Reading Co. v. Woodbridge Tp.

• Decision Date: 04 August 1965
• Docket Number: No. A--35,A--35
• Citation: 45 N.J. 407,212 A.2d 649
• Parties: READING COMPANY, a corporation of the State of Pennsylvania, Plaintiff-Respondent, v. TOWNSHIP OF WOODBRIDGE, a municipal corporation, Defendant-Appellant, and Director, Division of Taxation and Division of Tax Appeals, Department of the Treasury, Respondents.
• Court: New Jersey Supreme Court

Page 407

45 N.J. 407

212 A.2d 649

READING COMPANY, a corporation of the State of Pennsylvania, Plaintiff-Respondent, v. TOWNSHIP OF WOODBRIDGE, a municipal corporation, Defendant-Appellant, and Director, Division of Taxation and Division of Tax Appeals, Department of the Treasury, Respondents.

No. A--35.

Supreme Court of New Jersey.

Argued Nov. 16, 1964.

Decided Aug. 4, 1965.

Leo Rosenblum, Jersey City, for defendant-appellant.

Raymond J. Lamb, Jersey City, for plaintiff-respondent (Lamb, Blake, Hutchinson & Dunne, Jersey City, attorneys Raymond J. Lamb, Jersey City, and Lockwood W. Fogg, Jr., Philadelphia, Pa., of counsel).

Arthur J. Sills, Atty. Gen., filed a statement in lieu of brief on behalf of respondent Director, Div. of Taxation (Alan B. Handler, First Asst. Atty. Gen., of counsel).

The opinion of the court was delivered by

HALL, J.

This railroad tax litigation involves the classification and valuation of real property of the Reading Company ('railroad') in its Port Reading Terminal Yard in the Township of Woodbridge. The classification question--where the 'main stem' should be located within the yard and thus what portion of the terminal property should be taxed as Class I railroad property and what portion as Class II--concerns taxes for the years 1952 through 1958. The valuation question--the true value and appropriate assessments of the Class II property within the yard--relates to the years 1956, 1957 and 1958. The litigation originated in appeals by the railroad to the Division of Tax Appeals ('Division'), N.J.S.A. 54:29A--31, from the determinations of the Director of the Division of Taxation ('Director') on both questions for all of the respective years and appeals by the township from his valuation determinations for the years 1957 and 1958. All the classification appeals were tried together followed by a separate hearing on all the valuation appeals. The matter is before us on the township's consolidated appeals to the Appellate Division from the judgments of the Division of Tax Appeals, N.J.S.A. 54:29A--36, R.R. 4:88--8(a), which were certified on our motion before argument in the intermediate tribunal.

While the two questions are distinct and will be so treated, they both arise out of the basic scheme for the taxation of railroad property in this State. The substance of that scheme has been in effect for more than three-quarters of a century. L.1873, c. 400, p. 112; L.1884, c. 101, p. 142. The present statutory form, which governs this case, is found in the railroad tax law of 1948. L.1948, c. 40, p. 114; N.J.S.A. 54:29A--1 et seq.

The statute, N.J.S.A. 54:29A--17, provides for the annual assessment at true value by the Director of the Division of Taxation of all property used for railroad purposes in the State according to the following classes, in lieu of all other state or local property taxes (N.J.S.A. 54:29A--11):

'I. The length and value of the main stem of each railroad * * *;

II. The value of the other real estate used for railroad purposes in each taxing district in this State, including the roadbed (other than main stem), tracks, buildings, water tanks, riparian rights, docks, wharves and piers, and all other real estate, except lands not used for railroad purposes;

III. The value of all the tangible personal property of each railroad.'

Property in Classes I and III is taxed statewide at the uniform rate of $1.20 per $100.00 of assessed valuation, N.J.S.A. 54:29A--20(a), and the receipts therefrom are paid to and applied by the State to its uses, N.J.S.A. 54:29A--23. Class II property, on the other hand, is taxed by the Director pursuant to his assessments at the general tax rate in each taxing district where the particular property is located, N.J.S.A. 54:29A--19. The tax so computed is collected by the State but transmitted to each municipality for local and county purposes. N.J.S.A. 54:29A--24.

Since local tax rates covering Class II property are ordinarily several times the $1.20 state rate applying to Classes I and III, railroads are interested in having as much of their real property as possible classified as 'main stem.' Conversely, municipalities in which large amounts of railroad terminal, yard and pier properties are located are desirous of having such installations, or the major portion of them, designated as Class II property and are as well concerned that the Director's valuations of property so classified represent true value. These competing economic considerations are at the bottom of the controversy before us.

I The Classification Question

This issue involves the proper location of the main stem within a railroad terminal yard. The question is somewhat complicated because this particular freight yard is essentially a single purpose installation. Better than 95% Of the cargo carried by the trains ending their runs in the yard is coal which is ultimately dumped from the cars into barges moored at the railroad's pier, located on the property and extending into Arthur Kill, for transshipment by water to final destinations in other parts of the metropolitan area. If the main stem in this yard should properly encompass the tracks leading to and on the pier, the further question is presented whether the pier itself and the extensive equipment and structures utilized in the car-dumping operations should also be included as Class I property.

Although the 'main stem' concept has existed as a basis of classification for tax purposes in our statutes since L.1873, c. 400, p. 112, there has been little reported litigation in which the term has been construed and none to our knowledge so far as terminal yard property is concerned. This case is a rare one.

Before outlining the undisputed facts, the definition of the term in the current statute should be set forth:

"Main stem' of a railroad means the roadbed and exceeding one hundred feet in width, as measured horizontally at the elevation of the base of the rail, including the full embankment or excavated area, with slopes, slope ditches, retaining walls or foundations necessary to provide a width not to exceed one hundred feet at base of rail, Together with all tracks, appurtenances, ballast and all structures erected thereon and used in connection therewith, but not including passenger or freight buildings erected thereon.' N.J.S.A. 54:29A--2 (emphasis added)

The Port Reading branch of the Reading system runs from a point on its Philadelphia--Jersey City line near Bound Brook to this terminal yard on the Arthur Kill. It was constructed about 1892 to give the railroad its own New York metropolitan area seaboard terminus for anthracite, and later bituminous, coal shipped over its lines from mines in Pennsylvania. As the branch reaches the entrance, or throat, of the yard, almost a mile west of the waterfront, it has two tracks, one for eastbound and one for westbound traffic. Within the yard, the tracks fan out to become 60 or more in number, grouped in areas given specific names, for the receipt of arriving trains, storage of full cars until their contents are shipped out by barge, storage of empty cars pending return movement to the mines and the make-up of westbound trains. Apart from the facilities connected with the dumping of coal into the barges, the yard contains an office building, train crew accommodations and structures for the servicing of engines and other equipment, many of which have become more or less obsolete by the substitution of diesel locomotives for steam power.

When the yard was first constructed, an elevated pier (Pier 1) was built at the waterfront to which cars were moved from the yard tracks and the coal contents emptied into waiting barges by gravity chutes from the hoppers underneath the cars. Sometime later two other piers (Piers 2 and 3) were built for the same purpose. In 1917 the railroad erected a more elaborate pier north of the other three and installed a McMyler car dumper thereon. This huge mechanical device actually picks up a coal car, turns it over and empties the contents into a barge moored alongside. On the tracks approaching this pier, a thawing plant structure was constructed to thaw frozen coal in the cars during the winter months so that the contents could be easily dumped. After the installation of the dumper, all bituminous coal shipments were transferred to barges by this means. The use of Piers 2 and 3 ceased and Pier 1 was continued in service to transfer sized anthracite until 1946 when it was removed from service. It was dismantled in 1950 and all tracks removed from it. Since then all transshipment operations have taken place on the car dumper pier.

Despite the pier changes, the method of receiving trains in the yard and the handling of cars thereafter until the coal has been dumped into barges has not substantially differed over the years. When a loaded train pulls into the yard, the eastbound tracks through the throat lead into areas of yard tracks known as the North, New and South yards. The car dumper pier and tracks leading into it (which cannot be reached directly from the entering tracks without switching) are north of these areas. Pier 1 and the tracks leading to it (now removed) lay between the New and South yards. The arriving train is directed to empty tracks within any of these three named yards and the over-the-road journey of the cars comes to an end thereon. The locomotive and caboose are removed and the train crew turns over all documents to the yard master's staff. Thereafter the cars are handled only by the yard crew. They are clerically classified and those which are expected to be moved to the car dumper in the near future may remain on the tracks in these three receiving yards. The remainder are moved by yard engines to the larger storage areas north of the dumper area (where emptied cars are also stored pending movement back to the mines) to await receipt of orders for barge shipment. When shipment orders are received,...