-- Clackamas County on Thursday rejected Oregon City's offer to settle a fees dispute that has

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Already, the

that would largely bypass a number of the schools and fire stations in Oregon City the county had originally planned to serve. Given federal grant requirements and the lead time needed to order the broadband fiber, county officials say they will need to reach a decision on Oregon City soon.

"We're very close to making that drop-dead decision," said Laurel Butman, deputy county administrator.

Clackamas County officials have argued that the county should not have to pay fees to install fibers in the city's public right-of-way that private-sector firms pay.

In December, after months of negotiation, Oregon City offered to reduce the standard franchise fee, an annual payment of up to 7 percent of gross revenues or $2.75 per linear foot. The city proposed a 50 percent "discount" that would cut the county's bill to about $106,000 a year.

In its counteroffer Thursday, Clackamas County said it would be willing to pay 5 percent of gross revenues from private telecommunications users, but would not pay the fee using general fund dollars. A non-negotiable condition of the grant requires the network be financially sustainable without county subsidies, said Tim Heider, county spokesman.

The county is also not willing to pass the fees on to public users. Passing them on to the Oregon City School District , for instance, would result in each school paying more than $1,500 more than current rates, according to the county.

"Under the weight of Oregon City's proposed fee, the schools intend to decline any County fiber," Butman wrote. "The Fire District's situation is worse because, with the loss of the schools, their allocation of the $106,000 fee would rise exponentially."

Oregon City Recorder Nancy Ide, a member of the city's negotiating team, said Friday the city intends to respond to the county's counteroffer in the next week or so.

"We are in the middle of the negotiations and now that we've received a response form the county, we will consider what they have to say and potentially make another counteroffer," Ide said. "We are continuing to work to resolve it and hope that it can happen in the very near future."

City officials say that if they allow the county to use the city right of way at no charge, it could be forced to give the same right to others or face a legal battle over discriminatory practices.

Clackamas County started installing lines in Oregon City last spring after winning a $7.8 million federal stimulus grant in 2010 to build the 185-mile broadband ring connecting urban and rural parts of the county. Crews installed about 20,000 feet of fiber from the county's main campus in Oregon City to nearby wastewater treatment plants before the city issued its stop-work order Sept. 13.

Although the county obtained permits to work in the city's right of way, Oregon City officials say the county failed to reach a franchise agreement as required under city code. Utilities, telecommunications companies and other businesses, such as Comcast and Portland General Electric, pay franchise fees to cities in order to operate in public rights of way.

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