Paterson weighs $402K settlement in St. Joseph’s tax lien lawsuits
Paterson officials are planning to pay $402,000 to settle two lawsuits filed by investment groups that bought 17 municipal tax liens between 2017 and 2020 on land owned by St. Joseph’s University Medical Center.
The tax liens stem from Paterson’s attempt in 2016 to collect property taxes from St. Joseph’s, whose land had been tax-exempt for decades. Paterson at that time put the hospital property on the tax rolls after a court decision deemed portions of Morristown Medical Center taxable.
St. Joseph’s fought the taxation in court and didn’t pay taxes while the case was pending. As a result, Paterson sold tax liens on hospital-owned land, just as it would do with any other property that owed back taxes.
Under New Jersey’s laws, investors willing to pay a municipality the delinquent property tax on a particular tract get a lien against the land that entitles them to recoup their principal payment along with 18% interest from the owners. If the property owners don’t pay the investors, then the lien holders can eventually foreclose and take the land.
In the St. Joseph’s tax dispute case, the city and hospital eventually reached a settlement in 2022, a deal in which the medical center’s board agreed to pay Paterson $6 million over five years.
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After the settlement, Paterson canceled the tax liens on the St. Joseph’s property and offered the investors significantly lower interest rates than the 18% originally stipulated, according to the lawsuits.
In the lawsuits, the two investors, Stonefield Investment Fund and Tower, accused the city and the hospital of collusion.
“A municipality does not have the authority to cancel, set aside, invalidate, or otherwise void a tax sale certificate issued to a third-party,” the lawsuits said.
Under the proposed settlement, Paterson would pay the investors 10% interest on the liens — a compromise between the 18% cited in state law and the 3.5% and 4.5% that city officials initially offered the two financial groups, officials said.
The overall interest payments on the 17 liens will be $632,000, with the $402,000 representing the difference between the city’s initial offer and the 10% settlement, officials said.
The lawyer representing the investors did not respond to a phone message seeking his comment for this story. Paterson officials have a policy of not commenting on litigation.
The City Council reviewed the proposed settlements at its meeting on Aug. 2 and is scheduled to vote on the agreements next week.
This article originally appeared on NorthJersey.com: Paterson NJ weighs $402K settlement in St. Joseph’s lawsuits
