With court ruling, Cottage secures tax-exempt status

The New Jersey Supreme Court ruled yesterday that Cottage Club is eligible for property tax exempt status and that Princeton Borough must reimburse the club for its tax payments, totaling more than $300,000 since 2001. The Borough also stands to lose about $59,000 annually in future tax revenue from Cottage's new status.

To fulfill this compensation, the Borough will raise taxes.

"The taxpayers are being forced to pay for a club they are not allowed to use, which is ironic, isn't it?" Princeton Borough Mayor Mildred Trotman said.

The Borough has yet to decide whether to raise the taxes gradually or over a single year. Borough Council member Roger Martindell said he favors levying the taxes for the 2007 fiscal year to show local taxpayers the "immediate, direct and irrevocable consequence [of the decision] to their pocket book." Such action would raise property taxes from 3 to 7 cents on 100 dollars of assessed evaluation, he said.

Cottage applied for tax-exempt status in accordance with a state law dictating that historic properties can be tax-exempt if they are open to the public for 12 days each year. The Borough refused to grant the status, and the club sued.

In 2004, State Assemblyman Reed Gusciora presented the "Cottage Bill" that created stricter guidelines for organizations to obtain tax-exempt status in the state. The bill forces historic sites to be open 96 days of the year and to meet qualifications as a nonprofit to be considered for tax exemption status.

The seven-member Supreme Court, however, unanimously ruled yesterday that Cottage would be eligible for tax-exemption because the Borough failed to develop sufficient regulations for the granting of such status.

Various Borough Council members argued against the ruling, saying that tax exemption should be reserved for organizations that provide public benefit, such as religious groups and museums.

"Clearly the Cottage Club provides no public purpose to the community of Princeton, it provides purpose for an exclusive, elite, wealthy, protected nonpublic function as an adjunct to Princeton University," Martindell said. He added that one option the Borough is considering will be to ask the University to cover the tax bill.

"If [the club] won't pay its own tax bill, and Princeton University won't step up and cover the moral obligation that the club has, then the municipality has the option of declaring a public purpose that would remove the Cottage Club as it currently exists as long as we provide fair market value for the acquisition of the property," Martindell said.

The Borough also might ask Gusciora to push harder for the bill he recently introduced that would retro-date the "Cottage Bill" to 1998, Borough Council member Andrew Koontz said. Such action would force Cottage, which received historic site status in 1999, to either be open to the public for 96 days each year or to pay its taxes.

The president of the Cottage graduate board did not respond to request for comment.

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In light of this recent decision, Koontz said he does not fear that other clubs will attempt to file for tax exemption. The stricter regulations under the 2004 state statute would require clubs to open their doors to the public for more than a quarter of the year.

Tower Club was able to receive tax-exempt status in 1972 when it argued that it provided spaces for precepts, seminars and social functions for the University. Tower graduate board president Greg Berzolla '87 has said that the club pays money to the town.