New York’s Tax Cap Statute and Recent Tax Certiorari, Eminent Domain and Exemption Cases

The Hon. Thomas A. Dickerson and John Mechman, Esq. have authored an excellent article published in the Westchester Bar Journal titled “New York’s Tax Cap Statute and Recent Tax Certiorari, Eminent Domain, and Exemption Cases. The article provides a synopsis of interesting and relevant cases decided in the 2014 calendar year by New York Supreme Courts and is available by clicking here.

The first topic addressed in the article is New York’s tax cap statute, which was signed into law by Governor Cuomo on June 30, 2011. The statute provides that (1) No local government may increase its property tax levy by more than 2 percent or the rate of inflation (whichever is less); (2) A local government may exceed the tax levy cap only if the governing body enacts, by a two-thirds vote, a local law… overriding the tax cap; and (3) the cap will have limited exceptions.” To quote the article, “there can be little question that the Governor’s tax levy cap program is a game changer in the area of tax certiorari and governmental financing.”

In February 2013, a lawsuit commenced by the New York State Unified Teachers and others sought, inter alia, a declaration that provisions of the Education law 2023-a (a tax cap statute enacted in connection with Gen Municipal Law 3-c) is unconstitutional. The plaintiffs asserted that the statute “violated the Education Article of the New York State Constitution, and the equal protection, due process, and free speech guarantees under the Federal and New York State Constitutions.”

In rejecting Plaintiffs’ claims, the Supreme Court held that “since the constitutional floor is set at a ‘sound basic education’ which can be disparate, plaintiffs’ allegation that the legislation will results in greater disparities does not give rise to a claim under the Education Article.” Under the equal protection argument, the Court declined to apply heightened scrutiny and instead evaluated the claim under rational basis scrutiny, concluding that the statute was rationally related to the legitimate interest of slowing the growth of property taxes. Further elaboration of the case can be found in the article, including the court’s analysis on the plaintiff’s claims to the right to vote, the freedom of expression, and the substantive due process.

The tax certiorari cases highlighted in the article are broken down into three categories: valuation, procedure, and exemption. Some highlights include:

• Matter of Hempstead County Club v. Board of Assessors, 112 AD3d 123 (2d Dept 2013): in a challenge to the assessment of a private, not-for-profit golf course, it was proper to convert all golf course leases that were not gross leases into gross leases, and to deem municipal leases as gross leases, to estimate the rent to revenue ratio of the property.
• Matter of Board of Managers of French Oaks Condominium v Town of Amherst, 23 NY3d 168 (2014): Petitioner failed to rebut presumption of validity attached to tax assessments, since its appraiser failed to support all the “facts, figures and calculations” in his appraisal.
• Matter of Maettreum of Cybele, Magna Mater, Inc v McCoy, 111 AD3d 1090 (3d Dept 2013, aff’d 24 NY3d  1023 (2014): Petitioner, a not-for-profit organization, met its burden of showing that it primarily used its property for religious and charitable purposes, where testimony established, inter alia, regular communal living, the providing of charity and hospitality.

Recent eminent domain cases highlighted by the article are similarly divided into two categories: valuation and procedure. We will highlight one case mentioned that fits into both categories: Matter of State of New York (KKS Properties, LLC), 119 AD3d 1033 (3d Dept 2014). In KKS Properties, the trial court rejected Claimant’s appraisal for several reasons, including the appraiser’s failure to make adjustments to comparable properties or explain his calculations. Further, the Trial Court rejected claimant’s appraisal expert and the Appellate Division on appeal found that the condemnor’s appraisal was of no probative value. Given this situation, the Trial Court and Appellate Division “were without competent proof upon which to base a judgment on valuation” thus the matter was remitted for further proceedings. We blogged about this case back in July 2014.

We certainly recommend you give this article a read, as it is full of informative and timely summaries of relevant New York cases.