Rhode Island is trying to put the brakes on a federal lawsuit brought by the trucking industry that could steer the state’s truck toll system into a ditch. The outcome could create speed bumps for transportation agencies considering deployment of innovative congestion management tools.

In 2016 the Rhode Island General Assembly passed the Rhode Island Bridge Replacement, Reconstruction, and Maintenance Fund Act of 2016 (“RhodeWorks Act”) to fill a funding gap between revenue needed to maintain the state’s bridges in sound condition and the state’s revenue sources. The RhodeWorks Act authorized the Rhode Island Department of Transportation to collect tolls exclusively from “large commercial trucks,” and expressly prohibited RIDOT from collecting similar tolls from any other type of vehicle.

The American Trucking Association and three other plaintiffs sued in federal court, arguing that the RhodeWorks Act violates the commerce clause of the U.S. Constitution and discriminates against out-of-state trucking companies. Rhode Island argued that the toll imposed by the RhodeWorks Act is really a “tax” within the meaning of that term under the Tax Injunction Act (28 U.S.C. § 1341), which provides that “[t]he district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under state law where a plain, speed and efficient remedy may be had in the courts of such State.”

The district court dismissed the case, agreeing with Rhode Island and holding that the toll imposed by the RhodeWorks Act is “really a highly targeted and sophisticated tax designed to fund infrastructure maintenance and improvements that would otherwise need to be paid for by other forms of tax-generated revenue.” (American Trucking Associations, Inc. v. Alviti, C. A. No. 18-378-WES, March 19, 2019, emphasis added.) As such, the district court dismissed the case because it was without jurisdiction under the Tax Injunction Act.

The First Circuit Court of Appeals reversed the district court’s ruling, finding that the charges imposed on commercial trucks under the RhodeWorks Act were not state taxes protected under federal law from federal court review, and remanded the case to the district court. (Opinion No. 19-1316) In its opinion the Court of Appeals first explained that a “classic tax” is imposed by a legislature upon many, or all, citizens, to raise money for a general fund that is spent to benefit the entire community. A “classic regulatory fee,” on the other hand, may serve regulatory purposes directly, or may serve such purposes indirectly by, for example, raising money placed in a special fund to defray the agency’s expenses. Ultimately the Court of Appeals disagreed with the district court’s conclusion that the RhodeWorks tolls provide a “general benefit” characteristic of a “classic tax” because the bridge tolls benefited the payer in that the payment allows passage over the bridge, and the money raised is deposited into a fund used to repair wear and tear on the bridge.

On January 3, 2020, Rhode Island petitioned to have the appeal re-argued on the grounds that the judges did not apply the proper test of whether the case should be left for state courts to decide.

Transportation agencies studying the best way to manage congestion will be interested in the outcome of the Rhode Island case. The Rhode Island case has significant implications for innovative congestion management programs under consideration as possible tools to address declining gas tax revenues, such as mileage-based charges and cordon pricing. For example, whether a particular program imposes a “tax” or a “toll” can affect whether it triggers federal rules restricting the use of revenues to projects authorized under 23 U.S.C. §129. If a charge is a “tax,” how will that intersect with 23 U.S.C. §301, which provides that “[e]xcept as provided in section 129 of this title with respect to certain toll bridges and toll tunnels, all highways constructed under the provisions of this title shall be free from tolls of all kinds”? Can a charge be a “tax” for purposes of one federal law, and a “toll” for purposes of another one? Similarly, the distinction may create state law issues. For example, while a local agency may have authority under state law to impose a toll, a new tax may require voter authorization. If the Court of Appeals’ opinion in the Rhode Island case stands, its analysis will at least be a helpful guide for the drafting of legislation regarding enabling language, for such programs, the structure of the charges, and the management of the revenues.