TAX COURT OF NEW JERSEY
DOCKET NO. 011369-93
Calton Homes, Inc., :
Plaintiff, :
v. :
Township of West Windsor, :
Defendant. :
Decided July 24, 1995
Garry J. Roettger for plaintiff
(Skoloff & Wolfe, attorneys; Garry J. Roettger on the brief;
Saul A. Wolfe of counsel).
Brian M. Hak for defendant
(Weiner Lesniak, attorneys).
Julian F. Gorelli for amicus curiae
(Deborah T. Poritz, Attorney General of New Jersey, attorney).
ANDREW, P.J.T.C.
This local property tax case presents a question under the rollback tax assessment
provisions of N.J.S.A. 54:4-23.8. The parties, plaintiff, Calton Homes, Inc., and defendant,
West Windsor Township, have asked this court to decide whether the Mercer County Board of
Taxation followed an appropriate methodology in its calculation of rollback taxes for
plaintiff's property for the tax years of 1991 and 1992.
This case has been submitted for decision by the parties on a stipulation of facts,
supporting exhibits, the appraisal reports of the experts for the respective parties, and briefs.
At my request, because of the tangential constitutional issues presented, the Attorney General
has participated in this proceeding by filing a brief expressing her view of the correct
interpretation of the relevant legislative and constitutional provisions.
The property at issue is known and designated as Block 21, Lot 22 on the tax map of
defendant, West Windsor Township. It is an irregularly shaped parcel of land consisting of
143.33 acres and is located in a R-2 residential district which, for the most part, permits
development of single-family dwellings.
The record reveals that West Windsor Township implemented a district-wide
revaluation for each of the tax years 1983 and 1993. The subject, however, was assessed as
farmland pursuant to the Farmland Assessment Act of 1964, N.J.S.A. 54:4-23.1 to -23.23, for
the tax years of 1983 through 1993. In 1983, the farmland assessment was set at $58,200See footnote 1
and apparently that assessment was carried over each year until 1993 when the farmland
assessment was increased to $73,300. Although the property was assessed as farmland in
1983, the appraisal firm performing the revaluation suggested that the fair market value of the
subject was $1,171,816 which was a figure that was carried on the property record card
pursuant to N.J.A.C. 18:12-4.8.See footnote 2
Plaintiff acquired the subject property on March 2, 1993 for $5,016,000 and is
currently developing the property with the construction of single-family houses. Prior to
plaintiff's acquisition, the West Windsor Township Planning Board on April 22, 1987, had
granted preliminary and final subdivision approval to develop the property for residential
purposes. Plaintiff devotes a large portion of its initial brief to point out that, while
subdivision approvals had been granted as early as 1987, because of a sewer moratorium and
a host of other problems related to sewage disposal systems, actual development of the subject
was not feasible until April 15, 1993, when plaintiff filed its final subdivision map with the
Mercer County Clerk's office.
Shortly thereafter, on August 31, 1993, the West Windsor Township tax assessor filed
a complaint with the Mercer County Board of Taxation seeking additional taxes, known as
rollback taxes for tax year 1993, the year in which the property was applied to a nonfarmland
use and the two immediately preceding years of 1991 and 1992 pursuant to N.J.S.A. 54:4-23.8 and -23.9.
At the hearing scheduled by the county board, apparently no one appeared on behalf of
plaintiff and the county board adopted the assessable values recommended by the tax assessor.
The county board judgment reveals the following:
1991
1992
1993
Full & Fair Value
$5,016,000
$5,016,000
$5,016,000
x Chapter 123
average ratio
41.33"
41.33"
100"
= nonqualified
taxable value
$2,073,100
$2,073,100
$5,016,000
Assessment under
the Farmland
Assessment Act
$ 58,200
$ 58,200
$ 73,300
Rollback
Assessment
$2,014,900
$2,014,900
$4,942,700
Tax Rate
4.27
4.67
2.23
Amount of Tax
$ 86,036.23
$ 94,095.83
$ 110,222.21
As the chart reflects, the county board accepted a fair market value for each of the tax
years at issue of $5,016,000 which was the purchase price paid by plaintiff on March 2, 1993
for the subject property. With respect to tax years 1991 and 1992 the board applied the
chapter 123 average ratio to derive the nonfarmland qualified taxable value. However, while
the county board applied a ratio of 41.33" for tax year 1991, the correct average ratio for
West Windsor Township for 1991 was 42.33%. See Division of Taxation, Certification of
Average Ratios and Common Level Ranges for use in the tax year 1991, Mercer County,
West Windsor Township. If defendant's position is correct in this case, this court is
obligated, under N.J.S.A. 54:1-35a., to apply the chapter 123 ratio promulgated by the
Director of the Division of Taxation. See Murnick v. Asbury Park,
95 N.J. 452, 458 (1984)
(the use of a ratio other than that declared by the Director of the Division of Taxation violates
N.J.S.A. 54:1-35a. and should be corrected under the plain error rule, R. 2:10-2). Since 1993
was a year in which the township implemented a district-wide revaluation, 100" of fair
market value was the ratio applied for that year. See N.J.S.A. 54:3-22f. and N.J.S.A. 54:51A-6d.
Plaintiff subsequently filed a complaint with this court claiming that the rollback tax
assessment for each of the years of 1991, 1992 and 1993 was incorrect because of an
improper methodology employed by the board. During the course of this proceeding,
however, plaintiff withdrew its claim with respect to the 1993 tax year, a year in which the
township implemented a municipal-wide revaluation. Only the rollback tax assessments for
tax years 1991 and 1992 remain at issue.
There is no dispute that the subject property was applied to a nonfarmland use in
1993, and therefore, rollback taxes are appropriate. The focus of the dispute is solely on the
method of calculation of the rollback tax assessments.
Additionally, the parties have agreed as to the appropriate values to be employed based
on whether the plaintiff's proffered methodology is correct or that employed by the county
board is correct. The stipulation of facts provides that, if I conclude that the county board's
method is correct, the fair market value of the subject property as of the pivotal assessment
dates of October 1, 1990 for tax year 1991 and October 1, 1991 for tax year 1992 was
$5,016,000. The parties have also agreed that the applicable average ratio to be applied,
again, if the county board's method is correct, is 41.33" for both tax years of 1991 and 1992.
However, as I previously indicated, with regard to tax year 1991, I am obligated to apply the
average ratio of 42.33" as promulgated by the Director of the Division of Taxation.
In essence, if I conclude that the county board's method was correct, plaintiff concedes
that the 1991 and 1992 rollback assessments and resulting taxes are correct. However, for tax
year 1991, the rollback assessment and resulting taxes must be recalculated using an average
ratio of 42.33%.See footnote 3
If, however, the methodology offered by plaintiff is appropriate, the parties have
agreed that the total nonfarmland qualified value for the subject property for rollback tax
purposes is $1,289,000. This would produce a rollback tax assessment for each tax year of
1991 and 1992 of $1,230,800 after deducting the farmland qualified value of $58,200. The
sum of $1,289,000 was selected by plaintiff because it represents the value recommended by
the revaluation firm as the fair market value for the subject as of October 1, 1982 for the
1983 revaluation year ($1,171,816) with, as suggested by plaintiff's appraisal expert, an
additional ten percent added to account for entrepreneurial profit ($1,171,816 x 1.10 =
$1,289,000). Apparently, plaintiff's appraiser believed that an addition of entrepreneurial
profit was justified based on the subdivision approvals that were obtained subsequent to 1983,
but prior to the assessment dates at issue.See footnote 4
Plaintiff claims that defendant's tax assessor did not value the subject property for
purposes of the rollback assessment at the same standard of value at which other property in
the taxing district was being assessed. Plaintiff asserts that property in the taxing district for
tax years 1991 and 1992 was generally assessed at those values arrived at by a revaluation
firm during the revaluation implemented in 1983, eight years prior to the first rollback year in
this case.
Plaintiff contends, however, that while other properties in the taxing district were
being assessed at 1983 values, rollback assessments on the subject property for tax years 1991
and 1992 were based on values determined as of October 1, 1990 and October 1, 1991
respectively. See N.J.S.A. 54:4-23. Plaintiff maintains that the county board's practice of
assessing property for rollback purposes at its current full and fair value: (1) is not in
conformance with the rollback tax provisions of N.J.S.A. 54:4-23.8, (2) constitutes
discrimination in contravention of the tax clause of the New Jersey Constitution, N.J. Const.
art. VIII, §1, ¶1, and (3) is a violation of equal protection under both the New Jersey and
United States Constitutions, U.S. Const. amend XIV, N.J. Const. art I, ¶5.
Additionally, plaintiff alleges that these rollback assessments constitute a case of
egregious discrimination, and that, consequently, the discrimination provisions of chapter 123
of the Laws of 1973, N.J.S.A. 54:3-22 and :51A-6, do not provide an appropriate form of
relief. Plaintiff seeks to have the rollback taxes reduced to the amount that plaintiff would
have paid if the subject property had never been assessed as qualified farmland. Plaintiff
alleges that this amount is the fair market value of the subject property as determined for tax
year 1983 by the appraisal firm that performed defendant's revaluation for that year with an
adjustment for entrepreneurial profit.
In response, both defendant taxing district and amicus, the Attorney General, maintain
that the correct procedure for calculating rollback tax assessments was employed by the
county board in this case and that is to determine the fair market value of the property at
issue as of the applicable assessment dates which is then adjusted by the chapter 123 formula
to arrive at nonfarmland taxable value. See Schere v. Township of Freehold, 150 N.J. Super.
404, 409 (App. Div. 1977) (stating that "`full and fair value,' as contained in [N.J.S.A. 54:4-23.8], is the same as that traditionally applied in the assessment of property, i.e., the fair
market value."); Plushanski v. Union Tp., 1 N.J. Tax 520, 528 (Tax 1980) (explaining that
October 1 of each pretax year is the appropriate valuation date for purposes of calculating
rollback taxes) and V.B.R. Associates v. Bernards Tp., 6 N.J. Tax 241, 245-46 (Tax 1984)
(holding that under N.J.S.A. 54:4-23.8(a), the chapter 123 ratio must be applied to the "full
and fair value" of a property so that such property can be assessed "under the valuation
standard applicable to other land in the taxing district").
The dispute in this case arises from differing interpretations by the parties of certain
relevant constitutional and statutory provisions relating to the assessment and taxation of real
property in this State. To begin with, the original tax clause in the New Jersey Constitution
of 1844, as amended in 1875, provided that "[p]roperty shall be assessed for taxes under
general laws, and by uniform rules, according to its true value." Art. IV, §VII, ¶12. As
noted by our Supreme Court, the standard of true value was implemented by the Legislature
in the adoption of N.J.S.A. 54:4-23. See Gibralter Corrugated Paper Co. v. North Bergen
Tp.,
20 N.J. 213, 218 (1955).
N.J.S.A. 54:4-23 directs tax assessors to determine full and fair value or true value as
follows:
All real property shall be assessed to the person owning the
same on October 1 in each year. The assessor shall ascertain
the name of the owners of all real property situate in his
taxing district, and after examination and inquiry, determine
the full and fair value of each parcel of real property situate
in the taxing district at such price as, in his judgment, it
would sell for at a fair and bona fide sale by private contract on
October 1 next preceding the date on which the assessor shall
complete his assessments. . . .
[Emphasis added]
In 1947, when the people of this State adopted our current Constitution, the tax clause
provided for uniformity in the following language:
Property shall be assessed for taxation under general laws
and by uniform rules. All real property assessed and taxed
locally or by the State for allotment and payment to taxing
districts shall be assessed according to the same standard
of value, except as otherwise permitted herein, and such real
property shall be taxed at the general tax rate of the taxing
district in which the property is situated, for the use of
such taxing district.
[N.J. Const. art. VIII, §1, ¶1(a); emphasis added]
Although the new tax clause deleted the reference to true value in order to provide
legislative discretion or flexibility with regard to the standard of value, there has been no
change in the statutory assessment criterion of true value. N.J.S.A. 54:4-2.25 mandates that
the standard of value at which all real property shall be assessed is the "true value" of such
property. N.J.S.A. 54:4-23 still remains as the legislative prescription for assessment at true
value. In this regard, our Supreme Court stated the following with regard to the effect that
the adoption of the 1947 Constitution had upon N.J.S.A. 54:4-23:
The new Constitution worked no change in the statutory standard
for it speaks only in terms of equality, leaving the denominator
at which this is to be attained to legislative determination.
1947 Constitution, Art. VIII, Sec. I, par. 1 provides inter alia:
"Property shall be assessed for taxation under general laws and by
uniform rules. All real property . . . shall be assessed according
to the same standard of value; . . ."
The Legislature has not disturbed the provisions which call for
true value assessment, but the dominant principle now is equality
of treatment and burden, the standard employed is but the level
on which the objective is to be realized.
[Gibralter Corrugated Paper Co., supra, 20 N.J. at 218-19; emphasis
added]
Thus, although N.J.S.A. 54:4-23 was enacted pursuant to the Constitution of 1844, the "full
and fair value" standard expressed in this statute is faithful to, and consistent with, the "same
standard of value" requirement of our present Constitution.
Further, the legislative findings corresponding to the enactment of the "Revaluation
Relief Act of 1993," N.J.S.A. 54:1-35.39 to -35.48, reveal the Legislature's view with regard
to the "same standard of value" provision of N.J. Const. art. VIII, §1, ¶1(a):
The Legislature finds and determines that:
a. Article VIII, Section I, paragraph 1 of the Constitution
of the State of New Jersey requires that all real property in
the State be assessed for taxation under the same standard of
value, which the Legislature has defined as "true" or "market"
value, and taxed at a uniform general tax rate within each
taxing district; . . .
[N.J.S.A. 54:1-35.40; emphasis added]
"Full and fair value," as used in N.J.S.A. 54:4-23, is the equivalent of "true value" or "market value," Willingboro Chrysler/Plymouth v. Edgewater Park Tp., 6 N.J. Tax 168, 176 (Tax 1983) citing Newark v. West Milford Tp., 9 N.J. 295, 303 (1952), and, thus, synonymous with the "same standard of value" requirement of the New Jersey Constitution. See N.J.
Const. art. VIII, §1, ¶1(a).
Moreover, N.J.S.A. 54:4-23 requires the assessor to value real property as of October 1
of the pretax year. See Irvington v. 1125-1127 Clinton Ave. Associates, 5 N.J. Tax 420 (Tax
1983) (stating that N.J.S.A. 54:4-23 "directs the assessor to value real property as though it
were sold pursuant to private contract on the assessing date."); Genola Ventures v.
Shrewsbury, 2 N.J. Tax 541, 551 (Tax 1981) (stating that, in a local property tax proceeding,
the court is "seeking to find the true value of the property, specifically, the price a
hypothetical willing buyer would pay a hypothetical willing seller on October 1 of the pretax
year."); Atlantic Cty. New School, Inc. v. Pleasantville, 2 N.J. Tax 192, 196 (Tax 1981)
(stating that "questions of exemption or valuation are determined as of [October 1 of the
pretax year] unless the Legislature has specifically provided otherwise.") Thus, under the
plain language of N.J.S.A. 54:4-23, and pursuant to N.J. Const. art. VIII, §1, ¶1(a), the
"standard of value" at which property is assessed is its "full and fair value" as of October 1 of
the pretax year.
Paragraph 1(b) of N.J. Const. art. VIII, §1 provides an exception to the requirement
that all property be assessed "according to the same standard of value." N.J. Const. art. VIII,
§1, ¶1(b) states in relevant part as follows:
The Legislature shall enact laws to provide that the value of
land, not less than 5 acres in area, which is determined by the
assessing officer of the taxing jurisdiction to be actively
devoted to agricultural or horticultural use and to have been
so devoted for at least the 2 successive years immediately
preceding the tax year in issue, shall, for local tax purposes,
on application of the owner, be that value which such land has
for agricultural or horticultural use.
In the event that property receiving such preferential assessment is applied to a nonagricultural
or nonhorticultural use, the constitutional exception provides for a recapture of local property
taxes as follows:
Any such laws shall provide that when land which has been valued
in this manner for local tax purposes is applied to a use other than
for agriculture or horticulture it shall be subject to additional
taxes in the amount equal to the difference, if any, between the
taxes paid or payable on the basis of the valuation and the assessment
authorized hereunder and the taxes that would have been paid or
payable had the land been valued and assessed as otherwise provided
in this Constitution, in the current year and in such of the tax years
immediately preceding, not in excess of 2 such years in which the
land was valued as herein authorized.
[N.J. Const., art. VIII, §1, ¶1(b); emphasis added]
Thus, N.J. Const. art. VIII, §1, ¶1(b) explicitly authorizes rollback taxes once farmland
qualified property is applied to a nonagricultural or nonhorticultural use. The amount of
additional or rollback tax is equal to the difference between the tax based on the value of the
property for agricultural or horticultural use and the amount of tax "that would have been paid
or payable had the land been valued and assessed as otherwise provided in this Constitution."
The Legislature codified the constitutional directive requiring the imposition of
rollback taxes at N.J.S.A. 54:4-23.8. This section is entitled "Rollback taxes; determination of
amounts," and states in relevant part:
When land which is in agricultural or horticultural use and is
being valued, assessed and taxed under the provisions of this act,
is to be applied to a use other than agricultural or horticultural,
it shall be subject to additional taxes, hereinafter referred to
as roll-back taxes, in an amount equal to the difference, if any,
between the taxes paid or payable on the basis of the valuation and
the assessment authorized hereunder and the taxes that would have
been paid or payable had the land been valued, assessed and taxed
as other land in the taxing district, in the current tax year (the
year of change of use) and in such of the 2 tax years immediately
preceding, in which the land was valued, assessed and taxed as
herein provided.
. . . .
In determining the amounts of the roll-back taxes chargeable on the
land which has undergone a change in use, the assessor shall for
each of the roll-back tax years involved, ascertain:
(a) The full and fair value of such land under the valuation
standard applicable to other land in the taxing district;
(b) The amount of the land assessment for the particular tax
year by multiplying such full and fair value by the county percentage
level, as determined by the county board of taxation in accordance
with section 3 of P.L. 1960, Chapter 51 (C. 54:4-2.27);
(c) The amount of the additional assessment on the land for
the particular tax year by deducting the amount of the actual
assessment on the land for that year from the amount of the land
assessment determined under (b) hereof; and
(d) The amount of roll-back tax for that tax year by multiplying
the amount of the additional assessment determined under (c) hereof
by the general property tax rate of the taxing district applicable
for that tax year.
[Emphasis added]
See also N.J.A.C. 18:15-7.3 (containing substantially the same provisions as N.J.S.A. 54:4-23.8 with regard to the computation of rollback taxes).
Plaintiff argues that, because the rollback tax assessments were based on the value of
the subject property as of October 1, 1990 and October 1, 1991, its property was not assessed
according to the same "standard of value" at which other properties in the taxing district were
assessed, in violation of N.J.Const. art. VIII, §1, ¶1(a).
Despite the fact that N.J.S.A. 54:4-23, in harmony with N.J.Const. art. VIII, §1, ¶1(a),
dictates that the "standard of value," at which property must be assessed is its "full and fair
value" as of October 1 of the pretax year, plaintiff argues that, in this case, rollback taxes
should be calculated using values arrived at by a revaluation firm during the revaluation
implemented in 1983 (which values were presumably fixed as of October 1, 1982) as the
"standard of value." Plaintiff's argument is based, in part, on the language of N.J.S.A. 54:4-23.8(a) which requires that rollback taxes be determined based on the "valuation standard
applicable to other land in the taxing district." Plaintiff contends that the standard of value
applicable to other land in the taxing district is that of the 1983 revaluation values or, as
referred to by plaintiff, "base year" values. It is plaintiff's position that base year values are
carried forward each year by the tax assessor, with certain exceptions, until the next district-wide revaluation. Thus, plaintiff maintains, in the present case, the values determined in the
1983 revaluation, or base year, should be the basis for calculating taxable value until the next
revaluation or reassessment.
Plaintiff's argument is not convincing. As I have previously indicated, the tax clause
in our Constitution and N.J.S.A. 54:4-23 require that nonfarmland qualified property be
assessed at "full and fair value" as of October 1 of the pretax year. Any argument which
suggests that the "standard of value" at which real property is assessed is anything other than
"full and fair value" as of October 1 of the pretax year necessarily contravenes the legislative
prescription for uniform assessment practices. As I have previously discussed, the valuation
standard outlined in N.J.S.A. 54:4-23 is in harmony with the "same standard of value"
requirement of our Constitution. N.J. Const. art. VIII, §1, ¶1(a).
Plaintiff contends, however, that N.J.S.A. 54:4-23.8 does not require that a property be
assessed at its true or market value as of October 1 of the pertinent pretax year, but only that
the property be assessed according to the "valuation standard applicable to other land in the
taxing district." Plaintiff's argument, again, is not persuasive. The portion of N.J.S.A. 54:4-23.8 which details the procedure for determining rollback taxes explicitly refers to the "full
and fair value" standard found in N.J.S.A. 54:4-23. Additionally, N.J. Const. art. VIII, §1,
¶1(b) requires that rollback taxes be assessed in an amount equal to the difference between
taxes paid based on farmland value and the taxes that would have been payable "had the land
been valued and assessed as otherwise provided in this Constitution. . . ." Emphasis added.
As previously indicated, N.J. Const. art. VIII, §1, ¶1(a), by means of N.J.S.A. 54:4-23,
requires property to be valued at its "full and fair value" as of October 1 of the pretax year.
Thus, pursuant to the New Jersey Constitution, N.J.S.A. 54:4-23.8's reference to the
"valuation standard applicable to other land in the taxing district," must refer to "full and fair
value" as of October 1 of the pretax year.
In further support of its position, plaintiff's expert compared assessable line items on
the 1983 West Windsor Township tax list with those on the 1992 township tax list. Plaintiff's
expert determined that of the 6,498 items on the 1992 tax list, the total number of land value
changes from the 1983 tax list was 221, or 3.4" of the total line items. The total number of
all line item changes (land and improvements) was 689, or approximately 11" of the total
line items. Thus, plaintiff contends that, for tax year 1992, the value of 89" of the line items
was based on values established in the 1983 base year. Plaintiff's appraisal expert alleges that
these line item changes were due in some cases to successful tax appeals, changes in the status
of farmland qualified property, and the subdivision of property. Plaintiff argues that because
of the minimal number of changes to those assessments originally set for the 1983 revaluation
year, "the valuation standard applicable to other land in the taxing district" must be the 1983
revaluation values.
Again, plaintiff's argument is misplaced. The premise of plaintiff's argument is that
uniformity in tax assessments was achieved in 1983 and that by referring to those assessments
or recommended values even eight or nine years later will accomplish uniformity. First, there
is nothing in the record to demonstrate that the 1983 revaluation achieved uniformity of
assessment in West Windsor Township. Second, and more important, there is no proof in this
case that, even if the 1983 revaluation produced uniformity in assessments, that uniformity
continued with the passage of time. It cannot be denied that property values in a municipality
do not remain at uniform levels over time because of the uneven effect of economic forces.
See Appraisal Institute, The Appraisal of Real Estate at 75 (stating that "[t]he date of a value
estimate must be specified because the forces that influence real property value are constantly
changing."). Thus, it cannot be assumed that uniformity will be achieved if 1983 values are
applied to valuation or assessment dates many years later.
Moreover, if plaintiff's argument were accepted there would be two allegedly
acceptable "standards of value" depending on the number of changes that an assessor makes
between revaluation years. If the assessor adjusted 51" of the assessments in the
municipality between revaluations, which standard of value would plaintiff have this court
apply? The argument could be made that the alleged 1983 revaluation standard should not be
applied because the majority of property in the taxing district is allegedly assessed at full and
fair value as of October 1 of the pretax year. Even more important, however, is that the tax
clause in our Constitution does not permit more than one "standard of value." See Switz v.
Kingsley,
37 N.J. 566, 572 (1962) ("the Constitution of 1947 requires that whatever
"`standard of value' is legislated, that `same' standard shall be applied to all real property
taxable for local government (i.e., municipal, county, or regional school districts)").
Additionally, if plaintiff's position is to be accepted with regard to appeals of rollback
tax assessments, it would have to be accepted with regard to all traditional tax appeals in
order to satisfy the requirement of the tax clause that all real property be assessed and taxed
"according to the same standard of value." Thus, under plaintiff's interpretation of N.J.S.A.
54:4-23.8, evidence would have to be elicited in every local property tax appeal as to the
standard of value applicable in a particular taxing district. Additionally, as line items
continually change, so will the applicable standard of value. It is well established that statutes
should not be construed in a manner which leads to absurd or unreasonable results. Reisman
v. Great Amer. Recreation, 266 N.J. Super. 87, 96 (App. Div. 1993), certif. denied,
134 N.J. 560 (1993); 534 Hawthorne Ave. Corp. v. Barnes, 204 N.J. Super. 144, 148 (App. Div.
1985). To interpret N.J.S.A. 54:4-23.8 in the manner suggested by plaintiff clearly leads to
such results. Not only does the Constitution not permit it, but the Legislature could not have
intended for a standard of valuation to be determined for every local property tax appeal.
Plaintiff notes that, pursuant to N.J.A.C. 18:12-4.8(a)(4) and (8)(iii), a revaluation firm
is required to place, in addition to the subject property's qualified farmland value, its estimate
of the property's highest and best use or fair market value of qualified farmland on the
corresponding "property record card." The township's revaluation firm did, in fact, record its
estimate of the subject property's highest and best use value on the property record card as of
October 1, 1982 at $1,171,816. Plaintiff asserts that the purpose of N.J.A.C. 18:12-4.8(a)(4)
and (8)(iii) is to predetermine the property's highest and best use value according to the same
standard of value applied to other property in the taxing district, so that when rollback taxes
are imposed under N.J.S.A. 54:4-23.8, the assessor can merely go back to the property record
card to ascertain the property's highest and best use value. Plaintiff contends that such a
procedure eliminates the dangers of hindsight and the difficulty in reconstructing the standard
of value previously applied in the base year.
There are several problems with the approach suggested by plaintiff. Plaintiff's
argument presupposes that the $1,171,816 highest and best use value arrived at by the
revaluation firm and placed on the property record card actually represents the nonqualified
fair market value of the subject property on October 1, 1982. Plaintiff, however, has
provided no evidence to indicate that this is the case. Plaintiff simply assumes that
$1,171,816 actually represented the full and fair value of the subject property as of October 1,
1982. Simply because that figure appears on the property record card does not mean that it is
necessarily indicative of the property's full and fair value as of October 1, 1982.
Additionally, had the subject property actually been assessed at the $1,171,816 for the
1983 tax year or any subsequent year, both the municipality and the plaintiff would have been
entitled to contest that assessment by filing an appeal, pursuant to N.J.S.A. 54:3-21, within the
time period prescribed by that statute. However, under plaintiff's analysis, there would be no
opportunity to contest the base year value set by the revaluation firm, since plaintiff contends
that this number is conclusive for purposes of determining rollback tax.
Plaintiff concedes that Plushanski v. Union Tp., supra, dictates that for purposes of
rollback taxes, the relevant assessing date for each rollback year is October 1 of the pretax
year. 1 N.J. Tax at 528. However, plaintiff asserts that, in Plushanski, the Tax Court
presupposed that a particular municipality would comply with N.J.S.A. 54:4-23, and
"determine the full and fair value of each parcel of real property" on an annual basis.
As defendant has aptly observed, however, there is nothing in Judge Lasser's opinion
in Plushanski that would support plaintiff's assumption. Instead, what is abundantly clear is
that Judge Lasser held that "the standard of value mandated by N.J.S.A. 54:4-23 must be used
on land subject to rollback tax," id. at 525, and "as of the assessing date (October 1 of the
pretax year)," id. at 527. There is nothing in the statutory or decisional law which permits
otherwise.
Plaintiff also argues that the practice of assessing rollback taxes based on the full and
fair value of the subject property as of October 1 of the pretax year, constitutes discrimination
in violation of the uniformity clause of the New Jersey Constitution, N.J. Const. art. VIII, §1,
¶1(a), and the equal protection clauses of both the New Jersey and federal constitutions. See
N.J. Const. art. I, ¶5; U.S. Const. amend. XIV, §1. "Equality of treatment in sharing the duty
to pay real estate taxes is a constitutional right." Murnick v. Asbury Park, supra, 95 N.J. at
458. However, mathematical perfection in taxation is neither obtainable nor required.
Murnick, supra, 95 N.J. at 459; In re Appeals of Kents 2124 Atlantic Ave., Inc.,
34 N.J. 21,
32 (1961). If the ratio of assessed value to true value of a particular property substantially
exceeds the assessment ratio generally applied in a taxing district, the taxpayer is entitled to
relief. Murnick, supra, 95 N.J. at 458; In re Appeals of Kents, supra, 34 N.J. at 33-34.
The New Jersey Legislature enacted Laws 1973, chapter 123, N.J.S.A. 54:3-22,
N.J.S.A. 54:51A-6 and N.J.S.A. 54:1-35a, (commonly known as "chapter 123") to address the
problem of discrimination in local property tax assessments. N.J.S.A. 54:1-35a, entitled
"Definitions," states as follows:
a. The "average ratio" of assessed to true value of real
property for a taxing district for the purposes of this act shall
mean that ratio promulgated by the Director of the Division of
Taxation pursuant to P.L.1954, c. 86 (C. 54:1-35.1 et seq.), as of
October 1 of the year preceding the tax year, as revised by the
tax court.
b. The "common level range" for a taxing district is that
range which is plus or minus 15" of the average ratio for the
district.
N.J.S.A. 54:51A-6, entitled "Judgment revising taxable value of property; reduction of value;
applicability of section," states in pertinent part:
a. Whenever the tax court is satisfied by the proofs that the
ratio of the assessed valuation of the subject property to its true
value exceeds the upper limit or falls below the lower limit of the
common level range, it shall enter judgment revising the taxable
value of the property by applying the average ratio to the true
value of the property. . . .
Pursuant to chapter 123, a taxpayer is not entitled to discrimination relief if the ratio of the
assessed value to the true value of his or her property falls within the "common level range."
In Murnick, supra, our Supreme Court held that chapter 123 establishes a
rebuttable presumption of the common level of assessment within each municipality. In order
[t]o overcome the presumption that the chapter 123 ratio reflects
the common level, the taxpayer must establish that application of
the ratio would be "virtually confiscatory." . . . As a practical
matter, the presumption created by chapter 123 is so strong, that
it will be exclusive in all but the most egregious cases.
. . . .
It is sufficient to note that a taxpayer's right to relief should
be determined in accordance with chapter 123 in all but the most
extreme or severe circumstances. To that limited extent chapter
123 is not exclusive. Thus construed, we have no doubt that the
statute is constitutional.
[95 N.J. at 463; emphasis added]
See Township of West Milford v. Van Decker, 120 N.J. 354 (1990) (holding that reassessment of only those properties which were the subject of a recent sale constituted
"egregious discrimination," which fell outside the scope of chapter 123).
In this case, the county board applied the average ratio prescribed by chapter 123 to
the determined true value for the subject property in arriving at nonfarmland taxable value for
each of the rollback tax years of 1991 and 1992.See footnote 5 Plaintiff maintains, however, that chapter
123 is not the appropriate relief in this case. It is plaintiff's position that this case, like West
Milford v. Van Decker, supra, presents an egregious case of discrimination in which chapter
123 does not establish "both the right to and measure of relief," Murnick v. Asbury Park,
supra, 120 N.J. at 455, and therefore, the only appropriate remedy is to apply the 1983
revaluation or base year value as augmented by plaintiff with an entrepreneurial factor.
In Van Decker, our Supreme Court condemned "the practice of reassessing only
properties that were the subject of a recent sale while leaving undisturbed the appraised
valuations of properties in the same class that have not been sold." 120 N.J. at 357.
Plaintiffs, in Van Decker, alleged that they had been intentionally discriminated against in that
their property was assessed at current value, while other property in the same class had not
been reassessed. Id. at 358. Consequently, they asserted that a greater tax burden was
imposed on them than on other similarly situated property owners. Ibid. The township
argued that there was no discrimination because plaintiff's assessment-to-value ratio fell
within the chapter 123 "common level range." Ibid. The Supreme court agreed with
plaintiffs, holding that the assessor's practice constituted a "spot assessment" in violation of
both the uniformity clause of the New Jersey Constitution and the federal equal protection
clause. Id. at 362. The Court stated that "[t]his case presents an egregious case of
discrimination, and as such, is one of the narrow few that falls outside of the scope of Chapter
123." Id. at 365; emphasis added.
The Van Decker Court noted, however, that "it is arbitrary intentional discrimination
that is unconstitutional," and that "[a] municipality may revise assessments in years other than
years of a municipal-wide revaluation for legitimate reasons." Id. at 362. Such legitimate
reasons include increased value as a result of new improvements, the addition of formerly
exempt property, and the conversion of apartments to condominiums.See footnote 6 Ibid. There can be
no question that the imposition of rollback taxes is a legitimate reason for revising an
assessment. As previously discussed, the imposition of rollback taxes is required under the
New Jersey Constitution, N.J. Const. art. VIII, §1, ¶1(b), and N.J.S.A. 54:4-23.8. Plaintiff
argues that the present case is nearly identical to the "welcome stranger" pattern of assessment
found unconstitutional in Van Decker, supra. This case, in my view, is simply not a Van
Decker case. In Van Decker, supra, there was no constitutional or statutory requirement
directing the assessor to reassess those properties which were the subject of recent sales. In
the present case, the assessor, in seeking a rollback tax assessment, properly followed the
commands of N.J. Const. art. VIII, §1, ¶1(b), and N.J.S.A. 54:4-23.8.
Plaintiff also asserts that chapter 123 is inapplicable because it does not apply to
farmland rollback tax assessments made under N.J.S.A. 54:4-23.8. Specifically, plaintiff notes
that there is nothing in chapter 123 which indicates that it was intended to override N.J.S.A.
54:4-23.8. In support of this position, plaintiff notes that sales of property assessed under the
Farmland Assessment Act of 1964 are not considered in determining the chapter 123 ratio.See footnote 7
Plaintiff argues that in valuing property which qualifies for farmland assessment, only the
value that such land has for agricultural and horticultural purposes, and not the "prospective
value which such land has for sub-division or other nonagricultural or horticultural purposes"
should be considered. N.J.A.C. 18:15-4.2. Plaintiff also argues that all cases applying
chapter 123 discrimination relief involved properties which were assessed at their fair market
value, not at a qualified farmland value.
Plaintiff's argument in this regard makes no sense. As defendant points out, the value
of the subject property for purposes of farmland assessment is not at issue. Rollback taxes are
being assessed precisely because the property no longer qualifies for farmland assessment.
Under N.J.S.A. 54:4-23.8, the property must be assessed at its "full and fair value," not its
farmland value. By plaintiff's own logic, because the property must be assessed at its highest
and best use value, and not farmland value, chapter 123 will apply. Additionally, case law
indicates that chapter 123 is applicable to rollback assessments. See V.B.R. Associates v.
Bernards Tp., supra.
In V.B.R., defendant-municipality argued against the application of a chapter 123 ratio
to a rollback valuation. While defendant agreed that failure to apply the chapter 123 ratio to
the rollback valuation would result in a higher assessment than if the property had been
regularly assessed in the years at issue, defendant asserted that the additional amount was a
penalty, as distinguished from a regular tax assessment. 6 N.J.Tax at 244-45. The court, in
holding chapter 123 applicable to rollback tax assessments stated:
If equality of assessments were not reflected in rollback tax
assessments they would not be made "according to the same standard
of value" as all other assessments in the taxing district. This
result would be violative of the tax clause of the State Constitution,
N.J. Const. (1947), Art. VIII, §I, ¶1(a). . . . In the present
situation subsection (a) of N.J.S.A. 54:4-23.8 is reasonably
susceptible of a construction which encompasses discrimination
relief. In fact, the discrimination issue would seem to be inseparable
from the issue of valuation. Weyerhaeuser Co. v. Closter Bor.,
[190 N.J. Super. 528 (App. Div. 1983)].
[Id. at 245-46]
Plaintiff, however, asserts that this court's holding in V.B.R., is incorrect. Plaintiff alleges that, in V.B.R., the court did not consider the relevant language of N.J.S.A. 54:4-23.8, specifically, that "the valuation standard applicable to other land in the taxing district" be used, and that rollback taxes constitute "the taxes that would have been paid or payable had the land been valued, assessed and taxed as other land in the taxing district." As has been discussed previously in this opinion, however, and as required by the tax clause of the State
Constitution, the standard of value applicable to other land in the taxing district is "full and
fair value" as of October 1 of the pretax year. See N.J. Const. art. VIII, §1, ¶1(a); N.J.S.A.
54:4-23. Consequently, "the taxes that would have been paid or payable had the land been
valued, assessed and taxed as other land in the taxing district," must be based on "full and fair
value" as of October 1 of the pretax year. The V.B.R. decision is consistent with this
reasoning, and was correctly decided. Moreover, the decision in V.B.R., has now been the
authoritative statement on this question for over eleven years and the Legislature has made no
attempt to change it.
Plaintiff also attacks application of the chapter 123 ratio to rollback assessments by
reference to the 1970 amendment, L. 1970, c. 243, §2, to N.J.S.A. 54:4-23.8. Prior to this
amendment, N.J.S.A. 54:4-23.8(b) read as follows:
(b) The amount of the land assessment for the particular tax
year by multiplying such full and fair value by the average real
property assessment ratio of the taxing district, as determined
by the county board of taxation for the purposes of the county
equalization table for such year, pursuant to sections 54:3-17
to 19 of the Revised Statutes. . . .
[Emphasis added]
The 1970 amendment removed any reference to the "average real property assessment ratio of
the taxing district," and replaced it with the statute's current language which dictates that the
full and fair value of the property be multiplied by the "county percentage level." See
N.J.S.A. 54:4-2.27 (discussing the procedure for establishing the "county percentage level").
There is no legislative history which indicates the reason for this change.
Plaintiff submits that the reason for the 1970 amendment to N.J.S.A. 54:4-23.8 was
that application of the average ratio to the "base year" or revaluation year value would not
"recapture" the deferred tax as intended by the Legislature and should, thus, not be applied.
See Jackson Tp. v. Paolin, 3 N.J. Tax 39 (Tax 1981) (referring to The Report of the
Governor's Farmland Assessment Committee, March 20, 1963, which characterized the then
proposed rollback provision as "a tax deferral or recapture feature"). Plaintiff's position,
however, assumes that N.J.S.A. 54:4-23.8's reference to "full and fair value . . . under the
standard applicable to other land in the taxing district," means "base year value." As I have
previously indicated, there is no authority for this proposition. To the contrary, as explained
previously, the tax clause of our State Constitution and N.J.S.A. 54:4-23 demonstrate that the
standard of value is "full and fair value" as of October 1 of the pretax year.
Additionally, as the Attorney General points out in her brief, the 1970 amendment
corrected an error inherent in N.J.S.A. 54:4-23.8, which resulted in twice adjusting the
nonfarmland qualified value of a property to the common level. The "valuation standard"
referred to in N.J.S.A. 54:4-23.8(a) must, by necessity, include an adjustment to the common
level of assessment. If this were not the case, the particular property would clearly not be
assessed using the same standard of value "applicable to other property in the taxing district."
Consequently, because the adjustment to the common level is already incorporated in the
valuation standard set forth in N.J.S.A. 54:4-23.8(a), there was no need to account for it in
N.J.S.A. 54:4-23.8(b).
Further, at the time of the 1970 amendment to N.J.S.A. 54:4-23.8, many county boards
had adopted county percentage levels of less than 100%. See 1970 Annual Report of the
Division of Taxation (indicating, in the Table of Aggregates, the county percentage levels
utilized by the twenty-one county boards of taxation). By requiring that the county
percentage level be applied to the "full and fair value" of property subject to rollback taxes
under N.J.S.A. 54:4-23.8, the Legislature ensured that such property would be assessed at the
same level as other property in the taxing district. Thus, the 1970 amendment to N.J.S.A.
54:4-23.8 advanced the concepts of uniformity and equality in assessment between property
assessed for purposes of rollback taxes and other property in the taxing district.
Plaintiff's discrimination argument is, in essence, an attempt to show that it has been
discriminated against by reference to assessments of other properties in the taxing district. Its
argument is that, since other properties in the township are assessed at 1983 values, or
underassessed according to plaintiff, its assessment should be reduced to the same level of
underassessment. Plaintiff's argument is not only not persuasive but is counterproductive.
First, use of comparable assessments is insufficient to sustain a claim of
discrimination. Greenwald v. Metuchen, 1 N.J. Tax 228, 236 (Tax 1980). Further, Schere v.
Township of Freehold, supra, states that N.J.S.A. 54:4-23.8(a) "mandates a determination of
the `full and fair value' of the subject property, and that calculation has nothing to do with
the assessment of other properties." 150 N.J. Super. at 407. Thus, it is of no consequence
that other properties within West Windsor Township may be assessed based on values
determined in 1983. Second, plaintiff's argument is counterproductive because it seeks a
reduction in its tax assessment to a level that is less than the common level of assessments in
the township as reflected by the chapter 123 average ratio which is presumptively the
common level in West Windsor Township. A reduction to the level urged by plaintiff would
simply create an underassessment and unduly favor plaintiff at the expense of other property
owners in the taxing district. See Greenwald v. Metuchen, supra, 1 N.J. Tax at 233.
In support of its position that the 1983 revaluation or base year values should
constitute the standard of value in West Windsor Township, plaintiff's expert computed the
alleged coefficient of deviationSee footnote 8 for nine sales of vacant land in West Windsor that occurred
in 1991 and 1992. Plaintiff's expert calculated the coefficient of deviation at 13.63 and
intended to demonstrate by this exercise that there was no uniformity of assessments with
respect to vacant land, and therefore, an application of the chapter 123 average ratio to fair
market value would not achieve substantial equality in the present case.
Plaintiff's proofs fall far short of the intended purpose. To begin with, there is no
proof in this case that plaintiff's sales sample is of sufficient size to produce reasonable
statistical results. See Sunshine Biscuits, Inc. v. Sayreville,
4 N.J. Tax 486, 499-500 (Tax
1982) (plaintiff's statistician expressed the opinion that "30 sales" would constitute a sample
of sufficient size to produce reasonable statistical results).
Second, the coefficient calculated by plaintiff's expert is incorrect. Based on the data
supplied, the coefficient of deviation for the nine sales is 12.27 and not 13.63. In any event,
a coefficient of deviation less than 15 is indicative of relative uniformity in assessment
practice and demonstrates a common level. See New Jersey State Div. of Taxation,
Handbook for New Jersey Assessors §801.31(1).
Third, if the assessments of the nine properties are, indeed, based on a 1983 value
standard as plaintiff contends, the alleged lack of uniformity is attributable to the lack of
uniformity in the 1983 revaluation year values when measured against the fair market values
of 1991 and 1992.
Plaintiff also argues that the "Rollback Tax Worksheet" allegedly utilized by the West
Windsor Township tax assessor constitutes an administrative rule which required compliance
with the rule-making procedures set forth in the Administrative Procedures Act, N.J.S.A.
52:14B-1 to