921 A.2d 1122 (N.J. 2007), University Cottage Club of Princeton New Jersey Corp. v. New Jersey Dept. of Environmental Protection

Citation921 A.2d 1122, 191 N.J. 38
Opinion JudgeJustice LONG delivered the opinion of the Court.
Party NameUNIVERSITY COTTAGE CLUB OF PRINCETON NEW JERSEY CORP., Petitioner-Appellant, v. NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, Respondent-Respondent. The Borough of Princeton, Intervenor-Respondent.
AttorneyThomas M. Olson, Morristown, argued the cause for appellant (McKirdy and Riskin, attorneys; Mr. Olson and L. Jeffrey Lewis, on the briefs)., Jane F. Engel, Deputy Attorney General, argued the cause for respondent (Stuart Rabner, Attorney General of New Jersey, attorney; Patrick DeAlmeida, Assista...
Case DateMay 30, 2007
CourtSupreme Court of New Jersey

Page 1122

921 A.2d 1122 (N.J. 2007)

191 N.J. 38

UNIVERSITY COTTAGE CLUB OF PRINCETON NEW JERSEY CORP., Petitioner-Appellant,

v.

NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, Respondent-Respondent.

The Borough of Princeton, Intervenor-Respondent.

Supreme Court of New Jersey

May 30, 2007

Argued March 6, 2007.

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[Copyrighted Material Omitted]

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Thomas M. Olson, Morristown, argued the cause for appellant (McKirdy and Riskin, attorneys; Mr. Olson and L. Jeffrey Lewis, on the briefs).

Jane F. Engel, Deputy Attorney General, argued the cause for respondent (Stuart Rabner, Attorney General of New Jersey, attorney; Patrick DeAlmeida, Assistant Attorney General, of counsel).

Michael J. Herbert, Princeton, argued the cause for intervenor-respondent (Herbert, Van Ness, Cayci & Goodell, attorneys).

OPINION

LONG, Justice

[191 N.J. 41] The University Cottage Club of Princeton (Cottage) here challenges a final decision by the Commissioner of the Department of Environmental Protection (Commissioner) denying its petition for certification as a tax-exempt historic site. The Commissioner based his decision on an intention to promulgate more stringent rules governing public access to such sites and, in the interim, determined to deny all applications that did not meet "objectively reasonable standards of public accessibility." Cottage appealed, claiming among other things that public access is not a requirement for historic-site tax exemption. The Appellate Division affirmed. We hold that public access is an essential component of historic-site tax exemption but that the Commissioner acted arbitrarily in the denial of Cottage's application. Because Cottage satisfied all of the relevant standards in effect when its petition was perfected, it was entitled to tax-exempt certification. We therefore reverse.

[191 N.J. 42] I.

Cottage, a not-for-profit corporation under I.R.C. § 501(c)(3), is one of eleven private eating clubs. 1 Although not officially part of Princeton University, the eating clubs have traditionally been affiliated with Princeton's students. Cottage has operated at its current location in Princeton Borough (the Borough) since 1906. According to its constitution, "this privately owned and operated club is entirely for the use of its members and their accompanied guests, and is not open to non-members or the public."

The Cottage building, completed in 1906, is considered architecturally significant. Designed by the renowned, early twentieth century architect Charles Follen McKim, it is an example of the "club" style of architecture of the late-Victorian era.

In 1998, Cottage decided to apply for a property tax exemption as an historic site pursuant to N.J.S.A. 54:4-3.52. It initiated the process by letter to the Department of Environmental Protection (DEP), Office of Historic Preservation (OHP), which administers the tax-exempt historic-site certification process. In a return letter dated January 13, 1999, the OHP agreed that Cottage "is a key contributing building within the Princeton Historic District" and is "architecturally significant." It also informed Cottage that additional information was needed regarding its status as a non-profit organization, its commitment to the preservation of the building, its policy of non-discrimination, and its accessibility by the public.

In terms of public access, the OHP letter stated:

2. Open to the public, The property is not currently open to the public. This

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needs to be addressed. I am attaching a copy of one of the more recent "open to public notices" and copies of National Park Service "guidance" on what it means to be open to the public[,] required when federal funds go into restoring a historic property, but serves as a good guide for the minimum.

[191 N.J. 43] The included guidance material was a portion of the National Park Service's Historic Preservation Fund Grants Manual, which addressed the need for public access when federal funds are invested in an historic property: 2

d. Public Access. "Public Access" means that the general public can see the results of the HPF [Historic Preservation Fund] investment of public funds.

1) As long as all the HPF-assisted work is clearly visible from a public right-of-way, public access to the property is not required. Public access is also not required when interior development work (such as electrical or plumbing repairs) would not be visible if general access to the property were to be provided. (However, the interior of a property acquired with grant assistance must be open to the public at least 12 days a year if the interior has any architecturally or historically significant features.)

In closing, the OHP explained "[o]nce these items have been addressed, and the municipality has been given an opportunity to comment on your petition, the Historic Preservation Office will process your request for certified historic site (tax exempt) status to the Commissioner of New Jersey Department of Environmental Protection for final deliberation."

In April 1999, the Board of Governors of Cottage passed a resolution "to confirm certain facts in order to facilitate said historic site designation." The resolution stated that "the club is committed to the preservation of the Clubhouse as a historic site"; "strictly adheres to a policy that does not tolerate illegal discrimination or harassment"; and "shall be open to the public for visitation on no less than twelve days, to be specified during each calendar year. Those days shall be published in a local newspaper each year." Cottage also submitted evidence of its non-profit status.

In September 1999, Cottage was listed in the New Jersey Register of Historic Places, and, in November 1999, in the National Register of Historic Places. 3 Over two years after Cottage had [191 N.J. 44] supplied all of the information sought by the OHP, the OHP wrote again to Cottage in June 2001:

Under provisions of the Laws of New Jersey (1962, Chapter 92, as amended 1964, Chapter 61), the Commissioner of the Department of Environmental Protection can make historic properties tax exempt from local property taxes if the property meets the following conditions:

1. Listed in the New Jersey Register of Historic Places.

2. Owned by a non-profit corporation; with a specific provision to preserve the building.

3. Open to the public on a regular basis.

4. Non-discriminatory in regard to race, creed, color or religion.

I am enclosing a list of items, which must be sent to this office before tax-

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exempt status can be determined. (There is no application form). All materials should be sent to the above address. Upon receipt of the requested information, we will begin to process your application.

The list of items included a petition requesting tax-exempt status to be signed by the officers of the corporation and returned to OHP along with evidence that the site:

a. Will be preserved by the said corporation.

b. Will be freely available to all people, without discrimination as to race, creed, color, or religion, under reasonable terms and conditions, such as a nominal fee, which would insure the preservation, and maintenance of the site.

c. Will be available to the public on a regular basis.

In essence, only the petition needed to be supplied because Cottage had previously satisfied the other requirements.

In July 2001, Cottage submitted "its petition to be declared a tax-exempt site," including a copy of the resolution approved by its Board in April 1999, as well as copies of published notices confirming that the Club had been "open for public visitation and appreciation" for six hours on twelve days in 1999-2000, for five hours on ten days and for two hours on two days in 2000-2001, and that it intended to be open for five hours on twelve days in 2001-2002.

[191 N.J. 45] The OHP then alerted the Borough of Cottage's application, and requested written comments. In August, 2001, the mayor responded:

Thank you for apprising me of the petition filed for Historic Site exempt status by the University Cottage Club at 51 Prospect Ave. in Princeton Borough.

You have asked me to comment on whether I believe that conditions have been met for granting Certified Historic Site status.

I do not believe that Cottage Club has.

First, you should recognize that being "non-profit" does not automatically qualify an organization for property tax exemption. In Princeton Borough, our Assessor has always expected a "non-profit" organization to have a distinct community, educational, and/or charitable purpose before granting such exemption. The University eating clubs on Prospect Ave. have applied for such exemption in the past and our Assessor has always turned them down. (They are off-campus clubs and clearly not part of the University.)

Secondly, your criteria says that: "The property must be open to the public on a regular basis." This is clearly not the case. In a "Statement of Princip[le]s" adopted on May 11, 1994 and recently reconfirmed, the InterClub Council and the Graduate InterClub Council affirmed that: "The Upperclass Eating Clubs are private organizations for the sole use of their members and their invited guests."

While occasionally the Clubs are rented out for weddings or private parties, I hardly think that this qualifies them as "open to the public on a regular basis."

During 2001 and early 2002, Cottage sent three letters to the OHP regarding the status of its application. In April 2002, eight months after it had been received, OHP forwarded the letter from the mayor to Cottage. In June 2002, Cottage responded:

The Borough of Princeton letter of August 13, 2001 comments on our "non-profit" organization status having a distinct community, educational and/or charitable purpose. The Club does in fact have an educational...

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