$500,000 million in tax revenue threatened if all clubs win exemption, officials say.
By: Jennifer Potash
Imagine the financial impact if the stately manors and mansions on Hodge Road were taken off Princeton Borough’s tax rolls.
While that scenario may be farfetched, it has become a real possibility for a similar row of handsome and valuable borough buildings.
Princeton Borough officials are worried that an application for tax-exempt status by a privately owned Princeton University eating club on Prospect Avenue could lead to a loss of nearly $500,000 in tax revenue should the other clubs on the street follow suit.
The Cottage Club, 51 Prospect Ave., has submitted an application to be added to the New Jersey Register of Historic Places. That designation would give the club more than just a certificate to frame; it would also give it the opportunity to receive exemption from paying property tax.
Unlike the federal registry of historic places to which Cottage Club was added in 1999 New Jersey’s registry permits properties owned by a nonprofit corporation to become tax-exempt.
So Cottage Club, assessed at $1.5 million, would no longer have to pay its annual $51,237 property-tax bill.
That potential loss in tax revenue led the borough to challenge the club’s petition for tax exemption in tax court as well as its historic designation application to the state Department of Environmental Protection.
Princeton Borough Mayor Marvin Reed said if Cottage Club is successful, it would establish a precedent for the 11 other private clubs to seek tax exemption.
A 12th club, Tower, was exempted in 1972 because it hosts academic seminars called preceptorials for members and nonmembers, said borough Tax Assessor Carol Caskey.
At stake is the roughly $480,000 in property taxes and sewer fees paid to the borough, Princeton Regional Schools and Mercer County.
The borough faces the additional complication of having over 50 percent of its land already declared tax-exempt.
Without the clubs, the borough taxpayers would have to pick up a greater share for various municipal services, such as police, fire and garbage collection, said Princeton Borough Councilman Roger Martindell.
"Why should they get these services for free and have the taxpayers support those who eat and play at these clubs?" he said. "It’s fundamentally unfair."
Cottage Club’s filing in tax court claims the club already has state historic designation but Elaine Makartura, a DEP spokeswoman, said Cottage Club’s application for historic designation is still under review.
Borough Attorney Michael J. Herbert cited a Nov. 4 letter from Dorothy P. Guzzo, administrator of the Office of Historic Preservation to DEP Commissioner Bradley Campbell, which recommended the club’s addition to the state historic registry.
Ms. Makatura said the document was a "template" letter and does not represent the department’s position on the Cottage Club application.
Mr. Herbert argues the club should be denied the state historic designation because it isn’t open to the public on a regular basis, which is one of the criteria for the designation.
"What this means is somebody could acquire an old farmhouse on his property, form a nonprofit corporation, convey the title, close it off to the public and receive tax-exempt status," Mr. Herbert said.
A description of Cottage Club’s history on its Web site describes the club as "not only to be a gathering place for meals and friendship, but also a sanctuary to study, relax and enhance the quality of life for its current members, alumni and their guests."
While the club facilities may be rented by members or non-members sponsored by members, there is no indication Cottage Club is open to the public.
Pam Husick, club manager, said in a published report the club is open to the public but did not provide specifics.
Even Princeton University students who are not members cannot attend a party without an invitation from a club member, Mayor Reed said.
"By no stretch of the imagination are these clubs open to the public in the sense the (state) Legislature ever intended," Mayor Reed said.
And nonprofit status is not always a clear path for tax exemption, Mr. Herbert said. Over a decade ago, a nonprofit firm that conducts standardized tests for admission to secondary schools sought tax-exempt status in court and lost, he said.
H. Arthur Bellows, chairman of Cottage Club’s board of governors, did not return a call seeking comment Thursday. Club attorney Tom Olson could not be reached for comment.
In the event Cottage Club wins its case, Princeton University has a moral obligation to make up the difference to the municipality, Mr. Martindell said.
"There clearly would be no eating clubs if not for the university," he said.
Lauren Robinson-Brown, director of communications for Princeton University, said the university does not get involved in disputes between the private eating clubs and the borough.
Pam Hersh, the university’s director of community and state affairs, said the clubs are separate entities from the university and the university "works very hard with the borough on our contributions. But that does not mean the university would pick up the tab for buildings and properties it does not own."
In past legal cases and in other disagreements over municipal policy, representatives of Cottage Club have portrayed the organization as a private club and not a place of public accommodation.
In 2000, Cottage Club, along with two other eating clubs, protested a smoking ban in restaurants, bars and private clubs adopted by the Princeton Regional Health Commission. As private facilities, they should not be subject to the smoking ban, the clubs’ representatives said. The ban was subsequently overturned by the courts.
The three clubs, including Cottage Club, also argued the facilities were private organizations in a lawsuit filed by Sally Frank in the 1980s seeking to open membership to women. That case was settled in 1992.
For the clubs to now claim to be open to the public "is a degree of hypocrisy that is outrageous," said Mr. Martindell.

