In the case of Southern Pacific Company v. City of Portland in 1912, the Supreme Court ruled that a city ordinance could not require a railroad company to pay for street improvements adjacent to its right-of-way. The city of Portland had passed an ordinance requiring property owners on certain streets to pay for road paving and other improvements. When Southern Pacific refused to comply, arguing it was exempt from such regulations due to its federal charter, the city sued. The Supreme Court sided with Southern Pacific, holding that while cities have broad powers over local affairs including public works projects like street improvement, these powers do not extend so far as imposing costs on federally chartered entities without explicit authorization from Congress.

The dissenting opinion in the Southern Pacific Company v. City of Portland case argued that the city had a right to impose taxes on railroad companies operating within its jurisdiction, even if those railroads crossed state lines. The justice contended that such taxation did not interfere with interstate commerce and was therefore constitutional under the Commerce Clause of the U.S Constitution. They maintained that local governments should have authority over their own tax policies without federal interference unless it directly conflicted with national interests or laws. This perspective emphasized states' rights and local control, arguing for a more limited interpretation of federal power under the Commerce Clause.