U. to appeal denial of its motion to dismiss newer tax exemption lawsuit

The University announced on Thursday that it will appeal a Morris County tax court judge’s denial of the University’s motion to dismiss a lawsuit against its property tax exemption for the 2014tax year.

The University is asking the Appellate Division of New Jersey’s Superior Court to review the denial of the motion to dismiss.

The lawsuit in question is separate from a 2011 suit challenging the University’s property tax exemption for 19 buildings alleged to have non-educational or primary uses, University spokesperson Martin Mbugua said.

In the lawsuit whose motion to dismiss was adjudicated on Thursday, four town residents are challenging the University’s receipt of a property tax exemption from the town in 2014.

The lawsuit’s premises are flawed, University Vice President and Secretary Robert Durkee ’69 said.

“The standard in New Jersey for being eligible for property tax exemption is that your dominant purpose should be an educational institution, and Princeton’s dominant motive is to be an education institution," Durkee said. “Our dominant motive is not to make a profit. By law and by precedent, we believe this case should not go forward.”

The University’s legal counsel is moving forward to challenge the decision issued because the University believes it has a compelling case, Durkee said.

“This is not a trial of the case, but a motion to dismiss the case,” Durkee explained. “The plaintiffs of the case have not argued that Princeton’s dominant motive is to make a profit.”

The University will wait for a decision from the New Jersey’s Superior Court on whether the appeal will be heard to decide to go to trial, Durkee said.

“If it will not be heard, the case needs to go to trial,” Durkee said. “We have every confidence that if it goes to trial, we will be successful.”

The University also filed a motion to dismiss the case so that it does not have to commit the resources that are otherwise called for by the litigation, especially in a situation where the outcome seems so clear that the University’s tax exemption will be ultimately supported, Durkee said.

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“This case has nothing to do with specific buildings,” Durkee explained, referring to the 2011 suit. “There was a case earlier that had to do with buildings that has not been adjudicated yet.”

Both cases are being adjudicated by the same judge, Vito Bianco.

University General Counsel Ramona Romero deferred comment to Mbugua.

Bruce Afran, legal counsel for four town residents who brought the latest suit, said he believes the University has engaged in widespread commercial activity and that the conduct will deprive the University of its tax exemption.

Afran noted examples of what he said was the University’s commercial engagement, including being involved in a licensing deal with Eli Lilly and Company worth over $200 million and giving out $40 million a year in profit-sharing to faculty members from patent licensing. He added that the University owns two “vast office complexes” on Route 1 and is planning to triple the scale of the Princeton Forrestal Center to support a sizable hotel project.

Running a chain of publicly accessible restaurants on campus and a television company are also instances of for-profit activity, Afran said.

“The University is the largest renter business in Princeton,” Afran said. “They own 1,000 houses here that they rent out, and this is not to students. They are competing with local real estate businesses.”

Afran said the University’s legal arguments that its “dominant motive” is education relied on a 1949 case that has been superseded by cases in recent years.

“Judge Bianco said specifically that this 1949 decision is not controlling over this case,” Afran said. “The University is wrong ... That’s exactly what Bianco rejected today."

Afran — as well as the University in a press release —characterized the appeal of a denial of a motion to dismiss as "unusual."

“The immediate appeal is very unusual as it shows that the University feels threatened,” Afran said.

He said this type of appeal is rarely successful and that the University must obtain permission to appeal.

“The court may grant it just so to confirm the decision,” Afran said. “Judge Bianco has never been reversed.”

The University will be paying at least 40 million in taxes if the plaintiffs ultimately prevail, Afran said.

“This is not about being anti-University,” he said. “This is about respecting the fact that the modern university has become a commercial player. The University has about a $20 billion endowment, [and] the annual amount it has to pay in taxes amounts to 1 to 2 percent, which it can well afford. Students don’t want to be part of school that’s not respectful of the community. And I know many students and faculty who think that the University should be paying its fair share."

Mbugua said the denial of the motion to dismiss was delivered orally.

Bianco’s chambers did not respond to a request for comment, so a record of the decision was not immediately available.