For reversal and remandment -- Chief Justice Weintraub, Justices Jacobs, Hall and Mountain, and Judges Conford and Lewis. For affirmance -- None. The opinion of the Court was delivered by Conford, P.J.A.D., Temporarily Assigned.
This appeal concerns the county tax equalization table of Burlington County for the tax year 1970. The township of Willingboro complains that the final table prepared and certified by the Burlington County Board of Taxation assigned it an excessive share of the county tax burden of 1970 in relation to the shares assigned the other taxing districts of the county. The Division of Tax Appeals, after a hearing, dismissed Willingboro's appeal. The Appellate Division affirmed, relying upon its decision in Tp. of Little Falls v. Passaic County Bd. of Tax., 115 N.J. Super. 115 (App. Div. 1971), wherein the same general problem as is here implicated was presented and the court sustained a county tax equalization table as against objections similar to those here made by Willingboro. We granted certification. 60 N.J. 18 (1972).*fn1
The factual issues presented are complex. Before detailing them it will be useful to expose the general nature of the basic problem. For purposes of securing an equal proportionate allocation among the taxing districts of a county of the cost of county government each county board of taxation is required by N.J.S.A. 54:3-17 et seq. annually
on or before March 10, on notice and opportunity to be heard to all municipalities therein, to determine "according to its best knowledge and information" the ratio or percentage of true value at which real property of each taxing district is assessed according to the local tax lists and to prepare an equalization table showing the aggregate assessed valuation of the real property in each district and the ratio or percentage, if any, by which the assessed valuation should be increased or decreased in order to correspond to the true value thereof, also stating such true value. For a thorough treatment of the history, interpretation and practical difficulties long encountered in administering this statute see City of Passaic v. Passaic County Bd. of Taxation, 18 N.J. 371 (1955).
The stated equalization function of the county boards does not in any way affect individual tax assessments against property owners. Those are required to be separately revised and corrected administratively by the county boards after receipt of the lists from the local assessors (N.J.S.A. 54:4-46, 47), and are subject to further revision and correction on appeal to the county boards and the State Division of Tax Appeals.
Practically total disregard by local tax authorities of the former statutory requirement of uniform assessment of all real property at true value (N.J.S.A. 54:4-1, as of prior to 1960) produced absence of any degree of uniformity within taxing districts of any particular ratios of assessment to true value, although unofficial ratios were frequently purported to be employed by many districts. City of Passaic, supra (18 N.J. at 378-382). Consequently it became difficult, if not impossible, for county boards of taxation literally to comply with the statutory duty, mentioned above, of determining accurately the ratios to true value at which local assessors were assessing. See In re Appeals of Kents 2124 Atlantic Ave., Inc., 34 N.J. 21, 26 (1961). This condition came gradually to be relieved by several developments: (a) the courts began to press for assessment [62 NJ Page 209] at true value, Switz v. Middletown Twp., 23 N.J. 580 (1957); Ridgefield Park v. Bergen Co. Bd. of Taxation, 31 N.J. 420 (1960);*fn2 (b) there was movement toward periodic, systematic revaluation of assessed properties, on a professional basis, spurred by decisions such as those just cited, by the activity of the local property tax bureau of the State Division of Taxation and by the disclosures of the Sixth Report of the Commission on State Tax Policy (1953); and (c) under compulsion of the requirements of the State School Aid Act of 1954, L. 1954, c. 85, N.J.S.A. 18:10-29.30 et seq. (now N.J.S.A. 18A:58-1 et seq.; 58-4), which provides for distribution to school districts of state financial aid determinable to some extent by the aggregate of the equalized realty assessments of the particular municipality,*fn3 the State Division of Taxation developed a useful system of determining fairly reliable municipal ratios of aggregate assessments to aggregate equalized true valuations based on analyses of prices in sales of property recorded. Such analysis entailed screening out such sales as were for various reasons not reliable indices of market value. The details of the basic method of sales analysis employed, with later variations which will in part be discussed hereinafter, are set forth in Bayonne v. Division of Tax Appeals, 49 N.J. Super. 230 (App. Div. 1958). Under well-warranted encouragement by the local property tax bureau of the Division of Taxation and the courts, see City of Passaic, supra, 18 N.J. at 385, most if not all of the county boards of taxation came to use the ratios of the Director of the Division of Taxation, promulgated for school aid purposes, as guides for purposes of establishment of the county tax equalization tables.
It is the coincidence of periodic revaluation of assessments by municipal assessors and the reliance by the Burlington County Board of Taxation on the Director's municipal ratios for county equalization purposes which has produced the particular controversy involved in this appeal.
Aggregates of municipal equalized true valuations of real estate are fixed by the Director's table on October 1 of each year for purposes of the school fiscal year beginning the following July 1. Thus, in respect of the dates involved in the instant case, the Director's tables promulgated October 1, 1969 were fixed for application to state school aid for the school year July 1, 1970 to July 1, 1971. County boards of taxation, required to complete their county tax equalization tables by March 10 of the current tax year (in this case 1970), ordinarily use the Director's table of ratios of the prior year (in this case October 1, 1969) for their current tax year's county equalization tables. The Director's ratios are generally based on analyses of sales for time periods going back two years prior to the immediately preceding July 1 (in this case July 1, 1969). Despite this fact and the circumstance that the numerator of the fraction constituting the Director's ratio determinant consists of aggregate assessments for a year different from the current county tax equalization year, there is ordinarily no substantial impairment of reliability in the county board's use of the Director's ratios because, aside from new, enlarged or demolished structures, or general municipal revaluations or reassessments, etc., assessed valuations are largely repeated from one year's local assessment lists to the next.
The saving factor last above noted is, however, destroyed in relation to a taxing district like Willingboro which, along with several other districts in Burlington County, effectuated general revaluations for assessment purposes for the tax year 1970. It is apparent that a ratio arrived at by the Director by using assessed valuations for 1969 as the numerator of the fraction which is the ratio determinant cannot be applied for 1970 equalization purposes in the Burlington
revalued districts, consistent with proportionate treatment of non-revalued districts. As revaluations generally reflect accumulated increases in values since prior revaluations, the increases in aggregate assessments for 1970 in the revalued districts would cause gross distortion in the 1970 relative equalized valuations of such districts were the Director's 1969 ratios for the districts applied directly to their 1970 assessment aggregates.*fn4
It is thus clear that a county board of taxation which is confronted in a given tax year with the circumstance that one or more, but not all, of the districts in the county have been revalued for assessment purposes, must apply a different mathematical formula to the new aggregate assessments of such districts if it desires to use the Director's school aid ratios of the prior October 1 in relation to equalization of the non-revalued districts. It will appear from the ensuing discussion that the Burlington County Board of Taxation failed to seek or find an appropriate formula in equalizing for the tax year 1970.*fn5
Before setting forth the procedural background of the appeal and the specific fact situation presented it will facilitate comprehension of the issues if we outline the mechanics and the mathematics of the Director's ratios and of their ordinary use for county tax equalization purposes.
Sales for predetermined periods of time, usually for two years previous to the July 1 preceding the October 1 equalization date, are screened for valuation utility, and the usable sales are divided into four basic classes of property: vacant land, residential (four dwelling units or less), farm land, and all other (including commercial and industrial). The
current aggregate assessed valuations of the properties sold in each class are divided by the aggregate sales prices, yielding a ratio for the class. Each class ratio is divided into the aggregate assessed valuations for the class, yielding aggregate putative true valuations for the respective classes. These aggregates are added together, yielding the total putative true valuations for the district. These are ordinarily the operative figures for school aid distribution purposes. The aggregate assessments of the same tax and calendar year as the year of the Director's October 1 tables*fn6 are divided by the aggregate equalized true valuations last mentioned; this is called the average weighted ratio or weighted ratio (and we will hereinafter use the term "weighted ratio" therefor). Beginning with the Director's 1969 school aid tables, another ratio was developed, which we denominate the "final average ratio" (sometimes called "average ratio"). This is determined as follows: (1) take the aggregate equalized true valuations for the current year (as to the present case, 1969) and average them with the final aggregate true valuations certified in the Director's table for the prior year (i.e., 1968 as to the present case), the resulting figure representing the final certified true valuation for the current year; (2) the aggregate assessed valuations of the current year are divided by the final certified true valuations to produce the "final average ratio".
As is apparent, both of these latter ratios are only statistics insofar as distribution of school aid is concerned, see Bayonne v. Division of Tax Appeals, supra (49 N.J. Super. at 235), but they become operative when used for purposes of county tax equalization in the ensuing tax year.
For county equalization purposes in the tax year following the filing of the Director's October 1 table some county boards use the Director's weighted ratio for the districts but most the final average ratios; in either case the county equalized true valuations are arrived at by dividing the current tax year's assessed valuations of the district by the ratio chosen. The higher the ratio for a municipality, the lower its equalized true valuations for the current tax year and the less its proportionate share of the cost of county government; and vice-versa.*fn7 But, as indicated above, the procedure set forth in this paragraph can be applied to a district only when there has been no general revaluation or reassessment of the district in the current tax year.
Willingboro, formerly Levittown, had by far the greatest amount of 1969 and 1970 assessed valuations of realty of the forty taxing districts in Burlington County. About 99% of its individual real property assessment items is comprised of one-family dwellings of fairly uniform construction. In recent years, inclusive of 1969 and 1970, these have been sold at the rate of about one in five each year, and it is conceded that there has been a steady trend of increase in sales prices over that period, which continues. There was testimony before the Division of increases in building costs at the rate of 8 1/2% per annum. The assessor of Willingboro has maintained ...