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Norfolk Southern Railway Co. v. City of Roanoke

United States Court of Appeals, Fourth Circuit

February 15, 2019

NORFOLK SOUTHERN RAILWAY COMPANY, Plaintiff - Appellant,
v.
CITY OF ROANOKE, a Virginia Municipality, Defendant-Appellee, and CHESAPEAKE BAY FOUNDATION, Intervenor/Defendant-Appellee.

          Argued: November 1, 2018

          Appeal from the United States District Court for the Western District of Virginia, at Roanoke. Glen E. Conrad, District Judge. (7:16-cv-00176-GEC)

         ARGUED:

          Gary A. Bryant, WILLCOX & SAVAGE, P.C., Norfolk, Virginia, for Appellant.

          Monica Taylor Monday, GENTRY LOCKE, Roanoke, Virginia; Jon Alan Mueller, CHESAPEAKE BAY FOUNDATION, Annapolis, Maryland, for Appellees.

         ON BRIEF:

          Gregory J. Haley, Scott A. Stephenson, GENTRY LOCKE, Roanoke, Virginia; Daniel J. Callaghan, OFFICE OF THE CITY ATTORNEY FOR THE CITY OF ROANOKE, Roanoke, Virginia, for Appellee City of Roanoke.

          Alayna Chuney, Brittany Wright, CHESAPEAKE BAY FOUNDATION, INC., Annapolis, Maryland, for Appellee Chesapeake Bay Foundation, Inc.

          Before WILKINSON, WYNN, and DIAZ, Circuit Judges.

          DIAZ, Circuit Judge.

         Plaintiff Norfolk Southern Railway appeals the district court's order granting summary judgment for Defendant City of Roanoke, Virginia and Defendant-Intervenor Chesapeake Bay Foundation in this lawsuit alleging discriminatory taxation in violation of the Railroad Revitalization and Regulatory Reform Act of 1976. The district court concluded that the City's stormwater management charge is a fee, rather than a tax. This distinction matters because only taxes are subject to challenge under the Act. For the reasons that follow, we affirm.

         I.

         A.

         The City of Roanoke operates a stormwater management system that includes gutters, storm drains, channels, retention basins, and other infrastructure. The system collects stormwater and diverts it into the Roanoke River or one of its thirteen tributaries in the City.

         To operate its system, the City must hold a permit issued by Virginia's Department of Environmental Quality pursuant to the federal Clean Water Act and Environmental Protection Agency regulations. Such permits "require controls to reduce the discharge of pollutants to the maximum extent practicable, including management practices, control techniques and system, design and engineering methods, and such other provisions as the [EPA] or the State determines appropriate for the control of such pollutants." 33 U.S.C. § 1342(p)(3)(B)(iii). The City's permit requires it to implement six "minimum control measures" and meet Total Maximum Daily Load ("TMDL") limits, among other requirements.[1]

         To facilitate compliance with applicable state and federal stormwater regulations, Virginia law authorizes municipalities to establish stormwater utilities and enact stormwater management charges. Va. Code Ann. § 15.2.2114. These charges must be enacted "by ordinance," and must "be based upon an analysis that demonstrates the rational relationship between the amount charged and the services provided." Id. § 15.2.2144(A), (B). Localities must also provide for full or partial waivers of charges to property owners who engage in certain stormwater management practices. Id. § 15.2-2114(D). Income from the charges "shall be dedicated special revenue . . . and may be used only to pay or recover costs for" seven purposes related to stormwater management. Id. § 15.2-2114(A).

         In 2013, the Roanoke City Council enacted an ordinance establishing a Stormwater Management Utility and a stormwater utility charge. The City Council found that "an adequate, sustainable source of revenue for stormwater management activities is necessary to protect the general health, safety, and welfare of the residents of the city." Roanoke, Va., Code § 11.5-2. The Council also found that "parcels . . . with higher amounts of impervious surfaces contribute greater amounts of stormwater and pollutants to the city's stormwater management system and that the owners of such parcels should carry a proportionate burden of the cost of such system." Id. Therefore, the Council chose to base the charge on "a parcel's impervious surface cover." Id.

         The ordinance imposes the stormwater management charge on all "improved parcels," id. § 11.5-3(a), meaning all parcels with 250 square feet or more of impervious surface, id. § 11.5-10(e). An impervious surface is one that significantly impedes or prevents "the natural infiltration of water into the soil." Id. § 11.5-10(d). Approximately 86% of the parcels in the City are considered improved parcels subject to the charge. J.A. 57.

         Owners of improved parcels may apply for credits against the charge imposed upon them. Roanoke, Va., Code § 11.5-7. Credits are available for various stormwater management activities that reduce, control, or treat stormwater runoff from improved parcels, such as installing rain gardens or pervious asphalt. Id.; see J.A. 135-36. The maximum credit allowed for a given parcel is 50% of the total charge. Id. § 11.5-7(b)(1).

         All revenue from the charge is deposited into a stormwater utility enterprise fund, which is separate from the City's general fund. The enterprise fund may only be used for six stormwater management-related purposes listed in Va. Code Ann. § 15.2-2114(A). Since it was established, the Utility has used all revenue from the charge for stormwater management.

         B.

         Norfolk Southern is one of the City's largest property owners, and it holds one of the City's largest improved parcels. In 2017, it was assessed a stormwater charge of $416, 748.28 for that parcel. Much of Norfolk Southern's property is covered by railroad track and ballast. Ballast is the crushed stone surface beneath railroad tracks that stabilizes the tracks and drains stormwater away from them.

         Norfolk Southern claims that its ballasted property should be exempt from the charge. It contends that ballast is at least as pervious to stormwater runoff as lawns, which are not ...


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