Allied Corp. v. Town of Camillus

• Decision Date: 18 November 1992
• Citation: 80 N.Y.2d 351,604 N.E.2d 1348,590 N.Y.S.2d 417
• Parties: , 604 N.E.2d 1348 In the Matter of ALLIED CORPORATION, Respondent, v. TOWN OF CAMILLUS et al., Appellants. (And a Second Proceeding.)
• Court: New York Court of Appeals Court of Appeals

Page 417

590 N.Y.S.2d 417

80 N.Y.2d 351, 604 N.E.2d 1348

In the Matter of ALLIED CORPORATION, Respondent, v. TOWN OF CAMILLUS et al., Appellants (And a Second Proceeding.)

Court of Appeals of New York.

Nov. 18, 1992.

[80 N.Y.2d 352] O'Hara & O'Connell, P.C., Syracuse (Joseph G. Shields and Dennis G. O'Hara, of counsel), and Dirk J. Oudemool, for appellants.

[80 N.Y.2d 353] Bond, Schoeneck & King, Syracuse (H. Dean Heberlig, Jr., of counsel), for respondent.

OPINION OF THE COURT

SIMONS, Acting Chief Judge.

In this tax certiorari proceeding, the issue presented for review is whether Supreme Court properly valued petitioner Allied Corporation's property for tax purposes in 1987 and 1988. The property consists of more than 1,000 acres of earthen-walled wastebeds and buffer zones where waste material from an industrial process has been deposited to eventually solidify. Respondent Town of Camillus contends that the property was used as a holding and settling facility for the waste, even though the plant producing the waste had ceased operations, and should be valued as such. Inasmuch as there was no comparable market data for such a use, it viewed the property as a specialty using the cost of reproduction less depreciation to value the property. Petitioner maintains that because the property was no longer receiving waste in 1987 and 1988, it had no further industrial use and should be valued by the comparable sales method as a property having no immediate practical use, not as a specialty. Even if the property is valued as wastebeds, it claims the property is fully depreciated and therefore should be valued as vacant land.

Supreme Court concluded that the property could not be valued as a specialty because the wastebeds were no longer in use and the improvements were no longer appropriate and economically feasible (see, Matter of County of Suffolk [C.J. Van Bourgondien, Inc.], 47 N.Y.2d 507, 511-512, 419 N.Y.S.2d 52, 392 N.E.2d 1236). Finding a highest and best use of the buffers as recreational and concluding the wastebeds had no foreseeable use for 20 to 25 years, it determined the value by means of comparable sales in the area. The Appellate Division affirmed 177 A.D.2d 985, 579 N.Y.S.2d 919. We conclude that use of the comparable sales method was error and that the wastebeds and supporting facilities should have been valued as a specialty. We therefore reverse the order of the Appellate Division and remit the matter to Supreme Court for further proceedings.

The property consists of five wastebeds covering 868 acres surrounded by a buffer zone of approximately 155 acres consisting of sloping hillsides and wetlands. The wastebeds themselves resemble mesas ranging in height from 35 to 70 feet, with gravel dikes creating the walls of each structure. Allied's predecessor began using the property in the early part of this century to receive waste material generated by its "solvay process" at a nearby industrial plant. Initially, the deposits were contained below ground. As these reservoirs became filled, Allied built the huge gravel dikes above ground to expand holding capacity. Other improvements on the property include a settling lagoon, fences, access roads, catwalks, piping and a pumphouse.

The waste material was delivered to the wastebed through a pipeline in the form of a slurry. Initially, the substance has a toothpaste-like consistency, but over a period of 20 to 25 years, the material is transformed into a solid. During this process, liquid from the waste leaches through the dikes and into the surrounding ditches, which then carry it to the settling lagoon. Even older wastebeds continue to leach, as rain and snow fall on the beds. The material is not classified as hazardous, although some asbestos was deposited at the site during dumping unrelated to the industrial process. Four of the five wastebeds are full; the parties agree that the fifth will receive no more deposits with the closing of Allied's plant. The assessment on one of the wastebeds (No. 11) has not been challenged. The settling process was completed by 1988 and therefore it was valued as vacant land.

The Town's assessor valued the wastebed facility as a specialty, using reproduction cost less depreciation. Three calculations were central to his analysis: the base land value, the value of the improvements and depreciation. He determined the base land value by using comparative sales of five properties: four sold for landfill use and the fifth purchased as a site for a petroleum farm. The value of improvements was taken from an engineer's report projecting what it would cost to construct a new wastebed facility in 1990. Finally, to determine depreciation, the assessor calculated the "total economic life" of each wastebed, a period of years that included both a bed's "industrial life"--the period during which it was receiving deposits--and its "transitional life"--the period from the last deposit to the point when the land would be sufficiently firm to support an alternate use. He concluded that the transitional life was 55% of the total economic life. By using that figure in conjunction with data on the length of time each bed functioned as an active receiving facility, he was able to calculate the total economic life and then depreciate the cost of each wastebed over a period of years beginning with its initial deposit and concluding with the end of its transitional life. This methodology produced a value of $4,800 per acre for the facility as a whole.

Allied, which had evaluated the property at $60 to $400 an acre, instituted this proceeding to challenge that assessment. After trial, the court concluded that the Town's use of the specialty valuation method constituted error because only an ongoing concern could be deemed a specialty. In the view of the court, the site had ceased to be used as a wastebed facility when Allied discontinued its industrial operation in 1986. However, because most of the land did not have sufficient consistency to support other foreseeable use for 20 to 25 years, Supreme Court found that the "highest and best use" of the buffer was largely as a recreational site and that the wastebeds had "no uses now." The court employed a comparable sales approach and viewed the wastebed acreage as being similar to specified parcels of swampland. The wastebeds were valued at $166 to $250 per acre; the buffer zone at $570 to $600 per acre. The Appellate Division affirmed on the opinion of Supreme Court.

Allied's property is a singular type with a novel past and uncertain future. Unlike the swampland that Supreme Court used as comparables to value the wastebeds, Allied has devoted the property to the deposit of waste, a use that is increasingly commonplace in an industrial society and one that frequently has long-term effects on the land. Not surprisingly, courts and local governments are now beginning to contend with the problem of fairly valuating environmentally damaged properties (see, Arnold, Appraising and Valuing Contaminated Properties, 16 ALI-ABA No. 4; Patchin, Valuation of Contaminated Properties, Jan. 1988 Appraisal Journal, at 7; Firestone Tire & Rubber Co. v. County of Monterey, 223 Cal.App.3d 382, 272 Cal.Rptr. 745; Inmar Assocs. v. Borough of Carlstadt, 112 N.J. 593, 549 A.2d 38). No finding of contamination of Allied's wastebeds has been made, but many of the same economic considerations are present, most notably the "stigma" attached to environmentally damaged land in the eyes of any potential buyers, the risk that undetected or currently unclassified hazardous materials will be identified, and the costs of clean-up and rehabilitation. The particularized conditions of such properties make valuation difficult. In most instances, the comparable sales method is inappropriate, as it is in this case. We conclude that on the record the property should have been valued as a specialty (see, Matter of Brooklyn Union Gas Co. v. State Bd. of Equalization & Assessment, 65 N.Y.2d 472, 492 N.Y.S.2d 598, 482 N.E.2d 77; Matter of Great Atl. & Pac. Tea Co. v. Kiernan, 42 N.Y.2d 236, 397 N.Y.S.2d 718, 366 N.E.2d 808).

Analysis starts with recognition that while property must be assessed at market value, there is no fixed method for determining that value. The ultimate purpose of valuation, whether in eminent domain or tax certiorari proceedings, is to arrive at a fair and realistic value of the property involved so that all property owners contribute equitably to the public fisc. Any fair and nondiscriminating method that will achieve that result is acceptable (see, Matter of Great Atl. & Pac. Tea Co. v. Kiernan, supra at 240, 397 N.Y.S.2d 718, 366 N.E.2d 808; Matter of Merrick Holding Corp. v. Board of Assessors, 45 N.Y.2d 538, 541, 410 N.Y.S.2d 565, 382 N.E.2d 1341; G.R.F., Inc. v. Board of Assessors, 41 N.Y.2d 512, 393 N.Y.S.2d 965, 362 N.E.2d 597). The best evidence of value, of course, is a recent sale of the subject property between a seller under no compulsion to sell and a buyer under no compulsion to buy (see, Matter of Grant Co. v. Srogi, 52 N.Y.2d 496, 511, 438 N.Y.S.2d 761, 420 N.E.2d 953). Absent that evidence, however, the courts have traditionally valued property by one of three methods: comparable sales, capitalization of income or reproduction cost less depreciation (Matter of Great Atl. & Pac. Tea Co. v. Kiernan, 42 N.Y.2d 236, 237-238, 397 N.Y.S.2d 718, 366 N.E.2d 808, supra; see generally, Lee and LeForestier, Review and Reduction of Real Property Assessments in New York, ch. 1 [3d ed.].

Evidence of comparable sales is generally the preferred measure of a property's value for assessment, but where there is insufficient relevant data, value may be determined by other methods (Matter of General Elec. Co. v. Town of Salina, 69 N.Y.2d 730, 731, 512 N.Y.S.2d 359, 504 N.E.2d 686; Matter of Great Atl. & Pac. Tea Co. v. Kiernan, supra, 42 N.Y.2d at 242, 397 N.Y.S.2d 718, 366 N.E.2d 808; Matter...