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Vol. LXI, No. 23
Wednesday, June 6, 2007
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Cottage Club Prevails in Tax Battle; Borough on the Hook for $326K

Matthew Hersh

An appellate division of the state Supreme Court ruled last Wednesday that a privately owned eating club serving members of Princeton University's student and alumni population could receive more than $320,000 in county, school, and municipal back taxes — a decisive victory for the club, and a potentially devastating blow to Borough Hall, as well as Borough taxpayers.

The club, the University Cottage Club, at 51 Prospect Avenue, should be classified as a certified historic site, the decision stated, allowing for the facility to qualify for tax-exempt status. The decision overturns a 2003 ruling by then-New Jersey Department of Environmental Protection Commissioner Bradley Campbell, who denied the club's application for historic site certification. The club first sought the designation in 1998, and a subsequent tax-exempt tag in 2001. The ruling effectively requires Princeton Borough to return the $320,760 in county, school, and municipal taxes it has collected since 2001 — about $50,000 per year. State statute dictates that the monies must be returned within the year.

The back taxes owed to the 101-year-old Cottage Club equal just over three cents in the municipal tax rate.

Mr. Campbell's 2003 decision denying historic status to the Cottage Club centered around the club's limited public access, but club officials have argued that the minimum standard of public access, 12 days per year, as set by the DEP's Office of Historic Preservation, was sufficient.

"The court reviewed all the facts, and based on the law, the club was entitled to the exemption," said Cottage Club attorney Thomas Olson.

The 29-page unanimous court decision states that Mr. Campbell, as DEP commissioner, acted "arbitrarily" in his denial of the Cottage Club's application. The state Legislature, in December 2004, enacted a law creating more stringent public access requirements — at least 96 days a year — for historic sites seeking tax-exempt status. That legislation, however, followed the Cottage Club's application denial.

"Public access is an essential component of historic-site tax exemption," the Appellate Division decision read. "However, because Cottage satisfied all of the relevant standards in effect when it perfected its petition for tax-exempt status, Cottage was entitled to certification as a tax-exempt site."

The subsequent legislation, effective December 22, 2004, only applied to applications after that date, the court ruled, thus nullifying Mr. Campbell's October 2003 decision.

Assemblyman Reed Gusciora (D-Princeton Borough) introduced legislation in May that would make a 96-day open access requirement for historic sites retroactive to 2001. State Sen. Shirley Turner (D-Lawrence) has introduced a companion Senate bill.

"This is indeed a disappointment, especially for Borough taxpayers," Mr. Gusciora said Thursday at a news conference where he and other Borough elected officials voiced their concern. Mr. Gusciora said the court ruling would set a "dangerous precedent throughout the state," referring to the Cottage Club as a "fraternity.

"While there are many distinguished fraternities throughout the state, imagine if every single fraternity applied for tax exemption — it would create havoc in the communities that host the colleges."

Mr. Gusciora urged the Cottage Club to "do the right thing" and not accept back taxes. Mr. Olson, the Cottage Club attorney, last week said the club looked forward to "resuming a good relationship with the Borough.

"The club regrets any divisiveness," he said.

Borough Mayor Mildred Trotman said Borough Hall would look for the pending legislation in the state Assembly and Senate to pan out before the municipality negotiates with Cottage Club. "We need to take the necessary steps to protect the taxpayer, and make sure that [Cottage Club] pays its fair share in taxes for the municipal services they get — the same as the other clubs," she said.

Borough Councilman Andrew Koontz called refunding the Cottage Club's back taxes an "absolute last resort."

The court's decision represents what Borough lawmakers had feared when tailoring the 2007 $24.1 municipal operating budget, which passed last month. In March, as Borough Hall prepared itself for a court ruling favoring the Cottage Club, Borough Councilman Roger Martindell suggested either raising taxes to offset the refund, cutting municipal services and keeping taxes at a lower rate of increase, or refunding the club, using that as a bargaining chip with Princeton University for increased payments in lieu of taxes — though Mr. Martindell acknowledged the club's private status, with no official affiliation to Princeton University.

Currently, Princeton University is in the second year of its three-year, $1 million in-lieu agreement with the Borough. That contribution will increase each year commensurate with the percentage increases in the approved tax rate. In Princeton Borough, the University paid approximately $4.3 million in FY2006 on taxed buildings and infrastructure. In the Township, it paid approximately $4.6 million. The school is the largest taxpaying entity in both the Borough and the Township.

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