NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-4779-06T14779-06T1

PAN CHEMICAL CORP.,

Plaintiff-Respondent,

v.

HAWTHORNE BOROUGH,

Defendant-Appellant.

_______________________________________________

Submitted November 17, 2008 - Decided

Before Judges Carchman, R. B. Coleman and Sabatino.

On appeal from the Tax Court of New Jersey, Docket No. 001149-2000, 001296-2001, 001512-2002, 001606-2003, 002515-2004, and 002647-2005.

Law Offices of Michael J. Pasquale, attorney for appellant (Mr. Pasquale, on the brief).

Harry Haushalter, attorney for respondent.

The opinion of the court was delivered by

R. B. Coleman, J.A.D.

The Borough of Hawthorne (the Borough) appeals a Tax Court order in favor of plaintiff Pan Chemical Corporation (Pan Chem), for a reduction in property taxes for consecutive years 2000 through 2005 on a contaminated parcel of land owned by Pan Chem.

The parcel of land in dispute is located at One Washington Street in the Borough of Hawthorne, Block 2801, Lot 1. The property is located in the I-1 industrial zone of the Borough and consists of approximately 1.407 acres and seven buildings comprising approximately 26,940 square feet. The property had an assessed value as to land and improvements of $1,073,500 for the subject tax years. The parcel is triangular in shape with one side fronting Washington Avenue. The remaining two sides are bound by railroad tracks. This is relevant because the geographic layout ultimately led to the closure of the plant due to the limited growth potential of the manufacturing facility. Prior to 1999, Pan Chem had occupied the property for fifty-five years for the purpose of the manufacture of industrial coatings, color dispersions, inks and nail polish. In 1992, Pan Chem removed underground storage tanks which had leaked chemicals that contaminated the soil and ground water. Pan Chem has since maintained monitoring wells in compliance with the direction of the New Jersey Department of Environmental Protection (DEP).

In October of 1999, Pan Chem moved its manufacturing operations and thirty-plus employees to Carlstadt. It left only three employees on the subject property and two of its seven buildings in use. The president of Pan Chem, Robert Rossamondo, testified that the reason the manufacturer did not shut operations down completely on the property was to avoid or postpone costly environmental clean-up pursuant to its legal obligation under the Industrial Site Remediation Act (ISRA), formerly the Environmental Cleanup Responsibility Act (ECRA). N.J.S.A. 13:1K-6 to -14. The manufacturer conceded it made no efforts to improve or maintain the property, other than removal of the leaking storage tanks. Pan Chem sold the property in 2005 for $150,000 in "as is" condition, with the purchaser assuming all environmental cleanup costs.

Subsequently, Pan Chem filed with the Borough tax appeals for each tax year from 2000 through 2005. The appeals were heard by the Tax Court on June 28, November 6, 8, and 9, 2006. The Tax Court consolidated the matters for trial and issued its oral decision on January 12, 2007, in favor of a tax reduction for Pan Chem. The Tax Court found the buildings on the site to be in substantial disrepair as to each of the valuation dates. However, the Tax Court requested a revised appraisal valuation regarding the "entrepreneurial incentive." Upon receipt of the revised valuation report, the Tax Court issued a supplementary letter opinion on February 22, 2007, with a finalized deduction schedule for environmental clean-up costs and reduced assessment valuations for the tax years at issue. On March 23, 2007, final judgments were entered for each year under appeal. The Borough filed a notice of appeal with this court on May 4, 2007.

In reviewing Tax Court decisions on appeal, we generally defer to the expertise of the Tax Court in this specialized, complex area. Reck v. Dir., Div. of Taxation, 345 N.J. Super. 443, 446 (App. Div. 2001), aff'd, 175 N.J. 54 (2002). The judges assigned to the Tax Court "'have special expertise, [and] we will not disturb their findings unless they are plainly arbitrary or there is a lack of substantial evidence to support them.'" NYT Cable TV, a Div. of New York Times Co. v. Borough of Audubon, 230 N.J. Super. 530, 534 (App. Div. 1989)(quoting Kearny Leasing Corp. v. Town of Kearny, 7 N.J. Tax 665, 667 (App. Div. 1985)). However, the findings of the Tax Court Judge must be "supported by substantial credible evidence in the record as a whole." Hackensack Water Co. v. Borough of Haworth, 178 N.J. Super. 251, 259 (App. Div. 1981).

In tax assessment cases, it is well established that "exemptions from the general property tax scheme will be construed against exemption, and that the party claiming exemption must bear the burden of proof demonstrating entitlement to the exemption." Twp. of Monroe v. Gasko, 182 N.J. 613, 620 (2005)(citing Princeton Univ. Press v. Borough of Princeton, 35 N.J. 209, 214 (1961)).

No party to this action disputes that the resale value of the property at issue has been adversely impacted by soil and groundwater contamination. The Borough contends, however, that at no point during the time in question (tax years 2000 to 2005) did the contamination prevent or preclude the manufacturer from full use of its property. The record shows that Pan Chem did, in fact, use the site, albeit at a fifteen percent capacity, until the property was sold "as is" in 2005.

In determining true market value for taxation purposes, appraisers are advised to view contaminated properties as "special purpose" properties and allow a measure of flexibility to reach a determination of "true value." Inmar Associates, Inc. v. Carlstadt, 112 N.J. 593, 606 (1988). Inmar is controlling on this issue. There, the Supreme Court instructed that the "methodology for resolving the question is not simply to deduct the cost of the cleanup from a putative