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NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE
COURT COMMITTEE ON OPINIONS
______________________________
VIRGINIA SCHIMPF, : TAX COURT OF NEW JERSEY
Plaintiff, : DOCKET NO. 000411-93
: (Tax Year 1992)
v. :
:
LITTLE EGG HARBOR TOWNSHIP, :
Defendant. :
______________________________
Decided: August 9, 1994
Salvatore A. Zerbo for plaintiff, Virginia Schimpf
Mark H. Stein for defendant, Little Egg Harbor Township
AXELRAD, J.T.C.
This local property tax appeal involves Block 302, Lot 18,
commonly known as 32 North Boom Way, Little Egg Harbor Township
(Ocean County), New Jersey. The property consists of a somewhat
irregular parcel of land containing approximately 6.75 acres zoned
"MC" (Marine Commercial) improved and utilized as a marina, with 70
boat slips. In addition, the property is improved with a two story
masonry building containing a retail shop on the first floor and an
apartment on the second floor, bait shop, and a small residence
facing North Boom Way with a six foot chain link fence partially
separating it from the actual marina.
The original assessment of the property for 1992 was:
Land $419,500
Improvements $418,700
Total $838,200
*
As a result of a revaluation for the tax year 1992, discrimination
is not an issue. Chapter 123 does not apply.
The taxpayer appealed the original assessment and on October
6, 1992, the Ocean County Board of Taxation reduced the assessment
and entered a judgment as follows:
Land $419,500
Improvements $280,500
Total $700,000
This judgment was appealed by the taxpayer to the tax court.
The issues before the court involve (1) the presumption of
correctness of the county board judgment (2) the proofs necessary
to support a determination by the court that the site contains
excess land and (3) its valuation under the "highest and best use"
standard.
At trial both parties' experts utilized the "income approach"
of valuation and calculated virtually identical net annual
operating income, i.e. taxpayer - $57,998; municipality - $57,652.
Both parties used the 1992 tax rate of $2.134 and differed only in
the amount of the capitalization rate, excluding taxes. The
taxpayer's expert, citing higher risk and greater yield, used a 12" capitalization rate plus taxes resulting in an indicated value of
$415,000, while the municipality's expert utilized a capitalization
rate of 10" plus taxes in consideration of the 7 1/2" prime rate
for 1991, resulting in an indicated value of $475,000. I believe
that the capitalization rate of 10" in a 7 1/2" prime rate
environment is more accurate than a 12" capitalization rate. As
such, the fair market value of the parcel by the income approach
is $475,000.
The taxpayer asserts that the total valuation of the property
is that produced through the income approach. The municipality
contends that the site contains approximately 1 1/2 to 1 3/4 acres
of excess vacant land, not needed to support its improvements or
use. The municipality further submits that the highest and best
use of such excess land should be under an R-50 zoning, which when
sub-divided into ten lots would generate an additional value of
$205,500 resulting in a total assessment of the subject parcel of
$680,500.
The municipality claims that the taxpayer failed to produce
sufficient, competent evidence to overcome the presumption of
correctness of the county board judgment, and thus, judgment should
be entered dismissing the appeal. If that were the case, I would
be obligated to affirm the county board judgment of $700,000 when,
in fact, the municipality's own proofs, if accepted in full,
support a valuation of only $680,500.
The municipality has misconstrued the law involving the
"presumption of correctness" in local property tax appeals. In
appeals to the Tax Court there is a presumption that a judgment
entered by a county board of taxation is correct. Riverview
Gardens v. North Arlington, 9 N.J.167 (1952). This presumption
stands until it is overcome by evidence that is sufficiently
"definite, positive and certain in quality and quantity" to prove
a valuation different from the county board's judgment. Aetna Life
Ins. Co. v. Newark, l0 N.J.99 (l952); Pantasote Co. v. City of
Passaic,
100 N.J. 408 (1985); Ford Motor Co. v. Tp. of Edison,
127 N.J 290 (1992).
At trial, both the taxpayer and municipality presented expert
testimony that the valuation of the subject property was below the
total assessment determined by the county board. I find that for
purposes of overcoming the presumption neither expert's opinion is
entitled to greater weight than the other expert's opinion.
It is the court's obligation to apply its judgment to the
valuation data submitted by the experts and determine the value of
the parcel, provided there is enough substantive and competent
evidence to enable the trier of fact to determine true value.
Samuel Hird & Sons, Inc. v. Garfield,
87 N.J.Super. 65,74 (App.
Div. l964); Inmar Associates, Inc. v. Edison Tp.,
2 N.J.Tax 59,66
(Tax l980). The presumption of correctness was overcome when both
parties presented credible expert testimony sufficient to prove
valuation below the county board's judgment. Pantasote, supra at
417. The focus then shifted to a consideration of the case on the
merits and a determination of the proper valuation of the property
under law.
Only land beyond the normal needs of a particular use and that
which is not necessary to support its improvements, as determined
in the market, can be considered excess land. Such excess land
must be clearly identified and valued at its highest and best use
and added to the value of the lot as currently used, in order to
ascertain the value of the lot as a whole. Appraisal Institute, The
Appraisal of Real Estate (10th ed.) at 212, 294.
Highest and best use is defined as "the reasonably probable
and legal use of an improved property which is physically possible,
appropriately supported, financially feasible, and that which
results in the highest value, i.e. most profitable". The Appraisal
of Real Estate, supra at 275, 280-282;Inmar Associates, Inc. v.
Edison Tp., supra at 65; Six Cherry Hill, Inc. v. Cherry Hill Tp.,
7 N.J.Tax l20, 128 (Tax Court l984), aff'd 8 N.J. Tax 334 (App.
Div. l986). The highest and best use is shaped by competitive
forces within the market where the property is located. Highest
and best use considerations have as a prerequisite a probability of
achievement. The projected use cannot be remote, speculative or
conjectural. The Appraisal of Real Estate, supra at 275; Inmar
Associates, Inc. v. Edison Tp., supra at 65;. The test of use
being "legally permissible" and "physically possible" must be
applied before the remaining test of "economically feasible" and
"maximally productive". The Appraisal of Real Estate, supra at 275.
There is no dispute between the parties that the highest and
best use of the parcel, with the exception of the 1/2 to 1 3/4
acres delineated by the municipality as excess land, is as
currently used, i.e. marina-commercial. The burden is on the
municipality to demonstrate that there is excess land as defined by
law, that the highest and best use is for R-50 zoning, and to
establish the fair market value. Inmar Associates, Inc. v. Edison
Tp., supra at 67; Six Cherry Hill, Inc. v. Cherry Hill Tp., supra;
United Jersey Bk. v. Lincoln Park Bor., ll N.J.Tax 549, 558 (Tax
l99l). In this case the municipality has failed to present
sufficient proof in support of its position.
The municipality's appraiser candidly testified that he made
a visual determination of the amount and location of the vacant
land that he deemed superfluous to the current use of the site
without reference to any survey or topographical map. As a result
of looking at the site and/or the tax map he concluded that such
excess land was located along Great Bay Boulevard, along Boom Way
near the intersection with the Boulevard, and along Flax Isle Drive
between the existing dwelling and the lagoon. The subject land
visually appeared to be flat and level, with some portions heavily
wooded. There was no indication that he had actually walked this
specific area.
It appeared from photographs and the municipality's expert's
credible testimony that there was virtually no sight line from
Great Bay Boulevard to the actual marina due to the heavily wooded
area at the Great Bay side of the property and that the only view
of the marina was by way of North Boom Way. In addition, the only
access to the marina was from Boom Way, approximately 700-800 feet
from the intersection with the Boulevard, or from Flax Isle Drive.
The four by eight foot identification sign located near the
intersection of the Boulevard and Boom Way could remain even if the
frontage was developed according to the alternate use. The
appraiser concluded that the front portion was totally unnecessary
for the operation of the marina and related use of the property.
He further testified that the residence with chain link fence and
wooded area provided a natural separation between the marina and
the frontage. No testimony was offered as to the basis for
inclusion of the Flax Isle Drive frontage as excess land.
Plaintiff's appraiser's testimony that the entire property was
used to support the currently zoned marina-commercial use was more
compelling. The lagoon area was used for the storage of boats and
related marina purposes, the middle portion was used for parking
and the owner's residence, and the vacant land fronting the
Boulevard and Boom Way was used for advertising and placement of
boats for sale, the identification sign and visibility of the
marina. If the marina was at full occupancy, storage and other
activities would encroach upon the front section, creating a need
for flexibility in use of the vacant land. Reduction of the site
would reduce the land available for parking, storage of boats,
ingress and egress, signage and advertising. Overall, such sub-division and development would result in less operating area
available to the customers of the marina, jeopardize the continued
operation of the marina and its related uses and significantly
decrease the value of the marina.
The first and most important test for determining highest
and best use of a property is whether the alternative use is
legally permissible. The use proposed by the municipality was not
legally permissible on the assessing date. Six Cherry Hill, Inc.,
supra at l29. There was no dispute that the parcel was situate in
an "MC" (marina-commercial) zone. Residential use was not
permitted.
The municipality was not, however, precluded from showing the
probability of a change in the zoning ordinance or the grant of a
zoning variance to allow the suggested highest and best use of the
property.The Appraisal of Real Estate, supra at 281; Six Cherry
Hill, Inc. v. Cherry Hill Tp., supra at 129; State by Comm'r of
Transp. v. Caioli,
135 N.J. 252 (l994). There is insufficient
evidence before the Court that an R-50 use was within a reasonable
probability of being permitted in the foreseeable future within the
vicinity of the property.
The parcel had never been sub-divided and there were no
applications pending for sub-division, rezoning or a zoning
variance for any portion of the subject property. Contrary to the
municipality's argument that over the years numerous zoning
variances were granted for residential use, the Tax Assessor, a
current and former Planning Board member, testified that from 1986
through 1988, three use variances were granted by the municipal
board in the general vicinity of the subject property for townhouse
construction. No zoning changes or variance applications for such
use were pending or granted by the municipality from 1989 through
1991. It is also interesting to note that in 1986 single family
residences were a permissible use in an "MC" zone, which use was
expressly prohibited by the municipality by amendment to its zoning
ordinance in May, 1989. Thus, it seems clear that as of 1989 the
municipality had made an implicit decision to exclude residential
development from "MC" zones. The absence of any pending or
approved zoning changes or variances through October 1, 1991
clearly indicate that it was unlikely that there would be a zoning
change by the municipality and/or the absence of a market for such
use if there were such a zoning change.
Even assuming that R-50 residential use was a legal or
reasonably probable alternative use of the purported excess land,
the municipality's experts failed to determine the physical
possibility of the proposed sub-division and development of the
seven (7) conforming and three (3) oversized lots. "Size, shape,
area and terrain affect the uses to which land may be developed."
Appraisal of Real Estate, supra at 296. A proper determination of
highest and best use cannot be made without consideration of these
physical factors and there has been no such consideration in this
case. Six Cherry Hill, Inc. v. Cherry Hill Tp., supra at l32.
The municipality's arguments amount to little more than speculation
that the property may accommodate an additional use.
It is undisputed that in order for this property to be used as
suggested by the municipality, at the very minimum there must be a
zoning change from "MC" to "R-50" and sub-division approval. The
municipality did not survey the property, review a topographical or
flood map or perform any wetlands investigation or delineation of
the property in order to ascertain the extent of land, if any,
actually available for subdivision and development. The
municipality's experts testified that they basically determined the
extent of development by marking off seven (7) conforming (50 x 50)
and three (3) oversized (50 x 250+) lots on the tax map.
Furthermore, the municipality failed to present any data to
support its position that such development would be economically
feasible under the market conditions existing in the area on or
about October 1, 1991. The municipality did not prepare any
feasibility study or market analysis to ascertain the need for
additional multi-family housing in the township. In fact, the
taxpayer's expert's uncontroverted testimony was that there were a
number of vacancies in townhouse and other residential developments
in the area, including a new townhouse development across the
street from the delineated land. Furthermore, the municipality did
not inquire about the necessity for or probability of obtaining
CAFRA, DEPE or other environmental permits for the alternate use
and the cost of such permits or remedial work required to obtain
same.
Moreover, it has not been shown that the proposed alternate
use would be economically profitable. The weight to be given to an
expert's testimony depends on the facts and reasoning which form
the basis for the opinion. An expert's conclusion can rise no
higher than the data providing the foundation. Inmar Associates v.
Edison Tp., supra at 66.
The municipality's expert had no underlying support for his
opinion of the valuation of the purported excess land. The
municipality's appraiser opined that the market value for typical
lots would be $25,000 and for oversized lots would be $30,000
without providing any comparable sales data or other factual
information.
Furthermore, no analysis was made of costs of development and
construction or the need for and potential return from any given
type of development. United Jersey Bk. v. Lincoln Park Bor., supra
at 558. The municipality's appraiser speculated the projected sub-division cost without providing any factual basis. He also assumed
the sale of two (2) lots annually and calculated an absorption rate
and projection of taxes over a five (5) year period without
obtaining
a market analysis or reviewing the pro forma of similar
developments. The appraiser then assumed that the commissions
would be 10" and arrived at an indicated market value of the
"excess land" at $205,500.
I find that the entire site is necessary to support the use
and improvements of the marina, as determined in the market; thus,
there is no excess land to be considered for purposes of valuation
of the subject property. Moreover, I find that even if a portion
of the land was deemed excess, its sub-division and rezoning for R-50 residential development as proposed would effectively remove any
visibility that the marina had from North Boom Way and would
significantly reduce the operating area available for customers.
Such alternate highest and best use would detract from the value of
the marina. Thus, in this case the value of the land cannot be
derived by adding the indicated value under the income approach for
a fully operational marina to the projected value of the excess
land at the alternate use. Moreover, there is no foundation for
the municipality's valuation of the land.
I conclude that the municipality has not established excess
land value. The subject property's highest and best use is its
present use. Its true value as derived from the income approach
for the l992 tax year and corresponding assessment is $475,000.
The court will accept the municipality's proposed post trial
allocation of land and improvements. The Clerk of the Tax Court is
directed to enter judgment for the l992 tax year as follows:
Land $194,500
Improvements $280,500
Total $475,000
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