Volume 10 - Opinions of Counsel SBRPS No. 60
Assessments, generally (selective reassessment) - Real Property Tax Law, §305:
An assessor may not selectively reassess property such as by reassessing only those properties which recently have been conveyed or improved. However, an assessor is not precluded from revaluing any real property unless that assessor reassesses all real property. Rather, an assessor may change the assessment of a particular property, class of property, or neighborhood, but, if challenged, he or she must be prepared to show how any change brings such assessment into line with those of other properties whose assessments go unchanged.
We have been asked for a further explanation (see, 9 Op.Counsel SBEA Nos. 18 and 87) of selective reassessment and what an assessor must do to successfully withstand an assessment challenge based upon such allegation. A property owner of three lots requested a review of his assessments in a year when the assessor was not conducting a revaluation or update of assessments. Upon review, the assessor determined that one parcel's assessment should be reduced by $15,000, the second's should be increased by $12,000, and the third parcel's assessment left unchanged. The taxpayer has alleged that the proposed increase of his second parcel would constitute impermissible selective reassessment and we have been asked to comment.
We have previously expressed our opinion that a so-called piecemeal (or selective) revaluation program, in which specific parcels, various portions of an assessing unit, or certain types or classes of real property are revalued in different years, without regard to the relative uniformity of assessments of the properties in question violates the statutory standard of uniformity in assessments (Real Property Tax Law, RPTL, §305; 9 Op.Counsel SBEA No. 18). That opinion and another in Volume 9 (No. 87) are both based on the United States Supreme Court's opinion in Allegheny Pittsburgh Coal Co. v. County Commissioner of Webster County, West Virginia, 488 U.S. 336, 109 S.Ct. 633, 102 L.Ed.2d 688 (1989) and this State's Appellate Division's opinion in Krugman v. Board of Assessors, 141 A.D.2d 175, 533 N.Y.S.2d 495 (2d Dept., 1988).
In Krugman, the Second Department held that, by their failure to respond to the petitioner's notice to admit (i.e., a civil litigation disclosure device; see, CPLR, §3123), the assessors admittedly followed a practice of "reassessing only those properties which had been the subject of transfer or conveyance" (533 N.Y.S.2d at 500). The court decided that this practice (which is sometimes referred to as "welcome stranger" or "welcome neighbor" assessing) "violates the statutory and constitutional requirements of uniformity and equality" in assessing (ibid.). The court did note that, where an equal protection of law challenge is brought to review different classes created for taxation purposes, the challengers must bear a heavy burden to show that there is no rational basis for the government's action. Here, the court found no "legitimate governmental purpose" in the assessors' practice which "perpetuat[ed] this differential treatment" [of] "permitting property owners who have been longstanding recipients of public amenities to bear the least amount of their cost" (533 N.Y.S.2d at 501). The assessment was vacated and remitted to the assessors for a new assessment.
Less than three months thereafter, in Allegheny, the United States Supreme Court found that the assessor had valued the "petitioners' real property on the basis of its recent purchase price, but made only minor adjustments in the assessments of land which had not been recently sold" (488 U.S. at 338, 109 S.Ct. at 635). Like the Krugman court, the Supreme Court noted the Equal Protection Clause's "toler[ance]" of "occasional errors of state law or mistakes of judgment when valuing property for tax purposes," and stated that "the constitutional requirement is the seasonable attainment of a rough equality in tax treatment of similarly situated property owners" (488 U.S. at 343, 109 S.Ct. at 638). The Court noted that a State may divide property into classes and assign a different burden to each so long as those divisions and burdens are reasonable.1 The Court found, however, that West Virginia law provided for no such distinctions and that the assessor's practice was unconstitutional.
Perhaps as the result of Allegheny, a filed appeal of Krugman was discontinued and withdrawn (73 N.Y.2d 872, 537 N.Y.S.2d 498 (1989)). While the New York State Court of Appeals has not as yet addressed the issue of selective reassessment, other New York courts have had numerous occasions to do so. A review of some of those decisions may provide guidance for the question at hand. Many are from the Second Department of the Appellate Division.
In Waccabuc Construction Corp. v. Assessor of the Town of Lewisboro, 166 A.D.2d 523, 560 N.Y.S.2d 805 (2d Dept., 1990), the appellate court upheld the lower court's declaration that the Town's 1983 assessment roll was legal. The plaintiff alleged that the Town "systematically assessed newly constructed property at a higher percentage of market value than existing property" (560 N.Y.S.2d at 806). The court credited the assessor's testimony, not the plaintiff's expert, and concluded, "it cannot be said that Waccabuc met its heavy burden' of demonstrating that Lewisboro's 1983 assessment roll was improper and illegal [citing Krugman]" (560 N.Y.S.2d at 807).
In Nash v. Assessor of Town of Southampton, 168 A.D.2d 102, 571 N.Y.S.2d 951 (2d Dept., 1991),2 the appellate court reversed a motion for summary judgment for the taxpayers, where the trial court had relied on Krugman. The appellate court explained its earlier holding in the Krugman case, stating that it "involved a taxing jurisdiction that would only reassess property upon that property's sale" (571 N.Y.S.2d at 954; emphasis in original). In contrast, the court noted that in the case before it, the assessor claimed he was reassessing in four instances, including where the property became subject to the town's so-called "land equalization program," a six year effort at reassessing all 45,000 parcels in town. The appellate court sent the case back to the trial court for the creation of a record so it could decide if there was or was not "intentional, invidious, or arbitrary discrimination (as was the case in Krugman ...)" (571 N.Y.S.2d at 955).3
Similarly, in Chasalow v. Board of Assessors of the County of Nassau, 176 A.D.2d 800, 575 N.Y.S.2d 129 (2d Dept., 1991), the appellate court considered the lower court's sua sponte finding that Nassau County used two different methods to assess Class I property (i.e., pursuant to RPTL, Art. 18): 1938 cost of construction for parcels which were not grieved and market value for parcels which were grieved. Again, the Appellate Division sent the case back for development of a record. In a subsequent case with the same title, the lower court's finding of unconstitutional assessing in Class I was reversed on appeal. The court compared coefficients of dispersion and found Nassau's to be acceptable, the "evidence merely establish[ing] a moderate statistical deviation from a hypothetical norm" (202 A.D.2d 499, 609 N.Y.S.2d 27, 29 (2d Dept., 1994), lv. to app. den., 83 N.Y.2d 759, 616 N.Y.S.2d 14 (1994)). It said that "petitioners' evidence does not meet the rigorous requirements needed to establish a constitutional infirmity [referencing Krugman]" (ibid.).
In Mundinger v. Assessor of the City of Rye, 187 A.D.2d 594, 590 N.Y.S.2d 122 (2d Dept., 1992), the petitioners challenged a reassessment of their waterfront property, claiming discrimination as compared to non-waterfront property. The court said, "The reassessment program in the case at bar would be justified by the appellants' obligation to tax real property at a uniform percentage of value if waterfront residential property appreciated at a higher rate than nonwaterfront [sic] residential property" (590 N.Y.S.2d at 123).
Likewise, in Board of Managers of Acorn Ponds v. Board of Assessors, 197 A.D.2d 620, 603 N.Y.S.2d 491 (2d Dept., 1994), lv. to app. den., 83 N.Y.2d 759, 616 N.Y.S.2d 14 (1994), the appellate court reversed supreme court's finding that Nassau County had assessed property in an unconstitutional manner when it reassessed petitioner's property upon its reclassification from Class II (where it had been assessed using the income approach to value) to Class I (where the cost approach was used)(RPTL, §1802) without reassessing all such property. The Appellate Division noted that all Class I property was assessed using the cost approach to value. It distinguished its Krugman decision, finding no invidious discrimination.
In several other cases, however, the court has ruled against the assessor. For example, in Towne House Village Condominium v. Assessor of the Town of Islip, 200 A.D.2d 749, 607 N.Y.S.2d 87 (2d Dept., 1994), lv. to app. den., 84 N.Y.2d 802, 617 N.Y.S.2d 136 (1994)), the court struck down an assessment increase which followed from a property's conversion from an apartment complex to condominium ownership. In addition to finding that the assessor had violated the valuation limitation in section 339-y of the Real Property Law, the court found that the selective reassessment of "only the subject property" violated equal protection guarantees (citing Allegheny and Krugman)(607 N.Y.S.2d at 88).
In Feigert v. Assessor of the Town of Bedford, 204 A.D.2d 543, 614 N.Y.S.2d 200 (2d Dept., 1994), the court upheld a reduction in an assessment, finding that the petitioner had "offered substantial proof that the 1991 assessment of their property is based directly upon the resale of the property in 1983. The Town failed to offer any proof in rebuttal" (614 N.Y.S.2d at 200).
In DeLeonardis v. Assessor of City of Mt. Vernon, 226 A.D.2d 530, 641 N.Y.S.2d 83 (2d Dept. 1996), the court overruled the dismissal of a petition (for an assessment reduction) by a small claims assessment review hearing officer. The court noted that, "The Assessor did not submit an affidavit disputing the claim that he relied on the purchase price in arriving at the assessed value" (641 N.Y.S.2d at 84). Based on the record before it, the court held that, "Utilizing the recent purchase price as a basis for determining the increase in assessed value of a property on which improvements have been made pursuant to building permits, while similarly situated properties which have not been improved are not subject to reassessment, results in a discriminatory treatment of the petitioner by imposing upon him a tax burden not imposed upon owners of similarly situated property" (641 N.Y.S.2d at 85).
Still more recently, and citing many of the cases cited above, the Second Department found that a petitioner had standing to bring an Article 78 (of the CPLR) proceeding to challenge her assessment where she alleged "that she has paid a disproportionate share of property taxes pursuant to an illegally imposed assessment..." (Feldman v. Assessor of the Town of Bedford, 236 A.D.2d 399, 653 N.Y.S.2d 38, 39 (2d Dept., 1997)). The alleged illegality was a "welcome neighbor' assessment" (ibid.).
Within the Third Department of the Appellate Division, the results are more evenly split. In Averbach v. Board of Assessors of the Town of Delhi, 176 A.D.2d 1151, 575 N.Y.S.2d 964 (3d Dept., 1991), the court reversed state supreme court's dismissal of the case challenging a "welcome stranger" methodology. The taxpayers alleged that recently sold property was assessed at 80 percent of its sale price while similarly situated property was not. The court remitted the case.
In Akerman v. Assessor of the Town of Hardenburgh, 211 A.D.2d 916, 621 N.Y.S.2d 154 (3d Dept., 1995), the taxpayer argued that only parcels in its geographic area had been reassessed. The town countered that values in this area of the town justified its reassessment. The court found that the petitioner had failed to meet its "heavy burden" that the roll was illegal (621 N.Y.S.2d at 155).
In Corvetti v. Town of Lake Pleasant, 227 A.D.2d 821, 642 N.Y.S.2d 420 (3d Dept., 1996), the court reversed the lower court's dismissal and reinstated a proceeding alleging civil rights violations, given the taxpayer's allegation that the town's practice was a "...welcome neighbor' policy of arbitrarily increasing the assessments of new residents of the town" (642 N.Y.S.2d at 422).
It remains our opinion that the preferred way to reassess property is to conduct a comprehensive "revaluation" (RPTL, §102(12-a)) program, so as to attain uniformity, followed by regular "updates" (RPTL, §102(22)), so as to maintain that equity. The question is what an assessor may or may not do, when, between revaluations or updates, he or she is confronted by what is apparently an inequitable assessment.
Isolating a particular type of property or a particular neighborhood for reassessment may create a situation of discriminatory enforcement of the tax laws. Yet, after reviewing the foregoing cases, we do not believe that an assessor is precluded from reassessing any property within an assessing unit unless he or she reassesses all property, that is, in a revaluation or update year. Instead, whenever an assessor changes the assessments of individual properties or of a particular type of property in a year when the entire roll is not revalued or updated, the assessor must be prepared to explain and justify the changes.
Perhaps, our position is best explained in an unreported decision. In Bostock et al. v. City of Rye, Sup.Ct., Westchester Co., Index No. 11253/96 (10/18/96), Nastasi, J., R.P.T.A.R, Vol. 6, No. 1, p. 1),4 the court heard appeals from two small claims assessment review petitioners who claimed that the assessor had increased their assessments after they completed major improvements to their properties. Following the issuance of DeLeonardis, (supra), the petitioners argued that they had been selectively reassessed. The court noted that DeLeonardis was predicated solely on the issue of the use of resale value for assessment purposes, and that that was not alleged here. Also, there was no allegation the assessor used a "piecemeal approach' of assessing only those properties which have undergone improvements..." (at p.6; emphasis in original). The court continued, "Having determined that petitioners' respective properties were undervalued in comparison to others of the same type and condition, it was incumbent upon the assessor to make the appropriate adjustments she did (RPTL §§302; 305; 506). Had she not done so [she] would have further perpetuated inequality in the tax roll" (ibid., emphasis added).
In our opinion, then, when taken together, these decisions support our above position regarding selective reassessment. That is, an assessor may change the assessment of a particular property, class of property, or neighborhood, but he or she must be prepared to show how this change or these changes affect or (perhaps more accurately) do not affect other properties whose assessments go unchanged. The assessor must be prepared to prove that no selective reassessment occurred when he or she changed certain assessments to bring them to the locally applicable uniform percentage of assessed value. Where the assessor has "lost" in the cases discussed above, the assessor did not submit sufficient proof to the court, resulting in a finding of impermissible selective reassessment.
In the factual situation presented here, where the taxpayer will ultimately receive a net overall decrease in the assessments of his three parcels, we do not believe that the "reapportionment" of his assessments, with its resultant increase in the assessment of one parcel, would be found to be selective reassessment. Nevertheless, the assessor should be prepared to offer proof of his assessment methodology in general so as to successfully withstand any such challenge.
December 23, 1997
1 In fact, the Supreme Court subsequently upheld California's Proposition 13 which provides for reassessment upon sale, a practice which eventually results in a disparity between persons owning similar property (Nordlinger v. Hahn, 505 U.S. 1, 112 S.Ct. 2326, 120 L.Ed.2d 1 (1992)). However, as we noted in 9 Op.Counsel SBEA No. 87, New York law does not authorize such practice.
2 We note, in passing, that the taxpayers in Nash filed an amicus curiae brief in Krugman.
3 The validity of the town's piecemeal approach to revaluation, such as we criticized in 4 Op.Counsel SBEA No. 55, was therefore not addressed.
4 Citation is to The Real Property Tax Administration Reporter, a publication of the State Board of Real Property Services.