Niagara Mohawk Power Corp. v. Assessor of Town of Geddes

• Decision Date: 07 July 1998
• Citation: 699 N.E.2d 899,677 N.Y.S.2d 275,92 N.Y.2d 192
• Parties: , 699 N.E.2d 899, 1998 N.Y. Slip Op. 6625 In the Matter of NIAGARA MOHAWK POWER CORPORATION, Appellant, v. ASSESSOR OF TOWN OF GEDDES et al., Respondents.
• Court: New York Court of Appeals Court of Appeals

Page 275

677 N.Y.S.2d 275

92 N.Y.2d 192, 699 N.E.2d 899, 1998

N.Y. Slip Op. 6625

In the Matter of NIAGARA MOHAWK POWER CORPORATION, Appellant, v. ASSESSOR OF TOWN OF GEDDES et al., Respondents.

Court of Appeals of New York.

July 7, 1998.

Helm, Shapiro, Anito & McCale, P.C., Albany (Lawrence A. Zimmerman and Mark D. Lansing, of counsel), for appellant.

Setright, Ciabotti & Longstreet, Syracuse (Victor J. Ciabotti, of counsel), for respondents.

Lewis & Greer, P.C., Poughkeepsie (Michael J. Englert, of counsel), for Association of Towns of the State of New York, amicus curiae.

OPINION OF THE COURT

SMITH, Judge.

The issue here is whether petitioner has presented substantial evidence that its properties, which respondent Town of Geddes categorized as specialties, were overvalued. We hold substantial evidence exists that the four challenged properties were not specialties as a matter of law, and thus petitioner sufficiently overcame the presumption that respondents' assessments were valid for the tax years at issue.

Petitioner is a public utility company which owns and operates an electrical generation, transmission and distribution system in the Town of Geddes. Petitioner sought review of the tax assessments for approximately 23 parcels owned by it during the years 1990 through 1993. Petitioner conceded that the majority of its properties were specialties but took issue with such a categorization for four of those properties. In its appraisal of the alleged nonspecialty properties, petitioner used a "hybrid" method of valuation utilizing reproduction costs, income capitalization, and comparable sales.

Supreme Court granted the petitions, concluded that the properties in dispute were not "specialties," and reduced the assessments in accordance with the calculations of petitioner's appraisers. The Appellate Division reversed and dismissed the petitions. The Court concluded that petitioner had "failed to overcome the presumption that respondents' assessments were valid for the tax years at issue" (239 A.D.2d 911, 912, 659 N.Y.S.2d 632). Since the presumption remained in effect, the Court found no need to "consider the adequacy of respondents' appraisal or to inquire further into the value of the property."

The Appellate Division concluded that all of the parcels at issue were "specialty" properties which could not be valued by use of the comparable sales method. As to petitioner's reproduction cost calculations for those properties properly categorized as specialties, the Court concluded that petitioner's appraisal calculations were unreliable because the appraiser had accepted petitioner's representations without conducting any independent investigation. The Court further concluded that "the use of straight-line depreciation did not yield 'a fair and realistic value of the property involved' * * * because it permitted petitioner's appraiser to assign no value to property that remained in operation after passing its projected retirement date." (239 A.D.2d, at 912, 659 N.Y.S.2d 632.)

We have held that a locality's tax assessment is presumptively valid (Farash v. Smith, 59 N.Y.2d 952, 955, 466 N.Y.S.2d 308, 453 N.E.2d 537). However, a petitioner may overcome that presumption by bringing forth substantial evidence that its property has been overvalued (see, Matter of FMC Corp. v. Unmack, 92 N.Y.2d 179, 677 N.Y.S.2d 269, 699 N.E.2d 893 [decided today] ). Substantial evidence is evidence grounded in objective data and sound theory (see, 300 Gramatan Ave. Assocs. v. State Div. of Human Rights, 45 N.Y.2d 176, 179-181, 408 N.Y.S.2d 54, 379 N.E.2d 1183). In the context of a proceeding to challenge a tax assessment, substantial evidence will most often consist of a detailed, competent appraisal based on standard, accepted appraisal techniques and prepared by a qualified appraiser.

In the instant case, respondent's tax assessment was premised upon its conclusion that the properties were specialties. A "specialty" property is one that "is uniquely adapted to the business conducted upon it or use made of it and cannot be converted to other uses without the expenditure of substantial sums of money" (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; see also, 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; Matter of Saratoga Harness Racing v. Williams, 91 N.Y.2d 639, 674 N.Y.S.2d 263, 697 N.E.2d 164). This Court has articulated four criteria to determine whether a property is a "specialty":

"(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 at the time of the taking or assessment and its use must be economically feasible and reasonably expected to be replaced" (Matter of Allied Corp. v. Town of Camillus, supra, at 357, 590 N.Y.S.2d 417, 604 N.E.2d 1348).

We have cautioned against an indiscriminate classification of property as a specialty and have stated that a property containing "special features" is not in all instances a speciality (Matter of Great Atl. & Pac. Tea Co. v. Kiernan, 42 N.Y.2d, at 240, 397 N.Y.S.2d 718, 366 N.E.2d 808). Indeed,

"property does not qualify as a specialty where it possesses certain features which, while rendering the property suitable to the owner's use, are not truly unique to his business but, in fact, make the property adaptable for general industrial use. Thus, if no great expense would be entailed in converting the property from the present owner's use to other business and industrial uses and if a market value may be ascertained, property should not be valued as a specialty merely because it contains * * * features * * * which are not truly unique to the owner's business" (id., at 240, 397 N.Y.S.2d 718, 366 N.E.2d 808).

Where, however, a property is properly categorized as a specialty, a valuation of such property would not be based upon comparable sales since, by definition,...