Princeton University has reached an agreement with a group of residents who challenged the school’s property tax exemptions in court, avoiding a trial that was scheduled to begin next week. The case was being watched by schools and non-profits across the state and nation.
Under the agreement, the school will help lower-income Princeton residents pay their property tax bills. The school will contribute $2 million in 2017 and then $1.6 million a year for the following five years to a fund that will distribute annual payments to Princeton homeowners who received a homestead benefit under the New Jersey Homestead Property Tax Credit Act.
The 2017 distributions will establish a maximum amount per household, and any excess after making all eligible distributions will be donated to 101: Inc., a non-profit organization that provides need-based scholarships for graduates of Princeton High School attending post-secondary educational institutions other than Princeton University.
The university will also make three contributions of $416,700 to the Witherspoon Jackson Development Corporation each year from 2017 through 2019. The Witherspoon Jackson Development Corporation is a non-profit entity. The funds will be used to support housing and related needs of economically disadvantaged residents in the Witherspoon Jackson neighborhood and elsewhere in Princeton.
The university also agreed to make a $3.48 million annual voluntary contribution to the town of Princeton in 2021 and again in 2022, the same amount it is scheduled to contribute in 2020, the final year of the University’s current seven-year agreement with the municipality.
The school’s voluntary payment agreement with the town remains fully in place through 2020, Princeton University Vice President Robert Durkee said. That agreement includes an annual increase of 4 percent. The agreement with the town does not extend past 2020, but under the settlement agreement, the university agrees to make the 2020 contribution again in 2021 and 2022.
“I assume that as we get closer to 2020, we will have conversations with the town about what our agreement with them might look like after that,” Durkee said in an email.
Municipal officials and their representatives did not participate in the settlement negotiations. The town was also named in the lawsuit.
“Princeton University cares deeply about preserving the diversity of the Princeton community, and the contributions we have agreed to make will help to achieve that,” said Princeton President Christopher Eisgruber. “We have a long history of contributing to the well-being of our community, not only through our annual unrestricted contributions and targeted contributions for affordable housing, the schools and the library, and community services of various kinds, but in the educational, cultural and other opportunities we provide to members of the community.”
School officials claimed the university would have won the case in court. But given a recent ruling against a hospital by the same judge who is hearing the Princeton case, the school could have ended up paying much more money than the settlement if the judge ruled against the school. The trial could have been lengthy and might have involved the review of a substantial amount of discovery materials in court.
“We had every confidence that the courts ultimately would have affirmed the university’s continuing eligibility for property tax exemption on buildings and facilities that support its educational, research and service missions, but we concluded that the contributions we will make under the settlement agreement are a better expenditure of funds than continuing to incur the considerable costs of litigation,” Eisgruber said in a prepared statement.
Under the agreement between the plaintiffs and the university, the plaintiffs agreed to withdraw their pending complaints for tax years 2011, 2014, 2015 and 2016. As part of the deal the plaintiffs agreed that the settlement”is not to be construed as an admission that any of the university’s exempt property should be subject to taxation,” and they agreed that the settlement “aligns with the university’s commitment to supporting the affordability and socioeconomic diversity of the Princeton community.”
The school took the lead in announcing the deal this afternoon.