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Borough residents are suing the University and the Borough to force the University to pay taxes on certain properties that are currently tax-exempt.

A group of five residents began planning the suit several months ago as a way of alleviating the effects of last year’s property tax revaluation.

“It was the revaluation that prompted us to take a closer look,” said Kenneth Fields, one of the residents bringing the lawsuit. “The way it looks to us is that the expensive property in town was undervalued, and basically the rest of us are picking up the slack.”

“We’re trying to increase the amount of money that the University pays in property tax so that the rest of us can pay a little less,” Fields said.

He added that the plaintiffs would later be challenging the revaluation process in court.

The plaintiffs are a group of neighbors who came together in response to the property tax revaluation conducted last year.

The suit is partially funded by the estate of Eleanor Lewis, who died of cancer in November.

“Eleanor was very much interested in public interest matters. After the revaluation, she was incensed and basically she was the one who got the rest of us to look at it,” Fields said.

“Eleanor just had a few months to live, and she knew that; she was dying of cancer,” he added. “She put some money aside, basically, to pay for a lawyer.”

Bruce Afran, the lawyer representing Fields and three other Borough residents bringing the lawsuit, is arguing the case on the grounds that certain University buildings are not used for academic purposes and should not be tax-exempt.

“It’s very possible that Borough residents are paying perhaps 20 percent more in taxes than they should be because the University is not properly paying taxes,” Afran said.

If the suit prevails, the University may pay an additional $2.5 million in taxes to the Borough.

“We’re challenging only buildings that are not used for academic purposes,” Afran said. “The way the University describes these buildings [in its tax documents] really does not identify the actual functions.”

Afran said that the wording of the state laws suggests a narrow interpretation of which properties should qualify for exemption.  “Where it talks about religious buildings, it says, ‘all buildings actually used in the work of religious corporations.’ When it talks about colleges, it says ‘all buildings actually used for colleges.’ It doesn’t say ‘in the work of colleges.’ The legislature seems to have deliberately narrowed the academic exemption,” he explained.

One of the buildings whose exemption is in question is that of the Princeton University Press.

Because the Press is independent of the University, Afran said, “the University shouldn’t be claiming an exemption to the land that the Press is sitting on.”

The plaintiffs’ legal complaint also challenges McCarter Theatre, which is owned by the University but operated by McCarter Theatre Center, and Richardson Auditorium, which, Afran said, the University promotes “as a professional concert venue” and which only occasionally hosts academic speakers.

Other properties whose exemptions are in question include Prospect House; Frist Campus Center; Dillon Gymnasium; McCosh Infirmary; the graduate tennis courts; 71 University Place, which houses the Office of Conference and Event Services and the Princeton Summer Sports Camps; the John Maclean House, which houses the Alumni Association; New South, which is partly used for administrative functions; Chancellor Green; 48 University Place, which holds The Daily Princetonian and other publication offices; and Ivy Lane properties.

“What we’re talking about is less than 1 percent of [the University’s] unearned income every year,” Afran said. “If the University would pay its full share of taxes, it would pay another $2.5 million, probably. That’s one-half of 1 percent of what the University earns on its endowment every year.”

Afran characterized the ongoing discussions over the University’s payment in lieu of taxes contribution and its request for a zoning ordinance for the Arts and Transit Neighborhood as the University withholding money that should be paid in property taxes to the Borough.

“What the University did last month is threaten to withdraw its $1.1 million gift that it gives to the Borough in lieu of taxes, because the Borough won’t give it a zoning variance for the arts complex,” he explained.

“This is somewhat unconscionable behavior for an institution that is so fabulously wealthy to hold over the head of the Borough monies that should be paid in taxes,” Afran added. “If we get a court to say this money should be taxable, the University will no longer be able to hold it as blackmail over the municipality.”

This particular lawsuit is the first of three legal challenges to the University that the plaintiffs are planning, Afran said, including a similar lawsuit that would challenge the University’s properties in the Township and one that would challenge the valuations of the University’s nonexempt properties.

University Vice President and Secretary Bob Durkee ’69 said that he did not expect the lawsuit to prevail and that the suit may in fact influence the University’s negotiations with the Borough over its voluntary contribution.

“It’s really unfortunate that the University and the Borough are now going to have to spend funds on responding to this complaint, which I think is very clearly misguided,” Durkee noted. “The exempt properties they cite all support the educational mission of the University; that’s why they’re exempt. That’s why the Borough tax assessor has agreed they should be exempt. It just seems like a waste of time and money to have to go through this response.”

Durkee said that he believed that the New Jersey law “has traditionally been understood to encompass any property that is being used to support educational purposes.”

“I think it becomes another reason why we should wait and see what the outcome of the case is before we make any long-term decisions about the voluntary contribution to the Borough,” Durkee said. “I think we’d want to know before we made any long-term plans whether our tax obligation is going to change.”

Durkee reaffirmed earlier statements that the University was not planning to negotiate its voluntary contribution payments — its current agreement with the Borough expires this year — until the joint commission currently examining a potential Borough–Township merge has completed its study and a decision has been made about the future of the municipalities, despite calls from Borough officials for the University to settle the matter in the near future.

The report released on April 4 by the Joint Revaluation Study Commission examining the revaluation process also recommended rigorous reexamination of the University’s tax-exempt properties as a way of easing the tax burden on Borough residents.

The report was issued shortly after the plaintiffs had begun to organize their case but before the lawsuit had been publicly announced.

Roger Martindell, a Borough councilman and the Council’s liaison to the Commission, said it was a coincidence that the Commission released its recommendation to reexamine the exemptions only days after the plaintiffs had filed their complaint.

“We look forward to learning what the claims of the plaintiffs are,” Martindell said. 

He said that the commission did not have a role in this suit but that it would be pleased if the suit accomplished what the commission had advised.

“If this means the University will generate more tax receipts, the Borough will benefit and all the taxpayers could benefit,” he added.

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