Lora, Seidman and Milmed. The opinion of the court was delivered by Milmed, J.A.D.
These are appeals and cross-appeals from judgments of the Division of Tax Appeals (Division) concerning local property assessments for the years 1968 through 1974 on certain real property owned by The Anaconda Company (formerly International Smelting & Refining Co.).
The property, consisting of some 53 acres of land designated as Block 13, lot 1 and Block 14, lot 1, with improvements comprising petitioner's (Anaconda's) Perth Amboy plant, an electrolytic copper refinery, is bounded on the north by a railroad, on the south by the Raritan River, on the east by lands of another railroad, certain scrap dealers and other light industrial uses, and on the west by property of Chesebrough-Ponds and a company which manufactures asphalt coatings. The various improvements on the property were constructed over the period from 1898 to 1953, with most being erected around the turn of the century. At the Division hearing,*fn1 the mechanical superintendent at the plant*fn2 described the process undertaken at the facility and the flow of material through the process. He testified:
Q Mr. Emley, would you kindly describe for us the process that takes place at the Anaconda facility in Perth Amboy?
A We are an electrolytic refinery. We receive crude copper or copper scrap which is melted and cast into a shape which is transported to the tank house; at that point it is refined, and the result is another pure copper plate. The purity is approximately 99.99 percent pure copper. The residue consists of gold and silver, platinum and palladium, selenium and tellurium. These are refined in other parts of the plant.
The purified copper takes the form of a cathode. These cathodes are then carried by rail to either storage or one of the three casting buildings. In the casting buildings, they are melted down and cast into finished shapes such as wire bars, billets and cakes. All cast shapes are then carried by forklift or rail to a storage area and made up into shipping lots which are shipped by rail, truck and water.
Q Would you, using P-1, identify the flow of material through the process as you have just described it?
A If the material is received by water, it is unloaded at our docks, the dock area being described on the map with numerical numbers 202 and 204, and either placed in storage or directly on industrial cars. The material is taken either directly to the No. 1 Casting Building which is identified as Building 73 or stockpiled for later use. Material is also brought in by truck and unloaded in the area of the Brick Sheds, which are identified as Nos. 83 and 101; unloaded there and baled for future charging into the furnaces in Building 73.
Both rail and truck shipment deliveries are made to this same general location. Materials delivered in this manner are usually scrap copper which can be baled and later loaded into the furnaces in Building 73.
Petitioner's supply of raw material in the form of blister copper from Chile started to decrease in 1965. Its manager at the Perth Amboy plant testified at the Division hearing that
Copper was supplied in declining amounts to the Perth Amboy plant until 1971 when the regime of President Allende nationalized the mines, and at that time, that source of copper ceased to exist for the Perth Amboy plant. From that time we had to depend upon buying copper from wherever we could get it, whether it was from parts of the United States, Africa, Chile or Peru. In addition to that, we have been forced to depend heavily on purchases of No. 2 scrap copper. We have continued from 1971 to the present time under these conditions related to supply.
In the past years, economic conditions have made it exceedingly difficult to get sufficient copper into the Perth Amboy plant to maintain operations. Handling of No. 2 scrap copper, for example, causes difficult problems in material handling which adds to the cost of the finished product; in addition, No. 2 scrap has created serious problems of air pollution, and to meet the state codes for compliance, additional financial costs have been added which forced us to shut down many of our operations.
Petitioner's costs of maintenance and repairs have been substantial. Thus, the 1972 costs for maintenance amounted to $3,400,000, and for repairs $700,000. The corresponding totals for 1974 were: $4,400,000 for maintenance and $950,000 for repairs. While age is obviously one factor which accounts for the condition of the improvements, Anaconda points to other factors which it argues combined to force a suspension of operations in June 1975 and a sale of the plant in May 1976, viz. , the termination of its supply of Chilean copper and its inability to cope with air and water pollution problems.
We are entirely satisfied from the record before us that the industrial complex at the site, used as a copper refinery, was special purpose in nature, and that the only proper appraisal approach for evaluating it was the cost approach. This involved consideration of the replacement cost of the improvements with allowance for physical depreciation and all forms of obsolescence.
Using this appraisal approach, Perth Amboy's experts valued the improvements as follows:
Reproduction Cost Depreciated
1968 $38,011,000 $14,392,000
1969 38,751,000 14,719,000
1970 40,442,000 15,378,000
1971 43,295,000 16,580,000
1972 46,211,000 17,857,000
Using the same appraisal approach, Anaconda's expert valued the improvements for each of these five years at: reproduction cost new of $13,901,665, reduced to $3,959,704 after physical depreciation, and further reduced to $1,306,702 after making allowances for functional and economic obsolescence.
The Division judge properly discarded petitioner's projections of value based on the market data (comparable sales) and economic (income capitalization) approaches, and correctly determined that the best appraisal procedure for valuing this special purpose industrial complex was the cost approach, i.e. , reproduction cost less depreciation. For the years 1968, 1969 and 1970, he accepted petitioner's (reproduction cost less physical depreciation) aggregate valuation for improvements of $4,000,000,*fn5 adding petitioner's valuations for certain machinery and equipment which he (the Division judge) deemed taxable as real property. Adding the stipulated land value of $578,940 for each of these three years, he arrived at the following total valuations: $4,769,640 ...