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Vol. LXI, No. 26
Wednesday, June 27, 2007
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Legislature Passes Cottage Club Law

Matthew Hersh

Both legislative branches of the New Jersey State Legislature overwhelmingly passed a bill amendment Thursday that represents a tentative victory for Borough Hall in an ongoing legal debate over the pending tax-exempt status of one of Princeton University's eating clubs.

The bills now enter a 45-day window, awaiting an endorsement or veto from the governor's office.

The swift legislative action, sponsored in the Assembly by Reed Gusciora (D-Princeton Borough) and in the Senate by Shirley Turner (D-Ewing) comes just over a month after the state Supreme Court's appellate division ruled that the privately-owned University Cottage Club at 51 Prospect Avenue could receive historic site certification, thereby becoming tax exempt, and effectively owed six years in tax payments from the Borough, which had continued to collect municipal and county taxes from the club since its filing for tax-exempt status in 2001.

While the Legislature did pass a 2004 amendment to the existing 1962 Department of Environmental Protection provision regarding historic sites, it was passed after the Cottage Club's application submission, allowing for the request to be considered under the old law.

The former interpretation under which Cottage Club, a fraternity-like entity, was considered mandated that tax-exempt historic sites be open to the public 12 days a year. The 2004 amendment, which grew specifically out of the Cottage Club application, stipulated that structures with the same designation be open to the public 96 days a year.

The new legislation, passed last week in light of the May 23 appellate court decision, would require that any buildings approved under the historic site certification label since 1999 now not only offer public access at least 96 days a year, but also maintain a primary mission geared toward historic preservation.

Creating such specific regulatory mandates on state-designated historic buildings will likely have little or no impact on the state's current 42 certified historic sites.

The new law, which passed in the Assembly 59-18 with three abstentions, and in the Senate 32-5 with three abstentions, "is not saying that the Cottage Club has to pay its taxes," said Princeton Borough Councilman Andrew Koontz, a vocal proponent of the legislations. "It's saying that if they want to be tax exempt, they have to retool their mission to the preservation of historic property, and be open to the public for 96 days.

"They can either decide to pay their taxes or comply with this new law."

Cottage Club attorney Thomas Olson criticized any revised legislation as being retroactive in scope, and maintained that the court's ruling was correct, and that the Cottage Club's status should still be considered under the 2001 mandates.

"You can't go back. You can't do that, and it's not in keeping with the Supreme Court decision or the law. You can't change the rules later and say 'you should have been doing this.'"

Built by Charles Follem McKim in the early 1906, the University Cottage Club was entered into the New Jersey Register of Historic Places in September 1999, and was added to the National Historic Register of Historic Places shortly thereafter. Mr. Olsen said that the purpose of the historic designation is to protect the "building, and not necessarily what's it's being used for."

But Mr. Gusciora, the Assembly sponsor of the bill, cited the Taxation and Finance section of the state constitution, which reads that tax exemptions for real and personal property can be "altered or repealed," except those properties used "exclusively for religious, educational, charitable, or cemetery purposes."

"The Constitution is very clear," Mr. Gusciora said, adding that Thursday's amendment affirms "a philosophy that historic sites should fulfill a general interest." Mr. Gusciora went on to say that the original DEP proviso "should have been more vigilant in saying that historic properties truly have a public mission, and should have kept taxpayers in mind."

The Cottage Club's Mr. Olsen agreed, in part, with Mr. Gusciora's assessment, but held a fundamental difference in interpretation: "I think the Constitution is clear that tax exemption can be revoked or modified going forward, but not the other way."

The Cottage Club back taxes equal about three cents in the municipal tax rate.

Mr. Koontz stopped short of claiming victory, saying that bill was a "good step," but the results "remain to be seen."

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