Nextel of New York, Inc. v. Assessor of Spring Valley

OPINION OF THE COURT

Cell Towers are Taxable

The petitioner, Nextel of New York, Inc. asserts that its telecommunications equipment (Nextel’s Spring Valley communications equipment) is not taxable real property. The communications equipment consists of 12 antennae in three sectors of 4 each on top of a 110-foot-high steel water tank and are used along with two global positioning devices or timing devices to receive and transmit signals. The antennae are connected by coaxial cable to a 40,000-pound shed which sits on concrete piers buried three-feet deep on the property and attached to the piers by a series of welds to metal plates which themselves are set in the concrete blocks by means of threading rods. The antennae and coaxial cable are attached to the water tower by exothermically welded studs and metal supports (brackets and casings attached to the studs). All of the equipment can be removed within two days and it would take up to five days “for the final.”^[1]

The Nextel License Agreement

In a license agreement dated June 14, 1999,^[2] United Water New York Inc. (licensor), the owner of the water tower, granted Nextel (licensee) “a non-exclusive and personal right ... to erect, maintain and operate on the Tank Site radio communications facilities . . . utility lines, transmission lines . . . equipment shelters, electronic equipment, radio transmitting and receiving antennas and supporting equipment.”^[3] The term of the license agreement is for five years and “four (4) renewal terms of five (5) years each unless Licensee terminates,”^[4] with an annual licensee fee of $30,000 for the first year which shall increase 4% each subsequent year.^[5] Should Nextel terminate the license agreement during the first 15 years it must pay licensor

Nextel asserts that its license agreement describes its communications equipment as “personal property” and not as “fixtures” (e.g., “Licensor . . . agrees that [none of Nextel’s communications equipment shall] be considered as being affixed to . . . Tank Site”;^[9] “Licensee’s Equipment which [is] deemed Licensee’s personal property and not fixtures”).^[10] Of the 1,950 wireless communications facilities owned by Nextel in the States of New York, Connecticut and New Jersey only a few have actually been removed, primarily, because of condemnation proceedings brought by state or municipal agencies and a landlord’s insistence upon younger leases.*^[11]

Tax Assessments Increased and Challenged

After Nextel’s Spring Valley communications equipment was installed (authorized by a special use permit, a building permit and a certificate of use) the respondent Assessor, William R. Beckmann, by notice of change in assessment dated February 1, 2001,^[12] increased the property’s assessment from $200,000 to $400,000 which was continued in 2002 and reduced to $350,000 in 2003.^[13] Although Nextel’s counsel protested the 2001 assessment by letter^[14] dated October 11, 2001 no formal complaint was filed with the Board of Assessment Review as it was for the 2002 and 2003 assessments. Nextel filed before this court a notice of petition for review under RPTL article 7 for years 2002 and 2003 and within the context of the 2002 petition an application under RPTL article 5 for the refund of illegal taxes arising from the 2001 assessment. The agreed upon equalization rates are 13.59% for 2001, 12.40% for 2002, and 10.34% for 2003.

The taxability of Nextel’s Spring Valley communications equipment though still unsettled^[15] can be resolved by reference to RPTL 102 (12) (i)^[16] and its legislative history and, alternatively, to the common law of fixtures.^[17] RPTL 102 (12) (i) provides, in relevant part, that “real property” “[w]hen owned by other than a telephone company” (see RPTL 102 [12] [d]) shall be defined as

“all lines, wires, poles, supports and inclosures for electrical conductors upon, above and underground used in connection with the transmission or switching of electromagnetic voice, video and data signals between different entities separated by air . . . except that such property shall not include: . . . (D) such property used in the transmission of news or entertainment radio,[^[18] ] television or cable television signals for . . . exhibition to the public . . . .”

The 1987 Amendment and Deductive Reasoning

Reasoning by deduction,^[19] the Travis court (at 702) held that

“The 1987 amendment eliminated from the definition of taxable realty ‘telecommunications equipment,’ i.e., equipment used for the transmission or switching of electromagnetic voice signals, which is owned by other than a telephone company . . . limited such definition to ‘lines, wires, poles, supports and inclosures for electrical conductors upon, above and underground used in connection with the transmission or switching of . . . signals.’ ”

The Travis court then found that Nextel’s Binghamton communications equipment was the very same “telecommunications equipment” exempted from taxation under RPTL 102 (12) (i) and, further, rejected the argument “that the coaxial cable should be construed as ‘lines’ or ‘wires,’ the antennae as ‘poles’ and the racks in the basement as ‘supports [or] inclosures for electrical conductors.’ If equipment such as that involved in this case should be assessable as real property ‘the remedy is legislative rather than by strained or distortive judicial decisional analysis’ ” (Travis, supra, 183 Misc 2d at 702 ).

Stated, simply, Nextel would like its Spring Valley communications equipment treated by this court as its Binghamton communications equipment was treated by the Travis court.

The Legislative History of the 1987 Amendment

As it evidently failed to do in Travis, Nextel has failed herein to produce and discuss the legislative history underlying the 1987 amendment. Assuming arguendo an ambiguity in statutory language (e.g., are coaxial cables “lines” or “wires,” are antennae “poles,” are sheds and racks “inclosures for electrical

Taxation of Telephone Equipment From End-To-End

This court has obtained the Bill Jacket for chapter 416 of the Laws of 1987^[21] which, amongst other things, changed the language of RPTL 102 (12) (d) and added a new section 102 (12) (i).^[22] Chapter 416 was enacted in 1987 during the ongoing deregulation of the telephone and telecommunications industry

“The lines, wires, poles and ‘appurtenances’ which made up the integrated telephone system were classified as real property for which the telephone company was taxed . . . even though, under common law, the equipment was a removable fixture which would be classified as personalty and even though it was located on the customer’s premises” (AT&T, supra, 137 AD2d at 9 [citations omitted]).

“The telephone company is liable for taxes assessed upon real property, not only as such property is traditionally conceived but also with respect to the various components which make up the supply system and the special franchises required for the system’s operations” (Matter of Crystal v City of Syracuse, 47 AD2d 29 , 31 [4th Dept 1975], affd 38 NY2d 883 [1976]).

Chapter 416 sought to level the competitive playing field in the telecommunications industry by phasing out all real property taxes on COE and CPE (CPE being referred to as “telecommunications equipment”),^[27] whether owned by “a ‘telephone company’ . . . subject to regulation by the public service commission which provides . . . non-cellular switched local exchange telephone service” (RPTL 102 [12] [d]) or owned “by other than a telephone company” such as Nextel herein and in Travis (RPTL 102 [12] [i]).

This was to be accomplished by (1) “repeal(ing) paragraph (d) of subdivision 12 of section 102 of the Real Property Tax Law and replac(ing) it with a new paragraph (d) which would define as taxable real property the outside plant {lines, wires and poles, etc.) of local telephone companies” and (2) “add(ing) a new paragraph (i) to RPTL, section (102) (12) which would define as taxable real property the telecommunications outside plant of entities other than local telephone companies except that used for fire and burglar alarms, news wire services or new[s] or entertainment radio, television or cable television.”^[28] In essence, all telecommunications equipment between the COE and CPE was to be taxable real property described in 1987 terminology^[29] as “all lines, wires, poles, supports and inclosures for electrical

that cell to take the call. The MTSO communicates with your phone over the control channel to tell it which frequencies to use, and once your phone and the tower switch on those frequencies, the call is connected. You are talking by two-way radio to a friend! As you move toward the edge of your cell, your cell’s base station notices that your signal strength is diminishing. Meanwhile, the base station in the cell you are moving toward . . . sees your phone’s signal strength increasing. The two base stations coordinate with each other through the MTSO, and at some point, your phone gets a signal on a control channel telling it to change frequencies. This hand off switches your phone to the new cell.”^[30]

Common-Law Fixtures

Alternatively, Nextel’s Spring Valley communications equipment may be taxable as common-law fixtures. Factors to be considered in making such a determination are discussed in Matter of Metromedia, Inc. v Tax Commn. of City of N.Y. ( 60 NY2d 85 , 91 [1983] [outdoor advertising signs attached to steel frames welded to designated structures of elevated railroad stations; “(t)o meet the common-law definition of fixture, the personalty in question must: (1) be actually annexed to real property or something appurtenant thereto; (2) be applied to the use or purpose to which that part of the realty with which it is connected is appropriated; and, (3) be intended by the parties as a permanent accession to the freehold”]; Matter of Consolidated Edison Co. v City of New York, 44 NY2d 536 , 538, 542 [1978] [“four barges on which there are mounted gas turbine power plants designed to generate electric power” moored at Con Ed pier; “(h)ere the question must be resolved by reference to the degree of physical and functional connection to the land-based station, as well as by reference to the intention of the parties”]; South Seas Yacht Club v Board of Assessors, 136 AD2d 537 , 538 [2d Dept 1988] [houseboats and barges docked at marina; “(although all three (Metromedia) factors should be considered, the definite tendency is to accord less significance to the manner of annexation and more to the intention of the person making

Nextel’s Telecommunications Equipment is a Fixture

Nextel’s Spring Valley communications equipment is a cell tower base station and its antennae, coaxial cables and a 40,000-pound communications shed are sufficiently “permanent” to be common-law fixtures, notwithstanding that they may be removed within two to five days and very few Nextel cell tower base stations have actually been disassembled (Matter of Metro-media, supra, 60 NY2d at 89 [“Although the frames can be removed within one day, it appears that nearly all of the displays involved here have remained attached . . . for the 15-year period since their installation”]; Matter of Consolidated Edison Co., supra, 44 NY2d at 538 [8 to 12 hours to disconnect barge-mounted power plants with little or no discernable damage to the water tower]; South Seas Yacht Club, supra, 136 AD2d at 538 [“ ‘The permanency of the attachment does not depend so much upon the degree of physical force with which the thing is attached as upon the motive and intention of the party attaching it’ ”]; Matter of Capri Mar. & Pool Club, supra, 84 Misc 2d at 1100 [“the movability of the barge without injury to the upland is not ... a relevant circumstance where, as here, economic factors, physical considerations, as well as the conduct of the parties, negate transient and temporary use”]; Description of Local Taxes and Fees in New York State, The Real Property Tax^[31] [“The test is not simply whether the structure can be removed without material damage to it or to the realty to which it is affixed. Rather, the test is whether the structure remains attached to the realty in the normal course of events for its useful life”), or that the lease is for five years renewable four more times at Nextel’s option for a total of 25 years, including a 15-year liquidated damages provision (Matter of Metromedia, Inc., supra, 60 NY2d at 88 [10-year lease]; Matter of Capri Mar. & Pool Club, supra, 84 Misc 2d at 1096, 1099 [10-year lease]), or that self-serving language in a license agreement describes the equipment as personal property and not fixtures (South Seas

Failure to Submit an Appraisal Warrants Dismissal

Although petitioner disputes the respondent’s assessments using its own version of a “Cost Approach”^[32] while ignoring other and, perhaps, more appropriate valuation methods such as the comparable sales method and the capitalization of income method (see Matter of FMC Corp. [Peroxygen Chems. Div.] v Unmack, 92 NY2d 179 , 189-191 [1998]; Appraisal Institute, The Appraisal of Real Estate, parts IV¡ V [12th ed]) the petitioner has failed to submit^[33] an appraisal which pursuant to 22 NYCRR 202.59 (g) (2) must “contain a statement of the method of appraisal relied on and the conclusions as to value reached by the expert, together with the facts, figures and calculations by which the conclusions were reached.” Petitioner’s failure to file an appraisal not only prevents it from rebutting the presumption of the assessment’s validity (see below) but is itself a separate ground for dismissal of the subject petitions (Matter of Taylor Bldrs. v City of Saratoga Springs Bd. of Assessment Review, 263 AD2d 829 , 830-831 [3d Dept 1999] [failure to file appraisal report pursuant to 22 NYCRR 202.59 (g) (1) (i) warrants dismissal of petition; an opinion letter insufficient as an appraisal pursuant to 22 NYCRR 202.59 (g) (2)]).

Failure to Rebut the Presumption of Validity

The respondent’s assessments herein are presumptively valid but may be rebutted at trial with credible and competent evidence in the form of an appraisal and the testimony of a certified appraiser. Since the petitioner provided this court with neither, its petitions must be dismissed. (Matter of FMC Corp., supra, 92 NY2d at 191 ; Matter of Niagara Mohawk Power Corp., supra, 92 NY2d at 196 [“substantial evidence will most often consist of a detailed, competent appraisal based on standard, ac