
    Elmwood-Utica Houses, Inc., Respondent-Appellant, v Buffalo Sewer Authority, Appellant-Respondent. Diocese of Buffalo, N. Y., Council of Churches, et al., Intervenors-Appellants-Respondents; County of Erie, Intervenor-Respondent.
    Argued May 28, 1985;
    decided July 11, 1985
    
      POINTS OF COUNSEL
    
      James J. McLoughlin, Acting Corporation Counsel (Michael B. Risman of counsel), for appellant-respondent.
    I. The sewer rent formula utilized by the Buffalo Sewer Authority is authorized by Public Authorities Law § 1180. (Watergate II Apts. v Buffalo Sewer Auth., 46 NY2d 52; Matter of New Rochelle Water Co. v Public Serv. Commn., 31 NY2d 397; Silkman v Board of Water Commrs., 152 NY 327.) II. The court below misconstrued the language of chapter 862 of the Laws of 1981. (Watergate II Apts. v Buffalo Sewer Auth., 46 NY2d 52.) III. Chapter 862 of the Laws of 1981 is constitutional. (Watergate II Apts. v Buffalo Sewer Auth., 46 NY2d 52; Lighthouse Shores v Town of Islip, 41 NY2d 7; Town of North Hempstead v Exxon Corp., 53 NY2d 747; Capelle v Makowski, 62 AD2d 1167; Cook v City of Binghamton, 48 NY2d 323; Adelman v Adelman, 58 Misc 2d 803; People ex rel. Best & Co. v Graves, 265 NY 431; Rutland v Tuthill, 187 App Div 20; People ex rel. Beck v Graves, 280 NY 405; Matter of McGlone, 284 NY 527.) IV. The challenge to the sewer rents levied for the years 1975 through 1981 is barred by the Statute of Limitations. (Press v County of Monroe, 50 NY2d 695; Solnick v Whalen, 49 NY2d 224.)
    
      Kevin Kennedy and Charles S. Desmond for intervenors-appellants-respondents.
    I. The court below, without citing any relevant authority, has stated a rule of law which nullifies the exemptions provided for in the amendment to section 1180 and also nullifies the comprehensive scheme of exemptions from local assessments established by the Legislature. (Matter of Van Berkel v Power, 16 NY2d 37; Matter of Taylor v Sise, 33 NY2d 357.) II. The court below has misread Public Authorities Law § 1180 as amended in 1981. (Watergate II Apts. v Buffalo Sewer Auth., 46 NY2d 52; Walz v Tax Commn., 397 US 664; Welch v Henry, 305 US 134; People ex rel. Beck v Graves, 280 NY 405; Adelman v Adelman, 58 Misc 2d 803; Lacoste v Department of Conservation, 263 US 545.) III. The court below misconstrues Watergate II Apts. v Buffalo Sewer Auth. (46 NY2d 52). IV. The Legislature empowered the authority to adopt sewer rents which were equitable, not equal. V. Chapter 862 of the Laws of 1981 does not violate the equal protection and due process provisions of the Federal and State Constitutions.
    
      Richard T. Sullivan for respondent-appellant.
    I. The rent computation applied by the Buffalo Sewer Authority prior to the amendment to section 1180 was not authorized by law. (Watergate II Apts. v Buffalo Sewer Auth., 46 NY2d 52; Matter of City of New York, 228 NY 140; Brink v Village of Elmira Hgts., 139 Misc 818; Matter of Village of Canastota v Queensboro Farms Prods., 44 AD2d 276, 36 NY2d 793.) II. The July 1981 amendment to Public Authorities Law § 1180 could not retroactively vest the Buffalo Sewer Authority with power to exempt certain properties from the ad valorem component of sewer rent computations. (Dunkum v Maceck Bldg. Corp., 256 NY 275; Olds v City of Jamestown, 280 NY 281; Lane v Johnson, 283 NY 244; Welch v Henry, 305 US 134; People ex rel. Beck v Graves, 280 NY 405; Matter of Lacidem Realty Corp. v Graves, 288 NY 354; RKO-Keith-Orpheum Theatres v City of New York, 308 NY 493.) III. The 1981 amendment to Public Authorities Law § 1180 is unconstitutional. (Watergate II Apts. v Buffalo Sewer Auth., 46 NY2d 52; Matter of Rokowsky v Finance Administrator, 41 NY2d 574; Matter of Slewett & Farber v Board of Assessors, 80 AD2d 186.) IV. Elmwood-Utica’s claims relative to sewer/rents for the years 1975 through 1981 are not barred by the Statute of Limitations. (Press v County of Monroe, 50 NY2d 695; Solnick v Whalen, 49 NY2d 224; Matter of Lakeland Water Dist. v Onondaga County Water Auth., 24 NY2d 400; La Porto v Village of Philmont, 39 NY2d 7; Bender v New York City Health & Hosps. Corp., 38 NY2d 662.) V. The revised computations of the BSA are equitable insofar as they include all properties previously exempted from the ad valorem computation.
    
      Eugene F. Pigott, Jr., County Attorney (Alan P. Gerstman of counsel), for intervenor-respondent.
    I. The sewer rent formula devised by the Buffalo Sewer Authority complies with Public Authorities Law § 1180. II. The ad valorem sewer rent of the Buffalo Sewer Authority is in the nature of a special assessment. (Watergate II Apts. v Buffalo Sewer Auth., 46 NY2d 52; People ex rel. Griffin v Mayor of Brooklyn, 4 NY 419; Provident Inst. v Mayor of Jersey City, 113 US 506; Silkman v Board of Water Commrs., 152 NY 327.) III. It is within the power of the State Legislature to enact a special assessment to be raised by the Buffalo Sewer Authority. (Robertson v Zimmermann, 268 NY 52; Hassan v City of Rochester, 67 NY 528.) IV. The Legislature has authority to exempt certain properties from special assessments. (Matter of Mayor of N. Y., 11 Johns 77; Hassan v City of Rochester, 67 NY 528.) V. The Legislature acted constitutionally in enacting chapter 862 of the Laws of 1981. (Matter of Trustees of Union Coll., 129 NY 308; Matter of Mayor of N. Y., 11 Johns 77; McGowan v Maryland, 366 US 420.)
    
      Charles J. Tobin, Jr., and Joseph P. McCale for the Council of Churches of New York State and others, amici curiae.
    
    I. The definition of equity adopted by the court below in this case undermines long-standing public policy of the State and the very essence of the relationship between the government and religious, charitable and educational organizations. (Walz v Tax Commn., 397 US 664; Young Men’s Christian Assn. v Rochester Pure Waters Dist., 37 NY2d 371.) II. The court below has misconstrued this court’s decision in Watergate II Apts, with respect to what constitutes an equitable basis upon which to determine sewer rents. (Watergate II Apts. v Buffalo Sewer Auth., 46 NY2d 52.) III. The authority’s interpretation of section 1180, as amended, was proper. The authority’s exemption of the property of religious, charitable and educational organizations from a portion of the sewer rent is not unconstitutional. (Lehnhausen v Lake Shore Auto Parts Co., 410 US 356; Madden v Kentucky, 308 US 525; Matter of Long Is. Light. Co. v State Tax Commn., 45 NY2d 529; Shapiro v City of New York, 32 NY2d 96; Genet v City of Brooklyn, 99 NY 296; Gautier v Ditmar, 204 NY 20; Matter of United States Steel Corp. v Gerosa, 7 NY2d 454; Matter of Small v Moss, 279 NY 288; County Secs. v Seacord, 278 NY 34; Society of Plastics Indus. v City of New York, 68 Misc 2d 366.)
   OPINION OF THE COURT

Alexander, J.

The Appellate Division has determined that section 1180 of the Public Authorities Law, as amended by section 1 of chapter 862 of the Laws of 1981, and section 2 of said chapter are constitutional, but that the method employed by defendant, Buffalo Sewer Authority (BSA), to determine sewer rents is unauthorized by that statute. We agree that the statute, as amended, is constitutional, but disagree that the method used by BSA to determine sewer rents is unauthorized.

BSA was created pursuant to chapter 349 of the Laws of 1935. This legislative act authorized BSA to “establish a schedule of rates, rentals or charges, to be called ‘Sewer rents,’ to be collected from all real property served by its facilities.” The statute further provided that “[s]uch sewer rents may be based upon either the consumption of water on premises connected with such facilities, making due allowances for commercial use of water, the number and kind of plumbing fixtures connected with such facilities, or the number of persons served by such facilities, or may be determined by the authority on any other equitable basis.” Since 1938, BSA has employed a two-part formula for the computation of sewer rents. One component is based on the water consumption of the premises serviced, the number and kind of fixtures connected to the facilities and the number of persons served. The other is based upon the assessed value of the real property served — an ad valorem component. Historically, BSA has exempted from this ad valorem component real property in the City of Buffalo that is exempt from real estate taxation. This exemption has not been granted, however, to real property exempted from taxation pursuant to the Private Housing Finance Law and the Public Housing Law.

Plaintiff, Elmwood-Utica Houses, Inc., is organized under article 2 of the Private Housing Finance Law and is granted a limited exemption from real estates taxes pursuant to that law (Private Housing Finance Law § 33). Thus, it is not exempted by BSA from the ad valorem component of the sewer rent.

Since 1975, Elmwood-Utica has withheld payment of the ad valorem portion of its sewer rent, claiming that BSA had no statutory authority to exempt any users of its facilities from sewer rentals. Elmwood-Utica’s claim in this regard found support in an opinion of Buffalo’s Corporation Counsel, issued in 1975 and reaffirmed in 1979, which advised BSA that it could not legally “exempt any property served by its facilities from all or part of its sewer rents”.

In order to clarify its authority to assess sewer rents in the manner it had employed for some 40 years and to obtain explicit authorization for that method, BSA took steps in 1979 to have the Legislature amend section 1180 of the Public Authorities Law. This purpose was accomplished in the enactment of chapter 862 of the Laws of 1981.

Section 1 of the amendment created a specific statutory exemption from the ad valorem component of the sewer rent assessment for those properties that are exempt from real property taxation pursuant to enumerated sections of article 4 of the Real Property Tax Law. They comprise the same class of properties that BSA had historically exempted from the ad valorem component of its sewer rents, but which nevertheless remained subject to the user component of the sewer rent assessment. In addition to creating an express statutory exemption in section 1, the Legislature provided in section 2 of the 1981 enactment that: “All actions heretofore taken and proceedings had by the Buffalo sewer authority in granting exemption from ad valorem sewer rents granted properties exempt from real property taxes are hereby legalized, validated, ratified and confirmed.”

Following notification by BSA of its delinquency, Elmwood-Utica commenced this article 78 proceeding in which it contended that chapter 862 of the Laws of 1981 is unconstitutional and that BSA’s method of computing the sewer rent is unauthorized. Special Term converted the proceeding into a declaratory judgment action, denied BSA’s summary judgment motion and ordered that discovery proceed. On appeal to the Appellate Division, all of Elmwood-Utica’s claims were rejected except the claim that BSA lacked statutory authority to exempt any property from sewer rent assessments prior to July 31, 1981, and that its actions in so doing were ultra vires.

The Appellate Division upheld the constitutionality of chapter 862 of the Laws of 1981, but found that BSA’s method of assessing sewer rents was unauthorized by section 1180. The court viewed the 1981 amendment as not requiring the use of an ad valorem component in computing sewer rents, but merely providing that if such component were used it could not be assessed against certain specified properties. The court held that the amendment did not affect “the requirement that sewer rents ‘be collected from all real property’ on an ‘equitable basis’, [and t]hus defendant is left free, as it was prior to the amendment, to determine sewer rent charges against serviced properties on any basis which is fair and equitable to all users” (96 AD2d, at p 179). BSA’s contention that section 2 of chapter 862 of the Laws of 1981 validated its long-established practice of charging tax-exempt properties only that component based upon water consumption was rejected. The court held that such a construction would render section 2 unconstitutional as sanctioning disproportionate sewer rents. The court found it unnecessary to determine the applicability of the Statute of Limitations to either Elmwood-Utica’s challenge to the sewer rent assessments or to the amendment’s constitutionality, citing CPLR 203 (c) and Press v County of Monroe (50 NY2d 695). Pursuant to leave granted by this court, BSA and intervenors, the Diocese of Buffalo, N. Y., Council of Churches and the Buffalo City Cemetery, Inc., appeal, and Elmwood-Utica cross-appeals, pursuant to CPLR 5601 (d), from the judgment entered in favor of BSA on its counterclaim.

We hold that section 1180 of the Public Authorities Law, as interpreted and applied by BSA, is not unconstitutional and that BSA’s method of assessing the ad valorem component of its sewer rents is authorized by that statute. Legislative enactments carry an exceedingly strong presumption of constitutionality, and while this presumption is rebuttable, one undertaking that task carries a heavy burden of demonstrating unconstitutionality beyond a reasonable doubt (Maresca v Cuomo, 64 NY2d 242, 250; Lighthouse Shores v Town of Islip, 41 NY2d 7, 11). Elmwood-Utica has failed to carry this burden.

Where a statute is challenged as denying equal protection, and a “fundamental interest” or a “suspect” classification is not involved, the standard by which the classification is measured to determine whether or not it will pass constitutional muster is the “reasonable basis” test. Where the “ ‘classification has some “reasonable basis”, it does not offend the Constitution simply because the classification “is not made with mathematical nicety or because in practice it results in some inequality” ’ ” (Alevy v Downstate Med. Center, 39 NY2d 326, 332, quoting Dandridge v Williams, 397 US 471, 485). No argument is made, nor could any validly be made, that a “fundamental interest” or “suspect” classification is involved in BSA’s fixing of sewer rents. Consequently, Public Authorities Law § 1180, as amended, and BSA’s interpretation of the statute in classifying properties that are subject to or exempt from the ad valorem sewer levy are to be tested by “a rational basis standard of review * * * [and i]f any conceivable state of facts will support the classification, said provisions will not be held violative of the equal protection clause” (Maresca v Cuomo, 64 NY2d 242, 250, supra).

In Watergate II Apts. v Buffalo Sewer Auth. (46 NY2d 52), we acknowledged that “the Public Authorities Law allows [BSA] to fix charges only for such services as it actually provides its customers” (id., at p 59), and that the charges were in the nature of fees that “had to bear a direct relationship to the cost of furnishing the water services.” We recognized, however, that in fixing those charges there is the possibility that formulae more sophisticated than those criteria expressly enumerated in Public Authorities Law § 1180 might be adopted by BSA pursuant to the “equitable basis” provision of the statute. We noted that the essential services supplied to the people of Buffalo by BSA were far more extensive and complex than merely providing water for current and predictable use. The services involved, among other things, the construction and maintenance of effluent and storm sewer lines, sewage collection and treatment facilities. We concluded that the “cost of these activities is bound to bear only limited direct relationship to the volume of water utilized by [a] particular consumer” (id., at p 60). In providing these extensive services, BSA was providing a governmental service (Public Authorities Law § 1191). Thus, it was providing a public benefit to the entire community, as well as an exclusive benefit to the individual properties.

In approving BSA’s use of the assessed valuation of real property in Buffalo as a basis for assessment of a portion of the sewer rent to help defray the cost of providing the public benefit, despite that it was not specifically authorized by the statute, we recognized that “[e]xact congruence between the cost of the services provided and the rates charged to particular customers is not required” (id., at p 59), and therefore that the statute’s “equitable basis” provision did not necessarily mean “equal basis”. Rather, we held that the inquiry should be “whether [BSA’s] formulae reflect reasonable and nonarbitrary interpretations of the statute”, noting that “discrepancies may have to be endured * * * so long as there exists some rational underpinning for the charges levied” (id.).

Here the Legislature has conferred virtually unfettered power upon BSA to establish sewer rents, using the specific criteria enumerated in section 1180 and the general “other equitable basis” standards. In these circumstances, it is clear that the Legislature intended that BSA would fix sewer rents that, in its judgment, would best serve its economic and public policy goals, “including economic differentiations among its charges so long as there is not involved any of the invidious discriminations condemned by statute or Constitution, or some utterly arbitrary discrimination not related to economic considerations or some accepted public goal” (Carey Transp. v Triborough Bridge & Tunnel Auth., 38 NY2d 545, 550, remittitur amended 39 NY2d 806, cert denied 429 US 830). Rather than perceiving BSA’s long-standing policy of exempting the enumerated tax-exempt organizations from the ad valorem component of the sewer rents as an abuse of this discretion, the Legislature has specifically approved of the classification by including it in the amended statute.

We conclude that the classification employed here easily meets the rational basis test since entities that are tax exempt, such as governments and charitable and religious organizations, may properly be considered less able to pay for a sewer system, especially insofar as the system redounds to the common benefit of all property rather than to one specific parcel. This principle has been recognized often in the context of taxation and, although sewer rents are not taxes (Watergate II Apts. v Buffalo Sewer Auth., 46 NY2d 52, supra), the same concerns are pertinent here. In addition, while all property values are enhanced by a sewer system, holders of tax-exempt properties may be in a different classification because generally they do not share the objective of commercial and residential property owners — the enjoyment of their property’s market appreciation and the realization of profit thereon upon resale.

For much the same reasons, we conclude that, as a matter of statutory interpretation, BSA’s long practice of exempting tax-exempt properties from the ad valorem component is a fair and rational application of the “equitable basis” test provided in section 1180. While classifications fixing different rates must relate to the benefits received (see, 11 McQuillin, Municipal Corporations § 31.30a, at 222 [3d rev ed]), here it cannot be said that governmental, charitable and religious institutions obtain the same value, in terms of over-all market appreciation, from the entire sewer system as commercial and residential property owners. Nor is it irrational to exempt them from those charges designed, to defray the costs of the public benefit services supplied by BSA’s system.

Having concluded that BSA properly applied Public Authorities Law § 1180, we need not reach the issues regarding validity of the 1981 amendments, which simply, and explicitly, carry forward BSA’s prior interpretation.

Accordingly, the judgment appealed from, and the order of the Appellate Division brought up for review, should be modified, with costs to defendant and interveners, to the extent of declaring BSA’s method of calculating sewer rents valid, granting BSA’s motion for summary judgment on its counterclaim, and remitting the matter to Supreme Court for a determination of the amount of the sewer rent deficiencies of Elmwood-Utica for the period July 1,1975 to June 30,1982, together with appropriate interest, and as so modified, affirmed.

Simons, J.

(dissenting). I would affirm the order of the Appellate Division.

The critical fact in this action is that it involves fees, not taxes. The difference is that fees, such as those charged defendant’s customers, are charges for benefits and are related to the value of the benefits received. Taxes, on the other hand, are assessed against all real properties located within the area of the taxing authority and are charges made to support government generally without relation to specific benefits received (see, Watergate II Apts. v Buffalo Sewer Auth., 46 NY2d 52; Jewish Reconstructionist Synogogue v Incorporated Vil. of Roslyn Harbor, 40 NY2d 158, 163-164; Silkman v Board of Water Commrs., 152 NY 327; Matter of Hanson v Griffiths, 204 Misc 736, affd 283 App Div 662; Carmichael v Southern Coal Co., 301 US 495). Although defendant may vary the fees charged for its water and sewer services depending on the user, e.g., commercial or residential, the statute requires that such charges be equitable and that requires that they be equitable in relation to the benefits to the user. Defendant may not adopt classifications fixing different rates unrelated to the benefits received (see, Watergate II Apts. v Buffalo Sewer Auth., supra; Jewish Reconstructionist Synogogue v Incorporated Vil. of Roslyn Harbor, supra; 11 McQuillin, Municipal Corporations § 31.30a, at 222 [3d rev ed]). To the extent that the rates vary from this standard they are discriminatory and constitute a tax to support the sewer system generally (see, Watergate II Apts. v Buffalo Sewer Auth., supra, at p 59; State ex rel. Waterbury Dev. Co. v Witten, 54 Ohio St 2d 412, 377 NE2d 505; Boynton v City of Lakeport Mun. Sewer Dist., 28 Cal App 3d 91, 94-95, 104 Cal Rptr 409, 410-412; Town of Taylorsville v Modern Cleaners, 34 NC App 146, 237 SE2d 484). As we noted when we passed on the constitutionality of the original section 1180 of the Public Authorities Law, the Legislature granted defendant the authority to charge fees to users “only on a basis of service rendered” (Robertson v Zimmermann, 268 NY 52, 64). Neither the original statute nor the statute as amended in 1981 grant defendant the power to tax.

Notwithstanding all of this, defendant has chosen to charge one fee to plaintiff for service to its apartment houses and a substantially lesser fee for service to tax-exempt properties such as hospitals, public office buildings or similar structures whose use of the facilities would appear comparable, solely because they are tax exempt. As a result, the fees assessed against similarly situated property owners are patently inequitable resulting in effect in an unlawful tax upon the nonexempt property owners ultra vires defendant’s statutory powers.

The fee charged by defendant is made up of two components; a charge paid on water use and an ad valorem charge based on assessed value. The chosen method of effecting the unequal treatment of defendant’s customers was to exempt some properties from paying one component of the fee charged as rent, the ad valorem levy, in effect, imposing an inequitable surtax for the extra cost on the remaining users of the system. That is precisely what we said defendant could not do when we rejected a challenge to these sewer fees in Watergate II Apts. v Buffalo Sewer Auth. (46 NY2d 52, supra).

In Watergate plaintiff claimed that the charge was a tax because it included not only a traditional user component but also an ad valorem component based on the assessed value of the property. In sustaining the validity of defendant’s fees, and specifically the ad valorem portion of them, we observed that fees may be established after considering a variety of factors, including in defendant’s case assessed values, but that fees collected by defendant must be “in the nature of fees which * * * bear a direct relationship to the cost of furnishing the water services” (Watergate II Apts. v Buffalo Sewer Auth., supra, at p 58). Because the ad valorem portion of the rents was a rough approximation of the cost of furnishing essential services such as effluent and storm sewer lines, sewage collection and treatment facilities, removal of industrial wastes, ensuring adequate firefighting networks and reserves for future development that would not be adequately reflected in water use, we found it was a reasonable part of an over-all sewer rent formula. The charge was equitably related to the benefit received, we held, and thus was a fee, not a tax, notwithstanding the use of ad valorem levies usually associated with taxes as a measure of computing the fee. The majority now turns on its head the reasoning of that decision and well-established rules concerning the distinction between fees and taxes. It sanctions defendant’s exemption of certain users from the ad valorem component by claiming that the ad valorem component relates to a public benefit although we held in Watergate II that it was permissible because it reflected a benefit to the user.

The majority concludes further that the practice is permissible because the properties are exempt from taxation. Taxation, or the exemption from taxation, has nothing to do with the matter, however. Properties may be exempt from taxes because the Legislature decides, for policy reasons, that the owners need not share fully in the costs of government generally but a discriminatory fee may not be charged for a specific service rendered property owners (see, 1 Priest, Principles of Public Utility Regulation, at 290; State ex rel. Waterbury Dev. Co. v Witten, 54 Ohio St 2d 412, 377 NE2d 505, supra; Boynton v City of Lakeport Mun. Sewer Dist., 28 Cal App 3d 91, 94-95, 104 Cal Rptr 409, 410-412, supra; Town of Taylorsville v Modern Cleaners, 34 NC App 146, 237 SE2d 484, supra). We expressly recognized that point in Watergate II when we stated that because defendant’s sewer rents are fees rather than taxes, “there is no less reason to apply the charges to * * * [tax] exempt * * * property than to that which [is] nonexempt” because the tax classification bears absolutely no relationship whatever to the “reality of the services and benefits actually rendered to property owners” by defendant (Watergate II Apts. v Buffalo Sewer Auth., 46 NY2d 52, 61, supra).

The consequence of these exemptions is that plaintiff’s charges for sewer service are 40% higher than what they would be if all property owners paid rents solely on the basis of services rendered as required under the rule of Watergate. This excess amounts to a tax on plaintiff’s property because it bears no relationship to the benefits and services plaintiff receives but is a general imposition to make up for those properties exempt from the ad valorem portion of the rents. Exempt properties receive benefits from sewer lines and sewage collection and treatment the same as other properties do. To say that the rates are equitable and that there is a rational basis for such distinctions because the market value of the exempt properties is not appreciably increased by the existence of sewer lines and services blinks reality. Although such properties are generally not held for investment purposes, a publicly owned hospital or office building is just as dependent for value upon the existence of an adequate sewage system, for example, as is plaintiff’s apartment building. Neither would exist or at least enjoy its present utility without it. Because the ad valorem component of the rent is specially tailored to reflect this need and value for the sewage connection (see, Watergate II Apts. v Buffalo Sewer Auth., 46 NY2d 52, 60, supra), its expense should equitably be charged to the exempt properties.

Nor do I find persuasive Carey Transp. v Triborough Bridge & Tunnel Auth. (38 NY2d 545, remittitur amended 39 NY2d 806, cert denied 429 US 830). The statute involved in Carey granted the authority unconstrained power to set fees.

I accept the majority’s proposition that the statutory requirement that the rates be equitable does not mean that they must be equal. They must be fair though, and there is nothing fair about sewer rates which impose a surcharge of 40% above value received upon nonexempt owners to compensate for revenue losses resulting from services supplied to others paying substantially less than fair consideration for them.

The practice authorized results in the imposition of a tax, contrary to the authority of the statute and our decision in Watergate. I, therefore, dissent.

Chief Judge Wachtler and Judges Jasen, Kaye and Titone concur with Judge Alexander; Judge Simons dissents and votes to affirm in a separate opinion in which Judge Meyer concurs.

Judgment appealed from and order of the Appellate Division brought up for review modified, with costs to defendant and intervenors, and case remitted to Supreme Court, Erie County, for further proceedings in accordance with the opinion herein and, as so modified, affirmed. 
      
      . It appears that Elmwood-Utica was organized some time prior to the 1977 amendments to section 33 of the Private Housing Finance Law and thus was exempted from local and municipal taxes for a limited period of time and to a maximum of 50% of the value of its real property.
     
      
      . Section 1180, as amended, provides in part: “[T]he authority is authorized to establish a schedule of rates, rentals or charges, to be called ‘sewer rents,’ to be collected from all real property served by its facilities, except that no ad valorem sewer rent shall be assessed against real property exempt from real property taxes pursuant to subdivision one of section four hundred, sections four hundred four, four hundred six, four hundred twelve, four hundred eighteen, subdivision one of section four hundred twenty, sections four hundred forty-six, four hundred fifty-two, four hundred sixty-two and four hundred seventy-seven of the real property tax law” (amended language in italics).
     