Skip to main content

Ferry Plaza Urban Renewal, L.P. v. City of Newark

21 N.J. Tax 100 (App. Div. 2003)

TAXATION; SILOTS—If a property owner paying Service in Lieu of Taxes on a percentage of gross revenue basis collects those charges from its own tenants, the amount collected is to be included within the owner’s gross revenue, and doing so is “not double-dipping” by the taxing authority.

The Long Term Tax Exemption Law permits a municipality “to extend an exemption from taxes on improvements to an entity which proposes to undertake an urban renewal or redevelopment project within the municipality.” Together with the Local Redevelopment and Housing Law, that statute “operates to achieve a common legislative goal – the restoration to economic viability of blighted urban areas.” A developer and operator of a commercial project qualified as an urban renewal entity and received approval from the municipality for its project. “During the term of the tax exemption, the urban renewal entity is only obligated to pay to the municipality an annual service charge, known as a ‘Service in Lieu of Taxes’ or ‘SILOT,’ equal to a certain percentage of the annual gross revenues of the project.” Gross revenues were defined as “the annual gross rents or other income which is generated by the urban renewal entity from the operation of the urban renewal project.” The developer calculated the SILOT as one of its operating expenses in its financial statements when it calculated net profit. After the project was completed, the developer entered into a number of retail leases, each of which included a provision for the tenants to reimburse the developer for a proportionate share of the SILOT due to the municipality. Because the developer included the SILOT reimbursement monies that it received as part of its gross revenues, it paid a significant amount more to the municipality than if it had not included those reimbursement payments in its “gross revenue.” To recover the extra payments, it filed a complaint against the municipality seeking reimbursement of a portion of the SILOT payments made over a course of four years.

The lower court held for the municipality, believing that it was not double-dipping because “[a]ll definitions that I’ve seen about revenues essentially everything that comes in to the landlord, however made, if it’s an apartment coin machine or whatever. If they are reimbursements, that’s revenue. It’s not defined as income from a taxpaying point of view. It is revenue. Some of it may be deductible or non-taxable, but it’s still revenue.” After the developer appealed, the lower court judge amplified his oral opinion, pointing to the statutory definition of gross revenue and also to the definition from Black’s Law Dictionary, which reads: “[r]eceipts of a business before deductions for any purpose except those explicitly exempt.” The Appellate Division was in substantial agreement with the lower court’s oral opinion and it supplementary written opinion.

66 Park Street • Montclair, New Jersey 07042
tel: 973-783-3000 • fax: 973-744-5757 •