Volume 6 - Opinions of Counsel SBEA No. 111
Municipal corporations exemption (leased property) (regional off-track betting corporation); Regional off-track betting corporation exemption (leasehold interest) - Real Property Tax Law, § 406; McKinney’s Unconsolidated Laws, § 8124:
Real property owned by the City of Schenectady located within its corporate limits and leased to the Capital District Regional Off-Track Betting Corporation is not entitled to a tax exemption pursuant to section 406(1) of the Real Property Tax Law.
Real property leased by a regional off-track betting corporation is not entitled to the exemption provided by section 183 of chapter 254 of the Laws of 1940 (as added by L.1973, c.346, § 5 - see, McKinney’s Unconsolidated Laws, § 8124).
The City of Schenectady is leasing city owned property to the Capital District Regional Off-Track Betting Corporation (hereinafter CDROTBC). The question is whether this property is entitled to exemption, and if so, whether it would be exempted if CDROTBC thereafter sublet a portion to a profit-making organization, viz., the computer company which is employed by CDROTBC.
An answer to this inquiry involves analysis of two statutes. The first of these is section 406 of the Real Property Tax Law which exempts certain real property owned by municipal corporations. Subdivision 1 of section 406 provides in part that, “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.” We assume for purposes of this opinion that the property in question is owned by the City of Schenectady and is located within its corporate limits. Therefore, the sole question is whether it is being “held for a public use” within the meaning of that phrase in subdivision 1 of section 406.
The Court of Appeals has stated:
Although what comprises “a public use” within the meaning of the statute “has never been defined with exactitude” and “must necessarily depend on the peculiar circumstances of each case”, it has been said, and most appropriately, that “‘held for a public use,’ in this connection, means that the property should be 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.” (County of Herkimer v. Village of Herkimer, 251 App. Div. 126, 128, 295 N.Y.S. 629, 634, affd. 279 N.Y. 560, 18 N.E.2d 854.) (Town of Harrison v. Westchester County, 13 N.Y.2d 258, 263, 196 N.E.2d 240, 246 N.Y.S.2d 593, 596.)
In a recent opinion (6 Op.Counsel SBEA No. 95), we indicated that the performance of activities by private organizations which utilize municipally owned property does not necessarily remove the right to an exemption pursuant to section 406. Rather, case law holds that the exemption is retained provided the private parties using the property are performing a municipal function which State law authorizes the owning municipality to perform. In this case, however, it is clear that State law does not authorize the City of Schenectady to perform the function of an off-track betting facility. Rather, this authority has been given to the so-called “Capital District Region,” which region includes Schenectady County (L.1940, c.254, § 117, added L.1973, c.346, § 4 (see, McKinney’s Unconsolidated Laws § 8063(5)).
Adding further support to our conclusion that the property in question may not receive an exemption pursuant to section 406 is the recent case of Fallica v. Town of Brookhaven, 69 A.D.2d 579, 419 N.Y.S.2d 102, wherein the closely divided Second Department of the Appellate Division denied an exemption pursuant to section 406 to town land leased to the Federal government for use is an Internal Revenue Service Center. The Court relied on the Town of Harrison case, supra; Matter of County of Erie v. Kerr, 49 A.D.2d 174, 373 H.Y.S.2d 913; Matter of Dubbs v. Board of Assessment Review of County of Nassau, 81 Misc.2d 591, 367 N.Y.S.2d 898; and Erie County Water Authority v. County of Erie, 47 A.D.2d 17, 364 N.Y.S.2d 626, and concluded:
The cases cited illustrate the principle that in order for municipally owned real property to be exempt from taxation because of its “public use”, that use must be one that enhances the health, education, safety, or welfare of the residents of the municipality. (419 N.Y.S.2d at 110, emphasis in original)
Accordingly, based on the foregoing, since the property’s use benefits a statutorily defined region of the State, and not just the City, we conclude that it is not exempt pursuant to section 406 of the Real Property Tax Law.
As previously indicated, yet another statute must be analyzed in order to respond to this inquiry. That statute (L.1940, c.254, § 183, added L.1973, c.346, (see, McKinney’s Unconsolidated Laws, § 8124)) provides in part that, “The property of each regional off-track betting) corporation and any property under its jurisdiction, control or supervision . . . shall be exempt from taxation.”
In an unpublished opinion (Op.State Compt. 75-834), the State Comptroller pressed the opinion that the phrase “any property under the jurisdiction, control or supervision” should be read to exempt real property leased by a regional off-track betting corporation.
The Attorney General disagreed, stating that, “It would be a most unusual lease which did not leave some vestige of control, inspection or responsibility the landlord either during its term or at its termination” (1976, Op.Atty.Gen. 147, 149). The Attorney General also stated that the language used in the exemption statute was not so clear as to grant an exemption to OTB leasehold interests and that had the Legislature wished to do so, it would have expressly set forth such intention as it had in sections 1275 and 1299-0 of the Public Authorities Law [which sections exempt the property, including leasehold interests, of the Metropolitan Transportation Authority and the Niagara Frontier Transportation Authority, respectively].
Given the general rule that exemption statutes are to be strictly construed (City of Lackawanna v. State Board of Equalization and Assessment, 16 N.Y.2d 222, 212 N.E.2d 42, 264 N.Y.S.2d 528), we concur with the Attorney General’s position that property leased by a regional off-track betting corporation is not exempt from taxation. However, in order to eliminate the inconsistency of the aforementioned opinions, we have sought the introduction and passage of a bill to clarify that in order to receive an exemption, real property of a regional off-track betting corporation must be owned by that corporation (1979-80 Regular Session, S.4106, A.6179).
Accordingly, based on the foregoing, it is our opinion that real property owned by the City of Schenectady and leased to the CDROTBC is not entitled to exemption from taxation. Given this conclusion, we do not reach the second question posed above.
April 16, 1980
Note: A.6179 was signed into law as chapter 752 of the Laws of 1980.