Southern Ry. Co. v. Stair
| Decision Date | 21 August 1992 |
| Docket Number | Civ. A. No. 90-1029,90-1210,91-1004 and 92-1042. |
| Citation | 801 F. Supp. 37 |
| Parties | SOUTHERN RAILWAY COMPANY, et al., Plaintiffs, v. Patsy STAIR, et al., Defendants. |
| Court | U.S. District Court — Western District of Tennessee |
Everett B. Gibson, Memphis, Tenn., for plaintiffs.
Jimmy G. Creecy, Chief Special Counsel, and Daryl Brand, Asst. Atty. Gen., Nashville, Tenn., for defendants.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Plaintiffs in these consolidated cases are five interstate rail carriers that own rail transportation property in Tennessee. Each plaintiff is a part of the Norfolk Southern Corporation rail system. Defendants are the Tennessee State Board of Equalization ("State Board") and the county and city officials of those jurisdictions in Tennessee in which plaintiffs have taxable property and who have the responsibility to collect property taxes in their respective jurisdictions.
The plaintiffs seek injunctive and declaratory relief pursuant to 49 U.S.C. § 11503 () ("4-R Act"), Pub.L. No. 94-210, 90 Stat. 54 (1976).1 Plaintiffs ask this court to issue a permanent injunction directing defendants to reduce ad valorem property taxes upon plaintiffs' rail transportation property for the 1989, 1990, and 1991 tax years to the same ratio of appraised value to true market value as that at which commercial and industrial property was taxed in Tennessee for those tax years. Additionally, plaintiffs ask for a declaratory judgment pursuant to 28 U.S.C. § 2201 that the assessment of plaintiffs' rail transportation property at a higher ratio of appraised value to true market value than the ratio of appraised value to true market value at which commercial and industrial property was assessed in Tennessee for the 1989, 1990, and 1991 tax years violates Section 306.
This court has jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1337 as well as 49 U.S.C. § 11503(c). Upon application of the plaintiffs, the court previously granted preliminary injunctive relief, enjoining the defendants from collecting 1989, 1990, and 1991 ad valorem taxes at a level in excess of 65.4% of the taxes which plaintiffs would have otherwise paid.
Plaintiffs seek relief under 49 U.S.C. § 11503 by contending that commercial and industrial property in Tennessee is appraised for property tax purposes, on average, at approximately 60% of true market value, whereas plaintiffs' rail transportation property for the tax years 1989, 1990, and 1991 has been appraised for property tax purposes at 100% of true market value.
Under Tennessee law, T.C.A. § 67-5-1301, the property of railroads and utilities is appraised annually for assessment purposes by the Tennessee Public Service Commission ("Commission"). The Commission appraises a railroad operating system as a single unit. The unit value is first apportioned to the State of Tennessee and then distributed to counties and cities in Tennessee by use of a statutory apportionment formula. See T.C.A. §§ 67-5-1302(a)(2), 67-5-1323 to -1325. The entire assessment apportioned to local governmental units is determined by the Commission.
Real and tangible personal property is assessed for ad valorem taxation at varying percentages of true market value. Pursuant to T.C.A. §§ 67-5-801(a) and 67-5-901(a), real property and personal property in Tennessee are assessed at different assessment ratios. In accordance with these sections, railroad real and personal property would have been assessed at 55% of its market value; however, as a result of the ruling of the United States District Court for the Middle District of Tennessee in Tennessee v. Louisville & Nashville R.R. Co., 478 F.Supp. 199 (M.D.Tenn.1979), aff'd w/o opinion, 652 F.2d 59 (6th Cir.), cert. denied, 454 U.S. 834, 102 S.Ct. 135, 70 L.Ed.2d 114 (1981), the Commission now assesses railroad real property at the same statutory level of assessment as commercial and industrial real property (40%) and assesses railroad personal property at the same level of assessment as commercial and industrial personal property (30%).
Railroad property tax values must be submitted by the Commission to the State Board annually under T.C.A. § 67-5-1327(c). The State Board may then increase or decrease the values or do nothing. The State Board then certifies the final values back to the Commission under T.C.A. § 67-5-1329 and the Commission certifies the proportionate assessed values to county trustees and city recorders pursuant to T.C.A. § 67-5-1331(a) for collection. County and municipal officials then apply the tax levy and collect ad valorem taxes on distributable railroad operating property as assessed, apportioned, and distributed by the Commission and certified by the State Board.
All commercial and industrial property in Tennessee, other than railroad and utility property, is assessed locally by the county tax assessors under T.C.A. § 67-5-502. For assessment purposes, commercial and industrial real property is appraised for tax purposes infrequently, and no more than once every six years. T.C.A. § 67-5-1601(a)(2).2 The State Board, by statute and practice, has recognized that local real property appraisals for assessment purposes may sometimes be less than true market value. Using ratio studies conducted every two years by the Tennessee Division of Property Assessment ("Division") under T.C.A. §§ 67-5-1604 and 1605, the State Board will direct the Commission to reduce the assessments of centrally assessed taxpayers, including railroads, in each county found by the State Board to appraise real property, on average, below true market value. The State Board makes no effort to equalize centrally assessed taxpayers on the basis of personal property appraisal levels in Tennessee counties.
Plaintiffs allege several causes of discrimination against rail transportation property. First, plaintiffs contend that the annual appraisal of railroad property and the infrequent appraisal of commercial and industrial real property other than utility and railroad property results in a situation where commercial and industrial real property is appraised for assessment purposes at substantially below true market value. Plaintiffs contend that inflation alone causes commercial and industrial real property appraisals to be substantially below true market value before application of the constitutional and statutory assessment percentage of 40%.
Second, plaintiffs complain of the practices for assessment of commercial and industrial personal property. County tax assessors traditionally rely upon the individual taxpayer to report tax values of commercial and industrial personal property for assessment purposes. Although the Tennessee State Board of Equalization recently promulgated rules designed to improve personal property assessment practices, those rules were enacted for the first time in 1989. Consequently, plaintiffs contend that appraisals of commercial and industrial personal property are still far below true market value before application of the constitutional and statutory assessment percentage of 30%.
Plaintiffs contend that they are entitled to injunctive relief enjoining defendants from collecting taxes assessed on plaintiffs' property to the extent that the plaintiffs' appraised values exceed the appraised values of all other commercial and industrial taxpayers on average.
Defendants contend that Tennessee's system of ad valorem property taxation does not discriminate against rail transportation real or personal property or otherwise violate 49 U.S.C. § 11503. Pursuant to 49 U.S.C. § 11503(c), the plaintiffs are entitled to relief only if the ratio of assessed value to true market value of rail transportation property exceeds by at least 5 percent the ratio of assessed value to true market value of other commercial and industrial property in the same assessment jurisdiction. Defendants contend that any disparity that existed in Tennessee for tax years 1989, 1990, and 1991 between the ratio of appraised value to true market value of rail transportation property and the ratio of appraised value to true market value of other commercial and industrial property, was less than 5 percent, and, therefore, the plaintiffs have no basis for relief. Defendants contend that a separate analysis must be made of real property and of personal property with the burden being upon the plaintiffs to prove that taxation of their real property and of their personal property discriminatory in violation of 49 U.S.C. § 11503.
Defendants maintain that the levels of appraisal and assessment of commercial and industrial property, both real and personal, by Tennessee taxing jurisdictions are much higher than asserted by the plaintiffs, and fall within the range permitted by 49 U.S.C. § 11503. Defendants contend that computations by the plaintiffs' witnesses purporting to show lower levels of appraisal and assessment are inaccurate and misleading due to deficiencies in methodology and data bases, and due to the erroneous inclusion of classes of property which should not be considered part of the comparison class of commercial and industrial property.
Also, defendants contend that plaintiffs have failed to recognize that equalization factors, determined for each county taxing jurisdiction by the ratio of appraised value to market value of real property in each such taxing jurisdiction, are developed at least every two years, as required by T.C.A. § 67-5-1605(b), and not once every six years.
As to personal property, defendants contend that the State of Tennessee initiated a valuation and equalization program for each county in the State, which has improved assessment practices and raised the level of appraisal of commercial and industrial personal property. As a result, defendants contend that the...
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