The Red Bull Arena property will be tax-exempt but Harrison will collect an annual PILOT (Payment in Lieu of Taxes) fee and the soccer team will stay in town for at least the next two decades.
Those are some of the key ingredients of a proposed settlement of the longstanding tax appeal filed by the Red Bulls, involving the team owners, the Town of Harrison, the Harrison Redevelopment Agency and the Hudson County Improvement Authority.
If all the parties sign on to the deal and if the state Supreme Court agrees, it will end the Red Bull ownership’s six-year court fight for tax-exempt status as a “public entertainment” enterprise.
Along the way, the state Tax Court and the state Appellate Court ruled, for different reasons, that Harrison had the right to collect property taxes from the owners, with the appeals panel concluding, in a 3-0 vote, that right extended not only to the stadium but also to the land.
That didn’t stop Red Bull from appealing to the state Supreme Court which shocked the lawyers for both sides by agreeing to hear the case.
That decision, in turn, set in motion a protracted series of meetings by the lawyers in an effort to strike a legal compromise and when those talks continued to drag on, the state’s highest tribunal assigned a mediator to assist the disputants.
What Harrison feared, according to Mayor James Fife, Town Attorney Paul Zarbetski and CFO Gabriel Simoes, was that if the case did go to trial and the justices ruled in Red Bull’s favor, then the town would likely have to refund more than $15 million in back taxes it collected from 2010 – when the stadium opened – through the end of 2016, plus 5% interest, plus the costs associated with issuing bonds to pay out that money over time.
So, to avoid a worse-case scenario, the mayor and Harrison Town Council voted to ratify the proposed settlement which, according to the town’s special counsel Stephen Pearlman, provides that:
- The Hudson County Improvement Authority (which, in 2006, sold $40 million in bonds in 2006 to finance the acquisition, clearing and remediation of a 12.34-acre parcel in a redevelopment area to allow for construction of the Arena) will take over ownership of the land and Arena.
- The HCIA will enter into a lease agreement with Red Bull for the use of the land and Arena and will use the income from the lease fees to give Harrison an annual PILOT starting in 2017 at $1.3 million and, thereafter, “escalated annually” to the yearly Consumer Price Index, through the duration of the team’s stay in Harrison.
- Within six months of the settlement’s approval, the HCIA will issue bonds for up to $1 million, with the proceeds going to pay for certain types of capital improvements to the stadium, including “guest service kiosks, pavement replacement plaza level, [surveillance] camera system upgrades, concourse concrete repair and resurfacing, hospitality areas on plaza level upgrades, concourse lighting upgrades, Wi-Fi in seating bowl upgrades and distributed antenna system/cell phone service in seating bowl upgrades.” A Red Bull affiliate will pay the debt service on those bonds.
- The Red Bulls will agree to remain in Harrison at least through 2038, with options for four 5-year extensions through 2058. (By 2038, the town – which is responsible for paying the debt service on the $40 million bond issue – expects to have paid off that debt. Currently, there remains an outstanding balance of about $29 million).
- The HCIA and Harrison can use the stadium field and the grounds for up to 48 annual “public use events,” including “local soccer games, concerts … trade shows, arts or cultural events,” among others at times that will not interfere with the soccer team.
- If, at any time between 2038 and 2058, Red Bull opts to buy the stadium and land at fair market value, Harrison can control the future development of the property by vetoing the proposed use. Or, the town has the right to use the property for a school or for some public purpose.
Pearlman said the Harrison Redevelopment Agency approved the settlement last Monday. The HCIA was expected to consider ratification on March 23, he said. When the Red Bull ownership in Austria will act is not yet known.
After having granted two previous adjournments to permit settlement conferences to continue, the state Supreme Court has scheduled the tax case for review April 11, Pearlman said. At that time, if all parties have signed on to the settlement agreement, Pearlman said the court will be asked again for an adjournment “to implement the settlement.”
But Pearlman cautioned that the justices may, nonetheless, elect to hear arguments and, ultimately, impose their own outcome.