Opinion
Index No. 904834-20
02-27-2024
In the Matter of the Application of Crossgates Mall General Company Newco, LLC; CROSSGATES MALL DEVCO LLC; and PCC NEWCO LLC, Petitioners, v. Town of Guilderland, Respondent.
Phillips Lytle LLP Attorneys for Petitioners By: Craig A. Leslie, Esq. Jacob S. Sonner, Esq. Tabner, Ryan & Keniry, LLP Attorneys for Respondent William F. Ryan, Esq.
Phillips Lytle LLP Attorneys for Petitioners
By: Craig A. Leslie, Esq. Jacob S. Sonner, Esq.
Tabner, Ryan & Keniry, LLP Attorneys for Respondent
William F. Ryan, Esq.
DAVID A. WEINSTEIN ACTING SUPREME COURT JUSTICE
In this consolidated proceeding brought under Article 7 of the Real Property Tax Law ("RPTL"), petitioners Crossgates Mall General Company Newco, LLC, Crossgates Mall Devco LLC and PCC Newco LLC (collectively "Crossgates") challenged the 2020 and 2021 tax assessments imposed on them by respondent Town of Guilderland (the "Town" or "Guilderland") in regard to the property commonly known as Crossgates Mall. Following a trial, by Decision & Order dated December 13, 2023 (the "D&O" or "December 13 D&O"), I granted the petition to the extent of reducing the valuation for the 2020 assessment rolls from $282,493,500 to $258 million, and for the 2021 assessment rolls from $282,493,500 to $177 million.
After I issued the D&O, correspondence between the parties revealed a disagreement as to the contents of the judgment that was to be entered, in regard to the assessment rolls for the three years following 2021. Respondent moved for entry of a judgment which would, in the form proposed, provide that in addition to reflecting the valuations listed above for the 2020 and 2021 assessment rolls, "the assessed value for the 2022, 2023 and 2024 assessment rolls" would be fixed at $177,000,000. Respondent has cross moved for entry of its proposed judgment, which as relevant here would state that the assessor shall, after beginning with the $177 million figure, provide that "any refunds due to Petitioners for excess taxes paid in any of these years is to be calculated by applying the Town of Guilderland's equalization rate in each of those tax years to the full market value determined by the Court for the 2021-22 tax year, to arrive at the corresponding assessed value for each tax year (for the avoidance of doubt, the equalization rate to be applied for the 2022-23 tax year is 91%, resulting in an assessed value for that tax year of $161,070,000 and the equalization rate to be applied for the 2023-24 tax year is 85%, resulting in an assessed value for that tax year of $150,450,000" (Notice of Cross Motion, Proposed Judgment).
As can be seen from the above, the respondent's proposal refers to the valuations for the year of the assessment roll (i.e., 2021, 2022 and 2023), while petitioners' proposal refers to the valuations for each tax year (i.e., 2021-22, 2022-23 and 2023-24). For consistency's sake, I will use the former.
Equalization is a process intended to "assure equitable property tax allocation" among different tax jurisdictions (see https://www.tax.ny.gov/pdf/publications/orpts/under_eqrates.pdf). Since most school districts collect taxes from several different municipalities, the Office of Real Property Services each year calculates an equalization rate for each municipality representing "the percentage of true market value at which a municipality assesses its real property," which is then used to adjust the municipalities' valuations (see Town of Riverhead v New York State Bd. Of Real Property Services, 5 N.Y.3d 36, 39 [2005]). The question presented by the motions before me is whether those equalization rates should be applied to the valuation of Crossgates for the years that follow 2021.
The parties' disagreement turns on the meaning of Real Property Tax Law § 727(3), which reads as follows (with emphasis added):
"1. Except as hereinafter provided, and except as to any parcel of real property located within a special assessing unit as defined in article eighteen of this chapter where an assessment being reviewed pursuant to this article is found to be unlawful, unequal, excessive or misclassified by final court order or judgment, the assessed valuation so determined shall not be changed for such property for the next three succeeding assessment rolls prepared on the basis of the three taxable status dates next occurring on or after the taxable status date of the most recent assessment under review in the proceeding subject to such final order or judgment. Where the assessor or other local official having custody and control of the assessment roll receives notice of the order or judgment subsequent to the filing of the next assessment roll, he or she is authorized and directed to correct the entry of assessed valuation on the assessment roll to conform to the provisions of this section.
2. An assessment on property subject to the provisions of subdivision one of this section may be changed on an assessment roll where:
(a) There is a revaluation or update of all real property on the assessment roll;
(b) There is a revaluation or update in a special assessing unit of all real property of the same class;
(c) There has been a physical change (improvement) to the property;
(d) The zoning of such property has changed;
(e) Such property has been altered by fire, demolition, destruction or similar catastrophe;
(f) An action has been taken by any office of the federal, state or local government which caused a discernible change in the general area where the property is located which directly impacts on property values;
(g) There has been a change in the occupancy rate of twenty-five percent or greater in a building located on a property which is not eligible for an assessment review under title one-A of this article (small claims assessment review);
(h) The owner of the property becomes eligible or ineligible to receive an exemption; or
(i) The use or classification of the property has changed.
3. No petition for review of the assessment on such property shall be filed while the provisions of subdivision one of this section are applicable to such property"
In short, this statute locks in a judicial determination of value after a successful Article 7 proceeding for the following three years, unless certain exceptions apply. The legislative history of the provision makes clear that its purpose was to reduce the volume of law suits challenging tax assessments, which under prior law could be brought each year after the annual assessment was imposed (see Governor's Approval Message No. 112, 1995 ["by locking in the judicially reduced assessments on most properties for the following three tax years, the bill will spare all parties the time and expense of repeated court intervention"]; Memorandum in Support, Bill A-330B of 1995 [Section 727 was intended to address situations in which "taxpayers who are successful in obtaining reductions in assessments frequently have those assessments increased to pre judicially determined levels the succeeding year" and "this pattern sometimes becomes an annual event, forcing the taxpayer to seek judicial review each and every year"]; see also Matter of ELT Hariman, LLC v. Assessor of Town of Woodbury, 128 A.D.3d 201, 208 [2d Dept 2015] [section 727 allows all parties to "avoid the time and expense of repeated court interventions"], lv denied 26 N.Y.3d 918 [2016]). To this end, the statue "prevent[s] assessing units from increasing judicially reduced assessments in succeeding years" and "prevent[s] taxpayers from perpetually challenging their assessments" (Rosen v Assessor of City of Troy, 261 A.D.2d 9, 12 [3d Dept 1999]). The measure also "provides a measure of financial certainty to school districts that rely upon tax assessments when creating their annual budgets" (see Matter of ELT Hariman, LLC, 128 A.D.3d at 208 [citations omitted]).
The Approval Memo is missing from the Legislature's Public Legislative Information Site (http://public.leginfo.state.ny.us/), and is cited here from Petitioner's Exhibit J, which contains the bill jacket for this Chapter.
The statute delineates a few specific exceptions to this rule, and only those events provide a basis to get around the three-year moratorium (see id. [sale of property is not a change that allows a party to get around the three-year bar on suit; noting that "subsection (2) of the statute does not list a change in ownership as an exception to a three year moratorium"]). Petitioners do not argue that any of these exceptions apply here. Rather they claim that the statute is ambiguous on the question of whether the assessments fixed by statute for future years are subject to the equalization process, and thus under the principle that "tax statutes of doubtful meaning are to be construed in favor of the taxpayer" (see Matter of Bloomingdale Bros. v Chu, 70 N.Y.2d 218, 223 [1987]), section 727 should be read to incorporate the equalization rate (see Petitioner's Memorandum of Law ["Pet Mem"] 3).
When there is such an exception, it does not serve as a basis to adjust the amount fixed under section 727 to reflect that exceptional circumstance; rather, the three-year period under which the valuation is fixed lapses (see Colonie Plaza, Inc. v Assessor of Town of Colonie, 15 A.D.3d 830, 832 [3d Dept 2005]).
At oral argument, petitioners' counsel acknowledged that no statutory exception is relevant to this case.
For this argument, Crossgates relies on Matter of Dresser-Rand Co. v Champlin (39 A.D.3d 1156 [4th Dept 2007]). In that case, the parties resolved an RPTL Article 7 proceeding by stipulation. In response to a petition asserting that the stipulated amount should be adjusted for 2005 to reflect the applicable equalization rate for that year, the Court found the stipulation to be ambiguous on this issue, and therefore construed it in the taxpayer's favor to apply the relevant equalization rate to the property (id. at 157).
Petitioners' effort to apply the Dresser-Rand holding to this case does not wash, however. For one thing, the issue here is not how to construe a stipulation, but how to read RPTL § 727. And this very argument was made in Dresser-Rand, where petitioner's initial challenge was that the adjustment it sought was required by statute - to which the Court responded that "[p]etitioner's reliance on RPTL 727 is misplaced," since none of the statutory exceptions applied to this circumstance (39 A.D.3d at 1156). Indeed, the Court declined to consider whether the equalization rate should be accounted for in the following two years, as to which the record was silent - and thereby implicitly rejected the proposition advanced by Crossgates here, that these adjustments were required by statute (see id. at 1157).
Petitioner's argument in this regard has another problem: there is no apparent ambiguity in the statutory language that would invite application of the cited rule of construction in the first instance. The phrase pointed to by Crossgates at oral argument which contains this purported lack of clarity - the" assessed valuation so determined shall not be changed" - does not seem to me to be unclear at all. It refers back to the statutory phrase "where an assessment being reviewed pursuant to this article is found to be unlawful, unequal, excessive or misclassified by final court order or judgment." It is hard to see how the "assessed valuation so determined" means anything else but the valuation determined by the Court in such a proceeding. In case there was any doubt, the legislative history makes this plain (see Approval Message No. 112, 1995 [statute "lock[s] in the judicially-reduced assessments... for the following three years"]; Memorandum in Support, Bill A-330B of 1995 [ bill "would prohibit changes in assessed value for three years following assessment reductions ordered in tax certiorari proceedings"]). Indeed, as the Town points out, the argument that the statutory language excluded the equalization process was raised in a letter submitted in opposition to the statute when it was initially proposed, and no steps were taken to change the bill to address the issue (see Respondent's Memorandum of Law ["Resp Mem"] 4 & Respondent's Affirmation in Support, Ex E ["Under the proposed Bill... a settlement reached in 1988 for an assessment of $100,000 based on a property value of $221,288 would prelude the property owner from a further challenge to that property's $100,000 assessment for the next three years, despite the fact that that same assessment indicates an increased market value each year" based on the equalization process]). Since there is no ambiguity, I must read the statute to mean precisely what it says: that the valuation is fixed for the next three years, unless a delineated exception applies.
The letter was submitted to the Governor following passage of the legislation by both houses of the Legislature, in an effort to persuade the Governor to veto the bill, and thus came too late for the Legislature to have made an amendment to address this problem. But the Governor's Approval Memorandum set forth several technical issues which would be addressed by chapter amendment, and did not include the equalization issue among them (see Approval Message No. 112, 1995).
In any case, I note that the equalization process could either advantage or disadvantage a taxpayer (cf. https://www.tax.ny.gov/pit/property/learn/eqrates.htm ["The change in a town's total market value relative to other towns in the same school district (or county) can cause the town's share of the tax levy to increase or decrease"]). In Dresser-Rand, the Court was construing a particular stipulation, and could determine whether a reading of that specific document benefitted the taxpayer. Here, I must construe a statute, and the reading proffered by petitioners would benefit taxpayers in some instances, and harm them in others. I cannot apply petitioners' proffered reading based on this rule of construction just because it helps the taxpayer in this case, or even in most cases, since I cannot determine that the law means one thing where it assists the taxpayer, and another when it does not (see Matter of Wegmans Food Mkts., Inc. v. Tax Appeals Trib. of the State of NY, 33 N.Y.3d 587 [2019] [citing "settled rule of construction to ensure consistent application of taxing statutes"]). In addition, this principle of construction generally applies "only in determining whether property, income, a transaction or event is subject to taxation" - none of which is at issue here (see Matter of Grace v New York State Tax Commission, 37 N.Y.2d 193, 196 [1975]).
Petitioners acknowledged at oral argument that the equalization can increase a taxpayer's valuation, although they stated that this was a rare occurrence.
For all these reasons, I find that the Town's reading of the statute is correct: it fixes the valuation for three years without modification to reflect the equalization rates.
Petitioners maintain, however, that if the Town's reading is correct, then the statute is unconstitutional as applied to this case. They make two arguments in this regard. First, they assert that the imposition of the present assessments without the equalization adjustments violates Article XVI, Section 2 of the State Constitution, which provides as relevant here: "Assessments shall in no case exceed full value." Second, they contend that in excluding Crossgates from the equalization adjustments from which all other Guilderland taxpayers will benefit (unless they have similarly had their valuation fixed under section 727), the statute violates petitioners' right to equal protection.
There is a potential procedural barrier to these arguments. CPLR 1012(b)(1) requires that, when the constitutionality of a statute is challenged in an action where the State is not a party, "the attorney-general, shall be notified and permitted to intervene in support of its constitutionality." Petitioners do not give any indication that this occurred here. Since I reject petitioner's position on the merits as set forth below, I need not consider whether this is a bar to this argument, or whether it does not apply to the extent petitioners are merely arguing that the statute is unconstitutional as applied to this case (Compare 20 West Properties LLC v Banks, 188 A.D.3d 552 [1st Dept 2020] [noting that facial challenge to constitutionality of statute is barred by CPLR 1012, but rejecting as applied challenge on the merits], lv dismissed 37 N.Y.3d 1024 [2021] with People v Karantinidis, 2021 NY Slip Op 51245[U], at *3 n1 [App. Term 2d Dept Dec 17, 2021] [as applied constitutional challenge barred by failure to notify Attorney General], lv denied 39 N.Y.3d 963 [2022]).
In regard to the first argument, it is petitioners' contention that since "full value" has been determined for the next three years pursuant to the Court's ruling and RPTL § 727, denying Crossgates the benefit of equalization would increase the assessment to an amount exceeding full value, in violation of Article XVI (see Pet Mem 8-9). Those court decisions that have considered similar (although somewhat distinct) arguments make clear, however, the flaws in petitioners' position.
The parties discuss two trial court decisions regarding as applied challenges to the constitutionality of section 727 under Article XVI, neither of which provides a basis for the argument made by Crossgates. First, in Susquehanna Dev. v Assessor of the City of Binghamton (185 Misc.2d 267 [Sup.Ct, Tompkins County 2020]), the Court considered a claim that imposition of the three-year fixed valuation period based on the stipulated resolution of a tax certiorari action was a violation of Article XVI, Section 2 as to a subsequent purchaser of the property that had not been party to the original action or stipulation. The Court found upon evidence presented, including two comparable and contemporaneous property sales, that the stipulated valuation "far exceeds the full value limit imposed by the State Constitution on any conceivable valuation formula," and that the new owner had been in no way "complicit" in setting that assessment (id. at 272-273). Accordingly, the Court ruled as follows on the constitutional question:
In particular, the plaintiff had purchased one of the parcels at issue for 1/4 of the valuation provided for in the stipulation (185 Misc.2d at 268-269).
"We cannot assume that the Legislature intended that § 727 would be invoked to suspend the operation of the constitutional limitation upon the real property taxing power. The Legislature must have reasoned that § 727 would operate within the NY Constitution and subject to its mandate that assessments 'shall in no case exceed full value' (NY Const., art. 16, § 2). In that contemplation, there is no inherent conflict between the State Constitution and § 727 of the Real Property Tax Law. Hence, there is no need to conclude that § 727 is unconstitutional on its face. However, where the assessment is clearly in excess of full value, the application of the statutory moratorium to a non-complicit transferee raises a far different and much sharper issue. Here, the statute must yield to the constitutional command" (id. at 273).
The Court recognized that the decision could potentially allow for further valuation challenges within the three-year moratorium period and thereby undermine the "salutary purposes of § 727 to afford both municipalities and taxpayers a measure of stability and temporary repose" (id.). It found however, that such an outcome "would require an unlikely combination of factors, i.e. an assessment in excess of constitutional limits and a transferee with no connection to an assessment reduction within the moratorium period" (id. at 273 [emphasis added]).
The second case, cited by respondent, is Niskus Realty, LLC v Assessor of Town of Greenburgh (1 Misc.3d 764 [Sup Ct, Westchester Cty 2003]). In that case, a new property owner again challenged the three-year moratorium provision in regards to a tax certiorari settlement reached by the prior owner. The Court noted, however, that "the Susquehanna Court held that two factors in particular would be required to defeat § 727, namely, (1) an assessment which exceeds constitutional limits, and (2) a transferee who had absolutely no connection whatsoever to the assessment reduction at issue" (id. at 766). The Court found these elements were not present in the case before it, and therefore dismissed the challenge.
As particularly relevant here, petitioner' argument as to value in Niskus Realty was precisely what Crossgates asserts here: that as a result of a decline in the equalization rate, the market value of the property had increased, and thus the RPTL § 727 moratorium "would cause the subject property's assessment to be in excess of its full market value...." (id. at 766; see also id. at 767 ["petitioner herein argues that if he is 'locked in' by RPTL § 727 for calendar years 2001 and 2002 at the figure agreed to by the prior owner for year 2000, he will be unable to resolve these more recent proceedings at the appropriate equalization rates for these years"]). The Court found that there was no evidence that this was so, as fluctuations in the equalization rate in combination with a valuation fixed by section 727 were insufficient to establish that the assessment exceeded market value - noting the recent sale price of the property for higher than that on which prior assessments were based as evidence (id. at 767).
The Court noted a previous, unpublished decision in Rib Knitting v Town of Ramapo, Sup. Ct. Rockland Co., Index No. 1542/02, which similarly rejected an argument that fixing the valuation without regard for equalization rates meant the property was being assessed for more than full market value (see 1 Misc.3d at 767).
The Court also found that petitioner might not be able to establish that it was a "wholly unconnected transferee," for reasons not relevant here (1 Misc.3d at 767).
Petitioners argue that these trial-level decisions are not binding, and in any case concern a question - the impact of a settlement on a non-party - that is not at issue here (see Pet Mem 10-11). But the Second Department has adopted the Susquehanna Dev. holding, finding it to "represent[] sound reasoning under its unique facts" (ELT Harriman, LLC, 128 A.D.3d at 210). It then construed the ruling as requiring five elements to sustain a claim that section 727 has been unconstitutionally applied in violation of section XVI: "(1) there is a successful challenge to a property's tax assessment, (2) the same property is sold to a new owner, (3) the property's sale occurs within three years of the assessment reduction, (4) the new property owner is in no way complicit in the prior assessment reduction, and (5) the assessment unconstitutionally exceeds the fair market value of the property" (id.). Elements (2) and (4) are not present here, and thus Susquehanna Dev. (and its construction by the Appellate Division) is at odds with petitioners' argument.
And even if I were to agree with petitioners that a section XVI constitutional challenge could be sustained under circumstances where the present owner is the entity that brought the tax certiorari proceeding, it would still fail because the record does not demonstrate that the valuation set by section 727 will exceed full value if exempted from the equalization process, which is the crux of Crossgates' argument. As the above caselaw makes clear, petitioners' constitutional argument requires some actual proof that the assessment is for greater than full value, such as the showing in Susquehanna Dev. of a subsequent resale of the property at one-fourth of the assessed price (see 185 Misc.2d at 268-269; ELT Harriman, LLC, 128 A.D.3d at 209-210). In contrast, the ELT Harriman, LLC court rejected the constitutional challenge in part because "the record fail[ed] to establish that the reduced... assessment of the property exceeds the property's fair market value so as to render the assessment unconstitutional," notwithstanding its claims about the impact of the equalization rates (id. at 211).
Here, petitioners simply presume that the property's market value in years subsequent to 2021 will be at least that set for July 2020. At argument, petitioners also cited the evidence at trial of downward trends in valuation for retail malls to support the claim that the 2020 valuation would (at least) constitute full value for subsequent years as well, and thus excluding the equalization would push it beyond the constitutional limit. But there is no reason to assume that this is the case. The three-year fixed valuation is a creature of statute intended (as discussed above) to limit litigation; it does not reflect a finding that such fixed value necessarily reflects the actual value (see Matter of Mallinckrodt Medical v. Assessor of the Town of Argyle, 292 A.D.2d 721, 723 [3d Dept 2002] [rejecting claim that "the value [of the property] has clearly diminished and therefore the current stipulated valuation [set by section 727] violates NY Constitution, article XVI, § 2," since alleged drop in value not proven by one of the accepted means of valuation]).
Petitioner's argument is that, unlike in Matter of Mallinckrodt Medical, it has established the value of Crossgates at trial, and has now shown it will be assessed at higher than market value if such will not be adjusted by the equalization process. The presumption underlying this argument is that I may assume that the value of the property will not go up during the three years of the moratorium, but there is no reason why that should be assumed, and therefore no constitutional violation can be established on that basis. Indeed, "[p]roof of unconstitutionality beyond a reasonable doubt must be submitted to rebut the presumption of constitutionality which attaches to legislative enactments" (292 A.D.2d at 722). No such showing has been made here.
That is particularly true in this case, where the 2020 market value which I found in the December 13 D&O reflected in significant measure the impact of COVID-19 at the time for which the assessment had to be made. Indeed, my opinion repeatedly recognized that the uncertainty created by the pandemic in July 2020 directly impacted the capitalization rate and thus the valuation (see D&O at 14 [petitioners' expert adjusted the capitalization rate, inter alia, for "the uncertainty brought about by COVID "]; id. at 37 ["the trial testimony regarding the highly negative impact of the COVID pandemic on regional malls generally, and Crossgates in particular, justify a drop in the grade for 2020"]; see also Petition ¶ 12 ["Additionally, the Town's Assessor was advised that the fair market value of the Property had also been negatively affected by the devastating impact of the COVID-19 pandemic catastrophe on the Property"]). And while Crossgates' expert opined that COVID accelerated trends that were already in motion, the record - and my findings - made clear that the pandemic had a particularly adverse impact on valuation for 2020, when the mall was shut down and the future highly uncertain. Indeed, Crossgates' expert stated explicitly that the uncertainty created by COVID impacted his estimate of capitalization rates for July 2020, and thus his valuation:
"I added one thing here that, I think, is relevant is the uncertainty concerning Covid 19, looking forward, you know, as of July 1, 2020, there was still a lot of uncertainty, even when the mall was going to open again, or almost going to open again, so, I think, that's a factor that qualitatively, you know, is a reason why caprates would be higher" (Trial Transcript 421).
I explicitly adopted this principle into my own analysis (see id. at 39 [emphasis added] ["[s]ince I find Gardner's estimate of a 1% increase in the applicable capitalization rate for 2020 to be persuasive, in light of the significantly greater risks facing malls given the valuation date falls during the COVID closure, a 9.5% rate should be used for that year."]).
At oral argument, petitioners noted correctly that their appraiser "stabilized" (i.e. adjusted) the sales figures he used on the assumption of a post-COVID recovery, and did not rely on the exceptionally low sales numbers that existed during the pandemic closure (see e.g. Trial Transcript 284-285). He also made clear, however, that his capitalization rate numbers - which are, after all, impacted by investors' perception of risk - were affected by COVID (id. at 269 ["all industry reports were suggesting higher caprates related to higher risks associated with the operation of malls related to a number of different things; including Covid"]).
One implication that can be drawn from the above is that petitioners potentially received a significant benefit from section 727 in this case, in that the statute requires that the lower valuation they received as a result of the pandemic be extended out into future years where that factor was no longer present. The Legislature made a careful calculus that freezing the valuation in this way, with certain narrow exceptions, was needed in order to avoid excessive litigation and create greater certainty in the assessment process, regardless of whether valuations may in fact rise or fall in subsequent years. But that does not mean that the fixed valuation is therefore equal to the actual market value - even when the record provides an indication to the contrary.
In sum, I specifically took into account the risks faced by investors in the midst of the COVID pandemic in my valuation analysis, and the lower valuation that resulted from this factor was then locked in over the following three years by section 727. For Crossgates to simply ignore this aspect of my findings, and assert that the fixed valuation in future years necessarily reflects the Mall's market value for those periods as well is disingenuous. Since its argument is premised on this assertion, it must fall with it.
For the same reason, I find unavailing petitioners' claim that they cannot be made to "surrender the Constitutional right to be free of an assessment in excess of full value during the period covered by RPTL § 727(1) in order to exercise the right to be free of an assessment in excess of full value during the years being litigated through trial" (Pet Mem 11). There is no evidence that they have surrendered any such right.
Petitioners raise one more constitutional challenge to the fixing of its tax rates without regard to the equalization process: that it would violate the Equal Protection Clause. The argument is that such a construction of section 727 would "violate Petitioners' right to have their property assessed at a uniform percentage of its fair market value, the same as every other taxpayer within the Town of Guilderland" (Pet Mem 12).
An equal protection challenge to a taxing statute will succeed only if the statute creates distinctions between classes which are" 'palpably arbitrary' or amount[] to 'invidious discrimination'" (see Nash v Assessor of Town of Southampton, 168 A.D.2d 102, 105 [2d Dept 1991], citing Leinhausen v Lake Shore Auto Parts, 410 U.S. 356, 360 [1973]). As "absolute uniformity is an unattainable ideal," such a challenge to valuation on this basis must demonstrate that it is "arbitrary, capricious, fraudulent, or intentionally discriminatory" (id.). A tax assessment scheme violates the Equal Protection Clause, moreover, if it "permits similarly situated properties to be taxed unequally and there is no rational basis for the difference" (Killeen v New York State Off. Of Real Prop. Servs., 253 A.D.2d 792 [2d Dept 1998] [finding unconstitutional a law "effectively precluding utilization of the special segment equalization rate" by residents of certain municipalities]; see also Wilson v Dziedzic, 13 Misc.3d 242, 245 [Sup Ct, Bx County 2006] [equal protection violation shown when less favorable valuation method used only for newly improved properties, while more favorable method used for those not recently improved]).
Crossgates has not shown that the application of section 727 here - and the exclusion of equalization rates from the fixed valuations created by that statute - violates these standards. In brief, this is not a case where those subject to this provision are "similarly situated" to other taxed entities. Rather, the statute treats those who have successfully brought a tax certiorari proceeding differently from those who have not - that is the whole point of the law. Those who have prevailed on such a challenge have the valuation fixed for three years. They do not get a new annual valuation during the moratorium period. They do not get the benefit (or loss) that may result from equalization. They cannot bring a legal challenge during that time. On the other hand the municipality is bound by the court's finding (or any stipulation), regardless of whether there has been an event that increases (or lowers) the valuation, except for those exceptions set forth in the statute.
That is the legislative compromise reflected by RPTL § 727, under which both taxpayer and assessing authority are severely limited in their ability to adjust the valuation for a period of three years, with an overall benefit to the parties and public of reducing litigation and uncertainty, albeit with potential detriments that could redound to both the municipality (if the valuation increases during that time) or the taxpayer (if it decreases). In short, section 727 "has a rational basis, seeks to address and remedy a circumstance detrimental to the public welfare and seeks to achieve a balance between the competing interests in the least restrictive manner" (see Matter of Mallinckrodt Medical, 292 A.D.2d at 723-724). That careful balancing is in no way arbitrary, capricious or discriminatory on its face (see id. at 723 [Section 727 "is neither so arbitrary nor capricious as to violate substantive due process principles since it balances the relinquishment of the individual right to challenge the tax assessment against the forfeiture of the tax assessing unit's ability to increase the assessment during this period, regardless of any increase in the value of the real estate"]).
In addition, as is the case with petitioners' other constitutional challenge, no notice has been provided to the Attorney General, which may provide an additional basis for denial (see supra n 7).
Now, there may be particular circumstances in which this legislative compromise unfairly penalizes a company for bringing a challenge to its tax assessment. But this is not such a case. As discussed supra, my ruling on Crossgates' petition was on its face impacted significantly by the timing of the 2020 valuation date, coming as it did in the midst of a global pandemic that shut the mall. The result was a reduction in value of nearly one third over the course of a year, a calculation consistent with the appraisal experts of both petitioners (over 31% reduction in value between 2019 and 2020) and respondent (over 34% reduction) (see Dec 13 D&O at 14-15 and 19-20). That result will now be locked in for three years. Petitioners' equal protection argument, which looks only at its exclusion from equalization in isolation from this broader context, thus fails to demonstrate that they were treated in a discriminatory manner by the legislative balance underlying section 727.
By way of example, one can imagine a scenario in which a petitioner wins a modest downward adjustment of valuation pursuant to an Article 7 proceeding that is insufficient to offset the negative aspects of section 727 (such as the loss of benefits that may result from equalization), and thus a successful tax certiorari petition could result in an overall increase in petitioner's taxes. Such a scenario could raise constitutional concerns, but as explained above, that is not remotely what happened here, where the petitioner clearly has achieved a reduction in the Town's valuation through this litigation, notwithstanding my decision on this particular issue.
Finally, petitioners ask that in the event the Court rules against its application, that I issue an order "allowing them the opportunity to try the remaining (and still-pending proceedings challenging the Town's assessments for the 2022-23 and 2023-24 tax years" (Pet Mem 18). As made clear at oral argument, the request for such relief is premised on petitioner's reading of section 727 as not applying to cases already commenced, on the ground that the statute states that no Article 7 petition "shall be filed" while during the three-year period where valuation is fixed, without addressing pending petitions (see RPTL § 727[3]).
These other, pending proceedings, are not before me, and I have no jurisdiction to opine on what impact this Decision & Order - much less any statute - will have on those cases. I therefore decline petitioners' invitation to rule on such matters, except to make clear that nothing in this Decision & Order should be read as intimating in any way my position on this issue. It is a question for those other courts in those proceedings, not for me, to answer.
In light of the foregoing, it is hereby:
ORDERED that Respondent's motion is GRANTED to the extent that the judgment shall not reflect petitioner's demands that the assessment rolls for 2022, 2023 and 2025 shall not be calculated by applying the Town of Guilderland's equalization rate in each of those tax years to the full market value determined by the Court for the 2021 tax year, and petitioners' cross-motion to enter the form of Judgment it has proposed applying such equalization rates is DENIED; and it is further
ORDERED that the parties shall confer so as to agree on a form of judgment consistent with this Decision & Order, and shall either submit an agreed upon form of judgment to the Court within seven days of the filing of this Decision & Order, without respondent thereby waiving for purposes of appeal any arguments it has made in its cross-motion, and it is further
ORDERED that if the parties cannot reach agreement on the form of a judgment consistent with this Decision & Order, they shall submit any remaining differences in regard to the language of the Judgment and letters setting forth the reason for such to the Court within seven days of the filing of this Decision & Order.
This constitutes the Decision & Order of the Court. This Decision & Order is being electronically filed with the Clerk's Office, with copies e-mailed to counsel for the parties. The signing and e-filing of this Decision and Order shall not constitute Notice of Entry, and counsel is not relieved from the applicable provisions of the CPLR respecting to filing and service of Notice of Entry.
Materials Considered
1. Respondent's Notice of Motion dated January 9, 2024, with the Affirmation of William F. Ryan, Jr., Esq, dated January 9, 2024, appended exhibits, Memorandum of Law and proposed Order and Judgment.
2. Petitioners' Notice of Cross-Motion dated January 26, 2024 with the Affirmation of Craig A. Leslie, Esq, dated January 26, 2024, appended exhibits, Memorandum of Law and proposed Order and Judgment.
3. Affidavit of William F. Ryan, Jr., Esq. dated February 1, 2024, with appended Memorandum of Law.
4. Oral Argument conducted on February 21, 2024.