City of Newark v. Township of Jefferson

Summary of Facts and issues: The City of Newark owned 4,036 acres of watershed land in the Township of Jefferson. The property was mostly wooded, contained 400 acres of open water, and was comprised of 'steep slopes, rock outcroppings and floodplain areas. The property was also restricted by the Watershed Moratorium Act and the New Jersey Highlands Protection Act, as well as protected by conservation easements granted to the New Jersey Department of Environmental Protection in 2002 and 2004. In 2010, the Township reassessed all real property parcels, resulting in lower assessments for virtually all property owners except the City. Most of the City's parcels were valued at $5,000 per acre, resulting in an overall tax increase of $6 million. The City challenged the reassessment, and at trial presented expert testimony that the property, in its conserved state, was worth $1,500 per acre based on a highest and best use of commercial forest management. In contrast, the Township's expert appraiser found a value of $4,500 to $6,000 per acre, based on a highest and best use as a conservation sale to a land trust or a government agency.
Holding: The trial court ruled for the Township. Although the judge rejected the testimony of each side's appraisal experts, it found a lack of evidence to make an independent determination of value, and thus affirmed the Township's assessment based on the City's failure to maintain its burden of proof. The appellate court reversed and remanded, finding that the assessment had no basis in the facts. The appellate court pointed to evidence indicating that the $5,000 per acre value was based on settlement negotiations between the parties and was not grounded in any objective valuation methodology.
Analysis and Notes: The City's land in Jefferson is part of the 35,000-acre Pequannock Watershed, a group of reservoirs purchased by the City in 1900 after its own water supply became polluted. This inter-municipal dispute offers some lessons on how to value conserved land for property tax purposes.