NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE TAX COURT COMMITTEE
ON OPINIONS
TAX COURT OF NEW JERSEY
DOCKET NOS. 07-10-9317-35-
91D; 07-10-09124-92;
004406-93
CITY OF EAST ORANGE, *
*
Plaintiff, *
*
v. *
*
TOWNSHIP OF LIVINGSTON, *
*
Defendant. *
Decided May 26, 1995
Philip Elberg for plaintiff (Medvin & Elberg, attorneys).
Susan Feeney for defendant (McCarter & English,
attorneys).
CRABTREE, J.T.C.
These are consolidated local property tax cases, wherein
plaintiff seeks direct review of the 1991, 1992 and 1993
assessments on its property located in Livingston, New Jersey. The
property consists of 36 separately assessed contiguous parcels
(some consisting of two or more lots) which, in the aggregate,
comprise the East Orange Water Reserve.See footnote 1
The aggregate assessments were as follows:
1991 $9,479,000
1992 $9,541,300
1993 $9,541,300See footnote 2
The property, the site of a large, underground aquifer serving
as a water supply for residents of East Orange, contains
approximately 1,422 acres in Livingston,See footnote 3 of which 731 are
wetlands.
The lands in question have been the subject of judicial review
on two prior occasions. The earlier case was In re Appeal of East
Orange.
80 N.J. Super. 219 (App.Div. 1963), involving tax year
1957, wherein the court approved of a valuation approach which
divided the acreage into various categories based upon elevation
above sea level and their condition as wooded, cleared or under
water. The municipality's expert ignored value per acre and used
a method which assumed prospective uses to include two public golf
courses, a public park and a specified number of buildings. The
court rejected this approach as "speculative," "theoretical at
best," and "unrealistic." Id. at 228.
In the later decision, involving 1961, 1962 and 1963, the
court again concluded that the land had to be divided into its
various classifications, following which a value had to be
determined for each classification and an assessment fixed by
simply adding the total of the lands in each category. In re
Appeal of the City of East Orange,
103 N.J. Super. 109 (App.Div.)
aff'd
54 N.J. 96 (1968).
Both decisions followed the method prescribed by the Supreme
Court in Newark v. West Milford Tp.,
9 N.J. 295 (1952), namely, "a
comparison of the representative component parts of the various
classifications of the lands with the true value of comparable
parcels of land owned by private persons...measured by the standard
of value established by a fair and bona fide sale at private
contract." Id. at 308.
Two significant changes affecting the subject property's value
have occurred since the 1960's: the 1987 enactment of the
Freshwater Wetlands Protection Act, P.L. 1987, c.156, N.J.S.A.
13:9B-1, et seq., and the moratorium on sewer connections for new
residential construction, which, defendant concedes, is of
indefinite duration.
The Freshwater Wetlands Act effectively prohibits any activity
which disturbs the wetlands on the subject property. The same
proscription applies to the so-called transition area, which is the
buffer strip abutting the wetlands. The size of the transition
area depends upon whether the abutting wetlands are of exceptional
resource value or of merely intermediate resource value. If the
wetlands are the habitat for one or more threatened or endangered
species, the wetlands are of exceptional resource value, and the
transition area is 150 feet wide; if the wetlands do not contain
threatened or endangered species but are not isolated or man-made
drainage ditches, swales or detention facilities, they are of
intermediate resource value, and the transition area is 50 feet
wide. N.J.S.A. 13:9B-7(a),(c); N.J.A.C. 7:7A-6.1(d)(e).
Plaintiff has offered testimony of two individuals tending to
establish the presence of two species on the threatened or
endangered list, namely, the barred owl and the red-shouldered
hawk.
The moratorium on sewer connections for new residential
construction was imposed by defendant-municipality at the direction
of DEPE, on or about June 6, 1988. While defendant acknowledges
the existence of the moratorium and that it is of indefinite
duration, it contends that sewer connection alternatives are
available to the suppositious buyer of the subject property and
thus, that the property's highest and best use is for residential
development (of the uplands portion), consistent with existing
zoning regulations.See footnote 4
Plaintiff's valuation expert, following the Supreme Court
mandate in Newark v. West Milford Tp., supra, first divided the
subject property into seven parcels. He then identified, within
each parcel, the quantum of developable acres, the quantum of non-developable upland acres and the quantum of other non-developable
acres. In the latter category, he lumped wetlands, transition
area, landlocked upland and 100-year flood plain.
The expert's breakdown of the parcels and the composition of
each is best understood when expressed in tabular form as follows:
Developable Constrained Wetlands and
Parcel Size (Acres) Acres Upland Transition area
1 336.24 3 2.37 330.87
2 57.64 2 0.88 54.76
3 376.67 18 8.07 350.60
4 64.04 12 3.35 48.69
5 261.54 31 51.29 179.25
6 163.57 14 12.59 136.98
7 162.63 6 7.41 147.22
Relying upon eight sales of developable vacant land, the
expert estimated the value of developable acreage in Parcel 3 to be
$50,000 an acre. He arbitrarily assigned one-third of that value
to the non-developable upland acreage, and on the basis of eight
sales of wetlands, he estimated the value of the other non-developable acreage in all seven parcels at $2,000 an acre.
He made qualitative adjustments about the values of
developable acreage in Parcel 1, 2 and 4 through 7, compared to
Parcel 3. Parcel 1 was deemed 20" inferior; Parcel 2 was the same
as Parcel 3; Parcel 4 was deemed 10" superior; Parcel 5 was the
same as Parcel 3; Parcel 6 was deemed 10" superior; Parcel 7 was
deemed 20" superior.
Thus, his value estimates for all three assessing dates, prior
to adjustment for the sewer moratorium, were as follows:
Parcel 1 (Block 291, Lots 2A, 2B, 10C, 22-26, 28B, 28C, 29B, 29C,
37-40, 41A, 41B, 42, 43A, 45B, 46)
Developable acres Value
3 acres @ $40,000 $120,000
Non-developable upland acres
2.37 acres @ $13,300 $31,521
Other non-developable acres
330.87 acres @ $500
(The expert deemed the flood-prone lands in
Parcel 1 to be worth no more than $500/acre) $165,435
Total (rounded) $317,000
Parcel 2 (Block 291, Lot 10B)
Developable acres
2 acres @ $50,000 $100,000
Non-developable upland acres
0.88 acres @ $16,650 $14,652
Other non-discoverable upland acres
54.76 acres @ $2,000 $109,520
Total (rounded) $224,200
Parcel 3 (Block 293, Lots 4-9, 10C, 13A, 13C, 16-18, 28)
Developable acres
18 acres @ $50,000 $900,000
Non-developable upland acres
8.07 acres @ $16,650 $134,366
Other non-developable upland acres
350.60 acres @ $2,000 $701,200
Total (rounded) $1,735,600
Parcel 4 (Block 293, Lots 10B, 11, 12, 13B)
Developable acres
12 acres @ $55,000 $660,000
Non-developable upland acres
$3.35 acres @ $18,315 $61,355
Other non-developable acres
48.69 acres @ $2,000 $97,380
Total (rounded) $818,700
Parcel 5 (Block 292, Lots 2B, 4C, 4E, 5, 6, 7C, 8, 9, 11, 12)
Developable acres
31 acres @ $50,000 $1,550,000
Non-developable upland acres
51.29 acres @ $16,650 $853,979
Other non-developable acres
179.22 acres @ $2,000 $358,440
Total (rounded) $2,762,400
Parcel 6 (Block 292, Lots 1, 2C, 3, 4D, 7B)
Developable acres
11 acres @ $55,000 $605,000
Non-developable upland acres
14.98 acres @ $18,315 $274,386
Other non-developable acres
137.59 acres at $2,000 $275,180
Total (rounded) $1,154,500
Parcel 7 (Block 244, Lot 7 and Block 244A, Lots 3B, 4A, 4B)
Developable acres
8 acres @ $60,000 $480,000
Non-developable upland acres
7.41 acres @ $20,000 $148,200
Other non-developable acres
147.22 acres @ $2,000 $294,440
Total (rounded) $922,600
Total value of all parcels $7,935,000
As the final step in the valuation process plaintiff's expert
discounted the developable uplands in all parcels to account for a
5-year delay in development by reason of the sewer moratorium. The
discount rate was 15%, resulting in a discount factor of .497177
and a final value estimate for all developable land of $2,945,954.
This reduced his total estimate for all lands in all seven parcels
to $4,951,549, which he rounded to $5,000,000.
Defendant's expert, while arriving at separate value estimates
for each of the three years under review, relied upon the same set
of four comparable vacant land sales for his valuation of the
developable portion of the subject, which he concluded to be 806
acres and 356 developable lots. He utilized another set of four
comparable land sales for the undevelopable portion, which he
concluded to be 635 acres and which he characterized as nature
preservation and recreational lands.
The expert's final value estimates were as follows:
October 1, 1990
Land considered to have development potential -
356 potential lots @ $95,000/lot $33,820,000
Nature preserve/recreational lands -
635 acres @ $5,000/acre $3,175,000
Total $36,995,000
October 1, 1991
Land considered to have development potential -
356 potential lots @ $85,000/lot $30,260,000
Nature preserve/recreational lands -
635 acres @ $5,000/acre $3,175,000
Total $33,435,000
October 1, 1992
Land considered to have development potential -
365 potential lots @ $83,000/lot $29,550,000
Nature preserve/recreational lands -
635 acres @ $5,000/acre $3,175,000
Total $32,725,000
Defendant's expert assumed that sewer connections would be
available through Millburn and the Joint Meeting of Essex and Union
Counties. He opined that if there were development plans for the
developable portion of the property, Millburn would be notified and
Millburn would then seek permission of the Joint Meeting for a
sewer hookup. He observed, further, that during the applicable
tax years, there was capacity through the Joint Meeting for a
hookup.
For the reasons hereinafter stated, I find that the highest
and best use of the subject property, in its entirety, is for open
space or conservation.
The moratorium on sewer connections for new residential
construction, as defendant acknowledges, is of indefinite duration.
Defendant, however, contends that an alternative is available,
namely, sewer hookups through the Joint Meeting of Union and Essex
Counties. The court, on plaintiff's application at the trial,
ruled that defendant bore the burden of producing evidence on the
issue of an available alternative. The court's failure to allocate
such burden could have severely prejudiced plaintiff in the
presentation of its proofs. Blitz v. Hutchinson,
252 N.J. Super. 580, 590-594 (App. Div. 1991); N.J.R.E. 101(b)(1)(2). Defendant
having conceded the existence of a sewer moratorium of indefinite
duration in the municipality, the burden of producing evidence to
demonstrate the existence of a sewer hookup alternative, rests with
defendant. Biunno, Current N.J. Rules of Evidence, Comment 2 to
N.J.R.E. 101(b)(1).
I find that defendant has failed to carry its burden.
According to the credible, uncontradicted testimony of Neil
Yoskin, Esq., an expert in regulatory aspects of water quality
planning, the hookup of a developer of the subject property to the
Joint Meeting of Essex and Union Counties, a consortium of
municipalities formed pursuant to the New Jersey Water Quality
Planning Act, N.J.S.A. 58:11A-1, et seq., to administer wastewater
management facilities and sewer capacities, involves a system of
stratified approvals, first, by the adjoining municipality (here,
Millburn), then the Joint Meeting, and finally, the Department of
Environmental Protection and Energy (DEPE) (now the Department of
Environmental Protection).See footnote 5 Failure to obtain approval at any
stratum, e.g., Millburn, would destroy the opportunity for sewer
connection.
Yoskin concluded with his opinion, based upon his extensive
knowledge and experience in the field, that the prospect of
obtaining sewerage capacity for residential development in the
subject property was so problematic and beset with so many hurdles
that no developer would purchase the property for residential
development.
Defendant proffered a licensed professional engineer as an
expert in regulations and practices relating to sewer connection.
That expert concluded that a sewer connection through the Joint
Meeting was feasible. In support of his conclusion he relied upon
conversations with Robert Bocchino, Livingston's Junior Engineer,
Joseph Roberts, Livingston's Planning Director, Charles Tahaney,
Livingston's Town Manager, Tim Gordon, Millburn Township Manager,
and Michael Brinker, Executive Director of the Joint Meeting. Mr.
Bocchino, who testified at trial as plaintiff's witness, indicated
only a peripheral involvement with sewer treatment in Livingston;
he was not familiar with the division of the State into water
planning districts, and he was not even sure that the subject
property was included in the Livingston planning district for
wastewater management purposes.
There is no evidence pertaining to what Mr. Roberts may have
done or said to the engineering expert that may have assisted the
latter in formulating his opinion. Roberts was not called to
testify. The testimony of Mr. Tahaney, who was called as a witness
for plaintiff, provided no support for the expert's opinion. Mr.
Tahaney's sole contribution was his knowledge of an agreement
between Millburn and Livingston pertaining to hookups for a
hospital, a restaurant and a small residential development, all of
which antedated the enactment of the Water Quality Planning Act and
the creation of the Joint Meeting.
Mr. Gordon, according to the engineering expert's testimony on
cross-examination, told the latter nothing about the chances that
Millburn would approve the plan, but he, Gordon, volunteered the
information that Millburn had placed that portion of the reserve
lying within its borders in a conservation zone. Mr. Brinker,
Executive Director of the Joint Meeting, told the expert that the
Joint Meeting had the capacity to accept additional gallonage from
Millburn, but that approvals would be needed.
The engineering expert's opinion is further compromised by
palpable inconsistency in his own testimony. At one point, when
asked what he would advise the developer as to the possibility of
securing approval from the Joint Meeting for the hookup, he
replied: "Joint Meeting is not a problem." A moment later, when
asked about the possibility of Millburn approving the hookup, he
answered:
Now, if you ask me what the probability
that they're [sic] approve it is, I really
can't answer that. That's probably either
seven or nine governing body members that I
have no idea how they would vote....
(Emphasis supplied)
Given the requirement that Millburn, as well as the Joint
Meeting, approve the hookup, his optimism about Joint Meeting
approval is vitiated by his uncertainty over approval by Millburn's
governing body.
As if this were not enough, the credible evidence shows that,
when a proposal was made in 1987 for a commercial development on
the subject property, the Millburn Township Committee adopted a
resolution vigorously opposing the proposed development as a
"serious threat to the environment of the residents of west Essex
County."
The probative utility of an expert's opinion depends not only
upon the expert's analysis, but also upon the facts offered in
support of the opinion. Dworman v. Tinton Falls,
1 N.J. Tax 445
(Tax 1980), aff'd o.b. per curiam
3 N.J. Tax 1 (App. Div. 1981).
Here, there was not one scintilla of evidence to support the
expert's conclusion that sewer connections for new residential
development were available notwithstanding the Livingston
moratorium, which was of indeterminate duration.
Land subject to a building moratorium (or, what is the same,
a moratorium on sewer connections for new construction) cannot be
assessed as though the moratorium did not exist. Cappture Realty
Corp. v. Elmwood Park Bd. of Adj.
126 N.J. Super. 200, 217 (Law
Div. 1973), aff'd
133 N.J. Super. 216 (App. Div. 1975).
Similarly, this court has held that, where no sewers are
available for a particular property involved in a tax appeal, and
there is no probability that sewers will be available in the
foreseeable future, the highest and best use cannot be residential.
West Orange v. Goldman's Estate,
2 N.J. Tax 582 (Tax 1981). This
is but one application of the salutary principle that governmental
restraints on land use have a material effect on value for tax
purposes. Bergen County Associates v. East Rutherford Boro.,
12 N.J. Tax 399 (1992), aff'd o.b. per curiam
265 N.J. Super. 1 (App.
Div.), certif. denied
134 N.J. 482 (1993); Riorano v. Weymouth Tp.,
4 N.J. Tax 550 (Tax 1982), aff'd o.b. per curiam
6 N.J. Tax 253
(App. Div. 1983); Sage v. Bernards Tp.,
5 N.J. Tax 52 (Tax 1982).
See Inmar Associates, Inc. v. Carlstadt Boro.,
112 N.J. 593, 600
(1988).
In view of the foregoing, the court finds that the indefinite
duration of the ban on sewer hookups for new residential
construction precludes use of any part of the subject property for
residential purposes notwithstanding the fact that the property is
zoned residential.
As the highest and best use of the property in its entirety is
for open space/conservation, it is appropriate at this juncture to
examine the vacant land sales utilized by the valuation experts
that pertain to non-developable acreage.
For his non-developable acreage valuation, plaintiff's expert
relied upon five Fairfield sales, four of which occurred between
December 12, 1986 and January 11, 1989. All the parcels involved
were wetlands. The sale prices ranged from $21 per acre to $1,176
per acre. The fifth sale, also involving a wetlands parcel,
occurred on September 17, 1993, for a price of $208 per acre.
The expert also analyzed three other sales of wetlands. These
sales involved lands in Lincoln Park, Denville and Long Valley.
The sales occurred on June 29, 1988, June 8, 1989 and December 2,
1989, for prices ranging from $1,106 per acre to $3,125 per acre.
On the basis of these sales, as adjusted for time, location
and other factors, the expert valued the non-developable acreage at
$2,000 per acre for all valuation dates, except for a flood-prone
parcel in Block 291, which he valued at $500 per acre.
Defendant's expert relied upon four sales of undevelopable
land for all three valuation dates. These sales are worth
examining in detail, because of striking similarity of the lands
involved to the subject property.
Sale #1, involving 128.136 acres in Passaic Township, Morris
County, took place on September 28, 1988. The consideration was
$269,000, or $2,099 per acre. The property was sold by the New
Jersey Conservation Foundation to Morris County for annexation of
the Passaic River Park. The parcel has extensive flooded areas and
the soils are classified as hydric. The property has no
development potential. Sale #2, involving 35.3 acres in Harding
Township, Morris County, took place March 11, 1992. The
consideration was $200,000, or $5,666 per acre. The property was
sold by GRK Partnership to The Trust for Public Land for resale to
the U.S. Fish and Wildlife Service and annexation to the Great
Swamp Wildlife Refuge. The property is about 40" wooded. It is
located in the Passaic River flood plain and is impacted by
frequent flooding. There are wetlands over most of the site, which
is considered non-developable.
Sale #3, involving 14.6 acres in Passaic Township, Morris
County, took place on December 7, 1988. The consideration was
$90,000, or $6,164 per acre. The property was sold by Passaic
Township to the United States for annexation to the Great Swamp
Wildlife Refuge. The parcel is level and brush-covered. It
consists of hydric soils and is non-developable.
Finally, Sale #4, involving 9.87 acres in Montville Township,
Morris County, took place on December 4, 1991. The consideration
was $45,000, or $4,558 per acre. The property was sold by Davanne
Realty Co. to Morris County for use as a county park. The parcel
consists of gently sloping forest land. It is located within the
Rockaway River Watershed and the Passaic River Basin. The soils
have been designated wetlands, and the site is not developable.
On the basis of these sales, the expert valued the non-developable portion of the subject at $5,000 per acre on all
valuation dates. He opined that the values of non-residential
vacant land remained relatively stable over the time period spanned
by the three valuation dates.
The testimony and appraisal of defendant's expert are
persuasive on the issue of the valuation of non-developable lands.
He provided significantly more detail about these sales than
plaintiff's expert provided concerning his sales of non-developable
vacant land. The parcels involved in the comparable sales of
defendant's expert offer striking similarities in the contemplated
use, in wetlands designation and soil composition to the subject.
Thus, I give great weight to the opinion of defendant's expert as
the facts and reasoning amply support his conclusion. See Apex
Trucking v. Secaucus,
1 N.J. Tax 417, 420 (Tax 1980).
In view of the foregoing,See footnote 6 I conclude that the true value of
the subject property, in its entirety, is $5,000 per acre for all
three valuation dates, or $7,111,650.See footnote 7 As this amount is less than
the assessment for each year, plaintiff is entitled to relief under
N.J.S.A. 54:51A-6(b), by application of the general average ratio
to the true value as herein found.
The municipality's average ratios, as duly promulgated by the
Director, Division of Taxation, were as follows:
1991 - 27.12%
1992 - 28.47%
1993 - 27.65%
Thus, judgment will be entered indicating the aggregate
assessments to be as follows:
1991 - $1,916,100
1992 - $2,024,700
1993 - $1,966,400
The parties will submit computations pursuant to R. 8:9-3,
allocating the aggregate assessments among the several lots under
appeal.
Footnote: 1The property is not a watershed (i.e., a water reservoir) subject to the Watershed Protection Act, P.L. 1988, c.163, as amended by P.L. 1990, c.19, which imposed a moratorium on the conveyance of watershed lands. See letter from James F. Hall, Assistant Commissioner, DEPE, to Susan Feeney, Esq., dated September 7, 1993. Footnote: 2Block 291, Lots 29B and 29C, a single line item assessed at $62,300, was not appealed for 1991. Footnote: 3The water reserve in its entirety contains approximately 2,300 acres, about 900 of which are located in Millburn, a municipality on Livingston's southern border. Footnote: 4Septic tanks are not a viable alternative to sewers. Footnote: 5The Department of Environmental Protection and Energy (DEPE) was redesignated as the Department of Environmental Protection (DEP) by Reorganization Plan No. 001-1994, effective July 4, 1994. During the years in issue, the agency was still known as the DEPE. Footnote: 6The court's findings and conclusions concerning the effect of the sewer ban render unnecessary a decision on the impact of the presence of threatened or endangered species, or whether the subject property is a nesting or breeding habitat for any such species. Footnote: 7Block 291, Lots 29B and 29C, a single line item, was not appealed for 1991. The assessment for that item was $62,300, or .65 of 1" (.0065). The 1991 value will be reduced by that percentage, which amounts to $46,439. The true value for 1991 thus becomes $7,065,200 (rounded).