Tax Court Affirms Earlier Determination of Truck Stop Property Value on Remand

New Jersey Tax Court Judge Mary Brennan issued an opinion last week which clarified and affirmed a 2018 decision she made concerning a tax appeal by the owner of a truck stop/travel center property near Interstate Route 78 in Bloomsbury Borough.  The case, HPT TA Properties Trust, F.K.A. Travelcenters Properties, LP v. Bloomsbury Borough,  involved a multi-year appeal by the owner of a travel center/truck stop property that is adjacent to an exit on I-78 in Warren County, New Jersey.  The property is a typical highway travel center, a multi-purpose facility on approximately 15 acres of land, improved with a fueling station, restaurant, convenience store and restrooms, along with other special amenities for truckers such as laundry, showers, and other recreational facilities.  The owner had filed appeals of the assessment (totalling nearly $6,000,000) for the years 2014-2017 and the matter proceeded to trial before Judge Brennan in the summer of 2018.

At the trial, the parties stipulated to using the cost approach to value the property because it was a unique, special purpose property, with a limited market, and the court agreed that the cost approach was appropriate.  The parties also stipulated as to the depreciated value of the improvements but disagreed on the land value and the trial thus focused on the experts’ conclusions about the land value of the property, with the owner’s expert opining that the land was worth approximately $900,000, while the Borough’s expert concluded that the land value was nearly $4,000,000.  During the trial, the Borough moved to dismiss the case pursuant to R. 4:37-2(b) on the basis that the owner had failed to overcome the presumption of correctness afforded to municipal tax assessments.  The court denied this motion, completed the trial, and issued a written decision wherein she concluded that the land at the subject property was worth approximately $2,500,000 (with small adjustments made to each year under appeal), based upon her determination that the land should be assessed at an overall value of $200,000 per acre.

The Borough appealed the Tax Court judgment to the Appellate Division of the Superior Court, contending: (1) that the owner failed to overcome the presumption of validity because the comparable sales data relied upon by the owner’s expert were not truck stops, not used for similar purposes, and did not have a similar highest and best use; and (2) even if sufficient evidence was presented to overcome the presumption of validity, the evidence was insufficient to support the court’s conclusion that the property had a land value of $200,000 per acre.  In July 2020, the Appellate Division issued a per curiam opinion affirming the Tax Court’s denial of the motion to dismiss, but remanding the case for a “further explanation as to how the judge arrived at the per-acre value for the property.”  A copy of the Appellate Divison opinion is available here.  In its opinion, the Appellate Court reasoned that its review of a Tax Court opinion is limited, and the fact-findings of the court will not be disturbed on appeal “unless they are plainly arbitrary or there is a lack of substantial evidence to support them.”  Slip Op. at 10, quoting Alpine Country Club v. Demarest, 354 N.J. Super. 387, 390 (App. Div. 2002). While the appellate court recognized that the comparable sales in question had differences from the subject property under appeal, their comparability was a question of fact for the trial court and it found that the adjustments made by the owner’s appraiser to account for the differences between the sales and the subject were explained and accepted by the Tax Court.  As a result, even though the Tax Court noted that the decision to deny the defendant’s motion was a “close call”, the appellate court found that there was enough evidence to raise a question as to the validity of the assessment and the presumption had therefore been overcome.

With respect to the Borough’s second argument on appeal, the reviewing court concluded that the Tax Court had properly examined the comparable sales evidence and explained that she assigned weight to that evidence, but the judge did not detail “how she weighed the evidence or explain the reasoning that led her to fix $200,000 per acre as the value of the land component of the property”, which “impeded” the appellate court’s review function.  As a result, the court remanded the matter in order to provide a more detailed explanation of the judge’s conclusion as to value.

On remand, Judge Brennan reconsidered the evidence and authored a 25-page written opinion on October 29, 2020, which contained her detailed explanation of her value conclusion, and which supplemented and amplified her 2018 opinion.  This opinion examined each comparable sale offered by both parties, explained the relative weight accorded to each sale, and then explained her conclusions as to why she was entitled to apply her own judgment to the evidence presented, consistent with Moorestown Tp. v. Slack, 85 N.J. Super. 109, 115 (App. Div. 1964), to render her conclusion of value as the fact-finder.  She also noted that Tax Court judges are recognized to have special expertise and qualifications in making valuation decisions, again supporting the recognition that she had not only the right, but also the duty, to apply her own judgment to the evidence in order to arrive at a true value.   Glen Wall Assocs. v. Tp. of Wall, 99 N.J. 265, 280 (1985).  Against this backdrop, the judge concluded that four of the comparables were the “most reasonably reliable comparable sales”, that these sales after adjustment ranged in value between $49,944 per acre and $434,436 per acre, and that this evidence led her to affirm her earlier conclusion that the land value of the property was $200,000 per acre.  As Judge Brennan noted “the subject property was unique” and “[f]flexibility, not rigidity, was required to determine a fair valuation.” It appears that the judge’s lengthy opinion answered all of the questions raised on remand, and time will tell if the matter will end there, or be the subject of other or further appeals.