| Matter of Office Bldg. Assoc., LLC v Empire Zone DesignationBd. |
| 2012 NY Slip Op 03494 [95 AD3d 1402] |
| May 3, 2012 |
| Appellate Division, Third Department |
| 2—In the Matter of Office Building Associates, LLC,Respondent Appellant, v Empire Zone Designation Board et al.,Appellants. |
—[*1] Lacy Katezen, L.L.P., Rochester (John T. Refermat of counsel), for respondent.
Egan Jr., J. Appeal from a judgment of the Supreme Court (Lynch, J.), entered February 16,2011 in Albany County, which granted petitioner's application, in a proceeding pursuant to CPLRarticle 78, to annul a determination of respondent Empire Zone Designation Board revokingpetitioner's certification as an empire zone business enterprise.
The underlying statutory scheme is more fully detailed in our decision in Matter of WL,LLC v Department of Economic Dev. (97 AD3d 24 [2012] [decided herewith]). Briefly, the Department of Economic Development administers aprogram pursuant to the New York State Empire Zones Act (see General Municipal Law§ 955 et seq.) that provides special incentives and assistance—most notablyin the form of tax benefits and credits—to businesses that create jobs or otherwise invest ineconomically impoverished areas of the state (see General Municipal Law § 956).In response to concerns regarding the program's cost effectiveness and accountability, theLegislature amended the Empire Zones Act, together with related provisions of the Tax Law, inApril 2009. Insofar as is relevant here, the amendments required respondent Commissioner ofEconomic Development to conduct a review during calendar year 2009 of all businesses certifiedunder the program and ascertain whether, pursuant to two new standards for determiningprogram eligibility (see General Municipal Law § 959 [a] [v] [5], [6]), suchbusinesses should be [*2]decertified from participation therein(see General Municipal Law § 959 [w]). One of those standards, commonlyreferred to as the "1:1 benefit-cost test," requires that "the business enterprise . . .provide economic returns to the state in the form of total remuneration to its employees (i.e.wages and benefits) and investments in its facility greater in value to the tax benefits the businessenterprise used and had refunded to it" (General Municipal Law § 959 [a] [v][6]).[FN1]To that end, the Commissioner was directed to analyze the data contained in at least threebusiness annual reports (hereinafter BARs) filed by the entity in question in order to determine ifit remained eligible for participation in the program (see General Municipal Law §959 [w]).[FN2]
Petitioner, a limited liability company that owns three floors of a structure known as theGranite Building, located in the City of Rochester, Monroe County, obtained certification as anempire zone business in October 2003. In June 2009, respondent Randal D. Coburn, the Directorof the Empire Zones Program, notified petitioner that the Commissioner was revoking itscertification due to its failure to satisfy the 1:1 benefit-cost test. Petitioner filed a timely appeal torespondent Empire Zone Designation Board (hereinafter the Board) arguing, insofar as is relevanthere, that the previously filed BARs did not comprehensively report all costs actually incurredand paid by petitioner. In conjunction therewith, petitioner submitted revised BARs for the years2003 through 2007, together with various self-generated spreadsheets delineating the additionalcosts purportedly incurred.
In March 2010, the Board unanimously passed Resolution No. 3 of 2010 upholding theCommissioner's determination to revoke the empire zone certification of 91 separate businessentities—one of which was petitioner—based upon each entity's failure "to providesufficient evidence to demonstrate that the Commissioner's finding . . . was inerror." Petitioner was duly notified that its certification as an empire zone business had beenrevoked effective January 1, 2008, and petitioner thereafter commenced this CPLR article 78proceeding to challenge the Board's determination. Supreme Court annulled the determination,finding that the Board failed to articulate the basis for its denial of petitioner's appeal, andremanded the matter for reconsideration. This appeal by respondents ensued.
We affirm. As no administrative hearing was conducted here, the Board admittedly was notrequired to make specific findings of fact (see Matter of McPartland v McCoy, 35 AD2d641, 642 [1970]). However, "judicial review of an administrative determination is limited to thegrounds invoked by the agency" (Matter of Scherbyn v Wayne-Finger Lakes Bd. of Coop.Educ. [*3]Servs., 77 NY2d 753, 758 [1991]) and, consistentwith this "bedrock principle of administrative law" (Matter of National Fuel Gas Distrib. Corp. v Public Serv. Commn. of theState of N.Y., 16 NY3d 360, 368 [2011]), this Court cannot search the record for arational basis to support the Board's determination, substitute its judgment for that of the Boardor affirm the underlying determination upon a ground not invoked by the Board in the firstinstance (see id.; Matter of Figelv Dwyer, 75 AD3d 802, 804-805 [2010]). For these reasons, it is imperative that theBoard's determination contain sufficient information to permit this Court to both discern therationale for the administrative action taken and undertake intelligent appellate review thereof.
Although we have no quarrel with the sufficiency of the administrative record, the Board'sdetermination—as embodied in Resolution No. 3 of 2010—is completely lacking indetail. Simply put, the Board's determination does nothing more than recite—in aconclusory and unsubstantiated fashion—that petitioner, together with the 90 otherbusiness entities identified in the appendix annexed thereto, failed to "provide[ ] sufficientevidence to demonstrate that the Commissioner's finding with regard to revocation under[General Municipal Law] § 959 (a) (v) (6) was in error." This "one size fits all"determination, which does nothing more than mimic the statutory language (see GeneralMunicipal Law § 959 [w]) and sheds no light upon the manner in which petitioner's proofwas deemed to be deficient, falls far short of delineating the particular grounds for the Board'sdetermination and, in so doing, effectively precludes this Court from undertaking a "meaningfulreview of the rationality of the [Board's] decision" (Matter of Figel v Dwyer, 75 AD3d at804; compare Matter of Morris Bldrs., LP v Empire Zone Designation Bd., 95 AD3d1381 [2012] [decided herewith]).
In reaching this conclusion, we reject respondents' assertion that Coburn's affidavit may beused to supply the rationale otherwise missing from the Board's determination. As notedpreviously, no administrative hearing was conducted here and, hence, Supreme Court could (andthis Court may) properly consider Coburn's affidavit—despite the fact that it was notsubmitted during the administrative process (see e.g. Matter of Brown v Sawyer, 85 AD3d 1614, 1615-1616[2011]; Matter of Citizens' Envtl.Coalition, Inc. v New York State Dept. of Envtl. Conservation, 57 AD3d 1279, 1280 n[2008]; Matter of Kirmayer v New YorkState Dept. of Civ. Serv., 24 AD3d 850, 852 [2005]). However, neither Coburn'sadmitted familiarity with the relevant statutes and regulations nor his subsequent analysis of thematerials submitted in support of petitioner's administrative appeal speaks to or otherwiseevidences firsthand knowledge of the decision-making process undertaken by the Board(compare Matter of Kirmayer v New York State Dept. of Civ. Serv., 24 AD3d at 852;Matter of Jamaica Neighborhood Based Alliance Coalition v Department of Social Servs. ofState of N.Y., 227 AD2d 40, 43 [1997], appeal dismissed 89 NY2d 1085 [1997],lv denied 90 NY2d 808 [1997]). Stated another way, although Coburn—as anemployee of the very agency that administers the Empire Zones Program—indeed may beable to address the Commissioner's reasons for revoking petitioner's certification in the firstinstance, he certainly cannot supply the Board's rationale for upholding the Commissioner'sdecision upon petitioner's administrative appeal (cf. Matter of Weill v New York City Dept. of Educ., 61 AD3d 407,409 [2009]). Accordingly, Supreme Court's judgment annulling the Board's determination andremanding this matter for reconsideration is affirmed. To the extent that Supreme Court rejectedpetitioner's retroactivity and "extraordinary circumstances" arguments, petitioner did notcross-appeal from the underlying judgment and, therefore, we need not reach the merits of thoseclaims.
Peters, P.J., Malone Jr., Kavanagh and Stein, JJ., concur. Ordered that the judgment isaffirmed, without costs.
Footnote 1: In other words, to remaincertified in the program, the business entity must produce more than $1 in actual wages, benefitsand investments for every $1 in state tax incentives that it receives. The remaining standard(see General Municipal Law § 959 [a] [v] [5])—intended to curb a practiceknown as "shirt-changing"—is not at issue here.
Footnote 2: In conjunction therewith,emergency regulations were adopted that, among other things, limited the Commissioner's reviewto BARs filed by the entity between 2001 and 2007 (see 5 NYCRR 11.9 [c] [2]).