New York State Interactive Graphic ASSEMBLYWOMAN AILEEN GUNTHER raised the possibility of taxing such state properties as the two Woodbourne-based jails, Woodbourne Correctional (top, near Route 52) and maximum security Sullivan Correctional (bottom).

Actions may change tax-exempt laws

By Dan Hust
ALBANY — January 25, 2008 — A lone town supervisor in Chautauqua County may be turning state law on its ear.
Last year, Town of Arkwright Supervisor John Dillenburg III challenged the constitutionality of New York’s real property tax law (RPTL), specifically Section 404 which prohibits local municipalities from taxing the state for land the state owns.
He was trying to get the state Department of Environmental Conservation to pay taxes on about 2,000 hunting/recreation acres within his community, population 1,124.
Though numerous government officials, from local assessors to the governor himself, have criticized the overly complex property tax system in New York, the fact remains that state land is automatically tax-exempt.
And in most cases the State Legislature must pass special legislation to permit local taxing entities to receive payments on state properties.
Former Assemblyman Jake Gunther was well-known for his successful efforts to secure some measure of taxes on the state-owned Bashakill wetlands in the Town of Mamakating, and indeed Sullivan County has numerous state land on the tax rolls – about $600,000 worth in all.
But Dillenburg ended up finding even more success – or perhaps too much.
In November, the state Supreme Court in Chautauqua County ruled that the state’s policy of paying taxes on some land while paying none on others was a “hodgepodge of statutory provisions devoid of any consistent rationale for taxation.”
And so, agreeing that the inequity creates an unconstitutional situation, Judge Timothy Walker prohibited New York State from paying taxes on every piece of property it owns.
Communities across New York both applauded and condemned the ruling. Some townships in the state-owned Adirondack Park, for example, expressed deep concern that the loss of state funds would devastate them.
Sullivan County Treasurer Ira Cohen understands the dichotomy.
“As the county treasurer, I don’t like the court ruling,” he explained. “As an attorney, I agree [with it].”
While the loss of the state’s $600,000 contribution to local budgets would be significant, Cohen agreed that the court’s ruling attempted to make an unfair situation fair.
But short of engendering discussion, the court’s determination has had little actual effect – mainly because Judge Walker designed it that way.
After agreeing with Dillenburg that the system is arbitrary and unfair, he entered a stay of enforcement on the ruling – effectively prohibiting it from being enacted – until the Appellate Court can review the matter.
So the tax situation really remains as it has long been . . . for now.
Cohen is hopeful that the resulting discussion will turn into action, and he’s seen potential legislation that would create what he terms a more “uniform” method of taxing state land.
His view is that state property like prisons, courthouses and universities should remain tax-exempt, considering their public role and utilization.
On the other hand, Cohen feels vacant land and recreational areas like campgrounds, parks, preserves and hunting areas should be taxable.
But the risk exists that the court could find that distinction arbitrary as well, and that’s why Cohen has long advocated for legislation that addresses all tax-exempt property – including parcels owned by religious groups – in an extremely clear, demonstrably uniform fashion.
Indeed, the neighboring states of Pa. and NJ could serve as models, he said, because of the way their laws are structured.
“It’s better written because it’s less ambiguous,” he explained.
So what will happen now?
For the moment, Dillenburg and the state are waiting for the Appellate Court to hear his case, but legislation to change state law is wending its way through the NYS Legislature.
NYS Senator John Bonacic and Assemblywoman Aileen Gunther have long worked on ways to end the burden of tax-exempt lands, though the State Legislature has not found a way to collaborate on the goal as yet.
“I think the decision was a just one,” remarked Bonacic, who said New York struggles with more than $540 billion worth of tax-exempt land (including privately-owned properties).
But he agrees with Gunther that the decision is also “terrifying.”
If allowed to stand, “it will have a devastating effect on [communities in] the Catskill and Adirondack parks,” he said.
“We’d lose a ton of money,” said Gunther, who called the ruling “a terrible decision.”
Gunther’s of the mind that some state property, like courthouses and universities, should remain tax-exempt.
“But in my opinion, the state should be paying for the two prisons it owns in Fallsburg,” she remarked. “Those house prisoners from all over the state of New York . . . and it puts an unfair [tax] burden on that area.”
“I hope the State Legislature looks at a comprehensive change in the laws on tax-exempt laws,” said Bonacic, who’s introduced legislation year after year to do just that but found it stymied by inaction in the Assembly.
Gunther said the attorney general’s office has already filed papers against the latest court ruling, but in the meantime she said the Assembly is tweaking legislation that could curb the amount of tax-exempt land in the state.
“Right now it’s a bipartisan effort,” she said.
Regardless, Bonacic’s happy the discussion has once again been jump started.
“This one may get us to open our eyes to start to address it.”