PACKET EDITORIAL, Aug. 28
That on-again, off-again battle to determine whether Princeton University’s Cottage Club will or won’t pay property taxes to Princeton Borough is evidently far from over.
And while the circumstances surrounding this particular skirmish are certainly unique, the outcome could have an impact far beyond the campus of one Ivy League university and the treasury of one Mercer County municipality.
For those who haven’t kept up with the twists and turns of this saga, the situation is basically this:
In 2002, Cottage Club, a private eating club listed on both the state and national Register of Historic Places, applied for an exemption from local property taxation, claiming its status as a historic site and a nonprofit organization made it eligible for such exemption.
A year later, the state Department of Environmental Protection, which has jurisdiction over the designation of historic sites, denied the exemption request on the ground that Cottage Club was not generally open to the public. The DEP’s Office of Historic Preservation suggested that the club be open a minimum of 12 days a year to be eligible for tax exemption.
When Cottage Club went ahead and followed that advice, Princeton Borough suddenly realized that it stood to lose about $50,000 a year in property-tax revenue and promptly sought relief, first from the DEP commissioner, then from the Legislature. In 2004, a bill requiring private historic sites run by nonprofit organizations to be open to the public a minimum of 96 days per year, was passed and became law.
An appeals court upheld that law, but the Supreme Court ruled this past May that lawmakers did not specify that it was to be applied retroactively. Cottage Club took this to mean it could seek about $320,000 in refunds for municipal property taxes it had paid since 2002. Princeton Borough took it to mean that the law needed to be further clarified which led to passage of another bill, signed into law by Gov. Jon Corzine just last week, making the 96-day minimum retroactive to 1999, three years before Cottage Club began its quest for tax exemption.
Princeton Borough thinks this should settle the matter once and for all but Cottage Club apparently has no intention of acquiescing. The central question, which will almost certainly have to be decided again by the Supreme Court, is whether the newest version of the law trumps the court’s earlier ruling or that ruling still stands.
Regardless of the outcome of this dispute, there’s a much larger issue looming here. What this protracted legal battle brings into clear focus, once again, is the price we all pay for New Jersey’s over-reliance on property taxes to finance local government.
Aside from some loose change picked up from license fees, parking meters and a handful of other sources, municipalities in this state (as well as counties and school districts) raise practically all of their revenue from property taxes. That means every time a nonprofit organization an educational facility, hospital, church, library, historic site or other piece of property that serves a public purpose wins a property-tax exemption, every other resident bears an ever-larger share of the tax burden. The result is widespread resentment toward nonprofits, and an unhealthy tension between institutions that are meant to serve the public and the municipalities they choose to call home.
Last year, the Legislature made some bold promises about reforming New Jersey’s regressive property-tax system. The Cottage Club case offers yet another vivid example of how little meaningful progress has been made toward this worthy goal.

