Pitney v. Kelly

• Decision Date: 08 November 1943
• Citation: 34 A.2d 547
• Parties: PITNEY et al. v. KELLY, State Tax Com'r. JERSEY CITY v. KELLY, State Tax Com'r, et al.
• Court: New Jersey Tax Court

34 A.2d 547

PITNEY et al.

v.KELLY, State Tax Com'r.

JERSEY CITY

v.KELLY, State Tax Com'r, et al.

New Jersey State Board of Tax Appeals.

Nov. 8, 1943.

Proceeding by Shelton Pitney and another, trustees of the Central Railroad Company of New Jersey, against William D. Kelly, State Tax Commissioner of New Jersey, for reduction in final 1943 assessment, heard jointly with proceeding by the City of Jersey City against William D. Kelly, State Tax Commissioner of New Jersey, and Shelton Pitney and another, trustees of the Central Railroad Company of New Jersey, for an increase in the 1943 assessment.

Judgments in accordance with opinion.

WAESCHE, President, dissenting.

Autenrieth & Wortendyke and Joseph F. Autenrieth, all of Newark, and William F. Hanlon, of New York City, for petitioners Shelton Pitney and Walter P. Gardner.

Charles A. Rooney and Joseph C. Glavin, both of Jersey City, for petitioner Jersey City.

David T. Wilentz, Atty. Gen., and Milton B. Conford, Asst. Atty. Gen., for the State.

BY THE BOARD.

These cases consist of two jointly heard appeals. One is by the trustees of the Central Railroad Company of New Jersey, asking for reductions in the final 1943 assessment of $78,187,344, made by the State Tax Commissioner on all its property in railroad use and praying for certain other relief. The only specific property as to which these petitioners offered any proof consists of lands situated in the cities of Jersey City and Bayonne. The other is an appeal by the City of Jersey City requesting an increase in the 1943 assessment of all of the second class lands and some of the structures of the company located in that taxing district. The City also claims that part of the property of the railroad company assessed as main stem or class I was improperly assessed as such by the State Tax Commissioner, and requests that this Board transfer same to second class. The Attorney General defends the assessments as made and requests that they be affirmed.

The railroad company has introduced proof both by real estate experts and others. Counsel for the trustees contend that the aggregate assessment of class II lands in Jersey City, in the sum of $21,757,449, for the year 1943, should be reduced to the sum of $6,000,000, and that the assessment of main stem lands in the cities of Jersey City and Bayonne should be reduced from $2,338,293, to the sum of approximately $1,000,000. The City of Jersey City is not interested in the valuation of the main stem properties, but requests an increase in the valuation of class II lands for the year 1943, to the sum of $37,148,560, and also that the assessment of certain structures on the property should be substantially increased.

This case was tried at great length, approximately four thousand pages of testimony having been taken. Very many exhibits were offered in evidence by the railroad company, the City and the State. Careful consideration has been given to all of the proofs and to the lengthy briefs submitted by counsel. We also have heard oral argument over a period of two days. We have concluded that the appeals both by the railroad company and by the City shoudl be dismissed.

The property under appeal consists of a large waterfront railroad terminal fronting on the junction of the Hudson River and New York Bay. It is situated opposite the tip of the Battery on Manhattan, and has central access to all parts of New York Harbor. Its location is slightly south of the center of the almost continuous string of railroad waterfront terminal lands, which run from the Greenville Terminal of the Pennsylvania Railroad Company on the south, to the West Shore Branch of the New York Central Railroad Company in West New York, on the north. Practically the only properties on this waterfront not owned by any railroad are certain tracts held by the Hoboken Land & Improvement Co. and other parcels owned by municipal or federal authorities. For various periods of time up to almost one hundred years, the railroad properties have been constantly occupied and used as such. The property under appeal in this case was originally acquired by the Central Railroad Company of New Jersey or affiliated interests about eighty years ago, and it has continuously used this terminal location for practically the same purposes as at present, since 1864.

While this company, like other railroad companies, has had its economic ups and downs, we are satisfied that the property under appeal has today the same high degree of suitablity and adaptability for railroad terminal purposes which it always has had, just as the similar nearby properties of other railroad companies along the Hudson River and New York Bay.

In the case of Long Dock Co. v. State Board of Assessors, 89 N.J.L. 108, 97 A. 900, 902, affirmed 90 N.J.L. 701, 101 A. 367, a nearby similar railroad terminal was described by the court as follows: ‘This is a great terminal property opposite New York City, and which, while it is in fact connected with the Long Dock Railroad, might be connected with any other railroad now operating from the Jersey side, or that might be organized so to operate. If the Erie Railroad Company should go out of business, it could be used for a terminal connecting with all the railroads terminating between Communipaw and Weehawken. Taken by itself it is a great unified tract with deep water in front and railroad communications behind. We think it is idle to argue, as do prosecutor's experts, that it is to be split into two, or three, or four or more zones, each to be valued separately. Every part of this main tract depends for its value in some measure on every other part. There are tracts of land elsewhere that are worth more when cut up into building lots, and there are also tracts worth more because assembled and peculiarly adaptable to subiness. This is one of the latter class.’

The evidence offered by the City of Jersey City and by the State in this case shows that the terminal property under appeal, taken as a whole, has a very high measure of availability for railroad purposes, and leads us to conclude that its value for such purposes exceeds that which it might have for average business or industrial purposes. This proof was given not only by real estate experts, but was supported by testimony given by a highly qualified utility valuation engineer, Mr. Van Hook, and an outstanding expert in railroad operations, Mr. Mantell, former vice-president of the Erie Railroad Company for many years and in charge of all terminal railroad operations in the Port of New York on behalf of the United States Railroad Administration during the last war. Such evidence is held to be of first importance in valuing property of this character for taxation. Long Dock v. State Board of Assessors, 78 N.J.L. 44, 73 A. 53, affirmed 79 N.J.L. 604, 80 A. 1135; Long Dock Co. v. State Board of Assessors, 83 N.J.L. 21, 81 A. 568, affirmed Long Dock Co. v. Strong, 84 N.J.L. 762, 88 A. 1103; Long Dock Co. v. State Board of Assessors, 89 N.J.L. 108, 97 A. 900, affirmed 90 N.J.L. 701, 101 A. 367; Pennsylvania Railroad Company v. Jersey City, 98 N.J.L. 283, 119 A. 99, 125 A. 921; United New Jersey Railroad & Canal Co. and other Companies v. State Board of Taxes & Assessments, 100 N.J.L. 131, 125 A. 335; United New Jersey Railroad & Canal Co. and other Companies v. State Board of Taxes & Assessments, 101 N.J.L. 303, 128 A. 427; United New Jersey Railroad & Canal Co. and other Companies v. State Board of Taxes & Assessments, 103 N.J.L. 33, 134 A. 669; Lehigh Valley Railroad Co. v. New Jersey State Board of Taxes and Appeals, 174 A. 359, 12 N.J.Misc. 673.

The proof put into this case by the railroad company which purports to show a low value for the property ‘in railroad use’ does not, in our opinion, have any materiality on the question of the inherent availability or value of this property for railroad purposes, a consideration which the cases cited above indicate to be an important feature of the valuation for tax purposes of this kind of property.

The proofs of the petitioner railroad company, in this connection, are along two lines. In the first place, great stress is laid upon the fact that the company went into federal reorganization proceedings in October, 1939. An exhibit purporting to show accounting statistics of the railroad company for a number of years past was introduced through the Assistant Comptroller of the company. These figures were designed to show that the company has barely earned enough to pay its New Jersey taxes in past years. We find that the exhibit is grossly misleading in that the figures are contrived in violation of the uniform rules of accounting prescribed by the Interestate Commerce Commission. Those rules are formulated primarily to show ‘net railway operating income’, which is the figure upon the basis of which the Interstate Commerce Commission determines whether the railroad company is earning an adequate return, for rate fixing purposes. This is arrived at by deducting from operating revenues all operating expenses, railway tax accruals and joint facility and equipment rentals. The exhibit offered by the Assistant Comptroller noticeably avoids any indication of the net railway operating income of the company for past years. It also improperly, in violation of Interstate Commerce Commission regulations, sets up rentals for leased lines as a charge prior to tax accruals and fails to show the nonoperating income of the railroad, which is properly available to meet rents for leased lines and other ‘fixed charges'.

The Attorney General, on the other hand, has shown that the ‘net railway operating income’ of the company was $259,144 in the year 1938, $1,943,304 in the year 1939, $1,364,795 in the year 1940, $5,088,050 in the year 1941, and $9,321,852 in the year 1942. The 1942 figure is substantially the same as what the net railway operating income of the company was in the years 1928 and 1929, which are...