Leonard, Allcorn and Crahay. The opinion of the court was delivered by Allcorn, J.A.D.
In these consolidated appeals the City of Trenton challenges the validity of both the 1972 and 1973 equalization tables prepared and confirmed by the Mercer County Board of Taxation.
Initially, we find no merit to the contention of the city that the use by the county board of the ratios determined and fixed by the Director of the Division of Taxation for the comparable periods for the distribution of school aid was improper because the Director's ratios were based on "multi-year" averaging of sales. Newark v. Essex Cty. Bd. Taxation, 124 N.J. Super. 76, 80 (App. Div. 1973), certif. den. 63 N.J. 566 (1973).
The city next contends that the Director's tables for both years were further infected because the sales data used in the calculation of his ratios for Trenton included current year sales of residential properties which were F.H.A.-financed.
The same argument was made below. It was rejected by the Division on the appeal of the 1972 table; but on the appeal of the 1973 table the Division determined that certain specified current sales that were F.H.A.-financed should be eliminated, and directed the table to be revised by recalculating Trenton's ratio omitting said sales -- the case of Newark v. Essex Cty. Bd. Taxation, supra, having been decided subsequent to the Division decision on the 1972 table, but prior to its decision on the 1973 table.
There would appear to be little question but that, in the sale and purchase of residential properties which are financed by loans guaranteed by F.H.A. there frequently are imposed as conditions to the sale and to the grant of the loan various extraordinary charges such as points to the lender, purchaser's closing costs, etc., payable in whole or substantial part by the seller.*fn1 Such extraordinary charges necessarily reduce the net amount received by the seller on account of the stated price and, pro tanto, the market value of the property. And, assuming that no such extraordinary charges are laid on the seller in non-F.H.A.-financed sales, then the use of the F.H.A.-financed sales at their stated or contract prices in the calculation of the ratio between assessed values and sales prices necessarily results in something less than a true and accurate ratio.
Given these circumstances, the appropriate remedy in the present cases is difficult both of conception and of design. Should F.H.A.-financed sales of residential properties be excluded in computing the current year sales ratio? If so, should all such sales be excluded without regard to the existence and proportion of the extraordinary charges, or only those sales in which the extraordinary charges exceed a fixed, arbitrary percentage of the stated purchase price? Or, should F.H.A.-financed sales of residential properties be included in computing the current year sales ratio -- all at the stated contract price, except those sales as to which the affected municipalities
establish the fact and the amount of extraordinary charges borne by the sellers, in which cases the stated contract prices would be reduced accordingly and included in the computation as so adjusted.
Simplistically, accuracy best could be achieved by a complete exclusion of all F.H.A.-financed residential sales. The adoption of this course would have the advantage of eliminating the need for the affected municipalities to search out and compile the various data relating to the extraordinary charges in each sale. Questions of reliability of such data aside, the difficulties encountered and the time and effort expended in acquiring it are considerable. And the measure of success would be something less than satisfactory. The inability of the city here to obtain such data for any more than 56 out of a total of 159 such sales speaks for itself. Notwithstanding the advantages cited, however, there has been expressed an understandable concern, not unfounded, that if all F.H.A.-financed sales were to be excluded, there might well be an insufficient number of usable sales remaining in some communities to form a dependable base on which to determine a reliable ratio.
In the consideration of partial exclusion rather than total exclusion as the purgative, we are faced at the outset with the question of what the determinant shall be. Should all sales in which the payment of seller-borne extraordinary charges is established be excluded, without regard to the proportion they bear to the stated sales prices? Or should there be excluded only those sales in which the extraordinary charges constitute a substantial or significant percentage of the stated sales prices -- and, if so, where is the line to be drawn?*fn2
Quite obviously, there is no uniformity in the amounts or the proportions of the extraordinary charges imposed. No better evidence of this can be had than the proofs submitted by the city in its ...