At long last, the sticky tax case is in the books – but it cost Harrison a pretty penny to nail it shut.
The final tally for billings by the Bloomfield law firm Pearlman & Miranda for their input into the settlement of the tax case pitting the town against Red Bull: “approximately $265,000,” according to town CFO Gabriela V. Simoes Dos Santos.
After the State Supreme Court had agreed to hear the matter, Harrison retained the firm in December 2014 for what it anticipated would be a year’s worth of work for $100,000. Clearly, it took longer.
At the same time, however, fearful of the unknown consequences of a ruling by the state’s highest tribunal, the town – through Pearlman & Miranda – explored the possibility of settling the case out of court.
And that’s what happened in mid-July 2016 when the town’s governing body voted for a settlement deal by which Red Bull agreed to turn over “ownership” of the stadium property to the Hudson County Improvement Authority.
The Red Bulls began playing home games at the new Arena in Harrison in March 2010.
But whether the town could tax the land and/or stadium was unclear. Nonetheless, town assessor Al Cifelli proceeded to assess both, beginning in 2010, and the town began collecting annual property taxes totaling more than $2 million.
Red Bull challenged that assumption, interpreting the state Authorities Law and Redevelopment statutes to mean that the land and stadium were part of a redevelopment plan executed through a public agency (HCIA) and dedicated to a “public purpose” and should, therefore, be tax-exempt.
Twice, however, judicial rulings in 2012 by the state Tax Court and in May 2014 by the state Appellate Court, upheld the town’s actions. Red Bull began paying taxes in 2012 but continued its appeal.
That, in turn, led to the state Supreme Court agreeing to hear the case but the court assigned a mediator to try to get the parties to settle which, after countless hours of negotiations, ultimately, they did.
However, it took six months – and some hesitation by Red Bull brass in Austria to accept certain language in the agreement – before all the parties were ready to sign.
Under the terms, Red Bull turns over “ownership” of the 12-acre stadium site to the HCIA and pays an annual lease fee to its “landlord” and the town through at least 2038. For 2017 – the first year the deal takes effect – the HCIA is to receive $185,000 and Harrison will get $1.115 million. Subsequent annual payments may rise under a formula tied to the yearly CPI.
Additionally, HCIA has the right to use the arena for up to 48 “public use events” per year.
Also, HCIA is to issue a bond in an amount “not to exceed $2 million” for improvements to the stadium as needed and Red Bull is responsible for paying the debt service on the bond.
And, most importantly for Harrison, Red Bull agrees to “waive all rights to the approximately $18 million in real property taxes paid to date [since 2006]” for the land and stadium.
On Dec. 16, the representatives of all the parties involved met for the final closing transaction on the settlement and signed the myriad of separate agreements signaling the end to a protracted and painful process.
Bakari Lee, bond counsel for the HCIA, said the participants – the key parties, along with engineers, the state Local Finance Board, etc. – sorted through literally “tens of thousands of pages” – in excess of 30 to 40 documents comprising separate stand-alone agreements, each with multiple exhibits.
Those voluminous records were stretched out across a 30-foot-long conference table, “stacked end to end, with rows and rows,” added HCIA Executive Director Norman Guerra.
At the same time as the parties were approaching the legal deadline set by the court to arrive at a deal, the state legislature was moving in November 2016 to adopt a bill that “clarifies and reaffirms that stadiums and arenas owned by local government entities are entirely exempt from property taxation.
“The bill reaffirms that when government entities enter into private/public arrangements and lease property to for-profit entities to achieve stadium and arena uses that such property, including any leasehold interest in such property, remains entirely tax exempt. The recent Tax Court case concerning the taxability of Morristown Medical Center, due to for-profit uses of that property, has raised broader questions in this area.”
If Harrison and Red Bull had not reached a deal, it’s unclear how – if at all – the legislation might have impacted the case.