Unreliable Testimony Dooms Taxpayer’s Appeal

by: Anthony F. Della Pelle
8 Aug 2013

Another New Jersey taxpayer recently saw its property tax assessment affirmed by the New Jersey Tax Court due to a failure to present evidence to overcome the presumption of validity given to the municipal assessment.  90 Riverdale, L.L.C. challenged its 2009, 2010 and 2011 property tax assessments of its property located in the Borough of Riverdale. The Subject Property consists of 4.73 acres, and is improved with a two-story, light industrial warehouse/office building consisting of approximately 60,000 square feet as currently configured (valued based upon 40,656 square feet claiming an 18,880 square foot “obsolete second level”).  The building has a little over 50 percent office space, just under 50 percent unfinished industrial space, and both parties experts agreed that the current industrial/office use should continue. However, the owner’s expert concluded that the 18,880 square foot second level should be demolished, at an approximate cost of $500,000, which would reduce the overall office area from about 51 percent to less than 30 percent of the existing structure.  The clear ceiling height would be increased from 10 to 12 feet, to approximately 24 feet by removing the second level. Although the Borough’s expert also concluded that the current uses should continue, he determined that the property contained sufficient excess land that could be developed for office use.

90 Riverdale’s expert valued the property using the income capitalization and market approaches.  The Borough’s expert found the separate office and industrial values of the existing improvements on the property using the income capitalization approach only.  The court accepted plaintiff’s premise that the building on the property contains an obsolete second floor office area that impedes the industrial space to below market standards and should be removed, but found the expert failed to provide a reliable opinion of value.  The court found that no reliable data was provided with which the court could confirm or even recalculate demolition costs or determine the necessity of demolition.  Further, the market approach used by plaintiff’s expert also failed to meet the burden of proof because he failed to make clear adjustments to each of the comparable sales in his report.  Regarding the Borough’s expert, the court was not convinced that his conclusions of separate values for each of the office and industrial uses were justified where the office use of the property is appurtenant to the primary industrial use because valuing the individual components of the property separately resulted in significantly inflated values.  Finally, the court concluded that no excess land value was justified because the Borough’s expert was unclear on how local regulations would affect the development of the property, and the proposed use as only office space was inconsistent with his highest and best use for the property.  The court affirmed the property tax assessments for all years.

A copy of the Tax Court’s opinion in 90 Riverdale, LLC, v. Borough of Riverdale may be found here.

For more blog posts on expert testimony in tax appeal cases, please see the following:

Appeal Involving Apartment Complex Reaffirms Presumptions

Expert’s Mistake Sinks Valuation Case

Taxpayer Clears One Hurdle But Trips Over Another

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