Texas Eastern Transmission Corp. v. Borough of Carteret

• Decision Date: 15 October 1970
• Parties: TEXAS EASTERN TRANSMISSION CORPORATION, Petitioner-Appellant, v. BOROUGH OF CARTERET et al., Defendants-Respondents.
• Court: New Jersey Superior Court — Appellate Division

Page 9

116 N.J.Super. 9

280 A.2d 833

TEXAS EASTERN TRANSMISSION CORPORATION, Petitioner-Appellant, v. BOROUGH OF CARTERET et al., Defendants-Respondents.

Superior Court of New Jersey,

Appellate Division.

Argued Sept. 22, 1970.

Decided Oct. 15, 1970.

Robert J. Del Tufo, Morristown, for appellant (Jeffers & Dillon, Morristown, attorneys).

Sam Weiss, Newark, for respondents.

John M. Kolibas, Carteret, for respondent Borough of Carteret.

Roland A. Winter, Perth Amboy, for respondent Township of Edison.

Joseph Stevens, New Brunswick, attorney for respondent Township of Piscataway.

Isadore Rosenblum, Woodbridge, for respondent Township of Woodbridge.

Herbert K. Glickman, Deputy Atty. Gen., filed a statement in lieu of brief (George F. Kugler, Jr., Atty. Gen., attorney for Division of Tax Appeals).

Before Judges KILKENNY, HALPERN and LANE.

The opinion of the court was delivered by

KILKENNY, P.J.A.D.

Petitioner appeals from final judgments of the State Division of Tax Appeals, affirming determinations The property consists of pipelines of varying dimensions owned by Texas Eastern, to the extent of their footage in the respective municipalities. Some of these were used in combination with continuances thereof for the transmission of natural gas from Texas to the New York metropolitan area. Other pipelines of Texas Eastern in these New Jersey municipalities were 'idle,' not being in active use.

of the Middlesex County Board of Taxation, upholding the 1967 assessed valuations fixed for local taxation by the municipal authorities of the Townships of Edison, Piscataway, Woodbridge and Borough of Carteret.

No useful purpose would be served by a recital of the footage and dimensions of each particular kind of pipeline in each municipality; or when the pipelines were built; or the respective municipal assessed valuations. A common formula, known as the 'Middlesex County Formula,' because it had been approved and recommended for common use by the Middlesex County Assessors Asociation, had been employed by the respective local assessors in calculating values. The propriety and the correctness in the application of that formula are the main issues on this appeal.

Two local assessors, one from South Plainfield and the other from South Brunswick, testified as to the 'Middlesex County Formula.' All the lines were appraised at their 'historical cost,' meaning the cost when the lines were built. The 'per foot cost' was determined by dividing the cost of the 'spread' of the pipeline in New Jersey by the footage in the particular spread. There was deducted from cost 15% As a single, non-recurring depreciation factor. This was done to stabilize the annual valuations and thus avoid the need to recalculate true value from year to year. By way of exception, a 20% Deduction in the historical cost was made in the case of the 20-inch pipeline.

Applying this formula to the various lines, the 36-inch line's cost was fixed by the local assessors at $46 a foot and, with a 15% Depreciation, true value per foot was determined to be $39.10. The 24-inch pipeline's cost was set at The idle 12-inch line was valued at $4.20 a foot since it was idle. The idle 10-inch line was valued at $3.40 a foot and the idle 8-inch line at $2.55. This represented 50% Of the value of the active lines. The reason why these idle lines have not been in service is that the so-called 'Big and Little Inch' pipelines were built for the transmission of oil from the Texas fields to New Jersey refineries during World War II, but thereafter they ceased to be useful for the transmission of oil to customers, because Texas Eastern does not have customers for Oil. The company uses its pipelines for the transmission of Natural gas to different customers. It admittedly owns the 'idle' lines.

$27 a foot and depreciated 15% To make it $22.95. The 20-inch line was valued at $16 a foot and applying the 20% Depreciation factor was reduced to $12.80. The 12-inch line was valued at $10 a foot and then reduced 15% To $8.50. The 10-inch line, valued at $8 a foot, by similar deduction of 15%, became $6.80. The 8-inch line, valued at $6 a foot, was reduced by 15% To $5.10.

By multiplying the per foot valuation of each kind of pipeline, determined as above, by the footage of each kind of pipeline in a particular municipality, the respective local assessors calculated in 'true value' of the pipelines for local tax purposes.

All municipalities in Middlesex County are supposed to assess at a ratio of 50% Of true value, according to a County Board directive. Relying upon that directive, each of the respondent municipalities fixed the 'assessed value' of Texas Eastern's pipelines at 50% Of 'true value,' as calculated above. Texas Eastern had been so billed and had paid the taxes so determined.

Following a hearing before Judge Gotshalk in the State Division on June 2, 1969, the judge determined:

There was not before me evidence of the Cost of these lines from which I could make a positive finding of value * * *. (Emphasis added).

By reason thereof, the judge felt 'compelled to affirm the finding of the County Board as to true value * * *.' Accordingly, Texas Eastern's appeals were dismissed and the County Board's valuations were affirmed by judgments of the State Division entered on December 5, 1969.

I.

'The settled rule is that there is a presumption that an assessment made by the proper authority is correct and the burden of proof is on the taxpayer to show otherwise. * * * the presumption stands until sufficient competent evidence is adduced to prove a true valuation different from the assessment. Such evidence must be definite, positive and certain in quality and quantity to overcome the presumption.' Aetna Life Insurance Co. v. City of Newark, 10 N.J. 99, 105, 89 A.2d 385, 387 (1952).

On appeal to the county board, 'there exists a presumption in favor of the Quantum of the tax assessment made by the local taxing authority and the burden is on the taxpayer to prove otherwise. * * * It has also been held that a similar presumption attaches to the judgment of the county board on the appeal to the Division of Tax Appeals.' Riverview Gardens Section One v. North Arlington Borough, 9 N.J. 167, 174--175, 87 A.2d 425, (1952).

As noted above, the taxpayer's appeals to the Division from the judgments of the County Board were dismissed on the ground that there was no evidence before the Division of the 'cost' of these lines from which a finding of value could be made. On the contrary, the 'historical cost' of the pipelines constituted part of the very formula applied by the local assessors in calculating 'true value.' We have set forth above the per foot cost of each kind of pipe, as used by the local assessors in deciding first 'true value' and thereafter diminishing it by the 50% County ratio to arrive at 'assessed value.' The testimony of witnesses, Prothro, Linger and Renk, produced by Texas Eastern, and the inventories Presuming the correctness of these 'cost' figures used by the local assessors in their computations and the correctness of the footage of each kind of pipe in their respective municipalities, we find that the depreciation percentage, rather than 'cost,' presented the real basic issue. The local assessors reduced the 'cost' figures by 15% As to all pipelines, except the 20-inch lines, and depreciated the cost of those lines by 20% To arrive at 'true value.' This was in accordance with the 'Middlesex County Formula,' recommended by the unofficial Middlesex County Assessors Association.

and tax bills introduced as petitioner's Exhibits P--2, P--3, P--4 and P--5 established without contradiction both the details of the 'Middlesex County Formula' and their use in computing the contested assessments. Judge Gotshalk also made specific factual findings as to the 'cost' figures in the early part of his opinion, as set forth herein Supra.

On the contrary, as shown by the evidence, the New Jersey Assessors Association, also an unofficial body, had recommended on a state-wide basis a standard depreciation deduction from historical cost of 45%, continuing the resultant value from year to year. So, too, there was proof that the Federal Power Commission, which exercises control over these interstate natural gas transmission companies, had limited to 3% The annual depreciation deduction, as opposed to the constant 15% Or 45% Recommended by the County and State associations, respectively.

Moreover, in an analogous set of appeals by Transcontinental Gas Pipe Line Corporation, involving similar pipelines in these same respondent...