A New Jersey appeals court has found no abuse of discretion in a judge's decision to admit expert testimony about availability of tax incentives when it set a price of $3 million for the condemnation of an eight-story building in Camden.

With the state's tax incentive program facing heavy scrutiny, the ruling should be helpful to owners of eligible properties.

Upholding a jury's award for a building that was being condemned by Camden's parking authority for construction of a new parking garage, the panel said testimony about availability of funds under the state's Grow NJ program was not admitted in error because sufficient evidence supported the expert's opinion.

The parking authority claimed on appeal that a report to the property owner, the Estate of Milton Rubin, by appraiser Richard Wolf of Valbridge Property Advisors, should not have been admitted at trial because it was too speculative. The report said the building should be renovated into Class A office space and that its rental potential was aided greatly by the availability of Grow NJ tax incentives to companies operating in Camden.

Wolf's report put the property's value at $9 million. An expert for the parking authority estimated the value at $180,000. A jury set the value at $3 million following a seven-day trial in April 2018.

On appeal, the panel of Judges Douglas Fasciale, Scott Moynihan and Stephanie Ann Mitterhoff of the New Jersey Superior Court Appellate Division noted that in 1994 the state Supreme Court set rules for deciding whether a judge may permit testimony about a property's future use in determining its value. In Commissioner of Transportation v. Caoili, the court said the jury need not find that change is probable, but the critical inquiry is the reasonable belief by the buyer and seller negotiating over a property that a change may occur and have an impact on the value of the property.

The Caoili ruling, which concerned potential rezoning for commercial use of a property that was zoned residential, said a jury deciding fair market value of a condemned property could consider a potential change affecting use of the property "provided the court is satisfied that the evidence is sufficient to warrant a determination that such a change is reasonably probable." Thus, the judge performs a "gatekeeping function by screening out potentially unreliable evidence and admitting only evidence that would warrant or support a finding that a change is probable."

Judge Michael Joyce, who conducted the trial, did not abuse his discretion in finding that  evidence was sufficient to allow the jury to find that defendant would have benefited from Grow NJ had it renovated the property and subsequently rented it to a Grow NJ recipient, the panel said.

The appeals court said that Wolf's valuation was distinguishable from other cases where judges rejected valuations that were made on the assumption that improvements had already taken place. Wolf's valuation "was not based on the assumption that defendant's property had already been renovated and rented to a Grow NJ recipient," the court said.

Starting with an "as renovated" value, Wolf discounted the value to account for renovation costs, lost rent, leasing commissions and "entrepreneurial incentive," which is the profit required to purchase the building as is, find a tenant and renovate the building given the risks involved, the court said. This methodology recognizes the critical distinction between enhancing market value and constituting the basis of market value, the court said.

The parking authority's attorney, Michael Ash of Carlin & Ward in Florham Park, and Robert Baranowski of Hyland Levin Shapiro in Marlton, representing the estate of Rubin, did not respond to requests for comment.