Cottage Club loses bid for property tax-exemption

The University Cottage Club will not be granted property tax-exempt status as an historical site, the Appellate Division of the Superior Court of New Jersey ruled late last week. The decision brings to an end a five-year dispute over the exclusive Prospect Avenue eating club's financial obligations to the Borough.

The ruling is a major victory for the municipality, which stood to lose several hundred thousand dollars if a 2003 decision by Department of Environmental Protection (DEP) Commissioner Bradley Campbell to deny the club tax-exemption was reversed.

Had Cottage's appeal of that decision been granted, the Borough could have lost more than $60,000 in annual tax revenues and been forced to refund the club nearly $300,000 in school, county and local taxes paid during the past five years.

Borough officials also worried that a win for Cottage would have prompted the eight other taxed eating clubs to follow suit, potentially denying the city about $500,000 in combined tax revenue. Tower Club has been exempt from property taxes since 1972 because the club hosts preceptorials that are open to all University students.

In its decision, the state appellate court ruled that the DEP acted properly when it denied Cottage's request for historical-site-based tax exemption.

"The DEP's denial of plaintiff's application, based on the limited public access that Cottage Club was willing to provide (up to 12 days a year), was reasonable and within its statutory authority," the appellate panel wrote in its opinion.

In July 2001, Cottage attorney Thomas Olson filed a petition for historic site designation that would have exempted the club from local property taxes.

In response to that initial application, the state assembly overwhelming passed (71-1-4) the so-called "Cottage Club Bill" in December 2004. Proposed by Assemblyman Reed Gusciora (D-Princeton Borough), the bill requires that historic properties serve a "primary mission as an historical organization to research, preserve and interpret history and architectural history" in order to be exempt from property taxes.

Under the 2004 law, tax-exempt historical sites must also be open to the public for at least 96 days annually.

"I think it's almost a unique circumstance, what Cottage Club attempted to do," Gusciora told The Daily Princetonian in January 2005, a month after the passage of the bill. "Everyone knows that they're an elite club. I think it was a selfish thing what they wanted to do. Given who the membership and alumni are, they could probably raise the money [for property taxes] in the course of a weekend."

Cottage was added to the New Jersey Register of Historic Places and the National Register of Historic Places in 1999 because of the "architectural structure of the building, high degree of historic integrity, and significant cultural contributions to the community," according to the club's website. Under New Jersey law, such designations do not automatically guarantee property tax exemption.

According to Borough records, Cottage's property tax bill totaled $63,146 in 2006. The 2.5-story Georgian Revival-style clubhouse was designed in 1903 by Charles Follem McKim of the prominent firm McKim Mead and White — which also designed FitzRandolph Gate — and was completed in 1906. Today, the clubhouse and its 1.3 acre property are assessed at $1.5 million.

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"I agree that there should be historic preservation. We should promote our buildings, but it should not be at the expense of taxpayers," Gusciora added in the 2005 interview. "The Cottage Club wishes to be an exclusive club, so they should not be exempt unless they want to open their parties to the public."