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Port of New York Authority v. City of Newark

Decided: March 25, 1955.

THE PORT OF NEW YORK AUTHORITY, PLAINTIFF,
v.
THE CITY OF NEWARK, LEO P. CARLIN, AS A MEMBER OF THE BOARD OF COMMISSIONERS OF THE CITY OF NEWARK, SALVATORE A. BONTEMPO, AS A MEMBER OF THE BOARD OF COMMISSIONERS OF THE CITY OF NEWARK, PEARCE R. FRANKLIN, AS A MEMBER OF THE BOARD OF COMMISSIONERS OF THE CITY OF NEWARK, JOHN B. KEENAN, AS A MEMBER OF THE BOARD OF COMMISSIONERS OF THE CITY OF NEWARK, AND MEYER C. ELLENSTEIN, AS A MEMBER OF THE BOARD OF COMMISSIONERS OF THE CITY OF NEWARK, AS DIRECTOR OF THE DEPARTMENT OF REVENUE AND FINANCE AND AS COLLECTOR OF TAXES OF THE CITY OF NEWARK, DEFENDANTS



Civil action in lieu of prerogative writ.

Colie, J.s.c.

Colie

This action in lieu of prerogative writ is brought by the Port of New York Authority, hereinafter called "Port Authority," against the City of Newark and the Board of Commissioners, to set aside tax assessments by the city for the years 1952 and 1953 on the Newark Union Motor Truck Terminal.

The Port Authority contends that the terminal is tax exempt because the Port Authority is a governmental agency exercising governmental functions, and that the present use of the Newark truck terminal is for a public purpose. The Port Authority further contends that under chapter 69 of the Laws of 1931, R.S. 32:1-144, it is authorized to make payments to municipalities in lieu of taxes; that the terminal is exempt under the compact which, it is argued, precludes taxation of its property by one state, or its political subdivisions, without the consent of the other state, in this case New York. By its answer, the city raised a number of affirmative defenses, among others that the Port Authority had not exhausted its administrative remedies before instituting the present action; that the "in-lieu-of-tax" statute, chapter 69, Laws of 1931, was an unconstitutional delegation

of legislative power; that the property was not devoted to a public use on the assessing dates of October 1, 1951 and 1952.

In 1917 the Legislatures of New Jersey and New York authorized the appointment of a joint commission to make recommendations for the development of the Port of New York. Thereafter, New Jersey and New York executed a compact which was consented to by Congress. By that compact the Port Authority was granted "full power and authority to purchase, construct, lease and/or operate any terminal or transportation facility within said district; and to make charges for the use thereof; and for any of such purposes to own, hold, lease and/or operate real or personal property." R.S. 32:1-7. By 1939 traffic congestion and mounting freight handling costs became acute and as a result the Port Authority authorized joint studies with motor truck operators as to the advisability of the construction of union motor truck terminals, and in 1941 a report was submitted to the Port Authority. The report concluded that terminal delivery of freight in the Port Authority district was a public problem because of street congestion and excessive costs; that existing motor truck terminals were inadequate and their operations uncoordinated. After a public hearing the Legislatures of New Jersey and New York passed statutes for financing and construction of union motor truck terminals. Following this, Inland Terminal No. 1 was constructed in New York and in 1948 the cornerstone of Inland Terminal No. 3 was laid, the construction cost to amount of $8,000,000. The essential feature of the plan for Inland Terminal No. 3 was to provide for loading and unloading of the large over-the-road trucks at one side of the terminal platform and the transshipment of the cargoes to and from small delivery trucks on the other side of the platform, the purpose being to replace the huge over-the-road trucks in the congested metropolitan area by smaller local delivery trucks. In September 1948 Newark Local 478 of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers inserted a clause in the standard union contract which was then under negotiation with over-the-road carriers and local

cartage companies prohibiting the over-the-road carriers operating under a Local 478 contract from transferring, without the union's permission, more than 5,000 pounds of freight daily to local cartage companies. So long as this clause was a part of the contract between Local 478 and the carriers and cartage companies, the terminal could not be operated for the purpose intended. The Port Authority and the Mayor of Newark endeavored to eliminate this limitation or to waive its application in the case of the truck terminal, but without success. Efforts through the executive board of the International were made with the result that the executive board condemned the limitation, but nonetheless Local 478 refused to relax the requirement and it is and has been in each renewal of Local 478's contracts.

In 1950 the then Mayor of Newark wrote the Port Authority a letter in which he said:

"I urge the Authority to lease the idle truck terminal to a defense industry. Regrettably, because all real property under the Authority's control is tax-exempt and lessees of this property profit from that very peculiar advantage, fairness dictates that any industrial tenant of the terminal must be in a field that does not compete with existing industries in Newark.

On November 1, 1950 the Port Authority, the City of Newark and the County of Essex entered into a written agreement under the "in-lieu-of-tax" statute under which the Authority agreed to make the maximum payments permitted by the statute, and the city in turn undertook to mark the properties tax exempt on its books.

On March 14, 1951, after extended negotiations, the motor truck terminal was leased to the Air Force at an annual rental of $421,754, a rental based upon the approximate debt service and fixed charges on the facility. The lease was for a period of four years, to expire June 30, ...


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