In this hybrid CPLR Article 78 proceeding and action for declaratory and injunctive relief, the petitioner, POP Displays USA, LLC, (hereinafter "petitioner") seeks relief relating to the tax assessment by the City of Yonkers (hereinafter "City") and Mark B. Russell, the City's tax assessor (hereinafter "Assessor"), of three condominium units leased by petitioner and located at 555 Tuckahoe Road in the City of Yonkers.^[FN1] Specifically, as to Condominium Unit 1 ("Unit 1"), petitioner seeks to have the October 30, 2007 supplemental assessment and tax bill levied for that unit for the City's July 1, 2007 to June 30, 2008 fiscal year declared a nullity, as petitioner contends that the City's issuance of that bill was ultra vires in that it was not issued in accordance with the procedures set forth in the Real Property Tax Law ("RPTL"). As to Condominium Unit 2 ("Unit 2"), petitioner seeks a declaration that the Assessor erroneously included the value of improvements not actually present on Unit 2 in assessing its value and seeks to compel the Assessor to set an assessed value for the unit that is commensurate with values of other similarly situated property in the City and to take action upon petitioner's tax refund application for Unit 2. As to Condominium Unit 3 ("Unit 3"), petitioner seeks a declaration that the Assessor obtained proof that this unit should have been granted tax exempt status and further seeks to compel the Assessor to take action on petitioner's tax refund applications for that unit.

The three condominium units at issue herein were created in 2001, when the property owner at the time, Tuckahoe Development, LLC, (hereinafter "Development") issued a declaration converting the property located at 555 Tuckahoe Road into three condominium units (Verified Petition, Exhibit A). The City identified the individual Units on the tax map as section 4, block 4038, lots 101 (Unit 1), 201 (Unit 2), and 301 (Unit 3), respectively. Also in 2001, Development conveyed Units 1 and 3 to respondent Tuckahoe Owners, (hereinafter "Owners"), but retained ownership in Unit 2, which was improved with a paved parking lot only. In 2001, Owners leased Units 1 and 3 to respondent Qwest Communications Corporation (hereinafter "Qwest"). The terms of the lease between Owners and Qwest required Qwest to pay all duly assessed real property taxes and property tax equivalents [*2]on the leased premises (Verified Petition, Exhibit B)^[FN2].

In 2003, Qwest subleased Units 1 and 3 to Creative Solutions Group, Inc. (hereinafter "Creative"), and Owners executed a consent letter to Creative, giving Creative the right to use the parking lot located on Unit 2 (Verified Petition, Exhibits C, D). As a result of the sublease and consent letter, Creative was required to pay all duly assessed real property taxes and property tax equivalents on Units 1, 2, and 3 (Id.).

On September 1, 2004, Creative entered into a sublease agreement for Units 1, 2, and 3 with DIAM USA, Inc. (hereinafter "DIAM"), an entity affiliated with petitioner (Verified Petition, ¶23), which sublease required DIAM to pay all duly assessed real property taxes and property tax equivalents on the leased premises (Verified Petition, Exhibit E).

Also on September 1, 2004, DIAM and the City of Yonkers Industrial Development Agency (hereinafter "YIDA") entered into what is known as a straight-lease transaction under the General Municipal Law ("GML") (Verified Petition, Exhibits G, H)^[FN3]. Industrial development agencies, such as YIDA, are statutorily created public benefit corporations organized to encourage local economic development (GML §850 et seq.; see generally Matter of Steel Los III/Goya Foods, Inc. v. Bd. of Assessors of Co. of Nassau, ___ NY3d. ___; 2008 WL 1817274 at *1, n.1 (2008)). Because such [*3]IDA's are created and operated for public benefit, they are regarded as performing governmental functions in exercising their powers and thus are not required to pay taxes or assessments upon any of the property acquired by them or under their jurisdiction and control (GML §874(1)). One of the ways that an IDA can promote local economic development is by entering into a straight lease transaction with a business, which lease allows the agency to take title, possession or control of the property or equipment of the business, which entitles such property or equipment to be exempt from taxation (GML §854 (15)). The straight lease transaction between DIAM and YIDA permitted YIDA to take title, possession or control of Units 1 and 3.

In 2005, the City issued a tax statement to DIAM for the City's 2005-2006 fiscal year charging real property taxes on Unit 2, which was based on the Assessor's estimated full market value of $899,196 per acre. On July 7, 2006, DIAM merged with petitioner, as a result of which petitioner succeeded to DIAM's rights and obligations under the sublease agreement with Qwest, the right to use the parking lot on Unit 2, and the straight lease transaction with YIDA for Units 1 and 3 (Verified Petition, ¶ 28). In 2006, the City issued a tax statement to the petitioner for the 2006-2007 fiscal year charging real property taxes on Unit 2 based on the Assessor's estimated full market value of $1,066,425 per acre.

On October 3, 2006, Qwest, Creative, and petitioner entered into an agreement in which Creative assigned all of its rights, title and interest in its lease to petitioner (Verified Petition, Exhibit H). In 2007, Owners terminated Qwest's and petitioner's right to use the parking lot in Unit 2 (Verified Petition, Exhibit I). On October 5, 2007, petitioner terminated the straight lease transaction with YIDA (Verified Petition, Exhibit J). Accordingly, on October 30, 2007, the Assessor issued a 2007/2008 Supplemental Real Estate Tax bill (hereinafter "Supplemental Bill") charging petitioner real property taxes on Unit 1 for the City's July 1, 2007 to June 30, 2008 fiscal year (Verified Petition, Exhibit N).

It is undisputed that YIDA, as an industrial development agency, is not required to pay taxes or assessments upon any of the property acquired by it (GML §874(1); Verified Petition, ¶34; Verified Answer ¶4). Thus, as petitioner, through the straight lease transaction, leased Units 1 and 3 through YIDA, petitioner contends that these Units should have been tax exempt for the period the YIDA straight lease was in effect. Specifically, petitioner contends that because Unit 3 was leased to YIDA, it should have been considered to be tax exempt and that the City's taxation Unit 3 was an "unlawful entry" as defined in the Real Property Tax Law ("RPTL") §550(7)(a). As to Unit 2, petitioner contends that the Assessor assessed that Unit at two to three times its actual fair market value, and thus that the Assessor made an "error in essential fact" as defined in RPTL §550(3)(b). Accordingly, on October 15, 2007, in accordance with the requirements of RPTL §556, which sets forth the procedures for obtaining refunds of real property taxes where such taxes are attributable to an unlawful entry or an error in essential fact, petitioner submitted applications to the City for tax refunds on Unit 2 (on the basis that the Unit had been erroneously assessed) and Unit 3 (on the basis that the Unit should have been considered tax exempt) (Verified Petition, Exhibits M, O). Petitioner also submitted to the Assessor an affidavit for his execution stating that he had been provided with documents evidencing the exempt status of Unit 3. To date, the Assessor has not taken action on the refund applications or executed the affidavit.

Unit 1

With regard to Unit 1, petitioner argues that YIDA, pursuant to the straight lease [*4]transaction, held a leasehold interest in Unit 1 from September 1, 2004 until October 5, 2007, the date that petitioner terminated the lease. Petitioner submits and respondents do not dispute (see Russell Affidavit, ¶2), that Unit 1 was accorded tax exempt status during this period. The parties also agree that, as a result of petitioner's termination of the straight lease transaction, Unit 1 became immediately subject to real property taxation for the period of October 5, 2007 to June 30, 2008 (hereinafter "Nonexempt Period"), which was the remaining portion of the City's 2007-2008 fiscal year (Petitioner's Memorandum of Law, p. 3; Russell Affidavit, ¶7). As a result of the Unit's loss of tax exempt status, on October 30, 2007, the Assessor issued the Supplemental Bill purporting to assess real property taxes on Unit 1 for the City's July 1, 2007 to June 30, 2008 fiscal year (Verified Petition, Exhibit N). While conceding that Unit 1 was subject to taxation as a result of the termination of its exempt status, petitioner argues that this Supplemental Bill should nevertheless be declared a nullity because the respondents failed to follow the procedures in the RPTL for assessing real property taxes when an exemption from property taxes is lost. Petitioner therefore asserts that the City and the Assessor acted in excess of their jurisdiction and authority in issuing the Supplemental Bill.

Specifically, petitioner asserts that pursuant to RPTL §520, which addresses the assessment and taxation of exempt property upon a transfer of title, the Assessor is directed to assess the property pursuant to the provisions of Title 3 of Article 5 of the RPTL, which provides for the correction of assessment rolls and tax rolls. Petitioner contends that under Title 3, Unit 1's loss of its tax exempt status should be treated as an error on the tax roll for the year in which the termination occurred (in this case, the City's 2007-2008 fiscal year). Petitioner further contends that Title 3 directs the Assessor to assess property taxes on Unit 1 for the Nonexempt Period by extending an additional tax on its next tax roll occurring after petitioner terminated the straight lease transaction, which would be for the 2008-2009 fiscal year. Thus, petitioner submits that if the Assessor followed the procedure set forth in Article 5, Title 3 of the RPTL, he would have reflected the proposed additional assessment on the November 1, 2007 tentative assessment for the 2008-2009 fiscal year as well as the April 10, 2008 final roll for that year and would issue a property tax bill for that assessment on or about June 30, 2008, which is the City's tax levy date for that fiscal year and when the Assessor issues property tax bills for the taxes extended on that tax roll. In essence, petitioner is disputing the timing of the City's and Assessor's issuance of the supplemental bill. The City and Assessor assert that the bill was properly issued because once the Unit lost its tax exempt status, the Assessor was obligated to immediately place it back on the assessment roll and to send out tax bills pursuant to RPTL §520.

According to RPTL §520, when a property loses its tax exempt status, "such property shall be immediately subject to taxation and shall be taxed pro rata for the unexpired portion of any fiscal year during which said transfer of title occurred, and shall be liable in full for taxes in any fiscal year commencing subsequent to the date of transfer." (RPTL §520(1)). For the purposes of any fiscal year during which title to such property is transferred, the statute further provides, in relevant part, that "such property shall be deemed to have been omitted and the assessed value thereof shall be entered on the assessment roll to be used for the next tax levy by or for each municipal corporation in which such property is located in the same manner as provided by Title 3 of Article 5 of the RPTL with respect to a parcel omitted from the assessment roll of the previous year" (RPTL §520(3)). The [*5]specific provision of Title 3 of Article 5 which addresses the entry by an assessor of omitted real property on assessment rolls is RPTL §551, which provides that the assessor "shall enter on the assessment roll of the current year, prior to the tentative completion thereof, any parcel of real property shown to have been omitted from the assessment roll of the previous year, at the valuation of that year, or if not then valued, at such valuation as the assessor shall determine for the preceding year." (RPTL §551(1)). Here, Unit 1's exemption was lost on October 5, 2007 when petitioner terminated the straight lease with YIDA. This occurred during the City's 2007 - 2008 fiscal year. As a result of this termination during the fiscal year, pursuant to RPTL §520(3), Unit 1 was deemed omitted from the City's 2007-2008 tax roll and should have been "entered on the assessment roll to be used for the next tax levy" (emphasis added), i.e., the 2008-2009 roll, but shall be valued at a rate determined by the Assessor for the 2007-2008 fiscal year and taxed at that year's rate as well (RPTL §551(1), (2)). By issuing the Supplemental Bill on October 30, 2007, the City and Assessor failed to comply with the provisions of the RPTL regarding the taxation of properties which lose their tax exempt status during the current fiscal year. Therefore, the City's and Assessor's actions were not in accordance with RPTL §520 and §551.

Unit 2

As to Unit 2, petitioner submitted an application for a refund of real property taxes to contest the Unit 2 assessments carried out on July 22, 2005 and June 9, 2006, arguing that the Assessor incorrectly assessed a value for the property of $899,196 per acre in 2005 and $1,066,425 per acre in 2006. Petitioner contends that the actual value of Unit 2 is within the range of $300,000-$500,000 per acre and that the Assessor must have assumed that the property was improved by something other than a parking lot in arriving at his assessment values (Verified Petition, ¶ 63, Exhibit O, Katcher Affidavit, ¶25). Petitioner therefore submits that the Assessor made an "error in essential fact" regarding his assessment of Unit 2.^[FN4]

Pursuant to Article 78, petitioner seeks to compel the Assessor to set a value for Unit 2 that is commensurate with the value of other similarly situated property in the City of Yonkers, and to take action upon the refund application for Unit 2. However, pursuant to RPTL §700(1), a proceeding to review an assessment of real property shall be brought pursuant to Article 7 of the RPTL, which provides procedures for contesting assessments. RPTL §702(2) provides that such a proceeding must be commenced thirty days after the final completion and filing of the assessment roll containing such assessment. Thus, the proper method for correcting an error in assessments is a timely brought RPTL Article 7 proceeding, not an Article 78 proceeding (78 S. First St. Hous. Dev. Fund Corp. v. Crotty, 75 NY2d 982 (1990); Matter of Cathedral Fourth Development Corp. v. Bd. of Assessors, 25 AD3d 693, 694 (2d Dept. 2006); Matter of G.A.D. Holding Company v. City of New York Dept. of Finance, Real Property Assessment Bureau, 192 AD2d 441, 442 (1st Dept. 1993)).

Here, petitioner is in essence asserting that the Assessor overvalued Unit 2 in the 2005 and 2006 assessments because the actual value of the property was significantly less than the assessed amounts and therefore, because of this alleged overvaluation, the [*6]Assessor must be compelled to act on petitioner's refund application for that Unit. However, because petitioner challenges the valuation amount for Unit 2 as incorrect, its exclusive remedy was to commence a proceeding pursuant to Article 7 of the RPTL, not Article 78 (78 S. First St. Hous. Dev. Fund Corp. v. Crotty, supra ; Matter of Cathedral Fourth Development Corp. v. Bd. of Assessors, supra ; Matter of G.A.D. Holding Company v. City of New York Dept. of Finance, Real Property Assessment Bureau, supra ). It is undisputed that petitioner did not timely commence such an Article 7 proceeding here (see Reply Affidavit of Edward C. Daniel III, ¶ 4). As a result of petitioner's failure to timely follow the exclusive remedy for a claimed overvaluation as prescribed by Article 7, this Article 78 proceeding may not now be converted to an Article 7 proceeding (78 S. First St. Hous. Dev. Fund Corp. v. Crotty, supra ; Matter of Cathedral Fourth Development Corp. v. Bd. of Assessors, supra ; Matter of G.A.D. Holding Company v. City of New York Dept. of Finance, Real Property Assessment Bureau, supra ); see also Matter of Laurel Hill Farms, Inc. v. Bd. of Assessors of Nassau Co., 51 AD3d 794 (2d Dept. 2008)).

Unit 3

As to Unit 3, petitioner seeks to compel the Assessor, pursuant to Article 78, to issue a statement that Unit 3 was tax exempt for the duration of the straight lease transaction between the petitioner and YIDA - September 1, 2004 through October 5, 2007 - as well as to compel the Assessor to take action upon the Refund Applications submitted for that Unit. With respect to Unit 3, petitioner alleges and the City does not dispute, that the amounts reflected on the City's tax statements for the years at issue have been paid, as well as the amounts in Westchester County's tax statements for the 2006 and 2007 fiscal years (Verified Petition, ¶40, 45, 49, Verified Answer, ¶¶ 1, 3). Petitioner alleges that Unit 3 was erroneously considered not to be tax exempt by the City, despite petitioner's straight lease with YIDA, and therefore that the City's taxation of the property was an "unlawful entry" pursuant to RPTL §550(7)(a).^[FN5] Accordingly, pursuant to RPTL §556, which provides the procedures for obtaining refunds and credits of real property taxes, petitioner submitted to the City and to the Assessor applications for refund of such taxes with supporting documentation in regard to the October 15th assessments for Unit 3 for the years 2004 through 2006 (Verified Petition, ¶ 53, Exhibit L). The City and Assessor contend that Unit 3 was not granted a tax exemption because YIDA did not file for tax exemption for Unit 3; Unit 1 was the only property for which YIDA filed for such exemption (Verified Answer, ¶5). Respondents further contend that as a result of YIDA's failure to apply for tax exempt status for Unit 3, petitioner and YIDA negotiated an amendment to the PILOT Agreement entered into between the two parties because Unit 3 was not tax exempt (Affidavit of Mark B. Russell, ¶5). The City and Assessor also contend that, as only YIDA can apply for such an exemption from real property taxes, petitioner has no authority or right to apply for or claim a tax exemption on behalf of YIDA (Verified Answer, ¶7).

Article 78 proceedings in the nature of mandamus to compel require a petitioner to have a clear legal right to the relief sought and a corresponding nondiscretionary duty on the part of the administrative agency to grant that relief (CPLR 7803(1); see Matter of Scherbyn v. Wayne-Finger Lakes BOCES, 77 NY2d 753, 757 (1991); Academy Street Associates v. Spitzer, 50 AD3d 271 (1st [*7]Dept. 2008)). RPTL §412-a, which addresses industrial development agencies such as YIDA, states that real property owned by or under the jurisdiction, supervision or control of industrial development agencies shall be entitled to the real property tax exemption set forth in the GML (RPTL §412-a(1)). The statute further provides, in relevant part, that "application for such an exemption must be made by the agency on a form prescribed by the state board and shall be filed in the office of the assessor on or before the appropriate taxable status date for the year in which the exemption is first claimed." (RPTL §412-a (2)). Pursuant to RPTL §556(2)(c), one of the requirements for an application for a property tax refund is a statement issued by the Assessor, or by a majority of the Board of Assessors, stating that proof has been obtained that the subject parcel should have been granted tax exempt status. Failure to obtain such a statement of proof from the Assessor renders the application void (Id.).

Petitioner's position is without merit. Petitioner cannot compel the Assessor to issue a statement pursuant to RPTL §556(2)(c) substantiating that the Assessor has obtained proof that Unit 3 should have been granted tax exempt status for the years at issue, or compel the Assessor to take action on the application for refund of taxes because pursuant to the plain language of RPTL §412-a(1), only industrial development agencies like YIDA, and not petitioner, have authority to request such an exemption. The statute clearly states that the application for an exemption "must be made by the agency" (RPTL §412-a (2) (emphasis added)). There are no provisions which allow an entity other than the industrial development agency itself to request such an exemption. It is undisputed that YIDA did not make such an application in this case (Verified Answer, ¶5). Therefore, as YIDA did not file for a tax exemption for Unit 3, the property was not tax exempt and pursuant to RPTL §412-a, petitioner cannot seek such an exemption in its own right. It further follows that since petitioner cannot itself seek a tax exemption for the property, it also cannot compel the Assessor to issue a statement pursuant to RPTL §556(2)(c) substantiating that Unit 3 should have been granted tax exempt status for the years at issue, or compel the Assessor to take action on the application for refund of taxes, as petitioner has no clear legal right to this relief (see Matter of Scherbyn v. Wayne-Finger Lakes BOCES, supra ; Academy Street Associates v. Spitzer, supra ). Simply put, only YIDA could file for an exemption for Unit 3, and since YIDA did not do so here, Unit 3 was not tax exempt. As Unit 3 was not tax exempt, the Assessor cannot be compelled to issue a statement indicating that the property should have been granted tax exempt status.

Thus, in regard to Unit 1, the Court declares that as the City and Assessor failed to comply with the provisions of the RPTL in issuing the Supplemental Bill, they must follow the provisions of RPTL §520 and §551 in issuing such bill. As to Unit 2, the Court declares that petitioner's claim is procedurally barred, as a claim of overvaluation in assessment must be brought pursuant to RPTL Article 7, not pursuant to CPLR Article 78. Lastly, as to Unit 3, the Court declares that only YIDA, as an industrial development agency, and not the petitioner, may apply for tax exemption, which was not done here. Therefore, the Court further declares that the Assessor cannot be compelled to issue a statement that the property at issue should have been tax exempt. Accordingly, the petition is granted only insofar as the Supplemental Bill must be issued in accordance with the procedures set forth in the RPTL; the Court's rulings on petitioner's remaining requests are set forth above.

This Decision constitutes the Order and Judgment of the Court.

Dated: White Plains, New York

June, 2008

______________________________

BARBARA G. ZAMBELLI

A.J.S.C.