Court decision could bring more tax breaks.

An appellate court decision may mean millions in tax exemptions for some businesses that have expansion plans.

On June 17, the New York Supreme Courts Appellate Division recently ruled that CDL, owner of the Millennium Broadway Hotel on West 44th Street that underwent a $36 million renovation, is eligible for real estate exemption benefits under the New York State Industrial and Commercial Incentive Program. The decision overturned a New York County Supreme Court decision.

The tax exemption settlement will between $5 to $10 million, according to CDL's attorney, Donald Liebman of Stroock & Stroock & Lavan LLP.

"It actually has applicability beyond hotels," said Liebman. "It applies to any commercial building owner who is trying to expand horizontally. The law encourages buildings to expand where it is economically beneficial. What you have here is the court saying that the hotel did exactly what the policy was meant to encourage."

In 1997, the construction began to increase Millennium's square footage from 549,000 to 623,200. The hotel could not be expanded vertically, so it was expanded horizontally. Two wings were built onto the existing hotel adding 125 rooms.

CDL applied for the tax incentive in August of 1997. In August 1998, the city denied its application. CDL filed suit in December of that year and the expansion was completed in 1999.

"You can't always build up," said Liebman. "The bulk available on the site was used up, so they could only build horizontally. The horizontal expansion was what caused the problem for the city."

According to state statute, expansions must be physically and functionally integrated with the existing building and cannot increase the bulk or height of the building by more than 30%. In its denial the city concluded that the two wings were not a part of the main hotel building.

In December 2001, the Supreme Court of New York City agreed with the city saying that it was not unreasonable for the city to determine Millennium Broadway's three structures comprising the newly expanded hotel facility were separate buildings.

The city has a right to appeal and stands by their decision to reject CDL's application.

"We strongly disagree with the court's decision and feel that three separate structures over two tax blocks cannot b e treated as one building for tax-exempt purposes," said Carl A. Laske, senior counsel for the City of New York. "We plan to evaluate our legal options, including the possibility of seeking leave to appeal."

The deadline for an appeal application is July 17. Liebman doubts the city has the grounds to appeal.

"It has to be a constitutionality question," Liebman said. "I don't think they will appeal, but never say never. Politically, it may be necessary for the city to make an appeal motion."

Liebman contends that the decision provides a roadmap for future largescale, integrated developments in New York, including those that may involve landmark properties and ties together the policy of encouraging projects that result in economic growth with the laws that create the financial incentives for those projects. It also means the courts have agreed with the legislature's desire to encourage redevelopments in Manhattan, he said.