Polar Tankers, Inc. v. City of Valdez

Polar Tankers, Inc. v. City of Valdez

Opinion

Justice Breyer announced the judgment of the Court and delivered the opinion of the Court with respect to Parts I, II-A, and II-B-1, and an opinion with respect to Part II-B-2, in which Justice Scalia, Justice Kennedy, and Justice Ginsburg join.

The Constitution forbids a "State . . . without the Consent of Congress, [to] lay [**2281]  any Duty of Tonnage." Art. I, § 10, cl. 3. The city of Valdez, Alaska, has enacted an ordinance that imposes a personal property tax upon the value of large ships that travel to and from that city. We hold that the ordinance violates  [****7] the Clause.

 [*5]  I

In 1999, the city of Valdez, Alaska (City or Valdez), adopted an ordinance imposing a personal property tax upon "[b]oats and vessels of at least 95 feet in length" that regularly travel to the City, are kept or used within the City, or which annually take on at least $1 million worth of cargo or engage in other business transactions of comparable value in the City. Valdez Ordinance No. 99-17 (1999) (codified as Valdez Municipal Code § 3.12.020 (2008)). The ordinance contains exceptions that, in effect, limit the tax's applicability primarily to large oil tankers. Ibid.  And the City applies the tax in accordance with a value-allocation system that adjusts the amount owed downwards insofar as the tankers spend time in other ports. Valdez, Alaska, Resolution No. 00-15, App. to Pet. for Cert. 53a-56a.

Polar Tankers, Inc., a subsidiary of ConocoPhillips, owns vessels that transport crude oil from a terminal in the Port of Valdez (located at the southern end of the Trans Alaska Pipeline System) to refineries in California, Hawaii, and Washington. In August 2000, Polar Tankers filed a lawsuit in Alaska Superior Court challenging the tax as unconstitutional. Polar Tankers argued that the  [****8] tax effectively imposed a fee on certain vessels for the privilege of entering the port; hence it amounted to a constitutionally forbidden "Duty of Tonnage." It also argued that the tax calculation method (as applied to vessels with a tax situs elsewhere) violated the Commerce and Due Process Clauses by failing to take account of the time a ship spent at sea or being  [***7] serviced or repaired. Polar Tankers said that the method thereby overstated the percentage of the ship's total earning capacity reasonably allocated to time spent in the Port of Valdez.

The Alaska Superior Court rejected the Tonnage Clause claim, but it accepted the Commerce Clause and Due Process Clause claim. And, for that reason, it held the tax unconstitutional.  On appeal, the Alaska Supreme Court, rejecting [*6]  both claims, upheld the tax. In respect to the Tonnage Clause claim, the Supreme Court noted that Valdez's tax was a value-based property tax designed to pay for "services available to all taxpayers in the city," including Polar Tankers; and it concluded that "a charge based on the value of property is not a duty of tonnage." 182 P. 3d 614, 623 (2008) (citing Transportation Co. v. Wheeling, 99 U.S. 273, 25 L. Ed. 412 (1879)).   [****9] In respect to the Commerce Clause and Due Process Clause claim, the Supreme Court held that Valdez's allocation method was fair, hence constitutional. 182 P. 3d, at 617-622.

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