THE KANSAS CITY SOUTHERN RAILWAY COMPANY and NORFOLK SOUTHERN RAILWAY COMPANY, Plaintiffs,
SNY ISLAND LEVEE DRAINAGE DISTRICT, a political subdivision of the State of Illinois, Defendant.
RICHARD MILLS, District Judge.
On May 17, 2013, Plaintiffs The Kansas City Southern Railway Company and Norfolk Southern Railway Company filed a Complaint for Injunctive Relief [d/e 1] and Motions for Preliminary Injunction [d/e 4] and a Temporary Restraining Order [d/e 5]. On May 20, 2013, Defendant Sny Island Levee Drainage District filed Affidavits and Exhibits in Opposition to the Plaintiffs' Motion [d/e 12], in addition to a Memorandum in Opposition to the Motion [d/e 13]. On May 20, 2013, the Court held a Hearing on the Plaintiffs' Motion for Injunctive Relief.
Because notice was provided and both parties have now been heard, the Court considers the Plaintiffs' Motion for a Temporary Restraining Order to be moot. Their Motion for a Preliminary Injunction is properly before the Court.
Plaintiffs Kansas City Southern Railway Company ("Kansas City Southern") and Norfolk Southern Railway Company ("Norfolk Southern") (or collectively, "the Plaintiffs") filed a Complaint for injunctive relief. The Defendant is Sny Island Levee Drainage District ("Sny" or "the District"), a political division of the State of Illinois organized under the laws of the State of Illinois to construct, maintain, and repair a system of levees and drains located in Adams, Pike and Calhoun counties. Sny is an Illinois municipal corporation for a special and limited purpose and is vested with the power to tax land owners within Sny's boundaries to fund its operations and to sue and be sued.
Kansas City Southern and Norfolk Southern seek relief based on what they allege is an assessment by Sny that discriminates against railroads. Section 11501 of the Railroad Revitalization and Regulatory Reform Act of 1976 (4-R Act), see 49 U.S.C. § 11501, was enacted by Congress to end the discriminatory taxation of railroads by state and local governments. Section 11501(c) of the 4-R Act confers jurisdiction upon federal district courts to grant equitable relief such as that which is requested here.
According to the Complaint, the total amount of land within Sny's boundaries is approximately 113, 396 acres. Kansas City Southern and Norfolk Southern operate portions of their railroads over land located within Sny's boundaries that consists of 212.32 acres for Kansas City Southern and 145.17 acres for Norfolk Southern. On April 5, 2011, pursuant to Illinois statute, Sny petitioned the Circuit Court for Pike County, Illinois, for authority to levy a one-time "additional assessment" against all lands in the district. On December 5, 2011, the Circuit Court entered an order approving an additional assessment in the amount of $5, 853, 162.00. The Plaintiffs allege the order was a legislative act because it looked to the future and changed existing conditions by making a new rule to be applied thereafter to all lands within the District's boundaries.
On December 12, 2012, Sny filed with the Pike County Circuit Court an assessment roll to spread the $5, 853, 162.00 additional assessment on lands located within Sny's boundaries based on "benefit" to the land from the District's improvements. The Plaintiffs are required to file any objections they have to the assessment roll with the Pike County Circuit Court on or before June 4, 2013, after which the Pike County Circuit Court will hear evidence and determine the amount to be assessed against Kansas City Southern and Norfolk Southern. The Plaintiffs state they are seeking emergency relief because the money becomes due once the circuit court approves the assessment. It cannot be refunded. Sny claims that Plaintiffs are seeking a stay of a pending judicial proceeding in circuit court before that court has considered the issues.
B. Tax amount based on the additional assessment
Based on the assessment roll for the additional assessment, Kansas City Southern will be taxed $103, 612.52 (or $91, 084.59 if prepaid in one installment, instead of five annual installments) for the additional assessment. Norfolk Southern will be taxed $117, 139.71 (or $102, 976.18 if prepaid in one installment) for the additional assessment.
In the Complaint, the Plaintiffs allege that Sny's use of a benefits methodology to spread assessments will impose a disproportionate share of the additional assessment on Kansas City Southern and Norfolk Southern. If the assessments were spread on a per acre basis adjusted by elevation, Kansas City Southern and Norfolk Southern would pay, respectively, 0.225% and 0.143% of the total district-wide assessment and all other properties within Sny's boundaries would pay 99.632% of the total district-wide assessment. Based on the assessment roll for the additional assessment, Kansas City Southern and Norfolk Southern will be required to pay, respectively, 1.77% and 2.00% of the total district-wide assessment and all other properties within Sny's boundaries will pay 96.23% of the total district-wide assessment.
According to the Complaint, if Sny had used the methodology it historically has used to assess lands in the district, Kansas City Southern's portion of the additional assessment would be $13, 169.61 and Norfolk Southern's portion would be $8, 370.02. The Plaintiffs allege the additional assessment discriminates against them in that it treats the Railroads different than "other industrial and commercial properties" in the district.
According to the Plaintiffs' experts, the average amount of flood damage to other industrial and commercial properties if Sny's levees were not present is $550, 566. The average amount of flood damage to Kansas City Southern's property in the district if Sny's levees were not present is $24, 264.29. The average amount of flood damage to Norfolk Southern's property in the district if Sny's levees were not present is $55, 110.76.
According to the damage estimates of Nicholas Pinter, Ph.D., a geologist, and David Brookings, P.E., an engineer with 40 years of experience in railroad engineering and maintenance-of-way, the assessment-to-benefit ratio for the additional assessment is 0.236 for Kansas City Southern, 0.410 for Norfolk Southern, 0.360 for the two railroads combined, and 0.053 for other commercial and industrial properties. Mr. Brookings estimated the damages to the railroads. Using software developed by the Federal Emergency Management Agency, Dr. Pinter estimated damages to what he claims are 17 other commercial and industrial properties. Once the damage estimates were converted into annualized "benefit" amounts, Donna Beck Smith, C.P.A., a forensic accountant, compiled the data and compared it to the assessments levied against each property.
The Plaintiffs allege that based on a comparison of assessment-to-benefit ratios, Sny's assessment roll for the additional assessment would result in the railroads being assessed at a rate 52.5 times higher than other commercial and industrial properties. Kansas City Southern would be assessed at a rate more than 80 times higher, while Norfolk Southern would be assessed at a rate more than 40 times higher than other commercial and industrial properties.
The Complaint alleges that if the Plaintiffs were taxed at the same assessment-to-benefit ratio as the other commercial and industrial properties, then Kansas City Southern's assessment would be $1, 290.62 ...