National RR Passenger Corp. v. City of New York

• Decision Date: 04 October 1988
• Docket Number: No. 85 Civ. 9680 (WCC).,85 Civ. 9680 (WCC).
• Citation: 695 F. Supp. 1570
• Parties: NATIONAL RAILROAD PASSENGER CORPORATION, Plaintiff, v. The CITY OF NEW YORK, Defendant.
• Court: U.S. District Court — Southern District of New York

695 F. Supp. 1570

NATIONAL RAILROAD PASSENGER CORPORATION, Plaintiff, v. The CITY OF NEW YORK, Defendant.

No. 85 Civ. 9680 (WCC).

United States District Court, S.D. New York.

September 29, 1988.

As Amended October 4, 1988.

Stroock & Stroock & Lavan, New York City (James G. Greilsheimer, Janis Ettinger, William A. Rome, of counsel), Law Department, National R.R. Passenger Corp., Washington, D.C. (Stephen C. Rogers, Peter S. Craig, Dennis M. Moore, of counsel), for plaintiff.

Peter L. Zimroth, Corp. Counsel of the City of New York, New York City (Joseph T. Lauer, Robert Pfeffer, Carole S. Slater, Anthony Semancik, Assts. Corp. Counsel, of Counsel), for defendant.

OPINION AND ORDER

WILLIAM C. CONNER, District Judge.

Pursuant to 45 U.S.C. § 546b, Amtrak has been immune since October 1, 1981 from paying "any taxes or other fees" to state and local governments. The question presented in this action is whether this statute bars New York City from continuing to collect payments from Amtrak to which the City would otherwise be entitled pursuant to franchise agreements entered into between the City and Amtrak's predecessors in 1902 and 1907. The parties have cross-moved for summary judgment. For the reasons set forth below, judgment is granted in favor of the City.

Background

The material facts are not in dispute. Plaintiff National Railroad Passenger Corporation ("Amtrak") was established by Congress under the Rail Passenger Service Act, 45 U.S.C. § 501 et seq., to provide intercity and commuter rail passenger service. To provide that service, Amtrak uses streets, waterways, and public lands owned by the City of New York (the "City") for rail tracks, underground tunnels and a railroad bridge.

Amtrak is the successor-in-interest to two separate contracts, one between the City and the Pennsylvania, New York and Long Island Railroad Company, dated 1902, and the other between the City and the New York Connecting Railroad, dated 1907. Pursuant to these contracts, the City authorizes the railroad to use and occupy the City's property in exchange for "rental" payments. These payments are "readjusted" every twenty-five years. The City of New York is the only municipality that requires that the railroad make such payments for the use of city streets, waterways, and public lands.

The sums required by the City were paid by the railroad until the enactment of section 546b, which provides in pertinent part:

Notwithstanding any other provision of law, Amtrak shall be exempt from any taxes or other fees imposed by any State, political subdivision of a State, or local taxing authority which are levied on Amtrak, or any railroad subsidiary thereof, from and after October 1, 1981....

In 1982, Congress enacted legislation authorizing the expenditure of thirty million dollars in federal funds for a rehabilitation project designed to improve rail passenger service along the west side of Manhattan and, when complete, to provide direct rail service between Amtrak's Northeast Corridor line and its route to upstate New York. The City then demanded payment of arrearages due under the 1902 and 1907 franchises as a condition to granting its consent to the construction of a tunnel necessary to the project. That led Amtrak to institute this lawsuit.

Discussion

Section 546b exempts Amtrak from paying "any taxes or other fees" to state and local governments. The City contends that Congress did not intend to exempt Amtrak from paying it rent for the rights of way. Alternatively, it submits that such an exemption would be invalid. Since I agree that section 546b does not exempt Amtrak from the rental payments, I need not reach the City's arguments concerning the validity of such an exemption.

I must decide whether the payments demanded by the City constitute "taxes or other fees" within the meaning of section 546b. The plain language of the statute does not aid this inquiry. The phrase "taxes or other fees" does not expressly include or exclude rental payments for the use of municipal streets, waterways, and public lands. It is therefore necessary to examine the legislation's purpose and history. See Berger v. Heckler, 771 F.2d 1556, 1571 (2d Cir.1985) ("Where the scope of a statutory provision is not made crystal clear by the language of the provision, it is appropriate to turn to the legislative history of the statute.").

Legislative History

Section 546b was enacted in response to the findings set forth in a statutorily commissioned report by the United States Department of Transportation ("DOT") and was intended to relieve the increasing burdens imposed on the federal treasury as a result of Amtrak's continuing and projected operating deficit. In particular, DOT perceived a need to halt the conversion of federal dollars, intended for the operation of a national rail passenger system, into local revenues collected by cities along the Northeast Corridor, including New York. It was estimated that these local revenues would have reached fourteen million dollars in 1982.¹ H.Rep. No. 81, 97th Cong., 1st Sess. 19 (1981) hereinafter House Report. DOT concluded, in a portion of its report quoted with approval by the House of Representatives:

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 tax 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. This irony is compounded by the fact that any addition to or improvement in Amtrak services is primarily funded by Federal dollars and usually increases Amtrak's tax bill.

DOT Report (September 1980), quoted in, House Report at 20.

While reducing the federal deficit was the primary motivation behind the enactment of section 546b, Congress was very explicit as to how its goal was to be achieved. Amtrak, though probably not an instrumentality of the federal government for tax immunity purposes, see National Railroad Passenger Corp. v. Atcheson, Topeka and Santa Fe Railway Company, 470 U.S. 451, 467, 105 S.Ct. 1441, 1452, 84 L.Ed.2d 432, (1985) (Amtrak is a nongovernmental corporation); Sentner v. Amtrak, 540 F.Supp. 557, 561 (D.N.J.1982) (Amtrak is not a federal instrumentality for punitive damage purposes), was to be made statutorily immune from state taxation.

Congress authorized DOT to address Amtrak's "payment of taxes ... including the payment of property taxes, sales taxes, gross revenue taxes, fuel taxes, licenses, and other user fees." See Amtrak Reorganization Act of 1979, Pub.L. No. 96-73, § 125. DOT recommended that Congress accord Amtrak the same protection from state taxation that the federal government itself receives. In its report, DOT explained:

There is sufficient legal precedent to support Congress' granting of tax exemptions to Amtrak. The ability of Congress to legislate the immunity of Congressionally established (Government) corporations from state taxation is rooted in Article 1, Section 8, Clause 18, the "Necessary and Proper Clause" and Article VI, Clause 2, the "Supremacy Clause" of the Constitution. The Supreme Court, in numerous decisions, has consistently upheld the right of Congress to immunize Government corporations from state taxation.

DOT Report (September 1980), quoted in, House Report at 21.

DOT's recommendation was adopted by the House Committee. The Committee's bill exempted Amtrak from:

The 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."

House Report at 21 (emphasis supplied). Moreover, the Committee indicated that Amtrak would not be exempt from paying "fees for services used, such as water and sewer, just as the United States is not exempt from the payment of such fees." Id. (emphasis supplied).

While the Senate Committee bill used different language, it is evident that both houses wanted to extend to Amtrak the same immunity from state taxation that the United States enjoys. The Senate proposed a "permanent exemption from State and local taxes." S.Rep. No. 516, 97th Cong., 2d Sess. 170 (1982). The Joint Committee indicated that the House and Senate bill were merely in "technical disagreement" and adopted the Senate bill's language. H.Rep. 747, 97th Cong., 2d Sess. 42 (1982).

The legislative history of section 546b makes it plain that Congress intended to reduce Amtrak's operating deficit by providing it with the federal government's immunity from state and local taxation. See also National Railroad Passenger Corporation v. Commonwealth of Pennsylvania Public Utility Commission, 848 F.2d 436 at 440 (court construed section 546b "in a manner consistent with federal immunity from local taxes."). This case, therefore, must be resolved by reference to the case law governing federal tax immunity.

Tax Immunity

Under the doctrine of sovereign tax immunity, federal and state governments are immune from taxation by each other. This rule, established by the Supreme Court in McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 4 L.Ed. 579 (1819), rests on "an implied limitation on the taxing power of each, such as to forestall undue interference with the governmental activities of the other." Graves v. New York ex rel. O'Keefe, 306 U.S. 466, 477-78, 59 S.Ct. 595, 596-97, 83 L.Ed. 927 (1938).

This immunity extends beyond the protection of the governments themselves; federal and state instrumentalities are also immune from taxation. An entity is a "federal instrumentality" for tax immunity purposes only if it is "so assimilated by the Government as to become one of its constituent parts." United States v. Township of Muskegon, 355 U.S. 484, 486, 78 S.Ct. 483, 485, 2 L.Ed.2d 436 (1958).

Where Congres...