201 C-Town LLC v. City of N.Y.

• Citation: 206 A.D.3d 1398,171 N.Y.S.3d 235
• Decision Date: 23 June 2022
• Docket Number: 532888
• Parties: In the Matter of 201 C–TOWN LLC, Respondent, v. CITY OF ITHACA, New York, et al., Appellants.
• Court: New York Supreme Court — Appellate Division

206 A.D.3d 1398

171 N.Y.S.3d 235

In the Matter of 201 C–TOWN LLC, Respondent,

v.CITY OF ITHACA, New York, et al., Appellants.

532888

Supreme Court, Appellate Division, Third Department, New York.

Calendar Date: April 26, 2022

Decided and Entered: June 23, 2022

Aaron O. Lavine, City Attorney, Ithaca (Victor J. Kessler of counsel), for appellants.

Weaver Mancuso Brightman PLLC, Rochester (John A. Mancuso of counsel), for respondent.

Before: Egan Jr., J.P., Lynch, Aarons, Reynolds Fitzgerald and Ceresia, JJ.

MEMORANDUM AND ORDER

Egan Jr., J.P.

Appeals from an order and a judgment of the Supreme Court (McBride, J.), entered February 10, 2021 and April 2, 2021 in Tompkins County, which, among other things, in a combined proceeding pursuant to CPLR article 78 and action for declaratory judgment, granted petitioner's cross motion for summary judgment.

Petitioner owns real property (hereinafter the subject property) in a densely developed area of the City of Ithaca, Tompkins County upon which, in 2015, plans were developed to construct a 44–unit apartment building (hereinafter the project). In 2016, the Planning and Development Board for respondent City of Ithaca granted preliminary, then final, site plan approval for the project. As the site plan contemplated, among other things, the use of adjacent Bool Street as a construction staging and crane set up area, as well as sidewalk closures, site plan approval was conditioned upon the acquisition of a street permit from the City authorizing the obstructions in municipal rights-of-way. Petitioner's contractor submitted a street permit application to the City's Department of Public Works in October 2016 that included a work site plan reflecting the obstructions that would be caused by the project. In January 2017, following payment of a $50 application fee, the permit was issued.

In February 2017, in response to public complaints and concerns about public safety caused by multiple construction projects obstructing municipal rights-of-way, respondent Board of Public Works of the City of Ithaca (hereinafter the Board) adopted a new fee schedule for street permits in an effort to encourage permit holders to minimize their municipal right-of-way usage. The new schedule required, among other things, permit holders to pay:

1. a $5 daily fee for each obstructed parking space in a municipal right-of-way without parking meters or a pay station;

2. a $20 daily fee for each obstructed parking space in a municipal right-of-way with parking meters or a pay station;

3. a fee for closing a sidewalk in residential areas of $100 per week;

4. a fee for closing a sidewalk in other areas of $200 per week if the sidewalk were diverted into an adjacent parking lane and $500 per week if pedestrians were detoured to the opposite side of the street;

5. a $50 per day fee for closing a traffic lane; and

6. a $100 per day fee for closing an entire street.

The new street permit fee schedule took effect immediately for new street permit applicants and, for existing permit holders, in July 2017. Petitioner's contractor was notified of the new street permit fee schedule in February 2017 and was asked to notify City officials whether the work site plan would be modified to reduce the potential fee, after which Todd Fox, one of petitioner's members, inquired as to the fee that would be imposed under that schedule. In response, the Director of Engineering Services for the City's Department of Public Works estimated that a fee of $6,100 per month would be owed under the new street permit fee schedule. No modifications were made to the work site plan and, in November 2017, the City's Department of Public Works invoiced petitioner for $39,200, representing the amount due under the new street permit fee schedule for petitioner's closure of parking spaces, sidewalks, travel lanes and streets between July and October 2017. Petitioner raised objections to the invoice and only paid a portion of it and then, in March 2018, paid the remaining $31,347 under protest and demanded that the City conduct an audit of its records. In April 2018, counsel for the City responded by advising petitioner that a review of petitioner's street permit plan and other records had been conducted and that the total fee would be reduced to $32,650. Counsel added that the review also revealed that petitioner was obliged to reconstruct Bool Street under the terms of the final site plan approval and that, as a result, petitioner owed the City an additional $24,841 so that the City could perform that work.

Petitioner commenced this combined CPLR article 78 proceeding and declaratory judgment action in July 2018, seeking a declaration that the new street permit fee schedule was invalid and a full refund or, if the fee schedule was held valid, an audit and partial refund. Following an unsuccessful motion to dismiss the petition/complaint, respondents answered and counterclaimed for a declaration that petitioner was obliged to reconstruct Bool Street and an order that petitioner either perform that work or compensate the City for doing so. Following discovery, respondents moved for summary judgment dismissing the petition/complaint and granting their counterclaim, while petitioner cross-moved for partial summary judgment on its claims for a declaration that the new street permit fee structure was invalid and a refund for the full amount of the invoice, as well as for dismissal of petitioner's counterclaim.¹ Supreme Court thereafter issued a February 2021 order in which it denied respondents’ motion and granted petitioner's cross motion. The terms of that order were implemented in an April 2021 judgment that, among other things, declared the new street permit fee structure invalid, awarded petitioner damages in the amount of $39,200 plus interest, and dismissed respondents’ counterclaim. Respondents appeal from both the order and the judgment.

Respondents first argue that Supreme Court erred in invalidating the new street permit fee structure on the grounds that it was an unauthorized tax, and we agree. " Municipal Home Rule Law § 10(1)(ii)(a)(6) permits [a municipality] to adopt local laws relating to the acquisition, care, management and use of its highways, roads, streets, avenues and property" ( New York Tel. Co. v. City of Amsterdam, 200 A.D.2d 315, 317, 613 N.Y.S.2d 993 [1994] [internal quotation marks and brackets omitted]; see N.Y. Const., art IX, § 2 [c][6]; City of Buffalo v. Stevenson, 207 N.Y. 258, 262–264 [1913] ). The City exercised that authority by prohibiting encroachments "above, in, upon, over or beneath any public sidewalk, street or other real property owned by the City ... without first obtaining" the appropriate license or permit (Code of City of Ithaca § 170–3), and by empowering the Board to issue street permits to allow those encroachments in individual cases (see Ithaca City Charter § C–71; Code of City of Ithaca §§ 170–5[F]; 170–6[I]; 342–7[C]; 342–8[C]). The power to charge a fee to cover the costs of that regulation is implied, with a fee "characterized as the ‘visitation of the costs of special services upon the one who derives a benefit from them,’ " such as costs relating to the permit's issuance or subsequent enforcement of its terms ( New York Tel. Co. v. City of Amsterdam, 200 A.D.2d at 318, 613 N.Y.S.2d 993, quoting Jewish Reconstructionist Synagogue of N. Shore, Inc. v. Incorporated Vil. of Roslyn Harbor, 40 N.Y.2d 158, 162, 386 N.Y.S.2d 198, 352 N.E.2d 115 [1976] ; see Suffolk County Bldrs. Assn. Inc . v. County of Suffolk, 46 N.Y.2d 613, 619, 415 N.Y.S.2d 821, 389 N.E.2d 133 [1979] ; Matter of Torsoe Bros. Constr. Corp. v. Board of Trustees of Inc. Vil. of Monroe, 49 A.D.2d 461, 465, 375 N.Y.S.2d 612 [1975] ). If the charged fee exceeds those costs and was "exacted for revenue purposes or to offset the cost of general governmental functions," however, it constitutes an unauthorized tax and is invalid ( New York Tel. Co. v. City of Amsterdam, 200 A.D.2d at 317, 613 N.Y.S.2d 993 [internal quotation marks and citations omitted]; see Matter of Phillips v. Town of Clifton Park Water Auth., 286 A.D.2d 834, 834–835, 730 N.Y.S.2d 565 [2001], lv denied 97 N.Y.2d 613, 742 N.Y.S.2d 606, 769 N.E.2d 353 [2002] ).

With that framework in mind, the right of the public to use the City's streets "is absolute and paramount," and individuals have no similar right to obstruct that access ( Cities Serv. Oil Co. v. City of New York, 5 N.Y.2d 110, 115, 180 N.Y.S.2d 769, 154 N.E.2d 814 [1958] [internal quotation marks and citation omitted], cert denied 360 U.S. 934, 79 S.Ct. 1453, 3 L.Ed.2d 1546 [1959] ; see New York State Pub. Empls. Fedn., AFL–CIO v. City of Albany, 72 N.Y.2d 96, 101, 531 N.Y.S.2d 770, 527 N.E.2d 253 [1988] ; City of Buffalo v. Stevenson, 207 N.Y. at 261–262 ). As such, although a municipality is empowered to permit an individual to obstruct public streets and sidewalks, it may also "do all such things, or ... impose all such reasonable conditions, in relation to [the obstructions], as would tend to the accomplishment of the municipal duty to provide for the general welfare and safety of the community" ( City of Buffalo v. Stevenson, 207 N.Y. at 261–262 ; see Appleton v. City of New York, 163 App.Div. 680, 692 [1914], affd 219 N.Y. 150 [1916] ). Indeed, as "[t]he power to regulate the use of the streets is a delegation of the police power of the state government, ... whatever reasonably tends to make regulation effective is a proper exercise of that power," including the imposition of fees and penalties upon those who impair that use, even if an incidental result is that "the [municipality's] receipts of moneys are increased" ( City of Buffalo v. Stevenson, 207 N.Y. at 263 ).

The record reflects that the fees charged for a street permit prior to 2017 – an application fee of $50 for a permit to impede street access and $25 for one to impede sidewalk access – did not account for the impacts that permitted obstructions...