Long Island Lighting Co. v. Assessor for Town of Brookhaven

• Court: New York Supreme Court Appellate Division
• Citation: 202 A.D.2d 32,616 N.Y.S.2d 375
• Parties: In the Matter of LONG ISLAND LIGHTING COMPANY, Appellant-Respondent, v. ASSESSOR FOR the TOWN OF BROOKHAVEN, et al., Respondents-Appellants, Shoreham-Wading River Central School District, et al., Intervenors-Respondents-Appellants.
• Decision Date: 22 August 1994

Page 375

616 N.Y.S.2d 375

202 A.D.2d 32

In the Matter of LONG ISLAND LIGHTING COMPANY, Appellant-Respondent, v. ASSESSOR FOR the TOWN OF BROOKHAVEN, et al., Respondents-Appellants,

Shoreham-Wading River Central School District, et al.,

Intervenors-Respondents-Appellants.

Supreme Court, Appellate Division,

Second Department.

Aug. 22, 1994.

LeBoeuf, Lamb, Greene & MacRae, New York City (Michael Lesch, John G. Nicolich, Peter C. Neger and Jacques M. Rimokh [Shea & Gould] of counsel), and Robert J. Grey, Hicksville (Ronald J. Macklin and Robert E. Fernandez, of counsel), for appellant-respondent (one brief filed).

Murphy, Bartol & O'Brien, Mineola (Ernest T. Bartol and William L. Maher, of counsel), and Emily Pines, Town Atty., Medford, for respondents-appellants and intervenors-respondents-appellants (one brief filed).

Before MANGANO, P.J., and THOMPSON, SULLIVAN, BALLETTA and MILLER, JJ.

PER CURIAM.

These seven consolidated tax certiorari proceedings concern the real property tax assessments levied upon the Shoreham nuclear power station, which, during the relevant time at issue, was owned by the petitioner, the Long Island Lighting Company (hereinafter LILCO). On January 11, 1993, after a trial conducted over the course of 140 trial days, the Supreme Court, Suffolk County (Stark, J.), entered a "separate and partial" judgment which, inter alia, fixed the market value of the Shoreham plant for the tax years 1976/1977 through 1983/1984, exclusive of tax year 1979/1980. Subsequently, on June 28, 1993, the court entered a second separate and partial judgment which, inter alia, reduced the tax assessment on the Shoreham property for each of the tax years in question. Pursuant to this reduction, LILCO is entitled to a total tax refund of $34,289,955, plus interest. The parties have all appealed from the judgments. We conclude that the Supreme Court properly evaluated this case in accordance with the relevant standards of real property assessment and, therefore, affirm.

I

The tax parcel at issue consists of 113.79 acres on the north shore of Long Island in the Town of Brookhaven, County of Suffolk. Located thereon is the Shoreham nuclear power station, which, during all the tax years in question, was under various stages of construction. Also located on the parcel are a 69,000 volt switchyard and a 138,000 volt switchyard.

The history of this unfortunate project has been detailed in the various decisions its construction has generated (see, e.g., Long Is. Light. Co. v. Cuomo, 666 F.Supp. 370, 377, appeal dismissed and judgment vacated in part 888 F.2d 230 [2d Cir., 1989]; Matter of Citizens For An Orderly Energy Policy v. Cuomo, 78 N.Y.2d 398, 576 N.Y.S.2d 185, 582 N.E.2d 568; Cuomo v. LILCO, 71 N.Y.2d 349, 525 N.Y.S.2d 828, 520 N.E.2d 546; Long Is. Power Auth. v. Shoreham-Wading Riv. Cent. School Dist., 195 A.D.2d 140, 606 N.Y.S.2d 325; Matter of Long Is. Light. Co. v. Assessor of Town of Brookhaven, 154 A.D.2d 188, 552 N.Y.S.2d 336; Matter of Long Is. Light. Co. v. Public Serv. Commn. of State of N.Y., 134 A.D.2d 135, 523 N.Y.S.2d 615). LILCO's board of directors originally envisioned the construction of a 540 megawatt nuclear plant on the Shoreham site. Application for a construction permit was made in May of 1968. Shortly thereafter, LILCO decided to expand the capacity of the plant to 820 megawatts. Application for the construction of this redesigned plant was made in November of 1968.

Hearings on the granting of the construction permit commenced before the Atomic Energy Commission in 1970. However, as one court has noted, the "Commission's issuance of construction permits was abruptly halted a short time thereafter, however, in the wake of a decision by the Court of Appeals for the District of Columbia Circuit holding that the National Environmental Policy Act of 1969, 42 U.S.C. § 4321 et seq., required the Atomic Energy Commission to perform a comprehensive environmental impact analysis before issuing construction permits (see, Calvert Cliffs' Coordinating Committee, Inc. v. U.S. Atomic Energy Commission, 449 F.2d 1109 [D.C.Cir., 1971]. Thus, in July 1971 the Commission ceased issuing construction permits pending its development of procedures designed to comply with the Calvert Cliffs holding" (Long Is. Light. Co. v. Cuomo, 666 F.Supp. 370, 378, supra ).

In April of 1973 LILCO received a construction permit for the Shoreham project. At that time the estimated date for the commencement of commercial operation was July 1977. Numerous extensive construction delays intervened (see, Matter of Long Is. Light. Co. v. Public Serv. Commn. of State of N.Y., 134 A.D.2d 135, 139-141, 523 N.Y.S.2d 615, supra; see also, Guastella, Lights Out For LILCO: A Look At New York's Takeover Plan, 53 Brooklyn L Rev. 723, 724-726 [1987]. Additionally, in March of 1979 the accident at the Three Mile Island Nuclear Facility occurred. As we have previously observed, in response to this accident the United States Congress determined that no nuclear plant should be licensed to operate unless an adequate emergency plan could be devised and implemented for the area surrounding the nuclear facility (see, Matter of Prospect v. Cohalan, 109 A.D.2d 210, 211, 490 N.Y.S.2d 795, aff'd 65 N.Y.2d 867, 493 N.Y.S.2d 293, 482 N.E.2d 1209; see, Matter of Citizens For An Orderly Energy Policy v. Cuomo, 159 A.D.2d 141, 148, 559 N.Y.S.2d 381, aff'd 78 N.Y.2d 398, 576 N.Y.S.2d 185, 582 N.E.2d 568, supra; see also, 45 Fed.Reg. 55,402 [1980]. Moreover, the record established that after the accident at Three Mile Island, there were extensive regulatory revisions relating to plant operation and safety.

Construction of the Shoreham facility was substantially completed by the end of 1984. Thus, from the time the design of the plant as an 820 megawatt facility began in November of 1968, until the time it was completed and ready for low level testing, a total of approximately 16 years and one month, or 193 months, elapsed.

With this background in mind, we may now turn to the specific question before this court, whether the Supreme Court properly determined the value of the Shoreham facility for each of the tax years at issue.

II

As the Court of Appeals has recently observed:

"[W]hile 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 * * * 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 * * * 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 Allied Corp. v. Town of Camillus, 80 N.Y.2d 351, 356, 590 N.Y.S.2d 417, 604 N.E.2d 1348; see also, Real Property Tax Law § 305[2]; Matter of Merrick Holding Corp. v. Board of Assessors, 45 N.Y.2d 538, 542, 410 N.Y.S.2d 565, 382 N.E.2d 1341; Matter of Great Atl. & Pac. Tea Co. v. Kiernan, 42 N.Y.2d 236, 240, 397 N.Y.S.2d 718, 366 N.E.2d 808).

It is well settled that "specialty" properties, because of the unique use to which they are put, have no easily ascertainable market value and therefore must be assessed using the reproduction-cost-new-less-depreciation method of assessment (see, Matter of Allied Corp. v. Town of Camillus, 80 N.Y.2d 351, 357, 590 N.Y.S.2d 417, 604 N.E.2d 1348, supra; Matter of Brooklyn Union Gas Co. v. State Bd. of Equalization & Assessment, 65 N.Y.2d 472, 485, 492 N.Y.S.2d 598, 482 N.E.2d 77). In order to determine whether a specialty exists, four criteria must be met:

"(a) the improvement must be unique and must be specially built for the specific purpose for which it is designed; (b) there must be a special use for which the improvement is designed and the improvement must be so specially used; (c) there must be no market for the type of property and no sales of property for such use; and (d) the improvement must be an appropriate improvement * * * and its use must be economically feasible and reasonably expected to be replaced" (Matter of Allied Corp. v. Town of Camillus, 80 N.Y.2d 351, 357, 590 N.Y.S.2d 417, 604 N.E.2d 1348, supra; see also, 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 [quoting Matter of County of Nassau [Colony Beach Club], 43 A.D.2d 45, 49, 349 N.Y.S.2d 422, aff'd 39 N.Y.2d 958, 386 N.Y.S.2d 886, 353 N.E.2d 849].

We agree with the Supreme Court that the Shoreham tax parcel is a specialty property that must therefore be assessed using the reproduction-cost-new-less-depreciation method (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, supra; cf., 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, supra ). The Shoreham plant is unique and specially built for the purpose of generating electricity. As the Supreme Court observed, there is unquestionably no market for the sale of nuclear power stations on Long Island. Finally, the improvement of the parcel with a plant for the generation of electrical power is an appropriate improvement, reasonably expected to be replaced (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, supra; Matter of Tenneco, Inc.--Tennessee Gas Pipeline Div. v. Town of Cazenovia, 104 A.D.2d 511, 512, 479 N.Y.S.2d 587; Matter of Resort HFA v. Finance Admin. of City of N.Y., 81 A.D.2d 617, 437 N.Y.S.2d 703).

III

Application of the reproduction-cost-new-less-depreciation...