Source: https://www.tax.ny.gov/pubs_and_bulls/orpts/legal_opinions/v9/58.htm
Timestamp: 2018-08-17 20:29:45
Document Index: 329786003

Matched Legal Cases: ['§ 27', '§ 305', '§ 1700', '§ 302', '§ 301', '§ 9601', '§ 27', 'Art. 16', '§ 2', 'Art. 12']

Volume 9 - Opinions of Counsel SBEA No. 58
Assessments, generally (hazardous waste sites) (valuation) - Environmental Conservation Law, § 27-0303; Real Property Tax Law, § 305:
The determination of the assessed value of a hazardous waste site requires the evaluation of many factors, including its status as a “Superfund” site, cleanup costs, the potential liability of the owner for cleanup costs, the likelihood of a lender being willing to finance the purchase of the property and the stigma remaining after the cleanup.
Our opinion has been requested as to the valuation of a hazardous waste site. The best known instance of a problem of this type occurred in the area known as the “Love Canal”, located in the City of Niagara Falls and the Town of Wheatfield, Niagara County. In response to the problem, the State Legislature concluded that there existed a “state of great and imminent peril to the health of the general public” because of the presence of hazardous waste in the soil. The State offered to purchase the parcels most immediately affected by the health peril. In so doing, the Legislature provided that the purchase price of affected parcels was to be made “at their market value without consideration to any deleterious effects of the discovery of the danger to the general health on the market value of those properties” (Real Property Tax Law, § 1700; added L.1979, c.42).
By the same legislation, certain surrounding properties were granted a temporary real property tax exemption beginning in 1979 (L.1979, c.42). That exemption was subsequently extended by an additional six-year-phase-out (L.1983, c.878), and, later, an additional two years (L.1990, c.53, p. 273). The Legislative findings in support of the original provision included a statement that “the marketability of some additional properties may also be affected by this present health danger.”
In setting forth findings such as these, the Legislature was simply giving specific recognition to one fact, among many others, which any assessor should consider in determining the value of any parcel of real property. All real property is to be assessed according to its condition and ownership as of taxable status date (Real Property Tax Law, § 302) and its value as of the preceding January 1 valuation date (RPTL, § 301; Beisner v. Campbell, 137 Misc.2d 296, 520 N.Y.S.2d 474 (Sup.Ct., Dutchess Co. (1987)). Clearly, there are many factors which the assessor may and should consider in determining the “condition” of a parcel. These include the size, location and accessibility of the lot to be assessed; the type of construction; the age and state of repair of any buildings; the use of the parcel; and “all other elements which may be fairly considered as affecting the market value of real property in a given neighborhood” (Heiman v. Bishop, 272 N.Y. 83, 88, 4 N.E.2d 944 (1936)).
Section 305(2) of the RPTL provides that all real property is to be assessed at a uniform percentage of value. Where property is commonly bought and sold on the open market, the term “value” has been found to mean “market value” (Foss v. City of Rochester, 65 N.Y.2d 247, 480 N.E.2d 717, 491 N.Y.S.2d 128 (1985)), and the latter term has been found to mean the price a willing buyer will pay a willing seller under ordinary circumstances (Hellerstein v. Town of lslip, 37 N.Y.2d 1, 332 N.E.2d 279, 371 N.Y.S.2d 388 (1975); People ex rel. Parklin Operating Corp. v. Miller, 287 N.Y. 126, 38 N.E.2d 465 (1941)).
An important consideration in the valuation of contaminated property is that, under both Federal (42 U.S.C. §§ 9601-9657) and State (ECL, § 27-0303) laws, the liability for costs of cleaning up hazardous wastes is imposed on both the party responsible for the contamination and the owner of the property.
The liability was originally applied so strictly as to hold that an owner who had no part in the contamination and had acquired the property without knowledge of the contamination was nonetheless liable for its cleanup (State of New York v. Shore Realty Corp., 759 F.2d 1032 (2d Cir. 1985)). Another example of the somewhat severe manner in which this liability was imposed is found in United States v. Maryland Bank and Trust Co., 632 F.Supp. 573 (D.Md. 1986), where a bank, which foreclosed a $350,000 mortgage on contaminated property, was found liable for cleanup costs for the property totaling $460,000.
In 1986, the Federal statutes were amended to provide that a party which acquired contaminated property without knowledge of the condition could not be held liable for cleanup costs, provided that an appropriate inquiry had been made into the history of the property. This operates to protect the innocent purchaser; however, where the contamination is known or could have been ascertained through reasonable inquiry, no such protection exists.
A recent appraisal study of the impact of hazardous waste contamination on property values found that there is virtually no sales data on the subject (Patchin, Valuation of Contaminated Properties, Appraisal Journal, January 1988, pp. 7-16). This study also concluded that properties which have been placed on the Environmental Protection Agency’s “Superfund list” frequently require cleanup costs far in excess of the fair market value of the same property without contamination. Accordingly, such properties were found to be unmarketable and, therefore, without value. The same conclusion was also reached by a Federal court which held that:
designation of [a] parcel as having a problem serious enough to warrant E.P.A. and Superfund cleanup will mark that property as an unmarketable pariah for years to come. (SCA Services of Indiana, Inc. v. Thomas, 634 F.Supp. 1355, 1364 (N.D. Ind. 1986))
Of course, not every case of contamination is serious enough to warrant inclusion on the “Superfund list”, and the author of the study points out that many contaminated properties continue to be useable and, therefore, continue to have value. Only those few that are placed on the “Superfund list” will be without any value at all. The author lists several factors to consider in valuing such a parcel, the most significant of which would seem to be the costs of cleaning up the hazardous waste as compared to the value of the parcel assuming no contamination were present. The argument has been offered by some that to allow a reduction in assessed value on account of contamination unconscionably shifts the tax burden from the owner-polluter (who created the problem initially) to the rest of the taxpayers in the assessing unit. This argument, while possessing superficial appeal, runs afoul of the requirement found in most State constitutions (or statutes), including New York’s Constitution, that real property may not be assessed at more than its full (fair market) value (N.Y. State Constitution, Art. 16, § 2; for other states, see, e.g., Firestone Tire and Rubber Co. v. County of Monterey, 272 Cal. Rptr. 745 (Cal-App. 6 Dist. 1990); Inmar Associates v. Borough of Carlstadt, 112 N.J. 593, 549 A.2d 38 (1988)).
Reductions in assessed value may not be obtained merely upon opinion evidence; reductions must be supported by objective data (Appeal of Great Lakes Container Corporation, 126 N.H. 167, 489 A.2d 134 (1985)). This is the rule with respect to the effect on value of regulatory statutes, such as Article 27 of the Environmental Conservation Law, relating to freshwater wetlands (Katz v. Assessor of Mt. Kisco, 82 A.D.2d 654, 442 N.Y.S.2d 795 (2d Dept. 1981)).
Another factor in valuing such properties is the current use of the parcel; if the parcel continues to be used, then there would appear to be little merit to an argument that it is completely bereft of value (Groves, “Do America’s State Cases Tell You How To Value Contaminated Properties?”, Journal of Property Tax Management, Spring 1991, pp. 1-11).
In Northville Industries v. Bd. of Assessors, 143 A.D.2d 135, 531 N.Y.S.2d 592 (2d Dept. 1988), the Appellate Division found that the full cost of cleaning up a parcel in order to comply with the Suffolk County Sanitary Code (Art. 12) should be deducted from the parcel’s assessment. In Bass v. Tax Commission, Supreme Court, New York County, Index No. 56969/84, 1/18/91, Pamess, J., n.o.r., aff’d, 179 A.D.2d 387, 578 N.Y.S.2d 158 (1st Dept. 1992), mot. lv. to app. den., 80 N.Y.2d 751, 599 N.E.2d 691, 587 N.Y.S.2d 287 (1992), the court similarly concluded that the cost of removing asbestos contamination, as indicated by its impact on market rents, must be considered in the application of the income approach to value a large office building. However, we note that while the New Jersey courts have concluded that the cost of contaminant cleanup must be taken into consideration in determining value, they will not permit a dollar-for-dollar reduction in assessment based on that cost (Inmar Associates, Inc. v. Borough of Carlstadt, 112 N.J. 593, 549 A.2d 38 (1988)).
Additional factors to consider include the likelihood of finding a lender willing to finance a purchase of the property; the potential for liability to the public (e.g., for contamination of water supplies); and the stigma remaining after the cleanup. In establishing the value of a contaminated parcel, the assessor must review the specific circumstances on a case by case basis, and make a judgment as to the effect, if any, on value.