Court Opinion

ID: 9645826
Source: CourtListenerOpinion
Date Created: 2023-08-22 21:36:27.224155+00
Date Added: 2024-06-11T18:11:32.079093
License: Public Domain

Duncan, J., and Kenison, C.J.,
dissenting in part:
The issue considered in part II of the majority opinion arises because the plaintiff contends that consideration of the terms of its agreement with the federal government with respect to its mortgage for $2,546,200 would entitle it to a larger abatement than that recommended by the master. That agreement is designed, among other things, to provide for rentals which will produce earnings sufficient to pay the mortgage interest of 1%, and it restricts earnings to 11.11% of the mortgage and 6% on the equity.
The majority of the court sends the case back to the master on the ground that it was “error to not consider” the factor of “federal regulations governing [plaintiff’s] property”; and this despite the fact that the master’s report discussed the plaintiff’s valuations reflecting the regulations, but ruled that “the municipality is not required to give consideration to the fact that this is a ... project subject to [such] regulations”. Reconsideration is ordered even though it is held that the regulations “need not be controlling”, should be “weighed . .. to the extent found relevant”, and are not intended “to undermine a local municipal tax base”.
We would sustain the master’s findings and rulings. Public utilities are subject to regulation as monopolistic enterprises affected by a public interest. Consequently as to them, regulation is a factor necessarily entitled to consideration in finding market value. Public Service Co. v. New Hampton, 101 N.H. 142, 136 A.2d 591 (1957). On the other hand, the rental of privately owned housing stands upon a different footing. The plaintiff’s project is subject to regulation because the plaintiff agreed that it should be, not because the law required *673it. The plaintiff agreed to limitations upon its income in order to finance its project upon favorable terms and to obtain other economic advantages.
The result from the standpoint of the plaintiff taxpayer does not differ materially from the situation where a long term lease proves to be unsatisfactory under prevailing economic conditions, by yielding a return below that prevailing on the current market. In such cases, the taxpayer owner may not require the taxing authority to abate its taxes because the owner’s bargain proves to be improvident. “It is the capacity for earning income rather than the income actually derived which reflects ‘fair cash value’ for taxation purposes”. Marine Bank v. Tax Appeal Bd., 44 Ill. 2d 428, 256 N.E.2d 334 (1970). In applying the income approach to valuation, assessors are entitled to utilize the “economic rental” value in disregard of actual income. Clayton v. County of L.A., 26 Cal. App. 3d 390, 102 Cal. Rptr. 687 (1972).
In New Brunswick v. State of New Jersey Division of Tax Appeals, 39 N.J. 537, 189 A.2d 702 (1963), the court recognized that “a long term lease . . . for an unfavorable rent will impair the selling price”, but held that “the valuations of properties for local taxation cannot vary with the managerial successes or failure of the owners. Adjacent properties of equal potential cannot be assessed differently because one proprietor was more or less astute than the other.” See also Crossroads Center Inc. v. Commissioner of Taxation, 286 Minn. 440, 176 N.W.2d 530 (1970); Annot. 96 A.L.R.2d 666 (1964) and Supp.
In our opinion the rulings of the master were not erroneous. Accordingly, we dissent from part II of the foregoing opinion.