In this CPLR Article 78 proceeding commenced on August 13, 2008, petitioner Regeneron Pharmaceuticals, Inc. (Regeneron), seeks to annul the respondent assessor's determination granting only a partial exemption to property owned by petitioner at 81 Columbia Turnpike in the Town of East Greenbush, New York. Petitioner maintains the parcel should be assessed as fully exempt pursuant to a Payment in Lieu of Tax Agreement (PILOT) between petitioner and the Rensselaer County Industrial Development Agency (RCIDA).^[FN1]

During 2002, Regeneron submitted an application to the RCIDA to obtain favorable financing for a project to be developed at the 81 Columbia Turnpike site. The "anticipated project" called for the renovation of two existing buildings, containing approximately 99,000 square feet of space, and the construction of four new buildings of approximately 181,000 square feet (see Lease from Regeneron to RCIDA at pp. 1-2)^[FN2]. Following a public hearing, the project was redefined in phases, with Phase I including the construction of one new building of approximately 19,500 square feet, and Phase II consisting of the future construction of the remaining three buildings if certain conditions were satisfied (Id at pp. 3-4).

After the RCIDA approved the application, Regeneron and the RCIDA entered into three agreements pertinent to the exemption issue before the Court: [*2]the Lease from Regeneron to the RCIDA (the underlying lease); a Lease Agreement from the RCIDA to Regeneron; and a PILOT agreement, all effective as of January 1, 2003. Section 2.02B of the PILOT agreement provides as follows: "Commencing as of the effective date hereof and continuing until December 31, 2013, the value of the Phase I Project Facility for purposes of determining payments in lieu of property taxes due hereunder (the "Assessed Value") shall be Four Million Five Hundred Thousand Dollars ($4,500,000.00)". Section 2.02[C] further specifies that the amount of the payment is determined by multiplying the 4.5 million assessed value by "the tax rate or rates of such Taxing Entity that would be applicable to the Phase I Project Facility if the Phase I Project Facility was owned by (Regeneron) and not leased to the Agency".

Petitioner avers that it filed an exemption application pursuant to RPTL §412-a with respondent Assessor on or about January 13, 2003 (see Petition at paragraph 10).^[FN3] Thereafter, from 2003 into 2008 tax bills were issued based on a 4.5 million dollar assessed value, and payments were made (see Exhibit "B" annexed to September 15, 2009 letter from Robert Beebe, Esq.). During 2008, respondent Town completed a revaluation of all real property within the Town. As a result, the state equalization rate increased from 24% in 2007 to 100% in 2008, while the tax rate decreased from approximately $81 to approximately $21 per thousand dollars of assessed value (see Respondent's Memorandum of Law dated 11/6/09 at pp. 9-10). Correspondingly, the assessed value was increased from 4.5 million to 20 million.

In July, 2008, Regeneron commenced both an Article 7 proceeding and the instant Article 78 proceeding challenging the new assessment. In December, 2008, respondent corrected the 2008 final assessment role, by granting a partial exemption for the 19,500 square foot new building only (Id. at p.10) . This correction resulted in an assessed value of $13,000,000. In response, Regeneron commenced a second Article 78 proceeding. After the 2009 assessment role was finalized, Regeneron commenced a second Article 7 proceeding and a third Article 78 proceeding.

After the case was reassigned to the Court upon the retirement of a colleague in 2009, the Court held a conference with counsel on August 14, 2009. [*3]As a result of the conference, the Court (Lynch, J.) issued a letter order dated August 21, 2009 establishing a briefing schedule and scheduling oral argument on October 8, 2009. The parties were directed to address whether the Court could resolve the Article 78 proceedings without the necessity of further discovery. Oral argument was held on October 8, 2009. Post argument briefs have been accepted by the Court.

It bears emphasis that all of these proceedings key into the core issue of whether the property is exempt or not under the 2003 PILOT Agreement. As such, the Court agrees with petitioner that a CPLR Article 78 proceeding is the appropriate vehicle in which to resolve the dispute between the parties (see Matter of Adams v. Schoenstadt, 57 AD3d 1073; Kahal Bnei Emunim & Talmud Torah Bnei Simon Israel v. Town of Fallsburg, 161 AD2d 943, modified on other grounds, 78 NY2d 194). In any event, since the issue has been duly preserved in the companion Article 7 proceedings noted above, the Court will address the issue here.^[FN4] Moreover, since the issue may be resolved on the basis of the documents presented, it is not necessary to engage in further discovery in this proceeding.^[FN5]

Under General Municipal Law §874, any property under an industrial development agency's "jurisdiction or control or supervision" is entitled to a full exemption from real property taxes. Correspondingly, Real Property Tax Law §412-a [1] provides that "real property...under the jurisdiction, supervision or control of industrial development agencies enumerated in the general municipal law shall be entitled to such exemption as may be provided therein" (emphasis added). The agency is required to file an application for such exemption with the assessor and "include an extract of the terms of any agreement relating to the [*4]project" (RPTL §412-a[2]).

This dispute calls into question the interplay between these two statutory provisions. Notably, both GML §874 and RPTL §412-a were enacted by Chapter 1030 of the Laws of 1969, establishing the "New York State Industrial Development Agency Act" (GML Article 18-A). Article 18-A provides "the statutory framework for the creation and operation of IDA's" (9 Op. Counsel SBEA No. 17). This legislation is focused on prioritizing the ability of IDA's to promote economic development (Id). To that end, GML §888 expressly provides that GML Article 18-A supercedes any inconsistent statutory provisions, with one exception not at issue here.

This Court is mindful an assessor is statutorily charged with determining the taxable status of all property within the town (see RPTL §102[2]).

That being said it is important to recognize that the exemption at issue independently derives from the IDA's authority under §874 of the General Municipal Law, not the Real Property Tax Law (see Matter of Pyramid Company of Watertown v. Tibbetts, 76 NY2d 148). An IDA is statutorily charged with promoting economic development and, to that end, is authorized to lease real property necessary to achieve its corporate purposes (General Municipal Law §§ 851; 858[4], [9], [10]).

This interplay was addressed by the State Office of Real Property Services in 11 NY Op Counsel SBRPS No. 35. That opinion noted that a property will be exempt "[i]f the assessor determines that property qualifies for exemption because its ownership or use satisfies section 412-a(1)". The opinion further observes that

"requiring an exemption application setting forth the

terms of the agreement upon which the preferential financing is

based and salient PILOT agreement criteria would provide a needed informational base for assessors in determining taxable status and

for those public officials whose responsibilities include the monitoring

of [the] PILOT agreement".

The opinion further observes that "[i]nterpretation of payment in lieu of tax agreements...is not primarily an issue of assessment administration".

Based on the above, this Court finds that where, as here, an exemption derives from the agreements of an IDA, the assessor is required to record the property as exempt on the tax assessment roll in a manner consistent with the PILOT. It is not the assessor's function to second guess the propriety of the exemption authorized by the IDA. [*5]

Upon review of the three core agreements herein, the Court agrees with petitioner, that the entire parcel is entitled to an exemption.

In authorizing a partial exemption, the Town has read the lease agreements as limiting the exemption to the new building constructed as part of Phase I. By its terms, however, the underlying lease between Regeneron and the RCIDA leases to the agency, as tenant, "the land and all improvements now or hereafter located on the land" (Regeneron to RCIDA lease at p. 4). Section 3.1 of the underlying lease specifies that the lease embraces "the Land...and the improvements now and hereafter located thereon relating solely to Phase I Project Facility, including the Phase I Project Facility (the Land, the Phase I Project Facility and said improvements being sometimes collectively referred to as the "Premises")...The Premises are intended to include (1) all buildings and improvements currently located on the Land..." (See Regeneron to RCIDA Lease at p. 13). While the project was adjusted during the 2002 approval process to limit Phase I to include the construction of a single new building, the underlying lease, by its express language embraces the entire parcel, the existing buildings and the new building.

The leaseback by the RCIDA to Regeneron and the PILOT agreement provide mirror definitions that embrace the land, the existing buildings and the new building.

Since the entire premises have been leased by Regeneron to the RCIDA and leased back by the RCIDA to Regeneron, petitioner is entitled to a full exemption under General Municipal Law §874, provided the RCIDA has "jurisdiction or control or supervision" over the property. As discussed above, the RCIDA holds a "leasehold interest" in the entire property sufficient to satisfy the statute. The leaseback to Regeneron does not vitiate RCIDA's statutory control over the property. For example, under Section 3.2 of the leaseback to Regeneron, Regeneron is given the right to use the facility under certain conditions, including restrictions on the nature of the use and a requirement to maintain the integrity of the site as a public project. This contractual structure satisfies the control requirements of General Municipal Law §874 (see 9 OP. Counsel SBEA No. 17).

The Court is mindful that due to the the townwide revaluation at full market value the tax rate has been substantially reduced. Applying the new tax rate to the 4.5 million assessed value yields a significantly lower PILOT payment, raising the concern of an undue windfall. Under General Municipal Law §858[15], an IDA is authorized "to enter into agreements requiring payments in lieu of taxes. Such agreements...shall contain the amount due annually to each affected tax jurisdiction (or a formula by which the amount due can be calculated)..." [*6](emphasis added). Here, as noted above, section 2.02(B) of the PILOT agreement specifies that the payments are computed based on a 4.5 million dollar assessed value. Petitioner argues, and the Court agrees, that the RCIDA was statutorily authorized to base the PILOT formula on a fixed "assessed value". While the PILOT agreement does not expressly address the situation presented here, in which the Town subsequently reassessed all property at full value, that development was a risk foreseeable to each party when the contract was made. Consequently, petitioner is entitled to the benefit of its bargain.

Accordingly, the petition is granted and the respondent assessor is required to annul the assessment on the 2008 and 2009 tax rolls, and restore the exemption in accord with the PILOT agreement between petitioner and the RCIDA, without costs.

This Memorandum constitutes the Decision and Order/Judgment of the Court. This original Decision and Order/Judgment is being returned to the attorney for petitioner. The below referenced original papers are being mailed to the Rensselaer County Clerk. The signing of this Decision and Order/Judgment shall not constitute entry or filing under CPLR 2220. Counsel is not relieved from the provision of that rule regarding filing, entry, or notice of entry.

DATED: Albany, New York

December, 2009

________________________________________

Michael C. Lynch

Justice of the Supreme Court