Title: Gourmet Dining, LLC v. Union Township
Citation: N/A
Docket Number: 
State: new-jersey
Issuer: new-jersey Supreme Court
Date: June 30, 2020

Gourmet Dining, LLC v. Union Township Annotate this Case Justia Opinion Summary The issue before the New Jersey Supreme Court in this appeal was whether a high-end restaurant operated by a for-profit entity, but housed in a building on the Kean University campus, qualified for a local property tax exemption. Gourmet Dining, LLC, owned and operated a fine dining restaurant named Ursino in a Kean University building. In October 2011, the Kean University Foundation, Inc., and Gourmet Dining entered into a Management Subcontract Agreement (MSA), which conferred on Gourmet Dining the exclusive right to operate, manage, and control Ursino. Gourmet Dining agreed to pay the Foundation an annual “management fee” and a percentage of Ursino’s gross revenue. The Tax Court granted summary judgment in favor of Union Township. Concluding that Gourmet Dining had not established that the subject property is used for a public purpose pursuant to N.J.S.A. 54:4-3.3, or that its actual use of the property was for “colleges, schools, academies or seminaries” as required by N.J.S.A 54:4-3.6, the court held that Gourmet Dining was not entitled to tax exemption under either provision. The Appellate Division reversed, relying on a holistic view: the restaurant is located on-campus; University students and their parents regularly dined there; Gourmet Dining’s annual management fees were used for scholarships; many of the restaurant’s employees are students; and the restaurant used produce grown on theUniversity grounds and provides the University with compostable waste. The Supreme Court reversed, holding the arrangement by which Gourmet Dining operates Ursino was taxable as a lease or lease-like interest. The public-benefit-oriented exemption provisions in issue were not intended to exempt the for-profit operator of a high-end, regionally renowned restaurant situated on a college campus, when the overriding purpose of the endeavor was focused on profitmaking. "Gourmet Dining, as the exclusive operator and manager of this restaurant establishment, must bear its fair share of the local real property tax burden." Read more Want to stay in the know about new opinions from the Supreme Court of New Jersey? Sign up for free summaries delivered directly to your inbox. Learn More › You already receive new opinion summaries from Supreme Court of New Jersey. Did you know we offer summary newsletters for even more practice areas and jurisdictions? Explore them here .(NOTE: The status of this decision is .) SYLLABUSThis syllabus is not part of the Court’s opinion. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Court. In the interest of brevity, portions of an opinion may not have been summarized. Gourmet Dining, LLC v. Union Township (A-8-19) (083146)Argued March 17, 2020 -- Decided June 30, 2020LaVECCHIA, J., writing for the Court. The issue in this appeal is whether a high-end restaurant operated by a for-profit entity but housed in a building on the Kean University campus qualifies for exemption from local property taxation. Under the State Constitution, all real property within New Jersey is subject to taxation unless it qualifies for a statutory exemption. N.J.S.A. 54:4-3.3 exempts from taxation property belonging to the State, counties, or municipalities, or their agencies and authorities, that is used for a public purpose. N.J.S.A. 54:4-3.6, in turn, exempts certain property of various non-profit organizations, including: “all buildings actually used for colleges, schools, academies or seminaries, provided that if any portion of such buildings are leased to profit-making organizations or otherwise used for purposes which are not themselves exempt from taxation, said portion shall be subject to taxation.” The Legislature has also created limitations on the otherwise exempt status of property. N.J.S.A. 54:4-2.3 provides that real property entitled to tax exemption loses its exemption when leased to a person or entity whose property is not exempt. And, under N.J.S.A. 54:4-1.10, an arrangement that is not technically a lease but operates as one is subject to taxation, just as a leasehold estate would be under N.J.S.A. 54:4-2.3. Gourmet Dining, LLC, owned and operated a fine dining restaurant named Ursino in a Kean University building. In October 2011, the Kean University Foundation, Inc., and Gourmet Dining entered into a Management Subcontract Agreement (MSA), which conferred on Gourmet Dining the exclusive right to operate, manage, and control Ursino. Gourmet Dining agreed to pay the Foundation an annual “management fee” and a percentage of Ursino’s gross revenue. The restaurant began operation in late October 2011. In August 2012, Union Township issued a letter notifying Gourmet Dining that it would receive a tax bill for the last two months of the 2011 tax year and the entirety of the 2012 tax year. Gourmet Dining did not challenge those initial assessments but did challenge the 2013 and 2014 tax assessments. It ultimately appealed to the Tax Court. 1 The Tax Court granted summary judgment in favor of Union Township. 30 N.J. Tax 381, 391 (Tax 2018). The court first held that N.J.S.A. 54:4-3.3 applied because the University is a State governmental entity and the building constitutes governmental property. Id. at 402. Concluding that Gourmet Dining had not established that the subject property is used for a public purpose pursuant to N.J.S.A. 54:4-3.3, or that its actual use of the property was for “colleges, schools, academies or seminaries” as required by N.J.S.A 54:4-3.6, the court held that Gourmet Dining was not entitled to tax exemption under either provision. Id. at 410-13. And reasoning that the “rights, powers, and obligations conferred” through the MSA demonstrate that that agreement -- even if not denominated a lease by the parties -- is “a lease for legal purposes,” the Tax Court found the property taxable under N.J.S.A. 54:4-2.3 and N.J.S.A. 54:4-1.10. Id. at 424-26. The Appellate Division reversed, relying on a holistic view of the following facts: the restaurant is located on-campus; University students and their parents regularly dine there; the restaurant provides students and members of the University community “an alternative dining experience”; Gourmet Dining’s annual management fees are used for scholarships; the University’s Board determined “that having a critically acclaimed, upscale restaurant on campus enhances the public’s perception of the University as a forward-looking institution, and thereby serves as an important recruiting tool”; many of the restaurant’s employees are students; and the restaurant uses produce grown on the University grounds and provides the University with compostable waste. 459 N.J. Super. 323, 327, 334-35 (App. Div. 2019). The panel also rejected the Tax Court’s conclusion that Gourmet Dining is “the 'functional’ equivalent” of a lessee. Id. at 337. The Court granted the Township’s petition for certification. 239 N.J. 521 (2019).HELD: The arrangement by which Gourmet Dining operates Ursino is taxable as a lease or lease-like interest. The public-benefit-oriented exemption provisions in issue were not intended to exempt the for-profit operator of a high-end, regionally renowned restaurant situated on a college campus, when the overriding purpose of this commercial endeavor is focused on profitmaking. Gourmet Dining, as the exclusive operator and manager of this restaurant establishment, must bear its fair share of the local real property tax burden.1. Both the Tax Court and the Appellate Division recognized that the subject property is on State property and, as such, falls within the purview of N.J.S.A. 54:4-3.3. (p. 21)2. The Court rejects the argument, based on the punctuation of N.J.S.A. 54:4-3.3, that demonstration of a “public purpose” is unnecessary here. The State Constitution prohibits the donation of state property for private interests, and the Court has established a two-part test for determining whether a donation to a private entity violates the Constitution because it does not serve a public purpose. A court must first determine whether the provision of land or financial aid is for a public purpose, and second, whether the means to accomplish that public purpose are consonant with it. The latter 2 examination is understood as having two parts: whether the transaction is contractual and involves some obligation on the part of the private entity that is intimately tied to fulfilling the public purpose, and whether the accomplishment of the public purpose is the paramount factor in the contract with any private advantage being merely incidental or subordinate. Because an obligation of public purpose use already exists for State property, there was no need to mention the requirement in section 3.3’s first clause. Further, the public purpose assessment would remain integral to the determination of whether tax exemption would apply under N.J.S.A. 54:4-2.3 or -1.10. (pp. 21-25)3. The Appellate Division’s holistic approach to the public purpose inquiry was mistaken. The accomplishment of the public purpose must be the paramount factor in an arrangement with a private entity’s use of public property. For a tax exemption to apply, any private advantage must be incidental or subordinate. Here, that is not so. The Court stresses that it is not assessing the University’s exercise of its authority, but rather determining whether the legislative purpose in crafting the exemption from taxation in N.J.S.A. 54:4-3.3 anticipated the circumstances here -- the University contracting out the establishment and operation of an upscale for-profit commercial restaurant to compete with other local commercial restaurants that pay their fair share of local property taxes. The Court agrees with the Tax Court that Gourmet Dining’s interest in the property is not tax exempt under that provision. (pp. 25-29)4. The Court rejects Gourmet Dining’s claim that it is merely a manager and operator of the restaurant facility, not a tenant or lessee. Because N.J.S.A. 54:4-1.10 so clearly intends to cover user arrangements such as these, the Court relies on the Tax Court’s analysis of that statute’s applicability here. Ursino is taxable under N.J.S.A. 54:4-1.10, through which the Legislature indicated that it did not wish for the public at large to underwrite the local tax obligation of the private operator of a for-profit commercial establishment on public property. (pp. 30-31)5. Nor is Gourmet Dining exempt from taxation under N.J.S.A. 54:4-3.6. Gourmet Dining is a for-profit entity, and the restaurant, as contemplated by the MSA, is intended to make a profit. Gourmet Dining receives the gross revenue and, from that, it pays operating expenses -- which notably expressly reference payment of local taxes -- and fees to the Foundation. As the Tax Court reasoned, the profit, after all expenses are paid, goes to Gourmet Dining. Thus, Gourmet Dining’s use of the subject property does not constitute a use for the “college” but rather for itself. (pp. 31-32) The judgment of the Appellate Division is REVERSED and the judgment of the Tax Court is REINSTATED.CHIEF JUSTICE RABNER and JUSTICES ALBIN, PATTERSON, FERNANDEZ-VINA, and SOLOMON join in JUSTICE LaVECCHIA’s opinion. JUSTICE TIMPONE did not participate. 3 SUPREME COURT OF NEW JERSEY A- 8 September Term 2019 083146 Gourmet Dining, LLC, Plaintiff-Respondent, v. Union Township, Defendant-Appellant, and New Jersey Educational Facilities Authority, Defendant, and Kean University, Defendant-Respondent. On certification to the Superior Court, Appellate Division, whose opinion is reported at 459 N.J. Super. 323 (App. Div. 2019). Argued Decided March 17, 2020 June 30, 2020Robert F. Renaud argued the cause on behalf of appellant (Renaud DeAppolonio, attorneys; Robert F. Renaud and Adam J. Colicchio, on the briefs). 1 David B. Wolfe argued the cause on behalf of respondents (Skoloff & Wolfe, attorneys; David B. Wolfe, Robert F. Giancaterino, and Rebecca L. Hutcheon, on the brief). Richard F. Ricci argued the cause on behalf of amici curiae, Rutgers, The State University of New Jersey, Montclair State University, Rowan University, Stockton University, The College of New Jersey, and New Jersey Institute of Technology (Lowenstein Sandler, attorneys; Richard F. Ricci and Zachary L. Berliner, on the brief). JUSTICE LaVECCHIA delivered the opinion of the Court. The issue in this appeal is whether a high-end restaurant operated by afor-profit entity but housed in a building on the Kean University campusqualifies for exemption from local property taxation. When the restaurant became operational, the operator, Gourmet Dining,LLC (Gourmet Dining), was named as the taxpayer by Union Township, whichissued a tax assessment on the belief Gourmet Dining had a taxable leaseholdinterest. Gourmet Dining contested the assessment, claiming exemption fromtaxation under N.J.S.A. 54:4-3.3 (addressing State and other public propertyused for public purposes), and N.J.S.A. 54:4-3.6 (exempting property ofcolleges and other nonprofit organizations), among other bases no longerpertinent to this appeal. Bolstered by Kean University (the University), 2 Gourmet Dining also advanced public purpose arguments emphasizing theUniversity’s interest in having the restaurant on its campus. The Tax Courtrejected those arguments, but the Appellate Division found accumulated inthem a basis to permit the exemption. In this appeal, we are asked to evaluate whether the assertions byGourmet Dining and the University satisfy the statutory standards forexemption from local property taxation for the operator of the facility. For thereasons expressed, we reverse the Appellate Division and reinstate thejudgment of the Tax Court, which found the arrangement taxable as a lease orlease-like interest. We further hold that the public-benefit-oriented exemptionprovisions in issue were not intended to exempt the for-profit operator of ahigh-end, regionally renowned restaurant situated on a college campus, whenthe overriding purpose of this commercial endeavor is focused onprofitmaking. The Tax Court properly held that Gourmet Dining, as theexclusive operator and manager of this restaurant establishment, must bear itsfair share of the local real property tax burden. I. Certain tax statutes provide the framework for understanding thisdispute. 3 Under our State Constitution, all real property within New Jersey issubject to taxation unless it qualifies for a statutory exemption. N.J. Const.art. VIII, § 1, ¶¶ 1(a) and 2; see also N.J.S.A. 54:4-1 (“All property real andpersonal within the jurisdiction of this State not expressly exempted fromtaxation or expressly excluded from the operation of this chapter shall besubject to taxation annually under this chapter.”). The Legislature has created numerous exemptions from local taxation,and the two that are pertinent to this appeal are found in N.J.S.A. 54:4-3.3 and-3.6. N.J.S.A. 54:4-3.3 addresses the exemption for public property. Itprovides in pertinent part that the property of the State of New Jersey; and the property of the respective counties and municipalities, and their agencies and authorities, school districts, and other taxing districts used for public purposes, which public purposes include the use for stadiums and arenas, or for the preservation or exhibit of historical data, records or property; school district property which is leased to a nonprofit organization which is exempt from taxation under N.J.S.A. 54:4-3.6, for use by that organization in its exempt functions; school district property which is leased to another board of education or governmental agency; and property acquired by any municipality through tax title foreclosure or by deed in lieu of foreclosure, if not used for private purpose, shall be exempt from taxation under this chapter . . . . [N.J.S.A. 54:4-3.3.] 4 N.J.S.A. 54:4-3.6, in turn, exempts certain property of various non-profitorganizations, including: all buildings actually used for colleges, schools, academies or seminaries, provided that if any portion of such buildings are leased to profit-making organizations or otherwise used for purposes which are not themselves exempt from taxation, said portion shall be subject to taxation and the remaining portion only shall be exempt. The Legislature has also created limitations on the otherwise exemptstatus of property. In that respect, N.J.S.A. 54:4-2.3 and N.J.S.A. 54:4-1.10are relevant in this appeal. N.J.S.A. 54:4-2.3 provides that real property entitled to tax exemptionloses its exemption when leased to a person or entity whose property is notexempt. Under that statute, [w]hen real estate exempt from taxation is leased to another whose property is not exempt, and the leasing of which does not make the real estate taxable, the leasehold estate and the appurtenances shall be listed as the property of the lessee thereof, or his assignee, and assessed as real estate. [N.J.S.A. 54:4-2.3.] With the subsequent enactment of a related provision, codified at N.J.S.A. 54:4-1.10, the Legislature eliminated for tax exemption purposes “theartificial distinction between leased property and property used under a non-lease arrangement.” Dep’t of Envtl. Prot. v. Township of Upper Freehold, 31 5 N.J. Tax 230, 240 (Tax 2019) (quoting N.J. Highway Auth. v. Town ofBloomfield, 8 N.J. Tax 637, 642 (Tax 1987)). N.J.S.A. 54:4-1.10 provides: When real property which is exempt from taxation is used by a private party in connection with an activity conducted for profit, and the use does not render the real property taxable pursuant to section 1 of L. 1949, c. 177 ( N.J.S.A. 54:4-2.3) or otherwise, the real property shall be assessed and taxed as real property of the private party. The private party is subject to liability for taxation to the same extent as though he owned the property or any portion thereof, unless the owner consents to the taxation thereof. For purposes of this act, “use” means the right or license, express or implied, to possess and enjoy the benefits from any real property, whether or not that right or license is actually exercised.Thus, according to New Jersey’s statutory plan addressing tax exemptions forreal property, an arrangement that is not technically a lease but operates as oneis subject to taxation pursuant to N.J.S.A. 54:4-1.10, just as a leasehold estatewould be subject to taxation under N.J.S.A. 54:4-2.3. See State v. EatontownBorough, 366 N.J. Super. 626, 632-33 (App. Div. 2004) (“[T]ax liability isimposed on the lessee ( N.J.S.A. 54:4-2.3) or the 'private party’ user of thepremises (N.J.S.A. 54:4-1.10).”). We now turn to the circumstances that gave rise to this appeal. 6 II. A. In resolving this matter on a summary judgment basis, the Tax Courtsummarized the steps that led to the establishment of the restaurant at the heartof this dispute. We draw extensively from that explication of the financial andother arrangements between the parties. Gourmet Dining is “a restaurant, food service, dining operator, andmanager,” that, during the tax years in issue, owned and operated a fine diningrestaurant named Ursino (the subject property or the property). GourmetDining, LLC v. Union Township, 30 N.J. Tax 381, 391 (Tax 2018). Thesubject property takes up approximately 6.4% of the University’s 110,000square foot New Jersey Center for Science, Technology, and MathematicsBuilding (STM Building).1 Ibid. Construction of that educational facility wasfinanced through tax-exempt bonds issued by the New Jersey EducationalFacilities Authority (NJEFA), a State “instrumentality[] authorized to borrowmoney and issue bonds” to finance construction projects for educationalinstitutions within the state. Id. at 391-92; see also N.J.S.A. 18A:72A-31 Kean University is the owner of Block 101, Lot 4.0103 on the tax map of Union Township, commonly known as 1075 Morris Avenue. See Gourmet Dining, 30 N.J. Tax at 391. The STM Building is located on that property. 7 (defining “Educational facility” for purposes of meeting the definition of“project” eligible for NJEFA financing). As this record reveals, the NJEFAowns the STM Building and leases it to the University pursuant to a LeaseAgreement dated December 1, 2005.2 Gourmet Dining, 30 N.J. Tax at 392. On June 28, 2010, the University’s Board of Trustees adopted aResolution by which the University determined to grant to the Kean UniversityFoundation, Inc. 3 (Foundation), the right to launch a restaurant in a portion ofthe STM building and to “engage a restauranteur” for the project. Ibid. ThatResolution required that “a minimum of 10 percent of the restaurant’s grossrevenues annually be allocated for scholarship purposes within theFoundation.” Ibid. More than a year later, on October 19, 2011, the University and theFoundation entered into their contractual arrangement regarding this restaurantproject, executing an agreement (the Management Agreement) granting theFoundation “the 'exclusive right to operate, manage and control’ the subject2 Although the University and NJEFA entered into the Lease Agreement on December 1, 2005, the University did not transfer title for the land on which the building is located to the NJEFA until 2015. Gourmet Dining, 30 N.J. Tax at 392 n.1. 3 The Foundation is described in the record as “a non-profit, 501(c)(3) organization that receives, invests and administers private support for Kean University.” The Foundation also manages and awards scholarships for students to attend the University. 8 property.” Ibid. The Management Agreement also allowed the Foundation tosubcontract its management rights “to a manager with extensive experienceand expertise in the management and operation of various restaurant andcatering businesses, with [the] University’s written consent.” Ibid. On the same day in October 2011, the Foundation and Gourmet Diningentered into a Management Subcontract Agreement (MSA); notably, the MSAconferred on Gourmet Dining the exclusive right to operate, manage, andcontrol Ursino -- the restaurant to be located within the STM Building. Id. at392-93. Gourmet Dining thus became the exclusive manager of the restaurant,responsible for all management and operational services. Id. at 393. GourmetDining agreed to pay the Foundation an annual “management fee” of $250,000per year for nine years and $500,000 in the tenth year. Ibid. Gourmet Diningalso agreed to pay the Foundation 12.5% of Ursino’s gross revenue , designatedas an operations fee to be paid quarterly. Ibid. Once outfitted, furnished, and staffed, the restaurant began operation inlate October 2011. In August 2012, Union Township issued a letter notifyingGourmet Dining that it would receive a tax bill for the Ursino restaurantfacility, citing N.J.S.A. 54:4-2.3, based on the Township’s view that Gourmet 9 Dining was a lessee.4 Ibid. The assessment was imposed for the last twomonths of the 2011 tax year and the entirety of the 2012 tax year. Ibid. Gourmet Dining did not challenge those initial assessments. However, itbrought a challenge to the 2013 and 2014 tax assessments before the UnionCounty Board of Taxation. Id. at 394. After those proved unsuccessful insecuring relief, Gourmet Dining appealed to the Tax Court. Ibid. Defendant Union Township filed a summary judgment motion seekingdismissal of the action, and Gourmet Dining filed a cross-motion for judgment.Ibid. Thereafter, by order of the Tax Court, the NJEFA and the Universitywere joined as necessary parties. Ibid. B. In a detailed opinion, the Tax Court granted the Township’s summaryjudgment motion and denied Gourmet Dining’s and the University’s cross-motions. Id. at 391. The Tax Court concluded that the subject property falls within thejurisdiction of N.J.S.A. 54:4-3.3 because the University is a Stategovernmental entity and the STM Building constitutes governmental property.4 Based on the estimated true market value of the restaurant portion of the building and applying the Township’s ratio of assessed to true value, the local property assessment for the 2012 tax year was $300,800. Gourmet Dining, 30 N.J. Tax at 393-94. The land was valued at $50,000 and improvements at $250,800. Id. at 394. 10 Id. at 402. On the other hand, however, the court noted that “it is undisputedthat Gourmet Dining is a for-profit corporation, and its operation andmanagement of Ursino are conducted for-profit.” Ibid. The court thenanalyzed whether “Gourmet Dining’s use, possession, and occupancy of thesubject property as a restaurant fulfills a statutory purpose afforded to [theUniversity].” Ibid. Because it concluded that Gourmet Dining had notestablished that the subject property is used for a public purpose pursuant to N.J.S.A. 54:4-3.3, the court held that Gourmet Dining was not entitled to localproperty tax exemption under that provision. Id. at 410. The court explained Ursino is a for-profit business that, during the taxyears in issue, did not operate as a dining hall to serve the University’sancillary function of providing food to its student body, faculty, oradministrators. Id. at 406-07. As the court put it, Gourmet Dining conceded that during the 2013 and 2014 tax years, Ursino did not participate in, and was not part of, any meal plan offered by Kean to its students, faculty, or administrators. Additionally, Ursino was not identified by Kean’s Office of Residence Life as one of the six “dining service locations” available to students or other members of the Kean community. Significantly, Ursino did not accept the students’ “Cougar Dollars” or “Flex Dollars” (Kean’s student-dining currencies, which offer flexible dining options to students outside of the traditional meal plans), or offer discounts to Kean faculty, administrators, or students. While none of these factors individually are dispositive, they support Union 11 Township’s assertion that Ursino was no different from any other restaurant, bar, or tavern in Union Township. [Id. at 403.] The court took into consideration the Resolution between the Universityand the Foundation, which calls for at least ten percent of the restaurant’sgross revenues to be annually allocated for student scholarships; however, thecourt observed that “the Management Agreement between [the University] andthe Foundation contains no such provision, and imposes no such obligation orrequirement.” Id. at 407. Therefore, while the University may have initiallyexpressed an intent to fund scholarships with proceeds from the restauran t, thecourt did not find that intent “manifested in any contractual provision undereither the MSA or the Management Agreement.” Ibid. More fundamentally, the court was not persuaded that tax exemptionunder N.J.S.A. 54:4-3.3 was envisioned for a private, for-profit entity “simplybecause part of its gross revenue stream is remitted to a public entity and thenallegedly allocated to further the public entity’s purpose.” Ibid. To the extent that Gourmet Dining and the University claimed that apublic purpose was met because it was the University’s decision to have arenowned, high-end eating establishment on campus to raise the public profileof the institution, the court rejected the argument. Id. at 408. The court didnot agree that finding the University’s decision an inadequate predicate for a 12 tax exemption was tantamount to “interfering with the policy-making andadministrative purposes of [a] college.” Ibid. (alteration in original). Thecourt stressed that it was not evaluating the validity of the University’s internalor administrative processes but was simply determining whether the operationof a for-profit restaurant met the public purpose test for tax exemptionpurposes. Ibid. The court also rejected a bevy of arguments advanced to show that therelationship between the Ursino restaurant and the University supported thefinding of a public purpose to support tax exemption. The court rejected theclaim that a public function is served because Ursino employs students, id. at408-09, noting that to allow a for-profit business a tax exemption merely foremploying students “would eviscerate the current system of local property taxassessments and exemptions,” id. at 409. The court also rejected the argumentthat the restaurant’s provision of compostable material to the University andpurchase of some produce from a University-operated farm constitute use ofthe property for a public purpose. Id. at 409-10. The court described thisasserted environmental stewardship program as “at best an indirect benefit ofarms-length transactions between Gourmet Dining and [the University] forservices necessary for the operation of Ursino.” Ibid. 13 The Tax Court also addressed the application of N.J.S.A. 54:4-3.6 andconcluded that Gourmet Dining failed to demonstrate that its “actual use of thesubject property constituted a use for 'colleges, schools, academies orseminaries.’” Id. at 413. The court was unconvinced that this profit-makingarrangement met the intendment of that statute, noting that the intent behindoperating the restaurant is to generate profit, which generates revenue forGourmet Dining. Id. at 412. According to the court, “[i]f profit comprises therevenue that remains after all expenses of Ursino’s operations are paid,[including the fees it is required to pay the Foundation,] then it must be saidthat, here, all profit belongs to Gourmet Dining.” Id. at 413. Therefore, thecourt held that Gourmet Dining was not entitled to tax exemption pursuant to N.J.S.A. 54:4-3.6.5 Ibid. According to the Tax Court, Gourmet Dining has in essence a leaseholdinterest in the subject property, and as such, the property is subject to taxationunder N.J.S.A. 54:4-2.3. Id. at 424. The court reasoned that the “rights,5 The Tax Court also rejected an argument that Gourmet Dining is entitled to tax exemption pursuant to N.J.S.A. 18A:72A-18 as an agent of the NJEFA. Gourmet Dining, 30 N.J. Tax at 420. The court reasoned that the University and the Foundation are not agents of the NJEFA, and, therefore do not qualify for an exemption under that provision, which affords an exemption to a “project or any property . . . used by the authority or its agent.” Ibid. (omission in original) (quoting N.J.S.A. 18A:72A-18). This argument is not advanced before our Court. 14 powers, and obligations conferred on the parties” through the MSAdemonstrate that that agreement -- even if not denominated a lease by theparties -- is “a lease for legal purposes.” Ibid. The court further held that“because Gourmet Dining’s use of the subject property failed to satisfy thenecessary public purpose requirements, its use of the subject property issubject to taxation under N.J.S.A. 54:4-1.10.” Id. at 425-26. In sum, the courtfound that the relevant “statutes do not sanction the grant of tax exemptionswhere tax-exempt property is leased by public institutions to private entitiesfor a commercial, profit-generating purpose that is unrelated to theinstitution’s tax-exempt mission.” Id. at 425. The Tax Court thereafter denied a motion for reconsideration thatfocused on the court’s finding that the University and Gourmet Dining werenot agents of the NJEFA. C. An appeal was taken, and the Appellate Division reversed the TaxCourt’s judgment. Gourmet Dining, LLC v. Union Township, 459 N.J. Super. 323, 327 (App. Div. 2019). The Appellate Division determined that the subject property was exemptunder N.J.S.A. 54:4-3.3, stating “when all of the relationships between therestaurant and the University are considered, they warrant the conclusion that 15 the subject property is being used for a public purpose.” Id. at 335. TheAppellate Division relied on a holistic view of the following facts in reachingits determination, while conceding that no single one standing alone woulddemonstrate a public purpose: the restaurant is located on-campus; Universitystudents and their parents regularly dine at the restaurant; the restaurantprovides students and members of the University community “an alternativedining experience”; Gourmet Dining’s annual management fees are used forUniversity scholarships; the University’s Board determined “that having acritically acclaimed, upscale restaurant on campus enhances the public’sperception of the University as a forward-looking institution, and therebyserves as an important recruiting tool”; many of the restaurant’s employees arestudents; and the restaurant uses produce grown on the University grounds and“will provide compostable waste for the University’s science program, whereit will be used for research by faculty and students.” Id. at 334-35. For similar reasons, the Appellate Division also concluded that GourmetDining was not subject to local taxation for the restaurant under N.J.S.A. 54:4-3.6. Id. at 338. And the panel rejected the Tax Court’s conclusion thatGourmet Dining is “the 'functional’ equivalent” of a lessee of the subjectproperty, reasoning that the provision in the MSA between the Foundation andGourmet Dining for payment of annual management fees and not rent 16 demonstrates “that the parties intended the agreement to be one for themanagement and operation of the restaurant, rather than a lease of theproperty.” 6 Id. at 337. The Township filed a petition for certification from the AppellateDivision’s judgment, which we granted. 239 N.J. 521 (2019). We alsogranted amicus curiae status to a joint group of public institutions of highereducation that includes Rutgers, The State University of New Jersey;Montclair State University; Rowan University; Stockton University; TheCollege of New Jersey; and New Jersey Institute of Technology. III. The Township argues that the Tax Court properly applied the taxexemption statutes in concluding that the subject property is not exempt andthat the Appellate Division erred in stretching the statutes to apply in thesecircumstances, while ignoring N.J.S.A. 54:4-1.10. The Township emphasizesthat this property is being used to generate profit for a private entity andasserts that the University’s belief that having an “upscale” and “critically-6 The Appellate Division agreed with the Tax Court that there was no agency relationship between Gourmet Dining and the NJEFA and that the subject property is therefore not exempt from local property taxation under N.J.S.A. 18A:72A-18. Gourmet Dining, 459 N.J. Super. at 338-39. That issue is not pursued before our Court. 17 acclaimed” restaurant on campus will enhance its image does not transformthis for-profit restaurant into a public use. Gourmet Dining and the University contend that the concept of “publicpurpose” is broad and dynamic and that tax exemptions for state property areliberally construed. In arguing for affirmance of the Appellate Division’sjudgment, they contend that the subject property’s use falls within theUniversity’s broad statutory authority and constitutes a public purpose,regardless of whether the property is operated by a for-profit entity. Gourmet Dining and the University also continue to maintain that theMSA is not a lease or the functional equivalent of a lease. Moreover, theyclaim neither N.J.S.A. 54:4-2.3 nor N.J.S.A. 54:4-1.10 applies when theproperty is utilized for the purpose of the exempt entity. Amici support Gourmet Dining and the University on their publicpurpose arguments and also highlight that the plain language and punctuationof N.J.S.A. 54:4-3.3 supports their argument that State property, such as thatheld by the University, is exempt from local property taxation “regardless ofits purpose or use.” They point to the semicolon after the first clause, whichconcludes with the words “New Jersey,” and contend that that punctuation 18 signifies that the “public purpose” modifier later in the provision applies onlyto the later clauses. 7 IV. We begin with the constitutional directive that all real property is subjectto local property taxation unless its use has been legislatively exempted. N.J.Const. art. VIII, § 1, ¶¶ 1, 2. As observed by Chief Justice Vanderbilt,government needs taxes to function and “[a]ny impairment of the taxing poweraffects the lifeblood of government.” N.J. Tpk. Auth. v. WashingtonTownship, 16 N.J. 38, 44 (1954). That is especially true for localgovernments, which are particularly dependent on tax revenue. Borough ofMoonachie v. Port of N.Y. Auth., 38 N.J. 414, 423 (1962). The Constitution’s authorization for the legislative creation of taxexemptions contains some restrictions. Township of Holmdel v. N.J. HighwayAuth., 190 N.J. 74, 87 (2007) (citing Robert F. Williams, The New JerseyState Constitution 109-15 (1997)). Exemptions may be granted only through“general laws.” N.J. Const. art. VIII, § 1, ¶ 2; see N.J. Const. art. IV, § 7, ¶9(6) (prohibiting special laws on taxation). And our case law recognizes that7 This argument was advanced by Gourmet Dining and the University in their brief to the Appellate Division; however, the court did not address it, going directly to the public purpose debate and ruling in favor of Gourmet Dining and the University on that basis. 19 the exemption must be based on the property’s use, not on the propertyowner’s identity. Township of Holmdel, 190 N.J. at 87. Within thoseconstrictions, the Legislature has created and refined laws allowing forexemption of certain property from local taxation. Several such laws are thefocus of this appeal. When courts are called on to interpret tax exemption statutes, the generalstandards for statutory interpretation are followed. Ibid. (citing Walter Reade,Inc. v. Dennis, 36 N.J. 435, 440 (1962)). The paramount goal is to discern andimplement legislative intent. See DiProspero v. Penn, 183 N.J. 477, 492(2005). In performing that task, we also adhere to the longstanding principlethat tax exemption statutes in favor of nongovernmental actors are subject tostrict construction. See, e.g., Int’l Sch. Servs., Inc. v. West WindsorTownship, 207 N.J. 3, 15 (2011); Highway Auth., 190 N.J. at 88. And, that itis the burden of the party seeking the exemption to prove that the bases for itare established. Int’l Sch. Servs., 207 N.J. at 15. Public policy calls for thepublic tax burden “to be borne fairly and equitably.” Ibid. As this matter comes on appeal from summary judgment, that standardguides this appeal. See R. 4:46-2; Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). We turn, necessarily, to the application of the taxexemption statutes to Gourmet Dining. 20 V. One of Gourmet Dining’s claims for tax exemption relies on N.J.S.A.54:4-3.3, which provides that the property of the State of New Jersey; and the property of the respective counties and municipalities, and their agencies and authorities, school districts, and other taxing districts used for public purposes . . . shall be exempt from taxation under this chapter . . . .Both the Tax Court and the Appellate Division recognized that, whether theunderlying real estate was viewed as owned by the NJEFA or the University,the subject property is on State property and, as such, “falls within the purviewof N.J.S.A. 54:4-3.3.” Gourmet Dining, 459 N.J. Super. at 332. The twocourts differed on whether Gourmet Dining, bolstered by the University,satisfactorily demonstrated that the property was used for a public purpose.Ibid. Before reviewing the competing arguments on public purpose in thesecircumstances, we dispense with a legal argument that demonstration of a“public purpose” is unnecessary here. A. The contention is that N.J.S.A. 54:4-3.3 makes the consideration ofpublic purpose an irrelevant consideration for tax-exemption purposes becauseUrsino is located on State property. To support that proposition, Gourmet 21 Dining and the University, in their briefing to the Appellate Division,amplified by amici, rely on the text and punctuation of the first quoted clauseof the statutory provision. As the argument goes, the semi-colon after “New Jersey” precludesapplication of the second clause’s modifier about property being required to beused for public purposes for exemption to be triggered. While the punctuationreading has superficial attraction, the argument fails when considered in itslarger context. All property of the State is subject to use for public purposes by virtue ofthe State Constitution’s prohibition against the donation of state property forprivate interests. See N.J. Const. art. VIII, § 3, ¶ 3. Public property is to beused for public purposes and, to cement that obligation, the Constitutionmandates that “[n]o donation of land or appropriation of money shall be madeby the State or any county or municipal corporation to or for the use of anysociety, association or corporation whatever.” Ibid. The “provision was addedto the Constitution when it was amended in 1875 because of 'a number ofabusive practices that occurred during the nineteenth century when railroadsand other private corporations were provided direct public assistance to theserious detriment of the taxpayers under the guise of “encouragingdevelopment.”’” State Bar Ass’n v. State, 382 N.J. Super. 284, 318 (Ch. Div. 22 2005) (quoting Davidson Bros., Inc. v. D. Katz & Sons, Inc., 121 N.J. 196, 217(1990) (quoting, in turn, Roe v. Kervick, 42 N.J. 191, 212 (1964))). Basedupon that provision, this Court recognizes as a “fundamental doctrine” that theState is prohibited from lending, “directly or indirectly, or loaning, giving ordonating its money or property or that of its subdivisions to or for the use of anindividual, association or corporation for private purposes.” Roe, 42 N.J. at 207 (emphasis added). The seminal case of Roe articulated what passes for a public purpose: apublic purpose is “an activity which serves as a benefit to the community as awhole, and which, at the same time is directly related to the functions ofgovernment.” Ibid. In Roe, our Court established a two-part test fordetermining whether a donation to a private entity violates the Constitutionbecause it does not serve a public purpose. Ibid.; Bryant v. City of AtlanticCity, 309 N.J. Super. 596, 612 (App. Div. 1998); State Bar Ass’n, 382 N.J.Super. at 318. Stated simply, a court must first determine whether theprovision of land or financial aid is for a public purpose, and second, whetherthe means to accomplish that public purpose are consonant with it. Bryant, 309 N.J. Super. at 612 (citing Roe, 42 N.J. at 212). The latter examination isunderstood as having two parts: “whether the transaction is contractual andinvolves some obligation on the part of the private entity that is intimately tied 23 to fulfilling the public purpose[, and] whether the accomplishment of thepublic purpose is the paramount factor in the contract with any privateadvantage being merely incidental or subordinate.” State Bar Ass’n, 382 N.J.Super. at 318 (emphasis added). An obligation of public purpose use already exists for State property.The argument that no public purpose examination is required under N.J.S.A.54:4-3.3 for State land under any circumstance flies in the face of thefundamental doctrine recognized in Roe. The public purpose requirement iscarried forward when public property is turned over to private hands,otherwise the State risks a Donation Clause violation. There was no need tomention the requirement in section 3.3’s first clause. This textual argument that no public purpose showing is necessary,which the Appellate Division did not address,8 is unpersuasive when viewed inthe larger picture, and it fails to assist in the question before the Court for this,and a second, reason. The amici who emphasized this argument conceded, during oralargument, that the point was inconclusive because if State property is leased,8 Indeed, we note that in addressing what the statute means when it imposed a standard of “used for public purposes,” the Appellate Division here adverted to the same Roe standard in connection with its public purpose assessment. Gourmet Dining, 459 N.J. Super. at 331. 24 or similarly allowed to be used by a private party, that triggers an analysisunder N.J.S.A. 54:4-2.3 or -1.10. Thus, a public purpose assessment wouldremain integral to the determination of whether tax exemption would apply. Ifthe public purpose test is not satisfied, the user of the property is taxed, asprovided by either of those statutes, not the State. We return then to the public purpose debate in this matter. B. 1. Both the Tax Court and Appellate Division assessed the various basesadvanced by Gourmet Dining and the University to support their argument thatoperation of Ursino serves a public purpose: (1) the restaurant is a pu blicdining establishment that may be used by University students, their families,faculty and administrators; (2) a portion of gross revenue from the restaurant’soperations are paid to the Foundation, which will provide scholarships tostudents; (3) the acclaimed restaurant raises the University’s profile; (4) therestaurant employs students; and (5) the restaurant has an arrangement,presumed by the Tax Court to be an arms-length transaction in the absence ofany countervailing showing, that involves its use of some produce grown on afarm owned by the University and its provision of compostable waste to the 25 University, thus promoting the University’s mission of environmentalstewardship. The Tax Court rejected those bases in finding that a public purpose wasnot sufficiently supported on this record because, after engaging in detailedcomparisons of each proffered reason to factual settings and holding of priorcases, all came up short. Gourmet Dining, 30 N.J. Tax at 403-10. TheAppellate Division then examined those considerations and rightfullyacknowledged that none individually met the “used for public purposes” testthat has been deployed in tax exemption cases before and which traces back toRoe. Gourmet Dining, 459 N.J. Super. at 331-35. However, the Appellate Division found that, in considering the sum ofthose factors, an overall public purpose is demonstrated. Id. at 335. In itsassessment, the court expressed the view that it is incumbent on courts not tosubstitute their judgment for that of the University Board when it determinedthat the best interests of the University were advanced by having a “criticallyacclaimed, upscale restaurant on campus [to] enhance[] the public’s perceptionof the University as a forward-looking institution,” which enhanced recruitingof students and faculty. Ibid. The Appellate Division found persuasive thefact that the University considered its STM Building a visual landmark andthat the restaurant housed in it would enhance the University’s public profile. 26 The court also noted that the renowned, upscale restaurant would generate astream of income for scholarships. And, although the restaurant is notassociated with any meal plan or dining arrangement with the University, theAppellate Division also took into account that students take advantage of therestaurant’s lower cost bar fare, that parents patronize it, and that therestaurant employed many students and helped promote the University’senvironmental stewardship mission. In our view, the Appellate Division’s approach was mistaken. 2. Roe instructs that the accomplishment of the public purpose must be theparamount factor in an arrangement with a private entity’s use of publicproperty. For a tax exemption to apply, any private advantage must beincidental or subordinate. Here that is not so. The commercial success of this competitive high-end restaurant locatedon the University’s campus is the paramount factor in this arrangement.Providing food services for students, or even faculty or administrators, was notits key purpose. Indeed, having this eating establishment was not evenpromoted as a form of convenience for students and researchers at the STMBuilding, or the University generally. Cf. Blair Acad. v. BlairstownTownship, 95 N.J. Super. 583, 590 (App. Div. 1967) (“The use of a catering 27 system to feed the students and faculty of this boarding school cannot beregarded as a commercial activity or business venture of the school[;] . . . [i]thas been found expedient by the management of the school to have such aprivate caterer, in lieu of providing its own personnel to furnish this necessaryservice.”). Had the running of this restaurant been tied to the University’sprovision of dining services in some fashion (other than the happenstance ofstudents patronizing the venue on occasion, as might any member of thepublic), then a better argument might have been advanced. But that is not therecord presented for the contested tax years. For the University, Ursino’s commercial success would spin offincidental benefits, such as employment opportunities for students. Obviously,that is a positive side effect -- but not one required by the contractualarrangement. The University’s greater emphasis on the importance of therestaurant’s acclaim in providing positive notoriety -- a form of visualbranding as the Township would describe it -- does not fulfill a public purpose.The University is not running a culinary institute. And the restaurant’sgeneration of certain revenue, some percentage of which the Foundation usedfor scholarships, does not make an otherwise nonexempt purpose a publicpurpose. 28 Finally, there is no doubt that Title 18A gives to public universities widelatitude in the determination, delivery, and operation of their educationalprograms and institutions. See N.J.S.A. 18A:64-2. But that does not answerthe question whether a public purpose for tax exemption purposes is present. We are not asked to judge whether the University exceeded its statutoryauthority in deciding to house a commercial restaurant in its NJEFA-fundededucational facility. See N.J.S.A. 18A:72A-3 (defining “Project” and“Educational facility”). We are determining whether the legislative purpose incrafting the exemption from local taxation in N.J.S.A. 54:4-3.3 anticipated thecircumstances here -- the University contracting out the establishment andoperation of an upscale for-profit commercial restaurant to compete with otherlocal commercial restaurants that pay their fair share of local property taxes.To the extent that it did, the Legislature did not signal that a public purposeexception would apply. Rather, it provided for the taxation of leases,functional leases, and users of exempt public property for nonexempt purposesunder N.J.S.A. 54:4-2.3 and -1.10. In our judgment, the Tax Court’s analysis properly examined thearguments advanced for tax exemption under N.J.S.A. 54:4-3.3 and foundthem lacking. We agree and hold that Gourmet Dining’s interest in the subjectproperty is not tax exempt under that provision. 29 C. The Township assessed Gourmet Dining on its belief that it was a lesseeof the University’s otherwise exempt public property. Gourmet Dining claimsit is merely a manager and operator of the restaurant facility, not a tenant orlessee. The Tax Court held that the contractual arrangement between GourmetDining and the Foundation through the MSA rendered Gourmet Dining’sinterest subject to taxation, whether viewed under N.J.S.A. 54:4-2.3 as thefunctional equivalent of a lease 9 or under N.J.S.A. 54:4-1.10. Because N.J.S.A. 54:4-1.10 so clearly intends to cover userarrangements such as these, whether or not capable of being denoted as thefunctional equivalent of a lease, we rely on the Tax Court’s analysis of thatstatute’s applicability here. Having already concluded that Gourmet Dining’suse, operation, and management of Ursino failed the public purpose test, wehold that it is taxable under N.J.S.A. 54:4-1.10, as the Tax Court rightly held.9 The Tax Court found that the MSA satisfied the requirements of a lease in being a contract, for a defined property, that delineates a set term (ten years), and which requires Gourmet Dining to pay a fixed annual fee. Gourmet Dining, 30 N.J. Tax at 422. On the final point of whether Gourmet Dining has the right to exclusively occupy the subject property, the court found that the MSA conferred the functional equivalent of exclusive use, enjoyment, and possession. Ibid. 30 In concluding on this issue, we add that, in our view, legislative intentseems clear. By enacting the loophole-closing provision of N.J.S.A. 54:4-1.10, the Legislature indicated that it did not wish for the public at large tounderwrite the local tax obligation of the private operator of a for-profitcommercial establishment on public property. See Eatontown Borough, 366 N.J. Super. at 633. Application of that intent leads to the conclusion that thisfor-profit commercial dining establishment on public property, which is nottied to providing dining hall or other student-oriented convenient sustenance,is liable to local taxing authority for the assessment of its interest in the subjectproperty. Our holding does not affect taxation of the public entity. VI. To the extent that Gourmet Dining and the University also advance aclaim for tax exemption based on N.J.S.A. 54:4-3.6, the preceding analysesforeshadow our conclusion. To be eligible for exemption under that provision, property must beactually used for the tax-exempt purpose, the provision allowing forapportionment of space based on eligibility for exemption. In relevant part,the exemption is for all buildings actually used for colleges . . . provided that if any portion of such buildings are leased to profit- making organizations or otherwise used for purposes which are not themselves exempt from taxation, said 31 portion shall be subject to taxation and the remaining portion only shall be exempt. [N.J.S.A. 54:4-3.6.] Gourmet Dining is a for-profit entity, and the restaurant, as contemplatedby the MSA, is intended to make a profit. Gourmet Dining receives the grossrevenue and, from that, it pays operating expenses, which notably expresslyreference payment of local taxes. The MSA also calls for payment of the fixedfee and operations fee to the Foundation. As the Tax Court reasoned, theprofit, after all expenses are paid, goes to Gourmet Dining. Thus, GourmetDining’s use of the subject property does not constitute a use for the “college”but rather for itself. The Appellate Division reversed that compelling reasoning based on itscontrary view that public purpose had been demonstrated in thesecircumstances. Because we have rejected that conclusion and find that apublic purpose has not been demonstrated, we reverse the Appellate Divisionjudgment as to N.J.S.A. 54:4-3.6’s application. VII. The application of the State’s tax exemption statutes calls for fact-sensitive assessments in each circumstance, which we are satisfied was donecarefully, thoroughly, and persuasively by the Tax Court. Based on our reviewof the circumstances presented herein, we agree with the Tax Court’s 32 conclusions and accordingly reverse the judgment of the Appellate Division.We reinstate the judgment of the Tax Court that the subject property is not taxexempt under either N.J.S.A. 54:4-3.3 or -3.6 and that it is subject to taxationunder N.J.S.A. 54:4-1.10. CHIEF JUSTICE RABNER and JUSTICES ALBIN, PATTERSON, FERNANDEZ-VINA, and SOLOMON join in JUSTICE LaVECCHIA’s opinion. JUSTICE TIMPONE did not participate. 33