The opinion of the court was delivered by: Andrew
This local property tax case presents a question under the rollback tax assessment provisions of N.J.S.A. 54:4-23.8. The parties, plaintiff, Calton Homes, Inc., and defendant, West Windsor Township, have asked this court to decide whether the Mercer County Board of Taxation followed an appropriate methodology in its calculation of rollback taxes for plaintiff's property for the tax years of 1991 and 1992.
This case has been submitted for decision by the parties on a stipulation of facts, supporting exhibits, the appraisal reports of the experts for the respective parties, and briefs. At my request, because of the tangential constitutional issues presented, the Attorney General has participated in this proceeding by filing a brief expressing her view of the correct interpretation of the relevant legislative and constitutional provisions.
The property at issue is known and designated as Block 21, Lot 22 on the tax map of defendant, West Windsor Township. It is an irregularly shaped parcel of land consisting of 143.33 acres and is located in a R-2 residential district which, for the most part, permits development of single-family dwellings.
The record reveals that West Windsor Township implemented a district-wide revaluation for each of the tax years 1983 and 1993. The subject, however, was assessed as farmland pursuant to the Farmland Assessment Act of 1964, N.J.S.A. 54:4-23.1 to -23.23, for the tax years of 1983 through 1993. In 1983, the farmland assessment was set at $58,200 *fn1 and apparently that assessment was carried over each year until 1993 when the farmland assessment was increased to $73,300. Although the property was assessed as farmland in 1983, the appraisal firm performing the revaluation suggested that the fair market value of the subject was $1,171,816 which was a figure that was carried on the property record card pursuant to N.J.S.A. 18:12-4.8. *fn2
Plaintiff acquired the subject property on March 2, 1993 for $5,016,000 and is currently developing the property with the construction of single-family houses. Prior to plaintiff's acquisition, the West Windsor Township Planning Board on April 22, 1987, had granted preliminary and final subdivision approval to develop the property for residential purposes. Plaintiff devotes a large portion of its initial brief to point out that, while subdivision approvals had been granted as early as 1987, because of a sewer moratorium and a host of other problems related to sewage disposal systems, actual development of the subject was not feasible until April 15, 1993, when plaintiff filed its final subdivision map with the Mercer County Clerk's office.
Shortly thereafter, on August 31, 1993, the West Windsor Township tax assessor filed a complaint with the Mercer County Board of Taxation seeking additional taxes, known as rollback taxes for tax year 1993, the year in which the property was applied to a nonfarmland use and the two immediately preceding years of 1991 and 1992 pursuant to N.J.S.A. 54:4- 23.8 and -23.9.
At the hearing scheduled by the county board, apparently no one appeared on behalf of plaintiff and the county board adopted the assessable values recommended by the tax assessor. The county board judgment reveals the following:
Full & Fair Value $5,016,000 $5,016,000 $5,016,000
x Chapter 123 41.33% 41.33% 100%
= nonqualified $2,073,100 $2,073,100 $5,016,000
Assessment under $58,200 $58,200 $73,300
Rollback $2,014,900 $2,014,900 $4,942,700
Amount of Tax $86,036.23 $94,095.83 $110,222.21
As the chart reflects, the county board accepted a fair market value for each of the tax years at issue of $5,016,000 which was the purchase price paid by plaintiff on March 2, 1993 for the subject property. With respect to tax years 1991 and 1992 the board applied the chapter 123 average ratio to derive the nonfarmland qualified taxable value. However, while the county board applied a ratio of 41.33% for tax year 1991, the correct average ratio for West Windsor Township for 1991 was 42.33%. See Division of Taxation, Certification of Average Ratios and Common Level Ranges for use in the tax year 1991, Mercer County, West Windsor Township. If defendant's position is correct in this case, this court is obligated, under N.J.S.A. 54:1-35a., to apply the chapter 123 ratio promulgated by the Director of the Division of Taxation. See Murnick v. Asbury Park, 95 N.J. 452, 458 (1984) (the use of a ratio other than that declared by the Director of the Division of Taxation violates N.J.S.A. 54:1-35a. and should be corrected under the plain error rule, R. 2:10-2). Since 1993 was a year in which the township implemented a district-wide revaluation, 100% of fair market value was the ratio applied for that year. See N.J.S.A. 54:3-22f. and N.J.S.A. 54:51A-6d.
Plaintiff subsequently filed a complaint with this court claiming that the rollback tax assessment for each of the years of 1991, 1992 and 1993 was incorrect because of an improper methodology employed by the board. During the course of this proceeding, however, plaintiff withdrew its claim with respect to the 1993 tax year, a year in which the township implemented a municipal-wide revaluation. Only the rollback tax assessments for tax years 1991 and 1992 remain at issue.
There is no dispute that the subject property was applied to a nonfarmland use in 1993, and therefore, rollback taxes are appropriate. The focus of the dispute is solely on the method of calculation of the rollback tax assessments.
Additionally, the parties have agreed as to the appropriate values to be employed based on whether the plaintiff's proffered methodology is correct or that employed by the county board is correct. The stipulation of facts provides that, if I conclude that the county board's method is correct, the fair market value of the subject property as of the pivotal assessment dates of October 1, 1990 for tax year 1991 and October 1, 1991 for tax year 1992 was $5,016,000. The parties have also agreed that the applicable average ratio to be applied, again, if the county board's method is correct, is 41.33% for both tax years of 1991 and 1992. However, as I previously indicated, with regard to tax year 1991, I am obligated to apply the average ratio of 42.33% as promulgated by the Director of the Division of Taxation.
In essence, if I conclude that the county board's method was correct, plaintiff concedes that the 1991 and 1992 rollback assessments and resulting taxes are correct. However, for tax year 1991, the rollback assessment and resulting taxes must be recalculated using an average ratio of 42.33%. *fn3
If, however, the methodology offered by plaintiff is appropriate, the parties have agreed that the total nonfarmland qualified value for the subject property for rollback tax purposes is $1,289,000. This would produce a rollback tax assessment for each tax year of 1991 and 1992 of $1,230,800 after deducting the farmland qualified value of $58,200. The sum of $1,289,000 was selected by plaintiff because it represents the value recommended by the revaluation firm as the fair market value for the subject as of October 1, 1982 for the 1983 revaluation year ($1,171,816) with, as suggested by plaintiff's appraisal expert, an additional ten percent added to account for entrepreneurial profit ($1,171,816 x 1.10 = $1,289,000). Apparently, plaintiff's appraiser believed that an addition of entrepreneurial profit was justified based on the subdivision approvals that were obtained subsequent to 1983, but prior to the assessment dates at issue. *fn4
Plaintiff claims that defendant's tax assessor did not value the subject property for purposes of the rollback assessment at the same standard of value at which other property in the taxing district was being assessed. Plaintiff asserts that property in the taxing district for tax years 1991 and 1992 was generally assessed at those values arrived at by a revaluation firm during the revaluation implemented in 1983, eight years prior to the first rollback year in this case.
Plaintiff contends, however, that while other properties in the taxing district were being assessed at 1983 values, rollback assessments on the subject property for tax years 1991 and 1992 were based on values determined as of October 1, 1990 and October 1, 1991 respectively. See N.J.S.A. 54:4-23. Plaintiff maintains that the county board's practice of assessing property for rollback purposes at its current full and fair value: (1) is not in conformance with the rollback tax provisions of N.J.S.A. 54:4-23.8, (2) constitutes discrimination in contravention of the tax clause of the New Jersey Constitution, N.J. Const. art. VIII, § 1, P1, and (3) is a violation of equal protection under both the New Jersey and United States Constitutions, U.S. Const. amend XIV, N.J. Const. art I, P5.
Additionally, plaintiff alleges that these rollback assessments constitute a case of egregious discrimination, and that, consequently, the discrimination provisions of chapter 123 of the Laws of 1973, N.J.S.A. 54:3-22 and :51A-6, do not provide an appropriate form of relief. Plaintiff seeks to have the rollback taxes reduced to the amount that plaintiff would have paid if the subject property had never been assessed as qualified farmland. Plaintiff alleges that this amount is the fair market value of the subject property as determined for tax year 1983 by the appraisal firm that performed defendant's revaluation for that year with an adjustment for entrepreneurial profit.
In response, both defendant taxing district and amicus, the Attorney General, maintain that the correct procedure for calculating rollback tax assessments was employed by the county board in this case and that is to determine the fair market value of the property at issue as of the applicable assessment dates which is then adjusted by the chapter 123 formula to arrive at nonfarmland taxable value. See Schere v. Township of Freehold, 150 N.J. Super. 404, 409 (App. Div. 1977) (stating that "'full and fair value,' as contained in [N.J.S.A. 54:4-23.8], is the same as that traditionally applied in the assessment of property, i.e., the fair market value."); Plushanski v. Union Tp., 1 L. Ed. 2d 520, 528 (Tax 1980) (explaining that October 1 of each pretax year is the appropriate valuation date for purposes of calculating rollback taxes) and V.B.R. Associates v. Bernards Tp., 6 L. Ed. 2d 241, 245-46 (Tax 1984) (holding that under N.J.S.A. 54:4-23.8(a), the chapter 123 ratio must be applied to the "full and fair value" of a property so that such property can be assessed "under the valuation standard applicable to other land in the taxing district").
The dispute in this case arises from differing interpretations by the parties of certain relevant constitutional and statutory provisions relating to the assessment and taxation of real property in this State. To begin with, the original tax clause in the New Jersey Constitution of 1844, as amended in 1875, provided that "property shall be assessed for taxes under general laws, and by uniform rules, according to its true value." Art. IV, § VII, P12. As noted by our Supreme Court, the standard of true value was implemented by the Legislature in the adoption of N.J.S.A. 54:4-23. See Gibralter Corrugated Paper Co. v. North Bergen Tp., 20 N.J. 213, 218 (1955).
N.J.S.A. 54:4-23 directs tax assessors to determine full and fair value or true value as follows:
All real property shall be assessed to the person owning the same on October 1 in each year. The assessor shall ascertain the name of the owners of all real property situate in his taxing district, and after examination and inquiry, determine the full and fair value of each parcel of real property situate in the taxing district at such price as, in his judgment, it would sell for at a fair and bona fide sale by private contract on October 1 next preceding the date on which the assessor shall complete his assessments. . . .
In 1947, when the people of this State adopted our current Constitution, the tax clause provided for uniformity in the following language:
Property shall be assessed for taxation under general laws and by uniform rules. All real property assessed and taxed locally or by the State for allotment and payment to taxing districts shall be assessed according to the same standard of value, except as otherwise permitted herein, and such real property shall be taxed at the general tax rate of ...