October 10, 2012
IN RE CERTIFICATION OF FINAL VALUE OF DEVELOPMENT EASEMENT ON LANDS OF RIAMEDE FARM, CHESTER TOWNSHIP, MORRIS COUNTY BY STATE AGRICULTURE DEVELOPMENT COMMITTEE.
On appeal from the State Agriculture Development Committee.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted September 19, 2012 -
Before Judges Reisner, Harris and Hoffman.
This appeal presents esoteric issues that arise under the farmland preservation planning incentive grant program*fn1 implemented by the Right to Farm Act (RTF Act), N.J.S.A. 4:1C-1 to -10.4, and the Agriculture Retention and Development Act (ARD Act), N.J.S.A. 4:1C-11 to -48. Appellant Deborah Post appeals a $30,000 per acre certification of value determined by the State Agriculture Development Committee (the Committee) in connection with her offer to sell a development easement to the County of Morris (the County) for purposes of preserving Post's sixty-one acre pick-your-own apple farm known as Riamede Farm.*fn2 We affirm.
In January 2008, Post applied to the Morris County Agriculture Development Board (the Board) to convey a development easement for Riamede Farm. The Board referred the matter to the Committee, which undertook a review pursuant to N.J.A.C. 2:76-17.9. After the Committee approved the application, two appraisals were authorized and commenced pursuant to N.J.A.C. 2:76-17.10(a) ("Upon Committee approval of an application for the sale of a development easement . . ., the [Board] shall select two appraisers from the list of appraisers approved by the Committee . . . to conduct independent appraisals of each farm to determine the market value of the development easement for which funding is requested."). Victor D. DiSanto, MAI, and Robert G. Cooper, Jr., CTA, SCGREA, were chosen from a list of approved appraisers. A "desk review" of DiSanto's and Cooper's appraisals was conducted by Pamela J. Brodowski, MAI, ASA, CTA, pursuant to N.J.A.C. 2:76-17.11(e) ("The Committee shall appoint a review appraiser to evaluate the appraisals submitted by the [Board] and to recommend a market value of the development easement for each farm.").
On March 25, 2010, the Committee issued a Certification Report certifying the development easement value of Riamede Farm -- as of January 1, 2004*fn3 -- at $30,000 per acre. On April 2, 2010, the County, "in cooperation with the [Board]," formally offered to pay Post $30,000 per acre for the development easement.
Post did not accept the offer but instead, through counsel, wrote two letters. First, on April 14, 2010, counsel wrote to the County disapproving its offer, but indicating that "Ms. Post will agree to sell a development easement for [Riamede Farm] for $39,000 per acre.*fn4 Five days later, counsel wrote the Committee's Executive Director, Susan E. Craft, requesting reconsideration of the Committee's "certified value," and offering constructive criticism of DiSanto's and Cooper's conclusions. The letter also reminded Craft that in November 2009, before Brodowski reviewed the appraisals, Post had submitted "a detailed report of her review of the two appraisals, as well as review reports . . . of the two appraisals prepared by Thelma K. Achenbach, a [Committee] Approved Appraiser, and an independent appraisal of the Property prepared by Michael E. Holenstein, also a [Committee] Approved Appraiser."
Craft responded to Post's attorney on May 11, 2010. She impliedly rejected formal reconsideration by the Committee of its certification of value. Additionally, she outlined the Committee's position indicating that it does "not evaluate appraisals that have not been contracted for by [a Board] for purposes of determining certification of value for the cost share grant, nor does the [Committee] consider the conclusions of the landowner and/or other parties interested in the transaction." Nevertheless, Craft supplied six single-spaced pages of "general observations" responding to Post's (not her attorney's) submission. Dissatisfied with this response, Post filed her first notice of appeal on June 16, 2010.
On June 30, 2010, Post voluntarily withdrew this notice of appeal because the Committee agreed to allow her to present a request for reconsideration at a public hearing. On December 9, 2010, Post made a presentation where she argued for an upward adjustment to the development easement's valuation. The Committee adjourned without deciding the issue and stated that its staff would review Post's information and arguments.
On February 24, 2011, the Committee discussed Post's case in a closed session and unanimously found "no basis for amending that certification or recertification of value from [its] original value." Post's second notice of appeal followed on April 11, 2011.*fn5
On appeal, Post presents the following arguments for our consideration:*fn6
POINT I: THE [COMMITTEE'S] DECISION DENYING APPELLANT'S REQUEST FOR RECONSIDERATION WAS NOT BASED UPON ADEQUATE FINDINGS AND CONCLUSIONS.
POINT II: THE APPRAISAL REPORTS FAILED TO DETERMINE THE VALUE OF THE PROPERTY FOR "AGRICULTURAL PURPOSES" IN VIOLATION OF N.J.S.A. 4:1C-31.
A. THE RIGHT TO FARM ACT REQUIRES APPRAISALS THAT DETERMINE AGRICULTURAL VALUE.
B. IT WAS CLEAR ERROR FOR THE APPRAISERS TO USE HIGH END LOTS AS COMPARABLES.
C. THE APPRAISALS FAILED TO MAKE APPROPRIATE ADJUSTMENTS TO THE ESTATE LOT COMPARABLES.
1. FAILURE TO CORRECTLY CONSIDER FOR RESIDENTIAL OPPORTUNITIES.
2. FAILURE TO DETERMINE "RESTRICTED VALUE" CONSISTENT WITH HISTORICAL "RESTRICTED VALUES" IN CHESTER TOWNSHIP.
3. REFUSAL TO CONSIDER DATA OF PRESERVED FARM SALES AND AUCTION SALES.
4. FAILURE TO CONSIDER MORE APPROPRIATE COMPARABLES.
POINT III: REVERSAL IS REQUIRED BECAUSE THE [COMMITTEE] RELIED UPON APPRAISALS THAT CONTAINED ERRORS AND OMISSIONS AND DID NOT UTILIZE RECOGNIZED APPRAISAL METHODOLOGIES.
A. ERRORS IN COOPER'S APPRAISAL REPORT.
B. ERRORS IN DISANTO'S APPRAISAL REPORT.
C. ERRORS IN BRODOWSKI'S REVIEW APPRAISAL REPORT.
POINT IV: REVERSAL IS REQUIRED BECAUSE THE [COMMITTEE] FAILED TO CONSIDER THE HIGHLANDS MUNICIPAL AVERAGE FOR THE PROPERTY.
POINT V: REVERSAL IS REQUIRED BECAUSE THE [COMMITTEE] RELIED UPON THE REPORT OF AN APPRAISER THAT IS NOT QUALIFIED PURSUANT TO THE RIGHT TO FARM ACT.
POINT VI: REVERSAL IS REQUIRED BECAUSE THE REGULATIONS AND HANDBOOK GOVERNING THE CERTIFIED VALUE DETERMINATION ARE ULTRA VIRES OR INVALID.
A. REGULATIONS THAT DO NOT DETERMINE AGRICULTURAL VALUE ARE ULTRA VIRES.
B. THE METHODS IN THE HANDBOOK THAT WERE NOT ADOPTED PURSUANT TO FORMAL RULEMAKING PROCEDURES CANNOT BE USED BY THE APPRAISERS.
Most (but not all) of Post's grievances start and finish with her disagreement with the appraisers' opinions of value provided to the Committee for its use in the formulation of a value to be offered for the development easement. This appraisal process is not intended to conclusively determine the amount of consideration that must be paid for a development easement. Rather, it is merely a guide to the Committee in the negotiation process. It is one step in a much more nuanced arrangement that includes such variables as the vagaries of negotiation, selection of funding options, and timing of payment. Moreover, "'the appraisal of real property is not an exact science[.]'" Midlantic Operating Admin. v. West Caldwell Twp., 20 N.J. Tax 446, 462 (Tax 2002) (quoting Highview Estates v. Borough of Englewood Cliffs, 6 N.J. Tax 194, 217 (Tax 1983)). Post's contentions approach an insistence upon either mathematical perfection or a valuation analysis that inevitably yields a greater bounty to her. She is entitled to neither, but she rightfully can be adamant that the Committee follows the law and provides her with appropriate due process. From our review of the record, we are satisfied that Post received all of the process that she was due.
We start our analysis of the myriad issues raised by Post by briefly stating the principles that guide our review. Appellate oversight of an administrative agency decision is limited. In re Herrmann, 192 N.J. 19, 27 (2007). "Where . . . the determination is founded upon sufficient credible evidence seen from the totality of the record and on that record findings have been made and conclusions reached involving agency expertise, the agency decision should be sustained." Gerba v. Bd. of Trs. of Pub. Emps. Ret. Sys., 83 N.J. 174, 189 (1980). An administrative agency's determination is presumptively correct, and we will not substitute our judgment of the facts for that of the agency if the agency's findings are supported by sufficient credible evidence and are not arbitrary, capricious, or unreasonable. See A.M.S. ex rel A.D.S. v. Bd. of Educ. of Margate, 409 N.J. Super. 149, 159 (App. Div. 2009). The burden is on the party opposing the action to demonstrate grounds for reversal. McGowan v. N.J. State Parole Bd., 347 N.J. Super. 544, 563 (App. Div. 2002).
Under the arbitrary and capricious standard, our scope of review is guided by three major inquiries: (l) whether the agency's decision conforms with relevant law; (2) whether the decision is supported by substantial credible evidence in the record; and (3) whether in applying the law to the facts, the agency clearly erred in reaching a result that was either arbitrary, capricious, or unreasonable. In re Stallworth, 208 N.J. 182, 194 (2011). "In assessing those criteria, a court must be mindful of, and deferential to, the agency's 'expertise and superior knowledge of a particular field.'" Circus Liquors, Inc., v. Middletown Twp., 199 N.J. 1, 10 (2009) (quoting Greenwood v. State Police Training Ctr., 127 N.J. 500, 513 (1992)).
The ARD Act was enacted in 1983 to encourage "strengthening of the agricultural industry and the preservation of farmland." N.J.S.A. 4:1C-12; see also Bruce Paparone, Inc. v. State Agric. Dev. Comm., 392 N.J. Super. 391, 399 (App. Div. 2007). To accomplish this goal, the Legislature found it "necessary to authorize the establishment of State and county organizations to coordinate the development of farmland preservation programs within identified areas where . . . certain financial, administrative and regulatory benefits w[ould] be made available to those landowners who ch[ose] to participate." N.J.S.A. 4:1C-12(c). "The [Committee] was established by the [RTF Act], which was enacted at the same time as the [ARD Act], . . . and share[s] the same purpose to protect and encourage agriculture."
S. Brunswick v. State Agric. Dev. Comm., 352 N.J. Super. 361, 365 (App. Div. 2002) (citations omitted).
N.J.S.A. 4:1C-24 specifically envisions the purchase of development easements that require farmland to be dedicated to agricultural purposes. N.J.S.A. 4:1C-31 provides the framework for arms length bargaining between the Committee and the Board on one side, and the landowner on the other side, for the acquisition of a development easement. In the context of the purchase of farmland, we have noted the important nexus between appraised values and the expenditure of public funds.
Any purchase of farmland by the [Committee] is made with public funds, and the [Committee] is, in our judgment, obligated to ensure that it spends those funds wisely and exercises sound judgment in doing so.
Indeed, if the [Committee] were not able to obtain appraisals to determine the fair market value, the process would be subject to collusion and chicanery. [Bruce Paparone, Inc., supra, 392 N.J. Super. at 400.]
Moreover, there is a limit upon how much can be paid for any development easement. The property must be evaluated by "[t]wo independent appraisals," and "[n]o development easement shall be purchased at a price greater than the appraised value. . . ." N.J.S.A. 4:1C-31(c) and (h).*fn7 This statutory limitation is included within the Committee's farmland preservation planning incentive grant program regulations. N.J.S.A. 4:1C-43.1(h). N.J.A.C. 2:76-17.11(g) obligates the Committee to "certify the market value of the development easement and report the certified value to the [Board]." The Board is then required to report that "certified value to the landowner." N.J.A.C. 2:76-17.12(a). "The [Board] may negotiate a purchase price of the development easement for an amount greater than or less than the Committee's certified market value . . . , but not greater than the higher of the two independent appraised development easement values." N.J.A.C. 2:76-17.12(a)(1).
Post seeks to slant the pre-bargaining process by insisting that the Committee consider her lay and expert opinions as part of the Committee's certification-of-value determination. Her position, however, is not supported by the statute. The ARD Act ensures that the purchase of a development easement is completed by an arms length transaction untainted by impropriety. That is why "[t]wo independent appraisals paid for by the [B]oard" are required by N.J.S.A. 4:1C-31(c) to provide the Committee with an unbiased estimate of the value of the development easement. That is also why the price of the development easement may not exceed the highest of the values calculated by the appraisers. N.J.S.A. 4:1C-31(h). Therefore, Post has no basis to compel the Committee to consider her viewpoint or that of her appraisers.
Nevertheless, Post contends that the Committee's independent appraisal reports were erroneous and were prepared contrary to law. If that were so, then the Committee's reliance upon them may be unreasonable. Our Supreme Court has stated that even when dealing with farming matters, the Committee has not been vested "with a wide-ranging commission to arrogate to itself prerogatives beyond those set forth in the Act. The [Committee and Board] must act in a matter consistent with their mandate." Twp. of Franklin v. Hollander, 172 N.J. 147, 152 (2002). Our function is to determine if the alleged shortcomings in the appraisals rendered the Committee's ultimate certification of value arbitrary, capricious, or unreasonable. We find no basis to disturb the certification.
By statute, the calculation of the value of a development easement involves comparing two measures of value:
The appraisals shall determine the current overall value of the parcel for nonagricultural purposes, as well as the current market value of the parcel for agricultural purposes. The difference between the two values shall represent an appraisal of the value of the development easement. [N.J.S.A. 4:1C-31(c)].
The Committee's appraisers reached the following conclusions:
Cooper DiSanto Brodowski
Nonagricultural purposes value per acre: $63,000 $70,000 $63,000 Agricultural purposes value per acre: $35,000 $31,000 $33,000 Development easement value per acre: $28,000 $39,000 $30,000 Post argues that the appraisers failed to properly calculate her farm's agricultural purposes value, in all cases reaching opinions that were too high. Specifically, Post contends that the Committee's equating agricultural purposes value with what is known as "restricted purpose" value, is contrary to the RTF Act and ultra vires.
The terms "agricultural purpose" and "agricultural use" are used interchangeably in the ARD Act. See N.J.S.A. 4:1C-31(c) (describing valuation methodology for a development easement with reference to "the current market value of the parcel for agricultural purposes"); N.J.S.A. 4:1C-31(i) (describing "the fair market value of land restricted to agricultural use"). "Agricultural use" is defined as: the use of land for common farmsite activities, including but not limited to: production, harvesting, storage, grading, packaging, processing and the wholesale and retail marketing of crops, plants, animals and other related commodities and the use and application of techniques and methods of soil preparation and management, fertilization, weed, disease and pest control, disposal of farm waste, irrigation, drainage and water management, and grazing; [N.J.S.A. 4:1C-13(b).]
The Committee's regulations do not define "agricultural purpose" or "agricultural use," but rather define "agricultural value" and "agricultural market value":
"Agricultural value" means the value of the property based solely on its agricultural productivity which does not take into account alternative uses for the property. "Agricultural market value" means the market value of property with a present and future highest and best use for agricultural production. This includes consideration of exposure on the market and competition for agricultural property among farmers. [N.J.A.C. 2:76-10.2.]
These regulations calculate the value of a development easement as "the difference between the market value unrestricted and the market value restricted" on a per acre and total basis.
N.J.A.C. 2:76-10.8(a)(1). "Market value restricted" is defined as "the market value of property subject to the deed restrictions placed on the title of the property as set forth in N.J.A.C. 2:76-6.15."*fn8 N.J.A.C. 2:76-10.2.
Although not a model of clarity, these regulations neither obviate the provisions of N.J.S.A. 4:1C-31(c) nor unfairly skew the valuation process against a farmer. The ultimate goal is to identify and analyze all appropriate market forces that impact the potential fair value of a development easement. By its very nature, this is difficult to achieve, and we are satisfied that the Committee's regulatory scheme is consonant with legislative goals. More important, we are unpersuaded by Post's arguments that the appraisal methodology employed in this case was improper or resulted in a certification of value that was arbitrary, capricious, or unreasonable.
Post argues that the Committee erred in accepting "the appraisers' . . . inappropriate use of estate properties as comparables to determine the agricultural or restricted value of the property." Moreover, Post contends, that the Committee failed to "provide adequate findings and conclusions to support the use of high end estate properties in different municipalities and counties as comparables."
Our review of the appraisals reveals rational support for the use of "estate type property" as a measuring stick to compare Riamede Farm to the market. Cooper's appraisal described "estate type properties" as those single family building lots with large acreage, together with "agricultural/horticultural uses and recreational purposes includ[ing] equestrian hobbies." Cooper stated that "there is market evidence to support" the "desirability" of Riamede Farm as such an estate.
Post also argues that the Committee failed to "provide adequate findings and conclusions to support the use of high end estate properties in different municipalities." The appraisers' reports themselves address percentage adjustments that they made to account for differences in location. We observe nothing amiss in the Committee's reliance upon these opinions.
In like vein, Post alleges that the appraisers "failed to appropriately adjust comparables to determine the post-development easement value of the Property." Specifically, Post argues that the appraisers: (1) failed to explain adjustments of 20% or more;*fn9 (2) failed to "appropriately adjust for residential opportunities associated with the preserved, unbuildable farmland;" (3) failed to determine restrictive value "consistent with historical 'restricted values' in Chester"; and (4) calculated restricted values that are "dramatically more than preserved farm sales and auction sales for preserved properties throughout Morris County and the State."
The handbook's requirement to explain twenty percent adjustments must be read in context. When discussing the direct sales comparison method, the handbook states:
Adjustments should be for salient characteristics in the market, which may or may not include soil characteristics, zoning, topography; hydrologically limited areas, riparian lands (state owned or privately held), date of sale, financing, etc. Adjustments must be explained. If a sale is improved, the appraiser must consider making appropriate adjustments when comparing the sale to the subject farm. The basis for any adjustments should be contained in the report. . . .
If Appraisals are found to make assumptions regarding large adjustments of or --20% or greater the explanation should include a detailed explanation of the adjustment, including presentation of any specific data or observations the appraiser relied upon in deriving that adjustment.
Thus, the handbook only requires explanation for individual characteristics, and not for net adjustments. Both appraisals explained adjustments to the "salient characteristics," although neither Cooper nor DiSanto explained their "net adjustments." But they were not required to do so. We find no fatal error in the absence of such explanations.
Post next argues that the appraisers did not properly apply adjustments to account for differences in "build rights" associated with comparable properties. Post contends that land with an associated build right is worth more than one without such a right. Riamede Farm has no associated build rights, yet the appraisers compared that acreage with properties that had associated build rights but failed to apply enough of a downward adjustment. Consequently, the resulting restricted values of the chosen comparable properties were higher than they should have been, hence reducing the appraised value of the development easement.
The Committee's regulations clearly permit appraisers to consider build rights associated with a farm. N.J.A.C. 2:76-10.7(a)(3)(ii) states:
(ii) The appraiser shall adjust the comparable sales to include, but not be limited to, the following: soil characteristics, zoning, hydrologically limited areas, date of sale, financing, and residential opportunities.
(1) The appraiser shall consider the effect of residential opportunities, including an existing residential unit, an exception, which is not encumbered by the deed restrictions, or a residual dwelling site opportunity allocated to the subject property pursuant to N.J.A.C. 2:76-6.17, if appropriate, and any other improvements when conducting the valuation, but only the market value of the land is required to be identified.
(2) The appraiser shall determine if there is an increment of value attributed to the land that is independent of the actual value of the improvement.
This is what the appraisers did, and the Committee's reliance upon their opinions did not render the certification of value decision arbitrary and capricious.
Post argues that the restricted values calculated by the appraisers are inconsistent with restricted values calculated by them for other farms in Chester Township: "Cooper's and DiSanto's conclusion that a farmland preserved acre in Chester in the depressed real estate market of 2009 has doubled in value from the peak of the market in 2005 to 2007, is simply not credible."
Craft's May 11, 2010 letter addressed this issue as follows: "Previous certifications are not usable data for the purposes of an appraisal. Appraisals are conducted to address changing market conditions and to acknowledge the conditions in place as of the date of the appraisal." Post is not entitled to an appraisal that agrees with her perspective, and as noted, appraisers' opinions can change. There was nothing arbitrary, capricious, or unreasonable about the Committee's use of the appraisals.
Post also argues that the Committee did not consider the "preserved farmland auction data" of sales in Morris County and throughout the state which were made at a lower cost per acre. She presented data and made adjustments covering sales from 1993 to 2007. Post offers neither binding authority nor persuasive argument to convince us that the Committee was obliged to consider these data. In light of the narrow legislative approach that must be applied to certifying value for purposes of an offer to buy a development easement, we discern no error by the Committee in its approach.
Post contends that the Cooper, DiSanto, and Brodowski reports "contained glaring errors and omissions that should have led the [Committee] to question the accuracy of the appraisals or, at the very least, require that the reports be corrected." Instead, Post argues, "[the Committee] simply ignored the errors and used the reports" because "the appraisals worked to the [Committee's] advantage to produce an unreasonably low value for [Post's] farmland preservation easement."
We find not even a scintilla of evidence to support Post's assertions. We recognize that the proceedings in this matter may not have resulted in a perfect valuation process, but there is nothing in the law that guarantees an error-free proceeding. Cf. United States v. Hasting, 461 U.S. 499, 508-09, 103 S. Ct. 1974, 1980, 76 L. Ed. 2d 96, 106 (1983) ("[G]iven the myriad safeguards provided to assure a fair trial, and taking into account the reality of the human fallibility of the participants, there can be no such thing as an error-free, perfect trial, and . . . the Constitution does not guarantee such a trial.").*fn10 Whatever flaws emerged from the appraisals here were insufficient to warrant a different result. The Committee acted within the orbit of its authority when it utilized the appraisals submitted by the Board in calculating the value of the development easement, and we have no basis to intervene.
Post also argues that the Committee erred by not considering the Highlands Municipal average when certifying the value of Riamede Farm's development easement. "Settled principles of statutory construction guide us in our interpretation of the legislature's use of the words 'may' and 'shall[.]'" Aponte-Correa v. Allstate Ins. Co., 162 N.J. 318, 325 (2000). "Under the 'plain meaning' rule of statutory construction, the word 'may' ordinarily is permissive and the word 'shall' generally is mandatory." Ibid.
Here, N.J.S.A. 4:1C-31(c) states "If . . . the Highlands Water Protection and Planning Council has established a development transfer bank . . . , the municipal average of the value of the development potential of property in a sending zone established by the bank may be the value used by the [B]oard in determining the value of the development easement." The use of the municipal average of the value of the development potential is permissive, not mandatory. Aponte-Correa, supra, 162 N.J. at 325.
The Legislature has granted discretion to utilize one of two methods for valuing a farm's development easement when located where the Highlands Water Protection and Planning Council has established a development transfer bank. Here, the reason given by the Committee in not considering the municipal average is contained in the January 5, 2011 report prepared by the Committee's appraisal staff.*fn11 That report noted that the municipal average method was not used because "[t]he [Committee] would need to adopt specific rules and procedures if it were to purchase or retire development credits in lieu of its existing easement program." We observe no abuse of discretion in not engaging in that process in light of the long experience of the Committee in valuing development easements using the regulatory framework of this case.
To the extent we have not discussed any issue raised in this appeal, we are satisfied that it lacks sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).