For reversal -- Chief Justice Weintraub, and Justices Jacobs, Francis, Proctor, Hall, Schettino and Haneman. For affirmance -- None. The opinion of the court was delivered by Francis, J.
The Equalization Table promulgated by the Director of the Division of Taxation on October 1, 1959, under N.J.S.A. 54:1-35.1, fixed the average ratio of assessed value to true value of real property in the Town of Kearny at 33.87%. As the result of additional information submitted by Kearny, it was increased to 34.81% and the latter ratio was used as the basis for distribution of the 1960 state school aid to Kearny pursuant to N.J.S.A. 18:10-29.33. The mode of establishing this table and the nature and effect of its use have been fully explained and discussed in a number of cases in the Appellate Division and Supreme Court. See, e.g., In re Appeal of Kents 2124 Atlantic Ave., Inc., 34 N.J. 21, 26-27 (1961); City of Passaic v. Passaic County Board of Taxation, 27 N.J. 467 (1958); City of Passaic v. Passaic County Board of Taxation, 18 N.J. 371 (1955); City of Bayonne v. Division of Tax Appeals, 49 N.J. Super. 230 (App. Div. 1958); Borough of Carteret v. Division of Tax Appeals, 40 N.J. Super. 439 (App. Div. 1956), certification denied Borough of Sayreville v. Division of Tax Appeals, 22 N.J. 224 (1956).
The Hudson County Tax Board was under an independent duty to establish a county equalization table for the purpose of apportioning the county tax burden for 1960 among the municipalities of the County. N.J.S.A. 54:3-17. In
the discharge of that task, the Board as a matter of course adopted the ratio of assessed to true value of real property in Kearny as it appeared in the Director's Table.
In constructing the Table so far as it related to the ratio of assessment to true value in Kearny, the Director declined (for reasons to be discussed) to utilize three sales of property in that municipality, which occurred during the two years covered by his study and computations. These sales, if included, would have raised the ratio to 46.31%. The effect of the failure was to decrease Kearny's allotment of school aid by $26,326. It is conceded also that use by the Hudson County Tax Board of the Director's ratio imposed on the town an additional county tax burden in excess of $600,000.
To rectify the alleged unequal school aid treatment, Kearny sought a review of the Director's Equalization Table in the State Division of Tax Appeals. See N.J.S.A. 54:1-35.4. The Division held that the proof submitted was not sufficient to overcome the statutory presumption of correctness. The Appellate Division affirmed, saying among other things:
"* * * But a municipality may not accept the Director's formula (i.e., relation between sales price and assessment), and his use of all but two or three sales, and then by proving the circumstances relating to those two or three sales force the Director in those cases to abandon the formula for the truth. The Director may do so, but he is not compelled to do so; and, in the case at bar, we perceive no abuse of discretion in the rejection of Kearny's position." 61 N.J. Super. 438, 444 (App. Div. 1960).
We granted certification. 33 N.J. 326 (1960).
In order to attack the allegedly excessive county tax burden it was necessary to challenge the County Equalization Table before the County Tax Board. N.J.S.A. 54:2-37. Kearny did so, but was denied relief, the Board indicating that its practice was to adopt routinely the Director's ratio for school aid purposes as its own Equalization Table in allocating the county tax burden among the municipalities. The State Division affirmed and an appeal was taken to the
Appellate Division. We granted certification in order to consider the problem along with the appeal already before us.
The need for an equalization table and for a determination of the ratio of assessment to true value for school aid and county tax distribution stems from the failure of local assessors to assess property in their municipalities at true value or at a uniform percentage thereof uniformly applied by all municipalities. In preparing the table, the Director of the Division of Taxation follows a convenient and uncomplicated system. All sales of real estate in each municipality of the State during the year being studied are reported to him. The sale price as indicated by the revenue stamps on the deed is treated as representing true value. The ratio of assessment to true value is then determined by comparison between the sales price and the assessed value. The process is further refined by classifying the sales into four categories: (1) vacant land; (2) residential; (3) farm; (4) "other" (which includes commercial, industrial, apartments, etc.). An overall average ratio is calculated (by means which need not be further detailed here, see In re Appeal of Kents 2124 Atlantic Ave., Inc., supra; City of Bayonne v. Division of Tax Appeals, supra; N.J.S.A. 54:1-35.2, 3) which, by application to the total assessed value of real property in the municipality under study, as reported by its assessor, produces the aggregate equalized (hypothetically the true) value of such property. This total figure provides the basis for allocation of state school aid to each municipality, N.J.S.A. 18:10-29.33, and (when and if adopted by the County Tax Board) for distribution of the county tax burden among the municipalities. No one suggests that the aggregate true value of real property ratables reached by such means actually or accurately represents true market value. Borough of Carteret v. Division of Tax Appeals, supra, 40 N.J. Super., at pp. 446, 447. The Director's formula produces a practical, work-a-day equitable result which will have to serve the intermunicipal public purposes involved as a basic guide
until all assessors either assess at full true value or at a uniform percentage thereof.
The average ratio shown in the Director's table is not conclusive upon the particular municipality to which it relates. In connection with its use for school aid distribution, the Legislature has made specific provision for review thereof in the Division of Tax Appeals. N.J.S.A. 54:1-35.4. Obviously, if the Director improperly omitted some significant sales occurring in the period covered, which substantially affected the applicable ratio, the Division would be duty bound to correct the error. Of course the burden of proof on the municipality in such situation is a heavy one. The Director is and must be vested with wide discretion in fashioning the table. The statute envelops his work with a presumption of correctness vital enough to sustain it unless "upon all the evidence available [the challenged ratio] could not reasonably be justified." (Insertion ours)
The Director does not promulgate his equalization table to control distribution of the county tax burden. The obligation to equalize assessments to that end rests with the County Tax Board. N.J.S.A. 54:3-17. Because the same method of determining the average ratios would probably be followed, as a matter of practice the Director's table is ordinarily accepted by the Board as prima facie correct and consequently usable in the achievement of its statutory aim. See City of Passaic v. Passaic County Board of Taxation, 18 N.J. 371 (1955). But such a course would not be warranted in the face of adequate evidence offered by a complaining municipality to demonstrate that the ratio ascribed to it is incorrect or plainly unjust. In that event, the Board would not be fulfilling the statutory mandate to "ascertain and determine according to its best knowledge and information, the general ratio or percentage of true value at which the real property of each taxing district is in fact assessed * * *." N.J.S.A. 54:3-17. The comment of this court in City of Passaic v. Passaic
County Board of Taxation, 27 N.J. 467, 472 (1958), is clear on that subject:
"In a word, counsel's point was that the board was bound at all events by the Director's table established in aid of the distribution of state school funds, an untenable hypothesis. In reality, the basic grievance was, and is, the board's readjustment of the ratios to accord with all relevant data as of the statutory assessment date. Yet this was its peremptory duty under the statute." (Emphasis added)
When the Director's table is adopted as the county table it is not conclusive upon the municipalities. It is subject to attack and revision in the County Tax Board before final approval, N.J.S.A. 54:3-18, and thereafter may be challenged again in the Division of Tax Appeals. N.J.S.A. 54:2-37. Although the specific statutory presumption of correctness of the table appears to be related to school aid apportionment, undoubtedly the ordinary presumption of validity which accompanies a determination of a county tax board would apply on such appeal.
Kearny contends that the Director (and the County Tax Board which accepted his table) erred in refusing to include in the sales employed by him in computing the average ratio of assessment to true value three relevant and substantial sales. The sales are: (1) E. I. duPont deNemours and Company to Carla Holding Company on August 11, 1958, for $9,500; (2) duPont to Wasco Chemical Company, Inc., on September 25, 1958, for $400,000; (3) Congoleum-Nairn, Inc., to Kearnyland, Inc., on January 15, 1959, for $800,000.
The Director does not automatically include in his calculations every sale of land occurring in a municipality during the study period. He has established a list of 27 categories of transactions which are non-usable. In this instance, he rejected the three Kearny sales on the ground that they were "split-offs" within the meaning of category 6. The category provides that:
"Sales of property conveying only a portion of the assessed unit, usually referred to as apportionments, split-offs or cut-offs; for example, a parcel sold out of a larger tract where the assessment is for the larger tract"
shall be excluded. Exclusion of a sale apparently falling into one of the 27 classes is made subject to the following general qualification:
"Transfers of the foregoing nature should generally be excluded but may be used if after full investigation it clearly appears that the transaction was a sale between a willing buyer and a willing seller and that it meets all other requisites of a usable sale."
To decide, therefore, whether the refusal to include the sales in question constituted a mistaken use of discretion by the Director and the County Board, the factual circumstances surrounding them must be explored.
THE CONGOLEUM-NAIRN INC. TO KEARNYLAND INC. SALE OF JANUARY 15, 1959.
Prior to December 15, 1958, Congoleum-Nairn Inc. owned the following four separately assessed land units in Kearny:
Unit# Block Lot Area Assessment Assessment Total
1 23 1 $65,000. $251,500. $316,500.
2 23 2 & 3 35,000. 100,000. 135,000.
1 21 7 to 9 6.827 74,900. ...