One of the nation's biggest railroads has carried through with its threat to start suing municipalities over what it claims is a system that unfairly slaps higher property taxes on railroads.
On Tuesday, CSX Transportation sued 11 municipalities -- including Cheektowaga, where it has a major rail yard -- to serve as class-action defendants in a case the railroad says challenges New York's illegal method of taxing rail carriers at higher rates than other corporations. The lawsuit was filed in U.S. District Court in White Plains.
The legal tussle comes as CSX and Norfolk Southern, the other big freight railroad serving New York, have been negotiating passage of a bill to lower the rail tax rates. But the measure has stalled at the Capitol on concerns raised by municipalities and school districts over the loss of property taxes paid by the railroads.
"We regret that we have to take this action, but we simply cannot continue to operate under an illegal and discriminatory tax structure that penalizes us for doing business or for improving our infrastructure in New York state," said John Casellini, CSX's top lobbyist in New York.
Representatives of the railroads recently told The Buffalo News that the tax system is such in New York that they paid more in Erie County property taxes in 1999 than in all of Pennsylvania -- yet they own far less track in the county.
The situation has come to a head now since the expiration in December of a lawsuit settlement from 1997 that had frozen property tax rates at earlier, lower levels. The railroads say they are facing a near doubling of property taxes as municipalities rush to raise the taxes.
CSX said it could not wait, for legal deadline reasons, for a compromise to be worked out at the Capitol over a measure that would partially bail out the municipalities and school districts for the lost railroad tax revenues.
That compromise would cost $40 million in a plan that would cover the lost revenues, in part, for 10 years. However, a group representing the state's school boards says it wants closer to $70 million.
"We wish they hadn't sued but are nevertheless hopeful that a legislative settlement will be reached," said David Ernst, a spokesman for the New York State School Boards Association.
The matter is an issue, in particular, for towns with big rail yards, such as Cheektowaga. In some communities, the loss of tax dollars could represent as much as 5 percent of their school tax revenues.
Rail officials, however, say the loss will be much higher if the matter is resolved in court. Federal law bars states from taxing rail carriers at different rates than other companies. As such, even some opponents of the railroad's plan say their chances in court are not good. Moreover, the railroads say the situation is creating an atmosphere in which the higher tax rates in New York are forcing them to look to other states when they plan expansion of service and freight yards.
Tuesday's lawsuit was brought only by CSX. Norfolk Southern, which runs in different communities, has said it, too, will file a suit in the coming weeks.
"Our strong preference would be to resolve the tax issue quickly and get about the business of attracting more business to New York," said CSX's Casellini.
The class of defendants sued Tuesday includes New York City, Rochester and several counties and towns across New York. Cheektowaga is the only Western New York community being sued, though the lawsuit would affect any municipality with CSX track rolling through it.