Opinion
Docket No. 015995-2009 Docket No. 008255-2010 Docket No. 012451-2010 Docket No. 005472-2011 Docket No. 017509-2011 Docket No. 017121-2012 Docket No. 006688-2012 Docket No. 018108-2009 Docket No. 008251-2010 Docket No. 005466-2011 Docket No. 006685-2012
08-12-2014
RE: Jaylin Holdings LLC v. Manchester Township Jaylin Holdings LLC v. Toms River Township
Marc S. Galella, Esq. R.C. Shea & Associates, P.C. 244 Main Street P.O. Box 2627 Toms River, New Jersey 08754 Steven Secare, Esq. Secare & Hensel 161 Madison Avenue Suite 1A Toms River, NJ 08753 Kenneth B. Fitzsimmons, Esq. Township Attorney P.O. Box 728 33 Washington Street Toms River, NJ 08754-0728
NOT FOR PUBLICATION WITHOUT APPROVAL OF THE TAX COURT COMMITTEE ON OPINIONS
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE TAX COURT COMMITTEE ON OPINIONS
Marc S. Galella, Esq.
R.C. Shea & Associates, P.C.
244 Main Street
P.O. Box 2627
Toms River, New Jersey 08754
Steven Secare, Esq.
Secare & Hensel
161 Madison Avenue
Suite 1A
Toms River, NJ 08753
Kenneth B. Fitzsimmons, Esq.
Township Attorney
P.O. Box 728
33 Washington Street
Toms River, NJ 08754-0728
Dear Counsel:
This letter constitutes the court's opinion after trial in the above-referenced matters challenging the assessments for the tax years 2009, 2010, 2011 and 2012 on five parcels located in the Townships of Toms River and Manchester. For the reasons stated more fully below, the Court will enter Judgment affirming the assessments.
Procedural History and Findings of Fact
The following findings of fact are based on the evidence and testimony admitted at trial.
The subject property consists of five contiguous lots located along the south side of New Jersey Route 37 at its intersection with Northhampton Boulevard in the Townships of Toms River and Manchester, Ocean County, New Jersey. Route 37 is a multi-lane, divided highway that provides a corridor from New Jersey Route 70 to the Borough of Seaside Heights, a popular beach destination. The subject property is designated as Lots 14 and 15 in Block 505 on the official tax map of the Township of Toms River and Lots 2, 3 and 5 in Block 44 on the official tax map of the Township of Manchester. Unless specifically noted otherwise, "subject property" shall mean all the property located in both the Township of Toms River and the Township of Manchester.
The subject property is vacant, without improvements, and is heavily vegetated. The area surrounding the subject property is moderately developed commercial properties with community and neighborhood shopping centers as well as local and national service uses. The neighborhood also includes several adult communities as well as various industrial parks, one of which is adjacent to the subject property.
The portion of the subject property located in Toms River is zoned RHB (Rural Highway Business) permitting a wide variety of uses, including commercial, retail and residential. The Toms River lots aggregate a total area of 17.13 acres, with 468 feet of frontage on Route 37 and 774 feet of frontage on Northhamption Boulevard. The assessment, average ratio and implied equalized value for each of the lots and each of the years in question are as follows:
Lot 14
| Tax Year | Assessment | Average Ratio | Implied Value |
| 2009 | $1,222,000 | 100.68% | $1,213,747 |
| 2010 | $1,222,000 | 102.01% | $1,197,922 |
| 2011 | $1,222,000 | 101.08% | $1,208,943 |
| 2012 | $1,222,000 | 102.58% | $1,191,265 |
Lot 15
| Tax Year | Assessment | Average Ratio | Implied Value |
| 2009 | $1,278,000 | 100.68% | $1,269,368 |
| 2010 | $1,278,000 | 102.01% | $1,258,818 |
| 2011 | $1,278,000 | 101.08% | $1,264,345 |
| 2012 | $1,278,000 | 102.58% | $1,245,857 |
The portion of the property situated in Manchester Township has been zoned HD-3 (Highway Development, three acres), which permits many retail uses. The Manchester lots consist of a total of 25.87 acres, with 469 feet of frontage on Route 37. The assessment, average ratio and implied equalized value for each of the lots and each of the years in question are as follows:
Lot 2
| Tax Year | Assessment | Average Ratio | Implied Value |
| 2009 | $3,205,200 | 100.00% | $3,205,200 |
| 2010 | $3,205,200 | 90.35% | $3,547,537 |
| 2011 | $3,205,200 | 95.05% | $3,381,120 |
| 2012 | $3,205,200 | 100.47% | $3,190,206 |
Lot 3
| Tax Year | Assessment | Average Ratio | Implied Ratio |
| 2009 | $270,000 | 100.00% | $270,000 |
| 2010 | $270,000 | 90.35% | $298,838 |
| 2011 | $270,000 | 95.05% | $284,061 |
| 2012 | $270,000 | 100.47% | $268,747 |
Lot 5
| Tax Year | Assessment | Average Ratio | Implied Ratio |
| 2009 | $394,500 | 100.00% | $394,500 |
| 2010 | $394,500 | 90.35% | $436,635 |
| 2011 | $394,500 | 95.05% | $415,045 |
| 2012 | $394,500 | 100.47% | $392,655 |
Plaintiff timely filed complaints contesting the assessments against each of the referenced lots for each of the years in question. Trial of the assessments, for all of the years, was consolidated. For purposes of judicial economy, trial of all of the lots constituting the subject property was also consolidated notwithstanding the physical location of the property within two separate taxing districts.
Plaintiff's Proofs
Plaintiff presented William F. Harrison, Esq., as an expert in environmental law. Mr. Harrison also testified factually as to the steps taken by plaintiff relative to the approval process with the DEP and the ongoing appeals of that process.
The history of the process of application, denial, appeal and negotiation is long, commencing in 2004 and continuing through the present time. Subsequent to the issuance of permits by the DEP, appeals were filed by several interested parties which were only recently the subject of three separate Appellate Division opinions issued after trial of the within matter.
The testimony elicited at trial established that the subject property is subject to the Coastal Area Facility Review Act (CAFRA), N.J.S.A. 13:19-5(e) which restricts the development of property located within the CAFRA zone. Mr. Harrison testified that any proposed commercial development containing 50 or more parking spaces requires a CAFRA permit from the New Jersey Department of Environmental Protection (DEP). Conversely, a proposed development providing for less than 50 parking spaces does not require CAFRA approval. Because plaintiff's application was for development well in excess of 50 parking spaces, plaintiff submitted its required initial CAFRA permit application for development to the DEP in 2004.
In the course of plaintiff's application process, the DEP determined that the subject property could be a suitable habitat for the Northern Pine Snake (pine snake), a threatened and endangered wildlife, and required that a habitat survey of the subject property be undertaken. That survey disclosed the existence of two pine snakes at the subject property, one which overwintered on the Manchester portion of the subject property near the Toms River border and one which overwintered on a nearby property in Manchester, not a subject of this appeal.
Based in part on the habitat survey and the discovery of the pine snakes, plaintiff's initial CAFRA application for commercial development was denied by the DEP. Plaintiff appealed the denial and engaged in negotiations with the DEP for the development of the subject property resulting ultimately in the issuance of a permit, allowing a modified development, and providing for the preservation and protection of an extensive area of the subject property as pine snake habitat. The pine snake habitat area of protection encompassed areas located in both municipalities but the substantial majority was located in the Township of Manchester.
Plaintiff's initial proposal for development (which obtained approvals at the appropriate land use Boards in the Townships of Toms River and Manchester) was to construct a 208,433 square feet Walmart retail store with a 19,554 square foot garden center and parking for 1,198 vehicles. The ultimate approvals granted by the DEP allowed the construction of an 187,793 square feet retail store with a 5,703 square foot garden center and parking for 833 vehicles. Plaintiff was required to preserve and enhance approximately 20 acres of the pine snake habitat on the subject property, construct a "snake wall" to discourage the traversing of the pine snakes onto the improved property and to purchase and enhance approximately 212 acres of mitgation property off site for permanent pine snake preservation purposes.
Mr. Harrison testified that once it was determined that the subject property contained a pine snake habitat no commercial development of the subject property requiring more than 49 parking spaces, or a residential development with more than 25 units, could have proceeded without complying with the DEP CAFRA and pine snake mitigation requirements. Mr. Harrison further testified that since the subject property was in common ownership, the identification of the pine snake habitat affected the entirety of the 43 acres, regardless of the municipal boundaries and that the development limitations would apply to all of the lots in common ownership - that is, the individual lots could not be independently developed so as to avoid compliance with the CAFRA requirements.
On cross-examination, Mr. Harrison testified that the opinion of plaintiff's appraisal expert that the property could not be developed was not consistent with his opinion that the property could be developed with "appropriate mitigation".
Plaintiff then presented Harry F. Renwick, CTA as its expert appraiser. The Court accepted Mr. Renwick's qualifications over the objections of the defendants. In support of their objections the defendants introduced correspondence addressed to plaintiff from Mr. Renwick dated July 15, 2009 which stated:
Pursuant to our conversations on July14 and July 15, 2009, I am responding to your request for an outline of how we would approach this assignment. The indication is that you have had, for many years, a local approval for a proposed supercenter with a Wal-Mart as the anchor participant. You have indicated that you can provide to us a history of environmental restrictions related to endangered species that have held up the development over many years. Therefore, the premise or pre-existing condition of our appraisal would that the property be valued as restricted, limited utility land related to the low probability of approval.
Since your land is currently assessed (as approved) you have requested we indicate the range of per acre sale prices from our database covering limited utility land.
It is a condition of our involvement that a full history of the application process with DEP be provided, as an exhibit, within our ultimate appraisal report, which should be prepared for tax appeal purposes. As I had indicated to your during our conversation, I have been a real estate appraiser in New Jersey and a former tax assessor with specific experience (Chatsworth, Woodland Township) with core area Pinelands and limited utility highly restricted lands. We have an internal database that indicates the restricted value on such lands generally runs $1,000 to
$1,500 per acre and you have indicated to me that you have knowledge of a local Green Acres property that recently sold for approximately $3,000 per acre. We would use highly-restricted limited utility, land sales to provide a basis for the current value of the subject property and, as such, the acreage price range (from review of preliminary data) would appear to be somewhere in the area of $1,000 to $3,000 per acre.
Defendants argued that the engagement letter indicated a pre-disposition to appraise the subject property as highly restricted limited utility land with a pre-disposed value and that such pre-disposition disqualified the witness as an expert. During voir dire Mr. Renwick testified that he previewed the assignment and indicated a range of values in the engagement letter but thereafter performed an appraisal fully compliant with Uniform Standards of Professional Appraisal Practice (USPAP). The Court found that the engagement letter did not disqualify the expert, whose qualifications were otherwise acceptable, but that it might impact the expert's credibility once his opinion was provided.
In reaching his valuation conclusions, plaintiff's expert testified that he first determined the highest and best use of the property. In doing so, he reviewed several factors: the subject property's legally permissible use, its physically permissible use, its financially feasible use and its maximally productive/highest and best use.
While the expert noted that the zone in which the subject property is located permits a variety of commercial uses, including a Walmart retail store for which the plaintiff had obtained approval, he noted that the subject property was located within a CAFRA jurisdiction requiring the appropriate permitting process. He further noted that the southerly portion of the subject property was also affected by wetlands. He testified that it appeared obvious that approval to develop the subject property as permitted under the local zoning ordinance could not be anticipated by typical and reasonably informed purchasers over a typical "anticipated exposure period" on the market.
With respect to the physically possible uses, the witness testified that its size, topography, shape, frontage along paved and dedicated streets and access to all public utilities posed few limitations on its ability to be developed for a variety of permitted uses. He determined, however, that the location of the known habitat for threatened and endangered species imposed limitations on its use for any purpose other than conservation.
Further, the expert determined that the most financially feasible use of the subject property was for conservation because of the "abnormal amount of exposure time" to get to final approval to develop the property "not specific to a Walmart".
The witness testified that despite the commercial and industrial uses consistent with other uses in the immediate neighborhood, the location of the pine snake habitat on the subject property made development highly speculative. He determined that prospective purchasers would pay no more for the property than the cost of obtaining similarly impacted environmentally sensitive lands that could be used for mitigation purposes. Thus, he concluded that the only financially feasible use of the subject property was conservation, preservation or mitigation.
Mr. Renwick concluded that of all the uses legally permissible, physically possible and financially feasible, a conservation/preservation/mitigation use was the highest and best use of the subject property. Mr. Renwick then testified that he used the comparable sales method to value the subject property. In doing so, he provided eight comparable sales, which were identical for both valuation dates.
Comparable Number 1 consisted of a 21.40 acre unimproved site located in Southampton Township, Burlington County which was 90% encumbered by wetlands with no road frontage. The date of sale was March 18, 2009 with a sale price of $935 per acre.
Comparable Number 2 was a 107.21 acre unimproved site in Bass River Township, Burlington County, with no development potential and limited access via dirt roads, which sold on December 15, 2009 for $1,000 per acre.
Comparable Number 3 was a 10.87 acre landlocked parcel of wetlands in Shamong Township, Burlington County, purchased for conservation use at $1,000 per acre on January 29, 2009.
Comparable Number 4 consisted of 8.32 wooded acres located along a dirt roadway in Ocean Township, Ocean County which sold on May 11, 2007 for $3,570 per acre.
Comparable Number 5 was a landlocked parcel of 151 acres with extensive wetlands located in a preservation zone in Stafford Township, Ocean County with strong evidence of potential threatened and endangered species. The property was purchased for mitigation purposes on June 4, 2010 for $4,553 per acre.
Comparable Number 6 is a parcel of 156.16 acres in Ocean and Lacey Townships, Ocean County, minimally impacted by wetlands with strong evidence to suggest the presence of threatened and endangered species. It has no road frontage and was purchased for mitigation purposes on June 4, 2010 for $4,954 per acre.
Comparable Number 7 consists of 60.46 landlocked acres in Little Egg Harbor, Ocean County, purchased for mitigation purposes on June 4, 2007 for $4,102 per acre.
Comparable Number 8 is a parcel of 20 acres in Galloway Township, Atlantic County, with no frontage along an improved roadway. The property was sold to the New Jersey Conservation Foundation on April 13, 2009 for $1,000 per acre.
After making adjustments for date of sale, off-site improvements, conditions of sale as well as for the size of the two largest lots, Mr. Renwick opined that the indicated value per acre as of October 1, 2008 was $3,000 per acre and as of October 1, 2009 was $2,700 per acre. The indicated value of the subject property was set forth as $130,000 as of October 1, 2008 and $115,000 for October 1, 2009.
Adjustments of 30% to 25% were made to the purchase price in one case because the purchaser "felt he paid over market value" and in two other cases because the "grantee had to approach the grantor and paid a premium to acquire the site".
Mr. Renwick did not provide a value for the individual lots, nor did he provide any basis upon which he would value the Toms River property separate from the Manchester property.
For the tax years 2011 and 2012 Mr. Renwick testified there was no change in value over the 2009 values. When asked what new comparables Mr. Renwick looked at to support the valuation for the subsequent years, Mr. Renwick testified,
"We went to the market and we reviewed all of the restricted land sales that we had on file. I can't be specific about what additional ones over and above the base, but the result of that was there wasn't a substantial change. There are restricted properties. As long as they remain restricted and there's no substantial change to the property as to legal permissibility or physical possibility, those values are not going to change."
Defendants moved to strike Mr. Renwick's opinion for the later years on the basis that his opinion was a net opinion and the Court reserved decision, subject to the defendants' right to move to strike after the close of trial.
At the end of plaintiff's case, defendants moved to dismiss for failure to overcome the presumption of correctness. The Court found that the plaintiff had provided sufficient evidence which, if taken as credible, overcame the presumption of correctness.
Township of Toms River's Proofs
Defendant, Toms River, called Henry J. Mancini, MAI, CRE, as its expert appraiser, who was accepted by the plaintiff as an expert. Mr. Mancini testified that his conclusion of value for each of the years in question for the Toms River portion of the subject property alone was $3,400,000 as of October 1, 2008, $3,100,000 as of October 1, 2009, $3,000,000 as of October 1, 2010 and $3,000,000 as of October 1, 2011.
There was no attempt to break down the value for each of the two lots located in Toms River.
Mr. Mancini testified that he reviewed the property, the zone in which it was located and the surrounding neighborhood. He further testified that he was provided with a copy of a lease for the property between plaintiff and Walmart which provided for an initial rent payable to the plaintiff of $1,100,000 annually for twenty years. He testified that the property had a CAFRA permit issued for the construction of a 189,000 square feet Walmart facility and all required local municipal approvals.
Although referenced in his report as being in existence, the witness testified that he did not take the lease into account in determining the fair market value of the Toms River property.
In reviewing highest and best use, the witness testified that the Toms River property was located in the RHB zone which allowed broad based commercial development. He also testified that since the property had in fact received municipal approval for the construction of a significant commercial development, that it was physically capable of development. Furthermore, the presence of threatened and endangered species on the subject property was not an extremely uncommon situation within Ocean County and that mitigation measures can be undertaken in order to permit development on the site despite such conditions. Thus, he concluded that the property could be physically developed with some level of commercial development.
Mr. Mancini testified that based on the location of the site at a prime commercial intersection on a divided state highway and the fact that the nation's largest retailer leased the property and has expended time and effort to obtain approvals to develop the site into a Walmart Super Center, it was "clearly obvious" that commercial development would be the most feasible utilization of the site. He also noted that across the intersection is a Wawa convenience store, another major regional retailer.
With respect to maximally productive, Mr. Mancini testified that he did not conclude as to any specific development and that a combination of development might be appropriate rather than the proposed development of a Walmart, but that the subject property lends itself to a substantial commercial utilization.
As a result of the foregoing, his conclusion was that the highest and best use of the Toms River portion of the subject property, if not the subject property itself, was for commercial development by right of zoning.
He further testified that in reviewing the specific site plan documents submitted relative to the subject property, he noted that the majority of the environmental constraints were located on the Manchester property. He also testified that in reviewing the site plan application and information provided in connection with the development it appeared clear that everyone, including plaintiff, agreed that the subject property was developable, with the scale and scope of development being at issue.
The witness thereafter testified that the methodology employed by him in reaching his conclusions of value was the sales comparison approach.
With respect to the valuation date of October 1, 2008, the witness referenced seven sales of property, each of which was located in Ocean County and each of which were sales of vacant property for commercial development. On three of the seven sites threatened and endangered species were located, with off site and on site mitigation required. The seventh comparable sale was of property directly across the road from the subject property. Although smaller in size, it was in the same CAFRA coastal zone and RHB zone for Toms River as the subject property.
After adjustment for market conditions (date of sale), location, size of property, physical characteristics, accessibility/exposure and the status of development of approvals, the witness opined that the fair market value per acre as of October 1, 2008 was $200,000.
In adjusting for physical characteristics adjustment was made for the fact that the subject property had mitigation considerations. Each of the sales was adjusted downward by a factor of approximately $52,500 per acre for an overall downward adjustment for the Toms River property of $900,000 to take into account necessary mitigation costs.
The same comparables were considered and adjusted for the determination of fair market value on October 1, 2009. After adjustment, the per acre value as of that date was determined to be $180,000.
The expert testified that essentially the only additional adjustment to these comparable sales was the downward trend in the market of 10%.
For the valuation dates of October 1, 2010 and October 1, 2011, nine sales were considered, six of which were identical to the sales considered in the prior years. After making adjustments similar to those for the first two valuation dates, the expert concluded that the per acre valuation for each of the two years (October 1, 2010 and October 1, 2011) was $175,000 per acre.
The first comparable sale was eliminated as a result of the remoteness in time and three additional later sales were added.
When questioned about the comparables proffered by the plaintiff's witness in support of his valuation of the properties, Mr. Mancini stated that none of the comparables cited by Mr. Renwick, the plaintiff's expert were comparable to the subject property. He reasoned that none of the properties viewed by plaintiff's expert were located in a commercial zone and most had no access to an improved roadway. None were situated along a primary highway like Route 37.
He further testified that the fact that approvals may not be in place or finalized did not mean that the property was not subject to development. Mr. Mancini testified that he took the lack of approvals as well as the existence of threatened and endangered species located on the subject property into account and made appropriate adjustments to each of the comparable sales he identified in valuing the Toms River property.
On cross examination, Mr. Mancini testified that in his expert opinion there was a reasonable probability to get some level of approval from the DEP on the subject property for development purposes; and that mitigation for threatened and endangered species is not unusual and is quite common for properties located in Ocean County. He reiterated his position that the existence of threatened and endangered species, including pine snakes is not a fatal flaw in the development of properties. He noted that pine snake habitat was discovered on one of the comparable properties he referenced in his report which had nonetheless been developed. He believed that the existence of threatened and endangered species on a property would certainly be a factor taken into account by a willing buyer of the property, but that he had taken those circumstances into account when he adjusted for the physical characteristics of the comparable sales in his appraisal. Similarly, he accounted for the presence or absence of approvals in the evaluation process.
Township of Manchester Proofs
Manchester first presented Albert D. Yodakis, the engineer and planning board engineer for the Township of Manchester. He was presented as an expert to provide his opinion on what could be developed on the Manchester portion of the subject property. The Court found him qualified to testify as an expert engineer over the objections of the plaintiff.
Mr. Yodakis testified that he had prepared a "concept plan" to describe what could be constructed upon the Manchester lots taking into account the environmental constraints on the property, and particularly the location of the pine snake den and surrounding habitat. He continued that based on the zoning applicable to the property and the location of the threatened areas, the property could be developed with a building of 59,560 square feet.
Manchester then presented Robert Gagliano, MAI. CRE, FRICS, who was accepted by the plaintiff as an expert in the area of appraisals. Mr. Gagliano testified that he appraised the property based on the concept plan provided by Mr. Yodakis, that is a 25.87 acre site with a building of 59,000 square feet.
Mr. Gagliano then proceeded to value the Manchester property based on the per foot value of the "concept" building on the site using a comparable sales approach. Mr. Gagliano testified that it was his opinion that the value of the Manchester portion of the subject property as of October 1, 2008 (valued as if there was a building of 59,000 square feet located upon it) was $2,610,000 and as of October 1, 2009 - $2,360,000. No opinion of value for 2010 or 2011 was provided.
Legal Analysis
The Presumption of Correctness
In order to prevail in a property tax assessment case, a taxpayer needs to first overcome the presumption of the validity of the assessment. MSGW Real Estate Fund, LLC v. Mountain Lakes Bor., 18 N.J. Tax 364, 376 (Tax 1998). "Original assessments and judgments of county boards of taxation are entitled to a presumption of validity." Id. at 373. "The presumption of correctness ... stands, until sufficient competent evidence to the contrary is adduced." Township of Little Egg Harbor v. Bonsangue, 316 N.J. Super. 271, 285-86 (App. Div. 1998) (citations omitted). To overcome the presumption of validity a taxpayer must make a showing that they presented evidence sufficient to demonstrate the value of the subject property. MSGW Real Estate Fund, LLC, supra, at 376. This evidence should raise a debatable question as to the validity of the assessment. Ibid.
This presumption is typically tested at one or two times during a trial. The first time that it is tested is at the close of the taxpayer's proofs. There the municipality will generally move, pursuant to R. 4:37-2(b) to dismiss the tax appeal for failure to overcome the presumption of correctness. Then, the court will decide whether the burden has been met by accepting all of taxpayer's proofs as true and accord the taxpayer all legitimate inferences that can be deduced from the evidence provided. Ibid. (citing Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 535 (1995)). The evidence must still be "sufficient to determine the value of the property under appeal, thereby establishing the existence of a debatable question as to the correctness of the assessment." Lenal Props., Inc. v. City of Jersey City, 18 N.J. Tax 405, 408 (Tax 1999), aff'd 18 N.J. Tax 658 (App. Div. 2000), certif. denied, 165 NJ 488 (2000). "Only after the presumption is overcome with sufficient evidence at the close of trial must the court 'appraise the testimony, make a determination of true value and fix the assessment.'" Clemente v. Township of South Hackensack, 27 N.J. Tax 255, 266 (Tax 2013) (quoting Rodwood Gardens, Inc. v. City of Summit, 188 N.J. Super., 34, 38-39 (1982). If the plaintiff fails to provide sufficient evidence to overcome the presumption the court must affirm the assessments without making an independent determination of the subject property's value. Ford Motor Co. v. Township of Edison, 127 N.J. 290, 312 (1992); Global Terminal & Container Serv. v. City of Jersey City, 15 N.J. Tax 698, 703-04 (App. Div. 1996); Clemente, supra, 27 N.J. Tax 255, 266.
The court finds that plaintiff produced sufficient evidence as of the close of its case in chief to overcome the presumption of validity attached to the assessment. If taken as true, the opinion of plaintiff's expert and the facts upon which he relied, create a debatable question regarding the correctness of the assessment on the subject property in each tax year sufficient to allow the court to make an independent determination of the value of plaintiff's property. The expert opined that on each valuation date the subject property was assessed at more than 40 times its true market value on the applicable assessment dates. His opinion was based on his conclusion that the highest and best use of the property was for conservation/mitigation/preservation purposes. Giving that testimony every positive inference, the court concludes the presumption of correctness had been overcome at that point.
The court's inquiry, however, does not end here. Once the presumption is overcome, the "court must then turn to a consideration of the evidence adduced on behalf of both parties and conclude the matter based on a fair preponderance of the evidence." Ford Motor Co., supra, 127 N.J. at 312 (quotations omitted). "[A]lthough there may have been enough evidence to overcome the presumption of correctness at the close of plaintiff's case-in-chief, the burden of proof remain[s] on the taxpayer throughout the entire case . . . to demonstrate that the judgment under review was incorrect." Id. at 314-15 (citing Pantasote, supra, 100 N.J. at 413).
Highest and Best Use Analysis
Fundamental to the dispute between the parties is the highest and best use analysis that was performed. Property must be valued at its highest and best use for property tax purposes. Ford Motor Co., supra, at 300-01. "Any parcel of land should be examined for all possible uses and that use which will yield the highest return should be selected." Inmar Associates v. Township of Edison, 2 N.J. Tax 59, 64 (Tax 1980). The highest and best use approach is a technique of performing a land valuation and is relied upon in further stages of the land valuation process. Appraisal Institute, The Appraisal of Real Estate (14th ed. 2013) at 362-63. It is the first step in the valuation process. American Cyanamid Co. v. township of Wayne, 17 N.J. Tax 542, 550 (Tax 1998) aff'd 19 N.J. Tax 46 (App. Div. 2000).
The concept of highest and best use is not only fundamental to valuation but is a crucial determinant of market value. This is why it is the first and most important step in the valuation process. The highest and best use for the subject property is that use which at the time of the appraisal (here, the appropriate assessment dates) is the most profitable likely use or produces the highest property value.
[Ford Motor Co. v. Edison Twp. 10 N.J. Tax 153, 161 (Tax 1988), aff'd o.b. per curiam 12 N.J. Tax 244 (App. Div. 1990), aff'd 127 N.J. 290 (1992) (citations omitted)]
The principle of highest and best use requires that the achievement of the use selected must be probable and that the contemplated use be neither remote, speculative nor conjectural. Inmar Associates, Inc. v. Edison Tp., supra, 2 N.J. Tax at 65.
All of the experts conceded that the legally permissible use of the subject property was commercial development. However they diverged in determining what was physically possible, with plaintiff's expert concluding that the subject property's location in a known habitat for threatened and endangered species "imposes limitations on development for any use". Furthermore, plaintiff's appraisal expert concluded that the only financially feasible use of the property was for conservation/preservation/mitigation uses because "of the abnormal amount of exposure time" for final approvals for development.
Toms River's appraisal expert, however, concluded that it was, in fact, physically possible to develop the property for commercial uses, as was demonstrated by the approvals granted to the plaintiff for the development of the Walmart site. While acknowledging that the subject property was impacted by environmental constraints and the presence of a threatened and endangered wildlife species, Toms River's expert noted that such constraints were not uncommon in the Ocean County area and a substantial portion of the Toms River lot would nonetheless be subject to development. His opinion was borne out in the comparable sales produced to support his opinion of value, several of which had similar environmental constraints, but were developed into significant commercial uses.
Manchester's expert demonstrated that even with the pine snake habitat and preservation areas on that site, a substantial commercial property could be situated there. Furthermore, plaintiff's environmental expert testified that the opinion of plaintiff's appraisal expert that the property could not be developed for any purpose was inconsistent with his opinion that the property could be developed with appropriate mitigation. Yet plaintiff's appraisal expert completely rejected the possibility of developing the property for commercial purposes in reaching his conclusion as to the highest and best use of the subject property.
The determination of the highest and best use analysis is fundamental in the identification and analyzation of comparable sales, The Appraisal of Real Estate, supra, at 379-80; a sale property is not truly comparable if it does not have a highest and best use similar to the subject property, Id. at 363. The difference between the highest and best use of a comparable sale and the subject property must be recognized by an appraiser to determine if the sale is an appropriate comparable. Clemente v. South Hackensack, 27 N.J. Tax 255, 273 (Tax, 2013). If the property has a different highest and best use, the property may be rejected. See, e.g., American Cyanamid Co. v. Wayne Township, 17 N.J. Tax 542, 557 (Tax 1998) (noting that because the building was sold for multi-tenant use, which was different from the highest and best use for the subject property, the price might not be reflective of the subject property's value); Newport Ctr. v. City of Jersey City, 17 N.J. Tax 405 (Tax 1998) (excluding from evidence sales having highest and best uses so dissimilar to the highest and best use of the subject property as to render the sales of no assistance to the court in valuing the subject property).
The court finds that the defendants' experts' conclusions as to the highest and best use of the subject property is persuasive. The legally permissible use of the subject property is unquestionably commercial development. While the identification of the existence of the pine snake habitat on the subject property most certainly impacted the extent of the development on the subject property, it in no way prohibited all development as maintained by plaintiff's appraiser. That development may eventually occur is borne out by the process undertaken by plaintiff for the approval of a substantial retail commercial facility on the subject property.
The testimony of plaintiff's environmental expert to the effect that a small scale commercial development requiring less than 50 parking spaces would not have required CAFRA approval, and the attendant delays, further buttresses this conclusion. Plaintiff's expert's reliance on the difficulties plaintiff met in obtaining approvals for the large scale Walmart facility it proposed to support its conclusion that the property could not be developed for commercial purposes is misplaced. Defendant did not contend that the subject property's highest and best use was for the development of a super Walmart of the scope and scale proposed by plaintiff.
In fact, in arguing that the highest and best use of the subject property was commercial development, defendants vigorously resisted any mention of the proposed Walmart development during the trial. Defendants merely maintained that the highest and best use of the subject property was commercial development of some manner.
In refusing to recognize the subject property's potential development for any purpose, plaintiff committed itself to comparing the subject property to "comparable property" having a different highest and best use than the subject property as well as bearing little if any similarities to the subject property. Those sales are therefore rejected. See City of Atlantic City v. Boardwalk Regency Corp., 19 N.J. Tax 164, 189 (App. Div. 2000). As a result of the foregoing conclusion it is unnecessary to determine whether plaintiff's expert "update letter" constituted a net opinion.
The court also declines to comment on the effect of defendant Manchester's appraisal efforts to value the Manchester portion of the property as if the concept plan suggested by its engineer had been put in place. As plaintiff has failed to meet its burden, the court is not required to determine the subject property's value.
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Conclusion
Plaintiff has failed to sustain its burden of proof to alter the assessments for the years in question for all of the lots under appeal. Accordingly, the assessments are confirmed and judgment will be entered accordingly.
Very truly yours,
/s/
Kathi F. Fiamingo, .J.T.C.