Jefferson’s Challenge to Tax Equalization Formula Rejected

by: Anthony F. Della Pelle
7 Aug 2012

This week, a New Jersey appeals court rejected a challenge by the Township of Jefferson to the formula utilized in creating the property tax equalization ratio, thereby affirming the trial court decisions made by New Jersey Tax Court Judge Vito Bianco.   In Township of Jefferson v. Director, Division of Taxation, the appellate panel considered the claims raised on appeal by Jefferson Township, which contended that Equalization Tables approved by the State of New Jersey and County of Morris, which form the basis of the ratable base in each town, violated the New Jersey Statutes and also uniformity clause of the New Jersey Constitution.  Jefferson argued that the formula used in creating the equalization tables required that the current year’s true value be averaged with the prior year’s true value to arrive at the equalization ratio for the current year, and that averaging the two years in a declining real estate market would result in a situation where the Township would receive less in school aid, and that its county taxes would be increased than if the current year’s true value was used without averaging.

Jefferson’s claims were initially heard as part of separate lawsuits filed by Jefferson  – the first challenging the formula and use of the tables promulgated by the State Division of Taxation  (which also included other municipalities as parties), and the second (filed only by Jefferson) separately challenging the Morris County Board of Taxation’s equalization process, which had adopted the formula promulgated by the State.  In two separate published opinions, Tax Court Judge Bianco rejected the claims against the State and then the County (decision available here), the latter of which was not a part of the earlier lawsuit because the County ratio had not yet been adopted.  Judge Bianco relied primarily upon a 1992 decision in Bloomfield Township v. County Tax Administrator, which  held that the formulas were appropriate because they properly reflected the “practical approximation” of the equalized true value, and were applied uniformly for all municipalities in the State – whether in a declining or rising real estate market.  On this basis, Judge Bianco concluded that the average equalization ratio was not arbitrary and capricious and, in the second lawsuit challenging the County’s ratio, the judge also noted that granting relief to Jefferson alone and modifying the equalization ratio in question would likely have a negative impact on other towns in the County.

On appeal by Jefferson, the appellate panel noted that the Tax Court opinions contained a “detailed and careful analysis of the facts”, represented a proper application of the law, and therefore affirmed the decisions below for the reasons set forth in those decisions.

A copy of the Appellate Division’s opinion is available here.