The Road to Damascus: Birth of a New City

History was made — and maps of Clackamas County forever changed — on November 2, 2004, when residents of the Damascus community voted to incorporate their rural area into Oregon's first city in more than 20 years. Approved by the area's voters by a margin of 2-1, Damascus is the state's 240th city and the first created in Oregon since the 1982 incorporation of the City of Keizer.

With legal counsel provided by attorneys at Jordan Schrader Ramis, the incorporation concluded three years of grassroots effort by the Committee for the Future of Damascus, a group of local residents who sought to determine the best approach to future governance of the area.

Having just been brought into the Metro urban growth boundary, the area was prime for industrial, commercial, and residential development in a region where developable land is in short supply. But growth and development require urban levels of services, such as roads, sanitary sewers, and water supplies, to support them. If rural Damascus didn't become part of a city, Clackamas County's already stretched budget was unlikely to provide timely development of this needed infrastructure. But a city — with its ability to assess additional property taxes — could do it. The area's approximately 10,000 residents knew that if they did nothing, annexation by one or more of the neighboring cities of Happy Valley, Sandy, or Gresham was imminent — and with it, a loss of local control. The decision to pursue incorporation was made. And the rest, as they say, is history.

For Jordan Schrader Ramis' municipal law and land use attorneys — primarily Andy Jordan and Ed Trompke — the year-long incorporation process posed unique legal challenges over and above those expected. For example, although Oregon statutes and administrative rules provide the template for forming a new city, the evolution of land use regulations since the Keizer incorporation in 1982 added a layer of complexity to the incorporation process that proved educational to all concerned. Inconsistencies among statutes, rules, and the Metro Code became apparent in a real-life incorporation scenario, and Metro staff worked cooperatively with the incorporators to make the Code consistent with other legal requirements.

Furthermore, after incorporation, the victory celebration was tempered by the fact that although the city's voters had approved a permanent tax rate that could yield more than $2 million for the city each year, the brand-new city was broke. Because the city does not yet have a charter to provide otherwise, statutory debt limitations prevent it from borrowing more than $5,000 in the aggregate without a present means of repayment. Formed in November, it would be a full year before the city would collect its first property tax revenues, and the city does not yet provide services for which it can collect user fees. Tax anticipation notes (TANs) would enable the city to avoid debt limitations and obtain funds in July when taxes are assessed, but statutory language required the notes to be obtained and repaid within the same fiscal year, leaving the city unable to borrow for its first eight months of existence. Thus, although the city was legally formed and operational and had a duly elected city council, it could not incur most of the costs related to starting up a new municipal corporation, such as hiring staff, hiring a planner and city attorney, entering into a lease for office and meeting space, and purchasing equipment and supplies. A legislative change was promptly proposed and enacted to modify the one-year TAN repayment provision for new cities, which will help Damascus and any later-formed cities to address this problem.

With the incorporation of Damascus, Clackamas County can boast of having both Oregon's newest and oldest cities (Oregon City, inc. 1844). The creation of the new city also marks the end of a 22-year incorporation drought, the longest in Oregon history. In comparison, the late 1890s saw a deluge of new cities every year, with 15 in 1891 and 16 in 1893. The number of new cities slowed but still grew steadily into the twentieth century. Before Keizer's incorporation in 1982, city incorporations averaged more than 10 per decade, with 14 cities incorporated in the 1940s, 11 in the 1950s, 13 in the 1960s, and 11 in the 1970s. During the 1970s, however, Oregon's aggressive land-use laws coalesced to limit and manage growth. Furthermore, during the same period the statutory process for incorporating new cities was deliberately made more difficult, in part fueled by the controversy surrounding the incorporation of Rajneeshpuram near Antelope. That incorporation was later invalidated by Oregon courts.

Today, property tax limitations of the 1980s and 1990s prevent existing cities, counties, and special districts from increasing their tax rates. Counties, in particular, which have historically provided services within unincorporated areas, are becoming increasingly limited in what they can afford to do. As a result, the need to fund infrastructure and provide services for developing areas, and a concomitant desire by residential communities to avoid annexation by existing cities, appears likely to make incorporation of new cities more common. Time will tell whether the most recent incorporation marks the beginning of a trend or a trend-defying anomaly. But this much is certain: The route to future Oregon cities will follow the road to Damascus.

This article is intended to inform the reader of general legal principles applicable to the subject area. It is not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.

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