On appeal from Division of Tax Appeals.
Ard and Antell. The opinion of the court was delivered by Antell, J.A.D.
[167 NJSuper Page 566] Petitioner instituted this proceeding by filing an appeal with the Somerset County Board of Taxation, seeking an increase in the 1972 real property tax assessment levied against respondent Franklin State Bank (bank) by the Township of Franklin (township). The county board of taxation affirmed the assessment and petitioner appealed to the State Division of Tax Appeals (Division) where, pursuant to a written opinion dated March 2, 1978, the assessment was moderately increased. On appeal therefrom petitioner's central contention is that the determination
arrived at in the Division still reflects a substantial undervaluation of the building. The bank denies any undervaluation and on its cross-appeal asserts that the Division erred in refusing to allow a reduction from value for physical depreciation and obsolecence and in the inclusion of certain personal property in determining value.
The property is a two-story home office bank building which was completed in 1970 and for which a certificate of occupancy was issued October 1, 1970. The critical evidence as to value was received through the testimony of three witnesses: the township assessor, a real estate appraiser produced by the bank, and a real estate appraiser produced by the petitioner. All agreed that the correct approach to valuation of this special purpose building was to ascertain the cost of reproduction as of the valuation date, October 1, 1971, less an allowance for depreciation and obsolescence. Anaconda Co. v. Perth Amboy , 157 N.J. Super. 42, 46-47 (App. Div. 1978). The assessor, using an index in the Real Property Appraisal Manual For New Jersey Assessors,*fn1 first ascertained the unit construction cost as of 1954 for buildings of the classification which he determined was applicable to the bank. To this he applied a cost conversion factor of 1.57 to bring this figure into harmony with current economic conditions. After allowing for 3% physical depreciation he arrived at a valuation of $1,319,600.
The bank's appraiser, utilizing a different standard index, the Dodge Building Cost Calculator, determined a unit construction cost as of 1970 and brought this figure up to date by applying a cost conversion factor of 1.128. He then deducted 2% for physical depreciation and 35% for obsolescence and arrived at a true value of $1,145,450.
Petitioner's expert also used the New Jersey Appraisal Manual, as did the township assessor, in estimating the bank's value for 1954. However, he used a different building classification than did the assessor. He also applied a different cost conversion factor of 2.19. This figure is made applicable by the Handbook for New Jersey Assessors to building costs in New Brunswick and he used it for the reason that "New Brunswick was located nearby." Using these figures, after allowing 2% for depreciation, his valuation was $2,495,700. In addition to valuation based on estimated reproduction cost, petitioner's witness also fixed a valuation based upon the actual original costs of construction which were obtained from a bank official on depositions. Incurred during 1969, these costs totalled $1,940,096, which were trended up to the valuation date by a conversion factor of 1.27. He then allowed 2% for physical depreciation and arrived at a net reproduction cost of $2,414,600.
The relevant figures are summarized in the following chart:
Bank's Expert Taxpayers' Expert
Dodge Calculator Actual Figure
$866,504 $1,317,156 $1,075,848 $1,940,096
Factors 1.57 1.128 2.19 1.27
1971 cost $1,360,412 $1,818,174 $2,546,607 $2,463,922
Depreciation 3% 37% 2% 2%
$1,319,600 $1,145,450 $2,495,700 $2,414,600
Land $145,400 $232,695 $203,000 $203,000
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