Property Rights Foundation of America®
Founded 1994

Statement in Support of
Legislation to Reform Laws Governing Tax Exempt Properties

By Carol W. LaGrasse
President, Property Rights Foundation of America

Public Hearing of the
Senate Committee on Local Government and
Senate Committee on Housing, Construction, and Community Development
Lake Placid, N.Y.
March 13, 2003

My name is Carol W. LaGrasse, a resident of Stony Creek, Warren County, N.Y., and president of the Property Rights Foundation of America, a Stony Creek-based nationwide non-profit organization dedicated to the defense of private property rights as guaranteed in the United States Constitution. The Property Rights Foundation is equally dedicated to the preservation of the American tradition of private land ownership. It would seem almost too obvious to say that the two go together, but in today's context where the knowledge of history throughout the ages demonstrating the preeminent importance of private property is just now being resurrected, it must be emphasized that private property ownership and private property rights are essential to freedom and prosperity. I have also served as a member of the Stony Creek Town Board for nine years and am aware first-hand of the issues related to State land assessments where the State owns one-half of the land in this municipality.

Six bills comprise the excellent package of legislation for tax reform presented by Senator Betty Little and Senator John Bonacic, which is the subject of this hearing. I would like to express my full support and appreciation for all six bills:

S.1123 — to Require Annual Application with Clear and Convincing Evidence for Non-profit Exemption
S.1125 — to Charge Tuition for Non-residents of a School District
S.1126 — to Ensure Tax-exempt Properties are used for Specified Exempt Purposes
S.1127 — to Require Stricter Standards to Qualify for Exemption and for Exempt Purpose
S.1398 — to Provide Local Discretion in Granting Exemptions,
S.1415 — to Provide State Reimbursement to Municipalities for Lost Revenue from Exempt Private Forest Lands

My testimony pertains to S.1123, S.1126, S.1127, and S.1398, because these deal with the problem of the tax shift to ordinary private property owners caused by the exemption of non-profit organizations with often large land holdings that continue to grow with no end in sight.


Experience in the Lower Hudson Valley

I first became aware of the potential magnitude of this problem during the early nineties. A letter that was addressed to then-Senator George Pataki from the Board of Assessors of the Town of Philipstown in Putnam County was shared with me.

"As you may be aware, we in Philipstown, Putnam County, and in other areas of the state are in a tax squeeze in relation to the unusual amount of tax exempt lands owned by churches and the state in our town. In addition to this problem, we now have another large, well-funded organization that is purchasing huge amounts of our only asset — vacant lands — and applying for tax-exempt status. We have refused to grant these application requests but now face their court challenges and possible tax refunds.

"The Open Space Institute, one of a growing number of conservation groups, is acquiring many parcels of the town's vacant lands and because it is 'non-profit,' is seeking for and will receive tax-exempt status, at least according to what we believe will happen to the recently filed Supreme Court suits. This, we believe, is very detrimental to our financial well-being, as we have a lack of commercial properties and have nothing else to rely on to replace these lost revenues.

"We do not believe, as O.S.I. would have you think, that there is a long-term advantage to their 'conserving' of these large tracts. With the large amount of church lands, aqueduct and state-owned property (Hudson Highlands) the last thing we need is more of the same. What we could use is more commercial development in a planned and intelligent manner. Our own planning and zoning boards are ... against unwanted development or poorly planned development, and they don't require lands to be taken off the tax rolls forever.

"If this type of organization can afford to purchase these lands with huge amounts of money (the Hubbard parcel on Route 9 and 301 cost over $6,000,000) why shouldn't they be able to pay a tax bill like everyone else does? In fact, why wouldn't they want to? Their group is, after all, 'non-profit.' Doesn't this hurt their image of helping communities with these acquisitions?"

— from letter of February 18, 1994, Philipstown, N.Y. Board of Assessors,
Gary Ritchie, Chairman; Brian Kenney, William LeMon

Brian Kenney, the local assessor, had analyzed his 1993-94 tax rolls and found that the Open Space Institute owned 8.7 % of the land in the town and the State 15 %. Once accumulating the land, the Open Space Institute applied for a tax exemption for its 18 separate parcels, which would result in an annual net loss of $442,000 combined taxes yearly, according to Kenney, who called it a land "takeover." At that time O.S.I. had assets of $8,432,440 and annual revenues of $2,092,430.

At the time, I was also contacted by Paula Sarvis, the Fishkill Town Assessor. Fishkill is located directly north of Philipstown. She had become troubled by the tax-exempt status of Scenic Hudson, the environmental organization which has been purchasing large tracts of property which make up Fishkill Ridge. She observed that Scenic Hudson had acquired 966 acres with a total assessed value of $1,433,600.

"The intent of this purchase is to preserve and protect land in its natural state. This certainly sounds like a wonderful and noble effort for anyone to undertake, but also unfortunately for the local tax payer, Scenic Hudson has also demanded tax exempt status for its real estate holdings in Fishkill...," stated assessor Sarvis.

"I do not believe the original intent of the Real Property Tax Law, as it pertains to the granting of tax-free status to organizations with large endowments, was to be at the expense of local families and businesses. This is particularly so when the organization provides little benefit to the community in which it is seeking relief. If Scenic Hudson is at all concerned with the Town of Fishkill's future, why don't they voluntarily offer an alternative to the payment of real property taxes?"

— Paula Sarvis, Fishkill Town Assessor, 1995

Brian Kenney pointed out that the high prices paid by the wealthy non-profit organizations were pricing out the ordinary rural people in the Philipstown area.

"The exorbitant purchase prices of vacant, dormant lands, mostly in the lower Hudson...paid by these non-profits to private land owners are, more often than not, skewing the local market values," he stated in an unpublished letter dated March 6, 1995.

The tax exempt status of these lands makes it possible for the non-profit organizations to gobble the properties up and indefinitely hold the land out of reach of the ordinary local people, their businesses and children, while shifting the tax burden to the same local people.

This is a pattern that is being repeated at various levels of intensity across the state, but the much-needed studies of tax-impact are not available, or are not performed. The Hudson Valley between Albany and New York City is especially subject to intense acquisition of land by tax-exempt non-profits.

S. 1123 and S. 1127 — Tightening definitions and requirements for tax-exempt status

I appreciate the requirements in S.1127 that the exempt organization's incorporation limit the purposes of the group to tax-exempt purposes. The bill takes an excellent step in tightening the requirement that the property be "used exclusively" for the tax-exempt purpose, meaning that any other use would subject that part of the property to taxation. Setting precisely 120 days as the number of days by which the property owner must provide clear and convincing evidence that each acre is actually used for the tax-exempt purpose is a good idea. S.1127 should be a big help to local assessors to clarify their obligations. This legislation should also be an assistance to the ordinary taxpayers of the state who have been unjustly bearing the burden of a tax shift based on others receiving tax exemptions based on purposes that are not providing an exclusively public benefit.

It is also helpful that in S.1127 land used for meditation would be removed from the tax-exempt category, considering the nebulous definition of meditation and its orientation toward a private, rather than a public, benefit. S.1123 seems to reiterate the burden of proof requirement and is a short, succinct bill in its own right.

Responding to Court Decisions

I appreciate the useful citation in the memo attached to S.1127 of the key case law that has allowed the properties that are used principally or primarily for exempt purposes to receive tax exemptions where the idea was to require the properties to be used "exclusively" for tax-exempt purposes.

The bill memo states that the ruling in Mohonk Trust v. Board of Assessors of Town of Gardiner, 47 NY2d 476, 483 (1979) has led to a softening of the statutorily spelled out standard and has diminished the tax base of localities throughout the state.

The memo points out that the decision In the matter of Nassau County Council of Boy Scouts of America v. Board of Assessors of the Town of Rockland, 444 N.Y.S. 2d (1981) presents further evidence of the erosion of the real property tax law from the statutory intent. The memo states that in that case, some 3,700 acres were removed from the tax roll even though much of that acreage was rarely, if ever used. The Court allowed the admission of "non-use" within exempt purposes.

This brings to mind a frustrating case in the North Country where the Supreme Court Appellate Division, Third Department ruled on February 24, 1994 that the Town of Putnam Assessor could not withhold tax-exempt status from the Adirondack Land Trust.

I was in the court room when this case was argued. The 168-acre parcel with 8/10 mile shoreline on the east shore of Lake George in Washington County was assessed at $831,250. The most interesting point was when the attorney for the Adirondack Land Trust replied to the allegation by the town attorney that the land was not accessible for public use in any meaningful way. The lawyer for the land trust replied that the public purpose was served because the land could be seen and reached by canoeists and because it was a preserve. The Court ruled that the fact that the land trust had publicized the existence of the land and had organized canoe trips to the site was in keeping with its status as a nature preserve and overcame the objection that the property owner was using a purported public benefit as a mere pretext to shield an essentially private use from taxation.

S.1398 — Converting certain entitled exemptions to discretional exemptions

I do not know whether the proposed legislation would overcome these court decisions, and would like to offer for discussion the proposal that, with the exception of those exempt purposes required by the New York State Constitution, the exemption of properties for charitable purposes be moved entirely to the optional category, where localities would be granted discretion in granting exemptions, as proposed now under S.1398 for those properties devoted to "moral or mental improvement of men, women, or children."


S.1126 — Prohibiting land-banking

The proposal to hold to a two-year maximum the period wherein a tax-exempt organization can hold a parcel without making progress to implement plans to carry out the tax-exempt purpose on the land is reasonable and fair to both the local municipality and the tax-exempt organization.

Summary

The Senate package of legislation for reform of the standards governing tax-exempt status to real property reflects a proven need. Many municipalities have been faced with the tax burden of well-funded non-profit organizations buying up large tracts of vacant land and having the properties removed from the tax rolls. This package of legislation tackles this problem, and should be very beneficial to the people of the state of New York.

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