STATE CONSTITUTION, ART. I, §7(a), ART. VIII, §1; PUBLIC
AUTHORITIES LAW, §2045-a, et seq.: (1) The prohibition
against gifts and loans does not apply to the Onondaga County
Resource Recovery Agency [OCRRA], a public benefit corporation.
The county, however, is precluded by this prohibition from
reimbursing property owners for devaluation of their property
resulting from the operation of facilities by OCRRA. (2) If
the county were to exercise its powers of eminent domain on
behalf of the OCRRA or the county's role in the siting of OCRRA
facilities were found to be in the nature of a compensable
taking, however, the county could compromise claims against it
in the nature of inverse condemnation. (3) The OCRRA is
neither expressly nor implicitly authorized to establish a
program to reimburse property owners for devaluation of their
property resulting from operation of the Agency's facilities,
in the absence of claims against it for the operation of those
facilities as a nuisance. In the event that claims against the
OCRRA lie for operation of the facilities as a nuisance, OCRRA,
pursuant to its authority to settle claims against it, could
agree to reimburse property owners for devaluation of their
property attributable to such operation.
You ask whether, in view of the gift prohibition of article VIII, §1 of the State Constitution, the County of Onondaga ("the county") or the Onondaga County Resource Recovery Agency ("OCRRA"), which was created by title 13-B of article 8 of the Public Authorities Law (§2045-a et seq.), may establish a "property stabilization program". The purpose of the program would be to reimburse owners of real property for any devaluation of their properties which may occur as the result of OCRRA's operation of a nearby waste-to-energy facility and a landfill. The proposed program would require OCRRA or the county to pay an eligible property owner who sells his property the difference between the selling price and the "fair market value" computed as if the facilities were not located in the area. If the property is not sold within a specified period of time, OCRRA or the county would purchase the property from the owner at the predetermined "fair market value". You note that OCRRA would derive revenues to fund the program from tipping fees and energy sales.
Article VIII, §1 of the State Constitution prohibits counties, cities, towns, villages and school districts from making gifts or loans of "any money or property to or in aid of any individual, or private corporation or association". These provisions are intended to curb raids on the public purse for the benefit of favored individuals or enterprises furnishing no corresponding public benefit or consideration (Matter of Mahon v Board of Education of the City of New York, 171 NY 263; Teachers' Ass'n Central High School District No. 3 v Board of Education Central High School District No. 3, Nassau County, 34 AD2d 351, 312 NYS2d 252; see also 1986 Opns St Comp No. 86-70, p 109).
Payments to an individual or private entity, even if in furtherance of a public purpose, will violate the gift and loan provision of the Constitution unless there is some legal obligation for a municipality to make such payments to the private person or entity (Antonopoulou v Beame, 32 NY2d 126, 343 NYS2d 346). This legal obligation may be statutory or may be pursuant to an appropriate contractual obligation undertaken in good faith (see, Piro v Bowen, 76 AD2d 392, 430 NYS2d 847, lv to app den, 52 NY2d 702, 437 NYS2d 1025). Therefore, even if a payment to a private individual or entity is deemed to further a public purpose, such as ensuring the availability of sites for landfills, it may not be accomplished by a gift made in violation of article VIII, §1 of the State Constitution.
In our opinion, based on the foregoing prohibition contained in article VIII, §1, the county may not make the proposed payments to private individuals or entities unless the county determines that it will receive some consideration from them and that the payments made by the county for such consideration will further a proper county purpose. In our view, given the nature of the program, the most likely basis for such a payment would be a determination by the county that its activities in connection with the landfill may cause it to have liability to adjacent property owners and that the payments under the program will relieve the county of this potential liability (see Public Authorities Law, §2045-d, authorizing the county to condemn real property for corporate purposes of OCRRA; Public Authorities Law, §2045-e(3)(ii), providing that the acquisition by OCRRA of any real property designated as the site for any facility shall be subject to approval of the county legislature).
The courts have recognized that a property owner may be entitled to compensation for damage to his property caused by the location of a municipal facility. It has been noted that:
New York courts "have recognized inverse condemnation as a procedural vehicle for granting damages to an injured party where an entry [sic] cloaked with the powers of eminent domain has so interfered with the property rights of a landowner that it amounts to a compensable taking" (Evans v City of Johnstown, 96 Misc 2d 755, 759, 410 NYS2d 199, 200). As the court in the Evans case noted, however, "[e]ssential to the application of this remedy is a finding that there has been a taking in the constitutional sense" (96 Misc 2d at 760, 410 NYS2d at 201).
In this regard, we note that although at least one New York appellate case has recognized that the market value of real property may be "seriously affected by its location contiguous to [a] landfill site ..." (Vim Construction Co., Inc v Board of Assessors of Town of Huntington, 82 AD2d 537, 544, 442 NYS2d 533, 537), a "diminution [in market value] does not in and of itself constitute an unlawful and unconstitutional taking of property without compensation [citations omitted]" (Grinspan v Adirondack Park Agency, 106 Misc 2d 501, 505, 434 NYS2d 90, 92). As the United States Supreme Court has said, "[a] reduction or increase in the value of property may occur by reason of ... the beginning or completion of a [municipal] project. Such changes are incidents of ownership. They cannot be considered as a 'taking' in the constitutional sense" (Danforth v United States, 308 US 271, 285, 60 S Ct 231, 236, 84 L Ed 240).
However, where there has been "a physical ouster of the owner, a legal interference with the physical use, possession or enjoyment of the property or a legal interference with the owner's power of disposition of the property" (see City of Buffalo v J.W. Clement Co., 28 NY2d 241, 255, 321 NYS2d 345, 357, rearg den, 29 NY2d 640, 324 NYS2d 462), a claim for inverse condemnation may lie. For example, a county operation of a sewage treatment plant was found to be "an appropriation (on occasion referred to as 'inverse condemnation') by the defendant of an interest in the plaintiff's property of being able to waft obnoxious odors upon and over the said premises" while the condemnation power was not expressly used, the result is the same ... (Tom Sawyer Motor Inns, Inc. v County of Chemung, 39 AD2d 4, 6, 331 NYS2d 154, 156, affd 32 NY2d 775, 344 NYS2d 958; see also, Evans v City of Johnstown, supra).
Thus, if the county were to exercise its power of eminent domain on behalf of OCRRA for the purpose of acquiring a site for the OCRRA localities, or if its role in approving the site of the facilities had the same effect, that is, if such action resulted in a legal interference with the physical use, possession or enjoyment, or the power to dispose, of neighboring property, the owners of those properties might have a cause of action in inverse condemnation against the county for which the county would be liable to provide just compensation. Since the county will not be involved in the operation of the facilities, it appears that no action for damages arising out of the operation of a nuisance (see infra) would lie against the county.
Payments in settlement of a good faith claim against a municipality would not contravene article VIII, §1 (see, e.g., Ingram v Boone, 91 AD2d 1063, 458 NYS2d 671; 1989 Opns St Comp No. 89-50, p 112). On the other hand, payments to landowners under circumstances where there was no contractual or other legal basis for payment would be no more than gifts which are prohibited by this constitutional provision.
We recognize that the courts have also held that in proper circumstances, a municipality may recognize moral obligations or equitable claims where there is no legal obligation to pay, without running afoul of article VIII, §1 (see, e.g., Ausable Chasm Co. v State, 266 NY 326; City of Rochester v Chiarella, 98 AD2d 8, 470 NYS2d 181, affd 63 NY2d 857, 482 NYS2d 270). Although the County Law, unlike the Village Law (§4-412) and the General City Law (§20), contains no authorization to pay equitable claims, it is our opinion that a county, by local law, may authorize the payments of claims which are determined to be just and equitable (see Municipal Home Rule Law, §10[ii][a]; 1986 Opns St Comp No. 86-42, p 69).
The Appellate Division, in Chiarella, supra, however, described the circumstances in which a claim is equitably payable as follows:
Based on this analysis, we do not believe that payments under the program would be recognition of a moral obligation or an equitably payable claim unless it were determined that the payments were more than a "simple gift or gratuity". Therefore, the principles discussed above regarding article VIII, §1 would still have application.
In considering whether OCRRA may make payments pursuant to a property stabilization program, we begin by noting that the constitutional prohibition against the gift or loan of public money to or in aid of private persons or entities contained in article VIII, §1 applies only to the municipal corporations enumerated therein and school districts. The analogous prohibition in article VII, §8 only applies to gifts and loans by the State.
The OCRRA is both a "public benefit corporation" (Public Authorities Law, §2045-c) and a "public corporation" (General Construction Law, §65[b]). Although public corporations, such as OCRRA, are created by special act of the Legislature (see, NY Constitution, article X, §5; Plumbing, Heating, Piping and Air Conditioning Contractors Assoc., Inc. v NYS Thruway Authority, 5 NY2d 420, 185 NYS2d 534), they enjoy "a distinct connotation of separateness and judicial distinction from the state, its political subdivisions and municipal corporations [citations omitted]" (Bell v Manhattan and Bronx Surface Transit Operating Authority, 21 Misc 2d 162, 163, 364 NYS2d 274, 275-276). Accordingly, inasmuch as a public benefit corporation is neither the State nor one of its political subdivisions or municipal corporations, the constitutional prohibitions against gifts or loans do not apply to OCRRA.
Although the agency is not barred from making a gift by the State Constitution, as a creature of statute, a public authority such as the OCRRA has only those powers expressly or by necessary implication conferred upon it by its enabling act (see, e.g., Village of Boonville v Maltbie, 272 NY 40; Community Board No. 4 v Board of Estimate of City of NY, 88 AD2d 832, 451 NYS2d 140, affd 57 NY2d 846, 455 NYS2d 768). Thus, the authorization, if any, for the OCRRA to implement this program must be found in the legislation which created it.
The primary purpose of the OCRRA is "[t]o receive, transport, process, dispose of, sell, store, convey, recycle, and deal with ... solid waste and any products or by-products thereof ... " (Public Authorities Law, §2045-e). In addition, it may "assist in the planning, development and construction of and the financing of the cost of any solid waste management-resource recovery facility to be located in the county ..." (§2045-e), and it may "plan, develop and construct projects and ... pay the cost thereof ..."( §2045-e). "Cost" for these purposes is defined to include "the cost of construction, the cost of the acquisition of all ... real property ..., the cost of demolishing, removing or relocating any buildings or structures on lands so acquired, including the cost of acquiring any lands to which such buildings or structures may be moved or relocated ..." (§2045-b).
The agency is also generally empowered "[t]o acquire in the name of the agency ... [real] property ... for its corporate purposes" (Public Authorities Law, §2045-e). In addition, inter alia, the OCRRA has the general authority "[t]o sue and be sued" (id., §2045-e), "[t]o make contracts ..." (id., §2045-e), to "settle or adjust all claims in favor of or against the agency" (id., §2045-o) and to "do all things necessary or convenient to carry out the powers expressly given in this title" (id., §2045-e).
While OCRRA may pay costs associated with the acquisition or construction of the facility, we find nothing in the statute which suggests that OCRRA is empowered to compensate adjacent property owners for diminution in the market value of their properties as a result of the nearby operation of the landfill. The statute appears to recognize that the location of a landfill may adversely affect surrounding properties, but provides only that OCRRA must consider land use character (Public Authorities Law, §2045-e[iii]).
As to whether participation in the program is authorized as "convenient" to carrying out the powers expressly given to the OCRRA (Public Authorities Law, §2045-e), the word "convenient" must be read in connection with the general purposes for which OCRRA was formed and its stated functions and duties (Cuglar v Power Authority, 4 Misc 2d 879, 163 NYS2d 902, 921, affd 4 AD2d 801, 164 NYS2d 686, affd 3 NY2d 1006, 170 NYS2d 341). Virtually identical statutory language applicable to another public authority was construed in Civil Service Forum v NYC Transit Authority, 4 AD2d 117, 163 NYS2d 476, affd 4 NY2d 866, 174 NYS2d 234, to authorize a public authority to voluntarily enter into a collective bargaining agreement with its employees. There is no judicial decision, however, construing similar language to authorize a program analogous to the one proposed. Therefore, in the absence of express statutory authority, we are unable to conclude that OCRRA is authorized to undertake the program.
Of course, as noted above with respect to the county, if property owners have good faith claims against OCRRA, there is a legal basis for making payments to such property owners pursuant to OCRRA's authority to settle claims against it (Public Authorities Law, §2045-o). In this regard, we note that it has been held that a governmental function, such as the operation of a solid waste facility, may not be exercised in a manner which constitutes an actionable nuisance to adjacent property (Nicoll v President and Trustees of Village of Ossining, 128 Misc 848, 220 NYS 345, 348; Melker v City of New York, 190 NY 481; Storm v City of New York, 135 Misc 622, 238 NYS 143; 52 ALR2d 1134). On the other hand, unlike many other public authorities established for the same or similar purposes, OCRRA does "not have the power of eminent domain" (Public Authorities Law, §§2045-c[i]; cf., e.g., Public Authorities Law, §§2041-d; 2046-f; 2048-c; and 2049-d). Thus, it is clear that, unlike the county, no claim in inverse condemnation would lie against OCRRA. "The remedy of inverse condemnation, by the very premise which gives rise to it, is available only as against defendants who possess the power of eminent domain" (3 Nichols On Eminent Domain, §8.1[a], p 8-39; see also, Tuffley v City of Syracuse, 82 AD2d 110, 442 NYS2d 326; 51 NY Jur 2d, Eminent Domain, §464, p 679).
August 15, 1991