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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"


 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 ...

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