1 N.J. Tax 244 | N.J. Tax Ct. | 1980
Plaintiff seeks review of the judgments of the Middlesex County Board of Taxation for the tax years 1976,1977 and 1978. It contends that its property is assessed in excess of its fair market value and also that its assessment is at a higher percentage of true value than are other assessments in the taxing district on other properties, and thus exceeds the common level of assessments in the taxing district. The premises are located in the Township of East Brunswick and are known as Block 32, Lot 1-16, Tices Lane. The improvements which were constructed by plaintiff have been used by the ITT Continental Baking Co. for baking purposes since construction in 1970. The original assessment of the subject property for each of the tax years in question was as follows:
Land $ 547,600
Improvements 2,340,500
Total $2,888,100
This assessment was affirmed by the Middlesex County Board of Taxation for each of the tax years, to wit, 1976, 1977 and 1978.
The subject of this proceeding consists of land with all municipal improvements and services and is approximately 34.718 acres, with improvements consisting of three buildings which are utilized for production of baking goods, engineering research, a repair shop, truck wash and a thrift store, along with warehousing. The main building is primarily a one-story manufacturing improvement which houses the bakery production area, offices and warehouse. The main building consists of a concrete slab foundation, steel post and girder supporting steel deck concrete roof covered with tar and stone; aluminum coping facade; primarily concrete floors with some portions having maple floor and asphalt vinyl tile covering; fluorescent lighting fixtures and suspended blower units for heat. The entire plant is sprinklered. A mezzanine is located in the middle of the plant and
The second improvement, identified as the mechanical research building, is a one-story brick building containing a small air-conditioned office area finished with asphalt vinyl tile floors, a drop ceiling, fluorescent lights, a large open office area and three small offices, along with a small cafeteria, locker room, men’s room and ladies’ room. The balance of the building is utilized as an equipment repair and research area and is industrial space similar to the main building.
The third improvement is a one-story brick building which contains an air-conditioned retail store, a garage, warehouse and truck wash. The retail store is finished with asphalt vinyl tile floors, a drop ceiling, fluorescent lights and an aluminum-set store window. The balance of this building is unfinished and is generally of the same construction as the main building with the exception that there is no sprinkler. The subject improvements were originally constructed in 1970 with an addition in 1972.
Each party relied on the testimony of one expert in order to establish the value of the subject property. The expert for the taxpayer indicated that the value at which he arrived was $2,765,000 by means of the cost approach, $2,700,000 by means of the income approach and $2,700,000 by means of the market data approach. His correlated value was $2,700,000, allocated as follows:
Land $ 555,000
Improvements 2,145,000
Total $2,700,000
The expert for the taxing district indicated that the only method he utilized in order to value this property was by the cost approach. His reasoning was that this was a special pur
Because of the view that I have taken of this matter, it is unnecessary to decide whether the improvements constitute a unique or special purpose property such as was found in Anaconda Co. v. Perth Amboy, 157 N.J.Super. 42, 384 A.2d 531 (App. Div.1978) (a copper refinery), and Bostian v. Franklin State Bank, 167 N.J.Super. 564, 401 A.2d 549 (App.Div.1979) (a bank), requiring the use of the cost approach as the only proper appraisal approach to value.
As previously stated, both experts utilized the cost approach to value. They also both relied upon the [1979] Marshall Valuation Service, Marshall & Swift, but differed in estimated value due to their utilization of different basic building classifications as found in Marshall & Swift and also in their allowances for economic obsolescence. The taxpayer’s expert determined that the subject improvements fit the basic classification of a Class C building found on page C9 of Marshall & Swift, while the expert for the taxing district believed that the proper classification would be Class A as found in section 14, page 11 of Marshall & Swift. The primary characteristic of a Class A building is “fire proof structural steel frame,” while the main feature of Class C is “masonry or reinforced concrete.” On cross-examination the expert for the township indicated there was structural steel in the improvements, but he did not know where or the percentage of such material used in the subject. It was conceded that the difference in value produced by the differing classifications was substantial, i. e., approximately 27%. Although experience and judgment are necessary in the determination of a particular classification, the class of a
The second area of difference in the cost approach was with regard to economic obsolescence. The taxpayer’s expert found 10% economic obsolescence while the taxing district’s expert opined that there was no economic obsolescence.
Economic (also referred to as environmental or locational) obsolescence is a loss in value resulting from factors outside the improvements, such as environment, changes in zoning regulations or a declining neighborhood economy. Bostian v. Franklin State Bank, supra at page 573, 401 A.2d 549, American Institute of Real Estate Appraisers, The Appraisal of Real Estate (7th ed. 1978), at pp. 258, 259. It represents anything outside the property lines that would cause the property to have less appeal or marketability. The taxpayer’s expert allowed $245,554 (representing 10%) for a loss in value due to economic obsolescence. It was his opinion that it would take time to market the improvements because of size, and during this period costs such as maintenance, heating, security and property taxes would be incurred. He stated that this was a generally accepted approach and he allowed 10% for this element of depreciation. It was the opinion of the expert for the taxing district that there was no economic obsolescence because the concept of economic obsolescence has nothing to do with the size of the property or how long it would take to market. He felt that the period involved in selling property does not constitute economic obsolescence since this would be true with all property in varying degrees. I agree.
The taxpayer’s expert also used the income and market approaches which produced value estimates of $2,700,000. In the income approach the expert relied upon four comparable rentals which ranged from $1.33 to $1.60 a square foot. He selected the bottom of the range at $1.35 a square foot as constituting economic rent. It was shown that the subject was a light manufacturing industrial facility while all four comparable rentals were warehouses. The taxpayer’s expert admitted that generally warehouses have lower values than do industrial buildings. The taxing district’s expert indicated this is because a warehouse is a “bare bones building with very little finish that does not require heating facilities.” The general purpose of a warehouse is to provide a manufacturer or distributor of merchandise a place to store his goods temporarily pending delivery to a retailer or customer. There would be no need to construct an industrial light manufacturing facility for the purpose of the storage of goods. The taxpayer’s expert further admitted that the three comparables located in the area of the subject were considerably smaller in land size than the subject, and that he did not consider the excess land of the subject in his valuation.
With regard to the market approach, the taxpayer’s expert relied upon five sales which indicated to him a unit value of $11 a square foot of building area, which produced a value of $2,700,000 ($11.00 X 246,488 rounded). The sales ranged from $10 a square foot to $12.26 per square foot. It must be noted that the appraiser indicated that one comparable (his sale number 2) which sold in June 1975 for $10.00 per square foot resold in August 1976 for $15.02 per square foot but he did not consider the resale. His reason for not considering this resale was because it occurred after the assessment date of October 1,1975. This explanation is inadequate since there were three tax years to consider (1976,1977 and 1978) and secondly, he used two other sales that occurred after the date of the resale. Of the sales used I find that sale number 1 and sale number 4 are the most comparable. This is based on age of the improvements, location and size of land areas. These comparables produce a unit price per square foot of $12.26. This unit price is also supported by averaging the unit prices of all the comparables if I ignore the sale of comparable number 2 for $10.00 per square foot and consider its resale for $15.02 per square foot. Utilizing $12.26 per square foot will produce a value of $3,022,000 rounded ($12.26 X 246,488) which again is in substantial accord with the result produced by the taxpayer’s expert’s cost approach if economic obsolescence is ignored.
It is conceded that there is no single doctrinaire approach to the valuation of real property. Samuel Hird & Sons, Inc. v. Garfield, 87 N.J.Super. 65, 72, 208 A.2d 153, 157 (App.Div. 1965). The search is for the true value of the property, specifi
The allocation of the value therefore shall be as follows:
Land $ 555,000
Improvements 2,455,000
Total $3,010,000
Plaintiff has also raised the issue of inequality in assessment and has presented a summary of the State Director’s sales-ratio study for East Brunswick, New Jersey, for the tax years in question. The statistics indicated that the Director’s ratios (average weighted classified ratios) were:
1976 - 95.47
1977 - 90.50
1978 - 87.31
However, this matter does not end at this point because consideration must be given to N.J.S.A. 54:2-40.4, commonly referred to as Chapter 123. Pursuant to this statute the Tax Court must for the tax year 1978 utilize the unweighted, unclassified, arithmetic average as the guidepost for the common level range remedy enacted by the Legislature. N.J.S.A. 54:l-35a. The court must be satisfied by the proofs that the ratio of the assessed valuation of the subject property to its true value exceeds the upper limit or falls below the lower limit of the
Land $ 449,550
Improvements 1,988,550
Total $2,438,100
It is, therefore, the judgment of this court that the petitions for 1976 and 1977 be dismissed and that the assessment for 1978 be reduced to $2,438,100 allocated as previously stated.
Judgment will be entered by the Clerk of the Tax Court.