On appeal from the Tax Court of New Jersey, 003676-03.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted December 3, 2007
Before Judges Lintner and Graves.
This appeal arises from a decision in which the Tax Court affirmed the City of Elizabeth's (City) tax assessment for the years 2003, 2004, and 2005 of property consisting of a complex of four buildings owned by Elizabeth Center Apartments Urban Renewal Corporation (Center), a not-for-profit corporation operating under the auspices of the Federal Housing Administration (FHA) and the Department of Housing and Urban Development (HUD). The buildings consist of a total of 260 lowand moderate-income co-operative apartments. The Tax Court judge found that the sales approach taken by the Center was inappropriate as it failed to take into account comparables from similarly situated properties.
Notwithstanding his criticism of the Center's expert's application of the sales approach method, the judge concluded that the Center did not overcome the presumption of correctness for municipal assessments set forth in Pantasote Co. v. City of Passaic, 100 N.J. 408, 412-13 (1985), because it failed to provide evidence that the City's Tax Assessor neglected to consider the sales restriction affecting resale of the cooperative apartments. We affirm.
The Center's complex is located at 735-821 Pearl Street in Elizabeth. It was erected in 1967-68. The four buildings occupy 4.65 acres and contain a total of 30 three-bedroom units, 82 two-bedroom units, and 148 one-bedroom units. The units are required to be owner-occupied and must be sold to people of low or moderate income as defined by the standards listed by HUD. The Center's bylaws are restricted from being amended by the Regulatory Agreement between the Center and the FHA during the life of the HUD mortgage. Thus, the individual units in the complex may not be sold for more than the amount paid by the first occupant plus the cost of improvements approved by the Center. The price is essentially restricted to the amount paid in 1966, and no unit is permitted to sell for what would otherwise be its market value.
In tax years 2003, 2004, and 2005, the City assessed the Elizabeth Center property at $1,300,000, which "was broken down arbitrarily with $400,000 attributable to the land and $900,000 to the improvements." The record does not provide an indication of how the Elizabeth City Tax Assessor arrived at that figure. The Center disputed the assessment and filed an appeal with the Tax Court for each of the tax years in dispute.*fn1
During discovery, expert reports were submitted by each party.*fn2 Trial commenced on August 21, 2006. Testimony was taken from the Center's and City's experts. At trial, the City's expert, Maurice J. Stack, II, using the income approach, opined that the subject premises were worth approximately $8,000,000 in 2002 and $8,600,000 in 2003. However, the Center's expert, Greg Manzione, using the sales approach, opined that the value was $5,256,000 in 2002, $5,250,000 in 2003, and $5,263,000 in 2004.*fn3
The discrepancy was based upon the method by which the experts calculated the value of the premises.
The Center's expert noted that the "[a]pplication of the Sales Comparison Approach requires the comparing and rating of other comparable properties to the property appraised." However, nowhere in his report did the Center's expert state that he could not find comparable properties to the Elizabeth Center property for purposes of sales comparison. Instead, plaintiff's expert testified at trial that it would not be appropriate to use sales outside of this complex [for purposes of comparison] . . . because it's structured for low and moderate income living dwellings and use is restricted to the income levels that the particular residents can have here.
It is also restricted in how the different units can be transferred. It is restricted in the fact that it cannot be leased or used for investment purposes. And when you look at all of the different restrictions, whether they be government imposed or those imposed by the bylaws of this particular facility, it would be difficult . . . or not possible to really find true comparables outside of the subject.
So based on that, I looked at the property as a market unto itself and put the weight on the actual sales within this co-op complex.
In stark contrast, defendant's expert testified that, although he utilized the income approach, as a final test to see where the number fit in, [he] looked to competitive communities [in] Newark, Orange, East Orange, urban areas that have high rise properties that are similar in vintage to [the subject] property, to see what was paid for some of those properties per unit . . . and my ...