Volume 3 - Opinions of Counsel SBEA No. 1

Opinions of Counsel index

Municipal corporations exemption (museum) (Schoharie Valley Railroad Complex) - Real Property Tax Law, § 406:

Village owned property held for future development of a railroad museum will be exempt from taxation pursuant to section 406 of the Real Property Tax Law to the extent that such property is “held for a public use”. That portion of the property, however, which is leased to private individuals for private use will be subject to real property taxation. Our opinion has been requested concerning the taxable status of real property purchased by the Village of Schoharie from the Schoharie Colonial Heritage Association.

Our opinion has been requested concerning the taxable status of real property purchased by the Village of Schoharie from the Schoharie Colonie Heritage Association.   

To review the facts which have been presented, the property is the Schoharie Valley Railroad Complex, which we assume is a tract of land with improvements which had served as a railroad center and depot for the population of the Schoharie Valley during the Nineteenth Century. The Village plans a certain amount of restoration work, and the station, mill, freight shed and lookout will be opened to the public on a seasonal basis of approximately May to October.

The property was owned by the Schoharie Colonial Heritage Association, an educational corporation chartered by the Board of Regents in 1961. However, on March 23, 1972, the Association transferred title to the property to the Village of Schoharie. The Village is currently renting the various buildings on the property as follows:

All real property is subject to taxation, special ad valorem levies and special assessments unless specifically exempt therefrom by law (Real Property Tax Law, § 300). Real property which is owned by a village may be exempt from taxation, special ad valorem levies and special assessments if it satisfies the requirements of section 406 of the Real Property Tax Law. The Village-owned property in question is located within the Village of Schoharie and therefore must satisfy the requirements of subdivision 1 of section 406 which provides as follows:

§ 406. Municipal corporations

1. Real property owned by a municipal corporation within its corporate limits held for a public use, . . . shall be exempt from taxation and exempt from special ad valorem levies and special assessments to the extent provided in section four hundred ninety of this chapter. (emphasis supplied)

The taxable status of the property, then, depends upon whether it is being “held for a public use”.

In our opinion, if and when the property is converted to a public museum (as described above), it will be entitled to an exemption pursuant to section 406 (Herkimer County v. Village of Herkimer, 251 App. Div. 126, 295 N.Y.S. 629, aff’d, 279 N.Y. 560, 18 N.E. 2d 854). However, prior to the conversion of the property to a museum open to the public, in order for an exemption to be granted it must be demonstrated that the current use of the property is for a public purpose (Watkins Glen v. Hager, 140 Misc. 816, 152 N.Y.S. 146, aff’d, 234 App. Div. 904, 254 N.Y.S. 1016; Town of Huntington v. Bradford, 273 N.Y. 603, 7 N.E.2d 715).

It is clear that the leasing of municipally-owned real property is, in itself, not fatal to a claim for exemption, if the lessee oversees a public use of the property (Town of Harrison v. Westchester County, 13 N.Y.2d 258, 196 N.E.2d 240, 246 N.Y.S.2d 593). However, it is also clear that property which is leased to private individuals for a private purpose, is subject to taxation (Town of Harrison v. Westchester County, supra; Herkimer County v. Village of Herkimer, supra), and accordingly the freight shed, station house and the mill section leased to a private individual should be entered on the taxable portion of the assessment rolls.

The question which remains is whether the exemption should be granted where the lessee is another municipal corporation (as in the case of the subject property being leased by a town and a school district). The court in the Herkimer County case discussed this question, and the principle which was emphasized was that this is not necessarily a case of a municipality taxing its own property and paying the tax to itself. As a tax district, the village is an entity entirely separate from the county, the town, and the school district. The statute requires that the property be used for a public use of the municipal owner. Village-owned property used for school district or town purposes is not being used for a village purpose.

The Herkimer County case also applied to section 406 the rule of construction that an exemption from real property taxation will not be recognized unless granted in terms too plain to be mistaken, and that if there is any doubt as to the intent of the Legislature, then the question of taxable status must be resolved in favor of the taxing authority. This same case construed the term “held for a public use” to mean “. . . occupied, employed or availed of by and for the benefit of the community at large and implies a possession, occupation and enjoyment by the public or by public agencies.”

In view of our opinion that a strict construction of section 406(1) requires an interpretation that only property owned by a municipal corporation within its boundaries and used for its own authorized municipal purposes is entitled to exemption, the property in question should be entered on the taxable portion of the assessment roll.

March 15, 1973