Duke Energy Ohio, Inc. v. Cincinnati

[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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{¶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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{¶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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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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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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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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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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