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Tax Certiorari & Condemnation - Adjustment By Equalization Rate Comes To Westchester

44 Misc.2d 1020, 255 N.Y.S.2d 565

In the Matter of Longport Realty Corp. et al., Petitioners,

v.

William M. Eklund, as Assessor of the Town of Rye, et al., Respondents

Supreme Court, Westchester County

November 13, 1964

CITE TITLE AS: Matter of Longport Realty Corp. v Eklund

HEADNOTES

Taxation--assessments--in compiling capitalization rate to determine assessed value, actual tax rate must be adjusted by ratio of appraised to assessed value--so computed, actual assessment is less than proper assessment; property has not been overassessed; petition dismissed.

(1) In compiling the capitalization rate to determine assessed value, the actual tax rate of 6.20% should be adjusted by the 59% ratio of appraised to assessed value, reducing it to 3.66%. If the full tax rate were used, it would have the effect of adding in a tax expense based upon the tax rate as applied to appraised value rather than the tax rate as applied to assessed value.

(2) Using such formula, the actual assessment for the property is less than the proper assessment, and the property has not been overassessed either by reason of overvaluation or inequality. The petition is dismissed.

APPEARANCES OF COUNSEL

Schupp & Buckley for petitioners. Irving Wein, Town Attorney (Stephen Davis of counsel), for respondents.

OPINION OF THE COURT

Hugh S. Coyle, J.

Motion by respondents, Town of Rye and Village of Port Chester, for a reargument is granted, and upon such reargument the decision of this court confirming the Referee's report, dated July 2, 1964, is withdrawn and substituted therefor is the following decision:

The Referee, in compiling his capitalization rate (sometimes referred to as a "built up" capitalization rate) for his tax component should have used the figure of 3.66% in place and stead of 6.20%, the actual tax rate. The Referee found that the relation of assessed to appraised value in the assessing unit for the years in litigation was 59%. Accordingly, the Referee should have adjusted the tax rate so that it would be 59% of the actual *1021 rate of 6.20%, or 3.66%. (See computations of Mr. Justice Hogan in Matter of Cedar Park Terrace [Board of Assessors of County of Nassau], N. Y. L. J., May 20, 1964, p. 19, col. 2.)

By capitalizing income, market value or appraised value is sought to be determined. If the full tax rate were used, it would have the effect of adding in a tax expense based upon the tax rate as applied to appraised value rather than the tax rate as applied to assessed value. By adjusting the tax rate by the 59% ratio of appraised to assessed value, it then has the effect of adding into the built-up capitalization rate the item of tax expense based upon assessed value. The latter is the proper formula.

Consequently, paragraph "18" et seq. of the Referee's report should be modified to reflect such change in the tax component of the built-up capitalization rate as follows:

Income

Apartments (fully rented) $292,000

Garages (fully rented) 9,960

Total $301,960

Vacancies,

Etc.

Apartments 7% $20,440

Garages 40% 3,984

24,424

$277,536

Other income (machines, etc.) 3,000

Total Income $280,536

Total Expenses 66,000

Net income (before taxes, interest, amortization $214,536

and/or depreciation)

Land appraisal $1.50 sq. ft. 120,000 square feet $180,000

Adjusted tax rate (per $100 of assessed value) 3.66%

Land return 7.00%

10.66%

Return on land investment ($180,000 x 10.66%) 19,188

Residual amount of net income applicable to building $195,348

value (net income less return on land investment)

Adjusted tax rate (per $100 of assessed value) 3.66%

Building return 7.00%

Depreciation 2.00%

Capitalization rate for building (built-up 12.66%

capitalization rate)

Value of building $195,348 divided by 12.66% $1,543,033

Add land value 180,000

Total value of land and buildings $1,723,033

Since the Referee found that the relation of assessed value to appraised value in the assessing unit was 59%, the proper assessed value of land and building should be computed as follows:

Proper assessed value of land (appraised value of $180,000 x 59%) $106,200

Proper assessed value of buildings (appraised value of $1,543,033 x 910,389

59%)

Total Proper Assessment $1,016,589

Since the actual assessment for the years in litigation was $54,000 for land, and $900,000 for buildings, making a total of $954,000, the property which is the subject of these proceedings has not been overassessed, either by reason of overvaluation or inequality. Under the circumstances, the petition should have been dismissed and a final order entered in favor of respondents and against petitioners.

Submit final order on notice, which order shall be in accordance with this decision and shall vacate the prior order of this court, granted July 2, 1964, and shall vacate the costs heretofore entered in favor of petitioners.

Copr. (c) 2008, Secretary of State, State of New York.

N.Y.Sup. 1964.

MTR. OF LONGPORT REALTY v. EKLUND

END OF DOCUMENT