JACKSONVILLE — The Oregon Supreme Court on Friday ruled to uphold the city's controversial public safety surcharge, ending a legal battle between the city and some residents who viewed the fee as an unconstitutional tax.

"We are excited," City Administrator Paul Wyntergreen, adding the Supreme Court ruling upholds the city's favorable 2005 Oregon Tax Court decision.

The Supreme Court decision has set legal precedent for other financially strapped municipalities looking for ways to raise revenues, Wyntergreen said.

"This has, I'm sure, far-reaching implications throughout the state. Medford has already followed suit with their own surcharge which is basically patterned after Jacksonville. I'm sure other cities will be in line to do something similar in these times of severe fiscal constraint."

The city's legal costs have "come in at around $30,000," said Wyntergreen. City Attorney Kurt Knudsen defended the surcharge in Oregon Tax Court in 2005, and again before the Oregon Supreme Court in November in an appeal attempt which was filed by the plaintiffs' attorney, Karen Williams of Portland's Lane Powell PC, Wyntergreen said.

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The legal battle began in September 2003 when about a dozen property owners filed their case to kill the city's monthly $15 public safety surcharge in Oregon Tax Court, stating the then 4-month-old surcharge was an unconstitutional tax proposed by a local government and therefore illegal under Measure 50, which consolidated all existing levies in 1997.

Knudsen successfully argued the city's position that the surcharge is a legal funding source for the city's public safety departments.

Revenues from the surcharge, estimated to be about $230,000 a year, will benefit the city's police and fire department. The city has collected $470,000 in surcharge fees since its implementation, Wyntergreen said. The money has been held in an account while the court challenge played out, he added. The surcharge has been collected through municipal water bills.

Williams could not immediately be reached for comment on Friday. In November 2005, Williams said she filed the Supreme Court appeal after the her clients failed to prevail in a July 2005 Oregon Tax Court judgment. City officials agreed to stop collecting the controversial public safety surcharge after voters OK'd a property tax in November 2004.

The annual fire department levy was proposed as an interim funding source and structured to raise $230,000 annually. The levy funds were needed to cover the potential loss of revenue should the surcharge be permanently struck down by the courts, Wyntergreen said.

Now that the legal battles have been resolved in Jacksonville's favor, the surcharge ordinance will be reinstated, Wyntergreen said. But the voter-approved levy will only continue to be collected until the end of June, he said. The levy has imposed a property tax of $1.06 per $1,000 of assessed value on Jacksonville properties, he said. That amounts to $265 for the owner of a $250,000 home.

"We won't be double-dipping," said Wyntergreen. "This fiscal year we'll use the levy. Next year we won't use the levy, and we will use the surcharge"

Reach reporter Sanne Specht at 776-4497 or e-mail sspecht@mailtribune.com.