This proceeding involves homestead tax rebates claimed by residents of a retirement community for the years 1977, 1978 and 1979. The retirement community, known as Meadow Lakes, is located in Mercer County, partly in East Windsor Township and partly in the Borough of Hightstown. Rebate applications were filed by approximately 350 residents of Meadow Lakes with the tax assessors of the two taxing districts for 1977 and 1978. All applications were denied. The denials were affirmed by the Mercer County Board of Taxation. In addition to their local applications for 1978, the residents filed separate applications with the Director of the Division of Taxation for 1978, and they did so again for 1979. He denied the claims for both years. Separate complaints were filed with the former Division of Tax appeals by each resident for each year seeking a review of the denials. The matters were consolidated and the Attorney General was permitted to intervene as a defendant with respect to all years. The entire proceeding was transferred to this court upon its establishment by the Legislature. N.J.S.A. 2A:3A-26. The issue presented by this litigation is whether the residents of the Meadow Lakes retirement community have a sufficient ownership interest in their respective residences to be entitled to homestead tax rebates for the years in issue.
The factual record was established at trial. The Meadow Lakes property consists of 103 acres, on which there are 30 one and two-story buildings containing 317 residential apartment units of various sizes. The physical property and other aspects of the retirement community are more fully described in Presbyterian Homes v. Division of tax Appeals, 55 N.J. 275, 261 A.2d 143 (1970), in which the Supreme Court held that the Meadow Lakes property was not entitled to a local property tax exemption. The Presbyterian Homes of new Jersey, a nonprofit corporation, owns the land and buildings which comprise Meadow Lakes, including the buildings in which plaintiff reside. The corporation itself receives all local property tax bills for the property from the East Windsor and Hightstown assessors, and each resident is then billed by the corporation for his or her proportionate share of the taxes paid by the corporation for the entire property.
As a precondition to becoming a resident at Meadow Lakes, each plaintiff signed a residence agreement with Presbyterian Homes. The agreement is particularly significant in the present case. The agreement covers all aspects of residence in the retirement community and provides in part that the rights of the resident under the agreement "do not include any proprietary interest in the property or assets of the Corporation or any membership in the Corporation." The agreement also provides that Presbyterian Homes will provide total care to the resident for the rest of his or her life in return for the payment of an initial capital fee and subsequent monthly fees, unless the agreement is terminated under certain specified circumstances. Both the initial fee and each monthly fee are computed from actuarial tables and are revised periodically to meet the expenses of maintaining the corporation's facilities. In return for payment of the capital fee and monthly fees, residents receive full room and board and medical care. Their fees vary in accordance with the size of the apartment unit occupied by the resident. Medical care and long-term nursing care for the residents and for some nonresidents are provided on the premises in a 90-bed nursing unit known as the Medical Center. Each resident is also entitled to utilize certain common facilities furnished by the corporation, including dining rooms, lobbies, social and recreational rooms and outside grounds. The corporation provides each resident with specified services, including utilities, meals, laundering and general maintenance. Under the agreement the rights and privileges of the residents to the living accommodations, facilities and services are personal contractual rights which cannot be transferred, assigned or devised by the resident, and no person other than the resident can occupy the accommodations without the approval of the corporation.
The agreement contains several provisions pertaining to its termination and to the transfer of residents. For example, the corporation may erminate the agreement in the event a resident is unable to meet his or her monthly expenses. The agreement further permits either party to terminate the contract without cause and provides for automatic termination upon the death of the resident. In the event the agreement is terminated by reason other than death, a partial refund of the initial fee may be made by the corporation to the resident based upon an established formula. Finally, the corporation reserves the right under the agreement to transfer a resident permanently or temporarily to the corporation's infirmary, and in the event of a resident's mental or physical illness, the corporation may also permanently remove the resident to an outside institution.
At trial, plaintiffs presented the testimony of the vice-president for finance of Presbyterian Homes. He stated that in the 14-year history of Meadow Lakes it has been the intent of both new residents and the corporation that a resident will stay at and be cared for at Meadow Lakes for life. During the period only 95 residents of a total of approximately 900 have left the community during thier lifetimes. One-third of these left when Meadow Lakes lost its twx exemption and two thirds left for a variety of personal reasons. The corporation has attempted to terminate the residency of only two individuals. The vice-president also testified that in a case of insufficient funds beyond the control of a resident, Presbyterian Homes and the resident have cooperated in an attempt to solve the problem, in some instances relying upon a residents' assistance fund created by inter vivos and testamentary gifts. At the time of trial, approximately six to eight residents were receiving assistance from the fund in order to pay their monthly fees. The total number of residents was approximately 400, and their average age was 82 years.
Plaintiffs have claimed homestead tax rebates pursuant to the following statutory language:
Every citizen and resident of this State shall be entitled, annually, to a homestead rebate on a dwelling house and the land upon which such dwelling house is situated, or on a dwelling house assessed as real estate situated on land owned by another or others which constitutes the place of his domicile and which is owned and used by him as his principal residence.... The said requirement of ownership shall be satisfied by the holding of the beneficial interest where the legal title thereto is held by another for the benefit of the said citizen and resident, or for a resident shareholder in a cooperative or mutual housing corporation as defined herein.
A person who is a tenant for life or a tenant under a lease for 99 years or more... shall be deemed to be an owner for the purposes of this act. [ N.J.S.A. 54:4-3.80 a]
Plaintiffs place primary reliance upon the term "tenant for life" in the second paragraph of the quoted language. They concede that they do not have "formal legal life estates in the Medford Lakes realty," but they contend that it was the intent of the Legislature to grant homestead tax rebates to residents of retirement communities whose rights are as set forth in the agreement between Presbyterian Homes and plaintiffs.
The Director contends that the Homestead Rebate Act must be strictly construed and that plaintiffs are not entitled to rebates because they do not fall squarely within the terms of the statutory language. The Director cites Bloomfield v. Academy of Medicine of N.J., 47 N.J. 358, 363, 221 A.2d 15 (1966); Pingry Corp. v. Hillside Tp., 46 N.J. 457, 461, 217 A.2d 868 (1966); Princeton University Press v. Borough, Princeton, 35 N.J. 209, 214, 172 A.2d 420 (1961). These cases all recite the following proposition:
The fundamental approach of our statutes is that ordinarily all property shall bear its just and equal share of the public burden of taxation. As the existence of government is a necessity, taxes are demanded and received in order for government to function [citation omitted]. Statutes granting exemption from taxation represent a departure and consequently they are most strongly construed against those claiming exemption. The burden of proving a tax-exempt status is upon the claimant. [47 N.J. at 363, 221 A.2d at 18]
This rule is particularly cogent in the context of local government finance and local property taxation. In that context finite local budgets are funded by revenues raised by the imposition of the requisite tax rate upon an existing ratable base. When the ratable base is reduced by virtue of the exemption of a property from taxation, the local tax rate must be increased so that the same amount of revenue will be raised from those properties that remain taxable. Exemption of any property from taxation in this context necessarily results in increased taxation for all other properties. Consequently, statutes granting exemption from local property taxation must be strictly construed so as not to impose an inordinate burden on other properties.
The homestead tax rebate exists in a different context. It is not a tax exemption. The rebate program has no effect on local budgets or local tax rates. All property owners make their normal tax payments to the local tax collector. No local tax revenues are diverted to the State because of the rebate program, and local governments themselves receive no rebate payments. It is only when a homestead rebate application has been granted that rebate checks are issued to individual qualifying taxpayers. The actual payment is made by the State from gross income tax revenues on deposit in the Property Tax Relief Fund. N.J.S.A. 54A:9-25. Each fiscal year the homestead rebate program has been in effect the Legislature has included in the annual appropriations act "such additional sums as may be required... for additional payments to home owners qualifying for homestead [rebates]." L. 1977, c. 137, § 1 (account no. 77230); L. 1978, c. 60, § 1 (account no. 77230-240); L. 1979, c. 119, § 1 (account no. 77230-240); L. 1980, c. 56, § 1 (account no. 77230-240).The Homestead Rebate Act also included an appropriation of "such sums as may be necessary to carry out the provisions of this act through the period ending June 30, 1977." L. 1976, c. 72, § 15. In short, the Legislature has committed state monies to insure the payment of a homestead tax rebate to any qualified taxpayer who files a timely ...