The opinion of the court was delivered by: HIGGINBOTHAM
On May 1, 1968, the Spectrum Arena, Inc. (hereafter referred to as the "Debtor Corporation"), was involuntarily placed in reorganization under the Bankruptcy Act of July 1, 1898, Chapter 10 (11 U.S.C. § 501 et seq.).
The land and building in which the Debtor Corporation holds a leasehold interest (hereafter referred to as the "Spectrum"), are owned by the City of Philadelphia; the Debtor Corporation is a mere tenant. The terms of the leasehold are set forth in a Construction and Lease Agreement dated May 26, 1966, between the City of Philadelphia and Jerry Wolman. The leasehold interest was assigned by Jerry Wolman to the Debtor Corporation by agreement dated May 31, 1967. In substance, under the Construction and Lease Agreement, the Debtor Corporation as assignee agreed to build the Spectrum Arena at the Debtor Corporation's sole expense, and title to the building would be in the City. Thus, unlike the City's experience with Veteran's Stadium, wherein more than $25,000,000 worth of city bonds
were issued to start the Stadium, the Spectrum was built without the city's credit or bonds, but nevertheless the City has title to this building which purportedly cost approximately $8,852,000.00. The City now asserts that the Debtor Corporation, the lessee, should pay real estate tax on the building which the City owns.
On June 1, 1971, Harvey N. Schmidt and William David Webb, the trustees for the Debtor Corporation, filed a petition for tax liability determination, in which they asked this Court to
(1) strike the name of Debtor Corporation from real estate assessments and billings and to withdraw and cancel currently unpaid real estate taxes, interest and penalties for the years 1969, 1970 and 1971, totalling $922,808.75; and
(2) order the City and the Board of Revision of Taxes to cease and discontinue the assessment and levy of real estate taxes against the Debtor Corporation so long as the "property is owned by the City of Philadelphia and used for public purposes."
There are two primary issues facing this Court:
(I) Is the Debtor Corporation's leasehold interest in the Spectrum exempt from real estate taxes because the facility is used for public purposes?
(II) Even if the leasehold interest is exempt from real estate taxes, does the Construction and Lease Agreement of May 26, 1966 nevertheless require the lessee to pay real estate taxes on the Spectrum?
All parties agree that pursuant to the Bankruptcy Act, Chapter 2 (11 U.S.C. § 11(a)(2A)), I have jurisdiction to determine the instant tax issues. After careful consideration of the superbly prepared briefs and the applicable authorities, I conclude that (1) the Debtor Corporation's leasehold interest in the Spectrum is exempt from real estate taxes because of its use for public purposes; and (2) that the Construction and Lease Agreement does not require the Debtor Corporation to pay any alleged real estate taxes.
The taxes in dispute were assessed pursuant to the Pennsylvania "General County Assessment Law", Act of May 22, 1933, P.L. 853, 72 P.S. 5020-1 et seq., Section 204 of which provides as follows:
"The following property shall be exempt from all county, city, borough, town, township, road, poor and school tax, to wit:
(g) All other public property used for public purposes, with the ground thereto annexed and necessary for the occupancy and enjoyment of the same, but this shall not be construed to include property otherwise taxable which is owned or ...