In the Matter of Norman E. Roth, et al., Appellants,v.City of Syracuse, et al., Respondents. (And Other Proceedings.)

Brief

N.Y.May 1, 2013

To be Argued by: ALAN J. PIERCE (Time Requested: 20 Minutes) Onondaga County Index Nos. 2001-2698, 2002-3223, 2003-2666, 2004-2269 Court of Appeals of the State of New York In the Matter of the Application of NORMAN E. ROTH, STAMPEDE, LLC, STAMPEDE II, LLC, STAMPEDE III, LLC, STAMPEDE IV, LLC, STAMPEDE V, LLC, and UNIVERSITY HILL REALTY, LLC, Petitioners-Appellants, – against – THE CITY OF SYRACUSE, NEW YORK, THE BOARD OF ASSESSMENT REVIEW OF THE CITY OF SYRACUSE and JOHN GAMAGE, THE COMMISSIONER OF ASSESSMENT OF THE CITY OF SYRACUSE, Respondents-Respondents, For a Review of Tax Assessments Under Article 7 of the Real Property Tax Law. BRIEF FOR PETITIONERS-APPELLANTS HANCOCK ESTABROOK, LLP Alan J. Pierce, Esq. Attorneys for Petitioners-Appellants 100 Madison Street, Suite 1500 Syracuse, New York 13202 Tel.: (315) 565-4500 Fax: (315) 565-4600 Dated: September 25, 2012 {H1854302.1} i CORPORATE DISCLOSURE STATEMENT Pursuant to Rule 500.1(f) Petitioners state that Petitioners Stampede, LLC, Stampede II, LLC, Stampede III, LLC, Stampede IV, LLC, Stampede V, LLC, and University Hill Realty, LLC are all limited liability companies under New York law and wholly owned by Petitioner Norman E. Roth, and that none of the Petitioners have any parent, subsidiary or affiliate companies. {H1854302.1} ii TABLE OF CONTENTS Page CORPORATE DISCLOSURE STATEMENT ........................................................ i TABLE OF AUTHORITIES ................................................................................... v PRELIMINARY STATEMENT ............................................................................. 1 QUESTIONS PRESENTED .................................................................................... 6 STATEMENT OF FACTS ...................................................................................... 6 Petitioners’ Protests And Commencement Of These Proceedings .......................... 7 Trial Evidence Regarding The Subject Properties ................................................... 9 Unrebutted Testimony And Evidence From Envirologic, CRAL, And Marinich On The Presence Of Lead And The Cost To Cure ........................ 13 Petitioners’ Expert Appraisal Reports and Testimony ............................................ 18 The City’s Expert Reports And Testimony ............................................................. 27 The City’s Recognition Of Lead Paint Hazards ...................................................... 30 The Decisions of Supreme Court And The Appellate Division .............................. 34 ARGUMENT POINT I: PETITIONERS ESTABLISHED THE REQUESTED REDUCTION IN VALUE IN THE SUBJECT PROPERTIES BY THE COST TO CURE THE LEAD PAINT CONTAMINATION AT EACH PARCEL, AND SUPREME COURT’S CONCLUSION TO THE CONTRARY IS ERRONEOUS AS A MATTER OF LAW ..................................................................................... 39 A. The Legal Principles Established In Commerce Holding .............. 39 {H1854302.1} iii B. Commerce Holding Is Applicable To Asbestos In New York ........ 42 C. The Legal Principles Of Commerce Holding Are Applicable Where The Property Owner Is Not Required, And Has Not Agreed, To Remediate The Contamination .................................... 43 D. The Contamination Of Property By Underground Toxins, Asbestos, And Lead-Based Paint Are Legally The Same And There Is No Basis To Distinguish Between Such Contaminants In The Valuation Of Real Property........................ 47 E. Supreme Court’s Erroneous Application Of The Commerce Holding Principle ............................................................................... 53 1. Supreme Court Improperly Converted The Commerce Holding Test From “Environmental Contamination” To An Imminent Health “Hazard” ......................................... 54 2. Supreme Court Required Petitioners To Demonstrate That They Were Under A Current Requirement To Remediate The Lead Paint On The Subject Properties Or Had Agreed To Do So In Contravention Of Commerce Holding .................................................................. 59 3. Supreme Court Erroneously Required Petitioners To Establish That They Subjectively And Objectively Knew The Subject Properties Were Contaminated Before Commencing These Proceedings ............................................ 64 F. The Legal Issues Presented In This Case Are Not Beyond Review By This Court As A Result Of Affirmed Findings Of Fact ...................................................................................................... 66 G. Conclusions As To Valuation and Proper Tax Assessments For Tax Years 2001-2004 .................................................................. 72 {H1854302.1} iv POINT II EVEN DISREGARDING THE LEAD PAINT CONTAMINATION, PETITIONERS ESTABLISHED THAT EACH OF THE SUBJECT PROPERTIES WERE OVER-ASSESSED .............................................. 75 CONCLUSION ........................................................................................................ 81 APPENDIX Syracuse Lead Program .......................................................................................... A1 “Lead Safety For Renovation Repair And Painting,” EPA Course Book for Certification as Lead Paint Renovator .................................................................. A20 {H1854302.1} v TABLE OF AUTHORITIES Page STATE CASES Adams v. Rizzo, 13 Misc3d 1235(A) (Sup Ct, Onon Co 2006) ............................... 47 Affronti v. Crosson, 95 NY2d 713(2001) ................................................................ 57 Alexander’s Dept. Store of Valley Stream, Inc. v. Board of Assessors, 227 AD2d 549 (2d Dep’t 1996) ................................................................ 5, 42, 45 Allied Corp. v. Town of Camillus, 80 NY2d 351 (1992) ............................... 4, 60-61 Ames Dept. Stores Inc. v. Assessor of Town of Greenport, 276 AD2d 890 (3d Dep’t 2000) .......................................................................... 53 B. Altman & Co. v. City of White Plains, 57 NY2d 904 .......................................... 71 Chapman v. Silber, 97 NY2d 9 (2001) .................................................................... 50 City of Buffalo v. J.W. Clement Co., 28 NY2d 241 (1971) ..................................... 62 City of New York v. Mobil Oil Corp., 12 AD3d 77 (2d Dep’t 2004) ....................... 61 Consolidated Edison Co. of New York, Inc. v. City of New York, 8 NY3d 591 (2007) ............................................................................................. 72 Criscuola v. Power Authority of State of New York, 81 NY2d 649 (1993) ......... 4, 41 D'Agostino v. Forty-Three East Equities Corp., 12 Misc3d 486 (NY City Civ Ct 2006) ........................................................................................ 49 Fields v. Fields, 15 NY3d 158 (2010) ..................................................................... 68 Harrison & Burrowes Bridge Constructors, Inc. v. State of New York, 42 AD3d 779 (3d Dep’t 2007) ............................................................................ 50 In re Roth, 78 AD3d 1590 (4th Dep’t 2010)............................................................ 38 In re City of Syracuse Indus. Development Agency (Alterm, Inc. and Alaskan Oil Co.), 20 AD3d 168 (4th Dep’t 2005) .......................... 51, 53, 61 Juarez v. Wavecrest Management Team, Ltd., 88 NY2d 628 (1996) .... 48, 49, 50, 52 {H1854302.1} vi Matter of Bass v. Tax Commn., 179 AD2d 387 (1st Dep’t 1992) ....................... 4, 42 Matter of Church & Dwight v. City of Syracuse, 52 AD3d 1269 (4th Dep’t 2008) ......................................................................... 34 Matter of Commerce Holding Corp. v. Board of Assessors of the Town of Babylon, 88 NY2d 724 (1996) .....................................................................passim Matter of Northville Indus. Corp. v. Board of Assessors, 143 AD2d 135 (2d Dep’t 1988) .......................................................................... 44 Matter of Northville Indus. Corp. v. State of New York, 14 AD3d 817 (3d Dep’t 2005) ............................................................................ 42 Matter of Welch Foods, Inc. v. Town of Westfield, 222 AD2d 1053 (4th Dep’t 1995) ................................................................... 4, 42 Mola Dev. Corp. v. Orange County Assessment Appeals Bd., 80 Cal App 4th 309 (Ct App, 4th Dist 2000) ...................................... 5, 45, 46, 63 New York City Coalition to End Lead Poisoning, Inc. v. Vallone 100 NY2d 337 (2003) ............................................................................. 49, 51, 52 People v. Sanchez, 98 NY2d 373 (2002) ................................................................. 57 People v. Woods, 30 AD3d 983 (4th Dep’t 2006) ................................................... 57 University Plaza Realty Corp. v. City of Hackensack, 624 A2d 1000 (Sup Ct, App Div 1993) .................................................... 5, 46, 63 Westling v. County of Mille Lacs, 543 NW2d 91 (Sup Ct. Minn 1996) .............. 4, 61 Weyerhaeuser Co. v. Easter, 894 P2d 1290 (Sup Ct Wash 1995) ................ 5, 46, 63 Williamsburg Around the Bridge Block Ass'n v. Giuliani, 223 AD2d 64 (1st Dep’t 1996) ........................................................................... 52 FEDERAL STATUTES 15 USC §§ 2681-2692.................................................................................. 36, 50, 59 STATE STATUTES N.Y. Const., Article XVI, § 2 .................................................................................. 39 {H1854302.1} vii Public Health Law § 1372 ........................................................................................ 47 Public Health Law § 1373 ........................................................................................ 50 Public Health Law §§ 1370-1376-a ................................................................... 50-51 OTHER AUTHORITIES http://www.syracuseleadprogram.com .................................................................... 58 http://www.epa.gov/lead/pubs/renovation.htm ........................................................ 66 “Lead Safety For Renovation Repair And Painting,” EPA Course Book for Certification as Lead Paint Renovator ..................................................................... 66 {H1854302.1} 1 PRELIMINARY STATEMENT The primary issue on appeal is the legal significance and effect of the undisputed presence of, and substantial cost to cure, extensive lead paint contamination on the assessed value of five residential rental parcels of property under Matter of Commerce Holding Corp. v. Board of Assessors of the Town of Babylon, 88 NY2d 724 (1996). Petitioners appeal, pursuant to CPLR 5602(a)(1)(ii) and leave granted by this Court on June 26, 2012 (R2538), from a final Order of the Supreme Court, Onondaga County, entered on March 20, 2012 (R2533) bringing up for review under CPLR 5501(a)(1) the non-final Appellate Division Order entered on November 12, 2010. (R2531) The Appellate Division Order affirmed, “for reasons stated by Supreme Court,” a Decision and Final Order of the Supreme Court, Onondaga County (Greenwood, J., Presiding) entered on March 12, 2009. (R5a) Following a four day non-jury trial, the Decision struck the appraisals and expert testimony of Respondents-Respondents City of Syracuse, New York, The Board Of Assessment Review of The City Of Syracuse and John Gamage, The Commissioner of Assessment of The City of Syracuse, County Of Onondaga (“Respondents” or “the City”), but denied the Petitions for a reduction in the real estate assessments for tax years 2001-2004 based upon lead paint contamination of five (5) rental properties owned by Petitioners. {H1854302.1} 2 This case presents the application of well-established principles of law – developed in New York and applied in other jurisdictions – regarding the effect of environmental contamination on tax assessments to a new contaminate – lead paint. It is undisputed in this case that Petitioners’ five subject properties have extensive lead and lead paint contamination, but that the contamination is not in a condition that requires Petitioners to remediate the contamination under Federal or State law, except with respect to exterior soil levels. In this case, Supreme Court only paid lip service to the legal test established in Commerce Holding that “because environmental contamination can depress a parcel’s true value it must be considered in assessing real property.” Id. at 727. In reality, however, Supreme Court “reworked” the Commerce Holding test to impose three (3) onerous burdens on Petitioners not recognized in Commerce Holding or any precedent. First, Commerce Holding and a wealth of authority requires that all “environmental contamination” be considered in tax assessments. See 88 NY2d at 727 (“Because environmental contamination can depress a parcel's true value, *** it must be considered in assessing real property tax.”) Supreme Court, however, required Petitioners to demonstrate that the subject properties not only contained “environmental contamination” in the form of lead paint, but that the condition of the lead paint was a health “hazard” that required “remediation.” (R11a-12a, 14a); {H1854302.1} 3 Second, Supreme Court imposed a related requirement on Petitioners – not imposed in Commerce Holding or its progeny – to demonstrate that they had a legal obligation, or had agreed, to remediate the lead paint on the subject properties before they could obtain a reduction in tax assessment. (R13a) (“Petitioner is not required by federal, state or local law to remove the lead and lead-based paint from the subject property.”); and Third, in attempting to distinguish Commerce Holding, Supreme Court required Roth to both subjectively and objectively know with certainty, prior to commencing these proceedings, that the subject properties were contaminated and accordingly were over-assessed: “Commerce Holding is distinguishable “inasmuch as that case involved a parcel of industrial property wherein environmental contamination had been determined [i.e., the owner was ordered to remediate the site] prior to the tax certiorari proceeding [being] brought by the petitioner.” (R18a) In addition to conflicting with Commerce Holding’s requirement that all “environmental contamination” be considered in tax assessments, the additional burdens imposed by Supreme Court in this case are contrary to: 1. established law in New York and other jurisdictions that real property tax assessments may be reduced for “environmental stigma” even after all pollution or contamination has been remediated or removed. See, e.g., Commerce {H1854302.1} 4 Holding, 88 NY2d at 732 (“to assess the effects of environmental contamination, there are certain factors that should be considered *** includ[ing] *** the stigma remaining after cleanup ”); Allied Corp. v. Town of Camillus, 80 NY2d 351, 356 (1992) (“[n]o finding of contamination of Allied's wastebeds has been made, but many of the same economic considerations are present, most notably the “stigma” attached to environmentally damaged land in the eyes of any potential buyers ***”); Westling v. County of Mille Lacs, 543 NW2d 91, 93 (Sup. Ct. Minn. 1996) (cited with approval in Commerce Holding) (court may properly find that the stigma discount alone for environmental contamination to improved commercial real property support finding that the property has $0 market value for tax purposes, although the property generated $144,000 in annual rent); 2. Criscuola v. Power Auth. of the State of N.Y., 81 NY2d 649 (1993), which held that claimants were entitled to recover damages for the diminution in value of 94 acres resulting from a loss in market value based on the public’s perception of health risks associated with electromagnetic fields [EMFs], i.e., “cancerphobia,” not an actual health “hazard” requiring remediation; 3. the application of Commerce Holding principles to assessments for the presence of “non-friable asbestos” that is not a health hazard because it does not need to be remediated immediately. See, e.g., Matter of Bass v. Tax Commn., 179 AD2d 387 (1st Dep’t 1992); Matter of Welch Foods, Inc. v. Town of {H1854302.1} 5 Westfield, 222 AD2d 1053, 1054 (4th Dep’t 1995); Alexander's Dept. Store of Valley Stream, Inc. v. Board of Assessors, 227 AD2d 549, 551 (2d Dep’t 1996); 4. decisions in sister states following Commerce Holding’s conclusion that petitioners in tax assessment cases receive the benefit of a reduction in assessment for each tax year in the full amount of the cost to cure, rather than only amount actually expended by the property owner in remediating contamination in that tax year (88 NY2d at 731-732), even if the owner has no order or agreement to remediate the contamination. See Weyerhaeuser Co. v. Easter, 894 P2d 1290 (Sup Ct Wash 1995); Mola Dev. Corp. v. Orange County Assessment Appeals Bd, 80 Cal App 4th 309, 321-322 (Ct. App., 4th Dist. 2000); University Plaza Realty Corp. v. City of Hackensack, 624 A2d 1000 (NJ Sup Ct, App Div 1993); and 5. the undisputed facts that (a) lead paint itself, not just “flaking, peeling or chipping lead paint” (R11a), has been banned in New York since at least 1970 as a contaminate and toxin, see Public Health Law § 1372; and (b) the City has declared that lead paint itself – not “flaking, peeling or chipping” lead paint – is “a hazardous material” and a “poison” (R2433), and the City provides Federal funds for low income homeowners to remediate lead paint on their properties with no requirement that the lead paint be in what Supreme Court called a “hazardous” condition (“flaking, peeling or chipping”) or be subject to mandatory remediation under Federal or State law. {H1854302.1} 6 QUESTIONS PRESENTED 1. Are lead and lead-based paint forms of “environmental contamination” subject to the principles of Commerce Holding? 2. Given the established law in New York and sister jurisdictions that environmental “stigma” and “cancerphobia” must be considered in the valuation of real property, is Commerce Holding applicable where the property owner is not required, and has not agreed, to remediate environmental contamination? 3. Did Supreme Court erroneous apply the principles of Commerce Holding in this case? 4. Did Petitioners establish the requested reduction in value in the subject properties by the cost to cure the lead paint contamination at each parcel? 5. Even disregarding the lead paint contamination, did Petitioners establish that each of the subject properties was over-assessed? STATEMENT OF FACTS The facts are taken from the pleadings, trial testimony, and exhibits received into evidence in this matter during a four day non-jury trial before Honorable Donald A. Greenwood in Supreme Court, Onondaga County, on October 14-17, 2008. {H1854302.1} 7 Petitioners’ Protests And Commencement Of These Proceedings For each of the tax years at issue on this appeal (2001-2004), Petitioners timely protested the assessments on each of the five (5) subject properties (as well as many others) after the assessment roll was made. Petitioners filed with Respondent Board of Assessment Review (“BAR”) complaints specifying that each of the assessments were excessive by reason of the failure to consider the cost to remediate the presence of lead paint and asbestos at each property. (R734-1524) For each property and each tax year (2001-2004), Petitioners included a copy of Commerce Holding, and cost estimates for remediation of lead paint and asbestos for each parcel. (R734-746, 945-956, 1130-1144, 1319-1356) The BAR conducted hearings on Petitioners’ complaints. Roth personally appeared and asserted before the Board that the assessment for each of the subject parcels were excessive due to Respondents’ failure to consider the cost to remediate the presence of lead paint and asbestos at each parcel. (R1715-1716, 1740-1741, 1771, 1803 [Petitions, ¶¶5-6] ) The BAR denied each and every one of Petitioners’ requests for a reduction in assessments for the subject properties from 2001 through 2004. (R1525-1544) These proceedings were commenced by filing and service of Verified Petitions for each of the tax years in question for a review of the tax assessments, under Article 7 of the Real Property Tax Law (“RPTL”), of numerous, separate tax {H1854302.1} 8 parcels in the City owned by Petitioners. (R1709-1827) Roth is the sole member of each of the limited liability Petitioners in this proceeding. (R1711, 1736, 1766, 1798) The parcels are identified by their common street address and by tax map numbers and other detailed information in each Notice of Petition and Verified Petition. Although each of the properties and their dwellings do vary in age, size, and number of rental units, each is a residential property leased by Petitioners to third parties and are located in the Syracuse University campus area. The sole issue raised in each proceeding is whether the assessments for each of the parcels is excessive by reason of being overvalued because Respondents failed to consider the costs to remediate the contaminants of lead paint and asbestos within, on, and adjacent to the dwellings found on each parcel. (R1745, 1776, 1808 [“excessive and illegal by reason of over valuation in that the assessments fail to consider the influence of environmental problems ***.”] ) The parties entered into a pre-trial stipulation and agreement, so-ordered by the trial court, to proceed to trial as to the following five “subject properties”:  116 Victoria Place, Syracuse, NY  125 Victoria Place, Syracuse, NY  960 Lancaster Avenue, Syracuse, NY  965 Lancaster Avenue, Syracuse, NY  126 Harvard Place, Syracuse, NY The remaining tax certiorari proceedings and more than forty (40) of Petitioners’ properties at issue in the then pending proceedings were expressly held in {H1854302.1} 9 abeyance to be addressed pursuant to a supplemental Order of the Court. The Verified Petitions requested reductions in assessments of the five subject properties as follows: Property Assessment for 2001-2004 Requested Reduction 116 Victoria Place $75,000 $20,000 125 Victoria Place $70,000 $20,000 960 Lancaster Ave. $65,000 $20,000 965 Lancaster Ave. $65,000 $25,000 126 Harvard Place $60,000 $20,000 Trial Evidence Regarding The Five Subject Properties At trial the Court received into evidence the real estate tax invoices for each property and each tax year (R699-733 [Exhs 1-4] ), Petitioners’ Complaints to the BAR (R734-1524 [Exhs 5-8] ), the BAR determinations denying any reduction in tax assessment (R1525-1544 [Exhs 9-12] ), Petitioners’ Verified Income and Expense Statement for each tax year (R1545-1708 [Exhs 13-16] ), and the Notice of Petition and Verified Petition for each tax year. (R1709-1827 [Exhs 17-20] ) No evidence was received at trial that rebutted the information contained in Petitioners’ Verified Income and Expense Statements. Roth testified that after graduating from the SUNY Environmental Science and Forestry (“ESF”) school at Syracuse University in 1974 he began investing in residential homes in the University area. (R10) All of the properties at issue here are located in an area commonly known as “University Hill” in Syracuse. The {H1854302.1} 10 properties are generally utilized for student rental housing. (R19) Roth testified that he is the sole member of the other Petitioners, and that the subject properties were purchased by Petitioners between 1977 and 1979. (R11) When the properties were purchased, the sellers never disclosed the existence of lead, lead paint or asbestos. (R12) Prior to purchasing the subject properties Petitioners did not have any lead or asbestos testing performed. (R13) The properties were first tested to verify the expected presence of lead paint and lead contamination in 2008 by a licensed professional hired by Roth for purposes of these proceedings. (R13-14) Roth identified the photographs and lay outs of each of the five subject properties from the self-contained appraisals of each property prepared by Richard Kelley (“Kelley”) for these proceedings, and testified that the photos and lay outs were representative of each property from 2001-2004. (R15-17) Each property had one bedroom for each student tenant (at least five for each parcel), and each had a certificate of suitability from the City if required. (R17-18) Roth identified the BAR Complaints that he personally prepared without the assistance of counsel starting in 2001 to grieve the real property taxes for each of the five subject properties because of “environmental issues.” (R22-23) Each packet contained the complaint, the Commerce Holding case, a completed income expense data form required by the City, the then current signed lease for the property, general information printed off the City real property tax website for each {H1854302.1} 11 parcel, a floor plan he prepared, a Saber Systems investment capitalization statement as to value, equalization rate for each property, and the paid tax bill. (R24-28, 734-775 [Tax Year 2001, 126 Harvard Place] ) Each BAR Complaint also included preliminary estimates for the cost of lead abatement and a proposal for asbestos abatement from Environmental Products and Services, Inc. for each of the subject properties. (R744-746, 954-956, 1142-1144, 1355-1358) Roth provided these estimates to the BAR because “these properties most probably ha[d] asbestos and lead and this would be my guesstimate to mitigate to remediate it. (R75-76) Roth testified that when he grieved the taxes for these properties starting in 2001 he did not have a “full comprehension” of the “extent of lead contamination of the five properties,” but “had some rough ideas that turned out to be very low.” (R42, 76) Prior to the 2008 testing of the subject properties, Petitioners believed the rental properties had lead-based paint given the age of the properties, but no formal testing had been performed. (R79) Each of the five subject properties were constructed pre-1978. (R185) Petitioners’ BAR Complaints assert that the value of the properties were adversely impacted by lead and asbestos contamination, but Petitioners did not then have available the precise costs relative to lead remediation and related construction costs. (R42) Because Roth did not have any test results confirming lead paint, he was advised by the EPA to complete the lead disclosure form contained in his leases that are part of {H1854302.1} 12 the BAR Complaints that he has no knowledge of lead-based paint and/or lead paint hazards in the housing. (R76-77, 79-80) The BAR Complaints and the Verified Petitions alleged the existence of asbestos as well as lead and lead paint. The expense of remediating the lead and lead paint was so high and the company (EPS) that Roth used for preliminary asbestos abatement costs in 2000 – and included in the BAR Complaints – no longer tested residential properties, so Roth did not pursue testing for asbestos and estimates for asbestos remediation in 2008. (R41-42) The five properties were never listed for sale individually or as part of a larger group during the subject time period of 2001 through 2004. (R43) The subject properties continued to be owned by Petitioners through the date of trial. No offer for a sale of the subject properties, either individually or as part of a larger sale of assets owned by Petitioners, was ever consummated. No offer for the properties was ever received by Petitioners which did not include a demand by the prospective purchaser that Petitioners hold financing. (R57-60) Since commencing these proceedings, Roth has purchased other pre-1978 built properties in Syracuse, and has asked for lead paint disclosure, and he has asked for a reduction in price for the possible existence of lead paint. (R187-188) The specific properties raised by the City’s attorney were all purchased before he {H1854302.1} 13 obtained the expert information in 2008 on the presence and cost to remediate lead paint at the five subject properties in 2008. (R191) Unrebutted Testimony And Evidence From Envirologic, CRAL, And Marinich On The Presence Of Lead And The Cost To Cure Roth retained Envirologic of New York, Inc. (“Envirologic”) to test for lead and lead-based paint at the subject properties in 2008. (R38-39) Envirologic lead paint risk assessor Peter Koslowsky (“Koslowsky”) provided unrebutted testimony as to the existence of lead-based paint in both the interiors and exteriors of the subject properties. Koslowsky is certified to conduct lead-based paint analyses by the EPA and has been certified to utilize a device known as the RMD XRF gun (“XRF gun”). (R86, 98, 1937-1939 [Exh 21, Appendix E, e.g.] ) 1 Koslowsky tested the subject properties for the existence of lead and lead-based paint with the “XRF” gun. (R89-91) The City acknowledged that the use of a “XRF” or “lead gun” is an appropriate manner to determine whether lead paint is present. (R628) Envirologic prepared a report setting forth the level of lead-based paint for each of the subject properties. The Envirologic charts state whether lead is present in the interior of the properties at or above 1.0 milligrams per square centimeter. 1 The Appraisal Reports for each of the five subject properties contain much of the same information or at least in the same format. Rather than cite to duplicate information in all five Reports, we will cite in many situations to one Report as an “example” and note this by the reference “e.g.”. {H1854302.1} 14 (R92-93, 1910-1927, 1937-1939 [Exh 21, Appendix E, e.g.] ) The 1.0 mg/square cm standard utilized by Envirologic for lead paint was established by the United States Department of Housing and Urban Development (“HUD”). (R93) Respondents did not submit any evidence which contradicts the determinations of Envirologic as to the existence of lead and paint at the subject properties. For example, with respect to the dwelling at 126 Harvard Place, the Envirologic Report (R1910-1937) states that many exterior and interior “components” of the dwelling tested positive for “the presence of lead at or above the HUD Guidelines action level.” (R1913-1914) The attached chart shows positive (1.0 or higher) readings for 111 different components, including 62 that were “9.9” or “>9.9” vs. the 1.0 mg HUD standard. (R1917-1923) Envirologic made similar lead contamination findings at each of the other four subject properties. (R2034-2041 [116 Victoria St.]; R2154-2162 [960 Lancaster Ave]; R2274-2282 [965 Lancaster Ave]; R2392-2402 [125 Victoria Place] ) In addition to testing interior and exterior “components” of the dwellings, Envirologic tested soil samples in the yard at each property. For example, with respect to the soil testing performed at 116 Victoria Place, Envirologic found that the soil on two (2) out of four (4) “drip lines” of the dwelling had lead levels in excess of the HUD guideline of 5,000 ppm “requiring permanent abatement,” such as “removal and replacement of the contaminated soil, or the implementation of {H1854302.1} 15 permanent barriers, such as paving.” (R2051, 2052-2053) (Emphasis supplied) In addition, the bare soil area in the rear yard was in excess of the “level of concern” “requir[ing] interim controls,” such as “planting ground cover or shrubbery” or “restricting access to the areas.” (R2051) Again, Envirologic made similar lead contamination findings in the soil at three of the other four subject properties. (R1937-1939 [126 Harvard Place – 3 of 4 areas in excess of level of concern requiring interim controls] R2171-2173 [960 Lancaster Ave – 2 drip lines in excess of level of concern requiring interim controls]; R2291-2294 [965 Lancaster Ave – 1of 4 drip lines require permanent abatement, 2 more require interim controls] ) Envirologic recommended that all painted surfaces that tested positive for lead paint in excess of 1.0 mg that are in fair or poor condition should be remediated by a contractor whose workers are certified in lead safe work practices. (R103-104) Koslowsky testified that minimizing the dangers of exposure to lead are difficult, if not impossible, absent removal of the lead paint from the premises. (R104-105) Efforts to encapsulate lead-based paint are never a permanent solution. Koslowsky testified that “you can encapsulate but the problem with encapsulation is that after years, you know, deterioration, you are just going to get back to the lead paint again.” (R105, 112) He testified that it was the professional opinion of Envirologic and himself that the best way to remediate lead paint is to {H1854302.1} 16 remove it. (R110) Koslowsky provided unrebutted testimony that he observed peeling paint at all of the properties. (R110) Petitioners also retained CRAL Contracting Inc. (“CRAL”) to evaluate the five properties and determine the cost of labor, equipment, and materials necessary for the removal of lead and lead-based paint identified by Envirologic. (R40) CRAL President Craig Zinserling (“Zinserling”) testified that CRAL is an EPA licensed contractor which has performed lead remediation for the City. (R115-117) Zinserling testified that following his inspection of the subject properties he provided five proposals for the removal of lead. The CRAL work would result in the removal of all lead from the subject premises rather than encapsulation. (R122) The City acknowledged that due to the health risks from lead-based paint, the paint should not be removed by owners. Work should only be performed by licensed professionals like CRAL. (R623, 2439) The CRAL proposal included all labor, equipment, and materials necessary to complete the removal of lead, proper hazardous waste disposal of the lead, and the establishment of a health and safety plan during the performance of the work. The CRAL work would be performed within current HUD guidelines, including wet, chemical, and HEPA methods. (R114-134, 1930-1931 [Exh 21, Appendix E, e.g.] ) CRAL has never performed encapsulation as the contamination would still be present and eventually would present a problem for the owner and building {H1854302.1} 17 occupants. (R122-123) Roth testified that he has not hired CRAL to do the lead abatement, but that it is his “intention *** to in fact hire them to remove the lead *** [i]f I have the money to do it.” (R184) Marinich Builders is a remodeling company owned by William J. Marinich (“Marinich”). The company has been in existence for 27 years and performs remodeling for its customers. (R203) Petitioners retained Marinich to provide an estimate for the cost to renovate the five properties after the lead remediation services were performed by CRAL. (R41) The proposals were prepared after Marinich personally inspected the five properties. (R204-205, 1933-1936 [Exh 21, Appendix E, e.g.], 2423-2429 [Exhs 26, 27] ) The Marinich work would generally return the subject properties to the condition in which they existed before the lead paint removal and remediation work to be performed by CRAL. (R210) Marinich considered the expense of returning the properties to the precise condition in which they previously existed. In order to control costs, the proposals contemplate the use of more modern products (e.g., vinyl siding as opposed to wood clapboard) where appropriate. (R211, 1933-1936 [Exh 21, Appendix E, e.g.] ) {H1854302.1} 18 Petitioners’ Expert Appraisal Reports and Testimony Petitioners retained G. Richard Kelley (“Kelley”) of Pomeroy Appraisal Associates, Inc. (“Pomeroy”) to determine the fair market value, and to provide an expert evaluation, of the value of the subject properties. (R41, 239-240) Kelley is a Senior Counselor at Pomeroy, having worked there for 52 years, and is a Member of the Appraisal Institute (“MAI”) in good standing with a license from the New York State Board of Real Estate Appraisers. Kelley was previously the President and Chairman of the Board of the Greater Syracuse Association of Realtors, is the past President of the New York State Society of Real Estate Appraisers, and was on the organization’s Board of Governors. Additionally, Kelley was previously a member of the Board of Directors and President of the New York State Chapter No. 30, which is affiliated with the Appraisal Institute. (R234-238) Kelley’s Appraisal Reports of the value of the subject properties were marked and received into evidence as follows: Exhibit 21, 126 Harvard Place (R1827.1-1942); Exhibit 22, 116 Victoria Place (R1943-2063); Exhibit 23, 960 Lancaster Ave (R2064-2182); Exhibit 24, 965 Lancaster Ave (R2183-2301); and Exhibit 25, 125 Victoria Place. (R2302-2422) Kelley valued the subject properties pursuant to the Uniform Standards of Professional Appraisal Practice (“USPAP”). (R239, 249, 1830 [Exh 21, e.g.] ) His Appraisal Reports contain detailed {H1854302.1} 19 information on the presence and cost to remediate/cure the lead paint contamination at each parcel. (R1869, 1910-1939 [Exh 21, e.g.] ) Kelley has extensive experience in valuing environmentally contaminated properties and has been accepted as an expert witness in numerous courts, including in Supreme Court, Onondaga County. His appraisal reports have always been accepted into evidence and none have been stricken. (R248-251) Kelley testified that he routinely evaluates “environmental stigma” as it relates to the impairment of a property’s value. The issue was not addressed at length in his expert appraisal reports, however, because of the nominal property values obtained even without considering “environmental stigma” in this case. (R252-253, 302-304) Kelley personally inspected both the interior and exterior of each of the subject properties. He also spoke with Roth and obtained relevant data, including income and expense information, from Petitioners. (R258-259) The subject properties were evaluated pursuant to the three standard valuation approaches, namely: (1) sales comparison, (2) income capitalization, and (3) cost basis. (R256, 270-274, 1850-1851 [Exh 21, e.g.] ) Ultimately, although he considered it, Kelley did not utilize the cost approach method of valuing the subject properties because they are rental housing. The cost approach is generally limited to the valuation of {H1854302.1} 20 special-purpose properties. (R272-273, 1850-1851 [Exhs 21, “Valuation Process,” e.g.] ) Kelley also did not utilize the sales comparison approach to property valuation because “information on the status of environmental problems and whether there might be indemnification agreements *** is impossible to obtain, making comparison of the vital factor of property comparison here impossible.” (R271) According to Kelley, there was insufficient data available as to whether other rental properties are, indeed, comparable to the subject properties because the existence of lead and lead paint is not generally disclosed by sellers or identified in available data. (R271-273) During Kelley’s testimony at trial Justice Greenwood stated that “I reject [the City’s] contention that [Kelley] should have used comparable sales ***. He can use the income capitalization approach.” (R312) Thus, Kelley utilized the income capitalization approach in determining the values of the subject properties. The income capitalization approach bases the value of a property on the income that the property is capable of producing. Available data allows the income capitalization approach to be utilized in estimating the subject properties’ values. (R273-274, 280-281, 1850-1851 [Exh 21, “Valuation Process,” e.g.] ). Kelley analyzed a variety of issues related to the income capitalization approach, including capitalization rate, actual income and {H1854302.1} 21 expenses, taxes, and net operating income. (R282-286, 1856-1868 [Exhs 21, Tabs 2001-2004, e.g.] ) After taking into consideration appropriate and relevant data, Kelley determined values for the subject properties’ land and improvements. He based the values upon a hypothetical condition where the properties are not polluted. Kelley derived the following values for the properties “As If Uncontaminated”: Property Valuation Date 126 Harvard Place 1/1/01 1/1/02 1/1/03 1/1/04 Land $18,000 $18,000 $18,000 $18,000 Improvements 22,000 (4,500) -0- 18,000 Totals $40,000 $13,500 $18,000 $36,000 (R1868 [Exh 21, p.36] ) Property Valuation Date 116 Victoria Place 1/1/01 1/1/02 1/1/03 1/1/04 Land $18,000 $18,000 $18,000 $18,000 Improvements (11,400) 17,500 28,500 35,000 Totals $6,600 $35,500 $46,500 $53,000 (R1984 [Exh 22, p.36] ) Property Valuation Date 960 Lancaster 1/1/01 1/1/02 1/1/03 1/1/04 Land $18,500 $18,500 $18,500 $18,500 Improvements 39,500 36,000 29,500 25,500 Totals $58,000 $54,500 $48,000 $44,000 (R2105 [Exh 23, p.36] ) Property Valuation Date 965 Lancaster 1/1/01 1/1/02 1/1/03 1/1/04 Land $18,500 $18,500 $18,500 $18,500 Improvements 30,500 29,000 10,500 25,500 Totals $49,000 $47,500 $29,000 $44,000 {H1854302.1} 22 (R2224 [Exh 24, p.36] ) Property Valuation Date 125 Victoria Place 1/1/01 1/1/02 1/1/03 1/1/04 Land $18,000 $18,000 $18,000 $18,000 Improvements 26,500 20,000 26,000 28,500 Totals $44,500 $38,000 $44,000 $46,500 (R2343 [Exh 25, p. 36] ) The values of the subject properties “As If Uncontaminated” were then evaluated by Kelley based upon the cost of remediation. (R298-301, 2344, [Exh 25, “Market Value as if Remediated,” e.g.) Kelley testified, and it is undisputed, that contaminated property does not have the same value as uncontaminated property. Contaminated property should be valued to determine the amount of impairment to the property’s value. (R2327-2328 [Exh 25, pp. 24-25, e.g.] ) Kelly testified that there is no comprehensive list available to MAI’s as to all types of contaminants (e.g., lead, petroleum, asbestos, mold, etc.) that should be considered as environmental impairments to property. (R404-405) One type of environmental contaminant referenced by learned treatises is “metals.” (R405, 2384 [Exh 25, Appendix D, p. 3, Class VIII, e.g.] ) Kelley testified that determining the value of environmentally impaired property is not derived from a single analytical tool. One overview of the issue is contained in “The Red Report Real Estate Damages & Due Diligence” (“The Red Report”). The Red Report includes a Detrimental Condition Model that was relied {H1854302.1} 23 upon by Kelley, although with certain modifications detailed in his expert Appraisal Reports and testimony. (R277-280, 2381-2385 [Exhs 25, Appendix D, e.g.] ) One distinguishing factor between the types of properties being considered in the Red Report and the subject properties is the size of the properties and the number of rental units. For example, Kelley testified that in this Court’s decision in Commerce Holding there were 37 separate rental units, whereas each of the five subject properties in this case are single units rented to multiple students. (R412- 413, 2380 [Exh 25, Appendix D, e.g.] ) Kelley did not ignore the charts included in the Red Report, but rather he interpreted “the report with more specificity than *** [the] four or five pages could explain.” (R414) Kelley acknowledged that he is not an environmental expert and, consequently, he relied upon the opinions and conclusions of the environmental consultants retained by Roth for the costs associated with the lead paint remediation of the subject properties. These consultants and cost estimates included those of Envirologic, CRAL, and Marinich. (R249, 256-257, 275-276, 2386-2419 [Exh 25, Appendix E, e.g.] ) When questioned by Justice Greenwood “how would the fair market be affected by lead paint contamination in [sic] 2001 taxable status date” when the extent of contamination was not confirmed until testing in 2008, Kelley testified that the lead paint contamination “was very much {H1854302.1} 24 suspected and it certainly was present at that time as it is today and will be until it’s remediated.” (R409-410) Kelley opined that the “As If Unimpaired” value of the properties should be reduced by the cost of environmental remediation and subsequent construction repair costs. According to Kelley, “[i]n order to properly account for remediation, the Cost to Cure is subtracted from the value estimate “As If Uncontaminated” from his report. (R1853 [Exh 21, p. 21, e.g.] ) The Costs to Cure related to the environmental remediation for lead paint at each of the five subject properties are as follows: 126 Harvard Place Analysis Cost: $ 1,297.00 (Envirologic) Removal Cost: $ 49,250.00 (CRAL) Restoration Cost: $ 61,122.29 (Marinich) Total Cost to Cure: $111,669.29 116 Victoria Place Analysis Cost: $ 1,297.00 (Envirologic) Removal Cost: $ 54,650.00 (CRAL) Restoration Cost: $ 73,468.92 (Marinich) Total Cost to Cure: $129,415.92 960 Lancaster Avenue Analysis Cost: $ 1,297.00 (Envirologic) Removal Cost: $ 29,950.00 (CRAL) Restoration Cost: $ 29,374.77 (Marinich) Total Cost to Cure: $60,621.77 {H1854302.1} 25 965 Lancaster Avenue Analysis Cost: ` $ 1,297.00 (Envirologic) Removal Cost: $ 46,750.00 (CRAL) Restoration Cost: $ 40,256.99 (Marinich) Total Cost to Cure: $ 88,303.99 125 Victoria Place Analysis Cost: $ 1,297.00 (Envirologic) Removal Cost: $ 41,850.00 (CRAL) Restoration Cost: $ 99,246,33 (Marinich) Total Cost to Cure: $142,393.33 (R1869, 1985, 2106, 2225, 2344 [Exhs 21-25, p. 37] ) Notably, 960 Lancaster Ave. is the only one of the five subject properties where the cost to cure does not exceed the assessment for the property for each of the four years in question – this property was assessed at $65,000 as of January 1, 2001-2004. Moreover, due to the extensive cost to cure the lead paint contamination at each of the five subject properties, Petitioners opted not to include in Kelley’s Appraisals the cost to remediate the asbestos contamination at each parcel as asserted before the BAR. (R41-42) Taking the environmental impairment of the subject properties due to lead contamination into consideration, Kelley opined that the values of the fee simple interests in the properties as of the taxable status date of January 1st for each year in question, 2001-2004, at issue in this litigation were $1 for each of the subject properties. (R304-305, 308, 404, 409, 1829, 1945, 2066, 2185, 2304 [Exhs 21-25, p. 1] ) {H1854302.1} 26 The following chart summarizes the key assessment and appraisal data with respect to the five subject properties according to Kelley’s unrebutted expert testimony and Appraisal Reports: 960 Lancaster Avenue 1/1/01 1/1/02 1/1/03 1/1/04 Assessment 65,000 65,000 65,000 65,000 Value As if Uncontaminated 58,000 54,000 48,000 44,000 Cost to Cure 60,622 60,622 60,622 60,622 Residual Value 1.00 1.00 1.00 1.00 Requested Reduced Assessment $20,000 $20,000 $20,000 $20,000 965 Lancaster Avenue 1/1/01 1/1/02 1/1/03 1/1/04 Assessment 65,000 65,000 65,000 70,000 Value As if Uncontaminated 49,000 47,500 29,000 44,000 Cost to Cure 88,303 88,303 88,303 88,303 Residual Value 1.00 1.00 1.00 1.00 Requested Reduced Assessment $25,000 $25,000 $25,000 $25,000 126 Harvard Place 1/1/01 1/1/02 1/1/03 1/1/04 Assessment 60,000 60,000 60,000 60,000 Value As if Uncontaminated 40,000 13,500 18,000 36,000 Cost to Cure 111,669 111,669 111,669 111,669 Residual Value 1.00 1.00 1.00 1.00 Requested Reduced Assessment $20,000 $20,000 $20,000 $20,000 125 Victoria Place 1/1/01 1/1/02 1/1/03 1/1/04 Assessment 70,000 70,000 70,000 70,000 Value As if Uncontaminated 44,500 38,000 44,000 46,500 Cost to Cure 142,393 142,393 142,393 142,393 Residual Value 1.00 1.00 1.00 1.00 Requested Reduced Assessment $20,000 $20,000 $20,000 $20,000 {H1854302.1} 27 116 Victoria Place 1/1/01 1/1/02 1/1/03 1/1/04 Assessment 75,000 75,000 75,000 75,000 Value As if Uncontaminated 6,600 35,500 46,500 53,000 Cost to Cure 129,416 129,416 129,416 129,416 Petitioner’s Residual Value 1.00 1.00 1.00 1.00 Requested Reduced Assessment $20,000 $20,000 $20,000 $20,000 The City’s Expert Reports and Testimony William Kimball (“Kimball”) was retained by the City to perform an appraisal of the subject properties. He has been employed by Integra Realty Resources in Syracuse since 2005, and has been an appraiser for 25 years. (R424- 432). Kimball characterized each of the subject properties as “student housing” that was built prior to 1978. (R430-431) He inspected each of the five properties and described them as being in “average condition,” with no peeling paint inside but peeling paint on the exteriors. (R431) He prepared real estate appraisal reports for each of the five subject properties on behalf of the City. (R437-438 [Exhs B-F marked] ) However, as discussed in more detail below, after trial his appraisal reports were stricken, as was any of his testimony related to his Reports. Kimball most recently testified in a tax assessment matter prior to this trial in a matter he referred to as “Church & Dwight” that was also tried before Justice Greenwood. Kimball acknowledged that his expert report for the City of Syracuse was also stricken in that matter on the grounds that his report in that case failed to contain full and complete documentary evidence within the alleged self-contained {H1854302.1} 28 appraisal. (R571-572) He testified that that case involved “an industrial property that did require the cost approach, which is not applicable here,” and that he “did not include the backup material.” (R556-557) Prior to his inspections he was not provided any information about environmental contamination, although he understood that Petitioners’ claim concerned lead paint contamination at the properties. (R431) He was aware when he responded to the City’s request for proposals (“RFP”) to prepare the appraisal reports that Roth had raised an issue about environmental contamination of the properties, and that the alleged contaminant was lead paint. He is not an expert on lead paint, whether lead paint is present, the cost of remediating lead paint, the nature of remediation (encapsulation vs. removal) or the costs related to lead paint abatement and removal. (R566-568) Thus, Kimball testified that he was not qualified to detect hazardous substances at the subject properties. (R565-566, 587) Kimball acknowledged the necessity in certain instances of referring to and relying upon the expert analysis of other consultants in order to complete an appraisal. (R570, 573-574) However, he did not request assistance from an appropriate environmental expert nor did he recommend that the City consider such experts in this case or suggest that the City retain a lead paint expert. (R567-568) Kimball’s sole experience in evaluating environmentally contaminated properties involved industrial property in New Jersey – he has never evaluated {H1854302.1} 29 environmentally contaminated properties in the State of New York – and he has never previously testified in a case involving environmental contamination issues. (R569-570) Despite having no experience with lead paint Kimball did not review any treatises to determine how to address the general issue of environmental impairment or the specific issue of lead paint contamination as part of his retention by the City to value the subject properties, and did not consult with any other MAI’s. (R570-571) In fact, he admitted that he has never reviewed any advisory opinions or treatises with respect to environmental impairment issues. (R571) Kimball acknowledged that lead-based paint and lead as a gasoline additive were both “outlawed” in this country several decades ago. (R581) As a result of the dangers of lead exposure, Kimball is aware that there are government sponsored lead abatement programs. (R581-582) Kimball acknowledged that all five subject properties are contaminated with lead paint, but since he is “not a lead expert” he did not have an understanding as to the extent of the lead contamination. (R584) He admitted, however, that when he responded to the City’s RFP he “wasn’t certain” if he “consider[ed] the report of lead contamination to be an environmental hazard.” (R589) He “glanced” at the Envirologic and CRAL reports before testifying, but did not “comprehensively read them.” (R582-583) {H1854302.1} 30 The City’s Recognition Of Lead Hazards Kelley testified that lead is a hazardous substance that is detrimental to human health. (R405) In fact, the City has sought to address lead contamination issues by employing a Program Manager for the City of Syracuse Lead Program. At the time of trial, that position was held by Elizabeth Mokrzycki (“Mokrzycki”). She testified that her duties and responsibilities include managing and administering the HUD funded grant that the City has totaling over $10 million (R609-610), and training and certification of lead contamination contractors. Mokrzycki also is a certified lead inspector and certified in lead safe work practices. (R609) She testified that the City Lead Program must follow “HUD regulations of the lead safe work practices where any hazards that are noted or found on a risk assessment or lead inspection have to be corrected or risk reduced.” (R610) She testified that there is no specific requirement whether to remove lead or to encapsulate it and allow it remain in place, and that it “would be in the opinion of *** the project designer or the architect or the engineer *** to decide if they wanted to remove something and do total abatement.” (R611-612) Although Mokrzycki equivocated as to whether lead is always hazardous, she acknowledged that lead dust and lead in the soil above the limits set by the EPA “is considered hazardous.” (R616) She also admitted that if lead is ingested it is a poison. (R617) Moreover, she agreed with the following statement taken from {H1854302.1} 31 the Lead Hazard Control Program page of the City’s web site: “Health effects of exposure to lead affects practically all systems within the body. At high levels it can cause convulsions, coma and even death. Lower levels of lead can adversely affect the brain, central nervous system, blood cells and kidneys.” (R617, 2438) As a result of the consequence of the known hazards from the exposure to lead, the City conducts a Lead Hazard Control Program reflected in Trial Exhibits 33 and 34 taken from the City’s website. (R618, 2433-2443) The City specifically advises property owners and others “Do not remove lead paint yourself.” (R623, 2439) Mokrzycki admitted that with “normal wear and tear” lead painted windows and doors would last “not more than 20 years” without deterioration that would expose lead dust. (R627) Notably, the City’s Lead Hazard Control Program web site, as it existed at the time of trial in October 2008 stated, inter alia, that “[s]ince lead is a hazardous material, the proper removal and/or encapsulation does require certain strict guidelines and handling methods. *** Lead is found largely on painted surfaces, in soil, water and in dust. Homes built prior to 1978 are [illegible] for lead contamination. Lead is a poison ***.” (R2433) (Emphasis supplied) Notably, the City’s program of “financial assistance to reduce lead hazards” contains several requirements, none of which include that the property “contain[] deteriorating, flaking, chipping or peeling lead” paint. (R2433-2434, 17a) {H1854302.1} 32 In addition, Exhibit 34 contains the following information from the City’s Lead Hazard Control Program web site as of October 2008: The City’s Lead Program continues to significantly reduce lead hazards in the City’s housing stock. With an estimated 60% of the housing units built prior to 1940, lead is certainly an issue in this upstate city. *** Creating lead-safe housing, decreasing the number of children with elevated blood lead levels, general overall environmental improvements and a continual education process for families living within the City of Syracuse are all goals for our small but determined staff. *** Reduce the risk from lead-based paint. As mentioned above, most homes built before 1960 contain heavily leaded paint, and some homes built as recently as 1978 may also contain lead paint. This paint could be on window frames, walls, the outside of homes, or other surfaces. Do not burn painted wood since it may contain lead. *** Do not remove lead paint yourself. Individuals have been poisoned by scraping or sanding lead paint because these activities generate large amounts of lead dust. Consult your state health or housing department for suggestions on which private laboratories or public agencies may be able to help test you home for lead in paint. Home test kits cannot detect small amounts of lead under some conditions. Hire a person with special training for correcting lead paint problems to remove lead-based paint. *** Do not bring lead dust into the home. *** You may also be tracking in lead from soil around your home. Soil very close to homes may be contaminated from lead paint on the outside of the building. *** Encourage your children to play in sand and grassy areas instead of dirt which sticks to fingers and toys. Try to keep your children from eating dirt, and make sure they wash their hands when they come inside. (R2436-2439 [Emphasis supplied] ) {H1854302.1} 33 The Onondaga County Department of Health (“DOH”) also recognizes lead as a hazardous substance. The County has established a Lead Poisoning Control Program, and at the time of trial Inga Back (“Back”) was the Program Coordinator. (R629-630) She testified that the County performs a variety of tasks in order to ameliorate the dangers of lead in the environment. The County has an active case management program to identify elevated levels of lead in blood, performs environmental inspections, and conducts a prevention program to inspect properties. Although some of these activities are directed primarily towards children, and in particular those with reported elevated lead blood levels, the County has “an active ** primary prevention program where [it] inspects properties that are not necessarily associated with children in an effort to prevent lead poisoning before it happens.” (R630-631) It also has an active enforcement program, called “notice and demand” where, under the Public Health Law, it can require a property owner to correct lead hazards, initiate an administrative hearing, assess fines, placard the property, and/or attach the notice and demand to the property deed. (R631) All of these enforcement devices are available simply upon the County receiving a complaint of lead or lead paint. (R632) {H1854302.1} 34 The Decisions Of Supreme Court And The Appellate Division Supreme Court’s March 12, 2009 Decision (R7a-20a) first granted Roth’s trial and post-trial motions to strike Kimball’s appraisal reports and his testimony related to his expert reports as being “summary reports,” not self-contained appraisals as required by 22 NYCRR §202.59(g). Supreme Court also denied the City’s cross-motion to supplement or amend Kimball’s appraisal reports. (R8a- 10a) Justice Greenwood specifically noted that he had stricken Kimball’s appraisal reports in a previous matter for the same reason, a decision that was affirmed, see Matter of Church & Dwight v. City of Syracuse, 52 AD3d 1269 (4th Dep’t 2008), and that he was “puzzled that the City [again] failed to direct its expert prior to trial to prepare a trial ready assessment in conformance with the Court’s rules.” (R10a, fn1) In its Findings of Fact and Conclusions of Law, Supreme Court recited the recognized law that “because environmental contamination can depress a parcel’s true value it must be considered in assessing real property,” citing Commerce Holding. (R17a) In reality, however, Justice Greenwood required Petitioners to prove matters not required by Commerce Holding. First, he required Petitioners to demonstrate that the subject properties presented a health “hazard” rather than that they were “contaminated.” In his Findings of Fact, he wrote: {H1854302.1} 35 5. *** The existence of lead-based paint in and of itself does not constitute a hazard. It only becomes hazardous when it starts to deteriorate, flake, chip or peel. (Transcript, p. 616). Where walls painted with lead-based paint are intact and there is no risk of being exposed to lead dust through inhalation or ingestion, no such hazard exists. Id. *** 7. However, Petitioner failed to meet his burden at trial by demonstrating that the subject properties were contaminated. Petitioner introduced no evidence at trial demonstrating that the subject properties contained deteriorating, flaking, chipping or peeling lead, lead dust, asbestos or any other alleged hazardous substances as of the January 1, 2001, 2002, 2003 and 2004 taxable status dates. *** While an inference may be drawn that lead-based paint existed in the properties during the taxable status dates, because of the subsequent test in 2008 and the fact that lead-based paint is no longer manufactured, no such inference may be drawn as to the condition of the paint three to seven years earlier based upon the tests performed. (R11a-12a) (Emphasis supplied) Similarly, Supreme Court found: 16. *** No evidence was offered that the presence of lead represented a hazard to a potential tenant because it was peeling, flaking or in the form of lead dust on the subject dates. *** (R14a) (Emphasis supplied) Second, as matter of law Justice Greenwood required Petitioners to demonstrate that they had a legal obligation or had agreed to remediate the lead paint on the subject properties before they could obtain a reduction in tax assessment. The Findings of Fact state: 13. The Petitioner has taken no steps to have the lead paint removed nor has he retained the firm from whom he received estimates to actually engage in that work. (Transcript pp. 183-185) {H1854302.1} 36 14. The Petitioner is not required by federal, state or local law to remove the lead and lead-based paint from the subject property. (Transcript p. 610, see also, 15 USC §§ 2681-2692, New York State Public Health Law §§ 1370-1376-a). (R13a) Similarly, Conclusion of Law No. 8 provides that Commerce Holding is distinguishable “inasmuch as that case involved a parcel of industrial property wherein environmental contamination had been determined [i.e., the owner was ordered to remediate the site] prior to the tax certiorari proceeding [being] brought by the petitioner ***.” (R18a) Third, in attempting to distinguish Commerce Holding Supreme Court required Roth to both subjectively and objectively “know” with certainty, prior to commencing these proceedings, that the subject properties were contaminated and accordingly were over-assessed as follows: 8. The Petitioner's reliance upon Commerce Holding v. Board of Assessors of Town of Babylon, supra, concerning reduction in valuation of the subject properties is misplaced inasmuch as that case involved a parcel of industrial property wherein environmental contamination had been determined prior to the tax certiorari proceeding brought by the petitioner, and petitioner therefore sustained their burden of showing contamination and their entitlement to reduction. (R18a) (Emphasis supplied) Supreme Court also found that “Petitioner introduced no evidence at trial demonstrating that the subject properties contained lead contamination *** as of the January 1, 2001, 2002, 2003 and 2004 taxable status dates.” (R14a [Finding of Fact {H1854302.1} 37 No.16) This Finding was inconsistent with the undisputed proof and the Court’s own Findings. Thus, there was unrebutted evidence that (1) the subject properties were contaminated with lead paint in 2008, which Justice Greenwood acknowledged (“Envirologic lead paint risk assessor Peter Koslowsky testified as to the existence of lead-based paint in both the interiors and exteriors of the subject properties in 2008.”) (R13a); and (2) that each of the subject properties “were built prior to 1978 [so] Petitioner was required to provide a notice to tenants concerning the presence of lead-based paint in the properties” pursuant to 24 CFR Part 35. (R12a) Since lead paint has been banned in New York since the 1970’s, Supreme Court later found that it would be proper to find that the undisputed lead paint contamination confirmed in 2008 by Petitioners’ expert was present in January 2001, 2002, 2003, and 2004. (R17a-18a [“an inference may be drawn that lead- based paint existed in the properties during the taxable status dates, because of the subsequent test in 2008 and the fact that lead-based paint is no longer manufactured ***.”] ) After having rejected Roth’s environmental claim, Supreme Court turned to the undisputed evidence of Kelley’s “as if uncontaminated” values for each of the subject properties, which in most cases were less than the assessments even without considering the environmental contamination from lead paint. In short, Justice Greenwood rejected Kelley’s values in his Conclusions of Law based on {H1854302.1} 38 Petitioners’ actual expense information and documentation, Kelley’s replacement reserves, and Kelley’s purported failure “to consider all the approaches to value – cost, income analysis, and sales comparison – and weigh them accordingly.” (R18a-20a) Petitioners appealed from the Decision (R2a), but the City did not appeal or cross-appeal the striking of Kimball’s expert appraisal reports or his testimony related thereto. The Fourth Department affirmed in November 2010 “for reasons stated by Supreme Court.” (R2531) In re Roth, 78 AD3d 1590 (4th Dep’t 2010). {H1854302.1} 39 ARGUMENT POINT I PETITIONERS ESTABLISHED THE REQUESTED REDUCTION IN VALUE IN THE SUBJECT PROPERTIES BY THE COST TO CURE THE LEAD CONTAMINATION AT EACH PARCEL, AND SUPREME COURT’S CONCLUSION TO THE CONTRARY IS ERRONEOUS AS A MATTER OF LAW A. The Legal Principles Established In Commerce Holding In addition to reaffirming several cardinal principles of property valuation for tax purposes under the New York Constitution, Commerce Holding was a water shield ruling – in New York and throughout the nation – on the effect of environmental contamination on tax assessment. This Court held simply that “[b]ecause environmental contamination can depress a parcel's true value, *** it must be considered in assessing real property tax.” 88 NY2d at 727. “A per se rule barring any assessment reduction for environmental contamination” least owners of polluted property “would succeed in shifting the cost of environmental cleanup to the innocent taxpaying public *** ‘runs afoul of the requirement found in *** New York's Constitution, that real property may not be assessed at more than its full (fair market) value’ ***.” Id. at 729-730, quoting 9 Opns Counsel SBEA No. 58, at 113. This Court further held that “[f]lexibility is especially important in the valuation of contaminated properties, for which there has yet to emerge any single {H1854302.1} 40 generally accepted valuation methodology. The difficulty in assessing a polluted parcel of property stems from the uniqueness of environmental contamination (see, Wilson, The Environmental Opinion: Basis for an Impaired Value Opinion, Appraisal Journal, July 1994, at 411 [“Each environmental impairment to value is as unique as a fingerprint”] ).” Commerce Holding, 88 NY2d at 731. In the valuation of contaminated properties, “the prevailing trend in this field has been one of experimentation and adaptation, marked by the use of traditional techniques adjusted for environmental contamination ***.” Id. This flexible approach applies in New York, subject to the caveat that “a challenge to a property tax assessment must be supported by sound theory and objective data ***.” Id. “While it is not possible to prescribe any one method to assess the effects of environmental contamination, there are certain factors that should be considered *** includ[ing] the extent of the contamination, the estimated cleanup costs, the present use of the property, the ability to obtain financing and indemnification in connection with the purchase of the property, potential liability to third parties, and the stigma remaining after cleanup *** .” Id. at 732. Notably, these are precisely the factors addressed by Petitioners’ expert, Kelley, in his Appraisal Reports. One valuation method that “properly considers the effects of environmental contamination” in the assessment of real property and applies “an acceptable valuation technique” is where the valuation is “accomplished by the use of the {H1854302.1} 41 income capitalization approach to determine the value in an uncontaminated state of the income-producing property, combined with a downward environmental adjustment in the amount of outstanding cleanup costs.” Commerce Holding, 88 NY2d at 733. Again, this is precisely the approach used by Kelley in his Appraisal Reports. “[C]leanup costs are an acceptable, if imperfect, surrogate to quantify environmental damage and provide a sound measure of the reduced amount a buyer would be willing to pay for contaminated property *** .” Id. at 732. Kelley utilized, and incorporated into, his Appraisals the unrebutted cleanup costs testified to by Envirologic, CRAL, and Marinich. The ruling in Commerce Holding was foreshadowed by this Court’s earlier decision in Criscuola v. Power Authority of State of New York, 81 NY2d 649 (1993), where it held that the claimants in an eminent domain proceeding were entitled to recover damages, not only for the six (6) acres of their real property taken directly for a power line, but also for the diminution in value of the remaining 94 acres resulting from a loss in market value based on the public’s perception of health risks associated with electromagnetic fields (EMFs) surrounding the type of high voltage power line to be built, a fear known as “cancerphobia.” Thus, in Criscuola this Court had already applied the principles of Commerce Holding well beyond the hazardous substances at the Commerce {H1854302.1} 42 Holding Superfund site, to include something as amorphous as “cancerphobia.” B. The Application of Commerce Holding Principles To Asbestos In New York Even before Commerce Holding was decided in 1996, New York courts had applied the legal principles of Commerce Holding to the assessment of real property affected by asbestos. In Matter of Bass v. Tax Commn., 179 AD2d 387 (1st Dep’t 1992), the court affirmed a reduction in assessment from $951 million to about $582 million, resulting in a tax refund of over $23 million, due to “significant physical and functional impairments throughout the building as a result of the presence of asbestos” and experts’ testimony on the costs of asbestos removal. Id. at 387. Citing Matter of Northville Indus. Corp. v. State of New York, 14 AD3d 817 (3d Dep’t 2005), the Bass court held that it was proper for the lower “court to consider the foreseeable cost of curing the building’s deficiencies, particularly with respect to asbestos contamination ***.” Id. In Matter of Welch Foods, Inc. v. Town of Westfield, 222 AD2d 1053, 1054 (4th Dep’t 1995), the court held that “[t]he court’s downward adjustment of $526,000 to the assessment of the office building, beginning with the tax year 1991, to account for asbestos contamination and the cost of remediation, is fully supported by the record.” In Alexander's Dept. Store of Valley Stream, Inc. v. Board of Assessors, 227 {H1854302.1} 43 AD2d 549 (2d Dep’t 1996), the court affirmed, on cross-appeals, a judgment reducing the petitioner's tax assessments for each of the tax years in question (1986/87 to 1992/93). The court specifically approved of the trial court’s reduction in assessment based on his “determination of asbestos removal costs of $5,000,000 for each tax year ***.” Id. at 551. This amount “fell well within the removal costs urged by the respective parties [petitioner's expert estimated the asbestos removal cost at $7,125,000 for each tax year under review, while the County's expert indicated that the final cost of asbestos removal ranged from $4,982,550 to $3,224,003 for the tax years under review] and the court fully explained its determination, addressing the insufficiencies of the estimates of both the County's and the petitioner's experts and the court's own consideration of ‘all the material evidence’.” Id. “Accordingly, the trial court's determination was properly explained, within the range of the values urged by the parties' experts, and is supported by the evidence in the record.” Id. C. The Legal Principles Of Commerce Holding Are Applicable Where The Property Owner Is Not Required, And Has Not Agreed, To Remediate The Contamination Two holdings from Commerce Holding support the rule of law that even if a property owner is not required by law, or has not agreed by contract, to remediate contamination at a property, the cost to cure that contamination should be {H1854302.1} 44 considered in the tax assessment of the value of the property. First, in Commerce Holding this Court rejected the Town's argument that because the owner had agreed to pay the cleanup costs the property's market value would be unaffected by the presence of contamination. Accordingly, whether a property owner has agreed to remediate the property and pay the cleanup costs does not mean that the property's market value would be unaffected by the presence of contamination and “does not resolve the question of whether, and to what extent, the contamination in fact affects the value of the land *** .” Commerce Holding, 88 NY2d at 730. Second, this Court specifically accepted the petitioner’s argument that in each tax year the total remaining cost to cure all the contamination should be subtracted from the value of the property as if unaffected by contamination, and rejected the Town’s argument that only any amount actually expended by the owner in remediating the contamination in that tax year should be subtracted from the property's “uncontaminated” value. Id. at 728, 731-732. Thus, this Court concluded that it is the calculated cost to cure, not the amount actually expended by the property owner to cure the contamination, that must be deducted from the “uncontaminated” value to get a proper assessment for tax purposes. This calculation does not depend on a legal mandate to actually remediate the pollution. See also Matter of Northville Indus. Corp. v. Board of Assessors, 143 {H1854302.1} 45 AD2d 135, 138 (2d Dep’t 1988) (court deducted the full cost of remediating real property from each annual tax assessment “inasmuch as an assessment fixes value as of each taxable status date and each assessment is separate and distinct from each other”) (cited with approval in Commerce Holdings, 88 NY2d at 730). This was followed to the letter and spirit of the law by Petitioner’s expert, Kelley. The legal basis and rationale for this rule is straight forward: One must remember that property tax assessments are made on a yearly basis, so the entire fair market value of the property is assessed every year *** . That yearly assessment *** reflects the open market price of the property. But the open market price involves what willing buyers and sellers will consummate the transaction for, in fee, not just a year's lease. Thus the concern that the taxpayer somehow receives a windfall because every year's assessment reflects the same costs of cure is totally erroneous. The assessment should reflect the cost of cure – because every year's assessment reflects a hypothetical open market transaction in fee. It is precisely the full fair market value which is the subject of every year's assessment. Mola Dev. Corp. v. Orange County Assessment Appeals Bd., 80 Cal App 4th 309, 321-322 (Cal Ct App 2000) (applying Commerce Holding to the assessment of contaminated real property in California) (italics emphasis in original). Courts in other states have applied the legal principles and rationale of Commerce Holding, Bass, Welch Foods, and Alexander’s and similar authorities in their states to contaminants, including asbestos, where the property owner was not required to remediate the contamination and where the property owner did not and would not incur any costs to cure. {H1854302.1} 46 In Mola, supra, the California Court of Appeals, citing Commerce Holding, affirmed a Superior Court order that the entire amount of cleanup costs for toxic underground materials should have been deducted from the “uncontaminated” value of the property to determine the proper assessment of the property for tax purposes. It was undisputed in that case that the owner, Mola, “incurred no remediation cost.” 80 Cal App 4th at 313. In University Plaza Realty Corp. v. City of Hackensack, 624 A2d 1000 (NJ Sup Ct, App Div 1993), the New Jersey Appellate Division held that the Tax Court was justified in taking into account the taxpayer’s voluntary, non-mandated remediation efforts with respect to asbestos remediation of its commercial office building in establishing the property’s correct assessment, that it was proper to do so on a dollar-for-dollar “cost to cure” basis in each tax year at issue, and that the court could take judicial notice of the health hazards posed by asbestos. In Weyerhaeuser Co. v. Easter, 894 P2d 1290 (Sup Ct Wash 1995), the Washington Supreme Court affirmed so much of a Board of Tax Appeals decision, which was affirmed by the Superior Court, that concluded that the costs of removing asbestos in the amount of $18.3 million from its mill, which was not mandated or required by law, reduced the value of the mill and reduced the tax assessment accordingly. In short, these sister-state decisions apply Commerce Holding’s principles to {H1854302.1} 47 the costs to cure contamination when the property owner is under no legal or contractual obligation to remediate the property. There is no reason for New York not to afford its own property owners the same benefit, consistent with the holdings in Commerce Holding. D. The Contamination Of Property By Underground Toxins, Asbestos, And Lead-Based Paint Are Legally The Same And There Is No Basis To Distinguish Between Such Contaminants In The Valuation Of Real Property The use of lead paint has been unlawful in New York State since 1970. See Public Health Law § 1372 (“Use of leaded paint. No person shall apply paint or other similar surface-coating material containing more than .06 of one per centum of metallic lead-based on the total weight of the contained solids or dried paint film to any interior surface, window sill, window frame or porch of a dwelling.”). The potential effects of exposure to lead paint, either by ingestion or through airborne release, is as well recognized as exposure to asbestos or substances at Superfund sites at issue in Commerce Holding. In Adams v. Rizzo, 13 Misc3d 1235(A) (Sup Ct, Onon Co 2006), the court stated: “This court is mindful that it is well established that lead-based paint exposure presents a serious potential health hazard to children (See Center for Disease Control and Prevention, Screening Young Children for Lead Poisoning: Guidance for State and Local Public Health Officials, at 13, Nov. 1997).” {H1854302.1} 48 In Juarez v. Wavecrest Management Team, Ltd., 88 NY2d 628 (1996), this Court wrote: The serious health hazard posed to children by exposure to lead-based paint is by now well established. *** High blood lead levels can produce brain damage, coma or death, and even relatively low levels can lead to significant nervous system damage (see, 1995 Report of Lead-Based Paint Hazard Reduction and Financing Task Force, Putting the Pieces Together: Controlling Lead Hazards in the Nation's Housing, at 3; Oct. 1991 Statement by Centers for Disease Control and Prevention, Preventing Lead Poisoning in Young Children, at 7-10 [4th rev] ). While the use of lead-based paint on interior building surfaces has been prohibited since January 1960 ***, such paint continues to cover the walls of two out of three City dwellings *** . Its widespread use thus renders lead poisoning a continuing threat to the health of young children in New York City, especially those in older and poverty-ridden neighborhoods (see, New York City Coalition To End Lead Poisoning v Koch, 138 Misc 2d 188, 189, affd 139 AD2d 404; 1995 Report of Lead-Based Paint Hazard Reduction and Financing Task Force, Putting the Pieces Together: Controlling Lead Hazards in the Nation's Housing, at 3). Indeed, “[c]hildhood lead- paint poisoning may be the most significant environmental disease in New York City, in terms of the numbers of cases, the severity of the medical damage created, and the personal, social, and economic costs it imposes” (1993 Final Report of the Mayor's Advisory Comm to Prevent Childhood Lead-Paint Poisoning, at 1). 88 NY2d at 640-641. Moreover, the Juarez Court noted that “[a]batement of lead-based paint is an expensive process (see, Coyne, Lead Paint Abatement: Who Should Pay?, 2 Wis Envtl LJ 113, 115, n 9 [Winter 1995] [estimating abatement costs to range from 20 cents to $130.96 per square foot]; Miceli, Pancak and Sirmans, Protecting {H1854302.1} 49 Children From Lead-Based Paint Poisoning: Should Landlords Bear the Burden?, 23 BC Envtl Aff L Rev 1, 8 [Fall 1995] ). With nearly two million apartments in New York City built before lead-based paint was banned in 1960, addressing this problem therefore requires a weighing of policy interests, a responsibility that rests with Federal, State and local legislative bodies.” 88 NY2d at 641. In New York City Coalition to End Lead Poisoning, Inc. v. Vallone, 100 NY2d 337, 342-343 (2003), this Court further wrote that “[t]he dangers of exposure to lead-based paint *** are well documented and pose a serious public health problem. ‘Lead is a poison that affects virtually every system in the body’ and is particularly harmful to brain and nervous system development (Centers for Disease Control and Prevention Statement, Preventing Lead Poisoning in Young Children, at 7 [Oct.1991] ). Even low levels of blood lead have been linked to diminished intelligence, decreased stature or growth and loss of hearing acuity (see id. at 9).” Contrary to Justice Greenwood’s findings (R11a), it is well-established as a matter of law that the health hazards from exposure to lead and lead paint are not limited to children or to flaking or peeling paint. In D'Agostino v. Forty-Three East Equities Corp., 12 Misc3d 486, 470 (NY City Civ Ct 2006), the court wrote that “lead-based paint poses a serious health problem to adults and children ***.” In Harrison & Burrowes Bridge Constructors, Inc. v. State of New York, 42 AD3d {H1854302.1} 50 779 (3d Dep’t 2007), an action involving a contractor performing work for the State, the court wrote that “[t]he original contract included items for cleaning, priming and painting all eight bridges. Due to statewide concerns about potential health hazards associated with lead paint being released into the air, defendant began researching new policies on lead paint removal from bridges.” Id. at 781; see also www.syracuseleadprogram.com (“Anyone can get lead poisoned ***.”) A12) Moreover, in Chapman v. Silber, 97 NY2d 9 (2001), this Court recognized that the absence of a statute or rule, like the New York City Administrative Code provision at issue in Juarez requiring the abatement of lead paint, does not insolate a property owner from liability: New York State has not enacted similar legislation that imposes a duty on landlords to test for or abate lead-based paint hazards absent official notification of a problem (see Public Health Law § 1373). We recognize, moreover, that absent explicit legislative authorization we should not hastily impose a new duty since doing so “requires a weighing of policy interests, a responsibility that rests with Federal, State and local legislative bodies” (Juarez, supra, 88 NY2d, at 641). The absence of a statutory scheme, however, is not fatal to this type of action. Where certain requisites are satisfied, a landlord still may be liable for negligence under traditional common-law principles. 97 NY2d at 20. Statutory provisions in New York also demonstrate that lead and lead paint are considered an environmental contamination problem of the highest magnitude. Title X of the New York Public Health Law (§§ 1370-1376-a) is entitled “Control {H1854302.1} 51 of Lead Poisoning,” and among other things the legislation establishes a lead poisoning prevention program (§1370-a), and the New York State Advisory Council on Lead Poisoning Prevention (§1370-b). The Advisory Council consists of the following, or their designees: the Commissioners of Health, Labor, Environmental Conservation, Housing and Community Renewal, and Social Services, and 15 public members appointed by the Governor. At least one public member must be representative of, inter alia, real estate and environmental groups. Similarly, this Court is well aware of the purpose and effects of the State Environmental Quality Review Act (SEQRA), which was enacted with the express intent that ‘the protection and enhancement of the environment, human and community resources shall be given appropriate weight with social and economic considerations in public policy’ and that SEQRA's policies, statutes and regulations should be implemented ‘to the fullest extent possible.’ Environmental Conservation Law (“ECL”) § 8-0103(7), (6).” Vallone, 100 NY2d at 347. Thus, SEQRA creates “‘an elaborate procedural framework’ governing the evaluation of the environmental ramifications of a project or action ***. In assessing the significance of a proposed action under SEQRA, the lead agency must ‘thoroughly analyze the identified relevant areas of environmental concern to determine if the action may have a significant adverse impact on the environment *** .” Vallone, supra, 100 NY2d at 347. The statute requires all agencies to prepare an {H1854302.1} 52 environmental impact statement (“EIS”) on any action they propose or approve which may have a significant effect on the environment. The purpose of an environmental impact statement is to provide detailed information about the effect which a proposed action is likely to have on the environment. Id. In Vallone, this Court held that SEQRA applied to the New York City Council’s enactment of Local Law No. 38 (1999) to replace Local Law No. 1 (1982) – addressed in Juarez – requiring the abatement of lead paint in multiple dwelling units. Moreover, the Court held that as lead agency the City Council failed to comply with SEQRA in the enactment of Local Law No. 38 insofar as the City Council's negative declaration did not set forth an adequate explanation clearly evincing the considerations underlying its determination that the new law would have no significant environmental effects. Id. at 349-351. Similarly, in Williamsburg Around the Bridge Block Ass'n v. Giuliani, 223 AD2d 64 (1st Dep’t 1996), the court held that New York City's protocol regulating the removal of lead paint from city-owned bridges was subject to SEQRA and City Environmental Quality Review procedures, and thus required full environmental study and opportunity for public feedback; the work at issue was not action or a class of action determined not to have a significant effect on the environment so as to not require preparation of an EIS. Id. Accordingly, there is no legal basis to distinguish between the presence and {H1854302.1} 53 cost to cure underground toxins or asbestos as opposed to lead paint in the assessment of real property in New York. E. Supreme Court’s Erroneous Application Of Commerce Holding The Kelley Appraisal Reports are complete, accurate, and unrebutted. Moreover, Kelley demonstrated his knowledge, experience, and familiarity with the subject properties and environmental impairment issues presented. His expert appraisal reports were self-contained and complete, in marked contrast to the stricken summary reports prepared by the City’s expert. Kelley examined and explained in great detail the basis for his valuation of the subject properties and Petitioners’ environmental impairment claim. (R1828-1871 [Exh 21, e.g.] ) 2 Moreover, Supreme Court did not dispute that Kelley properly relied on the reports and information provided to him and Petitioners by Envirologic, CRAL, and Marinich. See Ames Dept. Stores Inc. v. Assessor of Town of Greenport, 276 AD2d 890, 891 (3d Dep’t 2000). Instead, Supreme Court rejected Petitioners’ applications for reduction in assessment due to the undisputed lead paint 2 Notably, the methods and approach utilized by Kelley in Petitioners’ Appraisal Reports is consistent with the Pomeroy firm’s opinions and conclusions adopted by the Fourth Department in In re City of Syracuse Indus. Development Agency (Alterm, Inc. and Alaskan Oil Co.), 20 AD3d 168 (4th Dep’t 2005) (affirming reduction in value of condemned property by 20% to account for the stigma of environmental contamination even after remediation because the stigma damages could not be accounted for in separate Navigation Law action by condemnor seeking recovery of remediation costs against condemnee). {H1854302.1} 54 contamination of the subject properties for several reasons, none of which have merit. In short, in his Conclusions of Law, Justice Greenwood paid lip service to Commerce Holding’s holding that “because environmental contamination can depress a parcel’s true value it must be considered in assessing real property.” (R17a) Supreme Court “reworked” the Commerce Holding test, however, in several important respects. 1. Supreme Court Improperly Converted The Commerce Holding Test From “Environmental Contamination” To An Imminent Health “Hazard” Supreme Court improperly converted the Commerce Holding test from “environmental contamination” of the property to a requirement that the property present an imminent health “hazard.” Thus, Justice Greenwood required Petitioners to demonstrate not just that the subject properties were contaminated and their value reduced thereby, but that each of the subject properties constituted an actual, present health “hazard” to its occupants. In the Findings of Fact, Supreme Court wrote: 5. *** The existence of lead-based paint in and of itself does not constitute a hazard. It only becomes hazardous when it starts to deteriorate, flake, chip or peel. (Transcript, p. 616). Where walls painted with lead-based paint are intact and there is no risk of being exposed to lead dust through inhalation or ingestion, no such hazard exists. Id. *** {H1854302.1} 55 16. *** No evidence was offered that the presence of lead represented a hazard to a potential tenant because it was peeling, flaking or in the form of lead dust on the subject dates. *** (R11a, 14a) (Emphasis supplied) Similarly, in his Conclusions of Law Justice Greenwood wrote: 7. However, Petitioner failed to meet his burden at trial by demonstrating that the subject properties were contaminated. Petitioner introduced no evidence at trial demonstrating that the subject properties contained deteriorating, flaking, chipping or peeling lead, lead dust, asbestos or any other alleged hazardous substances as of the January 1, 2001, 2002, 2003 and 2004 taxable status dates. *** While an inference may be drawn that lead-based paint existed in the properties during the taxable status dates, because of the subsequent test in 2008 and the fact that lead-based paint is no longer manufactured, no such inference may be drawn as to the condition of the paint three to seven years earlier based upon the tests performed. (R17a-18a) (Emphasis supplied) Thus, Supreme Court’s conclusion – that “[i]nasmuch as the Petitioner failed to meet his burden in showing contamination on the taxable status dates for the respective properties and the reduction in value calculated by its expert for the ‘cost to cure’ will not be considered” (R18a) – is based solely on the “hazardous condition” or not of the subject properties. On the contrary, Commerce Holding speaks only to a reduction in value created by the presence of the “contamination” and the “polluted property,” not an imminent health “hazard.” 88 NY2d at 727, 729-730 (“Because environmental contamination can depress a parcel's true value, *** it must be considered in assessing real property tax.” *** A per se rule {H1854302.1} 56 barring any assessment reduction for environmental contamination” least owners of polluted property “would succeed in shifting the cost of environmental cleanup to the innocent taxpaying public *** ‘runs afoul of the requirement found in *** New York's Constitution, that real property may not be assessed at more than its full (fair market) value’ ***.” [citations omitted] ). Clearly, this Conclusion of Law expressly relates back to the earlier Finding of Fact that “[t]he existence of lead-based paint in and of itself does not constitute a hazard. It only becomes hazardous when it starts to deteriorate, flake, chip or peel. (Transcript, p. 616) Where walls painted with lead-based paint are intact and there is no risk of being exposed to lead dust through inhalation or ingestion, no such hazard exists. Id.” (R11a) (Emphasis supplied) In making this Finding, Justice Greenwood cited to and relied on one small, isolated portion of the testimony of the City’s Lead Program Manager, Mokrzycki. She initially testified that lead is “found naturally in the earth’s surface” and “in and of itself” is not “hazardous” (apparently the part relied on by the Court), but then admitted that lead in “dust form” and “in the soil above the limit set by the EPA” is “hazardous” and if ingested is “a poison.” (R616-617) Moreover, she agreed with the statement on the City’s web site that “[h]ealth effects of exposure to lead [adversely] affects practically all systems within the body,” and “can cause convulsions, coma, and even death.” (R 617, 2438) {H1854302.1} 57 In fact, the City of Syracuse web site establishes that lead and lead-based paint is a dangerous contaminant regardless of whether it is “deteriorating, flaking, chipping or peeling,” the only conditions that Supreme Court found constitute a “hazard.” (R11a, 17a) At the time of trial, the City’s web site stated that lead paint is “a hazardous material” and a “poison” without any reference to it “deteriorating, flaking, chipping or peeling” as Justice Greenwood required. (R2433, 11a, 17a) At the time of trial and currently, the City offers “financial assistance to reduce lead hazards” to homeowners with certain – largely financial – requirements for participation, but not a single requirement that the lead paint be “deteriorating, flaking, chipping or peeling.” (R2433-2434, A6-9) 3 In addition, the October 2008 City web site advises property owners and occupants to: Reduce the risk from lead-based paint *** [that] could be on window frames, walls, the outside of homes, or other surfaces. *** Do not sand or burn off paint that may contain lead. Lead paint in good condition is usually not a problem except in places where painted surfaces rub against each other and create dust (for example, opening a window). Do not remove lead paint yourself. Individuals have been poisoned by scraping or sanding lead paint because these activities generate large amounts of lead dust. Do not bring lead dust into the home. *** You may also be tracking in lead from soil around your 3 Substantial portions of the City’s current “Syracuse Lead Program” web site (viewed and printed September 20, 2012) are found in the Appendix to this Brief and referred to as (A__). This Court may take judicial notice of this government web site. See, e.g., People v. Sanchez, 98 NY2d 373, 401 fn 13 (2002); Affronti v. Crosson, 95 NY2d 713, 720 (2001), cert denied 534 US 826 (2001); People v. Woods, 30 AD3d 983, 984 (4th Dep’t 2006) (“the court is entitled to take judicial notice of facts appearing in [internet] public records”). {H1854302.1} 58 home. Soil very close to homes may be contaminated from lead paint on the outside of the building. (R2436-2439 [Emphasis supplied] ) This information from the City, which Mokrzycki admitted she helped prepare (R617), certainly undermines her initial testimony that Justice Greenwood allegedly relied on. The current City web site (www.syracuseleadprogram.com) contains some of the same and similar information and admissions as the version in place at the time of trial in these proceedings. It advises “Building Owners and Investors” that “[i]f you own a property built prior to 1978 (most homes in the City of Syracuse are) you may have some lead in that home! Old windows, doors, siding, walls, etc. may be lead hazards in your home.” (A17) (Emphasis supplied) Under the heading “Frequently Asked Questions” the current City web site states: Is there lead in my home? If your house was built prior to 1978, you probably have some lead in your home. What causes lead poisoning in children? The most common cause is lead-based paint! Can my child get poisoned even if he/she doesn’t actually eat paint chips? Yes, most cases of childhood lead poisoning are caused by lead dust as a result of hand-to-mouth contact. If floors have dust from old painted walls, windows, doors, etc, a baby could breathe in the lead dust or suck on lead-dusted hands and toys. (A5, A18) (Emphasis supplied) {H1854302.1} 59 Moreover, the current City web site also makes clear that “[a]nyone can get lead poisoned,” not just children (A12), and that the “biggest problem is lead dust *** [which] is often created during renovation or remodeling in a home when a lead painted surface is disturbed. However, a simple task like opening a window or opening a door can also create these tiny lead dust particles.” (A13) Each of these public statements by the City about lead and lead paint make clear that the mere presence of lead and lead paint is a hazard to adults as well as children, and that the biggest problem is lead dust, not “flaking, chipping or peeling” lead paint. 2. Supreme Court Required Petitioners To Demonstrate That They Were Under A Current Requirement To Remediate The Lead Paint On The Subject Properties Or Had Agreed To Do So In Contravention Of Commerce Holding. As a matter of law Supreme Court imposed a requirement that Petitioners be under some obligation or directive to remediate the lead paint contamination as of the taxable status date in question in order to obtain a reduction in assessment for the lead paint contamination. Although this is not stated expressly in the Decision, it is clear from Findings of Fact Nos. 13 and 14 and Conclusion of Law No. 8. 13. The Petitioner has taken no steps to have the lead paint removed nor has he retained the firm from whom he received estimates to actually engage in that work. (Transcript pp. 183-185) 14. The Petitioner is not required by federal, state or local law to remove the lead and lead-based paint from the subject property. {H1854302.1} 60 (Transcript p. 610, see also, New York State Public Health Law §§ 1370-1376-a). (R13a) Conclusion of Law No. 8 states that Commerce Holding is distinguishable “inasmuch as that case involved a parcel of industrial property wherein environmental contamination had been determined [i.e., the owner was ordered to remediate the site] prior to the tax certiorari proceeding [being] brought by the petitioner ***.” (R18a) To the contrary, as discussed above, Commerce Holding and other authorities hold that the property owner may receive a reduced assessment notwithstanding that there is no order or agreement to remediate the contamination. This follows from several well-established authorities. First, the established law in New York and other jurisdictions that even after a contaminated property has been completely remediated, the “stigma” of prior environmental contamination can significantly affect the value of the property, even reducing it to $0. See Commerce Holding, 88 NY2d at 732 (“While it is not possible to prescribe any one method to assess the effects of environmental contamination, there are certain factors that should be considered. These include *** the stigma remaining after cleanup ***.”). In Allied Corp. v. Town of Camillus, 80 NY2d 351 (1992), this Court addressed a tax certiorari proceeding to value Allied’s property in the Syracuse area “consist[ing] of more than 1,000 acres of earthen-walled wastebeds and buffer {H1854302.1} 61 zones where waste material from an industrial process has been deposited to eventually solidify.” Id. at 353. This Court noted specifically that “[n]o finding of contamination of Allied's wastebeds has been made, but many of the same economic considerations are present, most notably the “stigma” attached to environmentally damaged land in the eyes of any potential buyers, the risk that undetected or currently unclassified hazardous materials will be identified, and the costs of clean-up and rehabilitation.” Id. at 356 (Emphasis supplied). In Westling v. County of Mille Lacs, 543 NW2d 91 (Sup Ct Minn 1996), cited with approval in Commerce Holding, 88 NY2d at 732, the Minnesota Supreme Court held that the trial court may properly find that the stigma discount alone for environmental contamination to improved commercial real property based on market study and present value of anticipated costs of clean-up support a finding that the property has zero ($0) market value for tax purposes, although the property generated $144,000 in annual rent. 4 4 See City of New York v. Mobil Oil Corp., 12 AD3d 77, 84 (2d Dep’t 2004) (“At the condemnation proceeding, the property should be valued ‘as if remediated.’ It must be pointed out that valuation of property ‘as if remediated’ is not exactly equivalent to valuation of ‘clean’ property. As stated by Professor Nichols in his treatise on Eminent Domain, ‘even after remediation “stigma” may persist, depressing value below “fair market value” ’ (7A Nichols on Eminent Domain § 13B.04[1]; § 9A.07 ***. Thus the term ‘as if remediated’ takes into account any residual stigma which may attach to real property as a result of the fact that it was previously contaminated.”) (Emphasis supplied); Alterm, Inc., 20 AD3d at 168 (affirming reduction in value of condemned property by 20% to account for the stigma of environmental contamination even after remediation because the {H1854302.1} 62 Thus, Supreme Court’s requirement that Petitioners’ properties be subject to mandatory or agreed remediation in order to obtain a reduction in value is completely inconsistent with the established law, in New York and elsewhere in the United States, that properties that were previously contaminated and have been completely remediated can still have a reduced value when compared to “as if uncontaminated” or even have a fair market value of $0 simply because of the “stigma” of the prior environmental contamination. Second, Supreme Court’s “remediation” requirement is also inconsistent with this Court’s decision in Criscuola that the claimants in that case were entitled to recover damages for the diminution in value of 94 acres resulting from a loss in market value based solely on the public’s perception of health risks – without even establishing the “reasonableness” of the fear – associated with electromagnetic fields (EMFs), i.e., “cancerphobia,” not an actual health “hazard” requiring remediation. 81 NY2d at 652; see also City of Buffalo v. J.W. Clement Co., 28 NY2d 241, 257-258 (1971) (property owner was entitled to damages for the diminished value of the property because of the threat of condemnation that “blighted” the property; “[i]n such cases where true condemnation blight is present, the claimant may introduce evidence of value prior to the onslaught of the ‘affirmative value-depressing acts’ *** of the authority and compensation shall be stigma damages could not be accounted for in separate Navigation Law action by condemnor seeking recovery of remediation costs against condemnee). {H1854302.1} 63 based on the value of the property as it would have been at the time of the de jure taking, but for the debilitating threat of condemnation.”). Third, this Court’s rejection of the Town’s dual arguments in Commerce Holding that (1) because the owner had agreed to pay the cleanup costs the property's market value would be unaffected by the presence of contamination insofar as this “does not resolve the question of whether, and to what extent, the contamination in fact affects the value of the land ***; and (2) petitioners receive the benefit of the reduction in assessment in the full amount of the cost to cure each year, rather than only the amount actually expended by the property owner in remediating the contamination in that tax year. See Commerce Holding, 88 NY2d at 730-732. Fourth, and finally, Supreme Court’s “remediation” requirement is contrary to the cases from New York’s sister states that have adopted, followed, and developed Commerce Holding and have held that a property owner may receive a reduction in assessment for environmental contamination even where the property owner is not required, and has not agreed, to remediate the contamination. See, e.g., Northville Indus., 143 AD2d at 138; Mola, 80 Cal App 4th at 313; University Plaza, 624 A2d at 1000; Weyerhaeuser Co., 894 P2d at 1290. {H1854302.1} 64 3. Supreme Court Erroneously Required Petitioners To Establish That They Subjectively And Objectively Knew The Subject Properties Were Contaminated Before Commencing These Proceedings In attempting to distinguish Commerce Holding Supreme Court required Petitioners to both subjectively and objectively “know” with certainty, prior to commencing these proceedings, that the subject properties were both contaminated and accordingly were over-assessed. Justice Greenwood wrote this legal requirement into Commerce Holding as follows: 8. The Petitioner's reliance upon Commerce Holding v. Board of Assessors of Town of Babylon, supra, concerning reduction in valuation of the subject properties is misplaced inasmuch as that case involved a parcel of industrial property wherein environmental contamination had been determined prior to the tax certiorari proceeding brought by the petitioner, and petitioner therefore sustained their burden of showing contamination and their entitlement to reduction. (R18a) (Emphasis supplied) 5 In every tax assessment case the petitioner has reason to believe his or her property is over assessed when the challenge is made, and it is up to the petitioner to demonstrate that this belief is correct during the BAR hearing and/or in the Article 7 proceeding. That is what Petitioners did here. 5 Supreme Court’s imposition of this requirement that “environmental contamination had been determined prior to the tax certiorari proceeding brought by the petitioner” may also be viewed, at least in part, as a duplication of the “requirement” imposed by Supreme Court that Petitioners demonstrate that the condition of the lead paint was such that remediation was mandated under Federal or State law at the time of commencement of the proceeding. {H1854302.1} 65 Here, Supreme Court initially found – contrary to common sense, reality, and its own later finding – that “Petitioner introduced no evidence at trial demonstrating that the subject properties contained lead contamination *** as of the January 1, 2001, 2002, 2003 and 2004 taxable status dates. *** (Transcripts pp. 628-629).” (R14a) In fact, there was unrebutted evidence that the subject properties were contaminated with lead paint in 2008, as Justice Greenwood acknowledged. (R13a [“Envirologic lead paint risk assessor Peter Koslowsky testified as to the existence of lead-based paint in both the interiors and exteriors of the subject properties in 2008.”] ). Moreover, it was undisputed, and Justice Greenwood found, that each of the subject properties “were built prior to 1978 [so] Petitioner was required to provide a notice to tenants concerning the presence of lead-based paint in the properties” pursuant to 24 CFR Part 35. (R12a) Since lead paint has been banned in New York since 1970, Supreme Court later acknowledged, however, that it was proper to find that the undisputed lead paint contamination confirmed in 2008 by Petitioners’ expert was present in January 2001, 2002, 2003, and 2004. (R17a-18a [“an inference may be drawn that lead-based paint existed in the properties during the taxable status dates, because of the subsequent test in 2008 and the fact that lead-based paint is no longer manufactured ***.”] ) {H1854302.1} 66 Justice Greenwood’s subsequent “inference” is correct and grounded in fact. First, when questioned by Justice Greenwood “how would the fair market be affected by lead paint contamination in [sic] 2001 taxable status date” when the extent of contamination was not confirmed until testing in 2008, Kelley testified that the lead paint contamination “was very much suspected and it certainly was present at that time [2001] as it is today and will be until it’s remediated.” (R409- 410) Second, the EPA’s Renovation, Repair and Painting (“RRP”) Rule, 40 CFR §745.80, assumes that any house built before 1978 and pre-1978 residential building materials contain lead-based paint unless the house has been tested for lead-based paint and the results indicate that the house does not contain lead-based paint. 6 “Lead Safety For Renovation Repair And Painting,” EPA Course Book for Certification as Lead Paint Renovator. (A20) F. The Legal Issues Presented In This Case Are Not Beyond Review By This Court As A Result Of Affirmed Findings Of Fact Petitioners’ anticipate that Respondents will argue, as they did in opposition 6 EPA issued the RRP Rule in April 2008 to protect against the risk that “common renovation activities like sanding, cutting, and demolition can create hazardous lead dust and chips by disturbing lead-based paint, which can be harmful to adults and children. *** It requires that firms performing renovation, repair, and painting projects that disturb lead-based paint in pre-1978 homes, child care facilities and schools be certified by EPA and that they use certified renovators who are trained by EPA-approved training providers to follow lead-safe work practices.” http://www.epa.gov/lead/pubs/renovation.htm. {H1854302.1} 67 to the motion for leave to appeal, that the issues raised by Petitioners are not reviewable by this Court because they are all based on affirmed findings of fact. Respondents’ argument is erroneous. The alleged affirmed findings of fact asserted by Respondents are in most cases undisputed facts that more accurately give rise to the significant legal issues raised in this case concerning the application of Commerce Holding and its progeny to lead paint contamination in and on Petitioners’ real property. Briefly, Respondents alleged “affirmed findings of fact” and the response why they are not beyond this Court’s review may be summarized as follows: “1. The existence of lead-based paint does not constitute a hazard. Lead paint is only hazardous when it starts to deteriorate, flake, chip or peel. Walls painted with lead paint are not a hazard where the walls are intact and there is no risk of being exposed to lead dust through inhalation or ingestion.” Respondents’ Opposition To Petitioners’ Motion For Leave To Appeal, dated May 27, 2011, at 4 (“Respondents’ Opposition”). Response: First, this alleged finding of fact actually presents the legal issue whether Commerce Holding requires the presence of a health “hazard” rather than merely “environmental contamination” as stated in Commerce Holding. Second, if this were a finding of fact, there is no evidence in this Record to support this alleged factual finding. No witness testified that “lead paint is only hazardous when it starts to deteriorate, flake, chip or peel.” In fact, the City’s expert, Kimball, acknowledged that all five subject properties are contaminated with lead paint, but that he is “not a lead expert” and does not have an {H1854302.1} 68 understanding as to the extent of the lead contamination. (R584) The Program Manager of the City’s Lead Program, Mokrzycki, equivocated as to whether lead is always hazardous, but she acknowledged that lead dust and lead in the soil above the limits set by the EPA “is considered hazardous” (R616) and that if lead is ingested it is a poison. (R617) The City’s web sites further rebut this alleged “fact.” See, e.g., Stiles v. Batavia Atomic Horseshoes, Inc., 81 NY2d 950, 951 (trial court’s affirmed finding of fact that defendant engaged in sales of equipment as a regular part of its business unsupported by the record despite evidence in the record cited by the Appellate Division); Fields v. Fields, 15 NY3d 158, 174 (2010) (Smith, dissenting) (“With all the deference that is due *** to affirmed findings of fact *** this finding cannot be sustained. *** The record here simply does not support [the] finding ***.”). Third, the voluminous case law herein demonstrates that the existence of lead paint at a property has been held by numerous courts in New York – and is admitted on the City’s own web site – to constitute a health “hazard” contrary to any purported affirmed finding of fact in this case. “2. Lead paint can be remediated by removal, enclosure, encapsulation and wet paint scraping and repainting.” Respondents’ Opposition at 4. Response: This is an undisputed fact that is irrelevant to the significant legal issues raised in this case because Respondents offered no proof to rebut Petitioners’ experts on the proper remedy and cost to deal with Petitioners’ lead {H1854302.1} 69 paint. The City apparently wants the Court to reject removal of the lead in favor of a less expensive alternative. There is no proof to support the City’s theory. Petitioner’s expert, Koslowsky, testified that: (1) minimizing the dangers of exposure to lead are difficult, if not impossible, absent removal of the lead paint from the premises (R104-105); (2) efforts to encapsulate lead-based paint are never a permanent solution; Koslowsky testified that “you can encapsulate but the problem with encapsulation is that after years, you know, deterioration, you are just going to get back to the lead paint again” (R105, 112); and (3) it was the professional opinion of Envirologic and himself that the best way to remediate lead paint is to remove it. (R110) Similarly, Zinserling of CRAL testified that CRAL would remove all lead from the subject premises rather than encapsulate it (R122), and that CRAL has never performed encapsulation as the contamination would still be present and eventually would present a problem for the owner and building occupants. (R122-123) Moreover, Mokrzycki admitted on behalf of the City that with “normal wear and tear” lead painted windows and doors would last “not more than 20 years” without deterioration that would expose lead dust. (R627) In response, the City offered the testimony of its Program Manager for the City’s Lead Program, Mokrzycki, who testified that there are no specific requirement whether to remove lead or to encapsulate it and allow it remain in place, and that it “would be in the opinion of *** the project designer or the {H1854302.1} 70 architect or the engineer *** to decide if they wanted to remove something and do total abatement.” (R611-612) In this case that would be Koslowsky of Envirologic and Zinserling of CRAL. “3. The Petitioner has taken no steps to have the lead paint removed and has not retained the firm from whom he received estimates to actually perform the work.” Respondents’ Opposition at 4. Response: Again, this is an undisputed fact that is irrelevant to the significant legal question whether Commerce Holding requires an order or agreement to remediate environmental contamination before it can be taken into consideration in the tax assessment of property. There is no such language in Commerce Holding, and the numerous authorities cited herein demonstrate that it is not the law in New York or its sister states who have applied Commerce Holding. However, in the unlikely event that this Court finds that Petitioners are only entitled to the reduction in assessments if the monies saved in real property taxes are used to remediate the lead contamination of the five subject properties, Roth testified that although he has not hired CRAL to do the lead abatement, it is his “intention *** to in fact hire them to remove the lead *** [i]f I have the money to do it.” (R184) “4. The Petitioner is not required by federal, state or local law to remove the lead and lead-based paint from the subject properties.” Respondents’ Opposition at 4. {H1854302.1} 71 Response: Once again, this is an undisputed fact, not challenged by Petitioners, that raises the legal issue that is presented whether such a requirement is necessary under Commerce Holding and its progeny. “5. Petitioner introduced no evidence at trial that the subject properties contained lead contamination, asbestos or any other alleged hazardous substances as of the January 1, 2001, 2002, 2003, and 2004 taxable status dates. Soil tests of the subject properties in 2008 do not provide proof as to whether the soil at the subject properties was contaminated on the taxable status dates.” Respondents’ Opposition at 5. Response: This is not an accurate description of Supreme Court’s findings of fact because it ignores the Court’s finding that “an inference may be drawn that lead-based paint existed in the properties during the taxable status dates, because of the subsequent test in 2008 and the fact that lead-based paint is no longer manufactured ***.” (R17a-18a) In conclusion, this Court’s scope of review in tax assessment proceedings is well-established. “The valuation of assessed property is, of course, essentially a question of fact, the courts' principal task being to discern the most accurate estimation of value for the specific property before it. Thus, where, as here, ‘the determinations of value made at nisi prius have been affirmed at the Appellate Division, those valuations must be upheld unless there has been an error of law in the use of an erroneous theory of valuation or unless the record does not contain evidence to support them’ (Matter of B. Altman & Co. v. City of White Plains, 57 {H1854302.1} 72 NY2d 904, 905–906 [1982] ).” Consolidated Edison Co. of New York, Inc. v. City of New York, 8 NY3d 591, 595-596 (2007). G. Conclusions As To Valuation and Proper Tax Assessments For Tax Years 2001-2004 Putting aside Supreme Court’s erroneous application of the Commerce Holding standards, it is clear that Supreme Court did not reject or dispute the methodology of valuing and the actual values of the subject properties for the tax years 2001-2004 as to the cost to cure the lead paint contamination in Petitioners’ expert Appraisal Reports. Moreover, Supreme Court did not reject Kelley’s reliance on and the validity of the testimony and reports of: (1) Envirologic regarding the lead paint contamination of the subject properties and that all painted surfaces which tested positive for lead paint in excess of 1.0 milligrams per square inch which are in fair or poor condition should be removed by a contractor whose workers are certified in lead safe work practices; (2) CRAL as to the cost of all labor, equipment and materials necessary to complete the removal of lead, proper hazardous waste disposal, and the establishment of a health and safety plan during the performance of the work, which would be performed within current HUD guidelines, including wet, chemical and HEPA methods; and (3) Marinich regarding the cost to renovate the five subject properties after the lead remediation services are performed by CRAL, which will generally return the subject {H1854302.1} 73 properties to the condition in which they existed before the work performed by CRAL, with the exception that, due to the expense of returning the properties to the precise condition in which they previously existed, the cost of restoration contemplates the use of more modern products (e.g. vinyl siding as opposed to wood clapboard) where appropriate. Accordingly, this Court should adopt Kelley’s valuations and, after taking the environmental impairment of the subject properties due to lead contamination into consideration, and subtracting the total cost to cure the lead contamination from the values “as if uncontaminated” of the subject properties, find that the values of the fee simple interests in the subject properties as of the January 1, 2001, 2002, 2003 and 2004 valuation dates at issue in this litigation be reduced as requested by Petitioners. Notwithstanding that the values are actually $1 for each of the subject properties, Petitioners did not request reductions to this level and cannot now do so. In conclusion, the assessments and values should be reduced as follows: 960 Lancaster Avenue 1/1/01 1/1/02 1/1/03 1/1/04 Assessment 65,000 65,000 65,000 65,000 Value As if Uncontaminated 58,000 54,000 48,000 44,000 Cost to Cure 60,622 60,622 60,622 60,622 Residual Value 1.00 1.00 1.00 1.00 Requested Reduced Assessment $20,000 $20,000 $20,000 $20,000 {H1854302.1} 74 965 Lancaster Avenue 1/1/01 1/1/02 1/1/03 1/1/04 Assessment 65,000 65,000 65,000 70,000 Value As if Uncontaminated 49,000 47,500 29,000 44,000 Cost to Cure 88,303 88,303 88,303 88,303 Residual Value 1.00 1.00 1.00 1.00 Requested Reduced Assessment $25,000 $25,000 $25,000 $25,000 126 Harvard Place 1/1/01 1/1/02 1/1/03 1/1/04 Assessment 60,000 60,000 60,000 60,000 Value As if Uncontaminated 40,000 13,500 18,000 36,000 Cost to Cure 111,669 111,669 111,669 111,669 Residual Value 1.00 1.00 1.00 1.00 Requested Reduced Assessment $20,000 $20,000 $20,000 $20,000 125 Victoria Place 1/1/01 1/1/02 1/1/03 1/1/04 Assessment 70,000 70,000 70,000 70,000 Value As if Uncontaminated 44,500 38,000 44,000 46,500 Cost to Cure 142,393 142,393 142,393 142,393 Residual Value 1.00 1.00 1.00 1.00 Requested Reduced Assessment $20,000 $20,000 $20,000 $20,000 116 Victoria Place 1/1/01 1/1/02 1/1/03 1/1/04 Assessment 75,000 75,000 75,000 75,000 Value As if Uncontaminated 6,600 35,500 46,500 53,000 Cost to Cure 129,416 129,416 129,416 129,416 Petitioner’s Residual Value 1.00 1.00 1.00 1.00 Requested Reduced Assessment $20,000 $20,000 $20,000 $20,000 {H1854302.1} 75 POINT II EVEN DISREGARDING THE LEAD PAINT CONTAMINATION, PETITIONERS ESTABLISHED THAT EACH OF THE SUBJECT PROPERTIES WERE OVER-ASSESSED Utilizing the income capitalization approach to determine the values of the subject properties “as if uncontaminated” Kelley arrived at values that were well below the assessments even without consideration of the “cost to cure” any lead paint. After taking into consideration appropriate and relevant data, Kelley determined the following values for the properties “as if uncontaminated”: 960 Lancaster Avenue 1/1/01 1/1/02 1/1/03 1/1/04 Assessment 65,000 65,000 65,000 65,000 Value As if Uncontaminated 58,000 54,000 48,000 44,000 965 Lancaster Avenue 1/1/01 1/1/02 1/1/03 1/1/04 Assessment 65,000 65,000 65,000 70,000 Value As if Uncontaminated 49,000 47,500 29,000 44,000 126 Harvard Place 1/1/01 1/1/02 1/1/03 1/1/04 Assessment 60,000 60,000 60,000 60,000 Value As if Uncontaminated 40,000 13,500 18,000 36,000 Requested Reduced Assessment NA $20,000 $20,000 NA 125 Victoria Place 1/1/01 1/1/02 1/1/03 1/1/04 Assessment 70,000 70,000 70,000 70,000 Value As if Uncontaminated 44,500 38,000 44,000 46,500 116 Victoria Place 1/1/01 1/1/02 1/1/03 1/1/04 Assessment 75,000 75,000 75,000 75,000 Value As if Uncontaminated 6,600 35,500 46,500 53,000 Requested Reduced Assessment 20,000 NA NA NA {H1854302.1} 76 After rejecting Petitioners’ environmental claim, Supreme Court rejected Kelley’s “as if uncontaminated” values in his Conclusions of Law based on Petitioners’ actual expense information and documentation, Kelley’s replacement reserves, and Kelley’s purported failure “to consider all the approaches to value – cost, income analysis, and sales comparison – and weigh them accordingly.” (R18a-20a) We submit that Supreme Court erroneously rejected Kelley’s “as if uncontaminated” values. First, Justice Greenwood concluded that there were various shortcomings in the “expenses” component of Kelley’s undisputed “as if uncontaminated” values for each of the subject properties, including: 1. the court was “unable to determine from the testimony presented whether the expenses presented by the Petitioner are legitimate in that there is no breakdown description of the expenses so that the Court can determine whether they are ordinary or capital expenses and whether they truly belong to the address to which they are charged” (R18a); 2. the court was “not at all convinced that management fees and common costs are not being double counted;” (R18a); and 3. the Court concluded that “the expense figures of the Petitioner's expert lack credibility for a number of reasons” including that “[n]o reliable supporting testimony or documentation, such as testimony by an accountant or bookkeeper {H1854302.1} 77 has been offered,” and “the appraiser failed to make the necessary inquiries concerning the figures presented by the Petitioner himself *** or to present the Court with any other valuation approach to reconcile the numbers derived from the income approach due to the lack of income in several years.” (R19a) These “Conclusions of Law” regarding Petitioners’ expenses are meritless and contrary to the undisputed evidence at trial. Petitioners’ Appraisal Reports clearly indicate that actual income and expenses were appropriately utilized due to the length and breadth of Petitioners’ experience in the unique student housing rental market. Kelley expressly relied upon the experience of Norman Roth in ascertaining the appropriate rents charged and necessary expenses to be incurred. This information was then utilized in Petitioners’ Appraisal Reports. Kelley correctly noted that “[t]he owner of this property owns and/or manages some 50 properties in the area. His rental rates are set in a pattern that his long experience in renting student housing has taught him. He is well aware of competing rates in the area. Therefore, it is my opinion that subject’s actual rentals are the best reflection of the market. No adjustments are warranted and any attempt to do so would be artificial and affected.” (R1854 [Exh 21, at 26, e.g.] ) Consequently, Kelley’s reliance upon actual expenses (as opposed to fictional “average” income and expenses relied upon by the City’s appraiser, Kimball), is supported by the information contained in Petitioners’ Appraisal {H1854302.1} 78 Reports and the testimony presented at trial. Actual, as opposed to average, expenses are generally preferred. Second, the court concluded that “replacement reserves determined by the Petitioner's appraiser are excessive based upon their prior use and the acknowledged average reserve per square foot.” (R19a) In fact, Kelley testified, without rebuttal, that his figure was within the appropriate range. Even if the Court disagreed with this number at the high end of the range, the entire valuation should not be discarded, but only modified accordingly for this one small aspect of the valuation. In fact, this is true for each of the court’s “objections” to the expense items. In general with respect to these two expense items, it should be noted that Petitioners presented verified dollar figures in the BAR Complaints, which contain a breakdown of the repairs, supplies, and maintenance for each property. The City had the BAR Complaints (R734-1524), Verified Petitions (R1709-1827), and Verified Income and Expense Statements (with actual numbers from tax returns) (R1545-1708) for years and never asked for further back up. Kelley reviewed Roth’s income and expenses and asked the appropriate questions concerning the income and expenses. Roth was on the stand, and the City and Justice Greenwood could have asked whether any expenses were ordinary or capital items. The City and the Judge could have asked if the common costs included management fees. {H1854302.1} 79 Roth could have been asked any relevant question. These same expenses were presented to the BAR, and presumably were reviewed by the City before trial. There is no evidence in this Record that capitalized expenses were treated as ordinary expenses, and in every document filed with the City and in court they are broken down by each property location to show that they “truly belong” with that property. (R18a) Similarly, there is no evidence in this entire Record that Petitioners’ management fees and common expenses “double counted.” (R18a) Student rentals are very management intensive and, like most professional appraisers of student rentals, Kelley knew and recognized this. (R258-270) Student housing is not like an apartment complex, as student wear and tear sometimes require extensive remodeling. Third, Justice Greenwood concluded that “Petitioner's appraiser has failed to consider all the approaches to value – cost, income analysis, and sales comparison – and weigh them accordingly. *** One or more of these approaches may be found by the appraiser to be inapplicable or unreliable, but all should, in the first instance, be considered.” (R19a-20a) To the contrary, it is undisputed that in his Appraisal Reports and his testimony Kelley examined whether a sales comparison approach could be utilized and, after careful consideration, determined that it could not. He stated that “[w]here sales occur, it is usually impossible to obtain information on the status of {H1854302.1} 80 hazardous substances and whether there were indemnification agreements, those being major factors in evaluating the comparability of such sales. Therefore, the sales comparison approach is not applicable.” (R1837 [Exh 21, at 9, e.g.] ) Thus, he explained his ultimate failure to utilize a comparable sales approach, although he considered it “in the first instance,” but determined that it was “not applicable.” (R1837, 256, 270-273) Thus, Kelley stated unambiguously in both his appraisal reports and testimony the basis for only ultimately using the income capitalization approach. (R 270-274) Moreover, during Kelley’s testimony at trial Justice Greenwood stated that “I reject [the City’s] contention that [Kelley] should have used comparable sales ***. He can use the income capitalization approach.” (R312) Similarly, although he considered it, Kelley did not utilize the cost approach method of valuing the subject properties because they are rental housing. The cost approach is generally limited to the valuation of special-purpose properties. (R272-273, 1850-1851 [Exh 21, “Valuation Process,” e.g.] ) CONCLUSION For all the foregoing reasons, Petitioners-Appellants respectfully request that this Court issue an Order reversing the Appellate Division Order brought up for review, and either grant Petitioners the reductions in assessments of the subject properties requested or remand this matter to Supreme Court for further proceedings consistent with this Court's decision, together with such other and further relief as to the Court seems just and equitable. Dated: September 25,2012 {H 1854302.1} 81 Respectfully Submitted By: Attorneys for Petitioners-Appellants :COCK~j~ Uu- Alan J. Pierce, Esq. 100 Madison Street, Suite 1500 Syracuse, New York 13202 Tel: (315) 565-4500 Fax: (315) 565-4600 APPENDIX l-teatthfj Kids art H-ap'Pfj Kids! The City of Syracuse's Lead Hazard Control Pmgrarn provides qualified homeowners and landlords financial assistance to help leduc'.! lead palnt hazards in houses located in the City of Syracllse. MORE..• SAFETY TIPS ANNOUNCEMENTS http://www.syracuseleadprogram.com/ A1 Syracuse Lead Pro gram Page 1 of7 Syracuse Lead Program • Home • FAQ • Contact • Search • About Us • Enroll/Forms • Training • Education • Links & Resources The City of Syracuse's Lead Hazard Control Program provides qualified homeowners and landlords financial assistance to help reduce lead paint hazards in houses located in the City of Syracuse. MORE ... Safety Tips Safe Toys http://www.syracuseleadprogram.com/ 9/18/2012 A2 Syracuse Lead Program Target Recalls Circo Childrens' Travel Cases Due to Violation of Lead Paint Standard Children's Chairs and Stools Recalled by Elegant Gifts Mart Due to Violation of Lead Paint Standard Mexican Wrestling Action Figures Recalled by Lee Carter Co. Due to Violation of Lead Paint Standard LM Import & Export Recalls Toy Cars Due to Violation of Lead Paint Standard Build-A-Bear Workshop Recalls Lapel Pins Due Cost Plus Inc. Recalls Wooden Animal Drum http://www.syracuseleadprogram.com/ Page 2 of7 City of Syracuse Lead Hazard Control Program 201 E. Washington S1.Rm. 712 • Syracuse, NY 13202-1432 • 315.448.8710 9/18/2012 A3 Frequently Asked Questions - Syracuse Lead Program Page 1 of 4 Syracuse Lead Program . I • Home • FAQ • Contact • Search • About Us • Enroll/Forms • Training • Education • Links & Resources Frequently Asked Questions Where does lead come from? Lead is a natural element found in the form of an ore called galena. What is lead poisoning? Lead poisoning means you have too much lead in your body. Lead can be found in your blood, soft tissues and in your bones. If lead levels in the blood stream are high, there can be serious health risks. Where can I learn more about lead hazards? The Syracuse Lead Program offers a l-Day Lead-Safe Work Practices Training for more information on reducing lead hazards in a safe manner. How long has the Syracuse Lead Program been around? The Syracuse Lead Program began in 1996 and since that time has reduced lead hazards in over 1,400 units in the City of Syracuse and assisted over 1,200 children under six (6) years old. How much money can I receive for lead hazard reduction from the Syracuse Lead Program if I qualify? An eligible one (1) unit property can receive a maximum three (3) year deferred loan up to $15,000 for lead hazard risk reduction work. An eligible two, three or four (2,3, or 4) unit property can receive a maximum three (3) year deferred loan up to $20,000 for lead hazard risk reduction work. What happens at the inspection? Inspectors will take soil and dust wipe samples and check all painted surfaces (interior and exterior) at the property to determine ifthere are lead paint hazards. The inspection lasts about one (1) hour. What is a deferred loan? The money borrowed will not need to be paid back as long as the property owner does not sell the house for three (3) years. If the house is sold before the three (3) years, the full amount ofthe loan would need to be paid back to the Lead Program. What if the cost of the work to be done at my property is more than the maximum money allotted? If there is an overage, it must be paid by the property owner at the closing, ifhe or she wants to continue with the program. For example, if the job cost for a one (1) unit property comes to $16,500, the homeowner would be required to pay $1,500 at the closing ifhe or she wanted to continue with the program. If there is an overage, can I just have some of the work done? No. All lead hazards listed on the lead risk assessment are required to be addressed. http://www.syracuseleadprogram.comlfaq/ 9118/2012 A4 Frequently Asked Questions - Syracuse Lead Program Page 2 of4 Ifmy job costs comes in lower than the maximum amount allotted for my property, can I use money for other repairs? No. The City of Syracuse Lead Program only covers lead hazards. Can I do the lead work myself or hire a contractor to do the work? No. Work must be done by City Of Syracuse Lead Program approved contractors. Is there lead in my home? If your house was built prior to 1978, you probably have some lead in your home. What causes lead poisoning in children? The most common cause is lead-based paint! Can my child get poisoned even if he/she doesn't actually eat paint chips? Yes, most cases of childhood lead poisoning are caused by lead dust as a result of hand-to-mouth contact. If floors have dust from old painted walls, windows, doors, etc, a baby could breathe in the lead dust or suck on lead-dusted hands and toys. How can you tell if a child is lead poisoned? Are there any symptoms? You can't tell! Lead poisoning is not like a child having the flu, where you can look at them and know they are sick. A healthy child and a lead poisoned child may look and act the same way! The only way to know for sure if a child is poisoned is a blood lead test. A simple lead test at your family physician or at a local health center can tell if your child has dangerous lead levels in their blood. What are the effects of lead poisoning? The effects oflead poisoning are irreversible and may include a lower IQ, kidney damage, hearing loss, growth problems, anemia and behavioral problems. How can I keep my family lead smart? • Keep children away from peeling paint! • Damp mop floors and damp wipe surfaces twice a week to reduce lead dust! • Wash your child's hands and toys often to remove lead dust and/or dirt! • Use cold tap water, not hot, for infant formula & cooking! • Let the water run for at least one minute before using to flush out the pipes! • Feed children healthy meals/snacks - a child with an empty stomach will absorb more lead! What does a healthy diet include? Foods high in iron, calcium and vitamin C can help prevent lead poisoning! Keep fast food to a minimum! Foods high in iron, calcium & vitamin C include ... • Beans • Peas • Lean beef & pork • Chicken/turkey • Spinach/collard greens • Whole grains • Eggs • Tuna • Cheese • Milk • Yogurt • Oranges • Tomatoes http://www.syracuseleadprogram.com/faq/ 9118/2012 A5 Enroll & Forms - Syracuse Lead Program Page 1 of3 Syracuse Lead Pro gram • Home • FAQ • Contact • Search • About Us • Enroll/Fonns • Training • Education • Links & Resources Enroll & Forms To enroll in the Syracuse Lead Program, please use the PDF forms below: Application (Part 1) Program guidelines and requirements. All documents listed on the application along with Lead Tenant/Owner Data Form (Part 2), Blood Lead Authorization Form (Part 3) and Visiting Child Verification Form (if applicable) must be turned in prior to approval. Occupant Data Form (Part 2) This form must be filled out by owner in owner-occupied situation and by the tenant in an investor- owned dwelling. Each unit must complete and sign this form. Blood Lead Authorization Form (Part 3) This form must be filled out by the parent or legal guardian of the occupying or visiting child. The child's name, DOB (date of birth) and signature on the bottom are required. By signing this form, the parent/legal guardian authorizes the Lead Program to receive a copy of the child's lead test records. Child between one and five (1-5) must be tested within six months of housing intervention. Visiting Child Verification Form This form must be filled out by the owner/tenant to certify that a child five or under spends at least two days per week, three hours per visit, 60 hours per year at residence, if there is not a child five or under living in the property. Vacant Agreement This form must be filled out if the property or a unit is vacant. http://www.syracuseleadprogram.com!enroll/ 9118/2012 A6 Enroll & Forms - Syracuse Lead Program Page 2 of3 When ALL requirements are met and ALL forms are completed and signed, please mail ALL required paperwork to the following address to proceed to the next step in the Program: Syracuse Lead Program 201 E. Washington Street, Room 712 Syracuse, New York 13202 Click Image fOr mQre jnformation "Is ad -b as ed pa int "( &: llIr oe :A m e. rf ca n He aM y Ho m e. f; SU rv ey : Dr af tR nai .Re por tf Q; 'Pe er Rl l0e W :- . Le ad an d. Ar se n, ic~ , Qc tOO ef7 ,2 PQ 8); ' .. , . ." ":' <, ' :;< '," " :' i. . ~ -'.: . 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