NO. HEB CV 11-6027305S 7 STATE OF CONNECTICUT BIRMINGHAM UTILITIES, INC. 7 SUPERIOR COURT v. : JUDICIAL DISTRICT OF NEW BRITAIN TOWN OF SEYMOUR A APRIL 28, 2016 Memorandum of Decision Plaintiff Birmingham Utilities, Inc., appeals from the decision of the board of assessment appeals of the defendant town of Seymour (town) approving the town’s assessment and taxation of certain property and equipment used by the South Central Regional Water Authority (authority) in the provision of water to the region. The plaintiff contends that the property is exempt from assessment and taxation under a special act. The court decides that the plaintiff does not qualify for the tax exemption. 7 After a court trial, the court finds the following facts. The authority is a nonprofit public corporation created by Special Act 77-98 “for the primary purpose of providing and assuring the provision of an adequate supply of pure water and the safe disposal of wastewater at reasonable cost within the South Central Connecticut Regional Water District. . ..” Special Acts 1977, No. 77-98, § | (the act). The town is within this regional district, which consists of New Haven County towns. Under § 21 (a) of the act, the authority and its subsidiary corporations are exempt from taxes on. the properties acquired by them or under their jurisdiction, but must instead magke payments in lieu of taxes (PILOT payments) in the same amount that they would otheryise#ay 391440 oe nm Py > 3 = S ataxes.! Towns in the district must assess land owned by the authority or a subsidiary corporation as if the land were farm land, forest land, open space, or maritime heritage land under the reduced rate provisions of General Statutes § 12-632 Section 21 (a) contains an exclusion for “any improvements made to or constructed on any such real property by the authority or such subsidiary corporation . ...” The town does not dispute that this exclusion is not only from PILOT payments but also from taxes. In 2010, the plaintiff constructed an addition to previously existing buildings on property that it owns at the Seymour Wellfield, which is located at 151 Roosevelt Drive in the town (subject parcel). The wellfield contains wells and water pipes. ‘The addition is a ten by fourteen foot masonry building. It houses an electrical transfer switch that can change the wellfield from utility power to generator power and a distribution panel that more specifically controls the flow 'Section 21 (a) provides in part: “Neither the authority nor a subsidiary corporation shall be required to pay taxes or assessments upon any of the properties acquired by it or under its jurisdiction, control or supervision, provided in lieu of such taxes or assessments the authority shall make annual payments to each municipality in which it or a subsidiary corporation owns property related to the water supply system equal to the taxes which would otherwise be due for the property of the authority or the subsidiary corporation in such municipality, excluding any improvements made to or constructed on any such real property by the authority or such. subsidiary corporation, provided land owned by the authority or a subsidiary corporation related {o the water supply system shall be assessed in accordance with section 12-63 of the general statutes ....” 2Section 12-63 (a) provides: “[t]he present true and actual value of land classified as farm land pursuant to section 12-107c, as forest land pursuant to section 12-1074, as open space land pursuant to section 12-107e, or as maritime heritage land pursuant to section 12-107g shall be based upon its current use without regard to neighborhood land use of a more intensive nature, provided in no event shall the present true and actual value of open space land be less than it ‘would be if such open space land comprised a part of a tract or tracts of land classified as farm land pursuant to section 12-107e. The present true and actual value of all other property shall be deemed by all assessors and boards of assessment appeals to be the fair market value thereof and not its value at a forced or auction sale.”of electricity. For purposes of the 2010 grand list, the town determined that the value of the building itself was zero but that the value of the equipment inside it was $237,500, which it classified as personal property. The authority objected to the classification, but the town nonetheless added approximately $5,740 to the plaintiff's personal property taxes to reflect the value of the equipment. The town also added a penalty, which it claims was required by law, for the plaintiff's failure to declare the property on its personal property declaration. ‘The authority paid the plaintiff's bill under protest and petitioned to the board of assessment appeals for the town.? The board declined to change the assessment. Similar events took place for the grand list of years 2011 through 2014.4 RWA2I, Ltd., f/k/a BIW Limited, a subsidiary of the authority, filed this suit in September, 2011 concerning the 2010 grand list. The plaintiff amended the suit in 2012 to add claims conceming the 2011 grand list. After the town filed a motion to dismiss, the plaintiff, with the permission of the court, filed a second amended complaint that substituted Birmingham Utilities, Inc., as the named plaintiff and added challenges to the assessments on the grand lists of 2012, 2013, and 2014. The amended complaint raised claims of illegal and excessive assessment ‘under General Statutes §§ 12-117a and 12-119. At oral argument, the plaintiff withdrew the § 12- 117a claim, leaving the § 12-119 claim as the remaining one before the court.> The town has routinely sent the bills to the plaintiff, but the bills have been paid on the checks of the authority. (Exs. 14, 18.) “The town depreciated the assessed amounts by approximately 5% each year. SGeneral Statutes § 12-119 provides for a remedy when an assessment was “manifestly excessive and could not have been arrived at except by disregarding the provisions of law ....” 3I The plaintiff argues that the 2010 addition and the equipment contained inside constitute “improvements made to or constructed on any such real property by the authority or such subsidiary corporation ....” under section 21 (a) of the act and therefore are exempt from both taxation and PILOT payments. The town’s principal defense is that the plaintiff is not a “subsidiary corporation” within the meaning of the act. Section 2 of the act defines “subsidiary corporation” as “a corporation organized under the general statutes or by special act which owns or operates all or part of a water supply or a wastewater system within the district and all of the voting stock of which is owned by the Authority.” Special Acts 1977, No. 77-98, § 2. ‘There is no dispute that the plaintiff is a “a corporation organized under the general statutes or by special act which owns or operates all or part of a water supply or a wastewater system within the district ....” The dispute instead centers on whether the plaintiff is a corporation “all of the voting stock of which is owned by the Authority.” ‘The parties stipulated to the following relevant facts, The plaintiff has been the record owner of the subject parcel since 1993. In January, 2008, the plaintiff became a wholly-owned subsidiary of RWA21, Ltd. RWA21, Ltd. is a wholly owned subsidiary of the authority. From January, 2008 until the present, RWA21, Ltd. has owned 100% of the voting stock in the plaintiff, “Cases in this category must contain allegations beyond the mere claim that the assessor overvalued the property. [The] plaintiff... . must satisfy the trier that [a] far more exacting test hhas been met: cither there was misfeasance or nonfeasance by the taxing authorities, or the assessment was arbitrary or so excessive or discriminatory as in itself to show a disregard of duty on their part.” (Internal quotation marks omitted.) Redding Life Care, LLC v. Redding, 308 Conn. 87, 121, 61 A.3d 461 (2013).while the authority has owned 100% of the voting stock in RWA2I, Ltd ‘The plaintiff argues that it meets the statutory definition of “subsidiary corporation” because the authority is the indirect owner of the plaintiff and the definition does not limit, ownership to direct ownership. Similarly, it posits that the purpose of the statute is to address control of the subsidiary and, without dispute, the authority controls the operations of the plaintiff. The problem for the plaintiff is that the statutory clauses in question, which address “improvements made to or constructed ‘on any such real property by the authority or such subsidiary corporation,” and which define “subsidiary corporation” to refer to an entity “all of the voting stock of which is owned by the Authority,” are exemptions from taxation and PILOT payments, It is a “settled rule of law that statutes which exempt from taxation are to be strictly construed against the party claiming an exemption. .. . Exemptions, no matter how meritorious, are of grace, and must be strictly construed. They embrace only what is strictly within their terms.” (Citations omitted; internal quotation marks omitted.) H.O.R.S.E, of Connecticut, Inc. v. Washington, 258 Conn, 553, 560, 783 A.24 993 (2001). Courts must resolve any ambiguity in the statutory formulation of an exemption against the taxpayer. See Common Fund v, Fairfield, 228 Conn. 375, 380-81, 636 A.2d 795 (1994), Under this rule of strict construction, the court cannot interpret the phrase “owned by the Authority” to include the word “indirectly” so that the phrase actually reads “indirectly owned.” Similarly, the rule of strict construction prohibits an expansive definition of the word “owned” to mean “controlled.” Further, the rule applicable to RWA21, Lid,, is that “[a] corporation is a separate legal entity, separate and apart from its stockholders. . ..” Success; Inc. v. Curcio, 160 Conn. App. 153, 176, 124 A.3d 563, cert. denied, 319 Comn. 952, 125 A.3d 531 (2015). There is a “legalpresumption that separate legal entities are in fact separate.” Old Farms Associates v. Commissioner of Revenue Services, 279 Conn. 465, 486, 903 A.2d 152 (2006). ‘The plaintiff, which has the burden of proof, did not overcome this presumption with regard to RWA21, Ltd. ‘The evidence establishes that RWA21, Lid,, is a “corporation organized and existing under the laws of the State of Connecticut. . .. .” (Exhibit 1.)° RWA21, Ltd., has filed its own certificate of incorporation identifying the street address of its registered office, its corporate purpose, the number of shares of its capital stock, and the rules for and liability of its board of directors. (Exhibit 6.) The plaintiff made no showing that these features of RWA21, Ltd., are identical to those of either the plaintiff or the authority, or that RWA21, Ltd. in any other way a fictitious corporation. The court, therefore, cannot overlook the separate corporate existence of RWA2I, Ld, or the fact that RWA21, Ltd., and not the authority, owns 100% of the voting stock of the plaintiff, Accordingly, the court concludes that the plaintiff is not a “subsidiary corporation” of the authority within the meaning of the act, Therefore, the plaintiff cannot prevail in this action.” m The court addresses the remaining issue in the event of further proceedings that call for the “Exhibit | is a January 16, 2008 certificate of merger of RWA21, Ltd., with BIW Limited. The certificate provides that BIW Limited shall be the surviving corporation but that its name shall be changed to RWA21, Ltd. The plaintiff represents that BIW Limited was its parent corporation before RWA21, Ltd. *The plaintiff points to a number of adverse practical consequences that would occur in the operation of the water authority if the court does not include it within the definition of “subsidiary corporation.” The short answer is that the court must interpret a statute according to the “text of the statute itself”; General Statutes § 1-273 and cannot make decisions based on what is convenient. On the other hand, it appears to be wholly within the power of the plaintiff and the authority to change their corporate structure or the ownership of the subject property so that, either the plaintiff or RWA21, Ltd., meets the definition of subsidiary corporation. 6court’s decision on this issue, The plaintiff contends that the equipment inside the addition constitutes “improvements made to or constructed on any such real property ....” within the meaning of section 21 (a) of the act and that, therefore, assuming the plaintiff is a subsidiary corporation, itis entitled to a tax exemption. ‘The town instead assessed the equipment as personal property. However, there is no reason to give deference to the town. In analogous proceedings under General Statutes § 12-117a, ‘once the taxpayer has shown aggrievement, “the court tries the matter de novo and the ultimate question is the ascertainment of the true and actual value of the applicant's property.” (Citations ‘omitted; internal quotation marks omitted.) Breezy Knoll Assn,, Inc. v. Morris, 286 Conn. 766, 715-716, 946 A.24 215 (2008). Nonetheless, “the taxpayer bears the burden of establishing the impropriety of the assessor’s valuation.” Sears Roebuck & Co. v. Board of Tax Review, 241 Conn, 749, 755, 699 A.2d 81 (1997). Although the act does not define “improvements,” it seems generally accepted that “improvements” include fixtures and other components of real property, See General Statutes § 47-202 (28) (defining “{rJeal property” for purposes of the Common Interest Ownership Act as “any leaschold or other estate or interest in, over, or under land, including structures, fixtures, and other improvements and interests that by custom, usage, or law pass with a conveyance of land though not described in the contract of sale or instrument of conveyance.”) See also Plato Associates, LLC v, Environmental Compliance Services, Inc., 298 Conn. 852, 867-68, 9 A.3d 698 (2010) (defining the phrase “improvements to real property”). “The question as to whether a particular piece of property is personalty or a fixture is a question of fact.” ATC Partnership v. Windham, 268 Conn. 463, 479, 845 A.2d 389 (2004). “To constitute a fixture, we must first lookat the character of how the personalty was attached to real estate, the nature and adaptation of the [personalty] to the uses and purposes to which they were appropriated at the time the annexation was made, and whether the annexer intended to make a permanent accession to the realty. ... The character of the personal property attached to the real estate is determined at the time that the property is attached to the real estate.” (Citations omitted; internal quotation marks omitted.) Id., 479-80. Here the plaintiff produced evidence, which the court credits, that the purpose of constructing the subject addition to its existing building was to house its electrical equipment and protect it from vandalism and the weather. The evidence also proved that it was the intention of the plaintiff that the equipment boxes inside the addition were to be permanently affixed to the building itself. In fact, the equipment boxes are permanently mounted or bolted either to the walls cr to the floors of the building. In some cases the boxes are also connected to conduits or pipes that come up from the floor and contain electrical wires. The plaintiff has never removed any of the equipment boxes. Under the standards stated above, this evidence establishes that the equipment inside the addition constitutes “improvements made to or constructed on [the] real property” of the plaintiff. See also Stratford v. Jacobelli, 317 Conn. 863, 870-77, 120 A.3d 500 (2015) (portable aircraft hangars located at city airport subject to real estate taxation, where hangars had shed-like metal walls with wooden cross-beams mounted with studs, and were affixed to ground by means of heavy spikes driven through openings in metal base into asphalt paving, even though hangars ‘were capable of being disassembled with much effort). Accordingly, in the event that the plaintiff is determined to be a subsidiary corporation, the town should grant the plaintiff the § 21 (a) taxand PILOT exemption for the equipment inside the addition. v ‘The court enters judgment for the defendant town. Neither side is awarded costs. Carl J. Schuman’ OC Judge, Superior Court Itis so ordered.