Resort HFA v. Finance Administration

• Decision Date: 13 April 1981
• Citation: 437 N.Y.S.2d 703,81 A.D.2d 617
• Parties: In the Matter of RESORT HFA, Respondent, v. FINANCE ADMINISTRATION et al., of the City of New York, Appellants.
• Court: New York Supreme Court — Appellate Division

Page 703

437 N.Y.S.2d 703

81 A.D.2d 617

In the Matter of RESORT HFA, Respondent, v. FINANCE ADMINISTRATION et al., of the City of New York, Appellants.

Supreme Court, Appellate Division, Second Department.

April 13, 1981.

Allen G. Schwartz, Corp. Counsel, New York City (Willa I. Lewis, Jackson Hts., and Leonard Olarsch, New York City, of counsel), for appellants.

Abberley, Kooiman, Marcellino & Clay, New York City (Henry J. Clay and Richard

Hagouel Langsam, New York City, of counsel), for respondent.

Before HOPKINS, J. P., and DAMIANI, LAZER and COHALAN, JJ.

MEMORANDUM BY THE COURT.

In consolidated tax review proceedings, the Finance Administration and the Tax Commission of the City of New York appeal from a judgment of the Supreme Court, Queens County, entered October 12, 1979, which reduced the tax assessments for the subject property.

Judgment reversed, on the law and the facts, with costs, the assessed valuations for the tax years in question are reinstated, and the proceedings are dismissed.

The subject property is improved with a six-story specialty building designed for use as a proprietary home for adults. The building was completed in 1975 and a certificate of occupancy was issued on July 22, 1975. Nevertheless, the structure remains unused. The assessed valuation of the subject property for the 1975/1976 tax year was $1,300,000, with $150,000 attributed to the land and $1,150,000 to the building. The assessed valuation of the subject property for the 1976/1977 tax year was $1,450,000, with $150,000 attributed to the land and $1,300,000 to the building. According to the owner, the land was purchased for $175,617, and the actual cost of construction of the building was $2,040,220.

At the trial, petitioner submitted evidence from a qualified appraiser that the land was worth $250,000. Petitioner's appraiser also acknowledged that the 1975 replacement cost of the building was approximately $2,100,000. However, he concluded that it was not economically feasible to use the building as a proprietary home for adults because of an oversupply of such facilities and "the rate-cost squeeze caused by the economic climate and by harsh New York City and State agency pressures," i. e., "burdensome staffing requirements imposed by the Department of Social Welfare" and "a restriction on the rates that were able to be obtained in homes for adults." Petitioner's appraiser concluded:

"The subject property, completed in mid-1975, was never opened for business because of prevailing economic conditions, government pressures, and oversupply factors which precluded any chances (sic) for a profitable operation for proprietary homes for adults in the general New York City area. Many comparable facilities which have been operating somewhat profitably prior to 1975 have since been abandoned or closed."

After further concluding that it was not economically feasible to put the building to another use, petitioner's appraiser estimated the "salvage value" of the subject property at $500,000, $250,000 of which was attributable to the land. Neither his written appraisal nor his trial testimony reveals the calculations used in arriving at the salvage figure.

Appellants noted that the tenant in possession of the subject property was under investigation by State officials and therefore was not issued a license to operate a home for adults. In the tax years in question, that tenant was obligated to pay rent of $413,000 per annum, plus real estate taxes and other assessments. The tenant failed to make those payments.

Based upon this evidence, Special Term concluded that it was not economically feasible to put the building to its intended use and, therefore, reduced the assessments for both 1975/1976 and 1976/1977 to $750,000, $150,000 of which was attributable to the land and $600,000 to the building.

In the tax years soon after construction of a building, the actual construction cost, in this case $2,040,220, is considered a reliable indicium of value (see Matter of Seagram & Sons v. Tax Comm. of City of N. Y., 14 N.Y.2d 314, 251 N.Y.S.2d 460, 200 N.E.2d 447; Matter of 860 Fifth Ave. Corp. v. Tax Comm. of City of N. Y.,...