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Volume 11 - Opinions of Counsel SBRPS No. 104

Opinions of Counsel index

Residential - commercial urban exemption (authority to grant) (repeal of exemption) - Real Property Tax Law, § 485-a:

A municipality may repeal its local law authorizing the residential-commercial urban exemption, and may effectuate such repeal by authorizing the exemption for a fixed number of years.

The exemption is intended only to afford tax exemption to properties that are converted after a municipality or county approves the exemption, so if property is converted during a period of time when the exemption is not authorized, it will not qualify even if the municipality or county subsequently enacts or re-enacts the exemption.

We have received an inquiry concerning the residential-commercial urban exemption program (Real Property Tax Law, § 485 a). Where it is granted, that law exempts the assessed value of nonresidential real property attributable to its conversion to mixed residential and commercial use. For such property, 100 percent of the base amount attributable to the construction work is exempted for eight years, the exemption declining by 20 percent per year over the next four years until it is eliminated.

By a local law adopted in 2003, a city adopted the exemption, and the county in which the city is located did so in 2004, {1} but both local laws purported to approve the exemption program for a period of three years. In 2006, the city, but not the county, adopted another local law approving the exemption for an additional three years.

We have been asked several questions about this situation. The first is whether the county’s section 485-a exemption “sunset” on or before the city’s 2007 taxable status date. The second is whether the county exemption applies to two properties that were granted exemption on the city’s 2006 assessment roll. The third is whether the county exemption applies to four properties that first became eligible for exemption on the 2007 city roll. Finally, if the answer to the third question is no, we’re asked whether the county legislature, by another local law, could approve the section 485-a exemption for those four properties on the 2008 roll.

RPTL, section 485-a(2), states that:

Any municipality [defined as any city (except New York City), town or village (RPTL, § 485-a(1)(a)] may, by local law, provide for the exemption of real property from taxation as provided in this section. Upon the adoption of such a local law, the county in which such municipality is located, may, by local law, . . . exempt such property from its taxation in the same manner and to the same extent as such municipality has done.

In other words, before a county may adopt section 485-a for its purposes, at least one city, town or village therein must first adopt it for its purposes.

RPTL, section 485-a, does not expressly delegate to a municipality or county which has approved the exemption the power to repeal it. By the same token, however, section 485-a also does not prohibit such repeal.

The judiciary in two previous cases has upheld a local government’s authority to discontinue other local option tax exemptions finding such repeal not inconsistent with provisions of the State Constitution or State laws (Wright v. Town Board of the Town of Ticonderoga, 169 A.D.2d 190, 572 N.Y.S.2d 397 (3d Dept., 1991); Boynton Suites, L.L.C. v. Board of Assessment Review of the City of Plattsburgh, 274 A.D.2d 926, 711 N.Y.S.2d 266 (3d Dept., 2000)). {2}  However, we have been unable to find any judicial decision addressing whether a local government may use “sunset” provisions in a local law to approve a local option tax exemption for only a limited period of time. {3} Nevertheless, since it appears that both the city and the county had the legal right to rescind their section 485-a exemptions, we think it likely that a court would find that the limited duration exemption each enacted was a valid, if somewhat unorthodox, means of “experimenting” with the program.

Clearly, a party with judicial standing could challenge the city and the county local laws, but that party would bear a substantial burden of proof. “In order to defeat [the] presumption of validity, a party must show that the local law in question is inconsistent with either provisions of the State Constitution or with a general law enacted by the State Legislature” (Holt v. County of Tioga, 56 N.Y.2d 414, 417, 437 N.E.2d 1140, 1141, 452 N.Y.S.2d 383, 384 (1982)). Accordingly, we presume, for the purposes of this opinion, that the “sunset” provisions of the county’s local law were valid. Therefore, it appears that those provisions had the effect of terminating the county’s section 485-a exemption program on or before the city’s 2007 taxable status date because the county legislature did not extend the county’s exemption.

The county’s 2004 local law provides that “[a]ny property that is granted an exemption on one of those rolls [2004, 2005 or 2006] shall remain eligible for the additional years of exemption on that property, provided the property continues to meet the requirements of § 485-a.” Accordingly, the county’s local law, by its own provisions, is not intended to deny the county exemption on the 2007 roll to the two properties that received the exemption on the 2006 roll. Consequently, we need not address whether a municipality could terminate existing section 485-a exemptions before their terms have run.

As previously noted, there are four properties that apparently are qualified for the city’s section 485-a exemption (but, due to its expiration, not the county’s exemption) on the 2007 roll. The question again is whether, assuming that the county reinstates its exemption, those four parcels may receive such exemption on future rolls.

RPTL, section 485-a(3), states that this local option exemption applies to an eligible “nonresidential real property, upon conversion to mixed-use property” (emphasis added). In our opinion, § 485-a(3), is intended only to afford tax exemption to properties that are so converted after a municipality or county approves the exemption. Therefore, in our opinion, the county legislature may not “cancel” its repeal of the section 485-a exemption to “retroactively approve” the exemption for the four properties that presumably have already been converted. Should the county again adopt the exemption, it will apply only to conversions which occur thereafter.

April 5, 2007

{1}  As originally enacted (L.2002, c.328), section 485-a applied only to cities with a population of over 50,000 but less than 1,000,000. The Legislature subsequently amended the law to permit any city, town, or village (except New York City) to adopt the exemption (L.2004, c.632, which became effective 180 days after it was approved by the Governor on October 26, 2004).

{2}  The court in Wright stated that a town had the power to repeal a local law approving the pro rata adjustment for the veterans exemption (former RPTL, § 458(5)(a)) since “[a] taxing authority is not precluded from changing its view respecting the continued allowance of a tax exemption because the passage of time creates no vested right in a tax exemption” (supra, 169 A.D.2d at 192, 572 N.Y.S.2d at 399). The court in Boynton Suites upheld a local law rescinding a city’s earlier approval of the Empire Zone exemption (RPTL, § 485-e) by stating that “[o]nce they have exercised that option, the statute does not preclude them from withdrawing the exemption by appropriate action” (supra, 274 A.D.2d at 927, 711 N.Y.S.2d at 268).

Such a statutory construction would further appear to be appropriate as consistent with legislative intent for the residential-commercial urban exemption program. A memorandum to the Governor from the State Division of the Budget regarding the bill that originally enacted the program, states that “the bill affords an option to certain cities to experiment with a tax incentive program in conjunction with other development incentives (e.g., the Empire Zones) . . .” (Governor’s Bill Jacket for L.2002, c.328; emphasis added).

{3}  Courts in zoning cases have decided that a conditional zoning approval granted by a municipality may “sunset” if the zoning approval recipient does not take a specified action within a certain period of time (Beyer v. Burns, 150 Misc.2d 10, 567 N.Y.S.2d 599 (Sup.Ct., Albany Co., 1991); O’Brien v. Town of Fenton, 236 A.D.2d 693, 653 N.Y.S.2d 204 (3d Dept., 1997)). The Beyer case involved “the ‘sunset’ provision of [a] local law which has the property revert to its original zoning classification if a building permit is not applied for and actual construction commenced within two years of the rezoning of the parcel” (supra, 150 Misc.2d at 12, 567 N.Y.S.2d at 600). The O’Brien case concerned “circumstances whereby a mining district loses its designation as such, [and thereafter the] property had reverted to its original classification as agricultural-residential” (supra, 236 A.D.2d at 693, 653 N.Y.S.2d at 205).