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September 29, 1992

Southeastern Pennsylvania Transportation Authority
Pennsylvania Public Utility Commission and Township of Lower Merion; Southeastern Pennsylvania Transportation Authority v. Pennsylvania Public Utility Commission and Township of Upper Gwynedd; Southeastern Pennsylvania Transportation Authority v. Pennsylvania Public Utility Commission

The opinion of the court was delivered by: LOUIS H. POLLAK

Those consolidated cases involve three separate orders issued by defendant Pennsylvania Public Utility Commission ("the PUC") allocating costs upon plaintiff Southeastern Pennsylvania Transportation Authority ("SEPTA") for maintenance of four highway bridge structures that pass over railway lines owned and operated by SEPTA. *fn1" SEPTA claims that this assignment of costs is precluded by a pair of federally conferred tax immunities: 45 U.S.C. § 581(c)(5) (1988) and 45 U.S.C § 546b (1988). *fn2" Defendants-- the PUC and two Pennsylvania townships forced to share bridge maintenance costs with SEPTA-- argue that this court lacks jurisdiction to hear this action because, under the Tax Injunction Act, 28 U.S.C. § 1341 (1988) [hereinafter § 1341], "the district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State." *fn3"

 Section 1341 withholds from federal courts power to decide questions that otherwise would fall within the jurisdiction of the federal courts; however, Congress can create a statutory exception to § 1341, and has indeed done so in 45 U.S.C. § 546b for Amtrak. The main question presented in these cases is whether Congress intended § 581(c)(5) to bestow upon SEPTA, a commuter and urban transit enterprise, a tax immunity of the sort conferred on Amtrak by § 546b, enforceable in the federal courts notwithstanding § 1341.


 Factual and Procedural Background

 The PUC is invested with power to allocate costs of construction and maintenance of rail-highway crossings among interested parties. See stat (1979); see generally Pennsylvania Dept. of Transp.v. Pennsylvania Pub. Util. Comm'n., 464 A.2d 645 (Pa. Comm. 1983). Factors considered by the PUC in making such assessments include prior ownership and maintenance responsibilities, benefits that will flow to the parties from the crossing, availability of funds, ownership of the tracks, and the general equities of the case. National R.R. Passenger Corp. v. Pennsylvania Pub. Util. Comm'n., 665 F.Supp. 402, 403 n. 3 (E.D.Pa. 1987), aff'd National R.R. Passenger Corp. V. Pennsylvania Pub. Util. Comm n., 848 F.2d 436, 440 (3d Cir. 1988) (Amtrak I), cert. denied, 488 U.S. 893 (1988).

 In 1982, the PUC began a series of investigations to determine the safety of all bridges in Pennsylvania that carry public highways over railroad tracks. At that time, bridge maintenance was mostly being funded by cities and local townships and, in some instances, by the trustees of the Penn Central Transportation Company. *fn4" Many of the inspected bridges were found to be in poor condition, and in 1987, the PUC began to reevaluate the maintenance responsibilities for a number of these bridges. In many cases, SEPTA-- when it owned and operated the underlying rail lines-- was assigned interim and then final maintenance responsibilities for the bridges.

 At issue in these consolidated cases are maintenance costs imposed on SEPTA with respect to four highway bridges: the Montgomery Avenue bridge in defendant Township of Lower Merion, Swedesford Road bridge located in defendant Upper Gwynedd, and Johnson Street bridge and Willow Grove Avenue bridge in the City of Philadelphia. SEPTA owns and operates the railway lines passing beneath each of these bridges, *fn5" and, with the exception of the Montgomery Avenue bridge, the PUC determined that each of the bridge structures was also owned by SEPTA. *fn6" The highways, on the other hand, are owned by the defendant townships and the City of Philadelphia. Determining that benefits from a separated crossing accrued both to SEPTA, as the railway line operator, and to the localities, as the road owners, the PUC-- in three separate proceedings-- imposed shared maintenance responsibility for each of the bridges. *fn7"

 Before final maintenance responsibilities were assigned, Administrative Law Judge Marlene Chestnut, in each instance, conducted evidentiary hearings, made recommended decisions, and presented those decisions to the PUC. The PUC then entertained exceptions from interested parties and issued three final rulings. During the course of these proceedings, the Third Circuit, applying Amtrak's federally-created tax exemption (§ 546b), enjoined the PUC from imposing upon Amtrak the costs of reconstructing a highway bridge, see Amtrak I, supra, and Congress enacted § 581(c)(5), extending to commuter authorities like SEPTA exemption from "taxes or other fees to the same extent as" Amtrak. In each of the three separate proceedings, SEPTA argued before the PUC that § 581(c)(5) precluded the allocation of bridge maintenance costs to SEPTA. Relying on Southeastern Pa. Transp. Auth.v. Pennsylvania Pub. Util. Comm'n, 592 A.2d 797 (Pa. Comm. 1991), appeal denied by A.2d (July 13, 1991 Table No. 626E.D.1991), and City of Philadelphia v. Pennsylvania Pub.Util Comm'n., 592 A.2d 808 (Pa. Comm. 1991), appeal denied by A.2d (July 13, 1991 Table No. 627E.D.1991), the PUC determined that § 581(c)(5) was inapposite. *fn8"

 Subsequently, SEPTA filed three separate complaints with this court challenging the legality of the PUC's orders and requesting declaratory and injunctive relief. On August 19, 1992, I consolidated these cases.


 History of the Tax Exemption Statutes

 The Consolidated Rail Corporation ("Conrail") was established by the Regional Rail Reorganization Act of 1973, 45 U.S.C. § 701 et seq., (1988) to purchase and operate the properties of insolvent railroads and form an efficient national rail transport system. Consolidated Rail Corp. v. Darrone, 465 U.S. 624, 627 (1984). Conrail, almost from its inception, operated commuter rail lines at a consistent loss-- despite massive federal investment. As a result, the Northeast Commuter Rail Service Act of 1981, 45 U.S.C. § 581 et seq., required Conrail to cease provision of local commuter rail service at the end of 1982 and transfer such operations to local commuter authorities. Concerned that local authorities could not handle such services on their own, Congress, in the same Act, created the Amtrak Commuter Services Corporation ("Amtrak Commuter"), as a wholly owned subsidiary of the National Railroad Passenger Corporation ("Amtrak"). Amtrak Commuter was made available to local authorities, on a contract basis, to provide commuter rail service formerly handled by Conrail. Under this reorganization, local commuter authorities had the option to contract out operation of rail commuter services to Amtrak Commuter or operate their own rail commuter services. SEPTA elected the latter course and, on January 1, 1983, assumed from Conrail the operation of thirteen commuter rail lines.

 Like Conrail, Amtrak-- established as a "for profit corporation" by Congress in 1971 to provide intercity rail passenger service, 45 U.S.C. § 541-- experienced serious financial woes through the 1970s, despite significant federal support. In 1981, Congress passed legislation designed to cut back Amtrak's federal subsidy. See, e.g., 45 U.S.C. 564(c)(4)(A) (requiring Amtrak to recover at least one-half of its operating costs from revenue). Then, on September 10, 1982, Congress enacted 45 U.S.C. § 546b, exempting Amtrak and Amtrak Commuter "from any taxes or other fees imposed by any State, political subdivision of a State, or local taxing authority which are levied on the Corporation, or any railroad subsidiary thereof, from and after October 1, 1981 . . . ." The statute continues:

 Notwithstanding the provision of section 1341 of Title 28, the United States district courts shall have original jurisdiction over any civil actions brought by the Corporation to enforce the exemption conferred hereunder and may grant equitable or declaratory relief as requested by the Corporation.

 45 U.S.C. 546(b) (1988)

 The genesis of the tax exemption mandated by § 546b is clear. The Secretary of Transportation determined that it would be inappropriate for states and localities to tax a primarily federal investment, particularly where that entity was struggling financially.

 Had Amtrak been profitable as well as initially expected, it would have met its tax obligations with private funds, just as other private corporations do. Instead, it now meets its obligations with public funds. The irony of paying taxes with taxes has the effect of diverting Amtrak's attention and funds from the purpose Congress intended.

 Department of Transportation (DOT) Report (September 1980), quoted in H. Rep. No. 81, 97th Cong., 1st Sess. 20 (1981). Congress apparently agreed with this reasoning, and in light of the benefits received by the states and localities from Amtrak's service, decided to allocate to them some of the attendant costs.

 [A permanent tax exemption] was given in recognition of the fact that there are many parts of the country which would gladly pay an amount equal to local or State taxes owed by Amtrak in order to have the benefit of Amtrak service. It remains the Committee's judgment that those who receive this service have some, obligation to contribute toward its continuation. At a time when local jurisdictions are demanding that nationwide rail passenger service be maintained, it seems reasonable to provide for a "user contribution" whereby those areas receiving the service in turn contribute to Amtrak's continued existence through tax relief.

 S. Rep. No. 516, 97th Cong., 2d Sess 170. (1982).

 In 1988, Congress enacted 45 U.S.C. § 581(c)(5), providing that:

 Notwithstanding any other provision of law, any commuter authority that could have contracted with Amtrak Commuter for the provision of commuter service but which elected to operate directly its own commuter service as of January 1, 1983, shall be exempt from the payment of any taxes or other fees to the same extent as [Amtrak] is exempt.

 SEPTA is expressly defined as a "commuter authority." See 45 U.S.C. § 502(8). Section 581(c)(5) apparently has no significant legislative history.


 "Taxes or Other Fees"

 As an initial matter, defendant Township of Lower Merion argues that SEPTA has failed both to state a claim under Fed. R. Civ. P. 12(b)(6) and to establish federal question jurisdiction under 28 U.S.C. § 1331, because no "taxes or other fees" have been imposed on SEPTA within the meaning of § 581(c)(5). *fn9" Challenges to jurisdiction based on the legal insufficiency of a claim are subject to the standards of a 12(b)(6) motion, and dismissal is warranted only if defendant shows that no claim has been stated. Kehr Packages, Inc v. Fieldcor, Inc., 926 F.2d 1406, 1408-09 (3d Cir. 1991), cert. denied, U.S. , 111 S. Ct. 2839 (1991). The position that no "taxes or other fees, within the meaning of § 546b, are involved in this case is flatly contradicted by Amtrak I, supra, whose underlying facts are virtually indistinguishable from the situation at bar. *fn10"

 In that case, the PUC had ordered Amtrak to pay 20% of the costs involved in the replacement of a highway bridge structure that traversed Amtrak-owned railway tracks. The district court, entertaining Amtrak's challenge to the PUC order, granted summary judgment in Amtrak's favor and permanently enjoined the PUC from assessing the costs in question. See National R.R. Passenger Corp. v. P ennsylvaniaP ub. U til. C omm'n., 665 F.Supp. 402, 410 (E.D. Pa 1987). In doing so, the district court found no merit in what it termed a "hypertechnical" distinction between a general tax (imposed in return for the overall benefits of government) and a special assessment (made in consideration of a distinctive benefit received). *fn11" The district court noted that the fee in question-- regardless of why it was imposed and whom it benefited-- was incompatible with the clear congressional purpose that funds appropriated to Amtrak not be diverted to the state and local governments. As further support for its broad understanding of § 546b, the court emphasized that the statute was designed to guarantee the survival of a federally-created entity. "The federal government has pursued governmental functions and policies through Amtrak. It would be inappropriate to undermine those goals through the too stingy construction of the exemption offered by defendants." 665 F.Supp. at 411. Accordingly, the court concluded that § 546b extended to special assessments to finance the replacement of the bridge.

 The Third Circuit agreed with the district court that this tax exemption should be liberally construed because of Amtrak's "federal ties." Amtrak I, 8848 F.2d at 440. Acknowledging that tax exemptions to private entities are typically strictly construed, the court reasoned that Amtrak deserved virtually the same privileged tax status as the federal government which, in the absence of an express exception by Congress, is typically immune from direct state taxation.

 The unique structure and mission of the Corporation are sufficient to remove it from the realm of purely private entities. Consequently, we need not assume that the customary presumption of obligation to pay state and local taxes applied to the Corporation. To the contrary, the signals point the other way. The House Committee on Energy and Commerce said that Amtrak was to be exempt from payment of "all state and local taxes, including but not limited to property taxes, income and franchise taxes, sales taxes, gross revenue taxes, fuel taxes, licenses and other fees, to the same extent as the United States is exempt from the payment of such taxes or other fees.

 848 F.2d at 440 (citation omitted) (emphases in original). The court continued:

 [Congress's] intention is clear-- to impose a passenger rail "user fee" on state and local governments. It would be manifestly inconsistent with that design to make Amtrak pay for related local improvements in the many instances where the states could, and would, impose them.

 Id. Therefore, the Third Circuit concluded that Amtrak's immunity from local "taxes or other fees" in section 546b extends to involuntary assessments to improve a bridge. *fn12"

  Defendant Township of Lower Merion attempts to distinguish Amtrak I by arguing that SEPTA, unlike Amtrak, is a state instrumentality subject to regulation by the PUC; therefore, on the Township's view, SEPTA is not entitled to the same broad immunity from state taxes that the Third Circuit preserved for the quasi-federal Amtrak. While it is of course possible to construct reasons why SEPTA should not receive the same tax exemption as Amtrak, Congress, in section 581(c)(5), conferred tax immunity on SEPTA "to the same extent" as Amtrak. When the terms of a statute are unambiguous, "judicial inquiry is complete." Rubin v. United States, 449 U.S. 424, 430 (1981). Therefore, just as the imposition of an assessment on Amtrak to finance the reconstruction of a bridge running over its tracks is a "tax or other fee" under § 546b, so the allocation of maintenance responsibilities for the four bridges in question is-- "to the same extent"-- a "tax or other fee" within the meaning of § 581(c)(5). *fn13" Accordingly, plaintiff has stated a claim under Rule 12(b)(6) and raised a federal question under 28 U.S.C § 1331.


 § 1341's Jurisdictional Bar

 The mere presence of a federal question will not suffice to establish jurisdiction where the jurisdictional bar raised by § 1341 operates. Accepting, as likely, defendants' contention that § 1341 extends to the instant efforts to enjoin the PUC's allocation of bridge maintenance costs, *fn14" the challenge is to reconcile § 1341, which bars jurisdiction, with §§ 581(c)(5) and 546b, which would appear to confer it.

 Defendant do not dispute, nor could they, that Congress can create a statutory exception to § 1341. See, e.g., Burlington N.R. R.v. Oklahoma Tax Co mm'n, 481 U.S. 461 (1987) (holding that district court could review railroad's claim under the federal Railroad Revitalization and Regulatory Reform Act of discriminatory state taxation, where that Act expressly declared exception from § 1341). Here, § 546b explicitly allows Amtrak and its subsidiaries to enforce their tax exemption in federal court "notwithstanding the provision of section 1341 of Title 28," and § 581(c)(5) exempts SEPTA from taxation "to the same extent" as Amtrak. Even though it is impossible to make sense of § 581(c)(5) without reference to § 546(b)-- because the former is designed to replicate the latter-- defendants would separate the two provisions, at least for jurisdictional purposes. On defendants' view, because 581(c)(5) does not remove § 1341's jurisdictional bar in the same direct terms as does the Amtrak exception, this court has no jurisdiction to entertain this case on the merits.

 It is true that where Congress has withheld federal court jurisdiction over a general class of cases, as in § 1341, the district courts should not exercise jurisdiction over a case falling within that provision, absent clear congressional authorization. See, e.g., Blangers v. Burlington N.,Inc. , 872 F.2d 327, 328 (9th Cir. 1989) (per curiam). Nonetheless, in searching for clear indications of congressional intent, it is possible to construe statutes too narrowly. To demand that Congress write out the magic words "notwithstanding the limitations on district court jurisdiction embodied in 28 U.S.C. § 1341" whenever it desires to create a federally-enforceable tax immunity-- thereby precluding the shorthand method of incorporation as well as the obvious, but implicit, repeal-- would be to expect an unrealistic linguistic precision in the legislative process. Cf. Pennsylvania v. Union Gas Co., 491 U.S. 1, 56 n. 7 (1989) (White, J., concurring) (refusing to require any "magic words" in a statute to achieve abrogation of the Eleventh Amendment). *fn15" Perhaps for this reason, courts have never required Congress literally to declare, using any particular words, that § 1341 does not apply when the statutory scheme otherwise makes clear Congress's desire to confer a federally-enforced tax immunity. Indeed, courts have based exceptions to § 1341 on statutes that did not so much as mention the Tax Injunction Act. See, e.g., Moe v. Confederated Salish & Kootenai Tribes, 425 U.S. 463 (1976) (upholding a federal district court injunction against Montana's collection of certain sales taxes from Indian merchants based on 28 U.S.C. § 1362, *fn16" which gives the district courts original jurisdiction over certain civil actions brought by Indian tribes but nowhere mentions § 1341); City Vending of Muskogee v. Oklahoma Tax Co mm'n, 898 F.2d 122, 123 (10th Cir 1990) (per curiam), cert. denied, U.S. , 111 S. Ct. 75 (1990) (§ 1341 "will not preclude the determination of state tax liability where federal courts have jurisdiction under the Bankruptcy Code, 11 U.S.C. § 505," *fn17" even though the Code makes no reference to § 1341); Firestone Tire & Rubber Co v. Bodle, 645 F. Supp. 305, 310 (N.D. Ohio. 1986) (concluding that Congress created an exception to § 1341 in 29 U.S.C. § 1132, *fn18" which permits a civil action in federal court for enforcement of rights under ERISA, but which nowhere mentions § 1341). Therefore, the mere absence of explicit reference to § 1341 in § 581(c)(5) does not itself preclude this court from exercising jurisdiction in this case.

 Claiming that jurisdictional statutes are narrowly construed, defendants would read § 581(c)(5)'s "to the same extent as" language as conferring on SEPTA the "same" substantive tax immunity as Amtrak but not the same federal court access to enforce that immunity. *fn19" However, the general canon of statutory construction that federal courts "scrupulously confine their own jurisdiction to the precise limits which the statute has defined," Healy v. Ratta, 292 U.S. 263, 270 (1934), in no way relieves this court of the obligation to make a sensible interpretation of the statute consistent with the legislative purpose in enacting it. *fn20"

 It makes no sense to conclude that Congress designed § 581(c)(5) to be enforced exclusively in the state courts. That provision does not merely confer federal tax immunity upon commuter authorities; it confers upon any commuter authority that could have contracted with Amtrak for local rail service the same favored tax position as Amtrak so that such an entity is not penalized by its decision to operate commuter rail service directly. It would be manifestly inconsistent with that design to limit SEPTA's legal remedies to state courts, which might, as has proven true here, more narrowly construe the federal tax immunity.

 Moreover, reading § 581(c)(5) as an exception to the Tax Injunction Act does not frustrate the underlying purposes of that Act. § 1341 is designed to preserve from judicial interference "the imperative need of a State to administer its own fiscal operations," Tully v. Griffin, 429 U.S. 68, 73 (1976), but here Congress itself has denied fiscal autonomy insofar as the state seeks to impose certain taxes on commuter authorities. The existence of a federally-created tax immunity distinguishes the case at bar from situations where the courts have refused to imply exceptions to § 1341 based on the mere existence of a general federal right of action or a general jurisdictional statute that does not specifically pertain to state taxation. See, e.g., Fair Assessment in Real Estate Ass'n v. McNary, 454 U.S. 100 (1981) (declining to treat the broad language of § 1983 as an exception to § 1341); Ashton v. Cory, 780 F.2d 816, 821 (9th Cir. 1986) (refusing to read ERISA as an exception to § 1341 because "nothing in the legislative history of ERISA suggests that in enacting federal law to protect individual pension rights and providing for exclusive federal jurisdiction over certain civil enforcement proceedings under ERISA, Congress sought to override the historic concern for state fiscal autonomy that underlies the Tax Injunction Act"). Where congressional interference with state fiscal autonomy is so clear and unequivocal, particular concern about federal judicial interference with state revenue collection is less justified.

 Additionally, whereas state revenue collection would be seriously interrupted if any taxpayer with a plausible § 1983 claim or any pensioner with a tax grievance could sue in federal court, § 581(c)(5)'s protection, by contrast, is sharply delimited to commuter authorities that could have contracted with Amtrak for operation of local rail service. Defendants have failed to provide any reason to conclude that Congress believed that for SEPTA to enforce its tax immunity in federal court would be more disruptive of state tax systems and applicable principles of comity than for Amtrak to do the same. Similarly, this is not an instance where the validity of state tax assessment turns on questions of state tax law, "'which, like issues of state regulatory law, are more properly heard in the state courts.'" California v. Grace Bretheren Church, 457 U.S. 393, 410 (1982) (citation omitted). Rather, Congress has created an exemption whose contours turn exclusively on interpretation of congressional purpose.

 For all of these reasons, I conclude that § 581(c)(5), read--as it must be-- in conjunction with § 546b, was enacted as an exception to the Tax Injunction Act.


 Eleventh Amendment

 Even though the Commonwealth is not actually named as a defendant in this litigation, the PUC argues that the Eleventh Amendment bars any action against the PUC unless it has consented to that suit. The PUC contends that it deserves Eleventh Amendment immunity because, under state law, it is "an arm of the Commonwealth of Pennsylvania" with powers to regulate railroads that are clearly derived from the legislature of the Commonwealth. PUC's Mem. in Sup. of Mot. 8 (filed in Civn. No. 92-3793).

 It is true that normally a suit may not brought in federal court against a state or one of its departments or agencies, regardless of the nature of the relief sought. Pennhurst State School & Hospital v. Halderman, 465 U.S. 89, 100 (1984). However, even assuming, arguendo, that the PUC is otherwise entitled to Eleventh Amendment immunity as an "arm-of-the-state," *fn21" Congress may abrogate that immunity by making its intention to do so "unmistakably clear in the language of the statute." *fn22" Atascadero State Hosp.v Scanlon, 473 U.S. 234, 242 (1985). Having already found that Congress plainly intended for SEPTA to have a right to enforce its tax immunity in federal court, *fn23" and since SEPTA is, like Amtrak, "exempt from any taxes or other fees imposed by any State, political subdivision of a State, or local taxing authority . . . ," § 546b (emphasis added), it follows that Congress clearly evinced an intent to subject states to suit in federal court when they impose "taxes or other fees" in violation of §§ 546b and 581(c)(5). *fn24" Therefore, the Eleventh Amendment does not prevent this court from entertaining jurisdiction over SEPTA's consolidated actions against the PUC.



 Because SEPTA states a colorable claim that § 581(c)(5) precludes the allocation of bridge maintenance costs to SEPTA, and neither § 1341 nor the Eleventh Amendment prevents this court from exercising jurisdiction over the instant cases, defendants' motions to dismiss for lack of subject matter jurisdiction and failure to state a claim will be denied.

 An appropriate order follows.

 EDITOR'S NOTE: The following court-provided text does not appear at this cite in 802 F. Supp. 1273.


 For the reasons given in the accompanying memorandum, it is hereby ORDERED and DIRECTED that:

 1. Defendant Pennsylvania Public Utility Commission's motions to dismiss for lack of subject matter jurisdiction are DENIED;

 2. Defendant Township of Upper Gwynedd's motion to dismiss for lack of subject matter jurisdiction is DENIED;

 3. Defendant Township of Lower Merion's motion to dismiss for lack of subject matter jurisdiction or, alternatively, for failure to state a claim is DENIED.

 September 29, 1992

 Louis H. Pollak, J.

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