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Volume 8 - Opinions of Counsel SBEA No. 19

Opinions of Counsel index

Real property, definition of (improvements)(golf course features); Separate assessment (privately owned improvements on State lands) - Public Lands Law, § 3; RPTL, §§ 102(12), 502, 564:

An “improvement” within the meaning of section 564 of the RPTL includes any conversion or change in the condition of land from its natural state, which otherwise enhances the value or usefulness of that land. Thus, golf course greens, sand traps, and similar features should be considered improvements, subject to separate assessment and taxation pursuant to section 564(2).

We have been asked whether the word “improvements” in the context of real property assessments and, more specifically, section 564 of the RPTL would include items such as putting surfaces or greens, or is limited to buildings or structures. Title to the land is held in the name of the Power Authority of the State of New York (PASNY), and a portion is used by a privately-owned country club pursuant to an agreement with PASNY.

The PASNY is entitled to exemption from taxation to the extent provided in section 1012 of the Public Authorities Law (see also, RPTL, § 412; 5 Op.Counsel SBEA No. 90).

At one time, section 564 applied only to improvements on lands owned by the State. However, section 564 now includes within its scope interests granted in lands pursuant to certain sections of the law (and improvements made to such lands), and would now encompass interests in lands owned by public authorities, such as PASNY. Thus, subdivision two of section 564 now provides for the separate assessment and taxation in the names of the lessees of “interests granted pursuant to [§ 3(4-a)] of the public lands law or [§ 10(38)] of the highway law or [§ 72-n(1)] of the general municipal law and any improvement made thereto” (emphasis added).

Subdivision 4-a of section 3 of the Public Lands Law empowers the Commissioner of General Services to lease “interests in real property including but not limited to air rights, subterranean rights and others, when such are not needed for present public use”. By implication, this includes interests in lands of a Public Authority since this same subdivision provides that “where the superintendence of the interest leased is vested . . . in a public authority. . .” the commissioner must obtain the consent of the head of that Public Authority.

Assuming that the use of the PASNY land falls within the provisions of subdivision 2 of section 564, we must determine whether the greens, sand traps and like changes to the land qualify as separately assessable “improvements”. The fact that enforcement of collection of taxes is difficult due to the nature of the improvement should not be considered dispositive of whether there is a separately assessable “improvement”. Clearly, a leasehold interest granted pursuant to section 3(4-a) of the Public Lands Law would be difficult, if not impossible, to enforce against; yet such an interest is, by statute, subject to separate assessment and taxation. That being the case, we see no reason to conclude that merely because something is of the type which could not be sold separately to enforce unpaid taxes, it is therefore not an “improvement”.

Stated most simply, then, the question is whether the word “improvement”, as used in section 564, refers only to buildings, structures, etc., erected upon or affixed to the land, or is it a broader, more comprehensive term which would include improvements made to the land as well (i.e., changes or alterations made to the land in its natural condition, which tend to enhance its value)?

Although the term “improvements” appears in several sections of the RPTL (see, e.g., § 502(3), relative to the form of the assessment roll), it is not generally defined therein (see, § 102) nor is it defined in the General Construction Law. {*}  For purposes of the so-called “Correction of Errors” Law (§§ 550-559), however, “improvements” takes on the more limited form of meaning, namely “real property as defined in [RPTL, § 102(12)(b)] . . .” (see, § 550(4)). That paragraph (b) of subdivision 12 of section 102 refers primarily to buildings or structures erected “upon, under or above the land, or affixed thereto”. However, section 550 provides at the outset that definitions therein apply “when used in this title”, meaning title 3 of Article 5 of the RPTL (which does not include section 564). Thus, we need not consider ourselves bound by the strictures of this definition for the general purposes of the RPTL.

There is little case law in New York to assist us in this matter. However, from research into other States’ cases, there seems to be universal agreement that the context of the statute will determine the extent of the definition of “improvement”. For example, mechanics’ liens statutes have been broadly interpreted. In the context of such a statute, one court has stated that “the general word ‘improvement’ cannot be reasonably construed to have been used with the limitation in its meaning to buildings and things ejusdem generis . . .” (Green v. Reese, 261 P.2d 596, at 596-597 (S.Ct., Oklahoma, 1953); see also, Lewis v. Midway Lumber, Inc., 561 P.2d 750 (Ct. of App., Arizona, 1977); Application of Magowan, n.o.r., 203 N.Y.S.2d 35 (S.Ct., Suffolk Co., 1960)).

Similarly, the Rhode Island Supreme Court refused to equate “improvement” with a “building or structure” in construing a zoning law provision which permitted the continuance of a preexisting non-conforming use in the case of a “building or improvement”:

As used in [the zoning statute] the term “improvement” describes land which has been converted from its natural state to a different state and condition for the use and enjoyment of man. As we view the statute, such an improvement may consist of vacant land that has been improved by some betterment such as cultivation, clearing, drainage, irrigation, grading or something which otherwise enhances the value or usefulness of the land. (Town of Little Compton v. Round Meadows, Inc., 276 A.2d 471, at 474-475 (1971)).

Finally, in City and County of San Francisco v. San Mateo County, 222 P.2d 860 (S.Ct., Calif., 1980), the Supreme Court of California was asked to consider the meaning of the word “improvements” as found in the following provision of that State’s Constitution: “no improvements of any character whatever constructed by any county, city and county or municipal corporation shall be subject to taxation”. In this case, the plaintiff had acquired lands in San Mateo County for the purpose of building an airport. It expended nearly $7,000,000 in raising the level of the land by dredging and filling operations, and making provision for drainage and drainage control. As a result, the defendant County increased the taxable assessment of the property from $100,785 to $684,625.

The Court noted that the issue was “whether the raising of the level of the land by filling operations was an improvement within the meaning of the constitution” (222 P.2d, at 861). The Court rejected the defendant’s position which it described as the proposition that “since land is land an addition thereto in the nature of a fill cannot be deemed to be an improvement in any sense” (id.). Instead, the Court declared “the phrase ‘improvements of any character whatever’ must be held to include any addition (i.e., excluding matters of repair and replacement) to the property as it was when acquired” (id., at 862).

Although the statutory and constitutional provisions considered in these cases are somewhat broader than the language of the RPTL, in light of the legislative history of section 564, we believe the rationale expressed in those cases should apply equally to that section 564. For example, Chapter 1016 of the Laws of 1971 amended section 564 to include, as separately assessable and taxable, certain interests in lands (and improvements thereto) granted pursuant to the Public Lands Law and the Highway Law. In section one of that Chapter, the Legislature set forth findings and declaration of purpose, including the following:

Valuable lands in this state have been forever removed from the tax rolls . . . as the state has acquired real property for public purposes.

The proper development of . . . adjacent, unused surface properties would provide sources of exceptional revenues to the municipalities to serve as a substitute for the loss of taxes for the realty involved.

(To the same effect, see, L.1980, c.829, § 1).

In other words, municipalities should be compensated for the loss to their tax bases resulting from State acquisitions, to the extent that the land is used for a non-public purpose. That being the case, we are of the opinion that the improvements made to the land in question fall within the meaning of section 564(2).

Support for this conclusion may also be found in several appraisal manuals on the subject of golf courses which include items such as greens and sand traps under the general heading of “land improvements” (i.e., apparently considering improvements to the land as well as those constructed on the land as “improvements”) (see, e.g., Golf Courses - A Guide to Analysis and Valuation, Chapter 5 (American Institute of Real Estate Appraisers, 1980); Encyclopedia of Real Estate Appraising, at 872-873 (3d Ed., Prentice Hall, 1978)).

Based upon the foregoing, it is our conclusion that the word “improvements” as used in section 564 of the RPTL should be broadly construed as meaning a conversion or change in the condition of land from its natural state, which otherwise enhances the value or usefulness of that land. Accordingly, the greens, sand traps, etc., which make up this golf course should be considered “improvements”, subject to separate assessment and taxation pursuant to section 564(2) of the RPTL.

May 9, 1983

{*}  Black’s Law Dictionary defines an improvement as “a valuable addition made to property . . . or an amelioration in its condition, amounting to more than mere repairs or replacement of waste, costing labor or capital, and intended to enhance its value, beauty or utility or to adapt it for new or further purposes” (Rev. 4th Ed., at 890 (West Publ. Co., 1968)).