City of Newark v. Essex County Bd. of Taxation

• Decision Date: 25 June 1969
• Citation: 54 N.J. 171,254 A.2d 513
• Parties: The CITY OF NEWARK, Plaintiff-Respondent, and The Port of New York Authority, Plaintiff-Appellant and Cross-Respondent, v. The ESSEX COUNTY BOARD OF TAXATION, Defendant-Respondent and Cross-Appellant, and Town of Belleville, et al., Intervening Defendants-Respondents.
• Court: New Jersey Supreme Court

Page 171

54 N.J. 171

254 A.2d 513

The CITY OF NEWARK, Plaintiff-Respondent and The Port of New York Authority, Plaintiff-Appellant and Cross-Respondent, v. The ESSEX COUNTY BOARD OF TAXATION, Defendant-Respondent and Cross-Appellant and Town of Belleville, et al., Intervening Defendants-Respondents.

Supreme Court of New Jersey.

Argued May 5, 6, 1969.

Decided June 25, 1969.

Francis A. Mulhern, Newark, for The Port of New York Authority (Isobel E. Muirhead of the New Jersey Bar, and Sidney Goldstein, New York City, Gen. Counsel to The Port of New York Authority, Joseph Lesser and Harold J. Smith, New York City, of counsel).

Norman N. Schiff, Newark, for City of Newark (Philip E. Gordon, Corp. Counsel, attorney).

Charles H. Landesman, Deputy Atty. Gen., for The Essex County Bd. of Taxation (Arthur J. Sills, Atty. Gen., attorney, Elias Abelson, Trenton, of counsel).

Saul A. Wolfe, Newark, for intervening defendants-respondents (Skoloff & Wolfe, Newark, attorneys).

The opinion of the court was delivered by

JACOBS, J.

The Law Division held that a goodly portion of the real property at the Port Newark terminal owned by the City of Newark and leased to The Port of New York Authority was subject to local property taxation. City of Newark, et al. v. Essex Cty. Bd. of Taxation, 103 N.J.Super. 41, 246 A.2d 509 (1968). The Port of New York Authority appealed to the Appellate Division from that part of the Law Division's judgment which designated much of its leased property as not exempt and the Essex County Board of Taxation cross-appealed from that part which designated some of the leased property as exempt. We certified the matter before it was argued in the Appellate Division. R.R. 1:10--1.

The lower court recognized, as do we, that the pertinent history should be examined and evaluated for the light it may properly shed on the legislative contemplation. 103 N.J.Super. at 45--48, 246 A.2d 509; Lloyd v. Bermeulen, 22 N.J. 200, 206, 125 A.2d 393 (1956); Hudson County News Co. v. Sills, 41 N.J. 220, 226, 195 A.2d 626 (1963), Appeal dismissed, 378 U.S. 583, 84 S.Ct. 1914, 12 L.Ed.2d 1036 (1964). As early as 1911 the Legislature adopted a resolution which referred to the fact that our communities were exercising local control over their waterfront facilities without any coordination with other communities, and which requested the Governor to appoint commissioners to act with others in formulating proposals for the development and management of the Port of New York. Jt.Res.No. 3, Laws of 1911, p. 840. The Governor did appoint such commissioners and in February, 1914 they submitted a preliminary report which recommended the creation of a permanent State agency with well defined powers over 'the waterfront and waterways in the State'. New Jersey Harbor Commission, Fourth Preliminary Report 8 (1914). In the course of their report, the commissioners referred to the trend towards public control of waterfront facilities in the United States, as well as in foreign countries, and noted that considerable legislation had been 'passed by States and cities, creating public bodies to control and develop the waterfront, not only with respect to docks and piers, but also to beltline railroads, storage and warehousing accommodations and the other things which go to make up a terminal.' Fourth Preliminary Report, supra at 37--38. In April, 1914 an act was passed formally creating the New Jersey Harbor Commission and defining its power and duties. See L.1914, c. 123; New Jersey Harbor Commission, Annual Report (1915).

In 1916 the Legislature adopted a referendum act which authorized cities fronting on tidewater 'to establish municipal docks, warehouses and shipping and industrial facilities, and to operate or lease the same in whole or in part'. L.1916, c. 162 (R.S. 40:179--58 et seq., N.J.S.A.). During the following year the Governor strongly supported the development of marine terminals through public ownership and the Legislature again adopted a referendum act authorizing any city fronting upon navigable waters 'to establish docks, warehouses, ferries, terminals and shipping and industrial facilities' and to operate such facilities or lease them for terms of years. L.1917, c. 127 (R.S. 40:179--46 et seq., N.J.S.A.). This legislation expressly provided that every terminal erected pursuant to its provisions 'and every interest or estate therein, shall, during the term of any lease thereof made as herein provided, be exempt from all taxes and assessments within this State'. L.1917, c. 127, § 10 (R.S. 40:179--55, N.J.S.A.).

In 1920 the Legislature adopted the so-called industrial terminal act which substantially reenacted the 1917 act including its provision for tax exemption but omitting its referendum requirement. L.1920, c. 176 (R.S. 40:179--34 et seq., N.J.S.A.). See R.S. 40:179--42, N.J.S.A. Under the authority of the foregoing legislation, Newark developed a marine terminal complex in the Port Newark area. See Shea v. Ellenstein, 118 N.J.L. 438, 193 A. 551 (Sup.Ct.1937); American Agricultural Chemical Co. v. Murphy, 136 N.J.L. 193, 54 A.2d 719 (E. & A.1947). The terminal covered approximately 700 acres of land and included wharves, warehouses and other buildings, along with open spaces, which were leased to private tenants engaged in receiving, storing, processing and distributing products of varying nature. Admittedly all of the leased real property thus used at the terminal was exempt from local taxation under R.S. 40:179--42 and R.S. 40:179--55, N.J.S.A.

In the meantime there were significant developments concerning the creation and activities of the Port of New York Authority. In 1917 the Legislature provided (L.1917, c. 130) that the Governor shall appoint commissioners to meet with New York commissioners and recommend the policy to be pursued in developing the Port of New York. Three years later the commissioners submitted the results of their extensive studies. See New York, New Jersey Port and Harbor Development Commission, Joint Report with Comprehensive Plan and Recommendations (1920). They pointed to the serious economic penalties which result from inadequate and incomplete terminal facilities and recommended the adoption of a compact between New Jersey and New York establishing a port district and creating a permanent interstate agency for development of the port. In 1921 the Legislatures of New Jersey and New York authorized the execution of the port compact (consented to by Congress 42 Stat. 174 (1921)) establishing the port of New York district and creating the Port of New York Authority as their joint agency. L.1921, c. 151; Laws of N.Y.1921, c. 154. See R.S. 32:1--1 et seq. The 1921 compact vested the agency with full power to construct, lease and operate any terminal facility within the port of New York district and defined 'terminal facility' to include wharves, piers, docks, warehouses, cold storage, etc., 'and every kind of terminal or storage facility now in use or hereafter designed for use for the handling, storage, loading or unloading of freight at steamship, railroad or freight terminals'. R.S. 32:1--23, N.J.S.A.

In 1922 New Jersey and New York adopted a comprehensive plan for the development of the port district. L.1922, c. 9; Laws of N.Y.1922, c. 43. See R.S. 32:1--25 et seq., N.J.S.A.; Bard, The Port of New York Authority 35--62 (1942). The plan provided, Inter alia, that terminal operations within the port district should be unified insofar as economically practicable; that there should be consolidation of shipments so as to eliminate duplication of effort and inefficient loading of equipment; and that there should be the most direct routing of all commodities so as to avoid centers of congestion, conflicting currents and long truck hauls. R.S. 32:1--26, N.J.S.A. Though the 1921 and 1922 legislation contained no express provision for tax exemption there is little reason to doubt that such was the legislative purpose. In any event, in 1931 the New Jersey Legislature provided (L.1931, c. 69; R.S. 32:1--144 et seq., N.J.S.A.), as did the New York Legislature by complementary enactment (Laws of N.Y.1931, c. 553; Unconsol.Laws §§ 6971--6973 (McKinney 1961)), that in order to relieve municipalities of undue loss of taxation because of Port of New York Authority acquisitions, the Authority shall have power 'in connection with any marine or inland terminal property owned by it' to make voluntary payments to municipalities in reasonable amounts not exceeding the sums last paid as taxes on the property prior to its acquisition by the Authority. In Port of N.Y. Authority v. City of Newark, 20 N.J. 386, 120 A.2d 18 (1956), this Court, citing Bush Terminal Co. v. City of New York, 282 N.Y. 306, 26 N.E.2d 269 (1940), pointed out that the Legislatures of both New Jersey and New York must have considered the Authority's marine and inland terminal property to be tax exempt; otherwise there would have been no need for relief to the local municipalities by way of L.1931, c. 69, described as the 'in-lieu-of' tax statute. 20 N.J. at 393, 120 A.2d 18.

Throughout the years, Newark's efforts to develop its seaport had proven very costly to its taxpayers and at the close of the second world war, during which period the seaport had been used by the Government for military purposes, it was in critical need of rehabilitation and reconstruction. At the request of Newark's Central Planning Board, a study of Newark's marine and air terminals was made by the Harland Bartholomew firm which submitted its preliminary report in 1945. In that report it was pointed out that 'to date, Port Newark has cost the taxpayers approximately $9,600,000' and continued city operation would not avoid 'long periods of substantial annual deficits'. The possibility of having the seaport, along with Newark's airport, operated by private parties, in which event they would be subject 'to full taxation', was mentioned but the report...