Consolidated Edison Co. of New York, Inc. v. State Bd. of Equalization and Assessment

• Citation: 103 A.D.2d 453,480 N.Y.S.2d 789
• Parties: In the Matter of CONSOLIDATED EDISON COMPANY OF NEW YORK, INC., Appellant, v. STATE BOARD OF EQUALIZATION AND ASSESSMENT, Respondent, and Village of Pleasantville et al., Intervenors-Respondents. (And 167 Other Related Proceedings.)
• Decision Date: 11 October 1984
• Court: New York Supreme Court Appellate Division

Page 789

480 N.Y.S.2d 789

103 A.D.2d 453

In the Matter of CONSOLIDATED EDISON COMPANY OF NEW YORK INC., Appellant, v. STATE BOARD OF EQUALIZATION AND ASSESSMENT, Respondent and Village of Pleasantville et al., Intervenors-Respondents (And 167 Other Related Proceedings.)

Supreme Court, Appellate Division Third Department.

Oct. 11, 1984.

Robert Abrams, Atty. Gen., Albany (Michael S. Buskus, Asst. Atty. Gen., Albany, of counsel), for respondent.

Whiteman, Osterman & Hanna, Albany (Michael Whiteman, Melvin H. Osterman, Jr., and Jonathan P. Nye, Albany, of counsel), for Village of Pleasantville, intervenor-respondent.

Frederick A.O. Schwarz, Corp. Counsel, New York City (John P. MacArthur, Albany, of counsel), for City of N.Y., intervenor-respondent.

Marvin S. Fink, Scarsdale, for Village of Scarsdale, intervenor-respondent.

McCarthy, Fingar, Donovan, Drazen & Smith, White Plains (Henry J. Smith, White Plains, of counsel), for City of Mount Vernon, intervenor-respondent.

Ernest J. Williams, New York City (Martin B. Cowan, on behalf of Milbank, Tweed, Hadley & McCloy, New York City, and Mark S. Tulis, on behalf of Rosenberg, Tulis & Gaynin, New York City, of counsel), for appellant.

Before MAHONEY, P.J., and KANE, CASEY, WEISS and LEVINE, JJ.

MAHONEY, Presiding Justice.

Petitioner is a public utility and owner of numerous special franchises in the City of New York and the Counties of Westchester and Rockland. A special franchise is the right to construct, maintain or operate mains, pipes and wires for conducting water, steam, electricity or gas in, under, above or upon a public street or other public place (see Real Property Tax Law, § 102, subd. 17). For purposes of assessment and taxation, the value of the special franchise includes the value of the tangible property situated in, under, above or upon the public area. The State Board of Equalization and Assessment (SBEA) is vested with exclusive authority to assess the value of a special franchise (Real Property Tax Law, § 600), which it accomplishes by applying the latest State equalization rate or special equalization rate to the full value of the franchise (Real Property Tax Law, § 606, subd. 1). Petitioner commenced 168 proceedings against SBEA alleging that its special franchise assessments for the years 1974-1978 involving 44 taxing units, many of which have been allowed to intervene, have been unequal, overvalued and illegal. This appeal involves only the causes of action grounded on inequality.

Following consolidation of the proceedings, SBEA and various intervenors moved to dismiss the inequality causes of action on the ground that a special franchise holder cannot challenge the equalization rate. This court held that a special franchise holder could challenge the accuracy of equalization rates such that it could contest the assessment of special franchise property on the basis of inequality; the Court of Appeals affirmed (Matter of Consolidated Edison Co. of N.Y. v. State Bd. of Equalization & Assessment, 73 A.D.2d 31, 425 N.Y.S.2d 651, affd. 53 N.Y.2d 975, 441 N.Y.S.2d 669, 424 N.E.2d 556). Subsequently, the Legislature amended subdivision 1 of section 744 of the Real Property Tax Law to include the following language:

Notwithstanding any provisions of this article to the contrary, evidence on the issue of whether a special franchise assessment is unequal shall be limited to the state equalization rate or special equalization rate used in determining the final special franchise assessment under review, and such equalization rate or special equalization rate shall be binding and conclusive on the parties upon any such issue (L.1982, ch. 714, § 24).

The amendment was made applicable to any proceeding commenced on or after January 1, 1973 and not finally determined as of the July 22, 1982 effective date of the amendment (L.1982, ch. 714, § 29); its purpose was to supersede the judicial determination that special franchise holders could contest the accuracy of equalization rates (see Memorandum of the Assembly Rules Committee, N.Y.Legis.Ann., 1982, p. 237).

SBEA moved, on the basis of the statutory amendment, for partial summary judgment dismissing the inequality causes of action. Petitioner cross-moved for a declaration that the amendment was unconstitutional. Special Term, 120 Misc.2d 617, 466 N.Y.S.2d 575, denied petitioner's cross motion and granted partial summary judgment as sought by SBEA. This appeal by petitioner ensued.

When this matter was last before this court, the issue was whether, as a matter of statutory interpretation, a special franchise holder could contest the equalization rates. As a result of the amendment which is the subject of this appeal, that issue is now settled: a special franchise holder is precluded from judicially contesting the equalization rates. The issues on this appeal are whether such preclusion is constitutional and, if so, whether such preclusion can be applied retroactively.

Petitioner contends that the attempt to prevent special franchise taxpayers from challenging equalization rates constitutes a denial of due process. Initially, we note that the Legislature has not attempted to deny special franchise holders any means of review of equalization rates. Sections 608 and 610 of the Real Property Tax Law provide for administrative review of tentative special franchise assessments and, since a component of that figure is the equalization rate, such can be contested administratively (see Matter of Consolidated Edison Co. of N.Y. v. State Bd. of Equalization & Assessment, 73 A.D.2d 31, 34-35, 425 N.Y.S.2d 651, supra ). Moreover, the statutory amendment has not completely eliminated a special franchise holder's inequality cause of action. Section 606 (subd. 1) of the Real Property Tax Law provides that "determining a special franchise assessment the state board shall apply the latest state equalization rate or special equalization rate * * * to the full value of such assessment". Thus, while a special franchise holder is precluded by the statutory amendment from challenging the accuracy of the equalization rate, admittedly the most important aspect of an inequality cause of action, it could use such a cause of action in the event that SBEA mistakenly applies an incorrect equalization rate or one which is not the latest rate.

Central to petitioner's constitutional arguments is its premise that a special franchise holder has a constitutional right to be assessed at a ratio equal to that being applied to other property holders. We find no support for this proposition. It is clear that special franchise property is of a different nature than other real property and the Legislature, by creating separate articles dealing with the assessment procedures for special franchises and real property generally, has recognized this distinction. It is true that the Legislature has determined that special franchises are to be assessed at a ratio equal to that being applied to other real property (Real Property Tax Law, § 102, subd. 12, par. § 305). However, this is a matter of legislative policy. The Legislature has also determined that the best means of assuring equality is to apply the latest equalization rate to the full value assessment figure (Real Property Tax Law, § 606, subd. 1). It is of course true that due process requires that a taxpayer have a right to be heard. However, that right does not include an opportunity to judicially contest the merits of every legislative determination in the taxing statute. As a result of the 1982 amendment, the Legislature has determined that the equalization rate shall be conclusive as to the issue of the ratio of assessed valuation to the full value assessment figure. Since the Legislature has simply determined that the best procedural means by which its policy of equal ratio assessment between special franchises and other real property can be effectuated is by strict reliance on the equalization rate, and has not eliminated petitioner's right to judicial review generally, petitioner's due process rights have not been violated.

We also reject petitioner's equal protection challenge to the amendment. The Legislature has a great deal of freedom in creating classifications for purposes of taxation (Matter of Long Is. Light. Co. v. State Tax Comm., 45 N.Y.2d 529, 535, 410 N.Y.S.2d 561, 382 N.E.2d 1337). The amendment does not result in special franchises being assessed at a ratio different from that of other real property in the taxing unit. Instead, it simply works a procedural change in the means by which such equality shall be assured. The objective of equality and uniformity of taxation is clearly a legitimate governmental objective. In our view, the statutory amendment at issue is rationally related to such objective. First, as discussed earlier, special franchises are inherently different from other types of real property, and the Legislature has recognized this fact by enacting different assessing procedures for special franchises (Real Property Tax Law, art. 6). Moreover, by mandating that evidence on the issue of equality is limited to the equalization rate, the...