20 N.J. Misc. 283 | N.J. Tax Ct. | 1942
The appeals designated by the foregoing-caption are in the nature of cross-appeals to the petitions of appeal filed by the railroad companies referred to, and others, for the reduction of the assessed valuations fixed by the State Tax Commissioner upon railroad property of all classes, for the year 1939. The city appeals are disposed of herewith. These latter are of course limited to the waterfront railroad terminal properties situated in that taxing district, described' as “second class” property under the Railroad Tax Act (R. S. 54:22-1; N. J. S. A. 54:22-1), in which the city has a peculiar interest, since for the tax year in question such property was taxed at the local rate of taxation certified for
The particular properties under review in these appeals are the lands and the railroad structures upon them, constituting classification terminals and waterfront rail float and lighterage facilities, known as the Pennsylvania Railroad Terminal, the Claremont Terminal of the Lehigh Yalley Railroad, the Black Tom Terminal of the Lehigh Yalley Railroad, the Central Railroad of 'New Jersey Terminal, the Pennsylvania Railroad Harsimus Goal Terminal, the Erie Railroad Terminal and part of the Delaware. Lackawanna and Western Terminal. It appears that the State Tax Department, for the year 1939, made primary valuations for second class lands and structures, in accordance with its practice of past years, i. e., by the deduction of retired or dismantled structures, the addition of new structures reported by the railroads, and the carrying forward of the valuations of prior years for lands and unimproved structures. It further appears that the Commissioner then made final assessment valuations for the year 1939, by reducing all of the said primary land valuations upon second-class property, horizontally, by 10%, and all of the said valuations upon structures, uniformly, by The gravamen of the Jersey City appeals is that the reductions of both land and structures assessments were arbitrary and unjustifiable, and result in a decrease of the valuations below the true value of the several properties in question. It may be noted that the most recent previous change in second-class land valuations took place in 1936, when there was a similar 10% reduction, to which, however, none of the taxing districts affected took exception by filing appeals.
The action of the State Tax Commissioner, as the assessor, is entitled to the presumption of correctness, United New Jersey Railroad and Canal Co. v. State Board of Taxes and Assessment (Supreme Court, 1926), 103 N. J. L. 33; 134 Atl. Rep. 669, and the problem before us accordingly is as to whether the exhaustive proofs and full arguments upon the
In performing his duties under the Railroad Tax Statutes, R. S. 54:19-1, et seq.; N. J. S. A. 54:19-1, et seq., the State Tax Commissioner is particularly directed, in reference to second-class property, to ascertain the “value * * * in each taxing district in this state, including *. * * waterways, reservoirs, tracks, buildings, water tanks, waterworks, riparian rights, docks, wharves, and piers, and all other real estate, except lands not used for railroad or canal purposes.” R. S. 54:22-1; N. J. S. A. 54:22-1. For the purpose of aiding in the making of sucli valuations, each taxpayer company is directed to return annually to« the commissioner a statement showing, inter alia, the number, character, and value of all buildings and structures in each county and taxing district. R. S. 54:23-l; N. J. S. A. 54:23-l. From these provisions, as well as from the entire statutory scheme for the assessment and distribution of taxes upon railroad property, it is clear that a separate and independent annual evaluation is to be made of each parcel of land and of each structure assessed as second class railroad property. It is thus an obvious corollary that a horizontal percentage reduction in all railroad structures, of whatever condition, age, degree of usefulness, or location, and without any inspection to determine the existence of variables in these respects, is in violation of the statute. Of similar effect, in principle, is a uniform reduction in all waterfront lands, although under conceivable showings of fact, relatively uniform changes in all railroad waterfront property might be justified. The proofs referred to hereinafter will show no such justification in fact as to either structures or land. And concerning the land, no justifiable or reasonable distinction will be seen to have been advanced for the reduction of the highly essential waterfront terminal properties, in contrast to the untouched main-stem lands (Class I property) throughout the state.
A further consideration which must influence the determinations of the board in this matter, in respect to the tax
Beference to the testimony given by the witness, Foeht, in the 1937-1938 cases, in which the valuations of the same second-class properties as are here involved were sustained as
Reading Company
1935 1936 1937
Freight tonnage . . 45,468,359 52,493,387 55,863,566
Operating revenue, $51,373,733 $59,291,758 $58,754,351
The Delaware, Laelcawanna and Western Railroad Co.
Freight tonnage . . 18,569,680 21,307,721 22,064,257
Operating revenue, $44,722,233 $49,728,116 $50,175,004
Erie Railroad Company
Freight tonnage . . 30,597,074 33,559,349 34,786,119
Operating revenue, $66,125,406 $73,937,442 $72,948,019
New Torlc Central Railroad Company
Freight tonnage . . 104,482,468 125,948,268 131,549,445
Operating revenue, $310,192,980 $361,063,872 $366,226,126
*289 Central Railroad Company of New Jersey
Freight tonnage . 22,868,995 25,375,155 27,227,609
Operating revenue, $28,859,339 $31,073,680 $31,816,691
Lehigh Valley Railroad Company
Freight tonnage .... . 23,604,007
Operating revenue, $40,641,557 $49,156,379 $48,618,849
With specific reference to the 10% decrease in the land assessments of these terminal properties, in the face of the maintenance of the prior years’ assessments of main-stem land values, Mr. Focht recognizes the fact to he, and this is conceded by the railroad companies in their brief, that while system tonnage and earnings figures suffered marked trends of variation, principally downward, in the ten-year period preceding the assessing-date for the year 1939, the proportion of the system business which utilizes the Jersey City terminal and transfer facilities has remained fairly constant. Testimony adduced on behalf of petitioner explains the relative constancy of the traffic which is handled by the Jersey City terminals, in that a great quantity of consumer’s goods, such as fruits, vegetables, food stuffs and general consumer’s merchandise, destined for delivery to the general public in the great metropolitan area, goes through the terminals daily, unaffected by economic conditions affecting the quantity of mined and manufactured products carried by the systems generally'.
The unique character and invaluable nature of the waterfront railroad property under appeal would seem to be obvious, in view of the fact that without them most of the major railroad systems serving the Port of New York would be irremediably severed from their most valuable source of business. The New York Custom District handles about one-half of the imports of the entire country and 37% of the exports. For both imports and exports, the terminals here under review constitute an irreplaceable link with the interior of the country. The total tonnage handled by all of the railroads from the Yew Jersey waterfront for the year 1938 was 3,597,223 ions, 91% of which was handled through the Jersey City
, In view of the foregoing, it is understandable that there are no expert witnesses available who can qualify their opinions as to the true value of these unique properties by reference to sales of such property, in railroad use, to buyers proposing to continue such use. There have been no such sales. These lands are subject to assessment at their true or market value, in the condition and under the particular use in which they were actually held by their owners, i. e., as railroad terminals. Trustees of Stevens Institute v. State Board (Supreme Court, 1928), 105 N. J. L. 99. Seeking to substantiate their respective views as to the true value of these properties, the city and the railorads have done the best that could be done under the circumstances, in adducing the testimony of those men generally conceded to be the most highly qualified authorities on the valuation of waterfront and industrial real estate in Hudson County. Lacking actual sales of such properties as criteria, these witnesses have arrived at valuations based upon hypothetical sales. Only the witness, Coffin, has sold any land in railroad use, and he has also negotiated leases of railroad property. The results arrived at, compared with the primary and final assessment figures determined by the State Tax Department, involving thirty-three parcels of land, varying from .047 to'252 acres in area, are as follows:
*291 S. T. D. Primary Valuations ........ $76,342,331
S. T. D. Pinal Valuations............. 68,708,099
Experts for Jersey City—
Coffin ........................ 102,656,372
Daly .-...................... 101,580,520
Makray .................... 98,389,800
Experts for Kailroad Companies—
Eyer...........'........ 38,557,853
Morrison ........... 38,745,294
Stack................. 43,642,202
These figures require no comment; neither do they furnish tiie board any light upon the difficult subject at hand. So far as the valuations of the railroad experts are concerned, they purport to reflect a supposed downward trend of all waterfront land values, based upon sales of property out of the Jersey City area. Such sales are no criteria, however, since not of lands comparable in any sense with those under appeal. We can only conclude that, upon the whole case, the valuations approved by us in the 1937-1938 cases, roughly corresponding with the “primary valuations” set forth above, were not properly subject to the downward revision of 10%, made by the department for the year 1939, in the light of anything shown in the records either of the prior appeals or of this one, or of the long standing knowledge of the board concerning these properties. We find such values were not in excess of the true value of these lands as of January 1st, 1938. and that their reduction, to the injury of the petitioner taxing district, for the year 1939, was erroneous.
With respect to structures, petitioner has offered full proofs of value, through two civil engineers, of each of the separate structures under appeal, numbering forty for the Delaware, Lackawanna and Western Kailroad Co., thirty-four for the Lehigh Valley Kailroad Co., three for the Yew York Central Kailroad Company, forty for the Pennsylvania Kailroad, fifty-eight for the Central Kailroad Company of Yew Jersey, and twenty-six for the Erie Kailroad. These structures, of every variety of railroad and terminal use, comprise ferry slips, bridges, piers, storehouses, powerhouses, sidings, passenger
Petitioners S. T.D. S. T. D.
Expert Primary . Assessed
D., L. & W. E. E. $9,063,660 $4,812,006 $4,342,898
Lehigh Valley ...... 3,266,969 2,470,325 2,285,053
New York Central . . . 84,241 63,815 53,948
Pennsylvania R. R. 10,548,388 6,323,782 5,844,638
C. R. R. of N. J. 10,114,202 7,58$,123 7,005,391
Erie R. R......... 7,486,964 4,430,512 4,098,224
While it has frequently been held that the true market valué of buildings or improvements cannot ordinarily be persuasively established by the valuation method of depreciated reproduction cost, Central Railroad Co. v. State Board (Supreme Court, 1886), 49 N. J. L. 1; Turnley v. Elizabeth, (Supreme Court, 1908), 76 Id. 42; 68 Atl. Rep. 1094; Schetty v. City of Jersey City (State Board, 1940), 18 N. J. Mis. R. 37; 11 Atl. Rep. (2d) 18; yet we have recently had occasion to hold that where structures of unique character, not commonly sold in the real estate market and having peculiar value to their owner because of the use being made of them, are involved, as is the case here, resort to consideration of the physical constituents of the structures and their cost, may be justified. City of Jersey City v. Seaboard Terminal and Refrigeration Co. (State Board, 1941), 19 N. J. Mis. R. 178 (certiorari denied by the Supreme Court). While such proofs are not at all conclusive, in view of the serious question as to whether many of these structures would be reproduced as such if required to be replaced to-day, yet they
The respondent railroads attack the accuracy, methods, and qualifications of the petitioner’s experts, but offer no proof whatever in rebuttal of the estimates of the former as to costs. Some of the companies have adduced testimony as to percentage of depreciation of some of the structures, while others have offered no proofs whatsoever. Hone of them have attempted to give this board the benefit of their own undoubtedly easily accessible cost figures. We can only suspect that such proofs are withheld because they would not derogate from the soundness of the estimates made by the city’s witnesses. Counsel for the City of Jersey City has developed the interesting fact that for an indefinite number of year's past, the statutory return of information as to all of the structures of each railroad company has not been supplied by the companies to the Commissioner; that since 1911 there has never been a full and exhaustive inspection by the department of all structures; that the only Information upon which the department bases its assessments of structures newly built or improved by the railroads, is that furnished by the companies themselves, consisting of a cost or value new, not independently rochecked by the department, and a proposed assessment figure for the structure, substantially reduced from the cost new figures which they submit. It is clearly established that the State Tax Department has uniformly accepted and applied the cost new figures submitted by the companies, and has also, for the first tax year after such report, assessed the structures upon the basis of an immediate allowance for depreciation of twenty to thirty per cent. Furthermore, counsel have proven that in numerous instances the cost new figures submitted by the companies to the Commissioner have been substantially less than the figures for such costs of the same structure, and for the same year, reported to the Interstate Commerce Commission. An edifying instance in point is the report by the Delaware, Lackawanna and Western Bail-
Proofs of the type here referred to fortify the conclusions which we arrived at in our determination of the appeals of the railroads in the 1937-1938 cases, to wit, that these second-' class structures were not overvalued by the State Tax Commissioner for those years. They lead to 'the further conclusion here that a reduction in such valuations to the extent of 7%% for the year 1939, or to any extent, was not justified. They establish that the separate and individual annual appraisal and assessment of each of these structures, enjoined upon the Commissioner by the statute, has not taken place, and that therefore the department could not soundly determine that there occurred a 7%% decline in the true value of all these structures, between January 1st, 1937, and January 1st, 1938, so as to justify a reduction to that extent, of the' values approved by us in the .1937-1938 cases.
We are not to be understood as criticizing the assessment methodology of the Tax Department generally, nor as indicating that any other approach to the problems of the department could be indulged, as a practical matter, with the means and facilities at hand for the performance of its duties. But nothing could justify us, as' the statutory reviewing tribunal, in approving an assessing technique which in the present case,
We must accordingly determine that the assessments both for lands and structures determined by the State Tax Commissioner for the year 1939, be set aside, and that the primary values fixed by him before calculation of the reductions of 10% upon lands, and 1%% upon structures, be fixed as the assessments thereon lor said year.
Judgments accordingly.