| Matter of General Elec. Co. v Assessor of Town of Rotterdam |
| 2008 NY Slip Op 06532 [54 AD3d 469] |
| August 7, 2008 |
| Appellate Division, Third Department |
| In the Matter of General Electric Company, Appellant-Respondent,v Assessor of the Town of Rotterdam et al., Respondents-Appellants, and Schalmont CentralSchool District, Respondent. (And Another Related Proceeding.) |
—[*1] Law Office of Robert L. Beebe, Clifton Park (Robert L. Beebe of counsel), for Assessor ofthe Town of Rotterdam and others, respondents-appellants. Hancock & Estabrook, L.L.P., Syracuse (Janet D. Callahan of counsel), for SchalmontCentral School District, respondent.
Mercure, J. Cross appeals from a judgment of the Supreme Court (Reilly, Jr., J.), enteredApril 27, 2007 in Schenectady County, which partially granted petitioner's applications, in twoproceedings pursuant to RPTL article 7, to reduce the 2003 and 2004 tax assessments on certainparcels of real property owned by petitioner.[*2]
Petitioner commenced these proceedings pursuant toRPTL article 7, seeking to review and reduce assessments to its real property in the Town ofRotterdam, Schenectady County, for tax years 2003 and 2004. The subject property, a roughly325-acre parcel that is improved by a complex of 43 buildings covering approximately 1.9million square feet, has been owned by petitioner for nearly a century. It is adjacent to anadditional parcel in the City of Schenectady, Schenectady County, that contains 19 buildings, andwas used during the tax years at issue for research, development, manufacture and marketing ofelectric turbine generators, steam turbines and gas turbines. The complex consists of spaceallocated to heavy manufacturing, office, research and warehousing. Of note are fourbuildings—Building 273 (the steam turbine/generator plant),[FN1]Building 281 (the spin test facility), Building 262 (the gas turbine test and development facility)and Building 263 (the steam turbine and generator development laboratory)—whichcomprise 75% of the total building area of the complex. In addition to the buildings, the propertyis improved by railroad service, including 17,000 linear feet of rail; roads and parking areas;pedestrian walks; high pressure steam and water lines; vacuum/condensate return pipes; sanitaryand storm sewers; low pressure steam, gas, compressed air, telephone and fiber optic lines; asuperheated steam plant and steam tunnels; an electrical substation; and a wastewater treatmentplant. It is undisputed that petitioner made capital expenditures of approximately $59,000,000 onthe subject property from 1999 through 2003, spending $49,000,000 on Building 273 alone.
The property was assessed in 2003 and 2004 at $5,450,539. Prior to trial, the partiesstipulated to the fair market value of the land and the equalization rates for the years in question.During trial, petitioner submitted a report prepared by appraiser John Coyle that relied upon thesales comparison approach to arrive at a market value for the subject property of $30,850,000. Incontrast, the town respondents proffered a report by Pamela Brodowski that, after setting forth 29sales of large manufacturing and warehouse distribution facilities that sold between 2000 and2005, concluded that the sales comparison approach is not a viable method by which to value thesubject property. Rather, Brodowski relied upon the reproduction cost new less depreciation(hereinafter RCNLD) approach[FN2]in estimating the market value of the property to be[*3]$249,000,000 for 2003 and $251,000,000 for 2004. Supreme Courtconcluded that petitioner submitted substantial evidence to overcome the presumption of validitycarried by the town respondents' property valuation (see Matter of FMC Corp. [PeroxygenChems. Div.] v Unmack, 92 NY2d 179, 187-188 [1998]), but rejected petitioner's appraisalsafter finding that the properties used in its sales comparison approach were not sufficientlysimilar to the subject property. Relying largely on the RCNLD analysis submitted by the townrespondents, with a significant adjustment to the figure used for depreciation, the court calculatedthe total value of the property to be $126,400,000 in 2003 and $129,000,000 in 2004, reducedfrom $128,550,000 and $142,684,000, respectively.[FN3]Petitioner and the town respondents now cross-appeal.
Inasmuch as petitioner successfully overcame the presumption of validity carried by the townrespondents' assessments, it "was required to show, by a preponderance of the evidence, that itsproperty was overvalued" (Matter ofNorton Co. v Assessor of City of Watervliet, 3 AD3d 760, 761 [2004]; see Matter ofFMC Corp. [Peroxygen Chems. Div.] v Unmack, 92 NY2d at 188; Matter of Niagara Mohawk Power Corp. vTown of Moreau Assessor, 46 AD3d 1147, 1148 [2007], lv denied 10 NY3d 708[2008]). In determining whether this burden has been met, "the court 'must weigh the entirerecord, including evidence of claimed deficiencies in the assessment' " of the particular property(Matter of NYCO Mins. v Town of Lewis, 296 AD2d 748, 749 [2002], lv dismissedand denied 99 NY2d 576 [2003], quoting Matter of FMC Corp. [Peroxygen Chems. Div.]v Unmack, 92 NY2d at 188; see Matter of City of Troy v Town of Pittstown, 306AD2d 718, 720 [2003], lv denied 1 NY3d 505 [2003]). Notably, valuation essentiallypresents a factual question, "and the courts have considerable discretion in reviewing the relevantevidence as to the specific property before them" (Matter of Consolidated Edison Co. of N.Y., Inc. v City of New York, 8NY3d 591, 597 [2007]; see Matter of General Elec. Co. v Town of Salina, 69 NY2d730, 732 [1986]). Thus, on appeal, we "defer to Supreme Court's decision 'unless such finding isbased upon [an] erroneous theory of law or [an] erroneous ruling in the admission or exclusion ofevidence, or unless it appears that the court . . . has failed to give to conflictingevidence the relative weight which it should have and thus has arrived at a value which isexcessive or inadequate' " (Matter of City of Troy v Town of Pittstown, 306 AD2d at720, quoting Matter of City of New York, 284 NY 493, 497 [1940]; accord Matter of Erie Blvd. Hydropower,L.P. v Town of Ephratah Bd. of Assessors, 9 AD3d 540, 541-542 [2004]).
Petitioner primarily argues that Supreme Court erred as a matter of law in relying on theRCNLD method to value its large industrial complex, and additionally failed to give adequateweight to its comparable sales approach. As petitioner correctly asserts, the comparable salesmethod is the preferred method for valuing large industrial complexes for assessment purposeswhen evidence of a recent sale price is lacking (see Matter of FMC Corp. [Peroxygen Chems.Div.] v Unmack, 92 NY2d at 189; Matter of General Elec. Co. v Town of Salina, 69NY2d at 731; Matter of Lehigh Portland Cement Co. v Assessor of Town of Catskill, 263AD2d 558, 560-561 [1999]). The use of the comparable sales method is not mandated, however(see Matter of [*4]Norton Co. v Assessor of City ofWatervliet, 292 AD2d 672, 673-674 [2002]); rather, " '[t]he ultimate purpose of valuation. . . is to arrive at a fair and realistic value of the property involved. . .[, and] [a]ny fair and nondiscriminating method that will achieve that result isacceptable' " (Matter of Saratoga Harness Racing v Williams, 91 NY2d 639, 643 [1998],quoting Matter of Allied Corp. v Town of Camillus, 80 NY2d 351, 356 [1992]; seeMatter of FMC Corp. [Peroxygen Chems. Div.] v Unmack, 92 NY2d at 189; Matter ofNYCO Mins. v Town of Lewis, 296 AD2d at 749). We are nonetheless mindful that "evenwhen alternative theories must be used, the courts have been cautious about applying the[RCNLD] method because it is most likely to result in overvaluation, given its tendency toascribe too little weight to such factors as rising construction costs and diminishing value byfunctional obsolescence" (Matter of Allied Corp. v Town of Camillus, 80 NY2d at356-357; see Matter of Niagara Mohawk Power Corp. v Assessor of Town of Geddes, 92NY2d 192, 197 [1998]; Matter of Saratoga Harness Racing v Williams, 91 NY2d at643-644; Matter of Great Atl. & Pac. Tea Co. v Kiernan, 42 NY2d 236, 242 [1977]). Useof this method has therefore generally been limited to properties deemed "specialties"(see Matter of Saratoga Harness Racing v Williams, 91 NY2d at 644, 646; Matter ofLehigh Portland Cement Co. v Assessor of Town of Catskill, 263 AD2d at 560) and, in anyevent, may be used " 'only in those limited instances in which no other method of valuation willyield a legally and economically realistic value for the property' " (Matter of Niagara MohawkPower Corp. v Assessor of Town of Geddes, 92 NY2d at 197, quoting Matter of GreatAtl. & Pac. Tea Co. v Kiernan, 42 NY2d at 242).
In accordance with the foregoing, this Court has thus deemed the use of the RCNLD methodto be "at best, suspect" when there is data available to support a sales comparison approach(Matter of Blue Circle v Schermerhorn, 235 AD2d 771, 773 [1997]; accord Matter ofLehigh Portland Cement Co. v Assessor of Town of Catskill, 263 AD2d at 561). However,we have countenanced the use of the RCNLD method even for properties that are not specialtiesif there is insufficient market information, other methods have been rejected as unreliable andSupreme Court has taken appropriate cautionary measures to avoid overvaluing the property(see Matter of Erie Blvd. Hydropower, L.P. v Town of Ephratah Bd. of Assessors, 2003NY Slip Op 50888[U] [2003], affd 9 AD3d 540, 542-544 [2004]). Significantly, despitepetitioner's reliance upon Matter of Lehigh Portland Cement Co. v Assessor of Town ofCatskill (supra), that case does not hold to the contrary. In addition, we note that itremains within the sound discretion of the trial court to determine whether there is a market fromwhich comparable sales may be selected (see Matter of General Elec. Co. v Town ofSalina, 69 NY2d at 731), and we have generally endorsed the use of other methods wherepurported comparable sales are rejected as insufficiently similar or the property at issue is"unique" (Matter of Gordon v Town of Esopus, 296 AD2d 812, 813 [2002]; seeMatter of NYCO Mins. v Town of Lewis, 296 AD2d at 750).
Here, at first glance, the comparable sales offered by petitioner's appraiser, Coyle, appearsimilar to the subject property. As petitioner asserts, the comparable properties were allmultibuilding complexes originally constructed for heavy manufacturing, with associated office,warehouse, security and ancillary buildings, shipping and receiving facilities, storage areas andelectric power substations. A further review of the record, however, supports Supreme Court'sfinding that the sales are not comparable to the subject property.
As noted by Supreme Court, six of the eight purportedly comparable sales used by Coylewere either previously converted to multi-tenanted facilities or were proposed to be converted atthe time of sale. While there is industrial use at portions of some of these [*5]properties, the six properties are also used for warehousing,professional and medical offices, light industrial, packaging, assembly, retail, and restaurantpurposes; one was sold pursuant to a redevelopment plan that included 650 residential units, aswell. Nevertheless, Coyle and a commercial real estate broker who testified on petitioner's behalfacknowledged that there was no plan developed for converting the subject property to multipleoccupancy, and that such conversion would require substantial capital expenditures that couldexceed the purchase price of the property, render any such project economically infeasible andextend the marketing period for up to a decade. The remaining two sales involved (1) a transferof space that had been excepted from the sale of a larger complex and that thepurchaser—which had previously entered into "an operating arrangement" to run a divisionof the seller—was already occupying, and (2) a transaction that took place in the context ofthe sale of a larger business, and included a 10-year leaseback guarantee, substantial incentivepayments from the state and a 10-year tax exemption.
In light of Coyle's failure to make adjustment for these additional factors and inasmuch as "'[t]he valuation of [the] property is determined by its state as of the taxable date, and may not beassessed on the basis of some future contemplated use,' " we conclude that Supreme Court didnot err in finding that these properties were not sufficiently similar to the subject property toserve as a guide to market value (Matter of Ross v Town of Santa Clara, 266 AD2d 678,680 [1999], quoting Matter of General Elec. Co. v Macejka, 117 AD2d 896, 897 [1986];see Matter of Stillwell Equip. Corp. v Assessors for Town of Greenburgh, 251 AD2d672, 672 [1998]; Matter of Stonegate Family Holdings v Board of Assessors of Town ofLong Lake, 222 AD2d 997, 998 [1995], lv denied 92 NY2d 817 [1998]; Matterof General Motors Corp. Cent. Foundry Div. v Assessor of Town of Massena, 146 AD2d851, 851-852 [1989], lv denied 74 NY2d 604 [1989]; Matter of Xerox Corp. vRoss, 71 AD2d 84, 86-89 [1979], lv denied 49 NY2d 702 [1980]; cf. Matter ofFMC Corp. [Peroxygen Chems. Div.] v Unmack, 92 NY2d at 189). Furthermore, given thelack of evidence of comparable sales and in light of the parties' agreement that the incomeapproach was wholly inappropriate to value the facility, Supreme Court properly elected to usethe sole remaining accepted method for valuing the property—the RCNLD approach(see Matter of Erie Blvd. Hydropower, L.P. v Town of Ephratah Bd. of Assessors, 9AD3d at 542-544; see also Matter of NYCO Mins. v Town of Lewis, 296 AD2d at 750).That is, even assuming without deciding that the subject property was not a specialty, as SupremeCourt found, " 'no other method of valuation will yield a legally and economically realistic valuefor the property' " (Matter of Niagara Mohawk Power Corp. v Assessor of Town ofGeddes, 92 NY2d at 197, quoting Matter of Great Atl. & Pac. Tea Co. v Kiernan, 42NY2d at 242) and, thus, Supreme Court did not err in applying the RCNLD method to thisunique property under the circumstances presented herein (see Matter of Erie Blvd.Hydropower, L.P. v Town of Ephratah Bd. of Assessors, 9 AD3d at 544).
In our view, Supreme Court additionally gave appropriate consideration to the tendency ofthe RCNLD approach to result in overvaluation by ascribing too little weight to factors such asrising construction costs and obsolescence (see generally Matter of Consolidated Edison Co.of N.Y., Inc. v City of New York, 8 NY3d at 596; Matter of Saratoga Harness Racing vWilliams, 91 NY2d at 643-644; Matter of Allied Corp. v Town of Camillus, 80NY2d at 356-357). Specifically, the court concluded that petitioner met its burden ofdemonstrating that the depreciation figure used by the town respondents was too low, andproperly adopted instead the calculations for reproduction cost new to which the partiesstipulated, and relied upon the effective physical and economic age estimates provided bypetitioner in selecting an appropriate depreciation figure (see Matter of Erie Blvd.Hydropower, L.P. v Town of Ephratah Bd. of [*6]Assessors,9 AD3d at 544).[FN4]Contrary to the town respondents' argument on their cross appeal, Supreme Court did not abuseits discretion in either determining that petitioner's appraiser was qualified to provide adepreciation estimate or in resolving the difference in expert opinion in this regard in favor ofpetitioner (see Matter of City of Troy v Town of Pittstown, 306 AD2d at 721; cf.Matter of Tennessee Gas Pipeline Co. v Town of Sharon Bd. of Assessors, 298 AD2d 758,759-760 [2002], lv denied 99 NY2d 506 [2003]). In short, inasmuch as Supreme Courtgave appropriate weight to the evidence presented by the parties and it cannot be said that thecourt's finding is based upon an erroneous theory of law, we will defer to the court'sdetermination of value and not disturb that decision upon this appeal.
The parties' remaining contentions are either not properly before us or, after consideration,have been found to be lacking in merit.
Cardona, P.J., Lahtinen, Kane and Kavanagh, JJ., concur. Ordered that the judgment isaffirmed, without costs.
Footnote 1: Building 273 alone contains1,167,634 square feet, the equivalent of 24 football fields. It has a high bay area of 81 feet that is,along with a 60-foot high bay and other high bays, in excess of other heavy industrial facilities.All are constructed with craneways that support 67 overhead cranes, including 11 that range from100 to 500 tons in capacity. The cranes are used in the fabrication and repair of customgenerators and turbines, which are placed in 45-foot-deep stacker pits supported by eight-footfoundations for manufacturing operations. The floor load capacity of the building itself is sixtimes the norm of 250 pounds per square foot for heavy industrial buildings.
Footnote 2: Pursuant to this method, "[t]hepresent-day cost of reproducing the property's improvements is separately calculated, from whichis subtracted the percentage of physical depreciation or functional obsolescence attributable tothe existing structures as of the valuation date. The RCNLD value is the sum of the land valueand depreciated value of the improvements" (Matter of Lehigh Portland Cement Co. vAssessor of Town of Catskill, 263 AD2d 558, 559 [1999] [citations omitted]).
Footnote 3: We note that for tax assessmentpurposes, petitioner's property was valued at $114,748,189 in 2001 and at $120,854,523 in 2002.
Footnote 4: To the extent that petitionerclaims that it did not stipulate to the accuracy of these calculations, its argument is flatly beliedby the record and, contrary to its further contention, Supreme Court did not interpret thestipulation to the calculations as a concession by petitioner that the RCNLD approach was thecorrect methodology by which to value the subject property. Coyle estimated the compositeweighted physical age of the improvements on petitioner's property to be 54 years, and opinedthat due to improvements and capital expenditures, the effective physical age was 44 years; heestimated the effective economic age of the improvements to be 45 years out of a total economiclife of 55 years.