On appeal from the Division of Tax Appeals.
[175 NJSuper Page 223] The Borough of Fort Lee (Borough) appeals from judgments of the Division of Tax Appeals (Division) concerning local property assessments for the years 1976 and 1977 on certain real property owned by respondent Hudson Terrace Associates (Hudson).
The property consists of some 4.22 acres of land designated as Block 6805, lot 3, with improvements consisting of three five-story and basement elevator apartment buildings including 20 basement level garages and a paved parking lot area, and is located on the northwesterly side of Hudson Terrace at the corner of Myrtle Avenue. It is opposite the Palisades Interstate Parkway and just north of the George Washington Bridge approach. The apartment buildings are brick-faced with metal casement windows, have steel fire escapes on each side, and flat roofs. The structures are heated by five hot-water boilers, two each in buildings A and C and one in building B. The boilers are oil-fired. All six levels of the buildings are serviced by 2,000-lb. Westinghouse electrically operated elevators. There are five elevators, two each in the buildings designated as A and C and one in building B. The buildings were completed in 1954 and contain a total of 224 rentable units, including four basement apartments. The units consist of 25 efficiency apartments, 100 one-bedroom apartments and 99 two-bedroom apartments. Each apartment is equipped with a 10 or 12-cubic-foot refrigerator, a free-standing gas range, a small complement of wall and base cabinets, and one three-fixture bath.
For the year 1976 the borough assessed the property at:
These assessments were sustained by the Bergen County Board of Taxation (county board). Hudson appealed therefrom to the Division. In 1977 the borough put into effect a complete revaluation of the assessed properties in the municipality and, pursuant thereto, assessed the subject property at:
The county board sustained the new land assessment but reduced the assessment for improvements to $1,893,825, resulting in a total assessment for the year 1977 of $3,364,425. Both the borough and Hudson appealed to the Division, challenging the county board's action.
The state agency hearings on the appeals were held before Judge Savino of the Division. In regard to the subject improvements, he made findings of true value based upon an income capitalization approach using a capitalization rate comprised of "8% interest, 2% depreciation and the effective tax rate" for the year 1976, and 8% interest, 2% depreciation and the actual tax rate for the year 1977. He determined that the average ratio of 58.56% promulgated by the Director of the Division of Taxation for the year 1976 (the only year regarding which the taxpayer claimed entitlement to discrimination relief) would apply to his finding of true value for that year. His recommended findings and conclusions were adopted by the Division and resulted in the entry of the following Division judgments in the matter:
Improvements 1,029,759 1,812,240
Total $1,880,759 $3,282,840
The borough contends that (1) the Division judge erred in denying its motion to compel the taxpayer (Hudson) and the partners thereof to produce, for the borough's inspection, certified copies of its federal and state income tax returns for the tax years involved; (2) the Division judgments "adopt an unconstitutional, non-uniform approach to assessments in the Borough"; (3) the Division judge erred "in computing the true value" of the subject improvements, and (4) the Division judge erred in applying to his finding of true value for 1976, the pertinent average ratio promulgated for that year by the Director of the Division of Taxation. In regard to the Division's application of the Director's average ratio, the borough argues that (a) the taxpayer's proofs were inadequate to sustain a finding of discrimination, and (b) the incorporation in the record of "proofs from previously tried and unrelated tax appeals constitutes reversible error."
We find no merit in the borough's claim that it was error to deny it access to the income tax returns of the taxpayer,
Hudson Terrace Associates, for the tax years involved. The fact that some investors in income-producing real estate, such as the apartment buildings here involved, actually consider the income tax benefits to be derived by them personally in deciding whether to purchase such property, or do receive such benefits, has no place or relevance in the proper determination of the true value of the property by any of the conventional approaches to value. Accordingly, no purpose would have been served by allowing the borough to inspect the income tax returns sought by its motion. It is obvious that whatever income tax benefits a taxpayer may derive from his ownership of real estate will depend upon facts peculiar to him, such as his income tax bracket for the particular year, the method of depreciation used and the current and unpredictable future provisions of the Federal income tax laws.
Affording consideration or weight to the income tax benefits which may flow to the taxpayer by reason of his particular ownership of the property, would violate the requirements of Article VIII, § I, par. 1 of the State Constitution of 1947, as well as N.J.S.A. 54:4-23, which require adherence to objective standards for determining true value. Thus, the focus must be on the value of the property in the market place, without regard to the particular or peculiar circumstances of the owner. Were this not so, adjacent parcels of land improved with identical structures might be valued differently to the extent that their respective owners' personal situations differed, even though in the open market each parcel would sell for the same price at a fair and bona fide sale by private contract -- i.e. , a transaction between a buyer willing but not obliged to buy and a seller willing but not obliged to sell. See Hackensack Water Co. v. Old Tappan , 77 N.J. 208, 213 (1978); New Brunswick v. Division of Tax Appeals , 39 N.J. 537, 543 (1963); Secaucus v. Damsil, Inc. , 120 N.J. Super. 470, 473-474 (App.Div.1972), certif. den. 62 N.J. 90 (1972); Glenwood Realty Co., Inc. v. East Orange , 78 N.J. Super. 67 (App.Div.1963).
As the court pointed out in In re Estate of Romnes , 79 N.J. 139 (1979):
The use of an objective standard necessarily precludes resort to any factors personal to the seller or the buyer. ...