97 A.D.2d 917 | N.Y. App. Div. | 1983
Appeal from an order of the Supreme Court at Trial Term (Ellison, J.), entered November 17, 1982 in Chemung County, which granted petitioner’s application, in a proceeding pursuant to article 7 of the Real Property Tax Law, to, inter alia, declare petitioner’s properties tax exempt pursuant to the Public Housing Law and cancel taxes assessed against such properties. Petitioner Riverview Apartments Company (Riverview) is a partnership, one third of which is owned by Paul Burke. In 1976, the Elmira Urban Renewal Agency named Paul Burke a preferred developer for the Riverview Apartments project, a proposed low-income federally subsidized housing development under section 8 of the United States Housing Act of 1937 (US Code, tit 42, § 1437f), enacted in 1974, which authorized assistance payments directly to private developers (88 US Stat 662). The Elmira Housing Authority (authority) formed a subsidiary, the Elmira Housing Development Corporation, to issue bonds to secure a mortgage and provide necessary capital for construction. Burke maintained at trial that the agency director, the city tax assessor and the city manager promised him an assessment which would result in taxes of $25,000 to $30,000 per year. The prospectus which accompanied the public sale of bonds projected taxes of $30,000 per year. The city manager, who was the only one of the three city officials to testify at trial, denied knowledge of any such arrangement. On March 4, 1978, Riverview contracted for the project’s construction. Several days thereafter, Riverview entered into a management agreement with Burke Rental Corporation, owned by Paul Burke and his wife, for management of the project. The bonds for the project were sold in April, 1978. Late in 1978, Burke learned that the city intended to tax the project at $75,000 to $80,000 a year. Burke then arranged with George Bragg, then chairman of the authority, who is now deceased, to have Riverview lease the project to the authority for 30 years in order that the project qualify for tax exemption under subdivision 3 of section 52 of the Public Housing Law. To qualify for tax exemption, a project must be leased by a housing authority for a term of not less than 10 years. The subject lease provided that, prior to its commencement, the parties would execute an attached management contract. The simultaneously executed management contract provided that Burke Rental Corporation would serve as management agent for the project for a 10-year term with two 10-year renewable options. Paragraph 14 of the lease required Riverview to obtain the written consent of three entities, the First National Bank of Atlanta as trustee of the bond proceeds, the Elmira Housing Development Corporation as issuer of the bonds, and the Federal Department of Housing and Urban Development, before the lease could commence. The authority approved the documents after review by counsel and, according to Burke, refused the opportunity to take over the project management. In 1979, the City of Elmira rejected a claim for