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Volume 3 - Opinions of Counsel SBEA No. 114

Opinions of Counsel index

Assessment, special franchise (property leased to water district) - Real Property Tax Law, §§ 102(17), 600:

Property located in, under or above any public street or place and owned by a private water company is subject to a special franchise assessment. Property of such company not subject to special franchise assessment is assessable locally. The fact that such property is leased to a municipality or water district does not alter this conclusion.

Our opinion has been requested relative to the taxable status of certain real property owned by a private water company and leased to a town water district to be used for purposes of the water district.

The facts indicate that the town water district has entered into a contract with the water company to purchase the franchise, business and property of the water company, except the reservoir, spring houses, and lands, mains and valves connected with said reservoir. As part of the consideration for the sale, the excepted property is to be leased to the water district without rent for a period of ten years, and during the term of the lease all repairs, maintenance as well as taxes thereon are the responsibility of the water district.

All the property constituting a water supply system (e.g., spring houses, mains and reservoirs) has been specially made taxable real property by paragraphs (b) and (e) of subdivision 12 of section 102 and section 566 of the Real Property Tax Law. Under these provisions “buildings and other articles and structures, substructures and superstructures erected upon, under or above the land, or affixed thereto”, in addition “mains, pipes and tanks permitted or authorized to be made, laid or placed in, upon, above or under any public or private street or place for conducting steam, heat, water, oil, electricity or any property substance or product capable of transportation or conveyance therein or that is protected thereby”, and “dam sites, dams, reservoirs and flowage lands” are taxable real property.

All real property within the State is subject to real property taxation unless exempt therefrom by law (Real Property Tax Law, § 300). There is no provision in any law which exempts property comprising a water supply system where the property belongs to a private company or corporation. However, where title is conveyed to the water district, a public special district, such property will become exempt. Real Property Tax Law, section 410 specifically provides that “real property owned by a special district, or the property owners therein, within its boundaries used exclusively for the purpose for which such district was established shall be exempt from taxation” (emphasis supplied). Since the property herein is not owned by a special district, it is our opinion that the property is taxable.

In general terms, real property placed in, under or above any public street or place constitutes special franchise property assessable by the State Board of Equalization and Assessment. Such property of a municipal corporation or a special district is specifically excluded from the definition of “special franchise” (Real Property Tax Law, §§ 102(17), 600). Property located in the public way and leased by a private company to a municipality has been held subject to special franchise assessment (People ex rel. Interborough Rapid Transit Co. v. State Board of Tax Commissioners, 126 App.Div. 610, 110 N.Y.S. 577, aff’d, 195 N.Y. 618, 89 N.E. 1109; Broadway Maintenance Corp. v. Moore, 73 Misc.2d 235, 341 N.Y.S.2d 761, aff’d, ____ App.Div.2d ____, 356 N.Y.S.2d 1017).

          Accordingly, property located in, under or above any public street or place and owned by the water company is subject to special franchise assessment by the State Board. Property owned by the water company which is not subject to special franchise assessment is assessable locally. The fact that in both instances the property may be leased to a municipality or water district does not alter this conclusion.

June 7, 1974

Updated: