[3][4] Prior to the formation of RCT, most transit service in the city had been provided directly by Portland Traction under that name since the 1930s.

[18][3] In October 1955, the city council refused to renew the franchise, citing dissatisfaction with the company's practices, quality of service and out-of-state corporate control.

The new company was initially given only a 60-day revocable franchise by the city, which was later extended by 30 days, while details of a long-term agreement were still being worked out.

[2][30][31] In 1964, RCT began negotiating to purchase the four suburban companies,[31] but no deal was reached, and the four Blue Bus lines remained in operation until taken over by Tri-Met in 1970.

[36] Rose City Transit never operated any streetcar service, but its parent, the Portland Traction Company, continued to operate streetcars on its two interurban lines, from Portland to Bellrose (at SE 136th Avenue north of Foster Road, on what is now the Springwater Corridor trail) and Oregon City after the urban transit lines were transferred from PTC to RCT.

[5] Rose City attempted to discontinue permanently all trolley bus service in January 1958, in part to eliminate the regulatory control of the state Public Utility Commission (PUC), which had some authority over operating franchises involving streetcars and trolley buses, but not of companies that operated only motor buses.

[49] The city council was upset with the move,[49] but back on January 29 it had passed an emergency ordinance giving RCT the authority to abandon its trolley coach service during a dispute over a requested fare increase, a move the council made so as to keep the state's PUC from asserting jurisdictional control.

RCT offered few details for its action, but told city officials that it was "necessitated" by an impending problem with federal taxes.

[41] When the city council granted RCT a 10-year operating franchise in 1962, one stipulation was that the company had to purchase at least 70 new buses within five years.

[21][51] Providing mass transit service was increasingly an unprofitable business during the post-World War II period, when private car ownership in the U.S. was growing rapidly.

[29][34][20] Portland transit ridership declined steadily every year,[51][56] and several of RCT's requests for permission to raise fares were turned down by the city council.

[21][36] Tensions between the two at times prompted calls for the transit system to be municipalized, as had already happened in several other West Coast cities, including San Francisco and Seattle.

[57] At the beginning of 1962, Portland and San Diego were the only two major West Coast cities whose transit systems were still privately owned.

[11] Proposition 55, on the May 1962 municipal ballot, would have issued $6.5 million in general-obligation bonds and established a 10-year tax levy to cover RCT's $300,000 annual operating deficit, created a new city Transit Commission, and given the city authority to take over the transit system if a majority of council approved.

[59] The three-day suspension of all RCT service in November 1968, angered the council and again led to consideration of municipalizing the system.

[63] Commissioner William Bowes explained that it was felt the long trend of ever-increasing fares and declining patronage seen under private ownership was not sustainable, and that it was in the public interest for the transit system to be municipalized.

[67][70] On October 1, 1969, the city council passed a resolution calling for the establishment of a new Portland metropolitan area transit district.

More specifically, the resolution called on Governor Tom McCall to appoint a seven-member board to administer the transit district, under the provisions of the new state legislation (House Bill 1808).

[73] In mid-November, RCT was still asserting that the city's termination of its franchise was "illegal" and was awaiting a Multnomah County court ruling on the matter.

[78] Tri-Met took over operation of the entire Rose City Transit system on December 1, 1969, using the same buses and workers and serving the same routes.

[80] The lawsuits were not finally concluded until 1971, with court rulings in May in favor of the City of Portland and Tri-Met on the matters of franchise termination and retirement benefits.