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4 minutes reading time (867 words)

A Judge Makes Policy, Taxpayers Pay More

"By law, the Tax Court's role is to determine value, not to redistribute the tax burden."

General Motors vs. Linden, one of the oldest pending tax cases in the country, writes yet another chapter in the continuing saga of issues taxpayers must combat everyday. Each year from 1983 through 2004, General Motors appealed its local property tax assessments on its automobile assembly plant in Linden. In 1991, the Tax Court rendered a decision that found the highest and best use of the property to be an automobile assembly plant and, therefore, taxed all of the plant's machinery and equipment.

In 1993, the New Jersey Appellate Division reversed that decision and sent the case back to the Tax Court. In so doing, it stated quire clearly to the Tax Court that it was a mistake to characterize the highest and best use of the General Motors' Linden plant as an automobile assembly plant.

Recently, a judge sitting on the New Jersey Tax Court rendered an opinion of the highest and best use of the property. This was not the same judge who ruled in the 1991 case. This judge completely rejected the reversal of the Appellate Court some 12 years ago, and concluded essentially the same decision that was rendered in the 1991 case. What is astounding about this opinion is not only did the court totally ignore the principles set forth in the reversal, but it blatantly stated it was doing so to enforce a policy of the Tax Court to equalize the tax burden of certain taxpayers across the state.

This should send a chill up the spines of all non-residential taxpayers in New Jersey and across the country. In a time when activist judges are being called into question in high profile issues such as Presidential elections, the right to life and the right to die, property tax cases fly well under the radar. Nonetheless, make no mistake about it - this insidious activism is just as harmful as those issues attracting much more attention.

The seminal decision in New Jersey on the issue of "highest and best use" was rendered in Ford Motor Co. v. Edison Township in 1992. In that case, the New Jersey Supreme Court delineated the appropriate standard to be used in valuing property for tax assessment purposes. It very clearly made the point that property must be valued based on what a willing buyer would pay a willing seller for the property given the use to which it would put.

In the Ford case, the Supreme Court crafted a doctrine which recognized that limiting the review of the subject's highest and best use to its current use as an automobile assembly plant would distort how the market would analyze the property if it were sold. The property's highest and best use must be achievable, and not speculative or remote.

Thus, in order to reach its conclusion, the Tax Court in the General Motors case totally rejected the law in the Ford litigation despite the incredible symmetry of the cases. It concluded that the property should be valued not as a general-purpose industrial property, but as an automobile assembly plant. the Court made this finding in spite of the fact that experts from both the plaintiff and defendant testified that if the plant were ever offered for sale it would never be purchased for use as an automobile assembly plant and, thus, would trade as a general industrial facility.

The Tax Court openly admitted it was setting tax policy. The New Jersey Tax Court stated, "determining a highest and best use that will result in value being attributed to the automobile assembly features of the subject property is consistent with and effectuates the public policy of fairly and equitably distributing the property tax burden."

The focus of the Tax Court's policy is to tax industrial property at its highest value, not to tax it as the statutes require, at the true value in the marketplace. Its opinion merely furthers its policy objectives without regard to how market forces will treat this property. By law, the Tax Court's role is to determine value, not to redistribute the tax burden.

This latest 2005 General Motors opinion is saturated with the singular focus of a misguided philosophy regarding redistributing the tax burden. It replaces adherence to the law with policymaking by the judiciary. Judicial activism must be met with appeals to the highest courts in order to preserve property owners' rights under the law.

The views expressed here are those of the author and not of Real Estate Media or its publications.

Phil Giannuario is a partner in the Montclair, NJ law firm Garippa Lotz and Giannuario, the New Jersey and Eastern Pennsylvania member of American Property Tax Counsel, the national affiliation of property tax attorneys. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.

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