Municipal officials in Harrison will never know which way the state’s highest court was leaning about whether or not the town has the right to tax the soccer stadium and land occupied by the New York Red Bulls.
The seven-member Supreme Court panel, which had agreed to rule on the issue, will now be spared making that decision because the town and Red Bull, the team’s owner, agreed to a compromise.
That deal was approved by Mayor James Fife and those members of the Town Council attending a special meeting July 14.
Two council members did not vote: Councilman Francisco Nascimento was out of the country and Councilman James Doran recused himself because he is a commissioner on the Hudson County Improvement Authority, which is also involved in the agreement.
It was the HCIA — and Red Bull — that balked when Harrison had initially settled on terms for an agreement back in March, prompting the town to go back and try harder to find language that would accommodate all the parties.
Now, finally, after more than 20 negotiation sessions and countless phone calls and text messages that stretched over some 17 months, there is an agreement which, it appears, everyone can live with.
Essentially, according to Fife and Town Attorney Paul Zarbetski, the key ingredients remain the same as those struck in March:
- Red Bull will transfer to the HCIA ownership of the stadium and the 12.34 acres of land on which the stadium sits. (In 2006, the HCIA sold $40 million in bonds for the acquisition, clearing and remediation of the stadium site within the town-designated waterfront redevelopment area.)
- Red Bull will pay an annual rental of $1.3 million to the HCIA, with the rental to be “escalated annually” based on a “12-month average of the Consumer Price Index for all urban consumers during the preceding year.”
- Red Bull will continue to make the annual lease payments through 2038 and those payments “may be extended at Red Bull’s option for four additional 5-year terms” through 2058. Ownership will revert to the town “at the end of Red Bull’s lease term.”
The terms of the initial agreement proposed that the HCIA apply income from the lease fees to pay Harrison an annual PILOT (Payment in Lieu of Taxes), beginning in 2017, of $1.3 million and increasing each year thereafter based on the yearly CPI.
Now, under the new settlement agreement, the annual lease payment by Red Bull is to be allocated as follows: the HCIA will retain $35,000 “plus 11.85% of remainder … with the balance … to be remitted to the town ….”
This means that for 2017, the HCIA will receive $185,000 and Harrison will get $1.115 million, as specified by the settlement. (Red Bull will pay full taxes on land and the stadium for 2016.)
Another new wrinkle gives Harrison “the right, but not the obligation, to require that Red Bull pay up to an amount that is double the town portion” under an “accelerated payment option [which] shall be available for the 2017 and 2018 tax years only.” Should the town exercise that option, then those payments would be credited against future amounts paid by Red Bull, “on a pro-rata basis,” from 2019 to 2038.
Red Bull will maintain an escrow fund of $1.95 million which may be tapped by the HCIA and/or Harrison if Red Bull fails to pay its lease fee “on time and in full.”
Red Bull has the right “to re-take ownership of the stadium … at any time during its lease term” in which case the town would become the land owner and Red Bull would pay either full taxes on the stadium or a lease payment, whichever is higher.
HCIA will have the right, during the term of the lease, to hold up to 48 “public use events” in the Red Bull Arena each year.
HCIA will issue a bond in an amount “not to exceed $2 million” — [it was $1 million in the old proposed agreement] — “to finance certain upgrades [to the stadium]” and the bond “shall be purchased by a Red Bull affiliate.” And Red Bull will pay the debt service on that bond.
If a “third party” successfully challenges the settlement, causing the stadium to be subject to taxation or if the HCIA “causes an event or default due to its intentional or grossly negligent conduct and such default impairs Red Bull’s quiet enjoyment of the stadium,” Harrison agrees to “assume certain liabilities” against such an occurrence.
And, most importantly, “Red Bull waives all rights to the approximately $18 million in real property taxes paid to date” [since 2006] for the land and stadium.
The possibility that the State Supreme Court could rule against the town on the tax issue was a prime motivation in a recommendation by the town’s tax lawyers to consider settling.
If the town ended up having to return the taxes previously paid by Red Bull, “the state would be coming in [to Harrison Town Hall] to padlock the doors,” Zarbetski told The Observer last week.
As it is, Harrison will be saddled with a huge bill for outside legal services in connection with the Red Bull tax case, including multiple appearances by the town’s outside counsel Stephen Pearlman, with offices in Bloomfield, before the State Tax Court and meetings with Red Bull attorney Michael Caccavelli and retired state Appellate Judge Philip Carchman, who was named by the Supreme Court in March to try and mediate the case.
Thus far, Zarbetski estimated, the town has been billed “more than $300,000” for the work performed by Pearlman and his associates.
“They’ve lived and breathed with this matter for nearly two years,” he said. “I’ve had conference calls with them at all hours. On week-ends, on vacations.”
And there’s more work ahead.
As part of the settlement, the lawyers must prepare “17 transaction documents” — expected to take up hundreds of pages — which shall memorialize the provisions set forth in the Project Agreement.”
Those documents must be completed and signed “simultaneous with the closing of the [HCIA] bond approximately six months following execution of … the settlement agreement and project agreement,” which means, Zarbetski said, “by year’s end.”
Despite the protracted legal wrangling, Fife said that the relationship between the town and Red Bull has remained relatively upbeat.
“They’re participating in our upcoming Harrison Fest celebration Sept. 17, 18 and 19 by contributing a portion of the cost,” the mayor said. “They’re donating 300 tickets to kids in our summer school program to attend a game. And they fixed the turf of our soccer playground and put in new goals.”
There is, however, still the matter of satisfying the team’s request for additional parking for its fans. “We’re working to fulfill our obligation, with the HCIA, to make parking near the stadium available,” Zarbetski said. The goal is to provide “around 4,000 spaces,” he said. Of that total, 1,200 spaces at the HCIA parking garage are allotted for Red Bull customers and there’s some space available through private lots, “but they’ve never been near 4,000 — even during sellouts,” said Zarbetski, because, he added, apparently, many of the fans have taken mass transit or walked to the stadium.