Princeton Settles Nonprofit Property Tax Suit for $18 Million

After fighting a property tax lawsuit for five years, Princeton University, the third-wealthiest endowed university in the country, has agreed to an $18 million settlement with neighbors who claimed the university’s tax-exempt status unfairly made their property taxes higher.

Under the agreement, the university will pay 869 homeowners in the neighborhood $10 million from 2017 to 2022. It will pay nearly $7 million to the Borough of Princeton and $1.25 million to the Witherspoon Jackson Development Corp., a nonprofit group, to meet the housing needs of poorer residents.

“Princeton University cares deeply about preserving the diversity of the Princeton community, and the contributions we have agreed to make will help to achieve that,” Princeton President Christopher Eisgruber said in a statement.

The settlement arrives as city and state officials in other parts of the nation — including Maine, Massachusetts and Connecticut —  question whether they can continue to allow wealthy Ivy League schools or big nonprofit hospitals  to remain off tax rolls while they scramble for money to pay for police, fire, streets and other government services.

Princeton, with its $22.3 billion endowment, ranks just behind Harvard (.6 billion) and Yale (.5 billion) in having the biggest endowment in the nation.

In 2011, a group of Princeton neighbors filed suit, maintaining that their property taxes were kept artificially high by the fact that most of Princeton University’s property is nonprofit and therefore, tax exempt.

Princeton for years had supported the community with a voluntary payment in lieu of taxes or PILOT, but for the neighbors, it wasn’t enough. The university agreed in 2014 to make a $2.8 million PILOT to the municipality, and to increase the payment by 4 percent annually through 2020.

New Jersey has the highest property taxes in the nation, and Princeton some of the highest in New Jersey