Cincinnati case sets the legal issues for who pays to move utilities

Jun. 13—The city of Toledo will have to overcome decades of case law and a recent state appeals court case out of Cincinnati to prove its point that Buckeye Broadband should pay nearly $1 million to move its underground equipment as part of the Summit Street reconstruction project.

The city of Cincinnati's loss to Duke Energy sets a high bar for city politicians seeking to make utility companies pay to move their cables, pipes, and wires whenever the city decides to do so.

The case has similarities to the legal questions overhanging the city of Toledo, and like Toledo, the Cincinnati law department told the administration it had an unwinnable case against the utility and its legal advice was ignored.

At issue in Toledo is the beautification of Summit Street and city leaders' desire to roll out a red carpet for sports fans and golf dignitaries when the Solheim Cup tournament commences at the end of August, as well as making Summit more attractive and pedestrian-friendly thereafter.

Last year, Toledo Law Director Dale Emch issued an opinion that it was the city's responsibility to cover the costs because the Summit Street renovation was an aesthetic project, not one borne out of necessary transportation improvements. Because it's a beautification project, he reasoned, the impacted utilities do not have to pay to move their equipment.

Under pressure from a group of city activists and two members of council, Mayor Wade Kapszukiewicz did an about-face, and on Friday filed a lawsuit in Lucas County Common Pleas Court to make Buckeye Broadband reimburse the city's taxpayers $972,474.

The complaint doesn't attempt to argue the merits of the known legal cases. Rather, it simply asserts that under city and state law, the utilities are responsible for paying for the utilities' relocation.

It's a case that could last for months or years in the court system.

A key case likely to inform judges as the suit moves through the court system is one involving Cincinnati being ordered to repay Duke Energy Inc. for its $15 million cost to relocate gas and electrical lines to accommodate a planned streetcar system.

In the Cincinnati case, the city claimed that its own municipal ordinances determined that Duke Energy had to pay for utility work.

The Hamilton County Court of Common Pleas, in 2014, and the Hamilton County Court of Appeals, in 2015, said home rule in Ohio did not allow Cincinnati to override state law, and under state law the utility-relocation cost could be charged to Duke only if the improvements in question were done "to protect or promote the public's health, safety, morals, and general welfare."

According to the appeals court ruling, the purpose of the new streetcar system was economic development, and therefore unrelated to health, safety, morals, or the general welfare. In 2016, the Ohio Supreme Court declined to hear the case, making the appellate decision final.

More than 50 years earlier, the Ohio Supreme Court ruled that government agencies cannot require utility companies to pay for equipment relocation on public projects being done in public streets. Cincinnati's law department tried to explain that to the then-city manager, advising him that the city had no case. The mayor went ahead and tried to make Duke Energy cover the cost of relocating utilities along the streetcar route through parts of Downtown and Over-the-Rhine.

Matthew Fellerhoff, a lawyer who represented Duke Energy in its case against Cincinnati, said Saturday the facts of the Summit Street dispute "seem to line up with the facts that existed in Cincinnati vs. Duke.

"There appears to be a strong argument that the result will be the same," Mr. Fellerhoff said in a telephone interview in which he stressed the distinction between "governmental" and "proprietary" functions.

The Cincinnati streetcar was promoted throughout project development as a catalyst for downtown development and a property-value engine that would boost city tax revenue, the Duke lawyer said.

"The city changed the justification and argued to the court that it was primarily a transportation project," Mr. Fellerhoff recounted, but the utility persuaded the judges that such was a "new excuse."

Given the Cincinnati case, the Kapszukiewicz administration's task will be to show that the Summit improvements are a more essential exercise of basic government functions than Cincinnati's streetcar was.

Terry Lodge, the local attorney representing the citizens' group that demanded the mayor go after Buckeye for the nearly $1 million, said the Cincinnati and Toledo situations differ.

"It wasn't a genuine transportation effort," Mr. Lodge said of the Cincinnati streetcar case. "It was more of having a short-range trolley line to get people moving through city neighborhoods — more of a promotional thing. I think what the court was saying was, it's not a bona fide transportation project."

Judges will decide "whether this is predominantly transportation or a Chamber of Commerce-y type thing," he said, but from his view the Summit reconstruction is needed, and Mayor Kapszukieiwicz was only being "pragmatic" in going along with Mr. Emch's assertion in July that the project is essentially aesthetic.

"That's fine, but it still was legally improper," Mr. Lodge claimed. "Get the money back."

A legal analysis by Shumaker Loop & Kendrick for Block Communications Inc. — which owns Buckeye Broadband and The Blade — also contends Ohio law recognizes home-rule authority to order utility companies to move their lines when the project in question is one that relates to a mandatory governmental function, such as protection from crime, fires, and contagion; preserving citizens' peace and health, and protecting their property.

When the project is proprietary — and that includes water distribution — the burden is on the city, the law firm's analysis said.

"While no Ohio case directly addresses whether economic development, tourism and aesthetic improvements — the essence of the Summit Street project — are governmental or proprietary undertakings, it seems highly likely a court would find them to be proprietary," it found. "...The city should pay for the cost of relocating Buckeye's facilities in accordance with the Ohio common law, and pursuant to TMC 945.10(b)(4) because the project qualifies as a 'non-transportation related aesthetic improvement.'"

Block Communications' lawyer, Keith Wilkowski — a former city of Toledo law director — said the mayor was right when he took the same position as Mr. Emch and dropped the attempt to force Buckeye to cover the cost of the utilities' relocation.

The Cincinnati case foreshadows the outcome of the Toledo case, he said.

"Fairness — and Ohio law — dictate that the costs of these proprietary projects be paid for by the general public that will benefit from them, not a small number of private businesses that just happen to be located in the project area," said Mr. Wilkowski, who is vice president of legal and governmental affairs for Block Communications.

"The mayor does not dispute that he agreed to pay for Buckeye's lines. I don't think you just go back and forth like that," Mr. Wilkowski said.

He said the city's explanations for the need for the work emphasize the beautified streetscape, and hope of appealing to European-influenced tastes.

"It speaks to the primary purpose of the project. And here the primary purpose is aesthetics and economic development and tourism. This is more about making people able to sit at outdoor restaurants. It's not about moving traffic through Summit Street," Mr. Wilkowski said. "We're happy to have a court decide."

Mayor Kapszukiewicz, who's up for re-election in five months, may be looking to keep the case in court a long time to finish the project in time for the Solheim Cup festivities.

If he pursues that strategy, the Cincinnati case might offer the mayor some hope. The initial vote to undertake the $148 million project was passed by the Cincinnati council in 2007 — nine years before it was finally put to rest by the Ohio Supreme Court.

Initially, the Kapszukiewicz administration expected the utilities that owned property buried under the street to have to pay for moving their lines.

Buckeye Broadband did not voluntarily pay for the work, which consisted of moving fiber-optic cables. According to documents obtained under a public-records request by The Blade, Buckeye's utility-relocation outlay was nearly twice those of all the other utilities, combined.

Initially, the mayor agreed to pay for Buckeye's expenses. In July, 2020, Mr. Emch explained in an email to City Auditor Jake Jaksetic — who reports to city council, not the mayor — that the project was essentially aesthetic, and that's why Buckeye would not be billed for the work.

Now that much of the work is done, and since some citizens and members of Toledo City Council have demanded the administration file a lawsuit to recover the money spent to move Buckeye's utilities, the mayor has performed a 180-degree turn and decided to side with them — or at least take a chance on a favorable court ruling.

While he said he agreed with Mr. Emch last year, he now says the issue is "murky." Mr. Kapszukiewicz declined to elaborate on why the issues have become murky

Preparing for the Solheim Cup

Mayor Kapszukiewicz proposed to totally rehabilitate Summit, which passes in front of some of the city's proudest hotels and office buildings.

The goal is to beautify the urban panorama that will be seen by the world's golf spectators and media when they descend on Toledo for the professional women's golf tournament at Inverness Club in late August.

Some citizens thought the proposed $7.5 million for the project could be put to better use — especially when, in the depths of a potential recession brought on by the coronavirus pandemic, the price tag rose to $10.5 million when presented to city council in May, 2020.

But the Kapzsukiewicz administration carried the day on the testimony of two administrators.

Abby Arnold, deputy chief of staff, told council the project involved "necessary infrastructure improvements" in line with the downtown master plan and the downtown transportation plan. Doug Stephens, then administrator of engineering services, warned that, without the fix, water mains would be damaged because the pavement could no longer bear certain loads.

The plans call for eliminating a bus lane, more parking, wider medians, new pavement and crosswalks, and new traffic signals. The design is intended to slow vehicle traffic and expand space for pedestrians and outdoor dining. In addition to the cosmetic upgrades, crews will install a new, larger water line. All of this is to be paid for by issuing 15-year bonds.

Council approved the $10.5 million project by a vote of 10-2, with Councilmen Larry Sykes, who was later suspended from council in a separate bribery scandal, and Katie Moline voting no.

First Published June 12, 2021, 7:33pm