Jersey City Sues Port Authority|for $315 Million in Back Taxes

NEWARK, N.J. (CN) - Jersey City sued the Port Authority of New York and New Jersey for more than $315 million - taxes on 40 properties in the city on which the Port Authority "pays no real estate taxes," according to a federal lawsuit.

Jersey City sued the Port Authority of New York and New Jersey and the Port Authority Trans-Hudson train system.

Jersey City Mayor Steve Fulop threatened to sue the Port Authority in November last year, but both the city and the Port Authority had been mum until the lawsuit was filed last week.

"Our attorneys engaged in preliminary discussions to settle these matters outside of court," Mayor Fulop said in statement. "However, those discussions did not resolve the issues between the city and the Port Authority. We are moving forward with the lawsuit to ensure Jersey City receives its fair share in taxes from the Port Authority. We will not be bullied or pushed around."

The city says in its 62-page filing that the 40 properties the Port Authority owns in the city "would currently yield about $18 million annually in real estate taxes and would have yielded more than $315 million in additional tax revenue during the periods the properties have been owned by the Port Authority and taken off the tax rolls."

The city claims that "the New Jersey and New York Legislatures have provided a qualified tax exemption for Port Authority-owned properties ... but the qualified exemption has been abused by the Port Authority."

Jersey City says that its loss of revenue has been "astronomical," and that the Port Authority "has benefited handsomely from its acquisition and ownership of properties in the City."

The city says that while the Port Authority has previously entered into Payment In Lieu Of Taxes (or PILOT) agreements with them, "they cover only seven of the 40 properties and generate only about $2.2 million in annual PILOT payments, which is millions of dollars less per year than if these seven properties had been regularly taxed."

The city claims that the Port Authority, during negotiations before the lawsuit was filed, took the position that "it is exempt from taxation because of its mere ownership of property" and that "it has no obligation to enter into PILOT agreements with affected municipalities."

Jersey City also claims that the Port Authority purchased an acre of land in the city in 2010, built a 177,000-square-foot office building on it and "has paid no taxes on the property and has not entered into a PILOT agreement with respect to this property."

Dozens of other properties in the Port Authority's Port Jersey marine terminal have "not yielded a dime to the city in either taxes or PILOT payments, even though the current taxes on these properties would total approximately $3.5 million a year," the city says in the complaint.

Jersey City claims that the Port Authority has also failed to reform existing PILOT agreements for city properties, one of which dates back to 1967, or to take other remedial measures "to achieve the statutory purposes that PILOT payments be fair and reasonable to the end that a municipality not suffer an undue loss of taxes and assessments."

It adds: "Both the city and its counsel have made requests under the Port Authority's Freedom of Information Code for documents relevant not only to Port Authority-owned properties in the city but also the Port Authority's inconsistent treatment of properties in other municipalities but to no avail. ...

"After months of delay tactics and boilerplate letters that do not even comply with the Port Authority's own rules, not a single document has been produced by the Port Authority."

Port Authority spokesman Steve Coleman said in a statement that "Jersey City's claims are without merit, and we will vigorously defend ourselves against these allegations."

Coleman told the Newark Star Ledger in an email that "the vitality of Jersey City has been important to the Port Authority for many years, and that's why we invested more than $1 billion to create a modern, robust PATH system that serves tens of thousands of city residents daily. It's also why we acquired and invested millions in the Global Terminal, giving the city a thriving, job-creating port facility."

This is not the first time the Port Authority has been sued over its properties. In 1998, Newark sued the agency, seeking underpaid rent.

The Port Authority eventually settled that case by handing over $100 million in tax relief to the city, plus $12.5 million annually for capital improvement projects.

Jersey City seeks declaratory judgment that "the Port Authority is not entitled to an unqualified tax exemption" and ordering it to "pay all back real estate taxes which are due and owing."

The city is represented by Richard Rudin with Weiner Lesniak of Parsippany, N.J.

Weiner Lesniak represented Newark in 1998 when it sued the Port Authority.

The Port Authority, which manages ports, bridges, tunnels, the PATH system, airports and other properties in the New York metro region, has been much in the news this year.

New Jersey Gov. Chris Christie's aides and appointees have been accused of closing lanes on the George Washington Bridge as political retribution against a mayor who refused to endorse Christie.

And The Wall Street Journal has reported that 1 World Trade Center, built with the Port Authority as redeveloper at the cost of $3.9 billion and scheduled to open this year, is still only 55 percent leased, and recently slashed its rent.

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit