916 F.3d 315
4th Cir.2019Background
- Roanoke enacted a stormwater utility ordinance in 2013 charging owners of "improved parcels" based on impervious surface area to fund stormwater management and comply with state/federal Clean Water Act permit obligations.
- Revenues are dedicated to a segregated stormwater enterprise fund and may be used only for statutorily enumerated stormwater purposes; credits up to 50% are available for qualifying runoff-reduction measures.
- Norfolk Southern owns large ballasted rail property (mostly track and ballast), was assessed a $416,748.28 stormwater charge, and contends ballast is as pervious as lawns and thus its property should be exempt.
- Norfolk Southern sued under the Railroad Revitalization and Regulatory Reform Act (4-R Act), alleging the charge is a discriminatory "tax" barred by 49 U.S.C. §11501(b)(4).
- The district court granted summary judgment for the City and intervenor, holding the charge is a fee not a tax; the Fourth Circuit reviews de novo and affirms.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is Roanoke's stormwater charge a "tax" subject to the 4-R Act or a "fee" outside its scope? | Norfolk Southern: charge functions like a tax and discriminates by taxing ballasted rail property while exempting lawns of similar permeability. | City/Intervenor: charge is a regulatory fee tied to municipal obligations under the Clean Water Act and state statute; funds are restricted to stormwater regulatory uses and incentivize runoff controls. | The assessment is a fee, not a tax, and thus not subject to the 4-R Act. |
| What framework determines tax vs. fee? | Norfolk Southern: (implicit) apply relevant precedents to find taxation traits. | Defendants: apply San Juan Cellular/Valero totality-of-circumstances test focusing on who imposes, who is charged, and the purpose/use of funds. | Court applies San Juan Cellular factors (adopted in Valero), giving primary weight to the purpose/use factor. |
| Does the legislative adoption of the ordinance make the charge a tax? | Norfolk Southern: legislative enactment supports classification as a tax. | City: even though passed by ordinance, the statute channels the charge into a regulatory scheme. | First-factor (imposer) points toward tax but is outweighed by purpose; City acted in a predominantly legislative capacity but within a regulatory framework. |
| Does the charge primarily raise general revenue or defray regulatory compliance costs/incentivize conduct? | Norfolk Southern: stormwater benefits the general public (flood control, pollution reduction) and resembles traditional public services funded by taxes. | City: charge is to fund compliance with federally- and state-mandated stormwater controls and to incentivize property-level mitigation, i.e., regulatory purposes. | Court holds the primary purpose is regulatory—defraying costs of complying with stormwater regulation and incentivizing runoff reduction—so the charge is a fee. |
Key Cases Cited
- San Juan Cellular Tel. Co. v. Pub. Serv. Comm'n, 967 F.2d 683 (1st Cir. 1992) (framework distinguishing taxes from fees along a tax-fee continuum)
- Valero Terrestrial Corp. v. Caffrey, 205 F.3d 130 (4th Cir. 2000) (adopts San Juan Cellular factors and emphasizes purpose/use in close cases)
- GenOn Mid-Atl., LLC v. Montgomery County, 650 F.3d 1021 (4th Cir. 2011) (charge tied to regulatory objectives is a fee)
- United States v. City of Huntington, 999 F.2d 71 (4th Cir. 1993) (analysis of whether an assessment funds general government services)
- DIRECTV, Inc. v. Tolson, 513 F.3d 119 (4th Cir. 2008) (discussion of assessment bases and relation to ability to pay)
- S.C. ex rel. Tindal v. Block, 717 F.2d 874 (4th Cir. 1983) (fees that regulate conduct are treated differently from taxes)
- Club Ass'n of W. Va., Inc. v. Wise, 293 F.3d 723 (4th Cir. 2002) (applying Valero's approach to characterize assessments)