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Volume 10 - Opinions of Counsel SBRPS No. 66

Opinions of Counsel index

Business investment exemption (scope) (municipally-owned water system) - Real Property Tax Law, § 485-b:

A municipally-owned water system is not eligible to receive a business investment exemption.

We have been asked whether a water treatment facility and reservoir owned by a village but located outside the boundaries of the village, may receive a business investment exemption (Real Property Tax Law, §485-b). We think not.

While the scope of qualifying business activity as set forth in subdivision five of section 485-b is a broad one, we do not believe that it applies to a municipally-owned water system. Indeed, in our opinion, section 485-b is inapplicable to all publicly-owned property.

In affirming the Appellate Division’s rationale for denial of a forestry exemption (RPTL, §480-a) to property owned by the City of Rochester, the State’s highest court noted: “Additionally, article 4 of the Real Property Tax Law, the exemption article, is comprised of title 1 - ‘Public Property’, and title 2 - ‘Private Property’ (L.1958, ch. 959); section 480-a appears in the latter” (Honeoye Central School District v. Berle, 51 N.Y.2d 970, 416 N.E.2d 1056, 435 N.Y.S.2d 721, 721 (1980)). Like section 480-a, section 485-b is located within title 2.

Instead, municipally-owned water systems located within the boundaries of the owning municipality are exempt pursuant to section 406(1) of the RPTL, as being property “held for a public use” (Matter of Delhi, 201 N.Y. 408, 94 N.E. 874 (1911)). Municipally-owned water systems located outside the boundaries of the owning municipality (if satisfying a certain population standard) may receive a total or partial exemption from taxation, special ad valorem levies and special assessments if the municipalities in which the water system property is located separately agree in writing to such exemption (RPTL, §406(3)).

The Village Board may continue to seek exempt status (pursuant to section 406(3)) from the county, town and school district, and, if those efforts remain unavailing, it may challenge its taxable assessment (per RPTL, Arts. 5 and 7) if it deems such assessment unfair. In our opinion, however, it is not entitled to receive an exemption pursuant to section 485-b of the RPTL.

July 8, 1998

Updated: