New York State Court of Claims

New York State Court of Claims

GYMNASTICS v. THE STATE OF NEW YORK, #2007-013-504, Claim No. 106332


Case Information

Claimant short name:
Footnote (claimant name) :

Footnote (defendant name) :

Third-party claimant(s):

Third-party defendant(s):

Claim number(s):
Motion number(s):

Cross-motion number(s):

Claimant’s attorney:
Defendant’s attorney:
Attorney General of the State of New York
BY: REYNOLDS E. HAHN, ESQ.Assistant Attorney General
Third-party defendant’s attorney:

Signature date:
June 20, 2007

Official citation:

Appellate results:

See also (multicaptioned case)


This claim arose from the partial appropriation in fee of 7,070 square feet, or 0.162 acre, of Claimant’s land on the west side of State Route 250 (Fairport-Nine Mile Point Road) in the Town of Penfield to a depth of 25 feet at the south, extending to a depth of 28 feet at the north of the taking area and the northerly boundary of Claimant’s land. The taking was pursuant to the Eminent Domain Procedure Law and §30 of the Highway Law and designated as Fairport-Nine Mile Point Road, Part 1; Map 77: Parcel 77. I adopt as accurate the description set forth in the aforesaid map and incorporate the same in this decision by reference. The parties stipulated on the record that the date of taking and of the filing of the maps, was July 7, 1999, with the date of service being August 5, 1999. The Court has viewed the property which is the subject of this claim (Court of Claims Act §12[4]).

There is no dispute that Claimant[1] holds title in fee to the property which is the subject matter of this claim, as evidenced by Deed dated March 14, 1994 and recorded with the Clerk of Monroe County on March 22, 1994 (Exhibit 3). I accept as accurate the description set forth therein and incorporate it herein by reference.

The Claimant, hereafter also referred to as GTC, erected a one-story structure developed and used exclusively as a gymnastics facility, with a compatible “Fit By Five” program, subsequently acquired by Claimant, also using the facility. As developed, the improved facility is a one-story brick building containing 20,768 square feet designed for use by gymnasts, with several stations constructed in conformity with accepted national gymnastics standards. These areas are permanent, and both appraisers agreed that this made the use of the building unique, and would require expensive and extensive renovation if it were to ever be adapted for other purposes. It was described by several of Claimant’s witnesses as being the only such facility north of Atlanta and east of the Mississippi River. No party disputes the financial success that Claimant has enjoyed over the years, both prior to and after the appropriation. The acquisition of the “Fit By Five” franchise, as well as the Botsford School of Dance subsequent to the appropriation, created Claimant’s need for additional space.

Ms. Clifford stated that when the structure was first conceived she envisioned a structure that was different from that finally constructed. Her first submission to the Town of Penfield Planning Board in 1993 that was rejected was for a steel clad structure. The revised plan was for a more expensive and somewhat smaller building being constructed on the property. At the time the plans for this building were drawn, she also requested that her architect, Scott Lawson, create a design for an additional 6,100 square feet of space. This plan was not submitted to the Town for consideration at that time (Exhibit 14). While the aforesaid exhibit bears no date indicating when it was created, or the square footage of the extension, Mr. Lawson testified that it had to have been in 1993 or 1994, since he did no further work for Claimant after 1994. By 2003, due to the continued expansion of the Claimant’s programs, it was determined that the time to expand had arrived, and Ms. Clifford, on Claimant’s behalf, contacted her engineer and requested that he start the process to secure the necessary approvals for the addition.

According to Peter Vars, Claimant’s engineer, the expansion as conceived by Clifford and designed by Lawson in 1993-1994, would have fully complied with the existing zoning laws of the Town of Penfield prior to the appropriation, and the process of obtaining a building permit would have been a routine matter. After the appropriation it was clear that Claimant would need to obtain variances. Vars forwarded a letter to the Planning Board on October 17, 2003 outlining the perceived problems caused by the taking and two sketches illustrating what changes had occurred (see Exhibits 19, 15 and 16). The most immediate problem was the loss of setback of Claimant’s property from Rte. 250 and green space requirements. When first constructed, the property met and exceeded the required setback, but the Town had adopted the 441/250 LUAMP[2] Overlay District, which revised the green space requirement from 30% in 1994 to 35% in 2003. As a consequence of the appropriation, if Claimant were to expand, the proposed addition would necessitate variances, since the property would no longer conform to the required setback or green space requirements. Ms. Clifford and her attorney appeared at the Planning Board meeting on October 25, 2003, and the Board, while supportive of the expansion, outlined some items that it felt needed to be addressed (Exhibit K).

By letter dated October 30, 2003, The Town Project Review Committee made several recommendations (Exhibit 20). Vars stated that when he reviewed it he did not see anything in these recommendations that would prevent the planned project from being completed. While optimistic, he also stated that these were just staff recommendations and that the Planning Board itself was the ultimate decision maker. At some point he also received a copy of minutes from a Planning Board meeting held on October 25, 2003 (Exhibit K), which referenced a concept sketch plan given it by Vars showing the proposed expansion, and from its tone he felt it was encouraging.[3] On or about November 14, 2003, Mr. Vars, on behalf of Claimant, submitted an application to the Zoning Board of Appeals (see Exhibit 22) specifically referring to the variances Claimant would need to complete the expansion and sketch plans A and B (Exhibits 15 and 16). He expressed confidence that the application would be granted given the Planning Board’s discussion during the October 25, 2003 meeting as well as the fact that the need for the variance was not the result of something the Claimant had caused or created.

The Board met on December 18, 2003, and the application was tabled with a request that Claimant and Vars provide additional materials. Vars was informed of the request the day following the meeting, and in February of 2004, the Board formally denied the request without prejudice (Exhibit 23). Vars then met with Clifford to discuss the four items or requirements by the Board set forth in Exhibit 23 and concluded that they had already provided the information regarding the proposed parking and its impact on the land-banked areas. Further, it was Vars’ opinion that the second requested item was out of sequence, since applicants generally provide a floor plan only when they have a viable project as it is an expensive part of any development and, according to him, involves architectural plans. It was his belief that the Board was looking to determine if a smaller expansion could be constructed without the need for any variance, and he stated that he did look at that possibility. The third item was one that is normally asked for and did not seem to be of any major concern. The fourth item, however, confused him since the Board had already received a recommendation from the Planning Review Commission regarding the proposed parking. In sum, after discussions with his client it was decided not to go forward with the expansion for reasons of expense and no assurance of success, in his opinion.

Claimant, over the Defendant’s objection, then called its accountant, Christopher Bailey, who testified that he had been the accountant for Ms. Clifford and later GTC from the time that she began to operate her own business. He stated that once the Fit By Five franchise had been acquired in 1999 it was apparent that additional space would be required in order to make the operation profitable. The proposed additional area would also provide for a cheerleading section, a performing arts section and other after school programs. It was his opinion that in the first year alone the Claimant’s net income would increase by $47,197.00, and over the useful life of the facility, which he stated to be 40 years, he projected a net increase in its income of $440,732.00, discounted to present value. Claimant’s appraiser coincidentally found the same amount when he applied a discounted cash flow analysis in determining that portion of Claimant’s consequential damages, denominated as loss of profit due to its inability to expand the facility.

Both appraisers agreed that the highest and best use of Claimant’s property before the appropriation was commercial, as developed and used as a gymnasium, with the Claimant’s expert adding “with the planned expansion.” I agree and adopt their opinion of its highest and best use as commercial as developed and used.

After the appropriation, the highest and best use as found by the Defendant remained unchanged. The Claimant’s expert, on the other hand, opined that the subject’s highest and best use remained as developed and used, but also noted that the appropriation had prevented Claimant from expanding the desired 6,100 square feet it claimed to need and required variances necessitated by the Defendant’s appropriation. Hence this resulted, according to him, in a severely diminished future income-producing capability, as well as marketability and consequently Claimant’s property lost significant market value.

Claimant’s appraiser, Edward Trenholm, utilized only the income and market data approaches to value the subject prior to the appropriation. He analyzed four land sales he deemed comparable, two of which were located in the Town of Penfield, and one of those, his sale four, was located only 269 feet directly south of the subject and was sold approximately seven months prior to the appropriation. He noted that he disregarded this sale entirely since he had been unable to determine if the sale price was influenced by the imminent acquisition/appropriation by Defendant for the above project. The other sale in Penfield, which occurred on October 15, 1996, was part of an assemblage for a Home Depot and was an interior lot smaller than the subject. Its unit price was listed at $6.00 per square foot, unadjusted, and $6.30 per square foot after adjustments for time, location and zoning differences. The second sale was located at 2660 East Henrietta Road in Henrietta and was almost twice the size of the subject. Its unit sale price was $7.26 per square foot. He then adjusted this sale to account for its superiority over the subject and concluded that, after an adjustment of -6% for time and utility, the value was set at $6.47 a square foot.[4] His final sale, located at 2480-2500 Ridgeway Avenue in Greece, took place on June 25, 1998 and was of comparable size to the subject. He adjusted the sale upward + 2% for time, but downward -10% for location, resulting in a final downward adjustment of -8%, which computed to a square foot value of $6.53 (Exhibit 29, p. 59). Based on the foregoing, he fixed the vacant land value for the subject at $6.50 per square foot and concluded direct damages for the 7,070 square feet taken by the Defendant to be $45,955.00 (see Exhibit 29, pp. 58-78).

He then used four sales to fix the subject’s value as improved. He stated that, because of the subject’s uniqueness in use and internal construction, he was unable to locate any comparable properties in reasonable proximity to the subject. As a result he stated that it was his opinion that these four sales, while different from the subject in use, were nonetheless able to be constructively compared to the subject and adjusted where appropriate to reflect differences allowing him to arrive at a value for the subject.

His analysis of these four sales included adjustments for time, when in his opinion it was appropriate, location, condition, size, land to building ratio, utilities, utility of parcel, zoning and the euphemistic “other” (Exhibit 29, pp. 82 to 102). He concluded the subject’s improved value before the appropriation to be $69.50 per square foot, which resulted in a value of $1,445,000.00(R) for 20,768 square feet.

As noted, he also utilized the income approach, in particular the band of investment or direct capitalization method, to determine the subject’s value. He adopted a capitalization rate after conferring with Chase Manhattan Bank and M&T Bank in Rochester with people who were familiar with the lending rates for mortgages in the area and with three local real estate investors familiar with the rate of return a knowledgeable investor would expect both before as well as after the appropriation (Exhibit 29, p. 104). He then established and applied a capitalization rate of 10.956% prior to the taking. Further, he used the income and expenses of Claimant for the year ending in 1999, which showed the net operating income to be $156,257.00 according to the corporate return for that year (Exhibit 29, p. 110). This resulted in an indicated value for the subject of $1,425,000.00.

He fixed the Claimant’s before value at $1,445,000.00 after analyzing and comparing both of these approaches to value.

Mr. Trenholm then considered the negative effects of the appropriation on the subject, the most significant being Claimant’s inability to expand since the property no longer complied with the requirements of the zoning law and now lacked sufficient parking to support expansion. Further, it was his opinion that the subject’s expansion would exceed the zoning law’s lot coverage requirements. In his market data whole-to-whole approach after the taking, he then considered four different improved sales, only one of which was in the Town of Penfield, while two were in the Town of Greece, and the last in the Town of Brighton (Exhibit 29, p.130). Based on these sales and after adjustment for time, location, condition, size, expansion possibilities, utilities, utility of parcel, zoning and the category “other,” he arrived at an after value for the subject of $45.00 per square foot, and an after value of $935,000.00. The diminution of the subject’s value by $510,000.00, or 35.29%, represented his opinion of a portion of consequential damages to the subject.

He went on to conclude that since the taking prevented Claimant from expanding, it would also lose significant income over the next 40 years. He then conducted a discounted cash flow analysis as set forth on pages 153 to 157 and fixed Claimant’s loss of future income at $440,732.00.

Based on these figures, he fixed Claimant’s total compensable damages, both direct and consequential, at $996,687.00.

Claimant’s expert, on cross-examination, acknowledged that the vacant land value he fixed in the before valuation was unaffected by the taking. He indicated that the only method of valuation he used after the taking was the whole-to-whole approach, and he abandoned verifying his computations by either the income approach or cost less depreciation methodology. It was noted that the properties he selected, both in the before and after whole-to-whole analyses, had a different zoning classification than the subject as well as a different use. Consequently, his focus appeared to be on the subject’s potential for expansion and the loss thereof in the whole-to-whole approaches he employed. In addition, he relied heavily on Mr. Vars’ information that before the appropriation, expansion would have been approved by the Planning and Zoning Boards of the Town of Penfield, but after the appropriation, it became economically infeasible to expand. He stated that he spoke to the Town of Penfield Assessor and a Mr. Morehouse, who he believed was in Zoning, but it appears that these discussions were not related to possible expansion after the appropriation (Transcript, Vol. II - pp. 328-329).

After Claimant rested, the Defendant moved to strike certain portions of Claimant’s appraisal and I reserved decision.

The Defendant called Douglas Fox, the Director of the Planning Board for the Town of Penfield, who, prior to his appointment as Director, had been with the Planning Department since 1984. He was familiar with Claimant’s initial application to construct the structure currently standing on the subject property and explained the process followed to obtain the necessary approvals for constructing a structure or an addition from the various municipal boards, including the Planning and Zoning Boards. He did not recall any discussions of future expansion of the subject at the time of the original application for a building permit or, for that matter, after the structure was built, until the inquiry in 2003 (Transcript, Vol II - pp. 357-360). He explained that a “gymnasium” was and is not a specific use contained either in the building or zoning codes, and in 1993 questions relating to the number of parking spaces the subject required arose since Claimant was not a retail commercial business as defined under the codes. The issue, however, was satisfactorily resolved, along with several other issues relating to Claimant’s status as a gymnasium.

Mr. Fox testified that when the 2003 application for expansion was initially received, the Planning Board was supportive of the expansion and acknowledged the success of the business (Transcript, Vol. II - p. 365). He also stated that he had not seen Exhibit 14 during the application process by Claimant in 2003 and first saw it in 2005 when it was faxed to him at his request by Claimant’s counsel (Transcript, Vol II - p. 357). He had no recollection of anyone ever coming to him to discuss possible expansion of the facility between 1993 to 2003, when Mr. Vars, on behalf of the Claimant, made application to expand. He stated that the memo (Exhibit K) Mr. Vars received in November 2003 pertained to conceptual comments, including the request for architectural details which he explained were concerned primarily with the exterior of the structure, and believed Exhibit 14 would be sufficient as representative of a floor plan (Transcript, Vol II - p. 361). The second concern related to the fact that, under the codes, buildings in a commercial/retail zone were limited to 25,000 square feet. He stated that he advised Mr. Vars to approach the Zoning Board to obtain a determination as to whether the subject fell within these limits, since it was not considered to be a retail business as such, and therefore perhaps a variance would not be needed for its expansion beyond the 25,000 square-foot restriction. However, while no application for an interpretation was made, he stated that since there had been an interpretation at some time that the subject was not a retail use, it was not subject to that maximum building size (Transcript, Vol II - pp. 362-363). He also stated that he did not believe that the third bullet item in Exhibit K was a requirement necessitating the installation of all land-banked parking. Likewise, he felt that the fourth and fifth bullet items did not, and would not, pose any problems.

He went on to state that the next step for Claimant was to apply to the Zoning Board for area variances, which would not require architectural renderings (Transcript, Vol II - p. 364). While Claimant did make such an application, and it was denied without prejudice, he explained that this meant the Zoning Board felt that there was material lacking in the application, and the denial would allow the application to come back to the Board at any time Claimant obtained sufficient material and information to respond to the Board’s concerns. If it had been a denial with prejudice, according to him, then Claimant could not reapply for one year.

While he could not address each of the four bullet items directly, he did state that the sketch plan as shown in Exhibit 14 would have met the Board’s request for a floor plan of the addition and was generally required when the addition might impact on the required parking spaces for an addition.

Robert Wrona, an employee of the State’s Department of Transportation (DOT), was then called as a witness. He explained that he was a right-of-way agent for DOT, and in that capacity dealt with the acquisition of the rights-of-way required for the widening of Rte. 250, which affected Claimant’s frontage. He identified Exhibit V as a field diary which summarizes discussions he and another employee of the Defendant had with Ms. Clifford regarding several of her concerns regarding the impact of the project relating to drainage, safety of her students, driveway and access. In addition, she was concerned that the taking would affect the future expansion plans of Claimant. This concern, with others, was reiterated in subsequent discussions with Claimant’s counsel (see Exhibits W, X and Y). He also stated that he was not made aware of any expansion plans involving an additional 6,100 square feet, but recalled that Claimant, or its representatives, had indicated an addition of 4,000 square feet to the existing structure on the east would be lost because of the appropriation (Exhibit O). He testified that all of these concerns were passed on to others, including the Appraisal Unit of Defendant.

Gregory Klauk, Defendant’s appraiser, was then called and his appraisal was admitted into evidence without objection (Exhibit A). In arriving at his conclusion of value for the subject, he utilized the three recognized and accepted appraisal methodologies, market data, income, and cost less depreciation. Each method was used to verify the value he eventually ascribed to Claimant’s property. He, like Claimant’s expert, agreed that the subject, while unique in design and use, was perhaps not a speciality, but because of its relatively recent construction, the cost approach was still an appropriate method to assist in determining the subject’s value.

He stated that he spoke with Claimant and her attorney, as well as the owners or their representatives of the comparables he used, and various town officials in preparing the trial appraisal. He, as well as his company, had previously been retained to work on the project appraisals for all the properties, including the subject, that were involved in the reconstruction of the intersection of Routes 250 and 441. He was specifically retained to prepare the Defendant’s trial appraisal for this matter in late 1998 or 1999 (Exhibit A). He explained that the 7,070 square-foot acquisition extended from the then existing right-of-way westerly into Claimant’s property to a depth on the south of 25 feet to 28 feet on the north, covering green space with small trees.

He determined the highest and best use of the property was commercial if it were vacant, but as improved, its existing use as a gymnastics facility remained its highest and best use. He noted that to convert it to another/different use would be costly, and since it was an income-producing enterprise that had been well received and supported in the area, its present use was its highest and best use.

He used five sales in his market data approach to fix the value of the land as undeveloped, arriving at a $220,000.00 per acre value, or $523,600.00 for the entire 2.38 acre parcel. I note that Sale #1 in his analysis of vacant comparable sales was the subject’s sale in 1994. He employed the same approach in arriving at a before value of the subject as improved and, in that instance relied on three different improved properties which he deemed comparable and which were located in the Town of Henrietta. He arrived at a square foot value for the 20,768 square foot building of $60.00 per square foot, or a total value for the land and building of $1,246,000.00(R).

The cost approach required him to fix a rate of depreciation, and he relied upon the Marshall & Swift cost service, a nationally recognized and accepted cost source. He obtained information regarding the cost incurred by Claimant to build the structure and yard improvements from its attorney. He considered physical, functional and external depreciation to the subject’s structure and, using the Marshall & Swift cost service, fixed the structure’s physical life at 40 years and fixed the rate of depreciation at 12.5%. The yard improvements, on the other hand, had a shorter life span than the building and he concluded the estimated economic life to be five years and/or physical life of 25 years. He adopted a depreciation rate of 20% for the concrete sidewalks and asphalt driveway, but not for the landscaped islands with concrete curbs and lawn and landscape enhancements. He arrived at a value of $74,520.00 for these items. He found the value of the structure to be $875,000.00 after applying the depreciation rate of 12.5% to the building cost of $1,000,000.00 when built. He added these figures to the land value of $523,600.00, for a total value of $1,473,000.00(R) before the taking using the cost approach.

As previously noted, he also employed the income approach in his analysis. He utilized three comparables, but did not disclose what types of properties they were or where they were located, since he had pledged confidentiality to the respective owners. Claimant objected to the introduction of this evidence, since it had no way to verify any of the information utilized by the expert, including, but not limited to, the locations of the properties; the particulars of each lease, if any; the names of the owners, lessors and lessees; the nature of the enterprise located on the premises and any other pertinent information that might be gleaned with full disclosure. I initially reserved decision on the motion to strike his testimony, and that portion of Defendant’s appraisal acknowledging that this went to the weight of such testimony. I have given no weight to that part of the Defendant’s appraisal or the testimony of its expert, since it is clear that Claimant was deprived of any opportunity to examine these properties or the particulars and peculiarities of the leases or to adequately prepare its cross-examination of the expert regarding his findings. Consequently, in fairness to the Claimant, I find that Defendant’s income approach is entitled to no weight, either in the before or after situation, as a method of verifying the subject’s value.

After the taking, Mr. Klauk determined that the highest and best use of the subject remained unchanged, and using the same sales he utilized in the before taking analysis for vacant land he found that there was no change in the unit value of the land.

He made two adjustment changes in the direct sales comparison of the subject as improved after the taking: the first was in a building to land ratio (FAR) in order to reflect the fact that the taking had resulted in the reduction in this category from 1 to 3.99 in the before, to 1 to 3.65 in the after situation; the second was in the category of site utility and parking to reflect the loss of lawn and trees along Rte. 250.

He concluded, using the cost approach in his after taking analysis, that the taking had no effect on the physical plant or the operation of the business. Further, he opined that the parking was unaffected by the acquisition and, relying on a conference with Mr. Fox and an unnamed member of the Zoning Board, he concluded that there would be no impediment to Claimant’s desire to construct the 6,100 square foot addition to the existing structure. Therefore, the only difference in the cost approach after the taking from the before situation related to site improvements acquired by the Defendant that were encompassed in the 7,070 square foot area.

He determined the subject’s after value to be $1,434, 500.00, resulting in a diminution in value of $38,600.00, all direct damages, allocated as follows:

June 20, 2007
Rochester, New York

Judge of the Court of Claims

  1. [1]Sarah Jane Clifford is the president and sole shareholder of Claimant and has devoted her life to gymnastics, and is The Gymnastics Training Center for all intents and purposes.
  2. [2] Land Use and Access Management Plan.
  3. [3]At that meeting Ms. Clifford represented to the Board that the addition was not to increase the enrollment, but to create a larger waiting area, program area offices for staff, bathrooms and changing areas.
  4. [4]His grid at page 59 is in error, since he fixed the net adjustment at -6%, but it is clear that he used -11% in his calculations.