Volume 2 - Opinions of Counsel SBEA No. 80
Public Authorities exemption (Erie County Water Authority) - Public Authorities Law, §§ 1053, 1063; Real Property Tax Law, § 404:
The Erie County Water Authority is not a New York State agency and therefore not entitled to an exemption under section 404 of the Real Property Tax Law; however, certain real property owned by this public authority is entitled to an exemption pursuant to section 412 of the Real Property Tax Law and by section 1063 of the Public Authorities Law. This exemption is only applicable to such properties which are included in the Authority’s supply and distribution system or incidental thereto. If the property is not being so used, an exemption will nevertheless be granted for a reasonable time, if the property is being held in good faith for eventual use in the Authority’s supply and distribution system. If after a reasonable period of time, no such use is made of the land, or if pursuant to a long term commitment, the land is used for other purposes, such as for revenue, it should be assessed on the taxable portion of the assessment roll.
We have received an inquiry concerning the status, for real property tax purposes, of certain property owned by the Erie County Water Authority.
The first question to be considered is whether this Authority is entitled to the same treatment for tax exemption purposes as an agency of the State. Section 404 of the Real Property Tax Law provides that real property owned by New York State or any department or agency thereof is exempt from taxation. In effect, this is merely a restatement of the common law principle that the property of the sovereign is immune from taxation unless it is specifically made taxable by law. Thus, the immunity endures even though the State uses the property for nonpublic uses, leases the property to private enterprise for private purposes or even uses it exclusively to produce income, unless some law expressly makes it taxable. (See, Bush Terminal Co. v. City of New York, 282 N.Y. 306, 26 N.E.2d 269; State Insurance Fund v. Hamblin, 31 Misc.2d 977, 222 N.Y.S.2d 732, aff’d 240 N.Y.S.2d 950). The exemption from taxation enjoyed by property owned by the State of New York, therefore, is not a limited exemption but extends to all real property owned by the State regardless of use (Real Property Tax Law, § 404).
However, an examination of the criteria previously utilized by the New York State Court of Appeals in determining whether an authority was an arm or agency of the State leads to the conclusion that the Erie County Water Authority is not a State agency entitled to the exemption under section 404. The members of the Authority are appointed by the Board of Supervisors of the County of Erie (Public Authorities Law, § 1053(1)); its statutory purposes are declared to be “in all respects for the benefit of the people of the County of Erie and the State of New York” (§ 1053(4)); the advancement of money to defray the initial expenses of the Authority is authorized to be made by the County of Erie (§ 1053(5)); and eventually the Authority’s properties will revert to the county of Erie (§ 1053(2)). (See, Easley v. New York State Thruway Authority, 1 N.Y.2d, 374, 376, 135 N.E.2d 572, 153 N.Y.S.2d 28.)
A specific exemption from real property taxes is extended to land owned by the Erie County Water Authority by section 1063 of the Public Authorities Law, which reads in part as follows:
“1. It is hereby determined that the creation of the authority and the carrying out of its corporate purposes is in all respects for the benefit of the people of the county of Erie and its environs, and is a public purpose, and the authority shall be regarded as performing a governmental function in the exercise of the powers conferred upon it by this title and shall be required to pay no taxes or assessments upon any of the properties acquired by it or under its jurisdiction or control or supervision or upon its activities.” (Emphasis added)
The “properties” exempted above from taxation are defined in section 1051 of the Public Authorities Law as meaning:
“. . . the water supply and distribution system or systems of the authority, including. . .lands, easements, rights in land and water rights . . . or any other property, real, personal or mixed, incidental to and included in such system or part thereof . . . .”
Therefore, the exemption pursuant to section 1063 is applicable only to such properties purchased by the Authority which are included in the Authority’s supply and distribution systems or are incidental thereto.
Where property acquired by the Authority for use in its supply and distribution system is not being so used by reason of the absence of adequate facilities or by reason of the incompletion of the particular project, such property would nevertheless be entitled to exemption during the period that the particular facilities or projects are being constructed. If the use of the land acquired for the supply and distribution systems of the Authority is delayed for a period of time because additional acts may be necessary in order to adapt the property for these purposes, the land is deemed to be held for such purposes and would be entitled to exemption. In such situation, however, the land must be held in good faith for use in the Authority’s supply and distribution systems. Of course, if after a reasonable period of time no such use is made of the land or if pursuant to a long term commitment the land is used for other purposes, such as for revenue, it should be assessed on the taxable portion of the assessment roll. Town of Harrison v. Westchester County 13 N.Y.2d 258, 196 N.E.2d 240, 246 N.Y.S.2d 593; Village of Watkins Glen v. Hager 140 Misc. 816, 252 N.Y.S. 146, aff’d 234 App. Div. 904, 254 N.Y.S 1016.
What is a reasonable period of time is a question which must be determined in each individual case based on the actual facts relating to the contemplated use of the property.
The above restrictions are also applicable to improvements on exempt property or portions of real property owned by the Authority.
November 22, 1972