Opinion
5274-02.
Decided August 16, 2004.
SHANLEY, SWEENEY, REILLY ALLEN, P.C., (Thomas A. Shepardson, Esq.) The Castle at Ten Thurlow Terrace, Albany, New York, Attorneys for Petitioner.
GARY F. STIGLMEIER, CORPORATION COUNSEL, (Joseph G. McCann, Esq., Assistant Corporation Counsel), Albany, New York, Attorneys for Respondents.
Petitioner, Washington Commons Associates ("WCA"), commenced this proceeding pursuant to Article 7 of the Real Property Tax Law ("RPTL) which concerns certain property located within the shopping center known as Crossgates Commons at 165 Washington Avenue Extension and identified as Tax Map No. 52.7-1-2.3 (hereinafter referred to as the "subject property"). In its petition, WCA alleged two separate causes of action. The first cause of action challenges the increased assessment of the subject property for the 2002 tax year pursuant to RPTL § 706. The second cause of action seeks to enforce the Order of this Court dated August 11, 2000, rendered in the Matter of Washington Commons Associates v. Board of Assessors et al., Index No. 4662-00, which pursuant to a Stipulation of Settlement of the parties, reduced the assessment of the subject property for the 2000 tax year from $14,000,000 to $6,000,000, and required that the reduced assessment remain in effect until the 2003 tax year in accordance with RPTL § 727(1). WCA now moves pursuant to CPLR 3212 for summary judgment on its second cause of action and seeks an order:
1) Determining that respondents violated RPTL § 727(1) by increasing the assessments of the subject property for the 2001 and 2002 tax years;
2) Directing respondents to correct the final tax assessment rolls for the 2001 and 2002 tax years by reducing the assessments on the subject property to $6,000,000;
3) Directing a refund of property and school taxes in the amount overpaid by WCA for the 2001 and 2002 tax years; and
4) Awarding WCA attorney's fees, costs and disbursements.
Respondents oppose the motion on grounds that the increased assessments were appropriate and that WCA is not entitled to any refunds. More particularly, respondents first point out that the Court's August 11, 2000 Order stated in relevant part that:
". . . pursuant to Real Property Tax Law § 727, the ordered reduced assessed values of the aforementioned parcels shall remain in effect, and not changed or re-assessed, except as permitted pursuant to Real Property Law § 727(2), until the tax year 2003."
Respondents point next to RPTL § 727, entitled "Prohibition against change in assessment following litigation" which states in relevant part as follows:
"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:
* * * *
(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);
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.
Respondents recognize that the provisions of RPTL § 727(1) were activated due to the August 11, 2000 Order and that they were prohibited from changing the assessment of the subject property for the next three succeeding assessment rolls. However, respondents contend that this prohibition is removed if one of the conditions set forth in RPTL § 727(2) occurs to permit a reassessment. Respondents contend that that is exactly what happened here. In particular, respondents contend that for tax years 2001 and 2002, the condition set forth in RPTL § 727(2)(g) did in fact occur to justify the change in the assessments of the subject property for both years.
More specifically, respondents contend that at the time that the August 11, 2000 Order was rendered, a 137,000 square foot ("SF") building located on the subject property had only one tenant, Circuit City, which utilized 33,000 SF of space for an occupancy rate of 24%. It is worthy to note that respondents calculated the occupancy rate of the subject building for 2000 by dividing 33,000 SF by 137,000 SF and multiplying by 100%. For the 2001 tax year, respondents contend a second tenant, Mars Music, moved into the building and utilized 18, 017 more square feet of space. According to a mathematical methodology utilized by respondents' expert appraiser and tax consultant, there was a 54% increase in the occupancy rate in 2001. Respondents' expert calculated the "change in the occupancy rate" as stated in RPTL § 727(2)(g), by determining the percent of change in the square footage utilized in the subject building based on the change in the quantity of square footage utilized from 2000 to 2001, in relation to the original quantity of square footage utilized in 2000, without accounting for the size of the building. Since according to their methodology the occupancy rate increased by more than 25% in 2001, respondents contend that they were authorized to increase the subject property's assessment in 2001, despite the August 11, 2000 Order.
WCA submits a copy of a survey prepared by C.T. Male Associates to demonstrate that the subject building is actually plus or minus 140,000 SF, but has no objection to respondents' use of 137,000 SF as the building figure for the purposes of this motion only since the difference of 3,000 SF will not be outcome determinative in calculating the change in the occupancy rate in the building pursuant to RPTL § 727(2)(g).
The mathematical equations of the methodology used by respondents' expert are as follows: 33,000 SF + 18,017 SF = 51,017 SF; 51,017 SF — 33,000 SF = 18, 017 SF; 18,017 SF divided by 33,000 SF and multiplied by 100% = 54% change in occupancy rate.
Respondents contend further that because the August 11, 2000 Order was essentially nullified with respect to the subject property for the 2001 tax year due to the alleged lawful activation of RPTL § 727(2)(g), WCA was precluded from relying on the Order for the 2002 tax year. Respondents contend that if WCA had wanted to challenge the 2001 increased assessment, WCA had to timely commence an RPTL Article 7 proceeding for that tax year which it failed to do. Respondents also contend that once the assessment for the subject property was increased for the 2002 tax year, WCA was again required to commence an RPTL Article 7 proceeding for 2002, which WCA has in fact done, but the proceeding has yet to be determined.
However, if the Court were to somehow find that the August 11, 2000 Order was still in effect for 2002, respondents contend that RPTL § 727(2)(g), again provided justification for the increased assessment. In particular, a third tenant, Panera Bread, moved into the building in 2002, and utilized 4,927 more square feet of space. In addition, respondents contend that a fourth tenant, PetsMart, received a Certificate of Occupancy in January, 2002, and would occupy 20,000 more square feet of space. Thus, using their expert's methodology, there was a 49% increase in the occupancy rate since 2001. As a result, respondents contend that because they were authorized by RPTL § 727(2)(g) to increase the subject property's assessment in both the 2001 and 2002 tax years, WCA's motion for summary judgment must be denied.
The mathematical equations of the methodology used by respondents' expert are as follows: 51,017 SF + 4,927 SF + 20,000 SF = 75,944 SF; 75,944 SF — 51,017 SF = 24,927 SF; 24,927 SF divided by 51,017 SF and multiplied by 100% = 49% change in occupancy rate.
On reply, WCA takes issue with the mathematical methodology used by respondents' expert and contends that it is not the methodology contemplated by the plain language of RPTL § 727(2)(g). Rather, WCA contends that in order to determine a "change in the occupancy rate" of a building, this simply requires that the occupancy rate for each year must be determined and then the two rates must be compared. WCA contends that if the "change" is 25% or greater, then an assessment may be changed pursuant RPTL § 727(2)(g), despite an order made pursuant to RPTL § 727(1). Because there was no 25% change in the occupancy rate in the subject building in 2001 or 2002, or with both years combined, WCA contends that the there was no authority for respondents' increased assessments of the subject property in 2001 or 2002.
To demonstrate, WCA contends that in 2000, there is no dispute that the occupancy rate of the subject building was 24% based on the tenancy of Circuit City (33, 000 SF/137,000 SF × 100%). For 2001, based on the tenancy of Mars Music, WCA contends the occupancy rate increased to 37% (33,000 SF + 18, 017 SF /137,000 SF × 100% = 37%). WCA contends that now the "change in the occupancy rate" in the subject building from 2000 to 2001, can be determined by simply subtracting 24 % from 37% which equals a change of 13%. WCA contends that a 13% change in the occupancy rate was not sufficient to entitle respondents to take advantage of RPTL § 727(2)(g) in 2001, and to circumvent RPTL § 727(1) and the August 11, 2000 Order.
In regards to 2002, WCA contends that while PetsMart may have received a Certificate of Occupancy in January, 2002, it did not occupy the building pursuant to the terms of its lease until March 20, 2002, after the tax year had ended on March 1, 2002. Thus, WCA contends that there was only one additional tenant in the subject building for the 2002 tax year, Panera Bread. Based on the additional tenancy of Panera Bread only, WCA contends the occupancy rate in 2002, increased to 41 % (33,000 SF + 18, 017 SF + 4,927 SF /137,000 SF × 100% = 41%). WCA contends that this equates to only a 4% change in the occupancy rate since 2001 (41%-37% =4%), and only a 17% total change in the occupancy rate since 2000 (41%-24%=17%). As a result, based on what it considers is the appropriate methodology to calculate the change in the occupancy rate pursuant to RPTL § 727(2)(g), WCA contends that respondents were not authorized to reassess the subject property in either 2001 or 2002, based on the prohibition contained in RPTL § 727(1) and the August 11, 2000 Order. WCA contends, therefore, that it is entitled to the relief it seeks.
Based on the Court's review of this matter, it is clear that the determinative issue here is how the "change in the occupancy rate" under RPTL § 727(2)(g) must be calculated. It is also clear that this issue has never been addressed before. In determining this issue, the Court finds that WCA has demonstrated ample support for the use of its methodology while respondents have not supported the use of their methodology at all. Rather, it appears that respondents have simply contrived a methodology for the sake of expediency.
To support the use of its methodology, WCA points first, as noted above, to the plain language of RPTL § 727(2)(g), which allows a property prohibited from being reassessed pursuant to RPTL § 727(1), to be reassessed if there is "a change in the occupancy rate of twenty-five percent or greater . . .". The Court agrees that the words "a change in the occupancy rate" plainly requires that the occupancy rate for each year must be determined and then the two rates must be compared to determine the "change." See Statutes § 76.
Second, WCA points to the legislative history of RPTL § 727. The Court notes that the legislative history of RPTL § 727 makes it clear that the intent of the statute is to give effect to settlements of RPTL Article 7 proceedings by creating a moratorium on reassessments for at least three successive years in order to achieve the purpose of the statute which is to "prevent taxpayers from perpetually challenging their assessments" and to "spare all parties the time and expense of repeated court intervention." See Rosen v. Assessor of the City of Troy, 179 Misc. 2d 915, aff'd 261 A.D.2d 9 (3rd Dept. 1999).
The Court also notes that the legislative history of RPTL § 727 makes it clear that there are exceptions which limit the application of the main purpose of the statute. The "exceptions embodied in RPTL 727(2) were designed to remove the application of the restriction created by subdivision (1) — and, in turn, the restriction created by subdivision (3) — in certain, specifically enumerated scenarios." Owens Corning v. Board of Assessors of the Town of Bethlehem, 279 A.D.2d 118 (3rd Dept. 2001).
In looking at all of the exceptions enumerated in RPTL § 727(2), WCA contends and the Court agrees that it is clear that they are triggered only upon the occurrence of significant events. WCA therefore contends, and the Court agrees, that for RPTL § 727(2)(g) to apply, there must be a significant change in the occupancy rate of a building, which has been established as a change of 25% or greater. In looking at the methodology used by WCA to calculate the change, the Court finds that the methodology fits the purpose of the exception and the purpose and intent of the whole statute. In fact, WCA's methodology ensures that a significant change in the occupancy rate of a building is necessary to reach the 25% threshold. See Statutes §§ 92-98. In looking at the methodology used by respondents, it is clear that a even a very small increase or decrease in the usage of square footage of a building authorizes a reassessment leading to more litigation and frustrating the intent and purpose of the statute.
RPTL § 727(2) states: 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.
WCA has also demonstrated that respondents' methodology is mathematically impossible if the change in occupancy rate must be calculated for a building that is vacant at the time a Court ordered settlement of an RPTL Article 7 proceeding occurs. In addition, WCA has demonstrated how respondents' methodology fails to take into account the size of a building, allowing for example, for a 10,000 SF building to be treated in the same manner as a 100,000 SF building, thereby producing absurd results which must be rejected. See Statutes § 145.
In short, WCA has demonstrated the logic in utilizing its proposed methodology over the significantly flawed methodology of the respondents. WCA has also demonstrated how its methodology is derived from the plain language of RPTL § 727(2)(g), as well as supports the intent and purpose of RPTL § 727. Respondents, on the other hand, have not supported the use of their methodology. Consequently, the Court accepts WCA's methodology for calculating a "change in the occupancy rate" of a building under RPTL § 727(2)(g), and rejects the methodology proposed by respondents.
This brings the Court to the application of WCA's methodology and two remaining issues. First, it is clear that when the Court applies WCA's methodology to the 2001 tax year as demonstrated by WCA above, respondents were not entitled to reassess the subject property under RPTL § 727(2)(g), because there had only been a change in the occupancy rate of 13%. Thus, the issue arises of whether WCA's failure to timely commence an RPTL Article 7 proceeding for 2001 precludes WCA from obtaining refunds for that tax year. The Court finds it does not. Rather, the Court finds that WCA's failure to timely commence a CPLR Article 78 proceeding within four months after the final completion and filing of the 2001 assessment roll precludes WCA from obtaining refunds for that tax year. See CPLR 217.
The Court recognizes that the Stipulation of Settlement between the parties which changed the assessment of the subject property and was reduced to the August 11, 2000 Order, is fundamentally a contract between the parties. The Court also recognizes that it has been determined that respondents violated RPTL § 727(1) by reassessing the subject property in 2001. However, these facts do not mandate that WCA gets the benefit of the six year statute of limitations set forth in CPLR 213 for breach of contract or the three year statute of limitations set forth in CPLR 214(2) for an action to recover upon a liability, penalty, or forfeiture created or imposed by statute. Rather, it is clear that that questions raised by respondents' actions required the commencement of a CPLR Article 78 proceeding. See CPLR 7803(2) and (3).
In Akey v. Town of Plattsburgh, 300 A.D.2d 871 (3rd Dep't 2002), the Appellate Division, Third Department, was faced with a petition alleging a claim identical to WCA's second cause of action. Although the Court had different issues to determine, it stated in a footnote at the very beginning of the decision that:
"While neither the petition nor Supreme Court identifies the statutory authority for this proceeding, petitioner describes it as a CPLR article 78 proceeding and we agree, for it seeks relief in the nature of mandamus, rather than a review under RPTL article 7." Akey v. Town of Plattsburgh, supra at note 1.
Although WCA contends that the petition in Akey was different than the instant petition because of differences in wording, the Court does not agree. Certain wording maybe different, but the claim is the same. WCA's second cause of action, like the Akey petition, clearly seeks review of the assessor's actions in similar circumstances on grounds that the assessor had no authority to circumvent RPTL § 727(1) and to reassess the subject property, thereby making the assessor's actions unlawful, as well as arbitrary and capricious. The instant petition, like the Akey petition, also seeks an order directing that the assessment rolls at issue be corrected in accordance with parties' Stipulations of Settlement.
The fact that WCA also seeks a refund of tax money actually paid pursuant to the wrongful assessments doesn't change the nature of the claim. In the Court's view, there is no question that the crux of the proceeding is a challenge to an action of a governmental body or officer that is governed by CPLR Article 78, and the primary relief sought is to vacate that action. See generally NYC Health Hospital Corp. v. McBarnette, 84 N.Y.2d 194 (1994); Solnick v. Whalen, 49 N.Y.2d 224 (1980). Furthermore, to permit a later challenge to the assessor's actions to stand runs contrary to the purpose for the short statute of limitations applicable to proceedings seeking the review of actions of a governmental body or officer and the strong policy, vital to the conduct of certain kinds of government affairs, that the operation of government not be trammeled by stale litigation and stale determinations. See Solnick v. Whalen, supra at 232 (1979). Therefore, the Court finds that WCA's failure to timely commence a CPLR Article 78 proceeding in 2001, now precludes WCA from challenging respondent's actions in 2001, and obtaining tax refunds for the 2001 tax year.
The Court, however, reaches a different conclusion in regards to the 2002 tax year. There is no dispute that the instant proceeding was timely commenced both as an RPTL Article 7 proceeding and as a CPLR Article 78 proceeding. See RPTL § 702 and CPLR 217. It is also clear, as WCA demonstrated above, that there was no basis to reassess the subject property in accordance with RPTL § 727(2)(g), if Panera Bread was the only additional tenant that occupied the subject building in 2002, since Panera Bread's tenancy resulted in only a 4% change in the occupancy rate if calculated from 2001, and only a total 17% change in the occupancy rate if calculated from 2000. Thus, the issue arises of whether PetsMart occupied the subject building in 2002, to change the outcome of the calculations. The Court finds that PetsMart did not occupy the subject building in 2002.
WCA has demonstrated that PetsMart's lease did not commence until March 20, 2002, three weeks after the tax year ended on March 1, 2002. In opposition, respondents have failed to demonstrate that PetsMart occupied the subject building prior to March 1, 2002. The Court finds that the Certificate of Occupancy issued by respondents on January 14, 2002, does not equate to actual occupancy of the subject building for the purposes of allowing the assessor to reassess the subject property in accordance with RPTL § 727(2)(g). Therefore, the Court finds that WCA is entitled to tax refunds for the 2002 tax year as a result of being wrongfully reassessed in 2002, in violation of RPTL § 727(1) and this Court's August 11, 2000 Order.
In sum, the Court finds that WCA made a prima facie case entitling it to summary judgment by demonstrating that the 2002 reassessment was prohibited by the August 11, 2000 Order and RPTL § 727(1). See Akey v. Town of Plattsburgh, supra; Malta Town Centre I, LTD., v. Town of Malta Bd. of Assessment Review, 195 Misc. 2d 619, 620, aff'd 2 A.D.3d 957 (3rd Dep't 2003). The burden, therefore, shifted to respondents to show that the reassessment was authorized by an exception provided in RPTL § 727(2). Id. The Court finds, however, that respondents failed to meet their burden.
Accordingly, WCA's motion for summary judgment is granted to the extent that respondents are directed to fix the 2002 assessment of the subject property at $6,000,000, the amount of the assessment stated in the August 11, 2000 Order. The motion with respect to the 2001 tax year is denied as the proceeding is time barred. Respondents are further directed to refund WCA that portion of the 2002 school, library and property taxes that were wrongfully assessed and paid by WCA. WCA's request for attorneys' fees, costs and disbursements is denied. Lastly, in view of the foregoing, WCA's first cause of action is dismissed as moot or otherwise barred by RPTL § 727(3). This memorandum shall constitute both the decision and the order of the Court. All papers, including this decision and order, are being returned to WCA's counsel. The signing of this decision and order shall not constitute entry or filing under CPLR 2220. Counsel is not relieved from the applicable provisions of that section relating to filing, entry and notice of entry.
IT IS SO ORDERED.