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Regent Care Center, Inc. v. Hackensack City

362 N.J. Super. 403, 828 A.2d 332 (App. Div. 2003)

TAXATION—Adjusting an assessment for legitimate reasons is an appropriate exercise of a tax assessor’s duties, and it is not required that it be done as part of a district-wide revaluation or reassessment.

In this case, the Appellate Division considered “whether the increase in assessment of a [particular] nursing home ... constitute[d] a constitutionally impermissible spot assessment. The increase did not occur as part of a district-wide revaluation or reassessment. The nursing home was not the subject of a sale. Thus, the increased assessment was not based on a sale of the subject property. The increase was a product of the assessor’s assessment maintenance program, in which he reviewed all line items on the municipality’s tax rolls and determined that certain commercial properties dramatically increased in value. In the case of the subject property, the assessor concluded it had been grossly underassessed, perhaps as a result of an oversight on the part of the former assessor. The assessor increased the assessments of about 150 properties, including [this particular nursing home]. About 95% of the changes were increases in assessments.”

The Tax Court upheld the increased assessment. The nursing home owner further appealed asserting that because the increase was not based on a zoning change or change in legal status or a physical change to the property, and its property was only one of a small group of properties so affected, it constituted prohibited spot assessment. It urged the Court to “declare the practice of ‘assessment maintenance’ an unconstitutional device creating spot assessments.” Lastly, it argued that a 2001 amendment to the tax law required the assessor to file a compliance plan with its county board of taxation and with the Division of Taxation for approval, but the Court did not consider that argument because it refused to apply that amendment retroactively.

The challenged assessment was for 1998. The last prior revaluation in the municipality was in 1988, followed by a district-wide reassessment in 1993. The nursing home was under construction at the time of the 1993 reassessment and its valuation upon completion was carried forward in 1994, 1995, and 1996. The assessor reviewed the assessment for 1997, leaving the value of the land unaffected, but almost doubling the value of the improvements. Between 1993 and the revaluation, there were no physical changes to the property and no zoning changes. The property was always used as a nursing home.

The assessor initially characterized the change as part of an “update.” It explained that it reviewed over 11,000 property record cards for the entire city. Based on examination of all available sales ratio data and similar information, he concluded that, “generally, between the 1993 reassessment and 1997 the values of single family homes did not increase.” He further determined that about 150 commercial properties were grossly underassessed. One hundred twenty-five were vacant parcels along one particular street and apartment buildings scattered throughout the city. The remainder were mostly shopping centers and other retail uses and this particular nursing home. He determined that the vacant parcels doubled or tripled in value because of a change in zoning from manufacturing to retail. He found the apartment building and other commercial properties to be substantially underassessed based on his analysis of income and expense data. “The 150 affected properties did not constitute all commercial properties in the city.” There was one other nursing home in the municipality. Based upon the assessor’s awareness of “recent nursing home sales in surrounding communities” he determined that both nursing homes should be assessed a per bed basis. In his opinion, the other nursing home was appropriately assessed but that the nursing home in question was so grossly underassessed that it “stood out like a sore thumb.”

The Court refused to characterize the process as “a piecemeal review of only some properties, some classes of properties, or some neighborhoods.” It characterized the assessor’s process as a “comprehensive review.” In fact, about five percent of the 150 properties were substantially overassessed and their assessments were lowered.

The nursing home did not present any evidence as to value and did not challenge the assessor’s per bed valuation method. Further, it did not contend that its property was overassessed.

The term “assessment maintenance” does not have a precise definition. Nonetheless, it generally “refers to the practice by which an assessor changes some assessments in a year when district-wide revaluation or reassessment is not performed.” Under law, the assessor is required to “determine the full and fair value of each parcel of real property” in his district “at such price as, in his judgment, it would sell for at a fair and bonafide sale by private contract on October 1 next preceding the date on which the assessor shall complete his assessments… .” The Court refused to explore whether all “asset maintenance” is impermissible. It did, however, explore the property owner’s argument “that even if asset maintenance, as generally described, were a permissible practice, it was impermissible here because no uniform standards existed to regulate the practice on a county-wide or state-wide basis.” The Court rejected that proposition. According to the Court, “it is arbitrary intentional discrimination that is unconstitutional. A municipality may revise assessments in years other than years of municipal-wide revaluation for legitimate reasons.” Although “under no circumstances can appraised valuation of property be increased merely because it has been sold,” reassessment “of all industrial and commercial properties based on [a] study showing they were underassessed as a class” is permissible.

The New Jersey State Constitution mandates equality of treatment and burden. Performing a district-wide revaluation or reassessment every year is simply not feasible. Consequently, an assessor can meet his or her obligation “to keep the tax rolls current by assessing each property at its full and fair value each year” by making appropriate “examination and inquiry ... in his judgment” to determine valuations in between full revaluations. “Assessors cannot be expected to do nothing in years in between district-wide revaluations or reassessments. Their role is not that of a caretaker.” Thus, “adjusting an assessment for legitimate reasons is an appropriate exercise of the assessor’s statutory obligation and is not arbitrary or discriminatory.” The nursing home’s revaluation was done in connection with a large group of properties and specific comparison was made to the only other nursing home in the municipality.

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