46 N.Y.2d 358 | NY | 1978
Lead Opinion
OPINION OF THE COURT
The court is presented with a challenge to a complex and well-considered plan, the purpose of which is to provide support for the continuation of financially troubled cultural institutions and museums in the State of New York. The Legislature, by chapters 902 and 903 of the Laws of 1976, enacted articles 13-E and 13-F of the General Municipal Law known respectively as the New York State Cultural Resources Act (SCRA) and the New York City Cultural Resources Act
The history and background of the litigation which propelled this case to our court is simply stated. Special Term ruled the provisions of these statutes to be constitutional over plaintiff’s claims that the result of the enactments was not a general law but a special law, and as such exceeded constitutional limitations. The Appellate Division, with one Justice dissenting, reversed Special Term and has held that the SCRA was a special law that could only be applicable to the Museum of Modern Art, a private nonprofit educational institution. The majority also concluded that since the CCRA involved condemnation of property, diversion of tax revenues and, further, because it was enacted without a home rule message, the New York State Constitution had been violated in several respects.
For the reasons hereinafter assigned and stated, we reverse the order of the Appellate Division and reinstate the order of Special Term.
The SCRA provides for the creation of cultural trusts (public benefit corporations) which, when authorized by separate legislation, are given the power to assist participating cultural institutions in the construction of combined-use facilities, i.e., institutions where part is devoted to the cultural purpose, and part used for commercial purposes designed to produce financial support for the cultural part. The legislation further provides that a trust is granted a general tax exemption, including an exemption from real estate taxation on the combined-use facility developed by the trust (General Municipal Law, § 317). The owners of the commercial part of the combined-use facility are required, however, to pay to the trust amounts equal to the real property tax that would otherwise be payable to the municipality. By separate legislation, the trust must specify the purposes for which, such payments will be used (General Municipal Law, § 307, subd 3) in aid of the cultural institution. In addition, this combined-use facility may not be developed by the trust unless the cultural institution to be aided has held fee title to contiguous tax-exempt real property in excess of 50,000 square feet for a period of at least five years (General Municipal Law, § 307,
The separate legislation needed to effectuate the general scheme of the SCRA on a local basis and to any particular cultural institution is, in the present instance, found in the CCRA. Under the CCRA a trust is created for New York City to develop combined-use facilities. The trust is empowered to acquire property by condemnation, but the area of taking is limited by metes and bounds to property contiguous to that owned by the Museum of Modern Art (General Municipal Law, § 329). The trust must remit to the city from tax equivalency payments an amount equal to the tax that otherwise would have been paid by the private owner of the condemned property, but not less than an amount equal to 10% of the tax equivalency payments for a period of 10 years following completion of the commercial construction; and the trust is to use the tax equivalency payments for servicing the debt incurred to build the institutional part of the combined-use facility. Then, after such servicing is complete, the tax equivalency funds are to be used only to pay the operating costs of the newly created institutional part of the facility. Any surplus of tax equivalency payments at the end of a fiscal year must be paid to the city (General Municipal Law, § 330, subd 1); and an abatement of tax equivalency payments is allowed while the facility is being constructed, and this abatement will follow a declining scale for the 10-year period following completion of construction (General Municipal Law, § 330, subd 2). Finally, the "effective date” portion of the CCRA legislation states: "This act shall take effect immediately, provided, however, that the provisions of the act shall not become operative unless and until the board of estimate, within ninety days after its enactment into law, adopts a resolution ratifying and
The Museum of Modern Art is the first cultural institution in the State to avail itself of the benefits of the legislation. The trust created under CCRA, in conjunction with the museum, developed a plan for building a combined-use facility adjacent to the museum building on West 53rd Street in Manhattan. Under the plan, its facilities would be expanded whereby a museum wing consisting of approximately 50 stories would be constructed on the west side of the museum’s existing building. The bottom six stories would be devoted to cultural purposes such as gallery space and a book store. The remaining stories would be used for condominium apartments from which the tax equivalency payments for support of the museum are to be derived. And the needed land would be acquired by the trust through its condemnation powers. Plaintiff is a qualified taxpayer, claims ownership to air rights which may be condemned, and owns land contiguous to the rights to be acquired.
Plaintiff has attacked the enabling legislation as being, in effect, special legislation designed only for the benefit of the Museum of Modern Art; and it is alleged that the precise specifications in the legislation, to wit, the ownership of 50,000 square feet of property for five years, along with the average annual admissions of at least 500,000 persons, applies only to this museum. This, it is urged, violates several provisions of New York State Constitution, among which are article IX (§ 2, subd [b], par [2] [necessity for a home rule message]); section 17 of article III (no private bill shall grant any private corporation any immunity or franchise); section 1 of article XVI (exemption from taxation to be granted only by general laws); and article I (§ 7, subd [a] [property cannot be condemned for private use]).
The Appellate Division majority adopted and accepted these arguments and reasoned that article IX (§ 3, subd [d], par [1]) of the Constitution defines a general law as one "which in terms and in effect applies alike to all counties * * * all cities, all towns or all villages”; and that, despite the drafters’ attempts to clothe the enactments with general language, they were tailored for the Museum of Modern Art, and only for that institution. If this view were accepted as valid, of course, it would necessarily follow that the enactments are in viola
The Special Term Justice, however, took a different view. He. stated.: "While the museum presently qualifies as the sole beneficiary of the statute, as has already been demonstrated the language of the law opens similar opportunities in the future to others who may be fitted into the wording of the statute. The new law does not grant any exclusive privilege or franchise and cannot under the circumstances be deemed a private bill since it satisfies the Constitutional test of generality. What is important, is that the grant according to the legislative findings, is for a public purpose both educational and cultural”.
It is significant to note that both courts below treated the case as one which turned on and was concerned only with questions of law, Special Term granting summary judgment for defendants, and the Appellate Division, on the other hand, denying that relief and granting summary judgment for plaintiff. Such being the case, it is difficult to understand why the Appellate Division majority stated in its opinion (63 AD2d, at p 162), "Nor is there any reasonable possibility that another cultural institution would ever become eligible.” Concededly, there is no agreed statement of fact in the record to support that conclusion — which is a conclusion that is essential to the Appellate Division’s holding.
Although the statutory specifications fit the present statistics applicable to the Museum of Modern Art, there is no showing that other institutions could not, in time, meet them also.
In sum, the Legislature has thus clearly stated that these statutory plans comprise general legislation applicable Statewide to institutions which own or will own enough property, will serve the needs and desires of many people throughout the State, and generate enough existing interest to warrant recognition as institutions of sufficiently significant community value. Whether the Museum of Modern Art’s specifications were used simply as a model, or whether this particular museum was selected especially for initial help, or, indeed, whether there is a combination of both these factors, is of no consequence. The legislation is applicable to any institution which can meet the specifications, and plaintiff has not produced any proof that the Museum of Modern Art is the only institution which can ever do so.
Courts are required to exercise a large measure of restraint when considering highly intricate and imaginative schemes for public financing or for public expenditures designed to be in the public interest. Some may be highly
There is a simple, but well-founded, presumption that an act of the Legislature is constitutional and this presumption can be upset only by proof persuasive beyond a reasonable doubt (Montgomery v Daniels, 38 NY2d 41; Matter of Malpica-Orsini, supra, at p 570). As noted above, there just is no such proof in this case and, indeed, there is no indication in the majority opinion below that this presumption of validity was given any effect or even recognized.
There is also, of course, a further presumption, long recognized by this court, that the Legislature has investigated and found facts necessary to support the legislation (I. L. F. Y. Co. v Temporary State Housing Rent Comm., 10 NY2d 263, app dsmd 369 US 795) as well as the existence of a situation showing or indicating its need or desirability (Matter of Van Berkel v Power, 16 NY2d 37, 40).
Any argument that the enactments under attack are invalid must fail. There is ample precedent to support this sort of financing effort, especially with respect to the device of having a public benefit corporation (in this case the trust) utilize the power of condemnation, and legitimize the tax
With respect to the question of condemnation, it is unquestioned that a public benefit corporation can condemn property for a public use, if authorized by statute (Matter of Keystone Assoc. v Moerdler, 19 NY2d 78). Of interest, such power was given to the Port Authority in Courtesy Sandwich Shop (supra) where, as already noted, the use to which the condemned property would be put would be partially revenue producing; and in that case this court wrote: "Nor can it be said that the use of property to produce revenue to help finance the operation of those activities that tend to achieve the purpose of the project does not itself perform such a function, provided, of course, that there are in fact such other activities to be supported by incidental revenue production” (12 NY2d, at p 389).
Surely, if the State Legislature and a responsible unit of local government (here the Board of Estimate) believe that the preservation of cultural institutions is in the public interest in that visitors will be produced in the city in which they are located, and benefit all who attend, city residents and visitors from throughout the State alike, legislation is legitimate which thus subsidizes the institutions. The method here used cannot be said to run afoul of the Constitution. The fact that the Board of Estimate approval was required does not render the CCRA a special law. The Legislature can, without creating a special or local law, provide that a general law will not become effective until approved at the local level (Bank of Chenango v Brown, 26 NY 467; Corning v Greene, 23 Barb 33), although such approval is not necessary.
The traditional and legal test for a local law is whether the statute affects the "property, affairs or government” of a governmental subdivision of the State (NY Const, art IX, § 2), but that terminology does not prohibit the State from legislating with respect to these concerns (Wambat Realty Corp. v State of New York, 41 NY2d 490, 494; Adler v Deegan, 251 NY 467, 491, mot for rearg den 252 NY 574). As was stated in Wambat: "Thus, in the decisively enlightening case of Adler v Deegan, the court rejected a home rule challenge to the then Multiple Dwelling Law even though the
In one of the rare instances in which a statute couched in "general” language was held to be special, Judge Cardozo wrote: "We close our eyes to realities if we do not see in this act the marks of legislation that is special and local in terms and in effect. This group of conditions so unusual and particular is precisely fitted to the claimants’ case, and only by a most singular coincidence could be fitted any other” (Matter of Mayor of City of N. Y. [Elm St.], 246 NY 72, 77-78). That case involved a statute which purported to revive entitlement to condemnation awards (generally) which had been barred by the Statute of Limitations. The "class” was limited to those who could show fact situations which, however, arose out of
In summary, since the bulk of the reasons for the finding of unconstitutionality below rest on the completely unsubstantiated theory that the SCRA and the CCRA combine to form special and local legislation, such claims are completely dissipated when the claim of special or local legislation is found to have no vitality in any degree.
Accordingly, the order of the Appellate Division should be reversed, with costs, and judgment granted to appellants declaring the challenged legislation constitutional.
. This conclusion by the court below is apparently based on the following statement found later in the opinion: "Respondents, in fact, concede that only [the Museum of Modern Art] fits all the statutory eligibility criteria for a participating cultural institution.” (63 AD2d, at p 165.) It is not denied that at the present time the museum is the only institution meeting the statutory specifications. Obviously, there is no concession, however, that no other institution could ever become eligible.
. The Whitney Museum of American Art has submitted an amicus brief in which it is noted that it, together with several other named museums, "may be able to benefit from the provisions of the challenged legislation by participating and expanding their own facilities”, a point which we take note of, without giving it any conclusive effect, which is indeed unnecessary upon our analysis.
. The fact that the class may be small does not make the law special (Matter of
. It is to be noted that the Constitution does not prohibit the Legislature from acting without a home rule message on matters of State concern (Wambat Realty Corp. v State of New York, 41 NY2d 490; Adler v Deegan, 251 NY 467).
Dissenting Opinion
(dissenting). I dissent and vote to affirm.
This case provides another example of burdening New York City’s taxpayers with additional long-term financial responsibilities when the existing fiscal crisis makes it difficult for the city to meet its most basic needs. Of course, if the constitutional underpinning for the extraordinary and ingenious convoluted devices used were present, that would be the end of the matter for the courts. Ultimate questions of policy are for the Legislature as the majority opinion makes so clear. Yet the practical peril produced by constitutional error in this case should be recognized. The issues therefore are not simply legalistic.
The evil is not that the city will be supporting a valued museum, for that would not be evil at all. Had expenditures for the museum been included in the city budget, straightforwardly, and subject to review and adjustment each year, there would be no objection. The evil, instead, is that stripped of ingenious gimmickry the net result of the statutory scheme is to conceal from taxpayers, perhaps for the long future, and from those concerned with the city’s credit the permanent, unreviewable diversion of anticipated city tax revenues to the museum.
With this context in mind, the constitutional issues are addressed. In doing so, however, one should not be deceived by the "now you see it, now you don’t” sleight of hand practiced by the drafters of the challenged legislation.
The melange of other issues raised by plaintiff requires no discussion. As to those, there is agreement with the majority. In particular, it is obvious that an expansion of an important museum is a public use for which the grant of eminent domain power may be appropriate. This would be true even if the expansion were accompanied by incidental use for revenue producing purposes (see Courtesy Sandwich Shop v Port of N. Y. Auth., 12 NY2d 379, 390, app dsmd 375 US 78, mot for reh den 375 US 960). The Museum of Modern Art is a great cultural institution, and its expansion would enrich the entire State, if not the Nation. As with other great nonprofit cultural institutions, conscious public support in one legal form or another is justified.
Although the taxation article of the State Constitution was not added until 1938, the constitutional prohibition against tax exemption, except by general law, dates from 1901, when section 18 of article III (now § 17) of the Constitution was amended to provide: "The legislature shall not pass a private or local bill * * * Granting to any person, association, firm or corporation, an exemption from taxation on real or personal property.” This restriction on the legislative power was initiated by the Legislature itself, weary of the constant attempts to secure tax exemptions by private bill (3 Lincoln, Constitutional History of New York, pp 680-681; 7 New York State Constitutional Convention Committee [1938], Problems Relating to Legislative Organization and Powers, p 84).
It is not disputed that the legislative history establishes that the challenged legislation was drafted with only the Museum of Modern Art in mind. Desired was a statute that would permit the museum to use its proposed westwing expansion as a pretext for building a tax-exempt 50-story tower, with the attendant burdens on the municipal services. Forty-four sto
The challenged statutes, taken together, create the "trust for cultural resources of the city of New York”, and permit the trust, in conjunction with a participating museum, to build a facility to be used partly for museum purposes and partly for income-producing purposes. The "combined-use facility” would receive a real estate tax exemption. To qualify for participation, however, a museum must have had annual admissions of 500,000 for at least five years, and must have owned in fee for at least five years 50,000 square feet of tax-exempt real property contiguous to the museum. The Museum of Modern Art is the only institution in the City of New York that qualifies for participation. Since no legislation has been enacted creating similar trusts for any other municipality in the State, the Museum of Modern Art is the only institution in the State currently eligible to take advantage of the tax exemption.
Of course, that is as it was intended to be. The legislative history indicates unequivocally that the bills were intended to "apply to one institution and one institution only” (Transcript of Assembly Proceedings, June 29, 1976, Appendix on App, p A189). It was even argued that this limited application was a benefit, because a broader scope would make the bills an unwanted "diversion of tax money” (id., p A193).
Defendants argue that a statute does not run afoul of the constitutional limitation merely because it is applicable to a single entity. In this, they are correct. But that does not mean the Constitution may be evaded simply by writing into an exemption restrictions with no valid purpose other than to limit its application to the entity the Legislature intends to benefit.
A valid tax exemption statute would apply to a class of taxpayers. Of course, the class, in a rare case, could be a class of one, but definition of the class, whatever its size, would have to be "based on conditions common to a class and germane to the subject of the Act” (Stapleton v Pinckney, 293 NY 330, 335). There must be reasons, not just excuses, for including some taxpayers and excluding others.
Always held unconstitutional, as not general, however, have been statutes written in general terms, but so tailored to apply only to a particular private or local interest (see Stapleton v Pinckney, 293 NY 330, 334-336, supra; Matter of Mayor of City of N. Y. [Elm St.], 246 NY 72, 75-79; Matter of Henneberger, 155 NY 420, 424-428). Thus, in the Henneberger case, a highway statute was expressed in general terms, but so restricted by conditions and exclusions as to be applicable only to a particular road in New Rochelle. "[T]o call this act a general law would be absurd”, said the court, treating with the requirements of section 18 (now 17) of article III of the State Constitution (155 NY, at p 427). "That the present act is expressed in general terms is not, and should not be, decisive of the question of its constitutionality. That is a question which must be decided not by the letter, but by the spirit, of the act” (id., at p 425).
Similarly in the more recent Stapleton case, the court held invalid, as in violation of the same constitutional prohibition, an act relating to jurors in counties with a population of 200,000 to 250,000, containing a city of at least 125,000 population. The court looked past the "general” language of the act and recognized that it could apply only to the County of Albany. Citing the Henneberger case, Judge Lehman wrote that a statute could not be considered general "where attempted 'classification’ is based on conditions 'which cannot be recognized as common to a class’ and have no reasonable relation to the subject. In such case there is in truth no 'class’ created but merely identifying marks of the locality or localities for which the Legislature is enacting a special law” (293 NY, at p 335).
The Legislature was, of course, patently aware that the bill before it was to benefit only the Museum of Modern Art. As one opponent noted during Assembly debate on the bill, "I don’t object to Mr. Siegel’s bill because it tries to help our cultural institutions in the City of New York which are responsible for bringing in more business and taxes than anything else we have in the City of New York. I am opposed to the bill because it gives to one institution, an institution that is wealthy, that can function, it gives them money to expand while there are many others throughout the City of New York that are in bad financial condition also” (Transcript of Assembly Proceedings, June 28, 1976, Appendix on App, p A184). And, as the Assembly sponsor acknowledged, "[t]he purpose is to allow the real estate taxes to be used to finance the expansion of the construction of the Museum.” (Id., p A183.) It is ludicrous to argue now that it was intended to have general application.
Appellants argue that since the challenged statute creates a
True, there have been cases sustaining tax exemptions granted to property owned by public benefit corporations (see Wein v Beame, 43 NY2d 326; People ex rel. Buffalo & Fort Erie Public Bridge Auth. v Davis, 277 NY 292). But in none of those cases was the public benefit corporation set up to benefit primarily a single private institution, whether worthy as is the museum or not. More important, in none of those cases was the public benefit corporation set up as a dummy for the exclusive purpose of obtaining a tax exemption on a particular piece of property. Involved in each case was a public benefit corporation created with objectives and authority of greater breadth than the desire to benefit a single institution. The cases emphatically do not stand for the position that any legislation creating a public benefit corporation is a "general” law.
Nor is Bush Term. Co. v City of New York (282 NY 306, 317-322) of help to defendants. That case involved the tax status of real property owned by the Port Authority and used as a railroad terminal. No explicit tax exemption was granted, either by general or special law, so no question arose under the constitutional provisions litigated in the present case. Instead, in the Bush Terminal case, the issue was whether the unique nature of the Port Authority, an agency created by bi-State compact, required that its property be tax-exempt even in the absence of an explicit exemption statute (see id., at p 317).
Thus, since the challenged statutes purport to create a tax exemption by other than a general law, they should be held invalid. But the City Cultural Resources Act is invalid for another reason as well. The Legislature, in enacting the bill, by its terms a special law applying only to New York City, provided that it should not take effect unless and until it was
Not questioned is that the substance of the legislation relates to matters of State, not strictly local, concern. Museums serve an educational function, and, as with educational matters, there can be no question that support of a great museum is a matter of State concern.
At issue instead is the State’s usurpation of the local government’s prerogative to designate the local governmental body that should approve legislation that substantially affects the city’s future revenue. That the City Cultural Resources Act would have a special effect on the city cannot be disputed; the Legislature conceded as much by making enactment of the statute conditional on approval by the city Board of Estimate. In fact, the bill was defeated on the first vote taken by the Assembly, at least in part because it was believed that a home rule message was required. Only on the last day of the Legislature’s regular session was the bill passed by the Assembly, and then only after insertion of the provision requiring approval by the Board of Estimate.
Once it is decided that city approval is necessary, however, approval itself is strictly a matter of the "property, affairs or government” of the city. The city’s elected legislative body is the city council, and it should have been for the council to decide how the bill should be approved. The Legislature’s callous substitution of the Board of Estimate for the city council violates both the spirit and the letter of the home rule article. It is, in short, a gross interference with the distribution of powers in the city’s local government.
Thus, the statutory scheme is unconstitutional. But that is not the whole of it. No constitutional provision was ever created nor is it ever to be interpreted without reading into it the effect of its violation. Constitutional provisions reflect a history of experience and mistrust of transient action dictated by transient necessities which may, as in the past, engender ultimate destruction for the society it is supposed to protect.
Once the proposed apartment tower is built and the tax exemption granted, even the most serious of fiscal crises might not permit the city to re-evaluate priorities. Even now, in a time of financial difficulty for municipalities in general and New York City in particular, substantial public support for an important museum may be thought beneficial or even essential. But it should not be for the Legislature to decide, by grant of a tax exemption in violation of the State Constitution, that the museum will be entitled to priorities, hidden because not subject to review in the annual budget, over other needs in the decades to come. That, in short, is what this legislation would do. But worse, it would become a "legal” precedent.
Accordingly, I dissent and vote to affirm.
Judges Jones, Wachtler, Fuchsberg and Cooke concur with Judge Gabrielli; Chief Judge Breitel dissents and votes to affirm in a separate opinion in which Judge Jasen concurs.
Order reversed, etc.