SENATE, No. 382

STATE OF NEW JERSEY

Introduced Pending Technical Review by Legislative Counsel

PRE-FILED FOR INTRODUCTION IN THE 1996 SESSION

By Senators McNAMARA and LITTELL

An Act concerning the taxation of property used for the purpose and for the protection of a public water supply, amending R.S.54:4-3.3, and supplementing chapter 4 of Title 54 of the Revised Statutes.

    Be It Enacted by the Senate and General Assembly of the State of New Jersey:

    1. (New section) The Legislature finds and declares that the protection of water supplies, especially public water supplies serving large segments of the State's population, is necessary for the purposes of protecting and promoting the public health, safety, and welfare; that protecting watershed lands is an important element in any governmental strategy to preserve the quality and quantity of public water supplies; that various State and local initiatives, programs, and declarations of intent indicate a common objective that the sale and development of watershed lands contributing to the protection of public water supplies should be significantly restricted.

    The Legislature further finds and declares that the courts of the State traditionally take into account governmental action in restricting the uses of land when determining the assessed value of real property for taxation, in order to implement the State policy that a parcel of real property be valued in the context of an arms-length sales transaction and in accordance with the requirements of Article VIII, Section I, paragraph 1 of the State Constitution that property be assessed for taxation by uniform rules and pursuant to the same standard of value.

    The Legislature also finds and declares that the courts of the State have heretofore recognized that there are essentially three types of appraisal methods appropriate for the evaluation of real property for taxation - comparable sales, capitalization of income, and replacement cost; that the courts, while cautioning that often more than one method may be needed or utilized in the appraisal of a parcel of real property, have also recognized that each of those three appraisal methods may be used as a primary, though not necessarily exclusive, approach for determining the value for taxation purposes of a particular type of real property.

    The Legislature therefore determines that it is appropriate to provide that in any case where limits or restrictions have been placed upon the sale or development of watershed lands owned by a State authority or commissions or a local governmental entity, whether by law, rule, regulation, or order of the State, or by county or municipal resolution or ordinance, or where it is the express intent of the owner of those watershed lands to restrict the sale or development thereof, it may be deemed appropriate for the tax assessor to determine that the highest and best use of those lands is for the provision and sale of water and for the protection of that water supply, and to employ the appraisal method involving the capitalization of the actual or potential income from those watershed lands in order to determine the assessed valuation thereof for tax purposes.

    2. (New section) As used in this act:

    "Tax assessor" means the tax assessor, appointed pursuant to the provisions of chapter 9 of Title 40A of the New Jersey Statutes, of a municipality in which watershed lands are located.

    "Watershed lands" means any lands that are held and utilized by any State authority or commission or other instrumentality of the State, or any county or municipality, county or municipal utilities authority, county or municipal commission, municipal water district, joint meeting, or other county or municipal governmental entity for the purpose and for the protection of a public water supply.

    3. (New section) a. In any case where limits or restrictions have been placed upon the sale or development of watershed lands owned by a local governmental entity, whether by law, rule, regulation, or order of the State, or by county or municipal resolution or ordinance, or where it is the express intent of the owner of those watershed lands to restrict the sale or development thereof, it may be deemed appropriate for the tax assessor to determine that the highest and best use of those lands is for the provision and sale of water and for the protection of that water supply. In accordance with such a determination, the tax assessor, in determining the assessed valuation of the watershed lands for taxation purposes, may employ the capitalization of income approach as the primary appraisal method.

    b. In deriving an appropriate economic rent equivalent for watershed lands for the purpose of capitalizing an income stream, the tax assessor may take into account income streams for comparable water supply operations, whether publicly or privately owned, or owned by a public utility, and regardless of the status thereof with respect to regulation by any State department, board, commission, or other agency or entity. Such data may also be used in determining the economic rent equivalent for watershed lands for which the owner fails to submit income data to the tax assessor pursuant to the requirements of subsection c. of this section.

    c. Every owner of watershed lands shall, on or before September 1 of each year, submit to the tax assessor of the municipality in which those lands are located such current and historical income data as the tax assessor shall require, pursuant to written notice, with respect to the provision and sale of water obtained from or protected by those watershed lands.

    d. The provisions of this section shall not apply if more than 5% of the watershed lands have been sold or offered for sale within the pre-tax year for use other than for the purpose, or for the protection, of a public water supply.

    4. R.S.54:4-3.3 is amended to read as follows:

    54:4-3.3. Exemption of public property; Morris Canal and Banking Company property

    Except as otherwise provided by article 1 of this chapter (§ 54:4-1 et seq.), the property of the State of New Jersey; and the property of the respective counties, school districts and taxing districts used for public purposes, or for the preservation or exhibit of historical data, records or property; school district property which is leased to a nonprofit organization which is exempt from taxation under R.S. 54:4-3.6, for use by that organization in its exempt functions; school district property which is leased to another board of education or governmental agency; and property acquired by any municipality through tax title foreclosure or by deed in lieu of foreclosure, if not used for private purpose, shall be exempt from taxation under this chapter, but this exemption shall not include real property bought in for debts or on foreclosure of mortgages given to secure loans out of public funds or out of money in court, which property shall be taxed unless devoted to public use. The lands of counties, municipalities, and other municipal and public agencies of this State used for the purpose and for the protection of a public water supply shall be subject to taxation by the respective taxing districts where situated, at the taxable value thereof, without regard to any buildings or other improvements thereon, in the same manner and to the same extent as the lands of private persons except as otherwise provided pursuant to P.L. , c. (C. ) (now before the Legislature as this bill), but all other property so used shall be exempt from taxation. Property, the title to which is in the Morris Canal and Banking Company, in trust for the State, shall, so long as the title is so vested, be deemed to be the property of the State within the meaning of any tax law.

(cf: P.L.1983, c.262, s.1)

    5. This act shall take effect immediately, and shall be applicable to assessments and taxes for the tax year beginning January 1 that occurs not fewer than 90 days following the date of enactment, and thereafter.

STATEMENT

    This bill would provide that in any case where limits or restrictions have been placed upon the sale or development of watershed lands owned by a State auhtority or commission or a local governmental entity, whether by law, rule, regulation, or order of the State, or by county or municipal resolution or ordinance, or where it is the express intent of the owner of those watershed lands to restrict the sale or development thereof, it may be deemed appropriate for the tax assessor to determine that the highest and best use of those lands is for the provision and sale of water and for the protection of that water supply. In accordance with such a determination, the tax assessor, in determining the assessed valuation of the watershed lands for taxation purposes, would be authorized to employ the capitalization of income approach as the primary appraisal method.

    The bill also provides that in deriving an appropriate economic rent equivalent for watershed lands for the purpose of capitalizing an income stream, the tax assessor may take into account income streams for comparable water supply operations, whether publicly or privately owned, or owned by a public utility, and regardless of the status thereof with respect to regulation by any State department, board, commission, or other agency or entity. Such data may also be used in determining the economic rent equivalent for watershed lands for which the owner fails to submit income data to the tax assessor pursuant to the requirements of the bill.

    Under the bill, every owner of watershed lands would be required, on or before September 1 of each year, to submit to the tax assessor of the municipality in which those lands are located such current and historical income data as the tax assessor shall require, pursuant to written notice, with respect to the provision and sale of water obtained from or protected by those watershed lands. The provisions of the bill would not apply if more than 5% of the watershed lands have been sold or offered for sale within the pre-tax year for use other than for the purpose, or for the protection, of a public water supply.

    The bill defines "watershed lands" to mean any lands that are held and utilized by any county or municipality, county or municipal utilities authority, county or municipal commission, municipal water district, joint meeting, or other county or municipal governmental entity for the purpose and for the protection of a public water supply.

Authorizes capitalization of income as primary appraisal method for assessment of county or municipally owned watershed lands.