The New Jersey Tax Court (Court) on October 4, 2019, affirmed an original assessment of watershed property after finding neither the property owner's appraiser nor the municipality's expert used comparable property in valuing the property (City of Newark/Newark Watershed Corp. v. Township of Jefferson)¹.

The ruling demonstrates the need for property tax practitioners and appraisers alike to support their valuations with relevant data.

Background

The property in dispute is owned by Newark, New Jersey in Jefferson Township, and is used as a 4,036-acre watershed. The property is vacant, heavily wooded, and significantly restricted in its ability to be developed. Among the restrictions burdening the property are conservation easements with the state's environmental protection department requiring the property to remain in its forested condition in perpetuity. The assessments for the years under appeal reflected valuations in the range of $4,000 to $5,000 per acre.

The property owner presented the opinion of a licensed real estate appraiser, who found that the harvesting of timber for sale was the highest and best use of the property. He concluded that the property had a value of $1,500 per acre. During his testimony, however, it was revealed that he had not analyzed any timbering properties in New Jersey that had been sold. Rather, the 20 sales upon which the appraiser relied to prepare his valuation were all farmland properties producing food crops, not timber.

Court rejects appraiser's opinion

In rejecting the conclusion of the property owner's appraiser, the Court determined the sales used by the appraiser in his sales comparison approach were non-comparable to the subject property. The Court said it could not accept his opinion of highest and best use without supporting data suggesting market value. The Court further noted that the lack of available information on timber sales should have alerted the appraiser that he should eliminate timbering as a potential highest and best use and consider alternative land uses for which comparable sales data did exist. The Court also found that the appraiser failed to provide sufficient support for adjustments made to his comparable sales and did not adequately verify the terms of his comparable sales. Accordingly, the Court found that the property owner's sales comparison approach was, as a matter of law, inapplicable.

The Court also rejected the value of the municipality's expert. The municipality's expert found that recreation was the property's highest and best use, with the most probable buyer being a government agency or land preservation group. The municipality's appraiser found 16 sales for which the property was to be used for active or passive recreational purposes. The Court, however, found that the value of the municipality's expert was not persuasive because the subject property was restricted by easements not present in the comparative analysis of the municipality's expert.

Accordingly, as neither party was able to overcome the presumption of correctness afforded to the original assessments by the municipality, the Court affirmed, for all years, the assessed values.

Implications

Courts require litigants to present evidence supporting their conclusions. At minimum, appraisers must present support for their valuations. This decision has particular importance in cases of unique property for which there may not be any direct comparable property sales. Property owners unable to find relevant support (such as comparable property) risk losing an appeal for lack of support for an alternative valuation. In this case, because the Court rejected the appraisals presented by both the property owner and the municipality, the property owner was unable to overturn the presumption of the validity of the original assessment.

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ENDNOTES

¹ City of Newark/Newark Watershed Corp. v. Township of Jefferson, Dkt. No. 013601 - 2009, et al. (N.J. Tax Ct. Oct. 4, 2019) (approved for publication).