Before Judges Petrella, Conley, and Coburn.
The opinion of the court was delivered by: Conley, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
On appeal from the Tax Court of New Jersey.
This appeal raises the question of whether those portions of the New Jersey Highway Authority's Garden State Arts Center complex subject to a twenty-one year "privatization" lease with GSAC Partners (GSAC) and to a biennial automatically renewable lease with 116 Park Caterers, have lost their prior immunity from local property taxes. The Tax Court determined they had not. In doing so, we are convinced the judge used an incorrect analysis of the issues and too broadly defined the boundaries of that tax immunity. We remand for further development of the record and for reconsideration.
The New Jersey Highway Authority Act (Act), N.J.S.A. 27:12B-1 to - 35, was enacted in 1952. The Act created the New Jersey Highway Authority (Authority). "In order to facilitate vehicular traffic and remove the present handicaps and hazards on the congested highways in the State, and to provide for the construction of modern express highways embodying every known safety device," N.J.S.A. 27:12B-2 (emphasis added), the Authority was empowered to "acquire, construct, maintain, improve, repair and operate highway projects . . . ." Ibid (emphasis added). In the performance of its statutorily conferred powers the Authority is "an instrumentality exercising public and essential governmental functions." N.J.S.A. 27:12B-4. "[T]he exercise by the authority of the powers conferred by [the] act in the construction, operation and maintenance of projects," as defined in the Act, is "deemed and held to be an essential governmental function of the State . . . ." Ibid. Among the things that the Authority may do with respect to projects that it implements for the purposes of the Act is to "make and enter into all contracts and agreements necessary or incidental to the performance of its duties and the execution of its powers . . . ." N.J.S.A. 27:12B-5(o). And see N.J.S.A. 27:12B-14 (authorizing, among other things, the authority to contract with others "desiring the use of any part [of a statutorily authorized project] . . . for . . . stores, hotels, and restaurants, or for any other purpose except for tracks for railroad or railway use . . . .").
As defined in the Act, prior to 1968, "project" was "any express highway, superhighway, or motorway . . . together with such adjoining park or recreational areas and facilities as the Authority . . . shall find to be necessary and desirable to promote the public health and welfare . . . ." N.J.S.A. 27:12B-3(d) (emphasis added). This would seem to establish rather broad boundaries for the Authority's engagement in activities and projects on properties it owns and which adjoin the roadways it operates. And see N.J.S.A. 27:12B-14. We take note, however, of the introductory statement to the Act which, in 1952, expressed the Act's primary objective as "[a]n [a]ct to facilitate vehicular traffic in the State of New Jersey by providing for the acquisition, construction, maintenance, repair and operation of highway projects." L. 1952, c. 16 (emphasis added). See also N.J.S.A. 27:12B-2.
Pursuant to its enabling powers, the Authority owns and operates the Garden State Parkway (Parkway). Sometime prior to 1968, it acquired 400 acres adjacent to the Parkway in Holmdel Township. That property is described by the Authority in the stipulated facts submitted to the Tax Court*fn1 as "the Arts Center complex, a 400-acre park containing nature trails, fitness courses, the New Jersey Vietnam Veterans Memorial, the offices of the Garden State Arts Center Foundation, and Garden State Cultural Fund, the New Jersey Highway Authority Maintenance Department, the amphitheater and related operation facilities, Celebrity House, and the Robert B. Meyner Reception Center." As further described by the Authority, the Arts Center complex "offer[s] park and recreation uses, along with concerts and other entertainment."
This may in general be an accurate description of the use of most of the facilities and activities at the Arts Center complex. But as far as the record reflects, the operation of the Robert B. Meyner Reception Center (Reception Center) under the lease with 116 Park Caterers is of a somewhat different category. Under that lease, the Reception Center is used for private receptions, banquets, meetings, conferences, luncheons, dinners, weddings and the like. Its intended use, as depicted in the 116 Park Caterers lease is as a "first-class high quality restaurant, catering, banquet and conference facility."
We pause at this point to make clear that not all components of the Arts Center complex are the subject of this appeal. Holmdel does not seek to impose local property taxes upon the following, as depicted in the parties' stipulated facts:
(a) The New Jersey Viet Nam Veterans' Memorial . . . and associated areas located to the southeast of the Arts Center building;
(b) The Telegraph Hill Nature Area and related picnic areas . . . located to the northwest of the Arts Center building;
(c) The New Jersey Highway Authority Maintenance Department building and yard . . . located to the southwest of the Arts Center building and to the west of the Parkway itself; and
(d) The facilities for the State Police Troop . . . assigned to the Parkway located to the southwest of the Arts Center building and to the west of the Parkway itself.
It does seek to impose local property taxes upon the following components, as depicted in the parties' stipulated facts:
(a) The Arts Center building . . . a roofed, open-air amphitheater which at present can accommodate an audience of over 17,500 in covered seating and on the adjoining lawn, together with adjacent ticket booths and refreshment stands;
(b) The Robert B. Meyner Reception Center . . . located to the southeast of the Arts Center building;
(c) The Celebrity House . . . located to the southeast of the Reception Center;
(d) The Large Main Parking Area . . . located to the southwest of the Arts Center building;
(e) The North overflow parking area . . . located to the north of the Arts Center building and to the east of the Parkway itself;
(f) The South overflow parking area . . . located to the southwest of the Arts Center building and to the west of the Parkway itself;
(g) The newly-constructed additional parking lots which have been built;
(h) Two large electronically-controlled billboards . . . , one facing the northbound lanes of the Parkway and one facing the southbound lanes of the Parkway;*fn2
(i) Various interconnecting roadways to accommodate traffic flow to and from the Main Parking, North Parking and additional parking facilities for those attending performances at the Arts Center building and events at the Reception Center and/or visits to the Guest House; and
(j) All land adjoining the foregoing which is beyond the established right-of-way of the Parkway, subject to [certain] exclusions . . . .
When we hereinafter refer to the Arts Center complex we limit our reference to the components that we have just listed which Holmdel seeks to tax.
The triggering event that prompted Holmdel, after years of the Authority's untaxed operation of the Arts Center complex, to attempt to impose local property taxes was the 1997 lease entered into with GSAC, effective as of May 1996. As to that lease, the stipulated facts set forth the following circumstances leading up to its execution:
On September 28, 1995, the Highway Authority Commissioners addressed Item 16, "Garden State Arts Center Privatization", on their Agenda and unanimously voted (with one abstention) to execute the Memorandum of Agreement with the entity now known as GSAC Partners ("GSAC") for the leasing and operation of the Arts Center.
Prior to that vote, a presentation was made to the Authority Commissioners by the Executive Director of the Arts Center with respect to leasing the Arts Center to a private entity. That presentation noted the following terms which are also found in the later Lease:
(a) The capacity of the Arts Center would be increased from 7,000 to 17,500;
(b) The new operator would have the benefit of a 21 year lease;
(c) $1,650,000, of revenue was to be guaranteed to the Highway Authority in 1997 and $34,000,000 over twenty years;
(d) Additional revenue generated by the lessee/operator to the Highway Authority could be a maximum of $2.5 million per year ...