100G for Arena tax case

By Ron Leir 

Observer Correspondent 


Now that the state Supreme Court has agreed to consider whether the New York Red Bulls professional soccer team should pay taxes on the stadium and the land it occupies in Harrison, the town has hired an outside law firm to defend its position before the court.

To that end, Mayor James Fife and the Town Council voted Dec. 2 to retain the Bloomfield law firm of Pearlman & Miranda as special counsel, from Dec. 1, 2014, through Nov. 30, 2015, for a “maximum” amount of $100,000 (no hourly rate specified).

To the casual observer, that would seem to be a lot of money to spend on a legal matter that will end up with the lawyers for both sides fielding questions from the chief justice and six associate justices. Because the court already has the facts of the case in hand, the lawyers won’t even have to write new briefs.

But, for Harrison, the stakes are high enough to justify that kind of investment in a legal brain trust since the town currently is collecting more than $2 million annually between taxes on the land and the arena.

Why will the firm’s services be needed for up to a year? Because, as explained by Town Attorney Paul Zarbetski, typically it can take, from eight to 12 months, for the state’s highest tribunal to actually schedule a hearing of a case.

Zarbetski said the Essex County firm was the only one that responded to the town’s solicitation for proposals to represent the town in the case known as Red Bull Arena Inc. vs. Town of Harrison, the Harrison Redevelopment Agency and Hudson County Improvement Authority.

Zarbetski said the firm was well qualified to handle the assignment because several members of the firm were “well-versed in bonds and redevelopment law, which is the basis for what the Red Bulls’ claim for tax exemption is based on.”

Pearlman & Miranda are currently representing RTL Services, owner of Kearny Point Industrial Park, in efforts to apply for a lowinterest loan from the state Environmental Infrastructure Trust Financing program to facilitate water quality improvements at the firm’s South Kearny site.

In prior appearances before the state Tax Court and the state Appellate Court, where the Red Bulls argued for tax-exempt status, Kearny attorney Norman Doyle Jr. defended the town’s interests and came away with victories on each level.

Doyle died in December 2013 so, when the Red Bulls decided to press on with the case and managed to persuade the State Supreme Court to “grant certification” on Sept. 25 to hear the case, Harrison searched for a replacement.

The road to litigation began in 1998 when Harrison adopted a redevelopment plan for its 250 acre largely dilapidated waterfront area and because that plan was to include a “professional soccer stadium and its accessory uses,” the town invited the then-Metro Stars soccer team to set up its home field in Harrison. In 2003, the town amended the plan to provide for a 25,000- seat multi-use stadium to be built on 12 acres of land in the redevelopment area.

In 2005, Harrison sold $40 million in bonds to the Hudson County Improvement Authority and gave the proceeds to the Harrison Redevelopment Agency to finance acquisition and preparation of the land for the stadium.

The Metro Stars, acquired by Red Bull, agreed to build and finance the stadium. In 2006, the HRA, HCIA and Red Bull signed various contracts: a redeveloper agreement which required Red Bull to develop the land as a soccer/entertainment stadium; a ground and stadium lease which required the HRA to lease the land to the HCIA; and a ground and stadium sub-lease which required the HCIA to sublet the land to Red Bull for 30 to 50 years.

The Red Bulls began playing their home games at the Harrison stadium in early 2010.

The agreements signed by the parties left the taxation question an open-ended one and the town’s tax assessor Al Cifelli went ahead and assessed both the land and stadium. For 2010, the Town assessed the land at $3,702,000, and the stadium at $22,127,000 and it issued a tax bill to Red Bull for $215,863.62 for the land and $1,290,225.37 for the stadium. For 2011, the Town assessed the land at $3,702,000, and the stadium at $30,400,000 and billed $119,482.05 in taxes for the land and $1,222,359.31 for the stadium. The current assessment on the land is the same and the stadium is assessed at $30,750,000 so the taxes on both are more than $2 million, Cifelli said.

Red Bull argued that the state Authorities Law must be liberally construed to exempt the land and stadium as “property” or a “public facility” of the HCIA devoted to an essential public purpose and that the Redevelopment Law must be liberally construed to exempt the land and stadium as “property” or a “project” of the redevelopment agency devoted to an essential public purpose.

However, in a June 13, 2012, opinion, the state tax court judge held that the HRA owned the land, Red Bull owned the stadium, and neither the land nor the stadium was tax-exempt because they were not used for a public purpose.

In July 2012, Red Bull paid its back taxes and, since then, has paid its taxes on time, while, at the same time, reserving its legal quest of tax-exempt status, taking an appeal to the Appellate Court which, on May 12, 2014, affirmed the state tax court ruling.

The appellate court opined that, “We recognize that the Authorities Law authorizes the Authority to operate public facilities for public recreation and entertainment; however, Red Bull operates the stadium privately for its own economic benefit, not for recreation or activities freely open to the general public. Notwithstanding the Town’s right to use the stadium for four civic events per year, or the Agency’s ability to use the stadium for events open to the public, those uses are subordinate to Red Bull’s right and do not convert the stadium to a public use as contemplated by the Authorities Law and Redevelopment Law …. Accordingly, because the property is not used for a statutorily authorized public purpose, it is not tax exempt.”

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