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Volume 6 - Opinions of Counsel SBEA No. 2

Opinions of Counsel index

Assessments, generally (standard of assessment) (effect of L.1977, chs. 888, 890); Assessment review (tax certiorari proceeding) (equalization rate data) - Real Property Tax Law, §§ 306, 720, 1200:

The 1977 amendments (L.1977, chs. 888, 890) to section 720 of the Real Property Tax Law do not alter the existing uniform standard of full value assessing in section 306 of such law. Rather, the amendment to section 720 is a codification of judicial statement that equalization rate data for each major type of property may be received into evidence in tax certiorari proceedings. As a procedural statute, section 720, as amended, is applicable to cases pending on its effective date. The amendment would not apply to cases in which the inequality issue has already been tried as of such date (i.e., August 11, 1977).

Our opinion has been requested as to the meaning and effect of the amendments made to subdivision 3 of section 720 of the Real Property Tax Law by Chapters 888 and 890 of the Laws of 1977. The question arises in connection with an Article 7 assessment review proceeding which was commenced prior to the effective date of the amendments (August 11, 1977).

Subdivision 3 of section 720 limits the evidence on the issue of whether an assessment is unequal (that is, an assessment made at a higher proportionate valuation than the average for all other real property on the same assessment roll) to (1) a selected parcel average, (2) certain sales occurring within the year under review and (3) “the state equalization rate established for the roll containing the assessment under review.”

Chapter 888, as amended by Chapter 890, adds to the final clause of subdivision 3 that evidence may be given by either party as to the State equalization rate established for the roll containing the assessment under review “with particular reference to the information developed by the state board with respect to the ratio of assessment to market values for each major type of taxable real property pursuant to section twelve hundred of this chapter.” The aforementioned chapters both took “effect immediately” and are silent with regard to the proceedings to which they apply. {1}

The threshold question is whether the law as amended applies retroactively to proceedings commenced prior to the effective date of the amendment.

Subdivision 3 of section 720, pertaining as it does to the evidence admissible in an inequality proceeding, affects a procedural remedy rather than a substantive right. (The possible exception to the principle that evidentiary statutes are procedural, not substantive, viz., that a conclusive presumption is really a rule of substantive law expressed as a rule of evidence, is not present here.)

Generally, statutes are to be construed with prospective application only unless there is clear legislative intent otherwise. This general rule applies to amendatory statutes as well as to new statutes (Kaplan v. Kaplan, 31 App.Div.2d 247, 297 N.Y.S.2d 881; Kramer v. Tofany, 35 App.Div.2d 237, 315 N.Y.S.2d 199). However, procedural and remedial statutes are an exception to this rule and will be applied to pending cases unless the Legislature directs prospective application only (Shielcrawt v. Moffett, 294 N.Y. 180, 61 N.E.2d 435).

Therefore, at the outset, it is our opinion that the amendment applies to pending cases since there is no direction of prospective application only. Even this general opinion, however, is apparently subject to an exception. There is case support (and logic too) for the proposition that a procedural statute will not apply to a pending action in which the procedural step affected by the new law has been taken at a time prior to the enactment of the procedural statute (People v. State Tax Commission, 261 App. Div. 416, 26 N.Y.S.2d 425). Thus, the amendment would apparently not apply to cases in which there has already been a trial of the inequality issue. This exception does not affect this case since the trial had not begun prior to the effective date of the law.

Now to the central question: What is the meaning of the amendment? It is our opinion - an opinion incidentally which we expressed in our memoranda to the Governor recommending approval of the legislation - that the amendment merely codifies the doctrine of appropriateness of the State equalization rate as set forth in several inequality cases beginning with Ed Guth Realty Co. v. Gingold (34 N.Y.2d 440, 315 N.E.2d 441, 358 N.Y.S.2d 367).

The leading case of Ed Guth Realty Co. v. Gingold, supra, established that the State equalization rate could be solely relied upon to prove the ratio of assessment to full value of other property on the roll. In that case, the “computer printouts” showing the data upon which the rate was based were introduced into evidence. The same was true at the trial of the inequality issue in the consolidated trial originally entitled 860 Executive Towers, Inc. v. Board of Assessors, 84 Misc.2d 12, 374 N.Y.S.2d 284, aff’d, 53 App. Div.2d 463, 385 N.Y.S.2d 604, aff’d sub.nom., Pierre Pellaton Apts., Inc. v Board of Assessors of the County of Nassau, 43 N.Y.2d 769, 372 N.E.2d 801, 401 N.Y.S.2d 1013. The Division of Equalization and Assessment has furnished many litigants with certified copies of these data sheets, and to our knowledge no court has ever refused to admit them. These “data printouts” consist in major part of the market value survey information developed for the particular assessing unit for each major type of taxable real property pursuant to section 1200 of the Real Property Tax Law. In other words, this is the information which the amendment now clearly states is admissible into evidence by either party.

That this data can be vital to a litigant’s proof is demonstrated by the case of Matter of Standard Brands, Inc. v. Walsh, 92 Misc.2d 903, 402 N.Y.S.2d 264, aff’d, 60 A.D.2d 530, 399 N.Y.S.2d 1020. In both the Guth and 860 Executive Towers cases, supra, the court had indicated that the State equalization rate might be “inappropriate” in a given case, as “where the property under review constitutes a relatively large percentage of the taxing unit’s total assessed valuation” (860 Executive Towers, Inc., 385 N.Y.S.2d at 609). In the Standard Brands, Inc. case, the taxpayer claimed that the state rate was inappropriate since its property constituted 6.38 percent to 8.07 percent of the total assessment roll and was included in the sample market value surveys of the State Board (as shown by the data sheets) for the years in question. The trial court agreed and did not use the rate.

In short, based upon both our analysis of the law and our participation in the enactment of the two chapters, it is our opinion that the amendatory language to Real Property Tax Law, section 720, is a codification of the judicially established doctrine of appropriateness relating to the introduction of equalization rates in tax certiorari proceedings. However, we are aware that the suggestion has been made that the amendment directs courts to review assessments on the basis of the so-called “class ratios” included within the equalization rate data for each assessing unit, rather than the equalization rate established for that assessing unit. Since we believe such suggestion to be completely violative of legislative intent, the existing statutory standard of assessment and the State Constitution, we consider extensive comment to be in order.

First and foremost, the plain wording of the new language negates such a construction. To reiterate, the statute reads “evidence may be given by either party as to . . . the state equalization rate . . . with particular reference to the information developed by the state board with respect to the ratio of assessments to market values for each major type of taxable real property. . . .” This language is taken from section 1200 and it clearly contemplates that in any given case the court should consider the market value data developed for all sampled types, not just the type to which the property under litigation belongs. Furthermore, the statute does not say “with particular reference to the ratio itself;” it says “with particular reference to the information developed.”

That the statute cannot possibly be construed as altering the existing uniform standard of full value is fortified by the fact that this amendment to subdivision 3 of section 720, manifestly a procedural law, was enacted by the same act which amends the section of law which prescribes the substantive standard of assessment, namely section 306. If the Legislature intended to change the statutory uniform standard, surely it would have done so by amending section 306. Moreover, it makes no sense for the Legislature to say that a court should consider the evidence relating to the level of assessment of the particular class to which the subject property belongs on the issue of whether an assessment is unequal without amending the provision in section 706 which sets forth the allegations on which an inequality proceeding is grounded. The relevant portion of section 706 is:

A proceeding to review an assessment shall be founded upon a petition duly verified setting forth that the assessment is . . . unequal in that the assessment has been made at a higher proportionate valuation than the assessment of other real property on the same roll by the same officers, and stating that the petitioner is or will be injured thereby. . . . [emphasis added]

This has been construed to mean the ratio of a fair sampling of all other property in the assessing unit regardless of type or class, and not the ratio of comparables (Wolf v. Assessors of Town of Hanover, 308 N.Y.416, 126 N.E.2d 537; Pollack v. Reed, 47 App. Div.2d 842, 366 N.Y.S.2d 31; see also, Rokowsky v. Finance Adm’tor of City of New York, 41 N.Y.2d 574, 362 N.E.2d 974, 394 N.Y.S.2d 176).

However, even if the plain wording of the statute does not settle the issue, supporting documents make it clear that this could not have been the intent. It is inconceivable that if this law were intended to effect a class system of taxation, which the suggested interpretation would do, the Governor would be silent as to a change of such magnitude and significance in his approval message. To the contrary, the Governor in his message (1977 Approval #58) reinforces the concept of full value assessing - a concept which is repugnant to “class” assessing. The Governors comment on Chapter 888 is merely that it “provides a statutory time frame for assessing units to implement the directive of the Hellerstein decision to assess real property at full value.” Also in point is his reference to the creation of the Temporary State Commission “to conduct a study on the impact of the implementation of the full value assessment standard and the desirability and feasibility of standards other than full value.”

Another most cogent reason for absolute rejection of the suggested meaning is that in almost all instances, a ratio of assessment to market value of a major type of taxable real property developed by the State Board in a market value survey undertaken pursuant to section 1200 of the Real Property Tax Law neither purports to nor does measure the level of assessment of the type of property on the assessment roll containing the assessment under review. In other words, “class ratios” are not ascertained for the assessment roll for which the state equalization rate is being established. An equalization rate for a given assessment roll is based on one or two market value surveys made on the basis of values in prior years. These surveys are based on earlier assessment rolls, often of a different year for each municipality and survey, and the level of assessment of the property classes on such earlier rolls would seldom coincide with the class level of assessment on the roll for which the rate is being established.

The property class ratios on the current roll are not known except where the base year roll for the survey and the current roll for which the rate is being established are the same. This happens infrequently. No mathematical adjustment can be made to the base year class ratios which will cause them to represent the level of assessment for the class on the current roll. In addition, where the rate is based upon two market value surveys, it is most probable that the ratio in each survey for a given class will differ, sometimes substantially as where there has been a material change in level from the base roll for the oldest survey to the base roll for the latest survey. This difference is irreconcilable, again because class ratios cannot be adjusted for changes in the level of assessment with available information.

Surely no court would adopt a strained construction of a statute to produce an illogical as well as an inequitable result.

Lastly, we believe that the suggested interpretation of the amendment would create a most serious question of constitutionality. That is, any law which would delegate to a state agency not only the definition and determination of “classes” of property, but also the level of assessment thereof, with the relative tax burden of taxpayers ultimately dependent upon the actions of the state agency, most assuredly presents, at the very least, a serious question of unconstitutional delegation of legislative power. The classes established by the State Board are administrative decisions which are subject to change at the discretion of the Board or its staff. There would be no legislative direction or control associated with these classes, and taxpayer liability would become in part a function of the State Board.

In addition, because these ratios differ with each assessing unit, the percentage to be applied to each class of property would vary widely not only statewide, but even within individual taxing jurisdictions such as counties and school districts. The resulting variations of tax liability among similarly situated properties within the same tax jurisdiction present the obvious Constitutional issue of equal protection.

This brings into play another canon of statutory construction, as stated in an old leading case in the real property tax field, People ex rel. Metropolitan Street Ry. Co. v. State Board of Tax Comm’ers, 174 N.Y. 417, 437, 67 N.E. 69:

Every presumption is in favor of the constitutionality of an act of the legislature and, if the Constitution and the act can be reasonably construed so as to enable the latter to stand, it is the duty of the courts to give them that construction. . . .

Thus, where one construction of a statute is clearly constitutional and the other construction raises grave doubts upon that score, the former will be adopted. (See, McKinney’s Statutes, § 150(c) and cases cited therein. (Therefore, for this reason alone. Chapters 888 and 890 would not be construed to create a class system of taxation.

In conclusion, therefore, it is our opinion that the amendment to subdivision 3 of section 720 is a codification of a rule of evidence which has already received judicial sanction. That rule permits the introduction into evidence in an inequality proceeding of the supporting state equalization rate data.

November 4, 1977

{1}  For example, the 1961 and 1969 amendments to section 720 (L.1961, c. 942; L.1969, c. 302) relating to the introduction of the State rate into evidence provided that the amendments applied only to proceedings commenced after the effective date of those chapters.