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Decision No. 16,048

Appeal of LEE PALMATEER from actions of the Greene County Industrial Development Agency, County of Greene, Town of New Baltimore, Town of Coxsackie, the Board of Education of the Coxsackie-Athens Central School District, and the Coxsackie-Athens Central School District regarding a tax agreement.

Decision No. 16,048

(March 31, 2010)

McCary & Huff, LLP, attorneys for respondent Coxsackie-Athens Central School District and its Board of Education, Kathryn McCary, Esq., of counsel

Segel, Goldman, Mazzotta & Siegel, P.C., attorneys for respondents Greene County Industrial Development Agency, County of Greene, Town of New Baltimore, and Town of Coxsackie, Paul Goldman, Esq., of counsel

STEINER, Commissioner.--Petitioner, a district resident, appeals a resolution of the Board of Education of the Coxsackie-Athens Central School District (“board”) approving two tax agreements which he claims deprived the Coxsackie-Athens Central School District (“district”) of funds.  The appeal must be dismissed.

In August 2008, Empire Merchants North LLC (“Empire”) applied for financial assistance from the Greene County Industrial Development Agency (“IDA”)[1] for a warehouse project in Kalkberg Commerce Park, which occupies land in the Town of Coxsackie, the Town of New Baltimore[2] and Greene County.  The financial assistance consisted of exemptions from certain taxes, including real property taxes.  Pursuant to GML §858(15), the IDA is authorized to enter into agreements for payments in lieu of taxes (“PILOTS”).[3]

GML §858(15) provides, in pertinent part:

Unless otherwise agreed by the affected tax jurisdictions, any such [PILOT] agreement shall provide that payments in lieu of taxes shall be allocated among affected tax jurisdictions in proportion to the amount of real property tax and other taxes which would have been received by each affected tax jurisdiction had the project not been tax exempt due to the status of the [IDA] agency involved in the project (emphasis added).

In order to provide more than $100,000 of financial assistance, an IDA is required to establish a uniform tax exemption policy (“UTEP”) with input from the affected tax jurisdictions, using 14 guidelines (GML §§859-a and 874[4][a]).  Generally, such policies set forth a decreasing scale exempting a percentage of the property subject to taxation over a period of 15 to 25 years, beginning with a 90% exemption, and decreasing five or ten percent a year until the property is taxed at 100%.  The record reveals that respondent IDA established a UTEP in 1998, which provided that a warehouse facility such as Empire may receive an abatement in real property taxes in the form of a PILOT for 15 years.[4]

The UTEP also provided, however, that, in addition to or in lieu of benefits under the UTEP, the IDA could determine to deviate from the UTEP for a project expected to have significant impact in the locality where the project will be located, if it sets forth in writing a procedure for doing so and notifies the affected tax jurisdictions of the proposed deviation and reasons therefore (GML §874[4][b]).  In this case, the chairman of respondent IDA avers that it provided the required public notices for a proposed deviation from the UTEP for the Empire project to the affected tax jurisdictions of the Towns of Coxsackie and Baltimore,[5] Greene County, and the district, along with supporting reasons for each of the 14 factors.

In the proposed deviation, the PILOT is for 25 years, there would be no exemption from real property taxes for the first 10 years, and years 11 through 25 would be fixed at the amount for year 10.  However, the IDA would first deduct a 20% administrative fee per year to cover road costs, infrastructure maintenance costs, landscaping, storm water retention basins, park maintenance costs, lighting and other working capital costs associated within various Green County business parks.  Thus, under the proposed PILOT, all respondent taxing jurisdictions would receive their proportionate share of 80% of full taxes in annual payments after deduction of the 20% IDA administrative fee for each of the first 10 years, and then their proportionate share of 80% of full taxes of the year 10 tax amount as the annual payment for years 11 through 25.  According to the IDA chairperson, all affected respondent taxing jurisdictions, including the district, would receive substantially more revenue in the beginning years of the PILOT than the smaller benefits they would have received under the UTEP for warehouse facilities, and slightly more than $13,000 over the 25 year term of the PILOT.[6]

Respondent IDA requested that all respondent taxing jurisdictions, including the district, agree to the proposed PILOT and the IDA’s 20% administrative fee therein, and a Taxing Authority Allocation Agreement (“TAAA”).  On October 28, 2008, the board adopted a resolution approving a PILOT and a TAAA for the Empire project on behalf of the district.

Petitioner contends that the board’s resolution is null and void because the board lacks the authority to approve, and breached its fiduciary duties by approving, a resolution wherein the IDA receives 20% of PILOT funds.  He contends that respondent IDA is not an affected tax jurisdiction and thus not entitled to the distribution of PILOT funds under the GML, and that the 20% administrative fee retained by the IDA in the PILOT is “diverted education money” which amounts to over two million.  He claims that the IDA is obligated to spend those funds on items beyond school boundaries, that none of the funds will be spent for educational purposes, that the district is not allowed to monitor how the IDA spends the funds, and that the district lacks authority to invest in commercial development.  He argues that the payment to the IDA violates the gift prohibition in Article VIII §1 of the New York Constitution.  Petitioner also maintains that the TAAA violates GML §103 regarding competitive bidding.  He seeks an order nullifying the resolution and the TAAA, and enjoining the district and IDA from distributing the district’s PILOT funds to the IDA.

Respondents assert that the appeal must be dismissed because petitioner has not alleged sufficient personal damages to demonstrate standing and the petition is not properly verified.  Respondents IDA, Greene County and Town of Coxsackie additionally assert that petitioner failed to personally serve each respondent and failed to join necessary parties.  They also contend that the appeal must be dismissed for failure to state a claim upon which relief may be granted, for failure to state a clear and concise statement of claims, for lack of jurisdiction, and because the appeal is barred by a court decision and the doctrines of staredecisis, resjudicata and collateral estoppel.

Initially, I must address several issues relating to the record.  The purpose of a reply is to respond to new material or affirmative defenses set forth in an answer (8 NYCRR §§275.3 and 275.14).  A reply is not meant to buttress allegations in the petition or to belatedly add assertions that should have been in the petition (Appeal of a Student with a Disability, 46 Ed Dept Rep 540, Decision No. 15,589; Appeal of E.P. and D.P., 46 id. 390, Decision No. 15,542; Appeals of Cass, et al., 46 id. 321, Decision No 15,521).  Therefore, while I have reviewed the reply, I have not considered those portions containing new allegations or exhibits that are not responsive to new material or affirmative defenses set forth in the answer.

Similarly, on March 5 and 9, 2009, respondents submitted a Collaborative Statement and Joint Corrective Affidavit in response to an email from petitioner alleging that respondents’ respective memoranda of law contained a misrepresentation of fact.  I have accepted these documents.  I have also accepted petitioner’s reply memorandum of law, to which respondents did not object, but only to the extent it addresses the Collaborative Statement and Joint Corrective Affidavit.

Section 275.8(a) of the Commissioner’s regulations requires that the petition be personally served upon each named respondent.  Although all but the district respondents dispute service, the record contains affidavits of personal service for each of the named respondents.  Accordingly, I decline to dismiss the appeal for lack of service.

Section 275.5 of the Commissioner's regulations requires that all pleadings in an appeal to the Commissioner be verified.  When a petition is not properly verified, the appeal must be dismissed (Appeal of D.P., 46 Ed Dept Rep 516, Decision No. 15,580; Appeal of C.S., 46 id. 260, Decision 15,501).  Here, although petitioner did not submit an affidavit of verification pursuant to §275.6 of the Commissioner's regulations, petitioner is also an attorney and submitted a sufficient oath in accordance with §275.6.  Accordingly, I find that the petition was properly verified.

An individual may not maintain an appeal pursuant to Education Law §310 unless aggrieved in the sense that he or she has suffered personal damage or injury to his or her civil, personal or property rights (Appeal of Jefferson, 46 Ed Dept Rep 487, Decision No. 15,572; Appeal of Himmelberg and Little, 46 id. 228, Decision No. 15,490; Appeal of Riccinto, 46 id. 39, Decision No. 15,435).  Only persons who are directly affected by the action being appealed have standing to bring an appeal (Appeal of Jefferson, 46 Ed Dept Rep 487, Decision No. 15,572; Appeal of L.A., et al., 46 id. 450, Decision No. 15,561).  District residents have standing to challenge an allegedly illegal expenditure of district funds (Appeal of Samuel, 45 Ed Dept Rep 418, Decision No. 15,371; Appeal of Sweeney, 44 id. 176, Decision No. 15,139; Appeal of Allard, 43 id. 167, Decision No. 14,957).  Petitioner is challenging an alleged illegal transfer of district funds to the IDA and, as a resident of the district, has standing to bring this appeal under Education Law §310.

On March 15, 2007, the Appellate Division, Third Department, affirmed an order and judgment of the Supreme Court, Albany County, dismissing this petitioner’s CPLR Article 78 proceeding seeking to annul the board’s approval of a TAAA with the IDA.[7]  At that time, the IDA had sought and received consent from the affected taxing jurisdictions for a TAAA and PILOT that allowed the IDA to retain a 20% administrative fee from the PILOT, after which they would receive their proportionate share of 80% of full taxes.  The Supreme Court dismissed petitioner’s challenge to that TAAA for failure to effect timely service and for lack of standing.[8]  In affirming the lower court’s ruling, however, the Appellate Division also ruled on the merits of petitioner’s argument that the IDA was not entitled to the distribution of PILOT funds under the GML.  The court stated that it was “not persuaded that [petitioner’s] claims have merit,” and specifically held that “General Municipal Law §858 permits a less than full allocation of PILOTs where the taxing jurisdictions agree, as they did here (citation omitted)” (Matter of Palmateer v Greene County Indus. Dev. Agency, et al., 38 AD3d 1087, 1089).

The legal issues raised in Matter of Palmateer are identical to those raised in this appeal.  In the instant case, as in Matter of Palmateer, the affected tax jurisdictions have “otherwise agreed” to less than the full allocation of PILOTs by approving the PILOT and TAAA, which is authorized by the plain language of GML §858(15).  In addition, the parties in Matter of Palmateer are identical to this appeal and the facts are similar in almost all respects, except that National Bedding LLC (“NBL”), rather than Empire, sought financial assistance from the IDA for a manufacturing, rather than warehouse, project to be located in Greene County in the Town of New Baltimore.  (Under the UTEP for manufacturing projects, NBL would have received a 95% exemption the first year, with a 5% decrease every year for 20 years.)

Pursuant to the doctrine of staredecisis, therefore, it is clear that petitioner’s appeal herein must be decided in conformity with the Appellate Division’s holding in Matter of Palmateer.  As the Appellate Division, Third Department, has explained:

“The doctrine of staredecisis provides that once a court has decided a legal issue, subsequent appeals presenting similar facts should be decided in conformity with the earlier decision” (citation omitted).  The doctrine, which “rests upon considerations of practicality and principle” (citation omitted), recognizes that a legal question, once resolved, should not be reexamined each and every time that it is presented (citation omitted).  Simply stated, the established precedent prevails unless there is a compelling reason to depart from it (citation omitted) (Battlev. State of New York, et al. [257 AD2d 745, 746]).

The Appellate Division in Matter of Palmateer found no merit to petitioner’s arguments that GML §858 does not authorize respondents to enter into a TAAA and PILOT that provides for payment of an administrative fee to the IDA.  Applying the principle of staredecisis, I find that the board acted within its authority under GML §858 and reject petitioner’s arguments that the board violated its fiduciary duty by taking the actions it was authorized to do by GML §858.  I also reject petitioner’s argument that the board violated GML §103 by not competitively bidding the TAAA.  The TAAA is governed by GML §858, and is not a “contract for public work” within the meaning of GML §103.

Finally, the Appellate Division in Matter of Palmateer also addressed petitioner’s argument that the transaction involves an unconstitutional gift of public funds, saying:

Here, despite petitioner's contention to the contrary, there is no illegal gift to a private party because the disputed portion of the School District's share of the PILOTs will be paid to the IDA, a public benefit corporation, to help achieve a substantial public purpose (citations omitted).  The benefit such payments will provide to the businesses being located within the industrial parks being developed by the IDA is merely incidental to the public benefit (citations omitted). (Matter of Palmateer v. Greene County Indus. Dev. Agency, et al., 38 AD3d 1087, 1089).

Based on the court’s ruling, I must reject petitioner’s constitutional claim.

In light of this disposition, I decline to address the parties’ remaining contentions.



[1]See Article 18-A of General Municipal Law (“GML”), §§850 etseq., known as the “New York State Industrial Development Agency Act.”

[2] By Stipulation dated December 29, 2008, the parties agreed that the Town of New Baltimore would no longer be a party to the appeal.

[3] GML §854(17) defines PILOT payments as “any payment made to an agency, or affected tax jurisdiction equal to the amount, or a portion of, real property taxes, or other taxes, which would have been levied by or on behalf of an affected tax jurisdiction if the project was not tax exempt by reason of [IDA] involvement.”

GML §854(16) defines “affected tax jurisdiction” as “any municipality or school district, in which a project is located, which will fail to receive real property tax payments, or other tax payments which would otherwise be due, except for the tax exempt status of an agency involved in a project.”

[4] Under the UTEP, the exemption for a warehouse started at 90%, decreased at 10% per year for the first five years and 5% per year thereafter.

[5] Although a small portion of the Empire project is located in the Town of New Baltimore, no improvements were to be constructed on that portion.  Therefore, New Baltimore was not part of the PILOT agreement.

[6] This calculation assumes an assessed value of $17.5 million based on $29.605 per thousand combined tax rate with a 3.5% escalation in the per thousand tax rate per year.

[7]Matter of Palmateer v. Greene County Indus. Dev. Agency, et al., 38 AD3d 1087, 831 NYS2d 604.

[8]Palmateer v. Greene County Indus. Dev. Agency; Supreme Court, Albany County; Ferradino, J.; Judgment granted dismissing petition; July 3, 2006, n.o.r.