Municipal Special Assessment Invalid Where Expert Report on Which it Was Premised Lacked a Rational Basis

Crispino v. Sparta Tp., 243 N.J. 234 (2020). By statute, the Legislature has delegated to municipalities the power to impose special assessments on property owners to fund improvements that benefit those properties. But such assessments, and the methodology to impose and apportion them, must be “in proportion to and not in excess of the benefits conferred.” N.J.S.A. 58:4-12(d)(1).

Sparta Township imposed a special assessment on 58 properties in order to recoup monies that the Township had spent to rehabilitate a dam owned by Glen Beach Lake Club, Inc. The owners of all 58 properties were eligible to join the Beach Club, but a number of them did not do so. Eight of the owners, none of whom were members of the Beach Club or owned property on or with a view of Glen Lake, sued the Township, challenging the assessment.

The Township had an appraisal expert whose report underlay the assessment. Agreeing with plaintiffs, the Law Division “determined that the expert report did not follow any discernible methodology in allocating the costs for the dam restoration among plaintiffs’ properties,” as Justice Albin wrote for a unanimous Court. That court voided the assessment and the municipal resolution imposing it. The Appellate Division took a different view of the expert report, finding it sufficient, and reversed. The Supreme Court granted review and reversed the Appellate Division and remanded the matter to the Sparta Township Council “to start anew the process of establishing a special assessment ….”

Justice Albin provided a detailed review of the facts and applicable statutory law. But the core of the opinion was its finding that, as the Law Division had concluded, the Township’s expert report lacked “a rational basis.” (The Law Division had labeled the report a “net opinion,” but Justice Albin did not “import the net opinion rule used in court proceedings into this municipal/administrative setting”). Though “no inflexible formula applies, nor is mathematical precision required,” the municipality must employ “a rational and non-arbitrary methodology.”

That did not happen here, Justice Albin said. The expert concluded that the mere fact that property owners were eligible to join the Beach Club and thus get access to Glen Lake and other amenities was a benefit. But there was no showing that the value of properties whose owners were eligible to, but did not, join the Beach Club had increased. And though the expert assumed that lakefront properties received the most benefit and properties furthest from the lake the least, an approach that the Court thought “has some logical and perhaps facial appeal,” he did not explain how he reached the particular assessment figures that he did.

Those and other flaws in the expert report led the Supreme Court to conclude that plaintiffs had, by clear and convincing evidence, overcome the presumption of validity accorded to municipal resolutions. The Court reversed the Appellate Division and sent the matter back to the Sparta governing body.