Appeal of City of East Orange
| Decision Date | 05 July 1963 |
| Docket Number | No. A--632,A--632 |
| Citation | 193 A.2d 377,80 N.J.Super. 219 |
| Parties | Appeal of CITY OF EAST ORANGE from the Assessment of Property in Township of Livingston, County of Essex, for the Year 1957. Appeal of TOWNSHIP OF LIVINGSTON from the action of the Essex County Board of Taxation in reducing the assessment on property of City of East Orange situate in the Township of Livingston, County of Essex, for the Year 1957. |
| Court | New Jersey Superior Court — Appellate Division |
Jerome C. Eisenberg, Newark, for appellant, Livingston Tp. (Louis Bort, Township Atty., and Clapp & Eisenberg, Newark, attorneys; James C. Eisenberg, and Harold Friedman, Newark, on the brief).
William L. Brach, Newark, for respondent and cross-appellant City of East Orange.
Before Judges CONFORD, GAULKIN and KILKENNY.
The opinion of the court was delivered by
KILKENNY, J.A.D.
The Township of Livingston appeals from judgments of the State Division of Tax Appeals, filed on February 9, 1962, (a) dismissing petitions of Livingston, and (b) reducing the aggregate assessments for 1957 of water reserve lands in the Township of Livingston owned by the City of East Orange to the sum of $1,238,110.
The City of East Orange cross-appeals, contending that the assessments should be further reduced.
The lands owned by East Orange in Livingston consist of approximately 1471 acres of raw land. About 10% Is cleared land and the other 90% Is woodland. The land is utilized by East Orange, along with other acreage in adjacent municipalities, to supply potable water to its inhabitants. The land does not contain a reservoir but has beneath its surface an Livingston assessed this water reserve land for 1957 at a total of $1,734.900. The total acreage was made up of 40 parcels, each listed separately by lot and block number and separately assessed. The total assessment was based on Livingston's determination that the aggregate market value of the land (excluding improvements) was $3,469,800 and to this was applied the local 50% Ratio of assessment to value.
aquifer, i.e., water-bearing strata, which is tapped by means of wells. The subterranean aquifer also extends throughout a substantial part of the Livingston area outside of the water reserve of East Orange and for miles over a good part of New Jersey to the west, north and south of the water reserve.
Livingston's right to tax this water reserve land is fixed by N.J.S.A. 54:4--3.3 which provides:
'* * *. The lands of counties, municipalities, and other municipal and public agencies of this State used for the purpose and for the protection of a public water supply, shall be subject to taxation by the respective taxing districts where situated, at the taxable value thereof, without regard to any buildings or other improvements thereon, in the same manner and to the same extent as the lands of private persons, but all other property so used shall be exempt from taxation. * * *'
East Orange appealed the Livingston assessment to the Essex County Board of Taxation. The county board fixed the total assessment at $1,314,200, thus giving East Orange a reduction of $420,700. Both Livingston and East Orange then petitioned the State Division of Tax Appeals for a review of the county board judgment, with the result first noted above.
The parties agree that the assessment valuation for 1957 is determinable as of October 1, 1956. N.J.S.A. 54:4--23. Their disagreement is as to the proper method to be employed in making the evaluation. Livingston contends that the land must be valued 'in the condition in which the owner holds it,' as a watershed in this case, with a substantial aquifer which has a value, irrespective of the surface use of the land. It complains that it was precluded by the State East Orange, on the other hand, argues that Livingston's approach is fundamentally contrary to the legislature intent that this property should be assessed 'at the taxable value thereof * * * in the same manner and to the same extent as the lands of private persons.' N.J.S.A. 54:4--3.3. It maintains that Livingston's attempt to impose a special, peculiar and unique form of assessment on these water reserve lands, based on the valuation of subterranean water rights, is contrary to constitutional and statutory assessment principles. East Orange contends that the property is zoned residential AAA, in which zone buildings are limited to one home per acre, and 'true value' can be determined only by a finding as to what a real estate developer would pay for the 1471 acres, purchased as a single entity, 'at a fair and bona fide sale by private contract,' in their present state and for the purpose of building homes thereon.
Division from introducing evidence as to the nature and extent of the aquifer for the purpose of developing by expert testimony a capitalized value for the water reserve lands on the basis of a public utility in the water supply business.
N.J.S.A. 54:4--23 requires the assessor to '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.'
Livingston counters with the argument that the approach of East Orange is inconsistent with the realities of the situation because this land will not in the foreseeable future ever be utilized for residential development, since that would interfere with the highest and best use of this land as a watershed. Accordingly, Livingston would have us discard as irrelevant the testimony of the real estate experts for East Orange, who based their valuations upon what the land would bring if used for a residential development, which was their opinion of its most readily feasible and highest economic use from the standpoint of a purchaser in the open market.
The parties agree that the division of the land into lots and blocks as assessment units is purely artificial and that the tract should be valued as a whole. It is admitted that Livingston's zoning regulations will not permit a building to be erected where the mesne elevation above sea level is less than 176 feet. About 340.59 acres are below that minimum level. The municipal AAA residential zoning herein means that a building plot must have a frontage of at least 150 feet and a depth of at least 235 feet, each house being required to have at least one acre of ground.
Each side produced experts in real estate values, who gave their varying opinions as to what these lands were worth as of the assessment date. The State Division applied, with some modifications, the formula established by Franklin Hannoch, a wellqualified expert called by East Orange. Mr. Hannoch used the approach of analyzing sales of large tracts in the area, purchased for residential development and, in one instance, by Commonwealth Water Company, in the several years prior to the assessment date. He figured market value without regard to what one particular customer, such as a water company, might pay for the tract. His appraisals set forth varying acreage values depending upon the differences in the elevations above sea level of the several parcels and on their condition as wooded or cleared or under water. For example, he gave no value to 60.9 acres under water. As to the other lands, Mr. Hannoch used the following acreage value formula:
Under 170' $ 500
Between 170-175' 750
Between 175-180' 1000
Between 180-185' 1500
Over 185' wooded 2000
Over 185' cleared 2500
Mr. Hannoch expressed the view that each of the foregoing values would be subject to a discount adjustment of 35% Because a buyer of such a large tract, sold as an entity, would expect such a discount since his capital would be tied up a In arriving at its final computation, the State Division accepted the Hannoch formula of valuation, but without adjustment for the 35% Discount, and arrived at a true value of $2,408,720. To that sum it added $34,500 for the 69.9 acres under water at $500 per acre, the minimum acreage price fixed by Mr. Hannoch, on the theory that this land has 'a great deal of value for the drainage of the entire area from surface water.' It added another $40,000 by reason of the fact that some 330 feet of the land were in the business district and had been valued by Mr. Stolese, a realtor witness for Livingston, at $150 a foot, the difference between the value placed upon it by Hannoch and the value placed upon it by Mr. Stolese amounting approximately to $40,000. These two additions, amounting to $74,500, increased the true value from $2,408,720 to $2,483,220, according to the State Division's determination. The Division then deducted $7,000 therefrom because Mr. Hannoch's computation was based on 1485.59 acres, but subsequent resurveying showed 14 acres less, or 1471.59 acres. These 14 acres at the lowest value figure of $500 per acre established the $7,000 deduction and made the Division's net true value figure $2,476,220. Applying the 50% Ratio, the assessment was fixed by the Division at $1,238,110.
long time due to delays in marketing such a large tract in a local market, whose ability to absorb new development would be limited. He estimated, on the basis of past experience in Livingston, that it would take 15 years to dispose of the entire 1500 acres, calculating a sale of 100 homes and acres a year. Mr. Hannoch testified that this would make the discount price 65% Of true value according to the 'Inwood tables' used by appraisers. Therefore, in arriving at his final total appraisal of $1,565,671, this real estate expert computed the acreage in each of the above classifications and multiplied by the value per acre, as adjusted by the 35% Discount.
No useful purpose would be served by a detailed review of the corroborative testimony of George Goldstein, the other Nor need we consider at length...
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