Volume 10 - Opinions of Counsel SBRPS No. 51
Business improvement districts (charges) (municipally owned tax exempt property); Municipal corporations exemption (business improvement districts) (liability for charges) - General Municipal Law, § 980-j; Real Property Tax Law, § 406:
Tax exempt city or county owned property is not liable for charges levied on behalf of a business improvement district.
Our opinion has been requested as to whether tax exempt property of a city or county is subject to charges levied on behalf of a business improvement district [hereinafter BID] (General Municipal Law [GML], Art. 19-A). City or county property, located within the owning municipality’s borders, and held for a public use, is exempt from taxation and exempt from special ad valorem levies and special assessments to the extent provided in section 490 of the Real Property Tax Law (RPTL, § 406(1)).
Section 980-a(8) of the GML provides that the BID plan shall contain:
a list of the properties to be benefited, and a statement of the method or methods by which the expenses of a district will be imposed upon benefited real property, in proportion to the benefit received by such property, to defray the cost thereof, including operation and maintenance. Notwithstanding any inconsistent provision of section nine hundred eighty-f of this article, the plan may provide that all or any class or category of real property which is exempt by law from real property taxation and which would not benefit from the establishment or extension of the district may nevertheless be included within the boundaries of the district but such property shall not be subject to any district charge[.]
BIDs may be established only after requisite notice and public hearing (GML, § 980-e(a)). Before that hearing is conducted, owners of real property “deemed benefited and therefore within the district” have the right to file an objection with the municipal clerk (GML, § 980-e(b)). Following the hearing, the legislative body must, among other things, determine, “except as otherwise provided in section nine hundred eighty-a of this article whether all the real property within the boundaries of the proposed district or extension will benefit from the establishment or extension of the district” (GML, § 980-f(a)(2)). The legislative body must also determine whether all the real property that will benefit from the BID is included within its boundaries (GML, § 980-f(a)(3)). If the result of either (or both) tests is negative, the boundaries must be redrawn and another hearing must be held (GML, § 980-f(b)(2)).
Once established, “[t]he expense and cost apportioned to benefited real property in accordance with the plan shall be a charge upon each benefited parcel of real property within the district” (GML, § 980-j(a); see also, 27 NY Jur2d, Counties, Towns, and Municipal Corporations, § 1188).
The charge upon benefited real property pursuant to this article shall be imposed as provided in the district plan. If the formula includes an ad valorem component, this component shall be determined by the assessed value of each parcel as entered on the latest completed assessment roll used by the municipality for the levy of general municipal taxes. The charge shall be determined, levied and collected in the same manner, at the same time and by the same officers, as general municipal taxes are levied and collected (GML, § 980-j(b)).
In our opinion, the quoted provisions of the GML do not provide a clear answer to the question and our research has disclosed no judicial opinions construing Article 19-A. Although Article 19-A of the GML was not enacted until 1989 (c.282), business improvement districts existed previously, albeit only in cities. An analysis of the laws which we believe culminated in the enactment of Article 19-A provides some guidance.
The first BID (then referred to as a “special assessment district”) in New York State was established for the City of Syracuse in 1975 (c.405). Properties within the district could be assessed for the cost of capital improvements in accordance with a formula established by the city council for determining those benefited by the BID; a uniform assessment of costs was not required (§ 3).
The following year, two BIDs were established, one in Queens [165th Street](c.910), one in Brooklyn [Fulton Street](c.911). Properties within the BID “which are directly benefited” were made liable for the special assessments charged for BID purposes (c.910, § 3(8); c.911, § 3(9)). All properties with frontage on 165th Street and Fulton Street, respectively, were deemed benefited and liable for the charges (c.910, § 5(2)(a)); c.911, § 5(2)(a)).
Two more city BIDs were established in 1977, one in Schenectady (c.453) {1}, the other in Manhattan [Nassau Street] (c.806). Again, special assessment districts were created (c.453, § 3; c.806, § 5). Of particular significance to this inquiry is the fact that the Manhattan BID law provided, in part, that “[a]ll such properties [those with frontage on Nassau Street], including properties by law exempt from real property taxation, shall be included within the mall special assessment district and shall be subject to the special assessments set forth in this section” (c.806, § 5(2)(a); emphasis added). Thus, in contrast to the silence of the earlier BID laws, the Manhattan BID statute specifically addressed the liability of otherwise tax exempt real property.
In 1978, city BIDs were enacted for Queens [Jamaica Center] and Saratoga Springs (cc. 665, 666, respectively). The former again included the quoted provision concerning the inclusion of tax exempt property (c.665, § 5(2)(a)), but the latter did not.
In 1980, Article 2-B was added (c.75) to the General City Law [GCL] to provide general authorization for the creation of city BIDs.
(a) *** The expense and cost apportioned to benefited real property in accordance with the plan shall be a charge upon each benefited parcel of real property within the district
(b) The charge upon benefited real property pursuant to this article shall be imposed as provided in the district plan upon which the establishment of the district was based, as set forth in section twenty-four-c of this article. The charge shall be imposed according to a formula upon benefited real property in proportion as nearly as may be to the benefit received by the property, to defray the cost, including operation and maintenance, of the business improvement district. *** (GCL, § 24-l)
The following year, the last quoted sentence of subdivision (b) was repealed but section 24-c(d)(3), defining the BID’s plan, was amended to require “a statement of the method or methods by which the expenses of a district will be imposed upon benefited real property, in proportion to the benefit received by such property, to defray the cost thereof, including operation and maintenance” (L.1981, c.926). We note that neither the general authorization created in 1980, nor the 1981 amendment, made reference to imposing charges on otherwise tax exempt real property.
Chapter 814 of the Laws of 1985 made a series of purportedly technical amendments to Article 2-B of the GCL. Significant to the issue at hand was the following addition to section 24-c(d)(3):
Notwithstanding any inconsistent provision of [§ 24-h(a)(2)] of this article, the plan may provide that all of any class or category of real property which is exempt by law from real property taxation and which would not be benefited by the establishment or extension of the district may nevertheless be included within the boundaries of the district but such property shall not be subject to any assessments imposed on behalf of the district[.]
The bill enacted as chapter 814 was a New York City proposal and its legislative representative’s memorandum in support is relevant:
This bill also addresses some of the more serious programmatic issues which have arisen over the past three years, such as the assessment of tax exempt properties within a district. Many not-for-profit corporations, universities and religious institutions are willing to support local communities but are very concerned about jeopardizing their tax exempt status. Thus, it has been difficult to proceed with BIDs in areas where tax exempt institutions are located. This bill resolves this problem by permitting the exclusion of these institutions from the special assessment. (Memorandum included in Governor’s Bill Jacket and also reprinted in 1985 McKinney’s Session Laws, p.3167, emphasis added.)
Other memoranda in the Governor’s Bill Jacket for chapter 814 are also germane. The memorandum of Assembly sponsor Dearie states that the amendment makes “certain technical clarifications concerning the exclusion of exempt property from BID assessments” (emphasis added). In discussing then-existing law, a memorandum submitted by the State Division of Budget [DOB] states that, “Not-for-profit organizations within a district pay these assessments” but then notes that, given the Governor’s approval of the then-pending bill, “Charitable organizations and other not-for-profit institutions would be excluded from district assessments.” This suggests that the writer of the DOB memo believed the signing of the new law would change the status of not-for-profit properties from one of liability for these charges, based, perhaps, on an awareness of the Manhattan (L.1977, c.806) and Queens [Jamaica Center] (L.1978, c.665) statutes, to one of exemption.
In addition to those comments, the State Comptroller said a “major change” in the bill was an amendment to section 24-c “to permit a district plan to exclude from assessment for district purposes tax exempt real property within the boundaries of a district which is determined not to be benefited by the establishment of a district[.]” Again, this statement seems to support the apparent interpretation by DOB. The State Board’s position was that this amendment:
would create an open-ended, fundamental change in the manner in which district revenues would be raised. Specifically, . . . the traditional benefit concept of the district (i.e., district boundaries determine benefit; property not benefitted is excluded from the district boundaries) would be fundamentally altered by authorizing a local entity to specifically designate exempt and nonexempt classes.
Thereafter, chapter 282 of the Laws of 1989 substituted Article 19-A of the GML for Article 2-B of the GCL thereby allowing towns and villages, as well as cities, to create BIDs. It is obvious that section 980-a(8) was derived from former section 24-c(d)(3) of the GCL.
The answer to the question presented is not without doubt. A case could be made for the proposition that the authorization of section 980-a(8) of the GML to include within a BID - but exclude from liability for district charges - property that is tax exempt “and which would not benefit from the . . . district” implies that there may also be tax exempt property which would benefit from the district and would, therefore, be liable for any such charges.
Given the various memoranda submitted in regard to what became chapter 814 of the Laws of 1985 (now, GML, § 980-a[8]), however, we believe that such an interpretation goes beyond the apparent intent of that enactment. Note that the chapter was intended as a series of technical amendments to the statute, that the memorandum of the New York City legislative representative implies and that of DOB states that the effect of the enactment would be to allow the BID map to include properties not liable for the charges in question.
Accordingly, it is our opinion that the pertinent language of section 980-a[8] of the GML was merely intended to allow the plan for a BID to “map-in” tax exempt real property, in lieu of a gerrymandered-type of mapping which would circumvent the tax exempts, rather than to serve as authorization to impose liability on not-for-profits and other tax exempt entities. {2} We believe that had the Legislature intended to grant such authority, it would have done so using the same crystal-clear language it used in the legislation enabling the creation of the Manhattan and Queens (Jamaica Center) BIDs. (Please note also the apparent purpose of BIDs was to permit business in a particular area to, in effect, agree to be charged additional fees for the assumed benefits to follow from the use of those monies to improve the business district area. For that reason as well, we are unwilling to conclude that the Legislature intended to create liability by innuendo for otherwise tax exempt properties.)
June 4, 1996
{1} In approving chapter 453, then Governor Carey expressed concern about the piecemeal approach to the creation of BIDs. He directed this agency [then the State Board of Equalization and Assessment] and the Department of State to develop proposed general legislation for such purpose (approval memorandum reprinted in 1977 McKinney’s Session Laws, pp. 2501-02).
{2} Given this conclusion, we need not analyze whether BID charges may be properly levied against the real property of charitable, educational, and religious organizations which enjoy constitutionally protected tax exempt status (N.Y. Const., Art. 16, § 1).