Carton, Mintz and Larner. The opinion of the court was delivered by Carton, P.J.A.D.
This appeal involves the propriety of the tax equalization tables promulgated by defendant Essex County Board of Taxation for the year 1971, and specifically as they affect petitioner City of Newark.
Newark made a two-pronged attack on the tax equalization table in the Division of Tax Appeals, asserting that (1) the Board improperly adopted the equalization ratio developed by the State Director of Taxation for distribution of school
monies, and (2) the Board improperly included in the equalization table data some 245 Newark sales of real property which were financed by V.A. and F.H.A. loans.
The Division rejected Newark's first argument that adoption of the state equalization ratio was improper, but accepted its argument with respect to 65 sales financed by V.A. and F.H.A. loans. These sales were withdrawn from the statistical sample and the municipal ratio of assessments to true value was recomputed on this basis.
In its appeal to this court the Board seeks to have its tax equalization tables approved as originally adopted. Newark's cross-appeal repeats its challenge to the Board's use of the state equalization ratio and reasserts its claim that none of the V.A. and F.H.A. financed sales should have been included in determining the equalization table.
USE OF STATE EQUALIZATION RATIO IN COMPUTING THE COUNTY RATIO OF ASSESSED VALUE TO TRUE VALUE.
Newark argues that the method of computing the ratio of assessed value to true value used by the Division of Taxation for each municipality and adopted by the County Board for its equalization tables is unreasonable. That method may be described as follows: The real property in the municipality is divided into four classes (residential, commercial, vacant and farm). The municipal assessment value is then compared with the record of sales in each category for the past year, certain categories of sales being eliminated (intrafamily et al.). The ratios in each of the four categories are then averaged, resulting in an overall municipal ratio. That overall ratio is then averaged with the final ratio for the previous year (recomputed with added and omitted assessments), thus producing a new final ratio for the current year. In other words, the sales data from any single year have a progressively diminishing effect on each year's final ratio -- first 50%, then 25%, then 12 1/2% and so on ad infinitum.
Newark specifically objects to the last step -- the averaging of the one-year figure with the final ratio from the previous year. That process, it contends, unduly favors municipalities with increasing property values and works against those with declining values such as Newark. This analysis of the effect of averaging appears to be correct -- the process causes the final ratio to lag behind the results of any single year study, whether property values are rising or falling.
It does not follow, however, that this result is necessarily unreasonable. The Legislature has not prescribed a specific plan or method to be followed by county boards in devising their equalization tables, and they are free to adopt any reasonable and efficient method. N.J.S.A. 54:3-17; Passaic v. Passaic County Bd. of Taxation , 18 N.J. 371, 385 (1955); Willingboro Tp. v. Burlington County Bd. of Taxation , 62 N.J. 203 (1973).
Our Supreme Court has specifically held that a county board may adopt the ratios promulgated by the Director of Taxation. Passaic v. Passaic County Bd. of Taxation, supra; Greenwich Tp. v. Gloucester County Bd. of Taxation , 47 N.J. 95, 99 (1966).
We conclude that Newark has not carried its burden of showing that the County Board or the Division of Tax Appeals acted unreasonably in the present case in adopting the ratios promulgated by the Director of Taxation, which include the averaging process to which the city specifically objects. The averaging process was fair and reasonably related to the ultimate objective of achieving fairly accurate approximations of the ratios between true and assessed valuation in each tax district.
True value is an ideal, unrealizable concept. See Kearny v. Division of Tax Appeals , 35 N.J. 299, 303 (1961). The best one can do is to approximate true value by means of observable data, i.e. , sales. Obviously, the greater the number of sales that can be included in the sample, the more likely it is individual distortions will be ironed out and the ideal more nearly approached. The Director's method of computing
the final ratio of assessed to true value for any given year is designed to achieve this objective by including all sales from the first year the method went into operation but weighting such sales proportionately less as they are more remote ...