Opinion
No. 154434/2024 Motion Seq. No. 001
11-18-2024
1567 MEDIA, LLC, Petitioner, v. NEW YORK CITY DEPARTMENT OF FINANCE, Respondent.
Unpublished Opinion
MOTION DATE 05/13/2024
DECISION + ORDER ON MOTION
LYNN R. KOTLER, J.S.C.
The following e-filed documents, listed by NYSCEF document number (Motion 001) 2, 17, 18, 19, 20, 21, 22, 23, 24, 31, 32, 33, 34, 35, 36, 37, 38 were read on this motion to/for ARTICLE 78 (BODY OR OFFICER)_.
Upon the foregoing documents, this motion is decided as follows. In this special proceeding brought pursuant to CPLR Article 78, 1567 Media, LLC ("petitioner") alleges that the New York City Department of Finance ("DOF") is improperly using a valuation methodology for billboards which violates lawful procedure. Petitioner seeks an order from the court enjoining DOF from using this methodology and requiring valuations to allocate revenue between the underlying property and the business operation. DOF cross-moves to dismiss, contending that the proceeding was improperly brought under Article 78 and that petitioner has failed to state a claim. For the reasons that follow, the cross-motion to dismiss is granted. Facts
The facts alleged in the petition are as follows. Petitioner owns two billboards located at 1567 Broadway, New York, New York 10036 in Times Square (the "Properties"). The Properties are designated as tax class 4 properties and the DOF uses income and expense data rather than sales to determine market value of such properties. Petitioner points to a DOF PowerPoint Presentation entitled RPIE Guide - Real Property Income &Expense (RPIE) Statements And Property Valuation (the "Presentation") which seeks to explain DOF's methodology for determining market value of tax class 2 and 4 properties. Respondent points out that the Presentation expressly states that "[m]any class 4 commercial properties, in particular larger properties, have the same assessment process as larger rental buildings" and to the extent the Presentation sets forth the process for calculating market value of class 4 properties, this only applies to office buildings, factories, stores, hotels, and lofts, not billboards.
In 2023, petitioner entered into a settlement agreement with the Tax Commission of the City of New York, and the Commissioner of Finance of the City of New York regarding its tax liability on the Properties for tax years 2015/2016 through the 2021/2022 tax year resulting in a cumulative refund of $4,719,529.63. The 2022/2023 and 2023/2024 assessments by the DOF are currently the subject of pending tax certiorari proceedings while the 2024/2025 assessment has been appealed to the New York City Tax Commission. Petitioner believes that an issue in the methodology utilized in the market value assessment is leading to overvaluations.
Petitioner has also submitted to the court a Supplemental Appraisal Report (the "Report") for the New York City Law Department prepared by nonparty Metropolitan Valuation Services, Inc. ("MVS") regarding the Properties' market value in connection with the tax certiorari proceedings. The Report asserts that a percentage of revenue generated by the billboard operator gets paid as a lease payment to the property owner or landlord. It states that billboards typically pay 50-75% of their net advertising revenue to the owner of the real property, with a range of 65-75% for billboards in Times Square. Petitioner alleges that DOF's methodology is flawed because they allocate 100% of the net advertising revenue to the business rather than accounting for the percentage of the advertising revenue that is paid to the owner of the real property. Petitioner alleges that when calculating the NOI, DOF should allocate the net advertising revenue between the business and the property, as failing to do so creates an artificially inflated market value.
Petitioner filed the instant petition on March 13, 2024 under Article 78, seeking to enjoin the DOF from using the current valuation methodology. DOF cross-moved to dismiss on July 26, 2024, arguing that it was improper to bring this claim under Article 78 and that petitioner failed to state a claim.
Discussion
The court must first consider the parties' arguments as to whether CPLR Article 78 review is available in this matter. DOF specifically argues that this petition was improperly brought pursuant to Article 78 to circumvent the Real Property Tax Law Article 7 process and cross-moves to dismiss the petition for lack of subject matter jurisdiction pursuant to CPLR § 3211(a)(2). Meanwhile, petitioner argues that its complaint properly seeks CPLR Article 78 review of respondent's methodology for valuing all billboards. Specifically, petitioner maintains that it seeks "a determination that the assessment methodology employed by Respondent with respect to the Property and other similar properties is improper, an abuse of discretion, and inconsistent with established law" and is not simply challenging the individual assessments.
Pursuant to RPTL § 706, Article 7 proceedings may be brought when "the assessment to be reviewed is excessive, unequal or unlawful, or that real property is misclassified." When a claim "is in essence a complaint of overvaluation" then Article 7, rather than Article 78, is the exclusive proceeding available to petitioner (Matter of G.A.D. Holding Co. v City of N.Y.Dept, of Fin., Real Prop. Assessment Bur., 192 A.D.2d 441,442 [1st Dept 1993]; see also Matter of Better World Real Estate Group v New York City Dept, of Fin., 122 A.D.3d 27, 33 [2d Dept 2014] ["[g]enerally, the proper method for challenging an allegedly excessive or unlawful real property tax assessment is by the commencement of a tax certiorari proceeding pursuant to RPTL article 7"]). However, where "the challenge concerns not the overvaluation or undervaluation of specific properties, but rather the alleged illegal use of a method involving several properties, a proceeding pursuant to CPLR [A]rticle 78 is appropriate" (Matter of 22 Park Place Coop, v Board of Assessors of County of Nassau, 102 A.D.2d 893, 893 [2d Dept 1984]).
DOF cites 78 S. First St. Hous. Dev. Fund Corp, v Crotty (75 N.Y.2d 982 [1990]) which is illustrative. In that case, the Court of Appeals reversed the First Department and granted a motion to dismiss a challenge to certain tax assessments, finding that the plaintiffs therein were required to bring an Article 7 proceeding instead. Further, the Court adopted Justice Milonas' reasoning set forth in his dissent in the First Department's underlying decision (150 A.D.2d 218, 220-221 [1989]). As Justice Milonas explained, "the essence of plaintiffs' complaint is that they desire to procure judicial correction of purportedly excessive and illegal tax assessments, and an [A]rticle 7 proceeding is the exclusive procedure by which such relief may be obtained" [1st Dept 1989, Milonas, J., dissenting] revd 75 N.Y.2d 982 [1990]). Justice Milonas further stated that an Article 78 proceeding is only appropriate where the jurisdiction of the taxing authority is questioned or when asserting that the authority used an "illegal or improper method to arrive at the amounts of the assessments" (id. at 221). When the challenge is due to the assessor ignoring or not giving deference to "some arguably significant factor" then it is not the methodology of the taxing authority being challenged but rather "a common challenge to the assessments of their properties in the garb of a broad dispute over methodology" (id. at 222)
Against this backdrop, this court finds that petitioner has disguised this dispute over excessive valuations as a complaint about of the DOF's methodology. Petitioner's issue with the valuation stems from the DOF's alleged practice of attributing 100% of the value of the net advertising revenue to the business rather than acknowledging that a portion of revenue is paid to the nonparty property owner. Petitioner claims that by attributing billboard revenue entirely to the business, DOF is inflating the value of the business used in the calculations.
Although DOF correctly points out that there is no evidence that they are utilizing the approach suggested by the petitioner: the Presentation does not contain any information regarding their methodology for valuing billboards, but rather gives an overview of class 4 properties in general. More importantly, the Presentation is not in admissible form.
However, assuming arguendo that petitioner has established the specific methodology utilized by DOF, the court agrees that the petition amounts to a mere complaint about the assessments levied on the Properties. There is no statutorily prescribed formula for determining the market value of billboards and DOF has discretion in the first instance to determine market value (see e.g. 78 S. First St. at 221-222 ["the Legislature has not established a specific method for ascertaining market value, and, in the absence of any legally mandated criteria, it is within the expertise and discretion of the Commissioner of Finance to ascertain fair market value"], citing Matter of Merrick Holding Corp, v Board of Assessors of County of Nassau, 45 N.Y.2d 538, 542 [1978]).
Further, petitioner does not allege sufficient facts to support a claim that DOF's valuations are arbitrary or irrational. Rather, petitioner essentially claims that there is a better way to value billboards than DOF's current method. "Mere allegations, unsupported by evidentiary matter, that the attack is on the methods employed rather than individual evaluations, are not enough to relieve plaintiffs of the obligation to pursue their relief via the provisions of article 7" (Samuels v Clarkson, 91 A.D.2d 836, 837 [4th Dept 1982]). Moreover, petitioner has not presented any evidence to support their allegations that DOF overvalues billboards in general due to the methodology it employs. The petition admits that this claim is based upon "information and belief' that DOF uses this allegedly improper methodology for all billboards in New York. Therefore, the petition must be dismissed for being improperly brought as an Article 78 claim. Petitioner can still obtain relief for property overvaluations via an Article 7 proceeding and is already in the process of doing so.
In light of this result, the court declines to consider the parties' remaining arguments.
Conclusion
Accordingly, it is hereby
ADJUDGED that the cross motion to dismiss is granted, the petition is denied and this proceeding is dismissed.
Any requested relief not expressly addressed herein has nonetheless been considered and is hereby denied and this constitutes the decision and order of the court.