On appeal from the Tax Court of New Jersey, Docket Nos. 000323-1998, 000325-1998, 003919-1998, 000136-2001, 003744-2001; Docket Nos. 00489-1998, 000490-1998, 003878-1998, 000128-2001, 003700-2001, 001297-2002; Docket No. 007116-2004; Docket No. 006531-2004, whose opinion is reported at 22 N.J. Tax 428 (Tax 2005).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Wefing, Fuentes and Graves.
Defendant the New Jersey Turnpike Authority (the Authority), as successor to the New Jersey Highway Authority, appeals from an order of the Tax Court entered on July 28, 2005. The order rejected a claim by the Authority that certain portions of its property and facilities now known as the PNC Bank Arts Center*fn1 (Arts Center) qualified for property taX exemption. We affirm.
This is the second time this matter is before us. In the first appeal, Township of Holmdel v. New Jersey Highway Authority, we noted that the issue was whether those portions of the Arts Center "subject to a twenty-one year 'privitization' 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." 329 N.J. Super. 410, 412 (App. Div. 2000). We found that the Tax Court's analysis of the scope of the authority's tax immunity was flawed because it failed to focus on whether the use of the Arts Center during the tax years at issue "fulfill[ed] a purpose that the Authority has been created to perform." Id. at 425.
Because of several deficiencies in the record, we remanded the matter to the Tax Court. Id. at 431-32. On remand, the Tax Court was to conduct further proceedings and determine whether:
(1) the use of the Arts Center under a lease agreement between the Authority and GSAC, dated January 10, 1997, effective May 1, 1996, actually represents the use the Legislature intended in 1968, when it "grandfathered" the Arts Center with an amendment to the Highway Authority Act, id. at 431, and (2) whether the Reception Center, constructed in 1989, was contemplated by the Legislature in 1968, when it amended the Highway Authority Act, and, if so, whether the actual use of the Reception Center during the years under appeal, was "too far removed from the initial contemplated use to warrant application of the taX immunity." Id. at 432.
On remand, the Tax Court issued a forty-five page published opinion, reported at 22 N.J. Tax 428 (Tax 2005). The Tax Court judge examined the Arts Center as it existed and operated in each of the tax years under appeal to determine whether there was either a continuation of existing facilities and activities or whether such facilities and activities were contemplated by the Legislature in connection with the 1968 legislation. After reviewing all the relevant circumstances, the Tax Court concluded that the entire Arts Center was not entitled to a tax exemption for the years 1997, 1998, 2000, 2001, 2002, or 2004. 22 N.J. Tax at 466. And for 1996, the Tax Court concluded that the Amphitheater facilities were entitled to a tax exemption, id. at 465, but the Reception Center was not. Id. at 466. The Tax Court's findings and conclusions included the following:
I conclude that the Amphitheater Facilities, as they existed as of October 1, 1996 and thereafter during the tax years under appeal, were operated in a manner foreign to the operation understood and contemplated by the Legislature in enacting the 1968 Legislation, and in a manner foreign to the purposes the authorities were created to perform. Accordingly, the Amphitheater Facilities ceased to qualify for tax exemption commencing in tax year 1997.
Based on the Study Commission hearings as described above, I find and conclude that the Reception Center was not in the planning stages as of enactment of the 1968 Legislation. Consequently, it was not grandfathered by that Legislation. I also find and conclude that the operation of the Reception Center during all years under appeal was "foreign" to what the 1968 Legislation intended to grandfather. I reject the Authorities' argument that the use of the Reception Center constituted merely a continuation of activities conducted in the Celebrity House as of 1968. The primary use of the Reception Center under the Park Caterers and Merri Makers Agreements was a catering facility with a capacity of 350 persons at a sit-down dinner and 500 persons at a stand-up reception. The Celebrity House, with a capacity of 70 persons, was not used as a catering facility before or as of 1968, and was not used for receptions until 1972 or thereafter. In 1968, the Celebrity House was used, if at all, only as an adjunct to the Amphitheater without an independent revenue-generating purpose. Under the Park Caterers and Merri Makers Agreements, the primary purpose of the Reception Center was to generate revenue for the Authorities, a purpose that was partially accomplished, as discussed above, by allowing the licensee to operate open bars at catered events. I concur with the statement contained in the legal opinion rendered by the Office of Legislative Services that "construction of the [Reception Center] appears to be exactly the type of project that the Legislature sought to control in enacting [the 1968 Legislation]." For all the foregoing reasons, the facility did not qualify for exemption for any of the years under appeal.
[Twp. of Holmdel v. N.J. Highway Auth., supra, 22 N.J. Tax at 455-56 (alterations in original).]
And the Tax Court specifically rejected the Authority's argument that the "Merger Legislation," L. 2003, c. 79, ...