82 N.J.L. 37 | N.J. | 1911
The opinion of the court was delivered by
The prosecutor complains of the valuation of its franchise and of the assessment to the West Shore Railroad
The railroad extends from Weehawken to Buffalo, a distance of four hundred and twenty-four miles, of which only nineteen and three hundred and seventy-four thousandths are in New Jersey. It is leased to the New York Central and Hudson River Railroad Company for four hundred and seventy-five years from 1885, with the privilege of a further term of five hundred years. The rental is the amount of the interest at four per cent, on $50,000,000 of mortgage bonds which are guaranteed by the lessee. The lessee owns the entire capital stock, amounting to $10,000,000, and has a claim for $8,000,-000 for advances. The bonds sell at about par, and, although there is no market for the stock, there is no proof that it is worth less than par, or that the railroad is not good also for the $8,000,000 floating indebtedness. The West Shore railroad is carried on the books of the New York Central at $68,000,-000. We must assume that to be its value. The rule approved by this court in Central Railroad Co. v. State Board of Assessors, 20 Vroom 1 (at p. 9), for ascertaining the value of the franchise is to take the market value of the stock, add the value of the debts of the company, and deduct from the sum the value of the tangible corporate property. The property of the railroad in that case lay entirely, or almost entirely, within the state. In this ease most of the property of the railroad lies outside the state. The United States Supreme Court has approved a method of taxation in such a case that treats the railroad within and without the taxing state as a whole, as, in fact, it is, and distributes the value, including the value of the franchise, in proportion to the mileage within each state. Pittsburgh, &c., Railroad Co. v. Backus, 154 U. S. 421; Cleveland, &c., Railway Co. v. Backus, Id. 439. And the same method has been approved for apportioning taxes among different counties in the same state. State Railroad Tax Gases, 92 Id. 575; Columbus Southern Railway v. Wright, 151 Id. 470 (at pp. 479, 480). A similar method has been approved in the case of telegraph companies. Western Union Telegraph
It is urged, however, that the railroad company is entitled to net a fair return on its investment, and we are referred to decisions of the United States Supreme Court in rate cases. It has, we think, never been decided that a railroad company was entitled under whatever circumstances and at all events to a reasonable return on its investment. On the contrary, the courts have recognized that the mere failure to produce a profit is not of itself conclusive evidence that a rate is unreasonable, for the road may have been built in advance of-the public needs, at an extravagant cost and it may be run in a wasteful manner. Considerations of this kind are suggested in Reagan v. Mercantile Trust Co., 154 U. S. 362 (at p. 412). Even, if this were a rate case, we should have to go into the inquiries
We are not impressed by the figures of receipts and cost of traffic presented by the prosecutor. It may .well be that the earning power of the nineteen miles in Hew Jorséy may be small considered by itseif, but that by no means measures the value of the franchise for a railroad connecting the four hundred and four miles north of our state line with tidewater opposite Hew York City. We can form some idea of the value of thé Hew Jersey franchise if we think of the difference between the value of a railroad from Buffalo to Tappan -without an outlet and the value of the same road with the outlet which the Hew Jersey franchise gives. Even in rate eases, it is held that it is not necessary that every mile of the road should show a profit. St. Louis and Santa Fe Railway v. Gill, 156 U. S. 649. The railroad must be considered as a whole. This road is leased to and controlled by the Hew York Central and Hudson River railroad, and the two roads are parallel and within a few miles of each other for their entire length. Ho doubt, as the prosecutor’s brief says, the West Shore is “practically a side track for the accommodation of the surplus freight of the Hew York Central and Hudson River railroad.” Whether it could be made more profitable if used to the same advantage as the Hew York Central lines, we do not know, but certainly it is within the bounds of probability that the lessee company may use this so-called “side track” for the least remunerative business, and reserve for its own lines the more profitable. This is conjecture; we know that the lessee was willing to pay a rental of $2,000,000 per annum and to agree to pay that sum
The argument that the franchise of the prosecutor is not taxed by a uniform rule with the franchise of other roads because the West Shore running through a sparsely settled country is assessed at $95,000 per mile, while the Central of New Jersey and the Pennsylvania running through a thickly settled portion of the state are assessed at much less per mile, lias a deceptive plausibility. It overlooks the fact that the great value of the Weehawken terminal is distributed by this calculation over nineteen miles of road only, while the value of the terminals of the other roads is distributed over perhaps a hundred or more miles. If two roads have terminals of equal value, and one has five times the mileage of the other, a valuation of a mile of the shorter road must greatly exceed a similar valuation of a mile of the longer road. If the value thus put upon the New Jersey franchise is too high, it is probably because the valuation of the property in New York is too low and the balance representing the franchise or adventitious value is thus unduly enhanced. It was for the railroad company, however, to make proof of this fact, and in the absence of such proof, we can determine the value upon the evidence before us only.
We think the prosecutor has failed to show that the valuation of the franchise is excessive.
As to the ferry-boats and floats, we think the state board erred. They were not the property of the West Shore railroad, but of the New York Central, and had no permanent situs in New Jersey. They were, therefore, taxable to the owner at its domicile. Ayer & Lord Co. v. Kentucky, 202 U. S. 409; American Mail Steamship Co. v. Crowell, 47 Vroom 54. To that extent the assessment should be corrected.