In the Matter of Norman E. Roth, et al., Appellants,v.City of Syracuse, et al., Respondents. (And Other Proceedings.)BriefN.Y.May 1, 2013TO BE SUBMITTED NEW YORK STATE COURT OF APPEALS 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 PetitionerAppellants v THE CITY OF SYRACUSE NEW YORK THE BOARD OF ASSESSMENT REVIEW OF THE CITY OF SYRACUSE AND JOHN GAMAGE COMMISSIONER OF ASSESSMENT OF THE CITY OF SYRACUSE RespondentsRespondents AMICUS CURIAE BRIEF Submitted March 8 2013 by NEW YORK STATE CONFERENCE OF ASSOCIATION OF TOWNS MAYORS AND MUNICIPAL OFFICIALS OF THE STATE OF NEW YORK 119 Washington Avenue 2nd Floor 150 State Street Albany New York 12210 Albany New York 12207 Telephone 518 463 1185 Telephone 518 4657933 Fax 518 463 1190 Fax 518 4650724 Jane E Tsamardinos of Counsel Michael E Kenneally of Counsel Onondaga County Index No 2001 2698 20023223 20032666 20042269 1 1 1 1 Table of Contents Table of Authorities Questions Presented iv Preliminary Statement and Interest of Amici 1 3 Argument 413 1 I Presence of lead paint in and of itself is insufficient to overcome a presumptively valid assessment 68 II Commerce Holding does not require the immediate recognition of9 the full cost to remediate a property in each year that a land owner fails to remediate the environmental contamination 812 Conclusion 13 1 1 1 1 1 1 1 1 1 Table of Authorities Cases 300 Gramatan Ave Assocs v State Div of Human Rights 45 NY2d 176 1978 6 1 Chapman v Silber 97 NY2d 9 2001 10 Commerce Holding Corp v Board of Assessors of Town of Babylon 88 NY2d 724 1996 passim FMC Corp Peroxyg n Chemicals Div v Unmack 92 NY2d 179 1998 5 8 Matter of Allied Corp v Town of Camillus 1 80 NY2d 351 1992 1 People ex rel Wallington Apartments v Miller 288 NY 31 1942 6 1 Statutes Public Health Law 1370 10 Public Health Law 1373 10 Real Property Tax Law 301 2 Real Property Tax Law 302 2 Real Property Tax Law 305 2 Real Property Tax Law 500 2 1 New York Constitution 110 ii 1 1 NY Const art VIII 4 12 III NY Const art VIII 10 12 1 NY Const art XVI 2 1 1 1 1 1 1 1 1 1 II N 1 0 0 piin 1 QUESTION PRESENTED 1 Does this Court decision in Commerce Holding Corp v Board of Assessors of Town of Babylon require a per se reduction in an assessment for the full amount of remediating lead paint in each year the property owner allows the condition to exist where there is no duty on the property owner to remediate the lead paint and there is no evidence that the lead paint is in a hazardous state 1 1 1 1 1 1 1 1 1 1 1 1 1 1 iv 1 Preliminary Statement and Interest of Amici Real property tax is the primary source of revenue for municipalities across New York State The Legislature enacted a comprehensive framework to ensure that the real property tax is fairly apportioned among the tax base The Constitution requires that in no case shall assessments exceed full value NY Const art XVI 2 and statute requires that all real property be assessed at a uniform percentage of its full value Real Property Tax Law 305 The fundamental principle guiding assessors is to ascertain a fair and realistic value of the property subject to the tax Matter of Allied Corp v Town of Camillus 80 NY2d 351 356 1992 Ensuring that each property owner pays his or her fair share based upon the full value of the property allows real property tax to be equitably distributed amongst the tax base Counties towns cities villages and school districts in New York State depend on real property tax revenue and therefore have a vested interest in ensuring that these constitutional and statutory mandates are fulfilled Assessments yimpactact all municipalities abilit to incur indebtedness and most 1 municipalities ability to raise taxes as well as determine how real property taxes are apportioned among the tax base NY Const art VIII 4 10 For every taxpayer whose property is assessed below the average level of assessment other taxpayers assessed at or above the average are forced to assume the rest of the tax LIPP j burden Taxpayers pay more than their fair share not only when their property is ycrassessed but also when their neighbors properties are under assessed The isesor employed by these municipalities are authorized by law to use a variety of approaches to arrive at a realistic value of the property to avoid such a result Real Property Tax Law 301 302 500 In addition the New York State Constitution Article VIII 4 provides that a cite village or county may not contract indebtedness which including existing NIindebtedness exceeds seven percent of the average full valuation of taxable real estate of the municipality Article VIII 10 of the New York State Constitution also provides that the amount of real estate taxes which may be levied in any fiscal car for municipal purposes is limited to two percent of the fiveyear average full aluation of taxable real estate of the municipality The average full valuation of la able real estate in a municipality is determined by taking the assessed valuations 01 taxable real estate on the last completed assessment roll and the four preceding rolls of the municipality and dividing each number by the State equalization rate for the applicable roll The ability to contract indebtedness and raise taxes is crucial for municipalities I n this case the Petitioner owner of five income producing properties in Syracuse NY seeks to reduce his assessment to a nominal value due to the mere presence of lead paint by relying on this Court decision in Commerce Holding 2 Cot N Board of Assessors of Town of Bab lon to support his position 88 NY2d 74 11996 Unlike the property owner in Commerce Holding the Petitioner here by his own admission has no obligation under local state or federal law to Ftmediate the lead paint conditions at these properties and has not taken steps to do t t PetitionerAppellants Brief at 2 Allowing the reduction requested by the 1 Petitioner would not only shift his tax liability to the remaining tax base within the i t v t t i Syracuse but if adopted by this Court would also have severe deleterious impacts on the equitable allocation of the real property tax statewide The effect of this spilt would be significant particularly in cities like Syracuse where apprtt intately 93 of all properties were built before 1978 City of Syracuse tt s DataI I n tn I In addition adopting the Petitioners arguments would create the potential h r a per se reduction in the assessments of pre1978 properties which would seer ly curtail a municipalitys ability to collect taxes and contract debt Therefore the Association of Towns of the State of New York and the New York State of Mayors on behalf of the more than 1500 cities towns and 011 iliae that they represent urge this Court to reject the Petitioners construction of fit nmcrce Holding and uphold the decision of the Appellate Division Fourth Department 1 3 ARGUMENT THIS COURTS DECISION IN COMMERCE HOLDING DOES NOT MANDATE AN ANNUAL PER SE REDUCTION IN ASSESSED VALUATION WHERE LEAD PAINT IS PRESENT Commerce Holding is the leading case in New York on environmental 01 contamination and tax assessment There the court concluded that when en Ironiii ntal contamination is shown to depress a propertys value the must be considered in property tax assessmentP P Commerce 1111Ioldino 88 NY2d at 729 The court reached this conclusion by reasoning that the mull aloe of property is based on its marketability and factors such as en irtn iiicntal contamination can affect a propertys marketability Id In CommerceHolding the court also endorsed a flexible approach to valuation particularly in light of the difficulty in assessing the market value of en i o Commerce Holding NY2d at 731Ir 1 niutally contaminated properties 1 tiotabl immerce Holding does not mandate a reduced assessment where their 1 has been no proof of environmental contamination prior to the taxable status dates for the properties in question Commerce Holding clearly articulates that one must first show that the cn iro nilental contamination depresses property value before an assessment is reduced Nevertheless the Petitioner maintains that the mere existence of lead paint constitutes an environmental contaminant that would automatically entitle a 4 property owner to a reduction in the assessed value of the property In addition to ionoringc the directives set forth in Commerce Holding the Petitioners position is contrary to the well established principle that property valuations by assessors are presumptively valid FMC Corp Peroxygen Chemicals Div v Unmack 92 NY2d 17 187 11998 By arguing that the presence of lead paint is an environmental contaminant that would automatically reduce the market value of the property the Petitioner is shifting the burden on assessors to prove that the value of the properties has not been adversely impacted by the mere presence of lead paint The Petitioner argues that the full cost of remediation should annually educe the assessed value of property however this is a misapplication of the tielibility in valuation endorsed by the court in Commerce Holding and would create it financial windfall for derelict property owners that shifts the tax burden onto ether property owners These property owners may be unable to keep up with thi increased tax burden resulting in foreclosures abandonment of property and Hight In addition the annual reductions proposed by the Petitioner would drastically and unreasonably reduce the assessed valuations of taxable real estate thus a municipalitys ability to raise taxes and incur indebtedness Because the Petitioners positions are contrary to law would shift the tax burden to post1978 property owners and adversely impact a municipalitys ability to 5 contract indebtedness and raise taxes this Court should not adopt the Petitioners ar otinrcnt 1 PRESENCE OF LEAD PAINT IN AND OF ITSELF IS INSUFFICIENT TO O t RCOME A PRESUMPTIVELY VALID ASSESSMENT lhis Court has repeatedly acknowledged that property valuation by the r or is presumptively valid see People ex rel Wallington Apartments v dill r 188 NY 31 1942 This presumption obviates the need for assessors to prttc that their valuations are correct going forward Id at 33 In order to o croon this presumption a petitioner challenging his or her assessment must produce substantial evidence that the assessment is incorrect FMC Corp 92 Nl21 rt 187 Substantial evidence requires proof of a valid and credible dispute rcrutiing rluation and does not rise from bare surmise conjecture speculation o rumor t Id at 188 citing 300 Gramatan Ave Assocs v State Div of Human hi lrt 45 NY2d 176 180 1978 Once the presumption of validity has been uercouc the court must weigh the entirety of the record to determine whether the propertti has hccn overvalued Id Appl ing this wellestablished burden of proof standard to the decision in 2911r1rc1 Holding a petitioner seeking to lower the assessed value of his or her prupert must produce substantial evidence that there is environmental contamination on the property and that such contamination warrants a reduction in the assessed value of the property If a petitioner fails to meet either of these 6 requirements the presumption of validity remains and the assessment is upheld l Jere the Petitioner failed to meet the criteria outlined in Commerce Holding by l i n oo to demonstrate that his properties were contaminated The Petitioner simply pointed to the existence of lead paint without any proof of deterioration Thus the Petitioners contention amounts to nothing more than bare surmise 1 unjc tune speculation or rumor 1111 To the extent that intact lead paint may be considered an environmental contaminate the Petitioner must prove that the condition necessarily depresses the 41 marketability of property which he failed to do see also Point II A infra As lead paint may be intact or encapsulated and pose no exposure to the residents or alternatively may be in varying degrees of disrepair lead paints impact on the marketability would vary from property to property Regardless as outlined in 1 11 om the burden rests on the property owner not the assessor to prove that lead paint has a negative impact on the market value of the property The practical implications of adopting the Petitioners argument would electi clv shift the burden of proof of a valid assessment from a property owner to th r Under the Petitioners position once an assessment has been set by the assessor a property owner would simply have to confirm the presence of lead paint and present a quote for remediation in order to have sufficient evidence to rebut an assessor assessment of the property for all years going forward Under 011 7 1 the burdenshifting framework of FMC Corp facedrp with similar assessment complaints would have to offer proof that the existence of lead paint 1 does not negatively impact the marketability of the property or any income that the property generates This minimal degree of proof combined with the abundance of pre1978 structures particularly in urban areas would create an administrative nightmare for assessors who would be forced to prove the validity of theirY 1 assessment on each and every pre1978 property Furthermore if the Court 1 accepts the Petitioners assertion that the mere presence of lead paint is sufficient to decrease tax assessments the owners of such properties would obtain a financial windfall in the form of reduced tax obligations which would serve as a disincentive to remediate lead paint 1 II COMMERCE HOLDING DOES NOT REQUIRE THE IMMEDIATE RECOGNITION OF THE FULL COST TO REMEDIATE A PROPERTY IN EACH YEAR THAT A LAND OWNER FAILS TO REMEDIATE THE ENVIRONMENTAL CONTAMINATION In Commerce Holding this court held that the petitioner sustained its burden of proof and was entitled to a reduction by the actual and anticipated cost of remediation on an annual basis 88 NY2d at 733 However this court also acknowledged that assessing the value of environmentally contaminated property can be difficult and therefore endorsed a flexible approach to valuation Id at 731PP 32 The court warned that adopting the methodology employed in Commerce Holding could overstate the effects of environmental contamination and 8 1 acknowledged that the courts holding was based on the particular facts in that caseP 1 Id at 73233 The facts of this case and the Petitioners arguments perfectly demonstrate the overstated effect cautioned against in Commerce Holding The Petitioner maintains that like the petitioner in Commerce Holding he is entitled to have his assessment reduced or completely offset each year due to the existence of leadY Y 1 paint in each of his income producing properties However the Petitioner has no 1 duty to remediate lead paint that has not deteriorated flaked or chipped nor has he shown that any of the lead paint at his properties are in a condition that warrant correcting Therefore a duty to remediate has not affected the marketability of the Petitioners ro erty Moreover the Petitioner maintains that the cost ofp p remediation should reduce his assessments annually a position which if adopted 1 creates a strong disincentive to remediate the condition particularly in light of the fact that the Petitioner has no obligation to remediate Reducing an assessment without proof of environmental contamination that requires remediation would create a windfall for P P Yro ert owners under no duty to remediate and further contradict public policy which dictates that lead paint conditions should be 1 remediated The Petitioner advocates for a windfall which would leave lead paint conditions unremediated shift the tax burden to the remainder of the property tax 1 9 base and impair a municipalitys ability to raise revenue therefore his arguments 1 should be rejected A There is no duty to remediate The Petitioner in this case much like other landlords across the state is not required by state or federal law to abate the lead paint in his incomeproducing properties Petitioner Appellants Brief at 2 As recognized by this Court New 1 York State has not enacted similar legislation that imposes a duty on landlords to test for or abate leadbased paint hazards absent official notification of a problem see Public Health Law 1373 and efendant landlords cannot be held liable for a hazardous lead paint condition unless they are actually aware that lead is present in chipping paint Chapman v Silber 97 NY2d 9 2001 see also Public Health Law 1370 et seq In fact the Petitioners own appraiser admits that property seller do not generally disclose that there is lead paint on the property Petitioner Appellants Brief at 20 The absence of a legal duty to remediate intact lead paint has enabled the Petitioner to continue to earn a reasonable return on his investment in the form of rental income and would likewise enable subsequent purchasers to do the same This speaks directly to the marketability of the property in turn supporting the presumptively valid assessment established by the assessor 1 10 1 Unlike the Petitioner in the instant matter the owner of the property in Commerce Holding was strictly liable for the environmental contamination and Ifaced significant penalties for failing to remediate the condition at issue there Id at 72930 Undoubtedly the strict liability to remediate the environmental condition affecting the property in Commerce Holding affected the propertys market value Id at 732 a factor which is noticeably absent in the instant case In 1 essence the strict liability in Commerce Holding had a direct impact on the marketability of the property as the costs to remediate would necessarily erode the reasonable return on the property and subsequent purchasers would be purchasing a law suit Neither of those impacts have been established in this case B Failure to remediate creates a continual benefit 1 Petitioner contends that he is entitled to have the full cost of remediation 1 carried forward year after year to offset his entire tax liability or a substantial portion thereof without ever having to remediate the lead paint This contention is contrary to the spirit and intent of Commerce Holding and runs afoul of sound public policy In short this contention would reward pre1978 propertyP Y P P P Y owners who fail to abate lead paint and allow them to hold these properties relatively tax free even if they own income generating rental property Ultimately the remainder of the tax base would subsidize this windfall 11 When the Legislature wants to reward property owners for putting their proerty to use in a particular manner they may enact tax exemptions and afford some relief from the property tax burden While the remainder of the tax payers must bear that burden this is balanced by the public policy supported by the overall benefit to the community Reading Commerce Holding in the manner proposed by the Petitioner would have the same effect as a tax exemption without the sound public policy to support it Rather than encourage beneficial uses adopting the Petitioners position would discourage landowners from remediating a potentially dangerous contamination The Court should avoid the poor public policy result that the Petitioner advocates In sum this Court decision in Commerce Holding does not support the premise that the mere presence of lead paint on the walls of income producing property requires a reduced assessment without any showing of an impact on the marketability or reasonable return on investment of the property Nor does it require that the entire cost of remediation be recognized each and every year a property owner without any duty to remediate fails to remediate his or her property Supporting such a premise would set a precedent that discourages remediation of lead paint and significantly reduces the assessed valuation of any pre1978 property impacting a municipalitys ability to raise revenue incur indebtedness and equitably distribute the tax burden among its residents 12 1 CONCLUSION FOR THE FOREGOING REASONS THE DECISION OF THE APPELLATE DIVISION FOURTH DEPARTMENT SHOULD BE AFFIRMED 1 Dated March 8 2013 Albany New York 1 1 I 7Jane E Tsamardinds Michael Ke wally Jr CZ NEW YORK STATE CONFERENCE OF ASSOCIATIO TOWNS MAYORS AND MUNICIPAL OFFICIALS OF THE STATE OF NEW YORK 119 Washington Avenue 2nd Floor 150 State Street Albany New York 12210 Albany New York 12207 Telephone 518 4631185 Telephone 518 465 7933 Fax 518 4631190 Fax 518 4650724 1 1 1 1 1 1 1 13