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Princeton Will Pay $18 Million to Settle Suit Over Property-Tax Exemption

Princeton University has agreed to pay more than $18 million over the next six years to settle a lawsuit brought by local homeowners who challenged its property-tax exemption, the university announced on Friday.

About $10 million of the settlement funds will go toward property-tax relief for homeowners, and $1.25 million toward assistance with the housing needs of economically disadvantaged residents of the town of Princeton, N.J. The university will also make two additional voluntary payments, of nearly $3.5 million each, to the town in 2021 and 2022.

The university is already making voluntary payments of about $3 million a year under a $24-million agreement, reached in 2014, that was set to expire in 2020.

In their challenge of the university’s property-tax exemption, the homeowners argued that Princeton used some buildings for commercial purposes and was earning hundreds of millions of dollars in royalties from its share of a patent on an anticancer drug. A trial in the case had been scheduled to begin on Tuesday.

Princeton University’s president, Christopher L. Eisgruber, said in Friday’s announcement that officials believed the institution’s property-tax exemption would have survived the legal challenge, but they concluded that making contributions that would help preserve diversity in the local community was “a better expenditure of funds than continuing to incur the considerable costs of litigation.”

The settlement came at a time of rising concern, among lawmakers at the national and local levels, over how wealthy universities use their tax-exempt endowments and the payments that many institutions make to local municipalities in lieu of property taxes.

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