Volume 5 - Opinions of Counsel SBEA No. 95
Housing exemption (redevelopment companies) (gross shelter rents) - Private Housing Finance Law, § 125:
A redevelopment company’s project receiving an exemption pursuant to section 125 of the Private Housing Finance Law must at least pay taxes based on an assessment no less than the assessed value of the real property at the time it was acquired by the company. If the company and the municipality in which the project is located so agree, the company may be made liable to pay taxes equal to a percentage of the project’s gross shelter rents. For purposes of section 125 “gross shelter rents” means the total amount of rents received exclusive of any deduction of any kind.
Our opinion has been requested concerning the taxes or payments in lieu of taxes payable in regard to a housing project which belongs to a company organized under the Private Housing Finance Law.
According to the inquiry and to two resolutions passed by the city council in which the project is located, the project is owned by a redevelopment company organized under Article V of the Private Housing Finance Law.
The first resolution (dated June 15, 1972) purported to grant a complete tax exemption to the project of the company and to provide that “in lieu of such taxes the sponsor shall pay to the City of. . .its proportionate share of an annual sum which shall be equal to 10% of the Effective Gross Income of the Project.” Under a second resolution dated March 7, 1973, a partial exemption was granted from taxes levied by or in behalf of the City of. . .with the additional proviso that the developer “shall pay to the city of. . .its proportionate share of an annual sum which shall be equal to the greater of (i) 10% of the Gross Shelter Rent of the Project or (ii) the total amount of the axes which would be payable to all taxing authorities upon the assessed valuation of the real property acquired for the Project at the time of its acquisition.”
However, a letter agreement between the city and the company, dated July 10, 1973, states:
The subject Project is exempted from all local and municipal real estate taxes that may be levied by or on behalf of the city other than assessments for local improvements, so much of the value of the property included in the project which represents an increase over the assessed valuation of the real property, both land and improvements, acquired for the Project at the time of its acquisition by you, as will result in the payments of taxes to and for the benefit of the city in an annual amount which shall be 2.5% of the gross shelter rent of the Project. . . .(emphasis in original)
The relevant portion of section 125 of the Private Housing Finance Law, the section which sets forth the tax exemption provisions for redevelopment companies, provides as follows:
The local legislative body of any municipality in which a project of such company is or is to be located may by contract agree with any redevelopment company to exempt from local and municipal taxes, other than assessments for local improvements, all or part of the value of the property included in such project which represents an increase over the assessed valuation of the real property, both land and improvements, acquired for the project at the time of its acquisition by the redevelopment company which originally undertook the project. . . .
There is also a provision in regard to shelter rents, but it is applicable solely to a project acquired for purposes of rehabilitation, and not to the type of projects involved here.
It is evident from reading the above quoted provision that the letter agreement dated July 10, 1973 is the only one which is in accord with the statutory provisions. The letter agreement makes it clear that taxes must be paid at least on the minimum taxable assessment required by the statute - that is, an assessed valuation equal to the assessed value of the real property at the time it was acquired by the company. The additional language in the agreement can reasonably be construed to mean that, in any event, an amount must be paid in city taxes equal to 2.5% of the gross shelter rent of the project.
A financial statement enclosed with the inquiry shows that for the year ending December 31, 1975, the company had a total income from rents of $386,804 with the operating net loss of $149,183. If utility expenses were deducted from the total rents, the resulting figure would be $320,190.
We are asked what amounts are payable this year.
First, a tax is absolutely due in an amount levied on an assessed value equal to the assessed value on the roll on the date of acquisition by the company. Second, the taxes payable must be in an amount at least equal to 2.5% of the “gross shelter rent.” We have been unable to find any cases defining “gross shelter rent,” but it is our opinion that this means the total amount of rents received exclusive of any deduction of any kind.
We do not think that it was intended that the definition of “shelter rent” contained in various other sections of the Private Housing Finance Law (i.e., §33) apply in this instance. In these other sections, shelter rent is expressly defined to mean the total rents received less the cost of providing to the occupants electricity, gas, heat and other utilities. The use of the word “gross” negates any meaning which would require any deductions since the word “gross” is always defined to mean “exclusive of deductions” or “total” (see, e.g., American Heritage Dictionary, 1st ed. 1969). Therefore, taxes are payable on an assessed value in such an amount as which would produce 2.5% of $386,804.
August 18, 1976