On appeal from the Tax Court of New Jersey, Docket Nos. 2093-2004, 4039-2005 and 0796-2006.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Rodriguez, Grall andC.L. Miniman.
Defendant Englewood Cliffs Borough appeals an order of the Tax Court reducing the 2004, 2005 and 2006 tax assessments on a commercial property owned by plaintiff Tealand Limited Partnership and occupied by Lipton Tea. The Borough seeks a remand for recalculation. It claims error on one component - "cost new." According to the Borough, in that respect, the judge relied on a net opinion as to "cost new," failed to state factual findings and legal conclusions explaining why he deemed Tealand's expert superior to the Borough's, and, relying on that expert, reached a determination on "cost new" without "adequate, substantial or credible evidence."*fn1
Tealand's commercial property has an area slightly in excess of twenty-nine acres on which there are several connected buildings erected at various times, including offices, laboratories, a cafeteria, a company store, kitchens, a plant for production of "pilot" products and space occupied by corridors and areas needed for shipping, receiving and mechanicals. Amenities such as heating, air conditioning, floor covering and interior structure vary with the use of the space. For example, some sections are open office space divided only by modular partitions and others have enclosed offices.
The assessment Tealand challenged is $74,285,000 for all three tax years. Tealand's expert, Anthony J. Rinaldi, appraised the property's total fair market value at about $30,000,000 less for each of the three tax years - $41,500,000, $42,000,000 and $43,000,000. He used a cost approach and lowered the value so derived by about $2,000,000 based on a sales comparison approach. The Borough's expert, John F. Cattanach, also used a cost approach and reached a value about $10,000,000 higher than the original assessments - $83,220,000, $91,589,000 and $96,657,000. Cattanach considered the sales comparison and economic approaches, but unlike Rinaldi, he relied solely on the cost approach.
One component of the cost approach applied by both experts accounts for "cost new," and, as noted above, that is the component that underlies all of the claims raised by the Borough on this appeal. Relative to "cost new," there is a difference in excess of $15,000,000 in the experts' appraisals. Cattanach used a "calculator cost" approach, and Rinaldi used a "segregated cost" method.
The following description of the method Rinaldi employed is found in a trial exhibit published by Marshall Valuation Service by Marshall & Swift, L.P. and introduced into evidence by the Borough.
The Segregated Cost method is designed to enable the appraiser to give separate consideration to all of the major construction assemblies or systems (groups or components) of a building with a minimum of time-consuming counting and measuring, and to systematically arrive at a reliable replacement cost in a reasonably short time. Use of this method does require a greater degree of understanding of both building construction techniques and the overall cost relationships between occupancies, classes and quality levels, as well as the basic differences resulting from quantity, material grade or workmanship affecting each component's rating range.
The costs of many parts of a building, such as floor, ceiling and lighting, change directly as the floor area of the building increases. Other building costs vary with relation to parameters other than floor area; however, most costs can be related to floor area, wall area, roof area or sometimes an individual count of unit installations. To facilitate the application of these individualized costs, they are grouped so that all costs related to floor area can be added together and applied to the total floor area. All wall area costs can be added together and applied to the wall area, and all roof costs applied to the ground floor or roofed area.
A breakdown of the components whose costs correspond to the major areas follows:
Site Preparation Floor Cover Sprinklers Foundation Ceiling Heating, Cooling and VentilatingFrame Interior Electrical ...