10-2333 Kansas City Southern Railway Co. v. Koeller

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Transportation
Railroads; taxes

A state assessment of a railroad is a discriminatory tax in violation of the Railroad Revitalization and Regulatory Reform Act.

“In our case, the district court relied on Houck and concluded that the District’s exaction was a ‘tax’ for purposes of subsection (b)(4). This resolution is faithful to Houck and is also consistent with our approach to the problem of characterization in Empress Casino. There, we rejected a multi-factor approach in favor of a clean line between taxes, which are designed to generate revenue, and other exactions designed either to punish or to compensate for a service that the state provides. 2011 WL 2652201, at *5-6. Flood control, from that perspective, cannot be considered an optional service that someone might want to take or leave. It is just as much a public responsibility as the provision of roads or sewage.

The District’s annual exaction distributes the cost of this public good across all of those living within Sny Island, not just the Railroads or even RPU properties. Everyone in the District (indeed, arguably everyone in the state, to the extent that state monies are typically expended for disaster relief) benefits by having fewer or less extreme floods when the Mississippi begins to swell. Unlike other fees, which might pertain only to certain property-holders in the District or fund one-time projects, the annual maintenance assessment provides funding for the widely-dispersed, general ‘work of the district.’ 70 ILCS 605/5-1; see id. (defining ‘additional assessments’ in contradistinction to ‘annual maintenance assessments’); Upper Salt Fork Drainage Dist. v. DiNovo, 904 N.E. 2d 84, 93, 95 (Ill. App. 2008) (distinguishing ‘additional assessments’ and ‘annual maintenance assessments’).”

Reversed and Remanded.

10-2333 Kansas City Southern Railway Co. v. Koeller

Appeal from the United States District Court for the Central District of Illinois, Scott, J., Wood, J.

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