Volume 8 - Opinions of Counsel SBEA No. 112
Municipal corporations exemption (public use requirement) (commercial marina) - Real Property Tax Law, § 406:
The lease of a municipal riverfront for a private commercial marina, available to a limited portion of the boating public, is not a public use for tax exemption purposes.
A question has been raised concerning the taxable status of city-owned property leased to “commercial marinas”. Docks have been installed upon this land and are rented to boat owners. The property in question is subject to a 10 year lease at $1 per year; only those boats 25 feet in length and greater are permitted to dock (this last condition tends to limit access to luxury crafts); one marina has 27 docks allowing 54 boats at $500 per slip.
Section 406 of the Real Property Tax Law provides to a municipal corporation an exemption for its real property located “within its corporate limits [and] held for a public use” (subd. 1). Since the ownership and location of the property are not in issue, our focus is whether the premises leased to a private business are “held for a public use”.
The issue has frequently been the subject of judicial review. In Town of Harrison v. Westchester County, 13 N.Y.2d 258, 196 N.E.2d 240, 246 N.Y.S.2d 593 (1963), the Court of Appeals considered whether certain portions of county-owned airport property consisting of land and hangars leased and further sublet to private parties, were exempt from taxation pursuant to RPTL, section 406(1). The Court set forth the following broad guidelines:
Although what comprises “a public use” within the meaning of the statute “has never been defined with exactitude” and “must necessarily depend upon 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” [citations omitted]. (Id., at 263, 246 N.Y.S.2d, at 596)
Consequently, the Court held that the hangars and land occupied by private corporations, either as lessees or sublessees under long-term leases insuring to them complete dominion over the premises from which the general public was excluded, were not exempt from town taxation as property held for public use.
In Dubbs v. Board of Assessment Review of County of Nassau, 81 Misc.2d 591, 367 N.Y.S.2d 898 (Sup. Ct., Nassau Co. 1975), the court considered the taxable status of the Nassau Veterans Memorial Coliseum, a county-owned arena used for “athletic games, contests, spectacles, entertainment, events, trade shows and exhibitions” (397 N.Y.S.2d, at 901). The court referred to State enabling legislation which declared that the purposes for which the facility was built were “public purposes”, but held that “tax exemption does not, ipso facto, flow from [that] fact” (id., at 904). Despite this, the concept of “public purposes” seems to influence this decision. The Town of Harrison case, described above, cited as the “leading tax exemption case” (id., at 901), was extensively discussed. The court distinguished the facts in the two cases and held the Coliseum exempt from taxation:
What is controlling is that the County, which manages the Coliseum, only permits private interests to use the Coliseum for the general benefit of the public to whom the facilities are open. It is that fact which compels the conclusion that it is held for the public use for tax exemption purposes. Stated differently, under the holding in Town of Harrison, it is access to the facilities by the public in order to utilize or enjoy the facilities or functions therein that determines whether or not the property is held for public use (id., at 907; emphasis added).
A situation similar to that presented in the Dubbs case was before the Appellate Division, Fourth Department, in County of Erie v. Kerr, 49 A.D.2d 174, 373 N.Y.S.2d 913 (4th Dept. 1975), mot. lv. to app. den., 38 N.Y.2d 711, 384 N.Y.S.2d 1025 (1976). The facility under review was Rich County Stadium, “a first-class recreational, sports and cultural facility” (373 N.Y.S.2d, at 919). State enabling legislation declared that the purposes for which the stadium was built were “public purposes”. Despite a declaration that “[t]he question now under consideration is whether Rich County Stadium is held for a public use and not whether it was constructed to serve a public purpose” (id., at 918), the Appellate Division held that “[w]hile these special legislative acts [the enabling legislation] cannot in and of themselves grant tax exemption [which can only be conferred by general laws of Statewide application], they are, nonetheless, valid indicia of legislative intention” (id., at 919).
Thus, the court, having synthesized a new test including the elements of both “public use” and “public purpose”, reframed the issue as “whether the non-qualifying tenant uses the property for a purpose recognized by the Legislature as benefitting the public. If the use is found primarily to benefit the non-qualifying tenant or as only incidentally related to the public purpose, then no tax exemption will be granted” (id. [citing the Town of Harrison case and others]. Accordingly, since “Rich County Stadium is presently being devoted to the purposes contemplated by the exempt owner and which are recognized as public purposes by the Legislature * * * [t]ax exempt status, in this case is conferred by section 406(1) of the Real Property Tax Law” (id.).
Finally, the Court of Appeals, in Fallica v. Town of Brookhaven, 52 N.Y.2d 794, 417 N.E.2d 1248, 436 N.Y.S.2d 707 (1980), per the dissenting opinion of Lazer, J., 69 A.D.2d 579, at 598-604, 419 N.Y.S.2d 102, at 111-118 (2d Dept. 1979), seems to have endorsed the evolving public use/public purpose test of the Dubbs and Kerr cases. The property at issue was a facility owned by the Town and leased to the Federal government for the Internal Revenue Service. In keeping with the earlier cases, Justice Lazer agreed that “public purposes” and “public use” were not synonymous. However, he cited favorably Dubbs for the proposition that enabling legislation with respect to the former is persuasive on the determination of the latter.
In applying the rules of these cases to this riverfront property, we are aware of no special enabling legislation nor do we believe any was necessary for leasing the property to the commercial marinas. Accordingly, greater guidance may be found in the Town of Harrison and Dubbs cases rather than the Kerr and Fallica cases.
Note that the primary difference between the fact situations in Town of Harrison (where the exemption was denied) and Dubbs (where it was granted) was that, although both occupancies of publicly-owned land were by private corporations, the long-term leases of the county airport gave to their holders complete dominion over the premises from which the general public was excluded. In Dubbs, on the other hand, the Nassau Coliseum was used by the private interests to which it was leased, “for the general benefit of the public to whom the facilities are open”.
The case before us appears to be more akin to the lease of county airport facilities in Town of Harrison than to that of the Nassau Coliseum in Dubbs. The lease of the riverfront to the marinas is analogous to the county’s lease of hangars to private corporations. The rental of individual slips to private boat owners is similarly analogous to the sublet of hangars to owners of privately owned and utilized aircraft. The commercial marinas, having constructed the docks and rented them out to a limited portion of the boating public, may be viewed as having precluded access by the general public to the riverfront property.
Accordingly, it is our opinion that the property in question does not qualify for exemption pursuant to subdivision 1 of section 406 of the RPTL.
April 18, 1986