Princeton Council held a closed session Monday to discuss the lawsuit challenging Princeton University’s tax exempt status.
The municipality is named as a defendant in the suit, brought by public interest lawyer Bruce I. Afran in 2011 on behalf of local residents Kenneth Fields, Mary Ellen Marino, and Joseph and Kathryn King.
The suit takes issue with the tax-exempt status of University properties, arguing that they are being used for commercial functions; it challenges the University’s status as a tax exempt non-profit organization. The impetus for the suit came after a 2010 property tax reevaluation in Princeton, which resulted in increases in assessed values and therefore in property tax payments.
Princeton University is the town’s largest taxpayer and the lawsuit, which has been likened to David taking on Goliath, could have major implications for home-owners. It could potentially reduce their property taxes, which would be a boon to residents of modest or fixed incomes.
According to the University’s website, its 2014 tax payments comprise less than one percent of its 2013-14 operating budget, which was $1.582 billion.
In lieu of paying taxes to the municipality on all of its properties, the University contributes a yearly payment or PILOT (payment in lieu of taxes) and makes certain properties eligible for taxation. In 2014, it paid $8.5 million in property taxes and $2.75 million in PILOT payments. For 2015 the University will make $2,860,000 in PILOT payments to Princeton as part of a seven-year agreement with the municipality that calls for four percent annual increases.
According to the Princeton Tax Assessor’s office, the University owns 1,035 acres of land in Princeton with a total estimated valuation of $1.79 billion. Some 27.6 percent of this valuation is taxable, the remainder is exempt from property taxes.
Before moving into closed session Monday, the Council looked for comments from members of the public.
But only one person from the community, Dale Meade, had turned up to speak to the Council represented by President Bernie Miller and members Jo Butler, Jenny Crumiller, and Patrick Simon. Lance Liverman had said he would be along later.
Town Administrator Marc Dashield was also a participant in the discussion as was attorney Harry Haushalter. According to his website, Mr. Haushalter’s special areas of expertise include New Jersey State taxes, local property taxation, tax litigation, and property tax abatement.
On Monday, Ms. Butler arrived clutching a June 1 cover story in a local news publication with a photograph of attorney Mr. Afran on the cover and posing the question “Bruce Afran: constitutional crusader, or skunk at the garden party?”
The article by Vincent Xu points out that Mr. Afran has represented plaintiffs in lawsuits against Princeton University, the Institute for Advanced Study, and the town of Princeton.
The article goes on to describe Mr. Afran as a “public interest lawyer devoted to civil liberties” for his work on behalf of Save the Dinky citizen group and the Princeton Battlefield Society.
Mr. Meade, a 43-year resident of Princeton, addressed the members of the Council, to whom he is no stranger, having previously spoken out on the issue of property taxes, in particular, the ways in which they are assessed and the degree of oversight the municipality has or should have with respect to this process.
“I am an advocate of strict compliance with New Jersey statutes and IRS regulations,” began Mr. Meade, pointing out that he was once a member of the Princeton Fair Tax Revaluation Group. “The municipality should be neutral with respect to this topic,” he said. “It should not take an advocacy position but rather comply with existing statutes and regulations. What I think is missing in the area of property taxes is independent oversight. The tax assessor is paid by the municipality but the Council is not supposed to tell him how to do his job. I feel that they should maintain that position and look at both sides of the issue and not take a position.”
Mr. Meade went on to advise the Council to be “squeaky clean” on conflicts of interest. “Anyone with a connection to Princeton University should not participate in this discussion; not only should they not vote, they should not participate at all.”
In response, Ms. Butler pointed out that Mayor Liz Lempert and Council Member Heather Howard had been recused. Ms. Howard is employed by the University, as is Ms. Lempert’s husband.
After his brief comments to the Council, Mr. Meade said that he had been prompted to speak in the hopes of forcing a clarification of what the municipality’s responsibility is regarding property tax assessments.
In February, tax court Judge Vito L. Bianco denied the University’s request to have the lawsuit challenging its tax exempt status thrown out.
In April, a state appeals court declined to hear the University’s appeal of Judge Bianco’s ruling.
At that time, Mr. Afran commented: “The issue is not whether the taxpayer will win but how much of the University’s tax exempt status will remain if this goes to trial.” He estimated that if the entire University campus were valued for tax purposes, the average Princeton taxpayer could potentially see a reduction of their tax bill of between 30 and 50 percent. He described contemporary universities as “hedge funds masquerading as educational non-profits.”
The challenge to the University’s property tax exempt status will be tried in New Jersey tax court, possibly in the early part of 2016.