Planet Princeton

Princeton University Settles Property Tax Case Out of Court

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.

Krystal Knapp

Krystal Knapp is the founding editor of Planet Princeton. She can be reached via email at editor AT planetprinceton.com. Send all letters to the editor and press releases to that email address.

  • FreshAir

    Dear D14. Great questions. The town of Princeton was named on the University side of the suit as a defendant, because the actions of our tax assessor are sanctioned by the town. Our elected officials/defendants then craftily consulted with the attorney who won relief for Morristown’s citizens. They did so behind closed doors, thereby negating any possibly of public comment and of that winning the attorney ever helping the citizen taxpayers of Princeton. The town’s annual report (which is paid for by all of us taxpayers) reads like a promotional piece for PU. The mayor & at least one other Council member cash a PU paycheck to run their households. Who do you really think our elected officials want to win? They will now point to Witherspoon Jackson & say how wonderful their work is. We can at least be happy for the WJ hood for finally becoming a prized gem in the crown.

  • FreshAir

    Your points are well taken. It’s easy to see what’s happening here. The interests of wealthy stakeholders & of those in (or on the edge of) poverty are protected as usual. Those in the middle class remain an endangered species in Princeton. Yes, it’s beyond horrifying that this settlement has an expiration date, when the tax inequities here don’t. With our municipal leaders sitting on the PU sideline, not in the game, nothing has changed here in any significant way. Still, I applaud the citizens who spoke up & did something (& those smart enough to sign on who received an additional award for their hood). Legislation to keep citizens from addressing gross tax inequities will take hold before renegotiation is needed. This is a PU slam dunk. “Profoundly disappointing” fits this system… “heroic” fits those who tried to win in it.

  • D14

    I’m not sure it was the responsibility of these individual plaintiffs to achieve that result. Is it not more appropriately the obligation of Princeton’s elected officials to take that on, as Morristown did? And will it not become even more critical for Council to do so if Reed Gusciora’s (shameful) bill becomes law?

  • Peter Marks

    Profoundly disappointing is an understatement. For the University, the amounts promised are a rounding error. Targeting specific recipients is an outrage. The settlement should have entailed annual eight figure payments, and those payments should have been used to reduce the property tax bills of each of Princeton’s long suffering tax payers.

    As I have argued previously, Princeton has real problems and they are not going to be solved with fashion statements. Many of those problems are a result of the University’s growth. The settlement described in this report does nothing to offset the costs that growth imposes on our residents. It is a disgrace. The University’s senior officials should be ashamed of themselves.

  • Penny Boudinot

    Despite my great respect for Bruce Afran and the plaintiffs in this case, I find the settlement profoundly disappointing. I emphatically don’t see this settlement as “a useful model going forward,” as SAM60BOS asks. As usual, the University has sidestepped the urgent and crucial question of its for-profit status and has fobbed the town off with dribs and drabs of money rather than make any systemic change in its financial relationship to us.

  • SAM60BOS

    Seems like Princeton University was concerned about what would happen during the trial – both the discovery phase and the uncertainty of the outcome. This was a marathon effort by Bruce Afran and his defendants.

    Can this case serve as a useful model going forward for “sharing success” of Princeton’s patent royalites and other entrepreneurial endeavors? How about Princeton University working in partnership with the municipality and community to support entrepreneurship and innovation by local residents of all ages and demographics? Working together for the benefit of all is perhaps the best way forward.

  • FreshAir

    Endless thanks to the citizens who bravely sought legal justice for homeowners in Princeton. You have given hope to those needing relief, in an unfair tax system. You’re heroes!

  • Dan D’Menny

    I fully support extracting money away from others to subsidize . . . me! I am not poor, and I definitely am not rich, but boy those property taxes are expensive!

    I suppose it’s time to get in line and sue the University for my share.

  • Dafna Kendal

    It doesn’t look like any of the money from this settlement will go to Princeton Public Schools. PPS gets some money from property taxes that the university pays on its properties that are on the tax rolls. PPS doesn’t get ANY money from the PILOT agreement between the municipality and the university ($3 million a year, approximately) and nothing from the PILOT between the university and the Institute for Advanced Study (which pays town $250,000 annually).

  • PrincetonResident

    Will any of that money go to the school district to pay for the students who attend the public schools? None of the money paid to the town goes to the schools.

  • Blake Cash

    I would like to see how much the university would have to pay were they to lose the case, to give perspective to the settlement.

  • Cecie

    Special tax relief should be given to Princeton’s senior citizens, who have paid so many taxes over the years, and now often struggle to get by, or are forced out of the town they helped build, and long loved. The university’s shabby treatment of its retired faculty and staff is particularly disturbing.

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