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Norfolk Southern Railway Co. v. City of Roanoke

United States District Court, W.D. Virginia, Roanoke Division

December 26, 2017

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

          MEMORANDUM OPINION

          Hon. Glen E. Conrad Senior United States District Judge

         Norfolk Southern Railway Company ("Norfolk Southern") filed this action against the City of Roanoke (the "City"), claiming that an assessment imposed pursuant to the City's stormwater utility ordinance is "another tax that discriminate[s] against a rail carrier, " in violation of the Railroad Revitalization and Regulatory Reform Act of 1976 (the "4-R Act"), 49 U.S.C. § 11501(b)(4). After the action was filed, the Chesapeake Bay Foundation (the "Foundation") was permitted to intervene as a defendant. Following the completion of limited discovery, all three parties moved for summary judgment on the threshold issue of whether the utility charge is a "tax" for purposes of the 4-R Act. For the following reasons, the court concludes that the utility charge is a fee rather than a tax, and is therefore not actionable under the Act. Accordingly, the defendants are entitled to summary judgment

         Background

         I. Statutory and Regulatory History

         Before delving into the factual background of this dispute, the court will summarize the statutory and regulatory context in which the facts developed.

         The federal Clean Water Act ("CWA") was enacted in 1972 to "restore and maintain the chemical, physical, and biological integrity of the Nation's waters." 33 U.S.C § 1251(1). In accordance with that objective, the CWA provides that "the discharge of any pollutant by any person shall be unlawful" unless the discharger complies with certain enumerated sections of the Act. 33 U.S.C. § 1311(a). One of the enumerated provisions is Section 402, 33 U.S.C. § 1342, which establishes the National Pollution Discharge Elimination System ("NPDES") program, "[t]he cornerstone of the Clean Water Act's pollution control scheme." Natural Resources Defense Council, Inc. v. U.S. Envtl. Prot. Agency, 822 F.2d 104, 108 (D.C. Cir. 1987). The CWA allows the Environmental Protection Agency ("EPA"), or an EPA-approved state agency, to issue NPDES permits for the discharge of certain pollutants. See id. § 1342(a), (b). In Virginia, the NPDES program is administered by the Virginia Department of Environmental Quality ("DEQ").

         The EPA has identified stormwater runoff as a significant source of water pollution. See, e.g., 40 C.F.R. § 122.30(c) ("Storm water runoff continues to harm the nation's waters. Runoff from lands modified by human activities can harm surface waters in several ways including by changing natural hydrologic patterns and by elevating pollutant concentrations and loadings. Storm water runoff may contain or mobilize high levels of contaminants, such as sediment, suspended solids, nutrients, heavy metals, pathogens, toxins, oxygen-demanding substances, and floatables."). Stormwater runoff is generated when rain or melting snow flows over land or impervious surfaces, such as paved streets, parking lots, and building rooftops, and does not soak into the ground. See EPA, NPDES Stormwater Program, https://www.epa.gov/npdes/npdes-stormwater-program (last visited Dec. 18, 2017). In urban areas, stormwater runoff is commonly collected and transported through municipal separate storm sewer systems (MS4s), and then discharged into local bodies of water. See EPA, Stormwater Discharges from Municipal Sources, https://www.epa.gov/ npdes/stormwater-discharges-municipal-sources (last visited Dec. 18, 2017).

         In 1987, Congress amended the CWA to require implementation, in two phases, of a comprehensive regulatory program to address municipal and industrial stormwater discharges. See 33 U.S.C. § 1342(p). Phase I of the program required NPDES permits for large discharge sources, including operators of MS4s serving populations of 100, 000 or more. Id. § 1342(p)(2). Phase II required the EPA to "identify and address sources of pollution not covered by the Phase I Rule." Envtl. Def Ctr., Inc. v. EPA, 344 F.3d 832, 842 (9th Cir. 2003).

         In 1990, the EPA promulgated regulations establishing Phase I of the NPDES stormwater program, which sets forth permit application requirements for the large discharge sources included in the first phase. See 55 Fed. Reg. 47, 990 (Nov. 16, 1990) (codified at 40 C.F.R. pts. 122-24). In December of 1999, the EPA promulgated the Phase II regulations. See 64 Fed. Reg. 68, 722 (Dec. 8, 1999) (codified at 40 C.F.R. pts. 9, 122, 123, and 124). The second phase required operators of MS4s in urban areas with populations of less than 100, 000 to obtain an NPDES permit for stormwater discharges. See 40 C.F.R. § 122.26(a)(9)(i). "This permitting mechanism is designed to prevent stormwater runoff from washing harmful pollutants into local surface waters." EPA, NPDES Stormwater Program, https://www.epa.gov/npdes/npdes-stormwater-program (last visited Dec. 18, 2017). Pursuant to the CWA, permits for discharges from MS4s must "prohibit non-stormwater discharges into the storm sewers" and "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).

         In 1991, the Virginia General Assembly enacted Virginia Code § 15.1-292.4, which "authorized local governments to adopt stormwater control programs and to impose charges on property owners to finance the cost of the programs." Twietmeyer v. City of Hampton, 497 S.E.2d 858, 859 (Va. 1998). That statute, which is now codified at § 15.2-2114, provides that "[a]ny locality, by ordinance, may establish a utility or enact a system of charges to support a local stormwater management program consistent with [the Virginia Stormwater Management Act] or any other state or federal regulation governing stormwater management." Va. Code § 15.2-2114(A). Charges imposed pursuant to the statute must be "based upon an analysis that demonstrates the rational relationship between the amount charged and the services provided." Id. § 15.2-2114(B). Localities must also provide for full or partial waivers of charges to any property owner who installs, operates, and maintains a stormwater management facility that reduces stormwater flow or pollutant levels, or retains and treats stormwater on site in accordance with an approved stormwater management plan. Id. § 15.2-2114(D).

         The statute further provides that income derived from stormwater management charges "shall be dedicated special revenue, may not exceed the actual costs incurred by a locality operating under the provisions of this section, and may be used only to pay or recover costs for the following":

1. The acquisition, as permitted by § 15.2-1800, of real and personal property, and interest therein, necessary to construct, operate and maintain stormwater control facilities;
2. The cost of administration of such programs;
3. Planning, design, engineering, construction, and debt retirement for new facilities and enlargement or improvement of existing facilities, including the enlargement or improvement of dams, levees, floodwalls, and pump stations, whether publicly or privately owned, that serve to control stormwater;
4. Facility operation and maintenance, including the maintenance of dams, levees, floodwalls, and pump stations, whether publicly or privately owned, that serve to control stormwater;
5. Monitoring of stormwater control devices and ambient water quality monitoring;
6. Contracts related to stormwater management, including contracts for the financing, construction, operation, or maintenance of stormwater management facilities, regardless of whether such facilities are located on public or private property and, in the case of private property locations, whether the contract is entered into pursuant to a stormwater management private property program under subsection J or otherwise; and
7. Other activities consistent with the state or federal regulations or permits governing stormwater management, including, but not limited to, public education, watershed planning, inspection and enforcement activities, and pollution prevention planning and implementation.

Id. § 15.2-2114(A).

         II. The City's MS4

         The City operates an MS4 that manages stormwater through a network of street drainage systems, catch basins, gutters, man-made channels, retention basins, storm drains, and other physical facilities that collect and divert stormwater. The stormwater collected and diverted by the MS4 ultimately discharges into the Roanoke River or one of its thirteen tributaries in the City. The City's MS4 is operated in accordance with a General Permit for the Discharge of Stormwater from Small Municipal Separate Storm Sewer Systems ("MS4 permit"), issued by DEQ. It is designated as a Phase II system, based on the City's population of less than 100, 000 people.

         Pursuant to its MS4 Permit, the City is required to implement a stormwater management program designed to (1) reduce the discharge of pollutants, (2) protect water quality, (3) ensure compliance with water quality standards, and (4) satisfy the appropriate water quality requirements of the CWA and its attendant regulations. MS4 Permit, Decl. of Dwayne R. D'Ardenne ("D'Ardenne Decl") Ex. 1 at COR 01894, Docket No. 46-2. The City is also required to implement "minimum control measures" to reduce pollutants and protect water quality. Id. Additionally, the City's permit includes Total Maximum Daily Load ("TMDL") requirements, which impose a ceiling on pollutant loads carried to City surface waters, and require the City to reduce pollutant levels in those waters in order to meet the TDML criteria. Id. at COR 01885.

         The City has implemented an MS4 Program Plan pursuant to the requirements of its MS Permit. The plan contains six, specific minimum control measures designed to reduce pollutants in the City's stormwater management system and its surface waters. The measures include public education and outreach on the impacts of stormwater, public participation and involvement, illicit discharge detection and elimination, construction site stormwater runoff control, post-construction stormwater management, and pollution prevention and good housekeeping for municipal operations. MS4 Program Plan, D'Ardenne Decl. Ex. 2 at COR 02102, Docket No. 46-3. The City has also implemented two TMDL Action Plans to comply with the TMDL requirements of its MS4 Permit. D'Ardenne Decl. ¶ 16. The pollutants targeted by the TMDL Action Plans are bacteria, sediment, and industrial pollutants known as "PCBs, " or polychlorinated biphenyls. Id. ¶¶16, 81.

         III. The Stormwater Utility Ordinance

         In November of 2013, the City Council enacted a stormwater utility ordinance ("Ordinance") that became effective July 1, 2014. As authorized by Virginia Code § 15.2-2114, the Ordinance established a utility to support the City's stormwater management activities (the "Utility") and a system of stormwater utility charges to fund those activities.[1] See Code of the City of Roanoke ("City Code") ยง 11.5-1 et seq, Since July of 2014, the Utility has managed the City's MS4 and administered its MS4 permit. Prior to the enactment of the Ordinance, the City's Department of Public Works and Department of Transportation ...


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