Watergate II Apartments v. Buffalo Sewer Authority
| Decision Date | 26 April 1977 |
| Citation | 397 N.Y.S.2d 516,91 Misc.2d 133 |
| Parties | WATERGATE II APARTMENTS, a Limited Partnership, Plaintiff, v. BUFFALO SEWER AUTHORITY, Defendant. |
| Court | New York Supreme Court |
This is a motion for an order pursuant to CPLR 3212 in which each party is seeking summary judgment.
Plaintiff Watergate II Apartments (Watergate) is a limited partnership whose general partner is Niagara Watergate, Inc., a corporation duly organized and existing under New York State law and having a place of business in Buffalo, New York. Defendant Buffalo Sewer Authority (Authority) is a public benefit corporation organized pursuant to Chapter 870 of the Laws of 1939 (now Public Authorities Law § 1175 et seq.) and having a place of business in the City of Buffalo.
In December, 1971, Watergate entered into an agreement for tax abatement with the City of Buffalo, authorized by its Common Council, which provided certain limitations upon taxes to be assessed against real property owned by Watergate. This tax abatement agreement was part of a loan agreement entered into between Watergate and an agency of the United States. One provision of the loan agreement provides for acceleration of the loan agreement and first mortgage covering the real property should Watergate default in payment of any taxes.
Upon completion of the above agreements, Watergate constructed twin apartment buildings upon the said real property.
Receipts submitted by Watergate (Exhibits A, B, C, D, E and F attached to Plaintiff's Motion to Dismiss) establish it has been billed for several charges by the City of Buffalo and the Authority in regard to the apartments. Such charges include:
1. City of Buffalo real property tax and Buffalo Sewer Authority sewer rent based on the assessed value of the non-tax exempt property. (See Exhibits C and D.)
2. City of Buffalo water charges and Buffalo Sewer Authority sewer charges based upon the quantity of water used as measured by meters of the Division of Water. (Exhibits E and F)
(The above sewer rent and sewer charges appear respectively on City of Buffalo real property tax and water charge bills as a billing convenience to the Authority, which receives the sewer revenues.)
3. Buffalo Sewer Authority sewer rent based on the assessed value of the tax exempt property multiplied by a standard factor. (Exhibits A and B)
Based on these receipts, there can be no dispute Watergate paid the charges listed in 1 and 2 above. However, it has not and refuses to pay the sewer rent described in 3 above. As a result of this non-payment, the Authority served Watergate's mortgagee with a statement claimed to be accruing monthly interest and which the Authority maintains constitutes liens against the property. (Exhibit C attached to plaintiff's complaint).
After being notified of the Authority's statement, Watergate commenced an action on May 30, 1975 against the Authority to declare the sewer rent an unlawful tax and to enjoin its enforcement against Watergate. By its answer, the Authority asserted several affirmative defenses and a counterclaim based on Watergate's failure to pay the sewer rent. On November 5, 1975 Watergate moved for summary judgment based on the allegations in its complaint and on November 21, 1975, the Authority similarly moved for summary judgment on its counterclaim.
Watergate maintains the sewer rent is an unlawfully imposed tax based on assessed valuation of its property. Alternatively Watergate claims if the sewer rent is a lawful tax, then the agreement with the City of Buffalo exempts Watergate from payment of same.
The Authority takes the position the sewer rent is not a tax, but rather is a charge based on specific sewerage services rendered to Watergate. Further, it submits the sewer rent is not subject to the abatement agreement.
The central issues presented for determination then are (1) whether the Authority's sewer rent is a tax based on property assessment or a charge based on actual use of the facilities and (2) whether the sewer rent was lawfully imposed on Watergate under the circumstances herein. Guidelines for determining both the nature and legality of the Authority's sewer rents are found in relevant sections of the General Municipal Law, the Public Authorities Law and in the authoritative case of Robertson v. Zimmerman, 268 N.Y. 52, 196 N.E. 740 (1935).
General Municipal Law, § 450 et seq., the New York "Sewer Rent Law", sets forth statewide guidelines for imposing sewer rents. In relevant part General Municipal Law, § 451 provides:
More specifically, Public Authorities Law, § 1175 et seq. entitled "The Buffalo Sewer Authority Act" (Chapter 349 of the Laws of 1935) both created the Buffalo Authority and delineated its powers and duties. In relevant part, the Act provides:
" § 1178 Powers of the authority
The authority shall have the power:
(11) To fix and collect rates, rentals and other charges for services rendered by the authority . . ." (Emphasis supplied.)
Thus, the Act empowers the Authority to impose sewer rents and sets forth the bases for establishing same.
In Robertson v. Zimmerman, supra, the Court of Appeals ruled on the constitutionality and scope of the Buffalo Sewer Authority Act (Public Authorities Law, § 1175 et seq.). Justice Hubbs upheld the constitutionality of the Act against a local taxpayer's challenge and set forth the constitutionally permissible interpretation of the provisions.
Referring specifically to the sewer rents now in question, the court held the Authority was lawfully given complete jurisdiction:
Supra, 268 N.Y. at 57, 196 N.E. at 741.
Thus, the Authority's power to impose sewer rents upon all property serviced was upheld.
The court further defined the constitutionally permissible basis for charging such sewer rents by holding:
Supra at 64, 196 N.E. at 744. (Emphasis supplied.)
Clearly, the Authority's power to impose sewer rents was upheld so long as such rents were not a tax but rather a charge based solely on services actually rendered. Conversely, sewer rents computed on the basis of assessed property valuation would be per se unlawful. See also Silkman v. Board of Water Commissioners of the City of Yonkers, 152 N.Y. 327, 46 N.E. 612 (1897).
Another recent decision similarly distinguished taxes from charges based upon services actually rendered and upheld only the latter. In Rock Hill Sewerage Disposal Corp. v. Town of Thompson, 27 A.D.2d 626, 276 N.Y.S.2d 188 (2d Dept. 1966), Justice Brink rejected a constitutional challenge to annul sewage charges imposed by a sewage disposal company pursuant to General Municipal Law, § 451 supra. It should be noted the use-related bases for charging sewer rents contained in General Municipal Law, § 451 are nearly identical to those in the Buffalo Sewer Authority Act, § 1180 of the Public Authorities Law.
In holding such charges did not deprive the city of property without due process of law, the court stated that § 451:
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