Fallica v. Town of Brookhaven

• Decision Date: 06 August 1979
• Citation: 419 N.Y.S.2d 102,69 A.D.2d 579
• Parties: Frank FALLICA et al., suing in their official capacity as all of the members of the Board of Fire Commissioners of the Holtsville Fire District, and individually, Appellants, v. The TOWN OF BROOKHAVEN et al., Respondents.
• Court: New York Supreme Court — Appellate Division

Page 102

419 N.Y.S.2d 102

69 A.D.2d 579

Frank FALLICA et al., suing in their official capacity as

all of the members of the Board of Fire

Commissioners of the Holtsville Fire

District, and individually, Appellants, v. The TOWN OF BROOKHAVEN et al., Respondents.

Supreme Court, Appellate Division, Second Department.

Aug. 6, 1979.

Frederic Block, Smithtown (Joel Markowitz, Smithtown, of counsel), for appellants.

Joseph R. Mulee, Town Atty., Patchogue (Benjamin L. Herzweig, Asst. Town Atty., Patchogue, of counsel), for respondents.

Before SUOZZI, J. P., and LAZER, GULOTTA, SHAPIRO and COHALAN, JJ.

SHAPIRO, Justice.

In the judgment appealed from, Special Term made the following determinations:

"ORDERED, ADJUDGED and DECREED that the Internal Revenue Service Center located in Holtsville, New York, which is owned by the Town of Brookhaven and leased to the United States of America, is exempt from real property taxation, exempt from taxes levied by the Holtsville Fire District, exempt from special ad valorem levies and special assessments, pursuant to Real Property Tax Law Section 406(1), and it is further

"ORDERED, ADJUDGED and DECREED that the Holtsville Fire District is obligated to furnish fire protection service to the Internal Revenue Service Center, and it is further

"ORDERED, ADJUDGED and DECREED that the first cause of action in plaintiffs' complaint which alleges that the Internal Revenue Service Center is not exempt from taxation is dismissed in its entirety upon the grounds that it fails to state facts sufficient to constitute a cause of action, and that defendants have an affirmative defense founded on documentary evidence, and it is further

"ORDERED, ADJUDGED and DECREED that the second cause of action wherein plaintiffs allege that under the authority of Chapter 972 of the Laws of 1970 as well as the lease between the Town of Brookhaven and the United States of America concerning the Internal Revenue Service Center, the Holtsville Fire District is entitled to receive money payments in lieu of taxes, assessments and other charges, for the provision of fire protection services rendered to the Center, is dismissed in its entirety on the grounds that it fails to state facts sufficient to constitute a cause of action and that the defendants have an affirmative defense founded on documentary evidence, and it is further

"ORDERED, ADJUDGED and DECREED that the third cause of action wherein plaintiffs allege that the Town of Brookhaven has been unjustly enriched by the receipt of fire protection services provided to the Internal Revenue Service Center is dismissed in its entirety on the grounds that it fails to state facts sufficient to constitute a cause of action and that the defendants have an affirmative defense based on documentary evidence."

THE ISSUE.

Section 181 of article 11 of the Town Law sets forth how a fire district, such as the one involved here, is to be funded. Subdivision 1 of section 181 provides, in part:

"After the annual budget has been adopted by the town board and a certified copy presented to the board of supervisors of the county in which the town is situated the board of supervisors shall assess and levy upon the taxable real property within the several fire districts the amounts to be raised by tax for the purposes of the respective districts as specified in such annual budget and shall cause the amount so assessed and levied to be collected, in the same manner and at the same time and by the same officers as town taxes are assessed, levied and collected."

The issue here is whether the land in question, leased by the town to the Federal government for use as an Internal Revenue Center, is tax exempt because it is "held for a public use" under the provisions of the Real Property Tax Law (§ 406, subd. 1) so that no tax may be assessed or levied thereon for the funding of the fire district in which it is located. We hold that in this case the land is not "held for a public use" and that, accordingly, it may be charged with its pro rata share for the maintenance of the fire district. Therefore the judgment appealed from should be modified as hereinafter stated.

THE FACTS.

On May 19, 1970, pursuant to the home rule request of the Town of Brookhaven, the State Legislature adopted chapter 972 of the Laws of 1970 which authorized the town to acquire "by purchase, gift or dedication or by condemnation, land * * * in the town, as the site for an office building and related facilities primarily suitable for the purpose of providing space for the permanent activities, facilities and employees of the United States of America, acting by or through any authorized agency * * * (and) own, construct, reconstruct, alter, improve and add to, an office building and related facilities suitable for such purpose and use on such site" (L.1970, ch. 972, § 2, subds. (1), (2)).

Pursuant to that authority the town acquired 42 acres of land in one of its subdivisions, within the Holtsville Fire District, and leased it to the United States for an Internal Revenue Service Center (IRS Center) consisting of five buildings having an "outside to outside dimension gross area of 520,637" square feet. The IRS Center processes tax returns for approximately 50 million taxpayers.

The enabling act (L.1970, ch. 972, § 5) provided that the town was:

"authorized and empowered to make request of the United States of America for and on behalf of the town And any political subdivisions * * * in which the land owned by the town and upon which the town owned federal office building is situate, for the payment of such sums in lieu of taxes, assessments or charges which otherwise might be levied upon, assessed or charged against such land and building, as the United States of America may agree to pay; and to enter into agreements with the United States in the name of the town for the performance of the services by the town And such political subdivisions for the benefit of such federal office building and for the payment by the United States to the town * * * of sums in lieu of such taxes, assessments or charges. Nothing aforesaid shall preclude the town from making such request in its negotiations with the United States of America and providing for such payments in the lease * * * but in such case, such payments shall be considered and treated separate and apart from the amounts of lease payments. Any agreement entered into with respect to such payments Shall contain the names of the political subdivisions with respect to which it is consummated, and a statement of the proportionate share of the payment by the United States of America to which each such political subdivision shall be entitled. The town board shall * * * pay over such proportionate share or any part thereof upon receipt." (Emphasis supplied.)

In its lease with the United States, the town agreed to provide "public and/or volunteer fire protection". Since the complex was contained in the fire district of Holtsville (a subdivision of the town) it is apparent that even without such a provision, the fire fighting services would have to be rendered by the Board of Fire Commissioners of the Holtsville Fire District.

The United States government took possession pursuant to a 20-year lease beginning July 1, 1972 at an annual rent of $3,065,568.25. The lease did Not provide that the United States of America was to make payment "in lieu of taxes, assessments or charges which otherwise might be levied upon, assessed or charged against such land and building" nor did it contain a provision that "any political subdivision" of the town was to receive payment (either directly from the lessee or indirectly from the lessor town) for the "performance of services by the * * * political subdivision for the benefit of such federal office building".

The lease contained "tax escalation" provisions to the effect that at the end of each five year interval the rent "will be adjusted to provide for increases or decreases in general real estate taxes", and that the tax adjustment "shall be 100% Of the increase or decrease of the total taxes". It then provided that "(p)roof of the amount of tax and evidence of payment will be furnished by the lessor". This was despite the fact that from its very inception the site, assessed by the town at $2,500,000, was listed on the town records as tax-exempt. Such exemption was based on the town's position that the site was "held for a public use" within the meaning of subdivision 1 of section 406 of the Real Property Tax Law, which provides that "(r)eal property owned by a municipal corporation within its corporate limits held for a public use * * * shall be exempt from taxation and exempt from special ad valorem levies and special assessments".

In 1975 the lease was amended, Inter alia, by deletion of the tax escalation provisions and by reduction of the annual rent to $2,100,000.

THE FUNDING OF THE HOLTSVILLE FIRE DISTRICT ¹

The Holtsville Fire District is funded by taxes upon taxable real property located in the fire district in accordance with the provisions of the Town Law (§ 181, subd. 1). That statute provides that the board of commissioners of each fire district is to file with the town in which the fire district is located detailed estimates of the revenues to be received and the expenditures to be made during the following fiscal year, and that after the annual budget has been adopted by the town, "the board of supervisors of the county in which the town is situated * * * shall assess and levy upon the taxable real property within the several fire districts the amounts to be raised by tax for the purposes of the respective districts * * * and shall cause the amount so assessed and levied to be collected, in the same manner and at the same time * * * as town taxes are assessed, levied and collected. When such taxes are collected, the amount thereof shall be paid to the supervisor of the town and by him immediately paid to...