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National Railroad Passenger Corp. v. Commonwealth of Pennsylvania Public Utility Commission

filed: June 6, 1988; As Amended June 22, 1988.


Appeal from the United States District Court for the Eastern District of Pennsylvania, D.C. Civil No. 86-5357.

Weis,*fn* Greenberg and Aldisert Circuit Judges.

Author: Weis


WEIS, Circuit Judge.

Congress granted Amtrak an exemption from "any taxes or other fees imposed by any State." 45 U.S.C. § 546b. On this appeal, we consider whether that statute covers a special assessment levied by a state agency for the construction of railroad grade crossing improvements. The district court held the exemption applied and entered summary judgment sustaining Amtrak's challenge to the assessment. We will affirm.

The pertinent facts are not in dispute. Following state administrative proceedings, the Pennsylvania Public Utility Commission directed Amtrak to pay approximately twenty percent of the cost of replacing a bridge situated in Tredyffrin Township, Pennsylvania. The existing bridge, constructed in [Text Deleted by Court Emendation] 1899 by the Pennsylvania Railroad Company, carries Cassatt Avenue over tracks owned and presently used by the National Railroad Passenger Corporation (Amtrak).*fn1 The remaining eighty percent of the reconstruction expense was allocated to Tredyffrin Township which, in turn, would be reimbursed by the state. The Commission also ordered Amtrak to assume certain maintenance costs of the proposed new bridge and adjoining pedestrian walkway.

Amtrak challenged the Commission's order as inconsistent with the tax exemption granted it fly Congress in 45 U.S.C. § 546b. The Commission rejected this argument sub silentio. Amtrak then sought declaratory and injunctive relief in the district court. Both parties filed cross-motions for summary judgment.

Reviewing the legislative history of Amtrak's tax exemption, the district court determined that the statute was designed to "guarantee Amtrak's fiscal integrity, and indeed its survival." National H.R. Passenger Corp. v. Pennsylvania Pub. Util. Comm'n, 665 F. Supp. 402, 411 (E.D. Pa. 1987). The Act creating Amtrak demonstrated "a federal commitment to maintain and improve rail passenger service, federal controls over Amtrak management and operations and federal financial support for Amtrak." Id.

Against this background, the court decided that it "would be inappropriate to undermine those goals through the too stingy construction of the exemption offered by defendants." Id. Holding that the statutory exemption found in section 546b included an order by the Commission to pay an assessment, the court entered judgment for Amtrak. The Township and Commission defendants both appealed, and their cases were consolidated.

Defendants mount two arguments. First, they contend that the Commission's assessment was a valid exercise of the state's police power to enforce safety at grade crossings. Alternatively, they argue that the assessment is not a tax within the meaning of section 546b. The district court rejected the police power - safety argument as being "of no moment." We agree. The issue in this case does not hinge on the power of the state to enforce safety measures at [Text Deleted by Court Emendation] grade crossings, and plaintiff does not challenge the state's authority in that area. Rather, the dispositive question is whether the federal statute at issue here exempts Amtrak from underwriting the safety measures the Commission ordered. The answer rests on statutory construction.

The conditions which prompted Congress' creation of Amtrak were described by the Supreme Court in National R.R. Passenger Corp. v. Atchison, Topeka Santa Fe Ry., 470 U.S. 451, 453-57, 84 L. Ed. 2d 432, 105 S. Ct. 1441 (1985). In 1929, approximately 20,000 intercity trains rode the rails in this country. That number diminished to about 11,000 in 1946 and, by 1971, to fewer than 500. Those railroads which continued to carry passengers incurred heavy and continuing losses, promoting requests for regulatory approval to discontinue service. The passenger coach, once a vibrant force in American cultural and economic life, seemed destined to take its place in the transportation museum alongside the stagecoach and sidewheeler.

In an effort to revive the failing intercity passenger lines, Congress enacted the Rail Passenger Service Act in 1971, 45 U.S.C. §§ 501-658, establishing the National Railroad Passenger Corporation, a private corporation better known by its official nickname "Amtrak." The Corporation is not "an agency or establishment" of the federal government, but is authorized by the government to provide intercity rail passenger service. Atchison, Topeka & Sante Fe Ry, 470 U.S. at 454-55.

Despite massive federal subsidies, Amtrak's financial picture was bleak. In 1979, Congress directed the Secretary of Transportation to study Amtrak's liability for payment of taxes to state and local governments. In his 1980 report, the Secretary estimated that these taxes would cost Amtrak more than $14 million in the next year. S. Rep. No. 253, 97th Cong., 1st Sess. 103 (1981). The Secretary concluded that "State and local taxes on a primarily Federal investment are inappropriate." Id.

The Senate Appropriations Committee agreed, reasoning that "such taxation serves to erode the revenue-to-cost ratios which impact on whether States and localities continue to receive the benefits of Amtrak service." Id. The Committee disapproved the process through which federal subsidies were used to provide tax windfalls to states and localities. Subsequently, Congress deferred for one ...

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