Goldmann, Freund and Conford. The opinion of the court was delivered by Conford, J.A.D.
The City of Bayonne was dissatisfied with the determination by the Director of the Division of Taxation of the average ratio of assessed to true value of real estate in that municipality for the year 1956 for purposes of promulgation of the table of equalized valuations used in the calculation and apportionment of state aid to local school districts for the school fiscal year 1957-1958. The table is prepared under L. 1954, c. 86 (N.J.S.A. 54:1-35.1 et seq.), and the state aid is payable under a formula fixed by the State School Aid Act of 1954 (L. 1954, c. 85; N.J.S.A. 18:10-29.30 et seq.). The average ratio was slightly modified by the Division of Tax Appeals on the appeal of Bayonne, but the city is still dissatisfied for reasons to be stated, and appeals from the final judgment in the Division.
State school aid is apportionable upon a statutory formula, the details of which do not presently concern us except in the respect that the higher a municipality's equalized real estate assessed valuations, the lower its aid from the State, and vice-versa. Bayonne's grievance is that its average ratio of assessed to true value for the year 1956 as fixed by the Director is less than it should be because there was omitted from the sales transactions upon the basis of which the ratio was calculated a particular sale whose inclusion would have operated to increase its ratio and thus decrease its equalized true value and consequently increase its school aid from the State for the fiscal year mentioned above.
L. 1954, c. 86 requires the promulgation of a table of equalized valuations, showing, for each taxing district in the State, the average ratio of assessed to true value of all
real property, to be completed on or prior to October first of each year for use in the apportionment of state school aid for the fiscal year commencing the following July 1. The method of fixing the average ratios is specified in N.J.S.A. 54:1-35.3 as follows:
"True value for the purposes of this act shall be deemed to be valuation at current market prices or values, determined in such manner as the director may, in his discretion, select. The director shall determine the ratio of aggregate assessed to aggregate true valuation of real estate of each taxing district. He may make such determination by reference to the county equalization table whenever he is satisfied that the table has been prepared according to accepted methods and practices and that it properly reflects true value or a known percentage thereof for the several taxing districts in the county. The director, with respect to any and all taxing districts, may use the assessment ratios reported in the Sixth Report of the Commission on State Tax Policy (Trenton, 1953) and may consider such other assessment ratio studies as may be available. He may make such further and different investigations of assessment practices as he may deem necessary or desirable for the establishment of the assessment ratios required by this act."
The statute permits review of an equalization table by the Division of Tax Appeals on complaint of any taxing district within ten days after its promulgation. If the equalized valuation of any district is found by the Division to be erroneous, it is required to "revise and correct" the table. However, in any such proceeding the assessment ratios as promulgated "shall be presumed to be correct" and shall not be revised or modified by the Division "unless the complainant district shall present proof that upon all the evidence available such ratio or ratios could not reasonably be justified." N.J.S.A. 54:1-35.4.
The assessment ratios reported in the Sixth Report of the Commission on State Tax Policy , referred to in N.J.S.A. 54:1-35.3, were developed in connection with a study of real estate assessment practices throughout the State and represented the early phase of a program in the Division of Taxation for improvement of the process of equalization of aggregate assessments as between municipalities in each
county for purposes of fair apportionment of the expense of county government, and, ultimately, the betterment of the quality of the rolls of individual tax assessments. The basic technique in the development of such ratios is the sales sample method, which is recognized by and used in many states for equalization purposes, according to the testimony of the defendant Aaron K. Neeld, Director of the Division of Taxation at the time of the preparation of the table questioned in this case and now Treasurer of the State of New Jersey. This method consists in general of collecting records of recorded deeds for the transfer of real property in as broad a sampling of such transactions as is practicable, ascertaining the sales consideration from the federal revenue stamps, discarding all transactions which for various reasons are presumed not to reflect the bona fide consideration in a sale between a willing buyer and willing seller dealing at arms' length, and then calculating the ratio between the aggregate assessed valuations of the properties involved in the transactions found usable in a given taxing district and the aggregate indicated sales prices in such transactions.
The New Jersey Division of Taxation, by its Local Property Tax Bureau, screens all sales transactions reported to it by local assessors and county boards of taxation and makes determinations as to which sales are usable or non-usable on the basis of a list of 26 specified criteria (mortgages as part of consideration, family transactions, sales by public bodies, etc.). These determinations are necessarily summary in nature since almost 200,000 deeds are recorded each year and an attempt is made to screen as many as possible for usability. The sales transaction period used is the year beginning July 1 of the prior calendar year. Such transactions as are not screened by the cut-off date fixed each year for purposes of completion of the ratios in time for promulgation of the tables on October first are not used.
The equalized valuations for each taxing district are determined by the Director on a "weighted" basis and are arrived at as follows. The usable sales are divided into four classifications: ...