On this appeal we are called upon to establish the appropriate technique for assessing real property under N.J.S.A. 54:30A-52, including not only underwater land in a reservoir as was dealt with in Hackensack Water Co. v. Old Tappan, 77 N.J. 208, 390 A.2d 122 (1978), but also the marginal land surrounding the reservoir and substantial upland "buffer" acreage used for the pumping and filtration plant and otherwise unimproved. Plaintiff is a private
utility which provides water for approximately 800,000 customers in Bergen and Hudson counties. Among others, it owns and operates the Oradell Reservoir, a portion of which is located within defendant Borough of Haworth. The company appeals from the final determination of the Tax Court fixing the value of its land at $2,179,481 for 1972 and 1973, and at $2,090,834 for 1974, 1975 and 1976.
Plaintiff started to acquire land for the Oradell Reservoir in 1914 and bought additional real estate over the next 40 years. Although the Oradell Reservoir spreads over seven different municipalities, the portion which lies within Haworth includes 251.73 acres of land under water, 47.30 acres of marginal marshy land surrounding the submerged property and 135.45 upland acres on 40 acres of which the pumping station and water filtration plant are located. This is one of three reservoirs operated by the company in northern New Jersey providing water to about 60 communities. All of the company's land located within defendant municipality is zoned for residential use.
The Tax Court judge concluded that "the highest and best use of these lands is for residential lake community purposes." Reasoning that the high, wooded and well-drained upland area consisting of 135.45 acres had a value one-third greater than other comparable lots because of its strategic location overlooking the "lake," his term for the reservoir, and adjacent to a golf course, he placed a per acre value of $12,500 on that portion of the land. The $12,500 per acre value was applied to the 40 acres within the upland area upon which the company maintains its pumping and filtration facilities because the judge found that to be the unit price which would have to be paid to acquire that parcel now.
The underwater and marginal lands were evaluated at $1,330 an acre by the Tax Court judge. He arrived at that figure by apportioning what he conceived to be the increase in the value of the uplands because of the existence of the "lake,"
and dividing that total increase by the number of acres under water and in marginal lands.
A water utility's real estate must "be assessed and taxed at local rates in the manner provided by law for the taxation of similar property owned by other corporations or individuals...." N.J.S.A. 54:30A-52. The underwater lands constitute real estate for tax purposes. N.J.S.A. 54:30A-50(b). Hence, all of the land of the company under and around the reservoir must be assessed at its "full and fair value... at such price as... it would sell for at a fair and bona fide sale by private contract...." N.J.S.A. 54:4-23.
However, in dealing with reservoir property it is "proper to consider the actual highest and best use of the land, namely as a reservoir in conjunction with the operation of a utility water system." Hackensack Water Co. v. Old Tappan, supra, 77 N.J. at 214, 390 A.2d 122 (footnote omitted). Reservoir lands should be assessed in a manner which has "some relationship to reality." Ibid. "It is the fitness and availability of property for particular uses which should be given consideration in arriving at its taxable value...." In re East Orange Appeal, 80 N.J. Super. 219, 231, 193 A.2d 377 (App.Div.1963), certif. den. 41 N.J. 200, 195 A.2d 468 (1963). Although the possibility of sale for different uses must be considered as a general rule, it is not applicable where "such possibility is so remote as to have no real bearing upon current value." Tax Appeals Div. v. Ewing Tp., 72 N.J. Super. 238, 243, 178 A.2d 229 (App.Div.1962). Where different uses are remote, they are irrelevant. Hackensack Water Co. v. Old Tappan, supra.
The Tax Court concluded that use of the upland property as a residential lake community is not remote. That conclusion was apparently based upon the statement that "the property need not be restructured," as was the problem with the underwater property with which the court was concerned in Old Tappan. Therefore, presumably, this land could be used for residential purposes in its present condition without "restructuring." But such use may be considered in assessing for tax
purposes only if it is not too remote and only if it has some ...