In BASF v. Township of Toms River, No. 002155-2011 (N.J. Tax Court Dec. 5, 2013), the Court was asked to decide, in advance of trial, the proper methodology for determining the assessed value of a large tract of land that had been designated as a Superfund Site, but which contained large portions of uncontaminated and developable land.  While the Township sought to discount the value of only the polluted areas of the property, the owner contended that the pollution discount must be applied to the entire parcel.  And that is exactly how the Court saw it.

For tax purposes, NJ assesses compromised properties in the following manner:  The property is given an “as clean” value, which is then adjusted downward to account for actual past and estimated future remediation costs, amortized over (generally) five years.     

A 1,200 acre parcel was at issue in the case.  While the entire parcel had been designated as a Superfund site, in fact only certain portions of the property (which had been the site of a manufacturing facility) were contaminated.   The Township of Toms River calculated the tax assessment by, in essence, dividing the property into separate parcels, giving separate “as clean” market values to the uncontaminated portion (which could be immediately developed) and to the contaminated portions,  and then applying the remediation discount as against only the portions of the property actually contaminated.   Since the remediation was an expensive one which, one presumes, made the contaminated portions worth little or nothing under the Township’s methodology, this effectively netted the Township much more money than had the discount been applied to the entire parcel (that is, had the remediation cost offset the “as clean” value of the entire parcel).   

The decision of the Court was that the Township’s methodology was not in keeping with New Jersey law.  While the Court did approve of the Township effectively dividing up the parcel to determine the “as clean” market value, it could not discount the remediation costs as against only the contaminated parcels.  The entire 1,200 acres was, in fact and on the tax rolls, one parcel and had always been treated as one parcel.  Further, the entire parcel had been designated as a Superfund Site, and thus the entire parcel carried the stigma of contamination which would drive down its true market value.  Thus, the remediation discount had to be  applied to the entire parcel.   

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