# HPT TA Properties Trust v. Bloomsbury Borough

> New Jersey Tax Court · October 1, 2018

URL: https://www.frixlaw.com/law-library/cases/10455710

## Case

- **Court:** New Jersey Tax Court
- **Decided:** October 1, 2018
- **Precedential status:** Unpublished
- **Opinion:** Opinion
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10455710

## How later opinions describe it (automated extraction)

- holding opinion of expert may not ordinarily be compelled against expert’s wishes
- stating that "it has long been recognized that the division of an assessment between land and improvements is an administrative action that does not create two separately contestable assessments"

## Opinion text

TAX COURT OF NEW JERSEY

10 S. Broad Street, 5th Floor
Hon. Mary Siobhan Brennan, J.T.C. Trenton, New Jersey 08608
JUDGE (609) 815-2922, Ext. 54560

September 28, 2018

Archer & Greiner, P.C.
Alex Paul Genato, Esquire
101 Carnegie Center, Suite 101
Princeton, New Jersey 08540

Palumbo Renaud & DeAppolonio LLC
Robert F. Renaud, Esquire
190 North Avenue E (Rte. 28)
Cranford, New Jersey 07016

Via ECourts

RE: HPT TA Properties Trust v. Bloomsbury Borough
Docket Nos. 008898-2014, 002900-2015, 001751-2016, 004400-2017

Dear Mr. Genato and Mr. Renaud:

This constitutes the court's opinion after trial in the above-referenced matters.

Plaintiff, HPT TA Properties Trust (“taxpayer”) is the owner of real property located in

defendant, Bloomsbury Borough (“borough”) in Hunterdon County. The property site consists of

two non-contiguous tax parcels of land identified on municipal tax records as Block 30, Lots 3

(12.2 acres) & 4.01 (1.45 acres) containing a total land area of 13.47 acres. Taxpayer challenges

the borough’s assessment of its real property taxes on both lots for years 2014, 2015, 2016 and

2017.

The court finds that as to Block 30, Lot 4.01, taxpayer has not proved by a preponderance

of the credible evidence that the assessment is incorrect, and the court affirms that assessment. As

to Block 30, Lot 3, the court finds that the taxpayer has met its burden of proof by a preponderance
1
of the credible evidence that the assessments are incorrect and that the true market value exceeds

the statutory limitations established by N.J.S.A. 54:51A-6(a), commonly known as Chapter 123.

I. Procedural History

Taxpayer’s four tax appeals were timely filed and were consolidated for purposes of trial.

The matter was tried on July 30 and 31, 2018.

At the beginning of the trial, the parties informed the court that they had reached a

stipulation as to certain matters. Specifically, the parties advised the court that both of their experts

had rejected the Sales Comparison and Income Capitalization Approaches to value, and both

experts had relied upon the Cost Approach 1 to valuation because of the unique and specialized use

of the property.

The experts were in agreement that the Sales Approach was not useful in determining the

true value of the property due to the uniqueness of the property and the lack of comparable sales

(a sentiment echoed by the assessor during her testimony.) The experts also agreed that there was

difficulty and unreliability in allocating the values for the real estate, furniture, fixtures and

equipment, and the business value when performing a sales comparison analysis of other potential

similar types of properties.

1
Real property in New Jersey is assessed according to its “true value”, which is synonymous with
“market value” and “full and fair value”, as that term is used in N.J.S.A. 54:4-23. New Jersey
courts have held, consistent with established appraisal principles, that property can be valued
according to three valuation methods: comparable sales, capitalization of income and depreciated
reproduction cost (“Cost Approach”). See New Brunswick v. State Div. of Tax Appeals, 39 N.J.
537 (1963); Pantasote Co. v. Passaic, 100 N.J. 408 (1985). See also Appraisal Institute, The
Appraisal of Real Estate at 44 (14th ed. 2013). The Cost Approach consists of two components,
land (or site) value, and the replacement cost of improvements. Where the improvements are not
new, this approach to valuation uses the depreciated replacement cost of the improvements.

2
In addition, both experts were of the opinion that the Income Capitalization Approach was

not useful because the allocation of revenue to the various tangible and intangible component parts

of the business, the furniture, fixtures and equipment, and the real estate would not be reliable.

The court was advised that typically this type of property is owner occupied and considered a

“special” use type of asset. As such rental data is not readily available in the taxpayer’s market

area.

The court found credible the opinions of the experts that the property is a limited market,

special purpose property. The improved structures were designed for a specific use and would

likely require significant alterations to be put to any other use. In addition the property’s location

is paramount and specific to its use and purpose. The court recognized that the Cost Approach

was the most credible method of determining value in light of the special nature of the property

and the dearth of reliable sales and income data.

Counsel placed on the record the following stipulations with respect to the Depreciated

Replacement Cost of Improvements 2:

2014 $2,647,350

2015 $2,638,483

2016 $2,597,386

2017 $2,461,079

2
In his post-trial brief, Defense counsel indicated that since the depreciated improvement cost
determined by both appraisers was close, plaintiff’s appraiser having a higher value in the first two
years and defendant’s appraiser having a higher value in the second two years, the parties agreed
to stipulate to the depreciated improvement cost for all tax years under appeal by averaging the
two estimates.

3
The court accepted the parties’ stipulation as to the Depreciated Cost of Improvements

values, and the trial proceeded on the remaining issue of land value.

During the trial, the borough assessor testified, and each party presented an expert real

estate appraiser who offered an opinion of the true market value of the land component of the

property on each of the relevant valuation dates. The court accepted the qualifications of both

experts without objection from opposing counsel. Both experts agreed that the highest and best

use of the property ”as improved” and “as vacant” is its continued use as a truck stop/travel center,

and the court accepted this opinion of highest and best use.

The expert opinions of land values are summarized as follows:

Tax Year 2014 2015 2016 2017

Valuation date 10/1/2013 10/1/2014 10/1/2015 10/1/2016

Plaintiff’s Expert $ 890,000 $ 890,000 $ 890,000 $ 890,000

Defendant’s Expert $3,785,000 $3,785,000 $3,910,000 $3,910,000

At the conclusion of the taxpayer’s case, the borough moved for dismissal pursuant to R.

4:37-2(b), arguing that the taxpayer’s claims should be dismissed because the land sales chosen

by taxpayer’s expert were not comparable and were largely non-useable sales that were not arm’s

length transactions. Taxpayer’s attorney argued against the motion, asserting that the proposed

comparable sales were sufficiently comparable to the taxpayer’s property to overcome the

presumption of validity.

The court denied the borough’s motion ruling that the opinions of value offered by

taxpayer’s expert, were based on accepted methodologies for determining the value of real

property, and if accepted as true, raised doubt in the court’s mind as to whether the assessments

exceeded the market value for the tax years at issue.
4
The borough then presented the testimony of its expert, who testified as to his selection of

comparable land sales. At the conclusion of the trial, and in a subsequent telephone conference,

the court requested that counsel submit closing briefs. The court was specifically concerned with

the lack of any comparable land sales with the same zoning and/or highest and best use as the

taxpayer’s property. Given the assessor’s testimony that the assessment had been formulated on a

Cost Approach basis by a revaluation company many years earlier, the court specifically asked

counsel to address the issue of whether the court should affirm the land value assessment and

reconcile that value with the previously stipulated depreciated cost of improvement value to

determine current market value.

Counsel for the Borough submitted a letter brief on August 17, 2018 and taxpayer’s counsel

submitted a letter brief on September 14, 2018.

II. Findings of Fact

The following findings of fact and conclusions of law are based on the evidence and

testimony admitted at trial.

Location of the Property

As previously stated, taxpayer’s property consists of two non-contiguous tax parcels in

Bloomsbury Borough, Hunterdon County, and is situated within the NJ Highlands Planning Area. 3

3
The Highlands Water Protection and Planning Act (“Act”), N.J.S.A. 13:20-1 to -35, is a 2004
law aimed at protecting the Highlands Region of northwest New Jersey by regulating development
within the region under the supervision of the New Jersey Department of Environmental
Protection. The Highlands area includes specified municipalities in Bergen, Hunterdon, Morris,
Passaic, Somerset, Sussex and Warren counties. The Highlands Planning Area is the portion of
the Highlands Region that is not included in the Highlands Preservation Area. While the Act does
not establish any new standards for the Highlands Planning Area, the Highlands regional master
5
The street address is 975 Route 173, and ingress and egress (Lot 3 only) are provided along the

north side of Route 173. Most significantly, the property is in close proximity to a full exchange

at Interstate 78. Although not directly accessible, Lot 3 has 735 feet along the south side of

Interstate 78.

Route 173 is a state highway that is a designation for an old section of U.S. Route 22. The

transportation route runs approximately 14.5 miles from Interstate Route 78 and U.S. Route 22 in

Greenwich Township, Warren County to County Road 626 in Clinton Township, Hunterdon

County. In the immediate area of the taxpayer’s property, Route 173 is developed with commercial

properties including an adjacent Pilot Travel Center, a Brown’s Hunterdon Mack Sales & Service

(contiguous to taxpayer’s property), a Citgo gas station, and a PNC bank branch. Commercial

development in the area is primarily due to the proximity to a four way Interchange with Interstate

Route 78 (Exit 7), with both west and east bound access supporting the current uses.

To the southwest, the borough is established with residential neighborhoods with pricing

ranging from $125,000 to $450,000 +. Most properties are between 10 and 65 years old and are

well maintained. Bloomsbury is the third smallest municipality in Hunterdon County with an

estimated population of 870 persons. Generally outside of the borough, the neighborhood is rural

in nature along Route 173. This section of Hunterdon County is not as densely populated as areas

to the east and south, and there are several agricultural properties in the area as well as the state

line between New Jersey and Pennsylvania, which is located approximately 6.5 miles to the west.

plan, which must be adopted by the Highlands Water Protection and Planning Council, provides
an avenue for enhanced standards, TDR and smart growth in this portion of the Highlands region.

6
The property’s location is most notably on a major transportation and trucking route. In

addition to its easy access to Interstate 78, it also assists in servicing a large warehouse and

distribution region in Pennsylvania in concert with Interstate 81. Its proximity to northern New

Jersey and New York also make it an ideal location for resting and preparing for early hour

transportation into those generally highly congested areas.

The Property

Block 30 Lot 4.01 is a slightly irregular parcel of land with 314 feet abutting the

Musconetcong River. The property is used as a retention basin in connection with Lot 3. The

retention basin has minimal improvements and is essentially a rectangular area excavated and

surrounded by an earthen berm on all sides with a tarp placed over the excavated area to retain

water. The area of the retention basin is 100 feet by 75 feet and approximately 2-3 feet deep. The

property is 1.45 acres in size and unimproved except for the retention basin area and its

surrounding fence. The remainder of the site has trees and grassy areas. There are no curb cut-ins

along State Route 173. Lot 4.01 is separated from Lot 3 by a lot owned by a separate non-related

entity.

Block 30 Lot 3 (“subject property”) is mostly irregular in shape. It is large for a local

commercial property, although its size is typical for its current use as a truck stop/travel center. It

has average depths and no known easements, encroachments or adverse conditions affecting

marketability. The topography is predominately level at street grade. It is located in Flood Hazard

Zone X which is an area that is outside of a flood hazard zone, and there is adequate drainage.

The site does not have access to a public sewer/wastewater disposal system and relies upon

a septic field wastewater treatment system situated in the northwestern quadrant of the site, which

is characteristic of property in this area of Hunterdon County. The property did not have access
7
to municipal/public water supply until June 2014, at which time the taxpayer paid to connect to

the borough water supply.

Zoning

The subject property is located within the B-2 Highway Business District.

The permitted uses are churches or similar places of worship; cemeteries; commercial and

general business oriented toward highway use including, automobile showrooms, campus style

office (non-manufacturing) complexes, retail stores, family restaurants, wholesale stores and

distributors in a completely enclosed building but not involving the processing or treatment of

goods or products; personal services, professional offices and other uses including or similar to

churches or other places of worship, medical clinics or laboratories serving medical and dental

requirements, offices or office buildings for physicians, dentists, lawyers, engineers, architects,

real estate brokers, stockbrokers and related uses; scientific research laboratory or other

experimental, testing or research establishment, including applied research, such as product

development, theaters (but not including drive-in theaters), printing, lithography, publishing and

photostatting establishments, lodges, clubhouses or fraternal organizations; and such municipal or

public buildings, parks and other municipal facilities or properties, of a character not customarily

conducted as a gainful business, as deemed appropriate by the governing body.

The zoning also permits the following accessory uses: private garages necessary to store

vehicles on the same lot; and any accessory use on the same lot with and customarily incidental to

any use permitted in the district. Conditional uses are drive-in restaurants, automobile and/or

trailer sales, motels, off-street parking, signs and automobile gasoline filling stations (without

repairs), however such stations shall be permitted only upon those properties where the same are

located or approved as of June 30, 1998. No further automobile gasoline filling stations shall be
8
permitted in the B-2 Highway Business District. The intent of this provision is to eliminate such

use in the district as a use permitted under any circumstances, but to permit those properties upon

which such uses are currently located so as to continue as a conditionally permitted use.

Based on a review of the ordinance, the court finds that the subject property’s use as a truck

stop/travel center is a blend of multiple uses listed within the zoning ordinance. As such the current

use is a legal, pre-existing, non-conforming use of the site. 4 The court also accepts the testimony

of both experts that they were unaware of any zoning ordinances that included a specific category

for a truck stop/travel center.

Highest and Best Use 5

4
Taxpayer’s expert came to this conclusion while the borough’s expert found that it was a legal,
conforming use within the zone.
5
The essential components in an analysis of a property’s highest and best use is defined as “the
reasonably probable use of property that results in the highest value.” Appraisal Institute, The
Appraisal of Real Estate, 332 (14th ed. 2013). Highest and best use analysis requires sequential
consideration of the following four criteria, determining whether the use of the subject property is:
1) legally permissible; 2) physically possible; 3) financially feasible; and 4) maximally productive.
Ford Motor Co. v. Edison Tp., 10 N.J. Tax 153, 161 (Tax 1988); see also The Appraisal of Real
Estate at 332. Implicit in this analysis is the assumption that the proposed use is market-driven; in
other words, that it is determined in a value-in-exchange context and that there is a market for such
use. WCI-Westinghouse v. Township of Edison, 7 N.J. Tax 610, 616-17 (Tax 1985), aff’d o.b., 9
N.J. Tax 86 (App. Div. 1986). A highest and best use determination is not based on value-in-use
because the determination is a function of property use and not a function of a particular owner’s
use or subjective judgment as to how a property should be used. See Entenmann’s Inc. v. Borough
of Totowa, 18 N.J. Tax 540, 545 (Tax 2000). The highest and best use of an improved property is
the “use that maximizes an investment property’s value, consistent with the rate of return and
associated risk.” Clemente v. Tp. of S. Hackensack, 27 N.J. Tax 255, 268 (Tax 2013). Further,
the “actual use is a strong consideration” in the analysis. See 10 N.J. Tax at 166-67.

9
Both experts agreed that the highest and best use of the subject property “as improved” and

“as vacant” would be for its current use. All of the 4 tests of highest and best use are satisfied.

The use as a truck stop/travel center is physically possible, based on the current site characteristics

and development trends. It is financially feasible assuming area vacancy rates remain at the current

moderate levels. It would be maximally productive within the zoning regulations based on the

demand for this type of facility, within this area of the county, based on current market trends, past

market activity, and neighborhood compatibility. In addition, the current configuration and

functional layout of the buildings support the highest and best use as a truck stop/travel center as

the structures are well–maintained and have not reached the end of their economic life.

Redevelopment of the buildings into another use is not considered a feasible option based

on its current use and occupancy history at the site. The close proximity to a four-way interchange

with Interstate I-78 further supports the current use of the subject property. The subject’s location

alongside Interstate 78, and its close proximity to Interstate 81 is ideal. This interstate corridor

services one of the largest warehouse distribution routes in the United States, which in turn,

supports truck stops along four-way interchanges, as well as truck service/repair and showroom

facilities that are noted to be in the subject property’s immediate neighborhood.

Improvements on the Subject Property (Lot 3)

The site was constructed in 1975 with various updates over the years. The last recorded

sale of the property was on November 14, 2000 for a reported consideration of $3,158,000. 6

6
The sale was marked NU-3 non-useable because it occurred between two related corporate
entities.

10
Lot 3 of the property is improved with three major structures and an Exxon gas station.

There is a Main Building and Travel center consisting of a first floor and partial second floor

masonry and steel retail building containing approximately 20,000 square feet inclusive of the

approximately 3,500 square feet of second floor space. The first floor is occupied by a travel store,

a Country Pride restaurant, a Burger King, an arcade, restrooms, a driver’s lounge, seven showers,

a coin-operated laundry, and an office. The second floor was previously used as a six room motel

with showers, but is now used for dead storage only and is in poor condition.

The second improvement on Lot 3 is a truck repair garage consisting of a one story block

and corrugated metal panel repair garage with four double repair bays with high bay ceilings

(approximately 18 feet) with eight 10 foot by 16 foot steel overhead doors. The building area is

approximately 9,100 square feet.

The third improvement on Lot 3 is a truck refueling station which consists of nine double-

sided diesel pumps/dispensers. The station is protected from the elements by a large, lighted

metal/aluminum canopy with a covered area of approximately 5,800 square feet. There are four

20,000 gallon underground diesel tanks that are approximately 35 years old.

The gas station consists of an outdoor truck refueling station with four double-sided

pumps/dispensers. The station is protected from the elements by a large, lighted, metal aluminum

canopy with a covered area of approximately 1,900 square feet. There are two underground tanks:

a 20,000 gallon underground tank for regular gasoline, and a 10,000 gallon underground tank for

super octane gasoline. Both tanks are also approximately 35 years old.

An additional improvement is an asphalt paved driveway and parking area. There are 122

lined spaces for trucks, as well as an additional 93 striped spaces for autos. The total paved area

is approximately 8.72 acres. There are also lighting fixtures, sidewalks, concrete pads,
11
landscaping, a septic field and treatment plant, and a 200,000 lb. Fairbanks 2600 Platform truck

scale.

Overall the site improvements are in average condition.

Tax Assessment

For the tax years in question, Lot 4.01 was assessed as follows:

Tax Year Land Improvements Total
2014 $122,500 $0 $122,500
2015 $122,500 $0 $122,500
2016 $122,500 $0 $122,500
2017 $122,500 $0 $122,500

For the tax years in question, the subject property (Lot 3) was assessed as follows:

Tax Year Land Improvements Total
2014 $2,404,000 $3,417,800 $5.821,800
2015 $2,404,000 $3,417,800 $5,821,800
2016 $2,404,000 $3,417,800 $5,821,800
2017 $2,404,000 $3,417,800 $5,821,800

The Director’s (Chapter 123) ratio for Bloomsbury for each year under appeal was as follows:

Tax Year Average Ratio
2014 100.00%
2015 100.00%
2016 95.57%
2011 93.48%

A. Summary of Testimony

1. Borough Tax Assessor.

12
The first witness to testify was Eloise Hagaman, Bloomsbury’s Tax Assessor. She is a

certified tax assessor and a state certified residential real estate appraiser, but not a state certified

general real estate appraiser.

Ms. Hagaman stated that the assessment has remained unchanged since a revaluation was

done by Appraisal Systems in 2006. She testified that the land assessment on Lot 3 had been set

at $200,000 per acre by the revaluation company using a “formula”, and that Lot 4.01 was set

lower at $125,000 per acre. The assessor was familiar with the 2006 Appraisal Systems report and

was aware that the company utilized the Cost Approach, however there were no land sales in the

report.

The properties were reassessed in 2010 and again 2014, and on each occasion the assessor

decided to maintain the same assessments. In terms of any independent investigation she stated

that if there were comparable sales she would have considered them, but there were none. 7 As to

her reasons for maintaining the 2006 assessment figures through the relevant tax appeal dates, the

assessor noted that (1) there was an a Pilot truck stop one exit away in another municipality on

Route 78, situated on 11 acres, that had sold in 2007 for $6 million, which led her to consider that

7
Taxpayer’s attorney inquired of Ms. Hagaman, as to how the tax assessment of the property was
made. Defense counsel objected stating “If he is attempting to use her testimony to establish land
value I object.” The basis of the objection was that expert testimony cannot be compelled. See
Fitzgerald v. Stanley Roberts, Inc. 186 N.J. 286, 299 n.7 (2006), citing Graham v. Gielchinsky,
126 N.J. 361, 369 (1991) (noting New Jersey in minority of jurisdictions not permitting
compulsion of expert testimony) and Genovese v. N.J. Transit Rail Operations, Inc., 234 N.J
Super. 375, 380 (App. Div. 1989) (holding opinion of expert may not ordinarily be compelled
against expert’s wishes), certif. denied, 118 N.J. 195 (1989). The court in sustaining the objection
ruled that Ms. Hagaman had not been qualified as an expert witness and indicated that she could
only testify as to how the assessment came about, not about the land values.

13
“This is what a truck stop could be worth,” and (2) the taxpayer had filed a tax appeal for tax year

2007 and had withdrawn it, which led her to believe that her assessment was correct.

Taxpayer’s Expert

The taxpayer’s expert Joseph Hiller, testified that the highest and best use of the subject

property as improved and as vacant was the continued use as a truck stop/travel center. He

indicated that he considered the three approaches to value. He did not use the Comparable Sales

Approach because he was unable to find comparable sales. He considered but did not use the

Income Capitalization Approach because the income from the subject property was derived from

the business and could not be attributed strictly to the real estate. He indicated that separating out

the income derived from the business operations and the real estate could not be done, because

there was insufficient data to render a conclusion of value of the businesses related to a truck stop.

He also testified that he had difficulty finding competitive leases to find value using the Income

Capitalization Approach. Due to the foregoing, he relied on the Cost Approach.

Inasmuch as the depreciated replacement cost of the improvements was stipulated to by the

parties, his testimony concentrated on the land component of the real estate. The appraiser selected

land sales with a focus on four factors: (1) land with zoning as close to the same zoning as the

truck stop/travel center; (2) land which lacked infrastructure for water and sewage 8; (3) land

8
The appraiser limited his search to land sales in Hunterdon County most of which did not have
utilities such as public water and sewer servicing the properties His rationale was that for all land
valuation dates in question (October 1 of 2013, 2014, 2015 and 2016) the subject premises had an
onsite sewage treatment facility. Additionally, for the valuation dates for the 2014 and 2015 tax
years, the subject did not have a public water service (public water was accessible to the subject
property prior to the valuation date for 2016 and 2017tax years).

14
located within Hunterdon County; and (4) land in close proximity to Interstate 78 or other roads

frequently traveled by trucks.

The appraiser offered eight comparable land sales, all of which involved non-developed

land. He could find no land sales that specifically had zoning as a truck stop/travel center, nor

could he locate land sales with the same highest and best use (a truck stop/travel center.)

Many of the comparable sales were non-usable sales. Several of them were farms that

continued to be used for farmland purposes and one involved a sale of land to a municipality for

preservation purposes. Some had environmental constraints, including streams and wetlands. One

was in the Highlands Preservation Area and was undevelopable (it was eventually sold to the son

of a neighboring property owner, who did not want to see it developed.) Five of the eight sales

closed between June 7, 2010 and September 14, 2012, well before the October 1, 2013 valuation

date for the 2014 through 2017 tax years in question. One was residentially zoned property that

was subdivided into residential building lots.

After making adjustments for conditions of sale, necessary approvals and shape and

topography, the taxpayer’s appraiser’s opinion of value of the land component of the subject

15
property was $60,000 per acre, 9 plus an added ten percent for entrepreneurial profit premium, 10

for all tax years under appeal. The taxpayer’s appraiser combined Lots 3 and 4.01 for a total land

area of 13.47 acres. After adding the stipulated depreciated replacement cost, his opinion of value

of the combined Lots 3 and 4.01 (13.47 acres) for the tax years in question was:

Tax Year Land Improvements Total
2014 $890,000 $2,647,350 $3,537,350
2015 $890,000 $2,638,483 $3,528,483
2016 $890,000 $2,597,386 $3,487,386
2017 $890,000 $2,461,079 $3,351,079

Borough’s Expert.

9
Both appraisers gave both a per acre value and a per square foot value. Since the assessor testified
to a value per acre, the court adopted this measure of value.

Although not mentioned in this matter, the court notes that land value is also derived and dependent
upon its density. For many years vacant land had been valued according to its per acre selling
price, and all comparable sales were converted to a price per acre. See, e.g., Venino v. Carlstadt,
1 N.J. Tax 172 (Tax 1980), aff’d o.b., 4 N.J. Tax 528 (App. Div. 1981); Riorano v. Weymouth
Twp. 4 N.J. Tax 550 (Tax 1982) aff’d o.b. 6 N.J. Tax 253 (App. Div. 1983); Newark City v. Cedar
Grove Tp., 7 N.J tax 66 (Tax 1984). Since about 1988, however, appraisers appearing in the Tax
Court have valued vacant land zoned for development, whether residential, commercial, or mixed,
according to the parcel’s buildable density, that is to say, the price depends upon how many units
can be built upon the parcel. Frieman v. Randolph Tp., 8 N.J. Tax 264 (Tax 1986), aff’d 216 N.J.
Super. 507 (App. Div. 1987); Romulus Dev. Corp. v. Weehawken Twp., 15 N.J. Tax 209 (Tax
1995).
10
“Entrepreneurial profit” is defined as a market-derived figure that represents the amount an
entrepreneur receives for his or her contribution to a project and risk; the difference between the
total cost of a property (cost of development) and its market value (property value after
completion), which represents the entrepreneur’s compensation or the risk and expertise associated
with development. See The Appraisal of Real Estate at 573.

16
The borough offered the testimony of expert real estate appraiser Timothy Hoffman. After

providing a description of the site and subject improvements, he testified that the value of the

subject site as a truck stop/ travel center was principally defined by its location in the immediate

proximity to a four way interchange off of Interstate Route 78, a major east-west truck traffic route.

He emphasized that the site was fully utilized with two restaurants, multiple diesel pumps, gasoline

pumps (also servicing automobiles), and a truck repair facility. Due to its location, truckers could

stop there for the evening and then proceed to points east, including the New York metropolitan

area, at an early hour before other vehicular traffic congested that area. He indicated that this type

of facility along I-78 in New Jersey made this location particularly valuable. This opinion he

stated was reinforced by the presence on the adjacent parcel of a smaller Pilot truck stop and a

very busy gasoline service station across Route 173.

Since the depreciated replacement cost had been stipulated, his testimony concentrated on

the land value. He testified as to eight comparable land sales, none of which were for truck stop

or travel centers, and none of which had the same zoning or highest and best use. The appraiser

characterized his comparable land sales as mostly high-volume locations with a considerable

amount of truck traffic, some of which were located in close proximity to an interchange of the

New Jersey Turnpike or other interstate highways.

The sale dates ranged from February of 2013 to December of 2016. Five of the land sales

were zoned Industrial and three were zoned Commercial. Only one was in Hunterdon County and

only three were in the Highlands Region. Adjustments were made for location, lot size and

physical characteristics. His opinion of land value was $315,000 per acre for the 2014 and 2015

tax years and $325,000 per acre for the 2016 and 2017 tax years.

17
After adding the stipulated depreciated replacement cost, his opinion of value of the subject

property for the tax years in question was:

Tax Year Land Improvements Total
2014 $3,785,000 $2,647,350 $6,432,350
2015 $3,785,000 $2,638,483 $6,423,483
2016 $3.910,000 $2,597,386 $6,507,386
2017 $3.910,000 $2,461,079 $6,371,079

When performing his land value analysis, Mr. Hoffman did not include the 1.45 acre parcel

associated with Lot 4.01. 11

III. Conclusions of Law

Presumption of Correctness

The court's analysis begins with the well-established principle that "[o]riginal assessments

. . . are entitled to a presumption of validity." MSGW Real Estate Fund, LLC v. Borough of

Mountain Lakes, 18 N.J. Tax 364, 373 (Tax 1998). “Based on this presumption, the appealing

taxpayer has the burden of proving that the assessment is erroneous.” Pantasote Co. v. Passaic,

100 N.J. 408, 413 (1985) (citing Riverview Gardens v. North Arlington Borough, 9 N.J. 167, 174

(1952)). “The presumption of correctness . . . stands, until sufficient competent evidence to the

contrary is adduced.” Little Egg Harbor Twp. v. Bonsangue, 316 N.J. Super. 271, 285-86 (App.

11
In his report, Mr. Hoffman sates the following: “Although the Subject Property’s site size of
12.02 acres and improvement coverage lends itself to having surplus land, the current use (Truck
Stop) requires a significant amount of paving and area for the movement of larger vehicles and
there is no surplus land evident given the subject property’s current use. I have included Block 30
Lot 4.01 utility in my valuation of the 12.02 parcel of land as this site’s use as a detention basin is
considered to have minimal value.

18
Div. 1998). A taxpayer can only rebut the presumption by introducing “cogent evidence” of true

value. See Pantasote Co., 100 N.J. at 413. That is, evidence “definite, positive and certain in

quality and quantity to overcome the presumption.” Aetna Life Ins. Co. v. Newark City, 10 N.J.

99, 105 (1952). Thus, at the close of plaintiff’s proofs, the court must be presented with evidence

that raises a “debatable question as to the validity of the assessment.” MSGW Real Estate Fund,

LLC, 18 N.J. Tax at 376.

In evaluating whether the evidence presented meets the “cogent evidence” standard, the

court “must accept such evidence as true and accord the plaintiff all legitimate inferences which

can be deduced from the evidence.” Id. at 376 (citing Brill v. Guardian Life Ins. Co. of Am., 142

N.J. 520 (1995)). The evidence presented, when viewed under the Brill standard “must be

‘sufficient to determine the value of the property under appeal, thereby establishing the existence

of a debatable question as to the correctness of the assessment.’” West Colonial Enters, LLC v.

City of East Orange, 20 N.J. Tax 576, 579 (Tax 2003) (quoting Lenal Properties, Inc. v. City of

Jersey City, 18 N.J. Tax 405, 408 (Tax 1999), aff’d, 18 N.J. Tax 658 (App. Div. 2000)). “Only

after the presumption is overcome with sufficient evidence. . . must the court ‘appraise the

testimony, make a determination of true value and fix the assessment.’” Greenblatt v. Englewood

City, 26 N.J. Tax 41, 52 (Tax 2011) (quoting Rodwood Gardens, Inc. v. City of Summit, 188 N.J.

Super. 34, 38-39 (App. Div. 1982)).

The presumption of correctness arises from the view "that in tax matters it is to be

presumed that governmental authority has been exercised correctly and in accordance with law."

Pantasote, 100 N.J. at 413 (citing Powder Mill I Assocs. v. Twp. of Hamilton, 3 N.J. Tax 439 (Tax

1981)); see also Byram Twp. v. Western World, Inc., 111 N.J. 222 (1988)). The presumption

remains "in place even if the municipality utilized a flawed valuation methodology, so long as the
19
quantum of the assessment is not so far removed from the true value of the property or the method

of assessment itself is so patently defective as to justify removal of the presumption of validity."

Transcontinental Gas Pipe Line Corp. v. Township of Bernards, 111 N.J. 507, 517, (1988).

Only after the presumption is overcome with sufficient evidence at the close of trial must

the court "appraise the testimony, make a determination of true value and fix the assessment."

Rodwood Gardens, Inc. v. City of Summit, 188 N.J. Super. 34, 38-39, (App. Div. 1982). If the

court determines that sufficient evidence to overcome the presumption has not been produced, the

assessment shall be affirmed and the court need not proceed to making a value determination. Ford

Motor Co. v. Edison, 127 N.J. 290, 312 (1992); Global Terminal & Container Serv. v. City of

Jersey City, 15 N.J. Tax 698, 703-04 (App. Div. 1996).

At the close of taxpayer’s proofs, the court denied the borough's motion to dismiss the

complaints for failure to overcome the presumption of correctness attached to the assessments.

The court placed its findings of fact and conclusions of law on the record in the presence of

counsel. Those findings and conclusions will not be repeated here at length. Put succinctly, the

court concluded that the opinions of value offered by taxpayer’s expert, combined with the

apparent and credible obstacles to identifying comparable sales of vacant land with the same

unique highest and best use and zoning of the property, in addition to the stipulated depreciated

cost of improvements, if accepted as true, raise doubt in the court's mind with respect to whether

the assessment on the property exceeded true market value for the tax years 2014, 2015, 2016 and

2017.

The court's inquiry, however, does not end here. Once the presumption is overcome, the

"court must then turn to a consideration of the evidence adduced on behalf of both parties and

conclude the matter based on a fair preponderance of the evidence." Ford Motor Co., 127 N.J. at
20
312 (quotations omitted). "[A]lthough there may have been enough evidence to overcome the

presumption of correctness at the close of plaintiff's case-in-chief, the burden of proof remain[s]

on the taxpayer throughout the entire case . . . to demonstrate that the judgment under review was

incorrect." Id. at 314-15 (citing Pantasote, 100 N.J. at 413).

Cost Approach Valuation of Land

There is no single rule or approach to be followed in valuing property. Glen Wall Assocs.

V. Wall Township, 99 N.J. 265 (1985); Pantasote Co. v. City of Passaic 100 N.J. 408 (1985). The

answer depends upon the particular facts and the reaction to them of experts steeped in the history

and hopes of this area. New Brunswick v. State Div. of Tax Appeals, 39 N.J. 537, 544 (1963).

In this matter, the court has accepted both expert’s determination that the Cost Approach

is the only reliable way to ascertain the true value of the property in question. The Cost Approach

is normally relied on to value special purpose property or unique structures for which there is no

market. Borough of Little Ferry v. Vecchiotti, 7 N.J. Tax 389, 407 (Tax 1985); Dworman v.

Borough of Tinton Falls, 1 N.J. Tax 445, 452 (Tax 1980), aff'd. 180 N.J. Super. 366 (App. Div.

1981), certif. denied, 88 N.J. 495 (1981).

"A cost approach has two elements — land value and the reproduction or replacement cost

of the buildings and other improvements." International Flavors & Fragrances, Inc. v. Borough of

Union Beach, 21 N.J. Tax 403, 417 (Tax 2004). In the Cost Approach, the value of a property is

derived by adding the estimated value of the land to the current cost of constructing a reproduction

or replacement for the improvements and then subtracting the amount of depreciation in the

structures from all causes. Depreciation is defined as a loss in value from three causes: physical

depreciation, functional obsolescence and external economic factors. See Worden-Hoidal Funeral

Homes v. Borough of Red Bank, 21 N.J. Tax 336, 338 (Tax 2004).
21
Land value must be estimated and stated separately in the Cost Approach. Land value and

building value may change at different rates because improvements are almost always subject to

depreciation. Usually, the most reliable way to estimate land value is by sales comparison. See

Appraisal Institute, The Appraisal of Real Estate at 43-44 (14th ed. 2013). Using this approach, an

appraiser produces a value indication by comparing the subject property with similar (i.e.

comparable) properties. The sale prices of the properties that are judged to be the most comparable

tend to indicate a range in which the value indication for the subject property will fall. The

Appraisal of Real Estate at 45 (14th ed. 2013). The appraiser estimates the degree of similarity or

difference between the subject property and the comparable sales by considering various elements

of comparison:

A. Real property rights conveyed
B. Financing terms
C. Conditions of sale
D. Expenditures made immediately after purchase
E. Market conditions
F. Location
G. Physical characteristics
H. Economic characteristics legal characteristics
I. Non-realty components of value.

Dollar or percentage adjustments are then applied to the known sale price of each

comparable property to derive an indicated value for the subject property. See Appraisal Institute,

The Appraisal of Real Estate at 45-46 (14th ed. 2013). The final step is to reconcile the value

indicators into a value conclusion.

When engaging in a sales comparison approach, similarities must exist between the subject

property and the comparable properties. “Evidence of comparable sales is effective in determining

value only where there is a substantial similarity between the properties.” Venino v. Carlstadt
22
Borough, 1 N.J. Tax 172, 175 (Tax 1980), aff’d o.b., 4 N.J. Tax 528 (App. Div. 1981). By

definition, comparability does not require properties to be identical, “differences between a

comparable property and the subject property are anticipated. They are dealt with by adjustments

recognizing and explaining these differences, and then relating the two properties to each other in

a meaningful way so that an estimate of the value of one can be determined from the value of the

other.” U.S. Life Realty Corp. v. Jackson Twp., 9 N.J. Tax 66, 72 (Tax 1987).

Thus, a fundamental predicate of the comparative approach requires evidence “be based

on ‘sound theory and objective data,’ rather than on mere wishful thinking.” MSGW Real Estate

Fund, 18 N.J. Tax at 376 (quoting FMC Corp. v. Unmack, 92 N.Y. 2d 179, 188 (1998)). An

appraiser must establish appropriate “elements of comparison for a given appraisal through market

research and support those conclusions with market evidence.” The Appraisal of Real Estate, at

390. Hence, the probative value of the comparable analysis hinges upon the similarities which can

be drawn and the objective market data utilized to support adjustments thereto.

It is also recognized that even though the Cost Approach may have an advantage over the

Sales Comparison and Income Capitalization approaches when reliable data on comparable sales

and rents is scarce, that same lack of data can weaken the credibility of the estimate of land value

that is an essential step in the application of the Cost Approach [Appraisal of Real Estate page

568.]

This difficulty in identifying credible comparable land sales though is through no fault of

the taxpayer. It is the expert(s) responsibility to identify the best and most credible measures of

value available, and as our Supreme Court has cautioned, the cost of litigation in determining the

adequacy of the data submitted in support of the expert’s value estimates must be considered. Glen

Wall Assocs. v. Township of Wall, 99 N.J. 265, 280 (1985).
23
Once the court is satisfied that the expert(s) has complied with this duty, it is the court’s

responsibility to determine value based on the evidence presented. The lack of comparable sales

with the same zoning, or the highest and best use, while problematic, does not in and of itself

render the land incapable of being valued by the court.

VI - Analysis

Block 30, Lot 4.01

Neither taxpayer’s nor the borough’s expert specifically valued this property. Taxpayer’s

expert equated it as having the same value per acre as the land in Lot 3, an assumption not based

on the evidence submitted. Additionally, the credible evidence adduced at trial leads the court to

arrive at the opposite conclusion – that Lot 4.01has less value than the land situated on Lot 3. The

borough’s expert did not explore the value of this separate parcel but chose to include it as value

to the overall property in Lot 3, and did not calculate a per acre value specifically for it.

Additionally, the borough assessor testified that her assessment of this property was at lower value

($125,000 per acre) than the land on Lot 3 ($200,000 per acre). Based on the foregoing, the court

finds that the taxpayer has not overcome its burden of proof and the court will affirm the

assessment for all four tax years under appeal.

Block 30, Lot 4.01

The court begins by noting that it is fully cognizant of the many cases that stand for the

proposition that challenges to real property assessments are unitary and not fractured – a taxpayer

must challenge the entire assessment not just the land or just the improvements. Our Appellate

Division has held:

24
Piecemeal challenges to assessments of real property are not
permitted except under exceptional circumstances. Separation of
land and improvement assessments is simply an "administrative" act
that does not relieve a taxpayer from proving a value for his or her
property as a whole. See generally In re Appeals of Kents 2124
Atlantic Ave., Inc., 34 N.J. 21, 33-34 (1961); David E. Crabtree,
State and Local Taxation, 43 New Jersey Practice, § 5.1 at 58 (1999)
(observing that "New Jersey courts have held that the assessments
of land and improvements may not be separately contested, thus, the
taxpayer may not appeal the land assessment while declining to
challenge the improvement assessment or vice versa") (emphasis
added); Texas Eastern Transmission Corp. v. East Amwell
Township., 13 N.J. Tax 24, 34 (Tax 1992); aff'd, 18 N.J. Tax 126
(App. Div. 1999) (stating that "it has long been recognized that the
division of an assessment between land and improvements is an
administrative action that does not create two separately contestable
assessments").

[Brown v. Borough of Glen Rock 19 N.J. Tax 366, 376-377 (App Div. 2001)]

The land assessment cannot be evidence of value, "the allocation [in a local property tax

assessment] between land and improvements being merely an administrative act.” N.J. Foreign

Trade Zone Venture v. Mt. Olive Tp., 10 N.J. Tax 330, 335 (Tax Ct.1989); aff’d 242 N.J. Super.

170, (App.Div.1990).

The leading local property tax assessment case of In re Appeals of Kents 2124 Atlantic

Ave., Inc., 34 N.J. 21, 33-34 (1961), clearly states:

A taxpayer who seeks a reduction of an assessment below true value
must prove that his share of the total tax burden substantially
exceeds the share allocated to others generally. If his proof does not
meet that test, it would be of no moment that the assessment of either
his land or his building would be excessive if separately measured
against the general treatment of land or of improvements
respectively. Indeed he would receive an undue advantage if he
could confine his proof in a case of this kind to the treatment of only
land or building and have the trier of the facts assume the assessed
valuation of the other accords with true value. The burden is his to
establish with independent proofs the true value of the parcel with
its improvements and that the total assessment of the improved
25
parcel substantially exceeds the ratio of assessment of real property
in the taxing district. By the same token, if the taxpayer meets that
burden, he is not concerned with such allocation of the resulting
figure between land and improvements as may be made
administratively for some other purpose. This is not to say that
evidence may not be offered as to the value of land and of building
separately as a step in the process of proving the total value of land
and building as an entity; rather the point is that relief is not
warranted unless the total treatment of the parcel as improved
violates the existing rule of equality.

[Id. at 33-34; emphasis supplied.]

The present case is no exception – and in fact, the taxpayer challenged both the land and

the improvement portion of the assessment in all four tax appeals.

This case is simply about the determination of the land value of a unique, special use

property, where the depreciated cost of improvements has been successfully determined. That the

improvement value was by stipulation is of no importance – the court could have easily made this

determination after trial. The difficulty this case presents is how to fairly interpret, analyze, and

reconcile the comparable land sales provided by the experts, when those sales by necessity have

different zoning and highest and best uses. It would be inequitable to hold a taxpayer to a standard

that cannot be met and so the court must apply the law and the facts as they are presented, not as

wished.

Zoning is often the most basic criterion in selecting comparables. Sites zoned the same as

a subject property are the most desired and appropriate comparables. When sufficient sales in the

same zoning category are not available, data from similar categories can be used after adjustments

are made. As a general rule, the greater the dissimilarity between the subject and the comparables,

the more potential there is for distortion and error in sales comparison. National Westminster Bank

New Jersey v. City of Brigantine, 11 N.J. Tax 502, 513 (Tax 1991).

26
All land has value, and the court’s review of the comparable land sales offered by both

experts is the best evidence available to determine the subject property’s land value. In choosing

the most credible land sales, the court gives greater weight to those land sales zoned commercial

zoning, that are in the Highlands region, and on or near roads or highways with heavy truck

volume.

The court finds that the most credible land sales provided by plaintiff’s expert (with an

additional ten percent for entrepreneurial profit) are sale number 5 ($49,844 per acre), number 6

($73,052 per acre), and number 7 ($59,400 per acre). The most credible land sales provided by

defendant’s expert are sale number 1 ($253,479), number 7 ($394,942), and number 8 ($363,636).

After weighing probative value of each of these sales, the court concludes a true value price per

acre of $200,000.

The court has confidence in its land value determination because it is supported by the

current land value contained within the subject property’s assessment. Although as a general rule,

the land assessment cannot be evidence of value because the allocation between land and

improvements is viewed to be merely an administrative act, the evidence in this case was presented

differently. The testimony of the borough assessor clearly and unequivocally was that the land

assessment was based on a $200,000 per acre value attributed to a 2006 revaluation formulated by

Appraisal Systems using the Cost Approach. The $200,000 price per acre was not therefore

arbitrary or merely an administrative act. Also land values do not change at the same rate as

improvements because depreciation is not a factor. So while not dispositive of value, the court

cannot conceive of any reason why given the assessor’s testimony, the land assessment cannot be

considered as supporting the other credible evidence establishing value.

27
When the court's conclusions of land value are added to the stipulated depreciated

replacement costs, the conclusion of true market value on the relevant valuation dates is as

follows:

Tax Year Land Improvements Total

2014 $2,404,000 $2,647,350 $5,051,350

2015 $2,404,000 $2,638,483 $5,042,483

2016 $2,404,000 $2,597,386 $5,001,386

2017 $2,404,000 $2,461,079 $4,865,079

Applying Chapter 123

Pursuant to N.J.S.A. 54:51A-6 (a), commonly known as Chapter 123, in a non-revaluation

year an assessment must be reduced when the ratio of the assessed value of the property to its true

value exceeds the upper limit of the common level range. The common level range is defined by

N.J.S.A. 54:1-35a(b) as "that range which is plus or minus 15% of the average ratio" for the

municipality in which the subject property is located.

Pursuant to N.J.S.A. 54:51A-6 (c), if both the average ratio and the ratio of the assessed

value of the subject property to its true value exceed the county percentage level,12 the tax court

shall enter judgment revising the taxable value of the property by applying the county percentage

level to the true value of the property. Applying these statutory provisions, the court will round the

12
The county percentage level in all cases is 100%. M.I. Holdings, Inc. v. Jersey City, 12 N.J.
Tax 129, 145 (Tax 1991).

28
true value figures for the subject property for tax years 2014 and 2015 and enter judgment as

follows:

Tax Year Land Improvements Total
2014 $2,404,000 $2,650,000 $5,054,000
2015 $2,404,000 $2,640,000 $5,044,000

Tax Years 2016 and 2017

The calculation for tax year 2016 is as follows: $5,821,800 ÷ $5,001,386 = 1.164. The

Chapter 123 average ratio for Bloomsbury Borough for tax year 2016 is .9557 with an upper limit

of 1.0991 and a lower limit of .8123. The ratio for the subject property for this tax year is 1.164,

which exceeds the upper limit of the range for this tax year. Consequently, the court will determine

the assessment for the subject property for tax year 2016 by multiplying the true value by the

Chapter 123 ratio: $5,001,386 x .9557 = $4,779,825.

The calculation for tax year 2017 is as follows: $5,821,800 ÷ $4,865,079 = 1.196. The

Chapter 123 average ratio for Bloomsbury Borough for tax year 2017 is .9348 with an upper limit

of 1.075 and a lower limit of .7946. The ratio for the subject property for this tax year is 1.196,

which exceeds the upper limit of the range for this tax year. Consequently, the court will determine

the assessment for the subject property for tax year 2017 by multiplying the true value by the

Chapter 123 ratio: $4,865,079 x .9348 = $4,547,876.

29
The court will round the true value figures for tax years 2016 and 2017 and enter judgment

as follows:

Tax Year Land Improvements Total
2014 $2,404,000 $2,376,000 $4,780,000
2015 $2,404,000 $2,146,000 $4,550,000

/s/ Mary Siobhan Brennan, J.T.C.

30

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10455710. Public record. Not legal advice.