernmental agreements for jail operations and to perform functions that one of them has authority to do. Finally, both governments had to follow the Local Budget Law procedures for these expenditures.
Currency note
This opinion was issued in 2011. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
Common questions
Why couldn't the county just hand the city money for the jail?
Because Article IX, section 3a of the Oregon Constitution restricts how state gas tax money can be spent (highway purposes only). Federal law restricts forest reserve money to schools and roads. The county road fund, by statute, is also limited to county roads and bridges with narrow exceptions. None of those restrictions allows direct spending on jail operations. The swap structure was an attempt to keep each pot of money flowing to its legally permissible use while moving the net economic benefit where it was needed.
Was the AG worried the swap was a sham?
The AG rejected the framing. Each transaction had to stand on its own legal authority. The county could only send money to the city for road purposes; the city had to use it for road purposes. The city could only send unrestricted general funds to the county if it had authority to spend on county jail operations. The fact that the two transactions netted to zero was incidental to the legal analysis.
What was the "nonessential services" charter limit about?
The Klamath Falls charter (section 48) requires services not deemed "essential" to be funded only through self-supporting funding, federal/state/private grants, or serial levies. Essential services are listed: police, fire, finance, City Manager, City Council, Mayor, Municipal Court, City Attorney, engineering, planning, building, streets, sewer, and water. Operation of a county jail is not on that list, and "police" probably means city police rather than county sheriff. The AG flagged this without resolving it, telling the city it had to address the issue before making the expenditure.
What about ORS 169.152 making cities liable for medical costs of city ordinance violators?
ORS 169.152 puts cities on the hook for medical care costs when someone is jailed for violating a city ordinance or for nonpayment of a municipal court fine. The AG noted that statute and other prisoner-cost statutes (ORS 169.140, 169.150, 169.220) generally place the housing-cost burden on the county, but read them as setting a default rather than barring voluntary city contributions to broader jail operations. Citing Thunderbird Mobile Club, the AG noted that state law preempts contrary local home-rule policies only if clearly intended to do so.
Did the AG endorse the public-safety rationale?
The AG noted that closing large portions of a jail near the city border likely meant routine release of prisoners into the community, where they might commit further crimes. Oregon courts have refused to second-guess government decisions that an expenditure serves a public or municipal purpose unless the determination is clearly unreasonable (Carruthers v. Port of Astoria). City officials could reasonably treat funding county jail operations as serving city public safety.
Background and statutory framework
ORS chapter 368 governs county roads. ORS 368.705 defines the county road fund, and ORS 368.722 authorizes counties to expend road funds derived from federal forest reserves on city streets and bridges, subject to ORS 373.260's requirement of an intergovernmental agreement specifying contributions and the nature of the work.
For state gas tax revenues, Article IX, section 3a, of the Oregon Constitution requires the funds be used exclusively for "the construction, reconstruction, improvement, repair, maintenance, operation and use of public highways, roads, streets and roadside rest areas in this state." ORS 294.950(2) allows a county to share these revenues with a city situated wholly or partly within the county, subject to a statutory cap.
City home rule authority comes from Article XI, section 2 of the Oregon Constitution. Burt v. Blumenauer, 299 Or 55 (1985), interprets that authority broadly: local governments have wide expenditure authority subject only to constitutional or preemptive statutory prohibitions. State law preempts only when clearly intended to do so under the LaGrande/Astoria framework.
For jail-funding agreements, ORS 169.030 authorizes city-county agreements to maintain a local correctional facility or to use county facilities for city prisoners. ORS 169.620, 169.630, and 169.640 authorize regional correctional facility agreements. ORS 190.003-190.130 authorize broader intergovernmental agreements for the performance of any function a party has authority to perform.
The Local Budget Law (ORS 294.305-294.565) imposes procedural requirements that apply to both sides of the transaction.
Citations
- Oregon Constitution, Article IX, section 3a; Article XI, section 2
- ORS 368.011; 368.705; 368.722; 373.260
- ORS 294.060; 294.100; 294.305-294.565; 294.950
- ORS 169.030; 169.140; 169.150; 169.152; 169.220; 169.620; 169.630; 169.640
- ORS 190.003-190.130
- 16 USC § 500
- Burt v. Blumenauer, 299 Or 55, 699 P2d 168 (1985)
- LaGrande/Astoria v. PERB, 281 Or 137, 576 P2d 1204 (1978)
- City of Eugene v. Miller, 318 Or 480, 871 P2d 454 (1994)
- Sisters of Charity v. Washington County, 244 Or 499, 419 P2d 36 (1966)
Source
- Landing page: https://www.doj.state.or.us/oregon-department-of-justice/office-of-the-attorney-general/attorney-general-opinions/
- Original PDF: https://www.doj.state.or.us/wp-content/uploads/2011/03/op2011-1.pdf
Original opinion text
JOHN R. KROGER
MARY H. WILLIAMS
Attorney General
Deputy Attorney General
DEPARTMENT OF JUSTICE
GENERAL COUNSEL DIVISION
March 9, 2011
Edwin I. Caleb, Klamath County District Attorney
Klamath County Courthouse
316 Main Street
Klamath Falls, OR 97601
Re: Opinion Request OP-2011-1
Dear Mr. Caleb:
This opinion concerns whether a county may lawfully provide a city with county road funds for use on city roads in exchange for the city providing the county with city general funds to help pay for operation of the county correctional facility.
We understand the following. The City of Klamath Falls (city) is located wholly within Klamath County (county) and is the county seat. The county correctional facility is located on the edge of the city. Due to declining revenue in the county general fund, the county sheriff's office has closed two of the three prisoner pods at the county correctional facility, reducing inmate capacity from 152 to 64.
The city has proposed a 2010-2011 budget that includes paying for city streets from funds that are not restricted to particular uses (unrestricted funds), rather than from restricted road funds. The county has funds in its county road fund that are not presently allocated, but those funds are restricted to road uses and cannot be used to operate the county correctional facility.
The city and the county propose to enter into intergovernmental agreements under which the county would provide county road funds to the city to construct, maintain, and repair city roads and bridges, and the city would provide the same amount of unrestricted city funds to the county to operate portions of the county correctional facility that are now closed. The net financial gain or loss under these agreements would be zero, both to the city and the county.
FIRST QUESTION PRESENTED
Is the county authorized to provide county road funds derived from state gas tax revenue and federal forest reserves to the city to be used to construct, maintain and repair city roads and bridges?
SHORT ANSWER
Yes, but those funds must be provided and used both in accordance with the statutes that authorize their use on city roads and bridges and the procedural requirements of the Local Budget Law, ORS 294.305 to 294.565.
SECOND QUESTION PRESENTED
Does the city have authority to provide unrestricted funds to the county to be used for partial operation of the county correctional facility?
SHORT ANSWER
Yes, either pursuant to the City of Klamath Falls' Revised Charter of 1972 (charter), if the city determines that the expenditure complies with section 48 and otherwise serves the city's legitimate purposes, or pursuant to the authority of the pertinent statutes in ORS chapter 169. The city also must ensure that, in making the expenditure, it complies with the procedural requirements of the Local Budget Law, ORS 294.305 to 294.565.
DISCUSSION
- Authority to exchange funds
We have located no authority that authorizes a city and county to agree to "swap" funds. But if the city has authority to provide unrestricted funds to the county to use to operate a county correctional facility, and if the county has authority to provide county road funds for use on city roads, they may accomplish the same objective pursuant to their respective authorities.
- County road funds
a. Generally
ORS chapter 368 addresses county roads. ORS 368.011 provides that counties generally may supersede the provisions of chapter 368 by enacting ordinances, but lists several chapter 368 provisions that may not be superseded.
ORS 368.705 through 368.722 define and govern the use of the county road fund. The "county road fund" is "a separate fund in the county treasury designated to receive deposit of revenues that are dedicated to roads or road improvements." ORS 368.705(1). Revenues in the county road fund generally must be used on "county roads and bridges on county roads" rather than on city roads and bridges. ORS 368.705(2). But there are exceptions.
b. Forest reserves in county road fund
Under federal law, Oregon counties in which a national forest is located receive a portion of the revenue generated by the forest (forest reserves). 16 USC § 500. Forest reserves must be used "for the benefit of the public schools and public roads" of the county. Pursuant to ORS 294.060(1), counties generally must apportion 75 percent of their forest reserves to the road fund and 25 percent to the school fund.
ORS 368.722 authorizes counties to "expend funds received by the general road fund pursuant to ORS 294.060 on city streets and bridges under such terms and conditions as the county may determine pursuant to the provisions of ORS 373.260." ORS 373.260(1) authorizes the county court or county commissioners and the authorities of any city within the county to "enter into an agreement for the construction, improvement, or repair of, and the acquisition of right of way for * * * [a]ny county road or city street within the corporate limits of the city[.]" ORS 373.260(2) requires those agreements to include "the proportion which each shall contribute" and "the method and kind of acquisition, construction, improvement or repair to be made."
c. State gas tax revenues in the county road fund
Article IX, section 3a, of the Oregon Constitution requires state gas tax revenues to be used exclusively "for the construction, reconstruction, improvement, repair, maintenance, operation and use of public highways, roads, streets and roadside rest areas in this state[.]"
ORS 294.950(2) authorizes a county to "share the proceeds of any tax or excise described in section 3a, Article IX of the Oregon Constitution, with any city situated in whole or in part within the county for the purposes stated in that section" subject to the limitation contained in ORS 294.950(3). Subsection (3) provides that "[i]n any fiscal year, moneys given to a city under this section shall not exceed the amount of revenue raised in any manner by the county within the boundaries of that city."
The city is "situated in whole" within the county. Accordingly, the county may provide the city with state gas tax revenues in the county road fund up to the amount of revenue raised by the county in any manner within the boundaries of the city as long as the city uses the revenue exclusively for the purposes specified under Article IX, section 3a.
- Expenditure of city unrestricted funds on partial operation of county correctional facility
It is unlawful for any public official to "expend any moneys in excess of the amounts provided by law, or for any other or different purpose than provided by law." ORS 294.100(1).
a. City charter
The Oregon Supreme Court has stated that the authority need not be explicit. Burt v. Blumenauer, 299 Or 55, 61-62, 72, 699 P2d 168 (1985).
Article XI, section 2, of the Oregon Constitution gives cities the "home rule" power to adopt municipal charters. Pursuant to that authority, the city's voters enacted a municipal charter that confers the broadest possible powers on the city.
The municipal home rule provisions of the Oregon Constitution have been interpreted to authorize local governments to enact reasonable regulations to further local interests such as public safety, health and welfare. City of Eugene v. Miller, 318 Or 480, 491 n 12, 871 P2d 454 (1994). That authority also appears to include the power to make expenditures reasonably designed to further those interests.
City officials might reasonably conclude that providing funds to the county to help operate the county correctional facility will further the public safety of the city's inhabitants. Closure of large portions of the county correctional facility, which is located on the edge of the city, is likely to result in the routine release of prisoners into the community where they may subsequently commit crimes. Oregon courts have refused to second guess a government body's decision that an expenditure served a public or municipal purpose, concluding that expenditures should be invalidated only when the decision was clearly unreasonable.
While section 4 of the city's charter gives the city authority to expend city funds for city purposes, another section places limitations on certain expenditures. Specifically, section 48 requires expenditures that are deemed to be "nonessential" under the provision to be made only through specified funding mechanisms. This opinion does not address the effect of that provision on the proposed expenditure, but the city will have to address that issue prior to making any expenditure.
b. Statutes
(1) Statutes imposing liability for prisoner expenses
Several statutes impose liability for payment of the expenses of prisoners incarcerated in county correctional facilities. ORS 169.150(1); ORS 169.140; ORS 169.220. ORS 169.152 provides that the city is liable to the county for the costs of medical care provided to a person confined in a county correctional facility when the person is confined "for violation of a city ordinance * * * [or] for nonpayment of a fine imposed by a municipal court."
Under those statutes, the county generally is liable to pay the expenses associated with housing inmates in the county jail, but the city is required to pay the medical costs for city ordinance violators. The question arises whether those statutes were intended to preclude a city from voluntarily agreeing to pay other costs to operate the county correctional facility. That is not their clear intent. See Thunderbird Mobile Club, LLC v. City of Wilsonville, 234 Or App 457, 470, 228 P3d 650 (2010).
(2) Agreements under ORS 169.030
ORS 169.030 requires cities to "provide, keep and maintain" a local correctional facility and further authorizes them to enter into agreements with counties to "provide, maintain, and use for their separate requirements, such a local correctional facility" or for the county "to furnish local correctional facility accommodations for the imprisonment of prisoners of the * * * city." That provision impliedly authorizes cities to pay the county for the costs of incarcerating city prisoners under such agreements.
(3) Agreements under ORS 169.630
ORS 169.630 authorizes two or more cities and counties "by agreement entered into pursuant to ORS 190.003 to 190.620" to, among other things, "operate a regional correctional facility." Read together with ORS 169.640, those statutes allow cities to pay the operational costs of those facilities pursuant to the agreements they authorize, but the statutes also appear to envision that the city will only pay for its share of the costs.
(4) Agreements under ORS 190.010 to 190.130
ORS 190.010 to 190.130 authorize local governments to enter into intergovernmental agreements in which one agrees to pay the other for performance of a function. But they do not expand the authority of either government to spend funds for purposes beyond their respective "governmental interests." The city has authority, pursuant to its charter, to expend city funds on operation of the county correctional facility if it reasonably concludes that doing so serves a legitimate city interest.
(5) Local Budget Law
The city and county must ensure that their proposed expenditures are made in compliance with those procedures specified in the Local Budget Law, ORS 294.305 to 294.565.
CONCLUSION
We conclude that the county may provide county road funds derived from forest reserves and state gas tax revenue to the city as specified in ORS 368.722 and ORS 294.950(2), respectively. And the city may provide city unrestricted funds to the county for use to fund operation of the county correctional facility or pursuant to its municipal charter if the city determines that the expenditure complies with section 48 of its charter and furthers a legitimate city purpose or as specified by the relevant statutes in ORS chapter 169. In addition, the city and county both must ensure that their proposed expenditures are made in compliance with the procedural requirements set out in the Local Budget Law, ORS 294.305 to 294.565.
Sincerely,
David E. Leith
Chief General Counsel
General Counsel Division
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