Michels, Pressler and Bilder. Bilder, J.s.c., Temporarily Assigned.
This is an appeal by the City of Newark from a determination by the Division of Tax Appeals upholding the 1976 Essex County Equalization Tables with certain modifications to reflect the exclusion of certain F.H.A. and V.A.-financed sales wherein the sales prices were found to have been substantially distorted by extraordinary charges. In its challenge to the validity of the tables, Newark alleges three errors. First, F.H.A. and V.A.-financed transactions having sales prices distorted by extraordinary costs were improperly included in the sales-ratio study. Second, municipally owned properties acquired by foreclosure and leased to private lessees as residences were improperly included in the aggregate assessed value of municipally-owned leased property. And finally, the use of equalization ratios prepared by the Director of the Division of Taxation was improper because the method used to derive the tables distorts the true market value of the property in Newark due to a failure to reflect the effects of urban decay.
Initially, we find no merit to Newark's contention that it was improper for the tax board to use the Equalization tables prepared by the Director of the Division of Taxation. The propriety of the use of these tables is well established. See Willingboro Tp. v. Burlington Cty. Bd. of Tax. , 62 N.J. 203 (1973). Newark contends that the method used to prepare the table by treating the city as a homogeneous unit distorts the results of urban decay by dampening the effects of deterioration in older parts of the city. Accordingly, its expert offered a suggested alternative.
Even the existence of another method, assuming a viable alternative had been thereby spelled out, would not prevent the use of the Director's tables. Any reasonable and efficient method of equalization may be used. Id. at 220.
Nor do we find merit in the contention that municipally-owned property leased out for residential purposes should be excluded from the tables. While the city's action in renting these foreclosure-acquired properties may serve a public purpose in a broad sense, the use to which the property is being put is private and the property is not exempt. Jamouneau v. Division of Tax Appeals , 2 N.J. 325 (1949); see N.J.S.A. 54:4-3.3 and N.J.S.A. 54:4-1.
The F.H.A. and V.A.-Financed Sales
In Trenton v. Mercer Cty. Bd. of Tax. , 66 N.J. 470 (1975), recognition was given to the reality that in certain F.H.A. and V.A.-financed sales, because of extraordinary charges paid by the seller, the sales price is not a fair or accurate reflection of true market value. Accordingly, the rule was laid down that sales distorted by extraordinary costs should be eliminated from consideration.
Once the sales price in an F.H.A. financed sale is shown to have been substantally distorted by extraordinary charges so that it does not reflect the true consideration for the property as between the buyer and the seller, it should be discarded and not used in the sales-ratio study at all. [at 473]
The dispute in the instant case arises with respect to the application of this principle to the particular sales in controversy.
It appears that the sales-ratio study in this case included some 908 residential sales of which 219 involved F.H.A. or V.A. financing. The city collected and furnished to the county tax board data with respect to 183 of these 219 sales. This data, derived from questionnaires, interviews and examinations of files, was properly considered by the Division.
Newark v. Essex Cty. Bd. of Tax. , 138 N.J. Super. 217 (App. Div. 1975). Analysis by the board expert disclosed that 138 of the F.H.A. or V.A.-financed sales involved points and/or closing costs paid by the seller and that the percentage ratio of those expenses to ...