Schulz v. New York State Legislature

• Decision Date: 03 July 1997
• Parties: In the Matter of Robert L. SCHULZ et al., Appellants, v. NEW YORK STATE LEGISLATURE et al., Respondents.
• Court: New York Supreme Court — Appellate Division

Page 155

660 N.Y.S.2d 155

230 A.D.2d 578

In the Matter of Robert L. SCHULZ et al., Appellants, v. NEW YORK STATE LEGISLATURE et al., Respondents.

Supreme Court, Appellate Division,

Third Department.

July 3, 1997.

Robert L. Schulz, Queensbury, Theodore Marks, Mahopac, Elmer Van Wagner and Mary S. Donohue, Hyde Park, Barry M. Horowitz and Fairlene G. Rabenda, Poughkeepsie and H. William Van Allen, Hurley, in pro per.

Dennis C. Vacco, Attorney-General (Frank K. Walsh and Peter H. Schiff, of counsel), Albany, for New York State Legislature and others, respondents.

Nixon, Hargrave, Devans & Doyle (Thomas D'Antonio and James P. O'Brien, Jr., of counsel), Garden City, for Hyde Park Fire and Water District and others, respondents.

Ian G. MacDonald, Dutchess County Attorney (Gail W. Epstein, of counsel), Poughkeepsie, for Dutchess County Real Property Tax Service Agency, respondent.

Before MIKOLL, J.P., and CREW, CASEY, SPAIN and CARPINELLO, JJ.

CARPINELLO, Justice.

Appeal from that part of a judgment of the Supreme Court (Kahn, J.), entered April 10, 1996 in Albany County, which, in a combined proceeding pursuant to CPLR article 78 and action for declaratory judgment, granted respondents' motions to dismiss the complaint/petition for lack of standing, failure to state a claim and as time barred.

This action/proceeding is yet the latest in a long series of lawsuits involving challenges to the method by which the Board of Trustees (hereinafter the Board) of respondent Hyde Park Fire and Water District (hereinafter the District) has assessed taxes for the construction of a new water treatment facility. Although not intended to be an exclusive list of all prior litigation involving this facility, we note the following cases: Matter of New York State Dormitory Auth. v. Board of Trustees of Hyde Park Fire & Water Dist., 206 A.D.2d 483, 614 N.Y.S.2d 573, mod. 86 N.Y.2d 72, 629 N.Y.S.2d 989, 653 N.E.2d 1159; Eckelman v. Anderson, 180 A.D.2d 618, 579 N.Y.S.2d 446, lv. denied 79 N.Y.2d 759, 584 N.Y.S.2d 447, 594 N.E.2d 941, and Van Wagner v. Hyde Park Fire & Water Dist., 158 A.D.2d 518, 551 N.Y.S.2d 282, appeal dismissed 76 N.Y.2d 771, 559 N.Y.S.2d 984, 559 N.E.2d 678.

The District's origin can be traced to its establishment by an 1860 special act of the Legislature (see, L. 1860, ch. 257). By 1987, the District had been providing water to its residents for more than half a century from a facility which drew from the Crum Elbow Creek. According to the District, the State Department of Environmental Conservation required that it cease the discharge of solids into the Crum Elbow Creek from its then-aging water treatment facility by the end of 1988. Consequently, the District decided to borrow approximately $20 million to build a new treatment facility using the Hudson River as its source.

While the parties have long disputed the wisdom of the Board's decision regarding the size of the new facility (the District allegedly has only about 2,000 residents), the gravamen of the instant dispute is the method adopted by the Board for assessing taxes on District properties to pay for construction costs. The three methods considered were (1) ad valorem assessments, (2) water rate charges, and (3) the benefit assessment method (which was ultimately adopted). Under this latter methodology, assessments for the payment of capital costs are levied against District properties based upon the "benefit derived by each property within the District". The Board selected this method because of its concern that neither ad valorem assessments nor water usage charges would be a fair method of financing the considerable capital costs since owners of undeveloped property "likely [to] be developed during the life of the facility" would not be paying according to the benefits conferred.

The benefit assessment system required that each piece of property be assessed a particular number of benefit units based not only on the existing condition of the property, but also its maximum future development potential. The units were calculated after a review of numerous factors, including zoning and topography. The assessment roll reveals that the vast majority of District residents were assigned a single benefit unit as owners of single-family homes. Because of the development potential of several large undeveloped tracts of land, other owners were assigned several hundred benefit units. For example, Elbow Creek Development Corporation, of which petitioner Theodore Marks is a shareholder, was assessed 542 benefit units based upon the development potential of its 168.3-acre parcel.

The Board points out that the benefit assessment system was intended only to address the capital costs of the new facility since operation and maintenance charges, as well as charges for water actually consumed, would be billed separately. The justification for the benefit assessment methodology is best summarized in an affidavit of the District's president, in which he explains that "[w]hen ¹ the owner decides to develop that property, the District's plant and transmission capacity will be sufficient to meet that parcel's needs" (emphasis supplied). Petitioners allege that utilization of this methodology has resulted in less than 1/10 of 1% of the taxpayers in the District paying over 64% of the total taxes, a charge not refuted by respondents.

The practical effect of shifting most of the cost of the District to owners of large undeveloped parcels is exemplified by analyzing the history of the Elbow Creek parcel, which throughout the relevant time period has had an assessed value of $390,000. In 1987, its annual tax was $194. By 1994, its annual tax had risen almost a thousandfold, to $142,464. Not surprisingly, most of the large undeveloped parcels in the District have been acquired by Dutchess County for nonpayment of taxes. This has led to the County now being the largest taxpayer in the District, paying well over $1 million every year on parcels already acquired in foreclosure or presently delinquent in taxes. Notably, the County is currently paying 63% of the District's total annual benefit assessment revenues. Efforts to sell the foreclosed properties at public auctions have been totally unsuccessful, presumably because no one is interested in acquiring them and paying District taxes under the current scheme. In February 1997, in response to this dilemma, the Dutchess County Water and Wastewater Authority formally proposed to acquire the District's water system and restructure the benefit assessment methodology, a plan which will provide no remedy to those owners who have already lost title to their properties.

The immediate problem faced by petitioners in the instant action/proceeding is that the vast majority of the 14 claims asserted in the complaint/petition have already been addressed in the earlier proceedings. For the reasons articulated in the decision of Supreme Court, which we need not repeat here we agree that 13 of the 14 asserted claims should be dismissed. We disagree only with the court's finding that the seventh claim should be dismissed.

For purposes of clarification, we agree that petitioners Robert L. Schulz, Fairlene G....