NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-3963-18
CIBA SPECIALTY CHEMICALS, CORP.,
Plaintiff-Respondent/ Cross-Appellant,
v.
TOWNSHIP OF DOVER,
Defendant-Appellant/ Cross-Respondent. ___________________________
TOWNSHIP OF TOMS RIVER,
Defendant-Appellant/ Cross-Respondent. ___________________________
BASF CORP., Plaintiff-Respondent/ Cross-Appellant,
Defendant-Appellant/ Cross-Respondent. ___________________________
Argued December 2, 2020 – Decided February 24, 2021
Before Judges Fuentes, Whipple and Firko.
On appeal from the Tax Court of New Jersey, Docket Nos. 5635-2004, 1986-2005, 1501-2006, 3458-2007, 5340-2008, 5210-2009, 4487-2010, 4486-2010, 2155- 2011, 2037-2012, 6367-2013, 3624-2014, 1913-2015, 3054-2016, 3686-2017, 1627-2018 and 1066-2019.
John F. Casey argued the cause for appellant/cross- respondent (Chiesa Shahinian & Giantomasi, PC, attorneys; John F. Casey, on the briefs).
Philip J. Giannuario argued the cause for respondent/cross-appellant (Garippa, Lotz & Giannuario, PC, attorneys; Philip J. Giannuario, Brian A. Fowler, and Adam R. Jones, of counsel and on the briefs).
PER CURIAM
Defendant The Township of Toms River, formerly known as Dover
Township (the Township), appeals from the judgment of the Tax Court finding
A-3963-18 2 that a tract of land consisting of 1211 acres "was development-prohibited"
during tax years 2004 through 2018, due to its designation by the Environmental
Protection Agency (EPA) as a Superfund site and subsequent listing in the
National Priorities List (NPL). In its cross-appeal, plaintiff CIBA Specialty
Chemicals Corporation (CIBA) also contends the Tax Court erred by failing to
determine the number of developable acres on the property. We affirm.
I.
We briefly describe the relevant proofs presented during the four phases
of the trial. CIBA conducted chemical manufacturing operations on the subject
property consisting of 1211 acres in the Township for many years. In addition
to abutting a river, the property contained 32.6 acres of freshwater wetlands and
State open waters, 6.4 acres of wetlands buffers, and 43.7 acres of intermittent
stream corridors as well as flood hazard areas.
The Toms River Chemical Company developed 320 acres of the property
for the manufacture of dyes, pigments, resins, and additives, and conducted
related operations, such as waste management and disposal. Manufacturing
began in 1952 and was "scaled back" in the early 1980's, when the company was
acquired by CIBA. On April 24, 1989, the EPA issued its Record of Decision
A-3963-18 3 (ROD)1 for Operable Unit 1 (OU1), which included the sealing of contaminated
wells, installation of a groundwater extraction and treatment system, and
discharge of the treated groundwater. The groundwater extraction and treatment
system commenced in March 1996 and was to continue until "restoration
standards" were met. Manufacturing operations also ceased in 1996.
On September 29, 2000, the EPA issued the ROD for Operable Unit 2
(OU2), which was the remediation of "source areas" of the site's contamination.
The two landfills would remain and be subject to DEP regulation. Those
operations contaminated the soil and groundwater leading to the EPA
designating the property as a Superfund site of approximately 1350 acres. While
the EPA had primary oversight and responsibility for approving the
environmental remediation work, the New Jersey Department of Environmental
Protection (DEP) retained jurisdiction to enforce applicable state standards and
regulations. Notably, the property was subject to the Coastal Area Facility
Review Act, N.J.S.A. 13:19-1 to -21 (CAFRA), and the DEP designated the
property as being within the CAFRA Mainland Coastal Center, Coastal
Suburban Planning Area, and Coastal Environmentally Sensitive Planning Area.
On September 4, 2001, CIBA and the EPA entered into a consent decree to settle
1 The ROD was not provided in the record. A-3963-18 4 the EPA's action concerning the ROD for OU2. The second decree
complemented the consent decree relative to OU1, which remained
independently enforceable on its own terms.
The OU2 consent decree defined the Site as including the entire property
and addressed where hazardous substances "have migrated or are migrating, and
all suitable areas for implementation of the response action" described in the
ROD for OU2. CIBA was to record the consent decree as a notice to any
successor in title to the property and record an environmental protection
easement in favor of the EPA over the entire property.
Commencing in tax year 2004, after the end of CIBA's manufacturing and
the start of environmental remediation, the Township began assessing the
property according to residential usage, not yet authorized by the zoning
ordinance, that the Township believed the realty market would anticipate with
the property. CIBA and its successor, BASF Corporation (BASF), brought
appeals for tax years 2004 through 2018 to challenge the assessments.
Because of the complex issues involved, the Tax Court tried the matter in
four phases: phase one addressed the propriety of assessing the property based
on prospective uses not yet permitted; phase two would address "usable acreage
and the development potential of the subject property" with the judge to "render
A-3963-18 5 a decision quantifying the number of usable acres that can be readily developed
at the subject property during each tax year under protest; phase three was
limited to the valuation of the property for tax years 2004 through and including
2011; and phase four would address valuation for tax years 2012 through 2018.
The parties entered into a stipulation of value and requested a final judgment,
which the judge utilized in entering orders as to all the pending matters.
The assessed value of the property was $20,629,300 for 2004 through
2008. It increased to approximately $80,000,000 for 2009 and 2010 and
decreased to $58,715,200 for 2011. In 2012, the property further decreased to
$42,715,200; $42,367,500 for 2013; and $42,000,000 for 2014 through 2019.
Phase One Reports and Expert Reports
In March 2006, John Lynch, the Township's Planner, issued an
investigative report on whether the property could be declared an area in need
of redevelopment under the Local Redevelopment and Housing Law, N.J.S.A.
40A:12A-1 to -49 (the LRHL). Lynch concluded that the location and layout of
the remaining industrial structures, the Superfund designation, and the
remediation and monitoring facilities "seriously constrain the development of
the remainder" of the property. He recommended redevelopment under the
LRHL in order to comprehensively address the property in contrast to
A-3963-18 6 "conventional zoning measures," which could lead to "piecemeal development
applications" that were less likely to result in the best use of the property.
Lynch considered redevelopment of the entire property as one parcel
because the limited access made it "imperative" to address all access and
infrastructure issues concurrently. Including the portions that were not
amendable to development, due to wetlands and flood-hazard areas, would
"allow for more comprehensive planning." Redevelopment plans contemplated
large-scale commercial uses, and the residential use of up to 600 age-restricted
housing units along a golf course on the site.
On March 15, 2006, the Township noticed a public hearing on whether to
pursue redevelopment of the property. In response, CIBA filed a lawsuit to
challenge the Township's designation of the property as being in need of
redevelopment. The matter was settled by "withdrawal" of the designation
without prejudice.
CIBA engaged the realty firm of Cushman & Wakefield to issue a Request
for Proposals and Concept Plans (the RFP).2 Proposals were submitted in
response to the RFP to construct residential units, townhomes, age-restricted
housing, one million square feet of retail use, 50,000 feet of office space,
2 The RFP was not provided in the record. A-3963-18 7 walking paths, and a golf course with a country club. A "sports resort" with a
hotel and recreational activities was among other responses to the RFP.
In July 2008, the EPA issued its Second Five-Year Report3 on the Site and
found the OU1 and OU2 remediation activities were proceeding as anticipated.
Of the three options the EPA could select to characterize the Site's status on the
NPL, the EPA chose "Final" rather than "Deleted" or "Other." The report noted
the volume of contaminated soil had been reappraised from 240,000 to 250,000
cubic yards.
On April 3, 2009, EcolSciences, Inc. issued a report to CIBA on its study
of threatened and endangered species on the property. It found three species of
non-woody flowering plants that were State-listed as being of special concern
but not as endangered, and three wildlife species and potential habitat for those
and other species. The Northern pine snake was resident on the property.
In May 2011, Lynch reported to the Township that the environmental
remediation activities for the property's surface soils and its "upper aquifer" had
been proceeding in excess of twenty years. The "soil cleanup [was] near or at
completion," while "the pump and treat of the upper aquifer should continue for
3 There is no First Five-Year Report in the record, which would have been issued in 2003. A-3963-18 8 about another [twenty-five] years." Lynch concluded that only 750 acres could
be developed due to the remediation activity, the wetlands and wetland transition
areas, habitat areas for the "threatened and endangered species" on the site, and
the CAFRA requirements for preserving tree cover. In 2009, BASF, a
multinational chemical company, acquired CIBA.
On July 12, 2012, BASF made a presentation to the EPA of its Conceptual
Property Management Plan. BASF proposed to "delist" or delete from the NPL
areas in the western, northern, and southern portions of the property that were
labeled in schematics as having an "unrestricted" potential future use. On
January 23, 2013, BASF presented that proposal again at the EPA's Third Five-
Year Review meeting. Notably, the areas that BASF proposed for deletion
corresponded to the area designated as unrestricted in the schematic set forth in
the ROD for OU2. On December 6, 2013, the judge granted the Township's
motion to bifurcate the trial.
On June 19, 2015, Maser Consultants P.A. (Maser) issued an Addendum
to its January 24, 2014 report. It described developments on other properties,
comparable in scale to its development proposals for the subject property, that
proceeded with DEP approval of the mitigation measures to preserve critical
wildlife habitat for the Northern pine snake and other species.
A-3963-18 9 On August 12, 2016, Advanced Geoservices prepared an OU2 remedial
action report for BASF. It related that the subdivision of the property paralleled
the EPA's designation of certain portions by potential future use. BASF
represented that Lot 6.01 "meets the requirements for unrestricted use," and that
Lot 6.02 met the requirements for "Restricted
Commercial/Industrial/Recreational Use," while Lot 6.03 had no designated
uses because it included a waste management area. "Institutional controls" in
the form of deed notices on Lots 6.02 and 6.03 would preserve the restrictions.
One Advanced Geoservices engineer certified that the OU2 remediation
had been "completed 4 in full satisfaction of the requirements of" its ROD while
another engineer certified that the OU1 remediation had likewise been
completed in full satisfaction of its ROD. On August 22, 2016, the EPA issued
an approval letter that stated the EPA's "concurrence on the completion of the
OU2 remedial action." On August 26, 2016, the judge granted CIBA's motion
for a hearing "on the isolated issue" of whether a zoning change to permit
4 "Completed" meant only "that remedial construction activities have been completed," in the EPA's phrasing. Two trial witnesses testified, on their own personal knowledge and without challenge, that the groundwater remediation activity on the property was ongoing. A-3963-18 10 residential development on the property was "reasonably probable" during "the
time periods relevant to the instant appeal," or phase one of the trial.
On March 15, 2017, Integra Realty Resources (IRR) issued its report for
BASF as to the reasonable probability of "a potential" zoning change or variance
from October 1, 2003, to October 1, 2010, that would be sufficiently publicized
to affect the realty marketplace's perceptions of the property and its future value.
IRR explained that Township officials made statements during its study period
that remediation had to precede development, and IRR did not see anything
during that period in the municipal master plans, the planning reports, zoning
change, or in defendant's manner of explaining redevelopment that would have
led a reasonable buyer to conclude that the Township "intended to permit
residential uses of the property."
In April 2017, environmental consulting firm Paulus, Sokolowski and
Sartour, LLC (PS&S) prepared an addendum to its October 2012 report for
BASF. PS&S performed a planning and engineering analysis of whether there
was a reasonable probability that redevelopment of the property would include
"high-density residential uses," and concluded it was "not reasonably probable"
because "it would not have been feasible" to develop the property. PS&S's
planning analysis cited the property's contamination, the public concern about
A-3963-18 11 the contamination, and the property's notoriety as reasons why a variance for
residential uses would not likely be granted.
Phase One Testimony
Brian Kirkpatrick of PS&S testified on behalf of CIBA and was qualified
as an expert witness in the area of land-use planning. He explained that PS&S
reviewed the zoning ordinance and use and dimensional limitations; the
applicable DEP and EPA regulations; deed restrictions; wildlife community
sentiment; and market interest. As of 2010, Kirkpatrick stated site work was
still progressing on groundwater remediation, soil treatment and disposal, and
closing and capping one of the landfills. In addition, the property was still an
active Superfund site, which in PS&S's view, carried a strong stigma with both
developers and the public against residential use. Kirkpatrick opined there was
no likelihood of a zoning change during the relevant period.
Brian McPeak of PS&S also testified as a planner for CIBA and focused
on CAFRA issues. McPeak opined that a 2006 zoning change in the Township
included a reexamination of the master plan, but that the process did not result
in any change allowing for residential uses on the property. Therefore, McPeak
stated a zoning change to that effect was unlikely. Indeed, the zoning ordinance
was ultimately amended to remove high-density housing, and the master plan
A-3963-18 12 identified other areas as suitable for "additional housing." McPeak also opined
that the ongoing remediation had a "huge" and "profound" effect on the
property's potential for development. He explained that the CAFRA limit on
impervious coverage for property in a "suburban planning area" was thirty
percent but could rise to eighty percent if CAFRA so designated an area as a
"center" where regional development could be channeled. In its twelve-year
planning process, McPeak noted that the Township "never once indicates" a
belief "that housing is an appropriate reuse for this site."
Anthony Graziano testified on behalf of BASF as an expert in real estate
valuation. He explained that the Township's 2006 zoning amendment added
commercial uses along the property's Route 37 frontage without adding
residential uses, consistent with the master plan. Graziano referenced transcripts
in which municipal officials plainly did not think that political and public
sentiment would allow residential use of the property before Cell 1 was
removed, even if the EPA and DEP allowed it. He also concluded that the
market would "absolutely not" have perceived a zoning change to permit high -
density residential development on the property to be "reasonably probable."
Jeromie Lange of Maser testified for the Township as an expert in land
use. He acknowledged that residential use required a zoning change, a use
A-3963-18 13 variance, or adoption of a redevelopment plan. In Lange's view, the Township
was most likely to proceed by redevelopment because it would bring additional
benefits, such as a reduction in county and school taxes, and the ability to issue
project bonds. Lange observed by 2000, the RODs "had already spelled out all
of the remediation" that the property required. He also believed that Cell 1 was
not "an absolute prohibition" to residential development that "absolutely had to
be removed for residential development to happen."
And, Lange affirmed his earlier opinion that the Township would not have
accepted a redevelopment plan until there was at least an agreement to remove
Cell 1, even though the EPA did not require removal. He believed that the
"tremendous public pressure" to have Cell 1 removed from the property would
have been a strong incentive for the Township to work with a developer to reach
an agreement that would accelerate its removal. Full development of the
property, including construction and marketing, would probably take twenty to
twenty-five years in Lange's estimation.
On November 17, 2017, at the end of phase one of the trial, the judge
issued an opinion and found that there was no prospect of a zoning change for
residential use of the property. A memorializing order was entered that day.
A-3963-18 14 Phase Two Expert Reports
On June 26, 2018, Herpetological Associates, Inc. (HA), issued a report
of Robert Zappalorti and David Schneider to BASF on the "rare wildlife" on the
property and how it may constrain development under DEP and CAFRA
regulations. HA noted similarities of its conclusions to those contained in the
2009 EcolSciences report, stating it was consistent with DEP and New Jersey
Pinelands Commission standards. Likewise, HA agreed with PS&S's conclusion
that the property had approximately 1067 acres of critical wildlife habitat for
the Northern pine snake. However, HA disagreed with the conclusions in the
Maser reports that the Northern pine snake population was geographically
isolated on the property and that the DEP demonstrated a lack of concern about
the species and its habitat by failing to list the property in the Landscape Project
maps.
On October 9, 2018, Byron DuBois, the principal biologist of DuBois
Environmental Consultants, issued a report commissioned by Maser on behalf
of the Township about the Northern pine snake habitat on the property and the
implications for its development potential. DuBois opined that this snake
population was genetically isolated due to the lack of corridors by which snakes
could traverse the heavy development abutting the property's boundaries. He
A-3963-18 15 further opined that the potential snake habitat on the property's western portion
was not critical because it did not have features to support hibernation or nesting.
DuBois "propose[d]" that approximately 386 5 acres of the property be
"considered critical habitat with appropriate buffers" because that was "sizeable
enough to support the seasonal activity parameters of the northern pine snake
including foraging and migration." He took issue with PS&S's opinion that 55.4
or 89.1 acres would be developable and would accordingly not be the DEP's
"preferred option."
Phase Two Testimony
Michael Kovacs of EcolSciences testified for CIBA as an expert on
threatened and endangered species, their habitat, and the impact on a property's
development potential under CAFRA. EcolSciences's report found no
threatened species, but it did find the endangered Northern pine snake. Kovacs
explained that CAFRA regulations prohibited development of areas that were
documented as threatened and endangered species habitat, or where
development would have direct or secondary adverse impacts. He noted there
5 DuBois testified that 386 was the intended figure and that the report mistakenly stated it was 880. A-3963-18 16 were no regulatory changes since 2009 that would have altered the property's
development potential.
Kirkpatrick again testified on behalf of CIBA, this time on land-use
permitted under CAFRA and in wildlife biology. He testified that the DEP
would allow development in an area of concern if the applicant demonstrated
that there was a public interest in the project, there was no alternative to it, and
a mitigation plan would offset the adverse impact on the natural resources being
disturbed to a degree resulting in a net gain.
Further, Kirkpatrick declared that the presence of a threatened species on
a site has the same effect on its development potential under CAFRA as the
presence of an endangered species. According to Kirkpatrick, 1066.8 acres were
classified as both "critical wildlife habitat" and as threatened and endangered
species habitat under CAFRA. Considering potentially different scenarios, the
property's development potential were 89.1 acres or 179 acres.
Zappalorti testified for CIBA as an expert in herpetology, threatened and
endangered reptile species, and their habitats. In his experience, Zappalorti
testified that a viable population of Northern pine snakes needed 1000 acres of
habitat. He opined that development of 400 or 500 acres would degrade the
habitat range and lead to a population decline.
A-3963-18 17 Lange also testified again on behalf of the Township as an expert i n land-
use planning, civil engineering, and development entitlement. He testified that
the DEP was not intransigent and would listen to an applicant's ideas for meeting
its requirements. Lange explained that parts of the property in the schematic in
the ROD for OU2 as having development potential were made "only with regard
to brownfield or toxic contamination" and to "what the EPA believes could
happen on the site in the future relative to contamination." The designations
carried no pretense of addressing other development constraints like threatened
or endangered species habitat. Lange criticized Maser's conclusion that 475
acres were suitable for development and commented Maser "had to make
something up frankly" and "just made assumptions." According to Lange, Maser
chose "a portion of the property [t]hat seemed as good a place as any to draw
the lines," and created a "shape" that would "kind of fit."
Raymond Walker, an ecology expert, testified for the Township on
CAFRA regulations and environmental biology. He explained that Lange asked
him to review "reports prepared by other consultants" about the property's
development potential under CAFRA. Relying on the PS&S and EcolSciences
reports, Walker concluded that the snake habitat was "restricted to the eastern
portions of the property" and disagreed with Kirkpatrick that the entire property
A-3963-18 18 was critical wildlife habitat. Walker opined that CAFRA was intended "to
balance the environmental concerns in the coastal zone with the development
pressures" located there and to focus development in centers in order to spare
other areas. In that light, he viewed the DEP's 2017 decision to include the
property in a coastal development center and sewer service zone "that would
"eliminate [its] wetlands at some point" as strong indicators that the DEP doesn't
consider this property to be critical habitat." He also surmised the DEP would
consider the figure of 55.4 developable acres low and not deem the site critical
"for the survival of" the Northern pine snake "in the [S]tate."
Steve Havlik was employed by BASF and previously by CIBA in
maintenance, facilities, operational planning, and management. As head of the
environmental remediation group, he testified that the goal of the subdivision
was to segregate Lot 6.01 and its lower level of environmental risks so that it
could be deleted from the NPL. Havlik claimed there was no indication of
leakage from Cell 1, and Cell 2 had "regulatory issues that required them to
remediate" by removing all drums for off-site disposal. Cell 3 held 110,000
cubic yards of sludge from the wastewater treatment plant.
DuBois testified on behalf of the Township as an expert in herpetology,
wildlife ecology, and CAFRA regulations compliance. He opined that the entire
A-3963-18 19 property was "suitable" as Northern pine snake habitat and that 375 developable
acres would result from "horse trading" with the DEP.
Robert Zelley, the senior principal at Maser and a State-licensed site
remediation professional, testified for the Township as an expert in brownfields
and "remediation and cleanup" under State and federal law. As remediation
progressed, Zelley declared that the Superfund site area was the only section
that continued to need remediation. The unrestricted portion was "clean" and
"viable for development." Zelley conjectured that the EPA does not "amend the
paperwork to eliminate[,] adjust, edit, modify to remove the area that . . . has
been identified as clean." In his opinion, transforming the uncontaminated and
unrestricted area into a new lot by way of a subdivision would lead to a new
deed without any restrictions being issued.
The judge also heard rebuttal testimony from CIBA's experts. In her
opinion for phase two, the judge found that development on any portion of the
subject property was prohibited "due to its designation as a Superfund site and
the accompanying institutional controls 6 in place" that "made development
during the 2004 through 2018 tax years impermissible," notwithstanding the
6 These "institutional controls" were not identified but presumably include consent orders and decrees that are not included in either party's appendix. A-3963-18 20 "future anticipated unrestricted development potential for 790 acres, and
restricted, limited, or prohibited development potential for the remaining 421
acres." While the presence of threatened and endangered species and habitat for
them "will undoubtedly trigger extensive CAFRA regulatory review" to ensure
"mitigation or accommodation," neither the EPA nor the DEP would "prohibit"
development of "any portion" of the 790 acres.
For the remaining 421 acres, which were "specific and well-delineated,"
the "environmental conditions and institutional controls such as deed
restrictions" would "limit or prohibit any future development . . . ."
Accordingly, the judge found that "once development approval is received from
[the] [EPA] and [DEP] or the property is delisted," it was unlikely that CAFRA
regulations pertaining to threatened and endangered species and their habitat
"would prohibit development of . . . Lot 6.01 within the current industrial
zoning."
Further, the judge noted that the entire property was placed on the NPL
due to soil and groundwater contamination, that remediation was ongoing, and
was "anticipated to continue for decades." The judge explained that until the
EPA and DEP expressly grant approval for public use, then "access to the
property is prohibited to the public, and development would be prohibited as
A-3963-18 21 well." No portion of the property had been delisted; therefore, the judge
highlighted "development on the [s]ite was prohibited."
The judge noted that the taxpayer had the burden of proving, by a
preponderance of the evidence, that the potentially developable acreage was as
low as CIBA asserted and commented this "[t]axpayer doesn't reference" the
Northern pine snake or any other such "species and habitat except in the context
of these tax appeals." Neither party proffered a witness from the EPA or DEP,
and the judge deemed it would be "speculation on the court's part" if she were
"to determine developable acreage that would be permitted by the [DEP] without
any testimony from" that agency. The difference of opinion among the experts
left the judge unconvinced "that [the] [DEP] would prohibit development of the
790 unrestricted acres, as opposed to requiring some mitigation or adaption."
This appeal and cross-appeal followed.
On appeal, the Township contends the judge erred by: (1) finding that the
property could not be developed for procedural reasons; (2) excluding certain
documents as privileged mediation communications; (3) addressing the
likelihood of a zoning change in isolation from the other elements of valuation;
and (4) failing to determine the number of developable acres on the property. In
its cross-appeal, CIBA raises similar points.
A-3963-18 22 II.
Our review of a Tax Court decision is limited. Estate of Taylor v. Dir.,
Div. of Tax'n, 422 N.J. Super. 336, 341 (App. Div. 2011). The Tax Court's
factual findings "will not be disturbed unless they are plainly arbitrary or there
is a lack of substantial evidence to support them." Yilmaz, Inc. v. Dir., Div.
Tax'n, 390 N.J. Super. 435, 443 (App. Div. 2007) (quoting Alpine Country Club
v. Borough of Demarest, 354 N.J. Super. 387, 390 (App. Div. 2002)). In our
review, "we take into account the special expertise of Tax Court judges in
matters of taxation," Dover-Chester Assocs. v. Randolph Twp., 419 N.J. Super.
184, 195 (App. Div. 2011), and a tax judge's "findings will not be disturbed
unless they are plainly arbitrary or there is a lack of substantial evidence to
support them." Jablin v. Borough of Northvale, 13 N.J. Tax 103, 107 (App. Div.
1991).
Thus, we examine "whether the . . . findings of fact are supported by
substantial credible evidence allowing due regard to the Tax Court's expertise
and its ability to assess credibility." Id. at 108. However, our review of the Tax
Court's legal conclusions is de novo. Advance Hous., Inc. v. Twp. of Teaneck,
215 N.J. 549, 566 (2013). "A trial court's interpretation of the law and the legal
consequences that flow from established facts are not entitled to any special
A-3963-18 23 deference." Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J.
366, 378 (1995).
III.
We first turn to the Township's contention that the Tax Court judge erred
by finding that the property could not be developed for procedural and other
reasons. Section 300.425 of the C.F.R. provides the criteria for placing sites on
the NPL, as well as for deleting them from it. 40 C.F.R. § 300.425(d) and (e).
A site or a portion of it "may be deleted from or recategorized on the NPL where
no further response is appropriate." 40 C.F.R. § 300.425(e). The EPA must
obtain the concurrence of the state where the site is located. 40 C.F.R. §
300.425(e)(2). The deletion must be based on a finding that "all appropriate
response actions required" to address the toxic release and its adverse
consequences have been "implemented," 40 C.F.R. § 300.425 (e)(1)(i), or that a
"remedial investigation has shown that the release poses no significant threat to
public health or the environment." 40 C.F.R. § 300.425 (e)(1)(iii).
In addition, the EPA must "ensure public involvement during the proposal
to delete" a site or a portion of it from the NPL. 40 C.F.R. § 300.425 (e)(4)(i)
to (iii). The EPA must publish notice locally and in the Federal Register, solicit
public comments, and "[r]espond to each significant comment and any
A-3963-18 24 significant new data submitted during the comment period." 40 C.F.R. §
300.425 (e)(4)(iv). Those criteria, along with the standards for applying them
and the necessary documentation, were elaborated in the EPA's "Close Out
Procedures for [NPL] Sites" and "Procedures for Partial Deletions at NPL Sites."
The Township's objection to the sufficiency of the evidence supporting
the judge's decision is based on its perception of the inadequacies in its
evidential support, which was based largely on expert testimony. We see no
basis for disturbing the judge's conclusion that no portion of the property could
have been developed during the tax years at issue.
The weight assignable to any expert opinion is a question for the finder of
fact. LaBracio Fam. P'ship v. 1239 Roosevelt Ave., 340 N.J. Super. 155, 165
(App. Div. 2001). Expert opinion can be assigned the weight that the fact-finder
deems appropriate in light of the facts and reasoning upon which the opinion is
predicated. See State v. Jenewicz, 193 N.J. 440, 456 (2008). In considering
whether a judge of the Tax Court has erroneously found adequate factual support
to accept an expert's opinion, we must recognize that Tax Court judges have
"special qualification[s], knowledge and experience." Ford Motor Co. v. Twp.
of Edison, 127 N.J. 290, 311 (1992) (alteration in original) (quoting Glen Wall
Assocs. v. Twp. of Wall, 99 N.J. 265, 280 (1985)). Out of deference to that
A-3963-18 25 expertise, we reject the judge's factual findings only when they are "plainly
arbitrary." Lenal Props., Inc. v. Jersey City, 18 N.J. Tax 658, 660 (App. Div.
2000).
A judge must articulate reasons for choosing between contradictory expert
opinions. See State v. M.J.K., 369 N.J. Super. 532, 549-52 (App. Div. 2004).
Here, the regulations on delisting a portion of the Superfund site declared that
the EPA had to ensure the satisfaction of the ROD's for OU1 and OU2, confirm
the compliance of any other "institutional controls," consult with the DEP, and
solicit and respond to public comments. The property's known environmental
contamination, the visceral concerns of the public and several municipal
officials, the presence of Cell 1 in particular, and the conflicting expert
testimony on whether the uncontaminated portion of the property was still
needed to support the ongoing remediation of other areas was substantial
evidence that partial delisting of the uncontaminated portion was not available
for the asking.
In the matter under review, the judge explained why she was skeptical of
Zelley's testimony that a partial delisting was readily available and
characterizing same as a "net opinion." Zelley provided no support for opining
that the partial delisting of an uncontaminated portion of a Superfund site was
A-3963-18 26 available upon a simple request. Expert opinion "is entitled to no greater weight
than the facts and reasoning upon which it is based." Todd v. Sheridan, 268 N.J.
Super. 387, 401 (App. Div. 1993) (citing Johnson v. Salem Corp., 97 N.J. 78,
91 (1984)).
Moreover, experts must base their opinions on "factual evidence,"
Buckelew v. Grossbard, 87 N.J. 512, 524 (1981), which may be "facts, data, or
another expert's opinion, either perceived by or made known to the expert, at or
before trial." Greenberg v. Pryszlak, 426 N.J. Super. 591, 607 (App. Div. 2012)
(quoting Rosenberg v. Tavorath, 352 N.J. Super. 385, 401 (App. Div. 2002)).
Experts may rely on their "knowledge, skill, experience, training, or education,"
Rule 702, but they may not give a "net opinion," unsupported by any factual
evidence or data. Creanga v. Jardal, 185 N.J. 345, 360 (2004); Buckelew, 87
N.J. at 524.
The record supports the judge's determination that Zelley merely based
his opinion on an inference from the generalized declaration of an EPA policy
to return property to productive use when safe and feasible. Zelley did not cite
an EPA regulation or policy statement on sua sponte partial listings or to
communications in this case, or other cases, in which the EPA encouraged the
owner of a Superfund site to seek a partial delisting.
A-3963-18 27 Furthermore, the judge was correct in her analysis. Zelley did not allow
for the possibility that an uncontaminated portion could still remain needed for
access to the contaminated areas, transport of contaminants from the
contaminated areas, transporting dangerous decontaminating agents to them, or
other support work to which the public could not safely be exposed. He did not
discuss the property in any detail in that regard, and the record was far short of
presenting enough evidence to compel a finding that the 790 unrestricted acres
had become unnecessary at any particular time to support remedial work in other
areas of the property.
Moreover, Havlik rebutted Zelley's opinion by explaining why the EPA
would not view subdivision of the uncontaminated portion of the property, a
unilateral act by its owner, as proving the satisfaction of any ROD requirement.
Havlik also explained that the EPA and the DEP would condition a partial
delisting on the owner's submission of deed notices that the RODs and other
control documents named. Zelley had unconvincingly declared deed notices to
be unnecessary, on the basis that an area within the boundaries of a Superfund
site but designated as having "unrestricted" development potential could not
logically be viewed as part of the Superfund "project," and therefore did not
A-3963-18 28 need deed restrictions regardless of what a consent decree or other control
documents mandated.
The judge found the DEP would eventually allow development of the 790
unrestricted acres under suitable conditions, that the DEP would not have made
any determinations based on the trial record alone and would not provisionally
allow development activity in advance of those decisions. Saliently, the DEP's
determination as to how much property could be developed under CAFRA
required more than simply calculating what percentage of impervious coverage
to allow. For example, the DEP would have required proof of the extent of the
Northern pine snake habitat on the property, the extent to which development
would disturb or diminish its ecological value, and the degree to which on-site
and off-site mitigation might offset the habitat disturbance. The judge did not
abuse her discretion in rejecting Zelley's opinion as deficient.
We conclude the judge gave a thorough explanation of her reasons and
how she weighed the evidence as a fact-finder. There was substantial evidence
to support the judge's finding that the Township failed to show development
activity would have been allowed on any portion of the subject property during
the tax years at issue.
A-3963-18 29 IV.
We next address the Township's argument that the judge erred by finding
the Cushman & Wakefield RFP, along with responses from developers, were
shielded from discovery under the mediation communication statutory privilege.
The Township acknowledges that the developers may have expected CIBA not
to disclose its responses to competitors in the event development actually
proceeded, but the developers did not anticipate the use of their proposals at a
mediation.
The Uniform Mediation Act, N.J.S.A. 2A:23C-1 to -13, defines a
"mediation communication" as "a statement, whether verbal or nonverbal or in
a record, that occurs during a mediation or is made for purposes of considering,
conducting, participating in, initiating, continuing, or reconvening a mediation
or retaining a mediator." N.J.S.A. 2A:23C-2. It recognizes that a mediation
may have a "nonparty participant," and it distinguishes a mediation from a
"proceeding," which includes "a judicial . . . process" as well as "related . . .
discovery . . . ." Ibid.
The Act provides that mediation communications "are confidential to the
extent agreed by the parties" unless they are made during a mediation session
that "is open, or is required by law to be open, to the public . . . ." N.J.S.A
A-3963-18 30 2A:23C-8. See also N.J.S.A. 2A:23C-3(a). It preserves the confidentiality by
conferring a privilege that makes them "not . . . subject to discovery or admission
in evidence in a proceeding[.]" N.J.S.A. 2A:23C-4(a). To that end, "[i]n a
proceeding, . . . a mediation party may refuse to disclose, and may prevent any
other person from disclosing, a mediation communication." N.J.S.A. 2A:23C-
4(b)(1).
The privilege may be waived "if it is expressly waived by all parties to the
mediation." N.J.S.A. 2A:23C-5(a); see also N.J.S.A. 2A:23C-4(a). The
privilege does not apply to statements that are not mediation communications,
so "[e]vidence or information that is otherwise admissible or subject to
discovery shall not become inadmissible or protected from discovery solely by
reason of its disclosure or use in a mediation." N.J.S.A. 2A:23C-4(c).
Here, the pre-trial judge during phase one of the trial issued an opinion
denying the Township's motion for discovery of the responses to the RFP. The
judge found the documents were subject to the statutory privilege for mediation
communications, finding CIBA's "failure to object when [the Township]
included some of the RFP responses as exhibits to pretrial motions in these
matters" did not amount to a "knowing and express waiver" of the privileg e.
Unlike the "express waiver" by the plaintiff in Willingboro Mall, Ltd. v. 240/242
A-3963-18 31 Franklin Avenue, L.L.C., 215 N.J. 242, 261 (2013), here, the privilege protected
the RFP, the responses, "and any related communications."
The Township's argument about the expectations of the developers who
responded to the solicitation is unavailing. Saliently, it ignores their assent to a
confidentiality agreement and fails to explain how the developers who
participated in executive sessions were uninformed about the mediation or any
secrecy surrounding the proceeding. Therefore, we discern no abuse of
discretion in the judge's decision to exclude the RFP and responses thereto under
the mediation privilege.
Next, we address the issue of whether the judge erred by addressing the
likelihood of a zoning change to allow residential uses on the property as an
isolated question. The Township contends that unlike the objective question of
the number of developable acres, which must be answered before any appraisal
can begin, the expectations about the potential of a zoning change constitute
subjective opinions of market actions that an appraiser can take into account
simply by observing their statements and conduct without having to opine as to
whether their opinions are reasonable.
A-3963-18 32 We note that, procedurally, after the judge granted the Township's motion
for bifurcation, the first phase of the trial was to address "the development
potential of the subject property." The judge also granted CIBA's motion for a
hearing "on the isolated issue of whether or not it was reasonably probable that
a change in zoning permitting residential redevelopment of the subject property
would have been approved during the time periods relevant to the instant
appeal." The Township was directed to "advance value arguments" as of each
annual valuation date "predicated upon alternate use scenarios," to support the
proposition "that 'as of' those dates, market participants would have expected
that a zoning change would be 'reasonably probable' to occur" in respect of
facilitating redevelopment of the site for residential use. This was to be
presented in accordance with the plans and densities set forth in Maser's "expert
planning report" of January 2014.
At the end of phase one, the judge issued an opinion on whether the
property could be valued as having any development potential for residential
use. The judge explained that the Township had the burden of proof because it
was "the party challenging the existing zoning" with the argument "that there
would, in fact, be a zoning change," and added that "[s]omething had to go first"
at trial, and that he chose the issue of "whether there was a reasonable
A-3963-18 33 probability of a zoning change at the property during the years in question,"
because [the Township] sought to value the property as if its prospective
development, viewed as of the valuation dates for each of those tax years, had
been "reasonably likely" to include "at least some residential development" as
the "highest and best use."
In addition, the judge noted that the entirety of the property was within
the Superfund site, and that some of it was not contaminated, in particular "a
large portion to the west" near Route 37. Another portion of the property
contained Cell 1, which was an on-site toxic-materials landfill that had been
"approved" by "the environmental authorities" and sealed.
Moreover, the judge aptly explained the property was to be assessed
according to the "highest and best use" that was "legally permissible." The use
had to be legally permissible as of the valuation date, and the case law treated a
use as legally permissible if it was likely to become permissible soon enough
for its prospect to increase market perceptions of the property's profit potential.
As a threshold test for reaching the question of how the market would perceive
the property’s value, the party advocating valuation under the new use had to
show, as of the valuation date, that a zoning change to permit it had a "reasonable
probability" of being adopted.
A-3963-18 34 The judge cited several factors supported by case law about finding
whether a zoning change had a reasonable probability of enactment. The most
notable factors were: (1) the nature of market interest in the property; (2) the
complexity and likelihood of success in securing approval from the municipality
for a zoning change; and (3) the complexity and likelihood of securing approval
from the regulatory agencies with authority over the property, without which
any zoning change would be moot. Securing any of those approvals could face
"hurdles and hazards along the way."
Furthermore, the judge highlighted that the record did not contain a
"financial analysis to show market interest in the property" as of the valuation
dates for a "redevelopment of this property as residential development." And
that the absence of market interest in a particular kind of development on a
parcel would leave the owner with no incentive to seek a zoning change to allow
it. Further, this would leave the municipality with no impetus to adopt a
redevelopment plan that requires one.
In the judge's view, the listing of the property as a Superfund site due to
substantial contamination, in particular of the groundwater, gave it "a level of
notoriety" that suggested the Township might have accepted some residential
development as an inducement for a developer to assume the cost of more
A-3963-18 35 remediation than the EPA required, namely, the removal of Cell 1. The lawsuits
to compel the removal of Cell 1 and legal claims by adjacent property owners
and the DEP for natural resource damage were further evidence of the
governmental and public interest in its removal. However, the Township's
abandonment of redevelopment proceedings and its failure to adopt a
redevelopment plan proved that the Township never intended to offer the
prospect of residential development as an inducement for developers to incur
the cost of removing Cell 1. The testimony of the Township's experts that it had
such an intent was accordingly speculative and amounted to the absence of
evidence of a "reasonable probability that the zoning at the property would
change."
The judge further found that even if the Township had been willing,
securing regulatory approval for residential development on the property would
have been a "very high" hurdle in light of the "serious pollution," the public
awareness of it, and the complexity of the remediation and of the applicable
regulatory regimes. There was no demonstrated "reasonably probable" prospect
on the valuation dates in this case that the DEP and the EPA would allow the
disturbance of what the record depicted as "a successful landfill," or allow the
risk of transporting "the 35,000 drums" of toxic materials "and whatever else
A-3963-18 36 that's in there" in order to find a new location at which to duplicate the work of
its safe disposal. "If there's enough incentive anything could be accomplished,"
but "securing necessary approvals . . . certainly wasn't going to be done any time
near the valuation dates."
We are convinced that because of those obstacles, which reflected "the
serious Superfund cleanup underway," the judge providently concluded that
"[n]o market participant in my view would have looked at this property" on any
of the valuation dates for tax years 2004 through 2011 "and say that these
approvals are going to be secured relatively soon, soon enough for me to pay a
price for this property that reflects residential development. It just wasn’t
happening." All of those "hurdles and hazards along the way" would defeat a
zoning change to permit residential development of the property. The
unlikelihood of obtaining the regulatory approvals concerning pollution and
moving Cell 1 made it unnecessary to estimate the degree of difficulty to obtain
the additional CAFRA approvals that would be needed if development were to
proceed.
In sum, the judge concluded that "no market participant in my view would
have looked at this property on" any of the valuation dates through October 1,
2010," and "sa[id] that these approvals are going to be secured relatively soon,
A-3963-18 37 soon enough for me to pay a price for this property that reflects residential
development. It just wasn't happening." Consequently, the Township's failure
to meet its burden of proving that residential uses were legally permissible
required the judge to value the property "under the zoning in place on the
valuation dates." "It would be inequitable to tax this property at a value that
reflects residential development when there is really no serious indication at the
times that are relevant here that this property would be re-zoned to allow
residential development." The owner was "sitting on a parcel . . . that was
contaminated, that had many concerns, that was generating public opposition,
and which was zoned not for residential development. It is fair to tax them to
reflect that reality," not on circumstances that might arrive "[i]f some day the
property is cleaned up."
The burden of showing that the highest and best use of a property is
something "other than its current use" is on "the person claiming otherwise," and
the showing must be "by a fair preponderance of the evidence." Clemente v.
Twp. of South Hackensack, 27 N.J. Tax 255, 267 (Tax 2013), aff'd o.b., 28 N.J.
Tax 337 (App. Div. 2015). That party here was the Township.
Property must be valued according to its highest and best use. Ford Motor
Co., 127 N.J. at 300-01. Highest and best use is a concept rooted in the market's
A-3963-18 38 perceptions of realty value, because the question it answers is "[w]hat use would
the market make of that property?" Id. at 302 (citation omitted). The answer
"requires a comprehensive market analysis to ascertain the supply and demand
characteristics of alternative uses." Clemente, 27 N.J. Tax at 269. The inquiry
must be "based upon what was known and reasonably anticipated as of the
assessment date and not upon speculation or conjecture." Linwood Props., Inc.
v. Borough of Fort Lee, 7 N.J. Tax 320, 328 (Tax 1985).
Nonetheless, the posited highest and best use must have "a probability of
achievement" and "cannot be remote, speculative or conjectural." Ford Motor
Co., 127 N.J. at 301 (citation omitted). The four criteria are that the use must
be "1) legally permitted, 2) physically possible, 3) economically feasible, and 4)
the most profitable." Ford Motor Co. v. Twp. of Edison, 10 N.J. Tax 153, 161
(Tax 1988) (citing Am Inst. of Real Estate Appraisers, The Appraisal of Real
Estate at 274 (9th ed. 1987)), aff'd o.b., 12 N.J. Tax 244 (App. Div. 1990), aff'd,
127 N.J. 290 (1992).
If the highest and best use is not currently permitted, it "must be within
reasonable probability of being permitted." Six Cherry Hill, Inc. v. Cherry Hill
Twp., 7 N.J. Tax 120, 129 (Tax 1984) (citation omitted), aff'd o.b., 8 N.J. Tax
334 (App. Div. 1986). Valuing a property according to a use that would require
A-3963-18 39 a zoning change requires "a probability of a zoning change in the near future."
Romulus Dev. Corp v. Town of West New York, 7 N.J. Tax 305, 318 (Tax 1985),
aff'd o.b., 9 N.J. Tax 90 (App. Div. 1987). A zoning change is not probable in
the near future if municipal approval of it, along with approval for the new use
from environmental agencies or other "regulatory bodies" with jurisdiction over
the property, "would require a substantial period of time, with hurdles and
hazards along the way that might defeat such a zoning change." Ibid.
In the analogous context of condemnation, our Supreme Court has
similarly allowed evidence about the effect on market value of a likely zoning
change. "It is generally agreed that if as of the date of taking there is a
reasonable probability of a change in the zoning ordinance in the near future,
the influence of that circumstance upon the market value as of that date may be
shown." State ex rel. Highway Comm'r v. Gorga, 26 N.J. 113, 116 (1958);
accord State ex rel. Comm'r of Transp. v. Caoili, 135 N.J. 252, 264-65 (1994)
(clarifying that the standard was "reasonably probable," not "probable").
However, the Court emphasized that the question of whether the zoning
change was reasonably probable as of the taking date was a question of whether
the evidence was admissible. "Whether there is evidence of such probability to
warrant submitting the issue to the jury, is in the first instance a question for the
A-3963-18 40 court as in the case of any other issue of fact." Gorga, 26 N.J. at 117. Our
Supreme Court later affirmed that Gorga "addressed the standard for judging the
sufficiency of evidence of potential zoning changes affecting the future use of
condemned property," as a threshold to be cleared before evaluating how the
evidence might have affected market perceptions of value. Caoili, 135 N.J. at
261-62. Under this "clear two-step process," the court performs a "gatekeeping
function by screening out potentially unreliable evidence" of a zoning change to
prevent it from figuring in the determination of market perceptions of value.
Borough of Saddle River v. 66 East Allendale, LLC, 216 N.J. 115, 138 (2013)
(quoting Caoili, 135 N.J. at 264).
Here, the judge performed the threshold determination required. In a
thorough analysis, the judge explored whether a zoning change to permit
residential uses on the property was sufficiently capable of affecting market
conceptions of value. We reject the Township's argument that the judge should
have disregarded the well-established standard of requiring a zoning change to
be "reasonably probable" and apply a new standard that the zoning change was
"possible." We, therefore, hold that the judge did not err in finding that a zoning
change was not reasonably probable. We also discern no abuse of discretion in
the judge's decision to sever the issues under Rule 4:38-2(a). The judge's
A-3963-18 41 decision to address the likelihood of a zoning change as a separate question that
preceded other valuation issues was sound.
VI.
Finally, we address the Township's argument that the judge erred by
failing to treat Maser's figure of 425 developable acres as the lower amount for
a judicial finding because it was only one-half of what the CAFRA regulations
on impermeable coverage allowed and was a conservative estimate in light of
"where the theoretical developer would wind up" after negotiating with the DEP.
In its cross-appeal, CIBA contends the judge erred in finding that CAFRA
regulations would only allow 55.4 acres of the property to be developed. CIBA
argues that Kirkpatrick evaluated all the regulated features of the property, such
as threatened and endangered species, critical wildlife habitat, wetlands, buffers,
riparian zones, intermittent stream corridors, and flood hazard areas. The
Township claims CIBA's assertion of only 55.4 developable acres is bereft of
support in light of the judge's ruling that CIBA failed to show that the DEP
would prohibit development of the 790 acres which the EPA recognized as
unrestricted for development. We reject both arguments.
To reiterate, the judge found the DEP would eventually allow
development on the 790 acres that the EPA designated as unrestricted. The
A-3963-18 42 judge prudently noted that all development activity would be precluded until the
DEP made those determinations. The second finding rendered it unnecessary
for the judge to address or refute the possibility that the feasibility of on-site
mitigation, or the opportunity for relevant off-site mitigation, might impel the
DEP to approve more or less development than the expert witnesses anticipated.
We are convinced that there is sufficient credible evidence to support the
judge's findings of fact and conclusions of law. Norfolk S. Ry. Co. v. Intermodal
Props., LLC, 215 N.J. 142, 165 (2013). CIBA and the Township's arguments
not addressed herein lack sufficient merit to warrant further comment. R. 2:11-
3(e)(1)(E).
Affirmed on the appeal and cross-appeal.
A-3963-18 43