Cottage tax status still undecided

This summer, Cottage filed a motion in the Supreme Court seeking an order requiring the state’s Department of Environmental Protection (DEP) to grant the club tax exemption, but the court denied the motion without prejudice and gave Cottage the right to re-file the motion with a lower court.

Cottage’s argument in the motion centers on state statutes enacted in 2004 and 2007 that barred the club from receiving tax-exempt status. The club argued that retroactive application of the statues was invalid.

If Cottage were granted tax exemption, Princeton Borough would owe the club nearly $380,000 in property taxes paid since the time of its application for historical site certification in 2001.

Cottage plans to proceed and take the case to the New Jersey Superior Court, Cottage Club attorney Thomas Olson said in an interview Thursday.

This latest salvo in the legal battle began in March 2007, when Cottage challenged a DEP decision that denied the club’s petition for certification as a tax-exempt historic site.

The State Supreme Court ruled in May 2007, though, that Cottage was entitled to tax-exempt certification because the club satisfied all of the DEP’s requirements in place at the time of Cottage’s application, reversing an earlier appellate court decision.

But the month after that decision, the state legislature passed a law reinforcing a piece of 2004 legislation — the so-called “Cottage Bill” — that required an establishment to be open to the public for 96 days a year to be eligible for tax exemption, though the previous standard, which Cottage could meet, was 12 days a year.

The June 2007 bill stated that, in the case of historic sites where “access is so severely limited as to be effectively denied,” the additional burden on taxpayers “far out-weighs any public interest it might serve.”

Cottage first pursued applying for property exemption on the basis of its historic status in 1998.

At this point in time, the DEP told the club that public access would be necessary, advising that 12 times per year would be sufficient, according to a history of the case in court documents from May 2007.

The club was added to the New Jersey Register of Historic Places and the National Register of Historic Places in 1999, but these designations do not affect tax-exemption status.

Cottage subsequently applied for historic status and tax exemption in 2001 after implementing a public tour. The DEP nevertheless denied historic certification to the club in 2003 because of a sense that the requirements for tax exemption were not stringent enough.

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In 2004, the “Cottage Bill” was passed, and Cottage subsequently filed suit to challenge it. In 2006, the Appellate Division of the State Superior Court ruled against the club. The decision was then appealed to the State Supreme Court, which ruled in the club’s favor in May 2007.

Olson said that Cottage met the DEP’s requirements at the time of its application.

“It’s fairly apparent ... that they were amending this statute [to respond to] Cottage Club,” he said.

Borough attorney Michael Herbert, however, said that the club’s motion abuses tax exemption at the public’s expense.

“We think that’s a perversion of what the tax exemption statute for historic structures was intended to be,” he said. “They want a free ride, and we think that is unconscionable.”

Borough councilmen Roger Martindell and Andrew Koontz both said in interviews Thursday that giving Cottage tax-exempt status and returning its property taxes paid since 2001 would be unfair.

“[The exemption would exist] so that certain individuals that run a ... high-end club to which the public is not invited ... [can] continue a certain way of life,” Martindell said. “It would be totally unjustified as a matter of public policy for the Borough taxpayer to have to make that payment.”

Koontz said that Cottage was taking advantage of a statute meant to ease a financial burden on other types of institutions.

“[It] flies in the face of the legislative intent, [which] was to protect museums ... and schools,” he said.

Martindell added that “If the Borough were required to [repay] Cottage,” each Borough household would be faced with a tax increase of “roughly $100.”

Martindell said that if Cottage were to win, the Borough may appeal to the University for added financial assistance.

“I think it would be appropriate for the Borough to go to the University and say ... ‘Look, you’re a ... multi-billion-dollar organization, and Cottage Club wouldn’t exist but for you,’ ” he explained.

But, he added, “we’re not there yet.”