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Volume 3 - Opinions of Counsel SBEA No. 51

Opinions of Counsel index

Municipal corporations exemption (watershed property) - Real Property Tax Law, § 406(3):

Watershed lands owned by a municipality but located outside of its boundaries are not eligible for exemption under section 406(3) of the Real Property Tax Law unless such lands support a sewage disposal plant, a water plant, pumping station, water treatment plant or reservoir.

We have received an inquiry as to whether property owned by a village, but located entirely outside the limits of the village, is entitled to a real property tax exemption pursuant to subdivision 3 of section 406 of the Real Property Tax Law. The property in question consists of a sewage treatment plant and disposal area and considerable watershed property.

Subdivision 3 of section 406 of the Real Property Tax Law provides as follows:

§ 406. Municipal corporations

* * *
3. Real property owned by a municipal corporation not within its corporate limits while used as a sewage disposal plant or system, including necessary connections and appurtenances, or real property owned by a municipal corporation having a population of less than one hundred thousand used as a water plant, pumping station, water treatment plant or reservoir, including necessary connections and appurtenances shall be wholly or partially 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, by any municipal corporation in which located, provided the governing board thereof shall so agree in writing.

In relation to the property comprising the sewage treatment plant and disposal area, such property is eligible for an exemption provided the municipality in which the property is located agrees to such exemption in writing.

However, as to the question of whether watershed property should be included under the wording of “necessary connections and appurtenances,” the determining factor will be the nature of the water resources supported by the watershed property.

If the watershed lands surround a municipally-owned reservoir, and are located without the municipal boundary, such watershed lands are to be considered “an integral part of the reservoir system and the ‘necessary connections and appurtenances’ to the reservoir as set forth in the Real Property Tax Law, section 406(3)” (25 Op. State Compt. 72). Therefore, upon procurement of an agreement in writing with the taxing municipality, such watershed property will be eligible for exemption.

Watershed land existing in and of itself will not, however, be eligible for a section 406(3) exemption. The statute is clear in that the “necessary connections and appurtenances” must support a “sewage disposal system” or a “waterplant, pumping station, water treatment plant or reservoir” (1966, Op.Atty.Gen. 44).

February 22, 1974

NOTE: Chapter 300 of the Laws of 1974, effective May 7, 1974, amended section 406(3) so as to allow the municipality in which the property is located to wholly or partially exempt such property from all special ad valorem levies and special assessments. Chapter 683 of the Laws of 1979 expanded section 406(3) to apply to eligible property owned by a municipal corporation with a population of 250,000 or more but less than 300,000, and to add watersheds to the list of potentially exempt uses.

Updated: