City of St. Louis v. United Railways Co.

Background

Two street railway companies that together operated a large St. Louis streetcar system challenged a city ordinance that imposed a new tax equal to one mill per paying passenger. The companies relied on earlier long-term city ordinances that granted rights to lay tracks and required the companies to pay specified sums or percentages of receipts. Until the new ordinance, the companies had paid a $25 annual license per car under the municipal code. They sued in federal court claiming the city’s new tax violated the companies’ contract rights under the Federal Constitution.

Reasoning

The court framed the question in simple terms: did the special franchise ordinances clearly and unmistakably give up the city’s power to impose license taxes? Relying on past decisions, the court said exemptions from taxation must be expressed in plain, unequivocal language. Merely agreeing to pay money for the right to use streets is not enough to block later city taxes unless the city explicitly and clearly surrendered its taxing power. The court found no such clear surrender in the ordinances and noted some language even suggested payments were “in addition to” taxes. Thus the trial court was wrong to treat the old ordinances as an absolute bar to the new license tax.

Real world impact

The decision lets St. Louis enforce the new per-passenger tax and denies the railway companies a blanket exemption. More broadly, municipal governments keep the power to impose general license taxes unless they give that power away in unmistakable terms in their contracts. This ruling reverses the injunction against the city’s ordinance.