A New Jersey tax-court judge has ruled that the New York Red Bulls owe property tax to the city of Harrison, despite playing in a stadium built on land owned by a tax-exempt public agency. The decision, if upheld, means that the team owes $3.6 million in back taxes for 2010 and 2011, plus similar amounts going forward.
Without getting too deep into tax law, public land usually goes untaxed — but it can be taxed, or can be subject to payments in lieu of taxes, if it’s used for a strictly private purpose. Given that all the money collected at Red Bull Arena flows to the Red Bulls, the judge ruled that the “public” nature of the land was an accounting fiction, and demanded that the team cough up.
Whether cash-strapped Harrison will see any money from this anytime soon is uncertain — the Red Bulls have promised to appeal, which could drag this out for years. (They’re also still stiffing the city on $150,000 a year in rent.) But at least there’s a chance of the city getting something back for its $80 million in land and infrastructure and $173 million new train station, aside from a bunch of muddy lots set aside for theoretical future development. (According to Business Week, payments from developers are running at just over one-tenth what was projected when the arena project was first planned.)
Given the number of teams that use the public-land, private-use dodge to avoid a stadium tax bill — which is to say, pretty much all of them — it’s going to be interesting to see if this ruling sets any kind of precedent. Given that tax law varies widely from state to state, and who knows if this will hold up under appeal anyway, probably not, but it’s an interesting idea for local governments to try to recoup some of the money they blew on stadiums in the hopes of sparking development that never arrived.