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The University reached a settlement with a group of Princeton homeowners who sued to challenge the University’s property tax exemption status, the University announced in a press release Friday. The settlement entails for an $18 million contribution from the University to the town and town residents over the course of six years.

The settlement, which leaves the University’s property tax exemption intact, comes just before the trial in the courtroom of Tax Court Judge Vito Bianco which was set to begin on Monday. The University previously stated it was prepared to go trial.

The agreement stipulates that the University will contribute $2 million per year in 2017 and then $1.6 million per year for the five years thereafter to a fund that will help abate the property taxes of homeowners who qualify for a homestead benefit under New Jersey law.

To be eligible for homestead rebates under current laws, the applicant must be a state resident, have paid taxes on the property, and the property must be the applicant’s primary residence. The rebate also has a general gross income requirement of no more than $75,000, and no more than $150,000 for senior citizens or disabled individuals.

The University also agreed to continue its annual voluntary contribution of $3,480,000 to the town in 2021 and 2022, after the current voluntary contribution agreement ends in 2020.

Finally, the University agreed to make three contributions of $416,700 to the Witherspoon Jackson Development Corporation from 2017-19.

Even though it comes after a series of defeats for the University on rulings as to motions filed with the Tax Court, the settlement is significantly lower than earlier estimates that the University could be liable for as much as $40 million in annual property tax liability. Bianco had previously ruled against a Morristown hospital in a non-profit tax exemption case that appeared to be similar to the one filed against the University.

In describing reasons for the settlement, University Vice President and Secretary Robert Durkee ’69 noted that the University believed it to be a better judgment to help lower-income homeowners and preserving the diversity of the town than to incur the legal expenses in pursuing the trial.

“We found a solution. We found a formula that met with our goals to help the less economically well-off homeowners, and one that met the University’s goal of making social progress,” Bruce Afran, counsel for the plaintiffs in the case, said. He explained that the initial goal of the suit was to ensure more proportionate taxation responsibility in the town so that lower-income residents are not unduly burdened.

"We can't become a preservation for the upper-middle class and the elite," he said.

Previously, Durkee and other University officials said that the probability of a settlement was fairly low. In an interview with the ‘Prince’ immediately after the settlement, Durkee explained that the University “couldn’t have seriously considered the settlement without an agreement that reflects the interest of both sides.”

According to Afran, both sides began actively pursuing a settlement in the case about one month ago. Durkee confirmed this timeline, and noted that the conversation about a settlement was the reason behind postponing the trial, which was originally scheduled to begin on Oct. 6.

“The University worked very, very hard with us to make this solution happen,” Afran said. He noted that during the process of drawing up the settlement, both sides often had daily meetings.

Afran also noted that prior to the finalization of the settlement, his side was prepared to go to trial with more than 1,400 exhibits of instances in which University buildings were used for commercial activities. Similarly, the University has previously noted that it had an extensive list of witnesses including University President Christopher Eisgruber '83, University Treasurer Carolyn Ainslie, and Vice Provost for Space Programming and Planning Paul LaMarche.

Afran also noted that this is the first time any university has created a private fund to directly help disadvantaged homeowners in the local community, and that this fund could be a model for other higher education institutions.

Durkee explained that the University has a long history of helping to provide affordable housing in Princeton.

According to Durkee, between 1990 and 2005, the University contributed well over $1 million to the borough and township for affordable housing.Additionally, the University has donated the land to the Housing Authority to support Karin Court, one of the town’s low-income housing developments. Furthermore, the University has created 56 units of publicly available affordable housing in connection with the development of Merwick Stanworth.

The University also co-founded Princeton Community Housing, an affordable housing initiative, Durkee explained. He also stated that it is highly likely that the University would have negotiated a renewed agreement with the town entailing at least a $3.48 million per-year contribution for years 2021-22 without the settlement.

The newly created private fund will be managed by a third-party non-profit organization. Both sides will collaborate in the next five months to formalize the fund, Afran said. Durkee noted that this aggregate fund of ten million dollars mostly comes from the discretionary budget that otherwise would’ve been spent on litigation. According to Afran, this fund will give payments averaging $2,000 a year per family that qualifies. He also noted, however, that this group of home owners that qualify for the fund have been declining rapidly since 2013.

“No politician in New Jersey has ever delivered something like this to those in need,” Afran said. He also explained that concentrating a smaller sum on the targeted beneficiaries would create greater impact than potentially winning a higher amount in trial to be distributed to everyone in the municipality.

The plaintiffs agreed to withdraw the outstanding complaints as a part of the settlement. However, Afran said that the plaintiffs are not closed to the possibility of renewing the litigation if the University does not continue the fund after the six years specified in the agreement.

“For its size, the University is now doing more for the community,” Afran said, “butwe may come back in a few years if we see that things aren’t going in the right direction.”

In September, a legislation was introduced in the New Jersey legislature that prohibits individuals from challenging tax valuations and exemptions of properties other than their own. University officials previously denied that the University had lobbied for the bill or was involved in its introduction.

“The settlement leaves the University’s tax exempt status in place as it was. This status is justified by the nature of the University —that it is a non-profit, educational institution,” Durkee said.

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