Goldmann, Freund and Haneman. The opinion of the court was delivered by Goldmann, S.j.a.d.
[55 NJSuper Page 77] The City of Passaic appeals from judgments of the Division of Tax Appeals ("Division") determining the assessment on the real property of Gera Mills and its successor owners Gera Corporation and Passaic Industrial Center, Inc. (hereinafter "taxpayer") located on
Eighth Street, Passaic, N.J., for the years 1954, 1956 and 1957. The property in question consisted of a tract of about 19 acres on which there were located some 31 buildings described as the "older group," and 7 buildings "in the newer group built in the year 1951," as well as appurtenant ground improvements. The property had been a woolen mill, now converted to what is known as a "tenant mill," for tenants.
The assessments made by the municipal assessor were as follows:
Local Assessment 1954 1956 & 1957
Improvements 1,214,100 1,194,100
The taxpayer appealed to the county board of taxation, with the result that the board reduced the assessments as follows:
County Board 1954 1956 & 1957
Improvements 911,740 931,740
The municipality then appealed to the Division of Tax Appeals from the county board action, with the following results (the appeals for 1956 and 1957 were tried together):
State Division 1954 1956 & 1957
Improvements 946,837 931,740
A preliminary word of explanation is required as to the last figure of $931,740 fixed by the Division judgment, in view of the different figure found in the Division panel's report.
Passaic assesses its property at a 40% common ratio figure. There does not appear to be any dispute on this appeal as to the value of the land. The area involved was corrected and agreed upon at the Division hearing to be 18.9 acres. Land value, before the 40% ratio for assessment purposes was applied, was fixed at $12,000 an acre by the city's expert,
and that figure was accepted by the Division panel which heard the appeal. As to improvements, the taxpayer's expert testified that he valued them in 1954 at $2,367,094 which, reduced to 40%, produced the $946,837 figure accepted by the panel for that year. Although the taxpayer's expert based his land value at $12,000 an acre for 1954, he reduced it to $10,000 an acre for 1956 and 1957. For these two years he gave a fair value of $2,422,643 for the land and improvements before reduction to 40%, using a land area of only 16.1 acres. The value he placed on improvements alone would then be $2,422,643 less $161,000 (16.1 acres at $10,000 an acre), or $2,261,643. 40% of this figure would produce an assessment on improvements of $904,657, the assessed valuation determined by the panel in finding No. 10 set out in its report to the Division, and accepted by the latter. Since only the city appealed from the county tax board action, and the $904,657 figure was less than the $931,740 assessment made by the board, the Division did not further reduce the board's assessment to the level shown in finding No. 10, but affirmed the county tax board judgment as to improvements while increasing the land assessment from that found by the board.
The city's expert Vermilya, testified that the reproduction cost of all the improvements was $5,595,230. After deducting physical depreciation and functional obsolescence he testified that the "total sound value" of all improvements was $3,035,303. The city then set the assessment at the 40% common level ratio, or $1,214,100.
The assessment in question was made as part of an overall revaluation program undertaken by the city as a result of an investigation of local assessment practices made by state authorities. The revaluation work was done by J.M. Cleminshaw Company of Cleveland, Ohio, in 1953. Vermilya had charge of the valuation of all industrial property. His qualifications as an expert were challenged by the taxpayer at the Division panel hearing, but he was allowed to testify. The record shows his qualifications to be as follows: he had studied engineering at Worcester Institute of Technology
in Massachusetts, but was not a graduate engineer. Vermilya had once worked as assistant town engineer. He had not attended any professional school to study real property appraisal, but was trained by Mr. Cleminshaw in appraising industrial realty. Vermilya had done appraisal work since 1948. Prior to the Passaic job he had appraised over 400 industrial properties, none of them in New Jersey. He was not a licensed appraiser, did not hold a real estate license in New Jersey, and had never bought or sold industrial property or had anything to do with such a transaction.
Vermilya testified as to the method he had used in appraising Passaic industrial properties. All appraisals were based on "the one formula of replacement cost, current, less depreciation due to all forms, physical and otherwise." The Cleminshaw company had, prior to the beginning of the appraisal work, investigated local material and labor costs and local labor efficiency, and in June 1952 compiled a set of "standard building unit costs" applicable to Passaic. Vermilya had nothing to do with this compilation. In the instant case, as in the case of all other Passaic industrial properties, he examined the taxpayer's properties personally. Applying the unit costs developed by the Cleminshaw company, he then established the reproduction value of the building. After making allowance for physical depreciation and for obsolescence (functional) depreciation he arrived at what he described as the "sound value" of the property.
Contrasted with the "total sound value" of $3,035,303 determined by Vermilya, the taxpayer's expert, as noted, gave the improvements a true value total of $2,367,094 for 1954, adjusting the figure for 1956 and 1957 because of certain changes and demolitions. It has already been mentioned that his true value figure for 1954 was accepted as correct by the Division, so that applying the 40% common ratio, the true value for improvements in 1954 was $946,837. The Division, therefore, increased the assessment on improvements from the $911,740 figure found by the county tax board for that year. Its valuation for 1956 and 1957 has been explained above.
Finding No. 7 of the Division panel report was that:
"The reproduction cost new less depreciation and obsolescence figures submitted by the expert for the respondent as applied to subject premises result from his wide experience as a real estate expert and building contractor familiar with cost estimates on industrial properties.
The figures submitted by him are to be preferred over the testimony offered by the municipality wherein its expert, without any experience in the purchase or sale of industrial property or the construction of same, relied on unit costs compiled by the company by which he was employed."
The record shows that the taxpayer's expert was a licensed real estate dealer of New Jersey who had lived in the City of Passaic for 43 years up to 1950. In addition, he was a contractor and builder, having actually engaged in the supervision of construction and the building of various buildings, factories, and ...