The gigantic American Dream Mall located in East Rutherford, New Jersey challenged its tax assessments for the years 2019-2025 before the New Jersey Tax Court. Notably, the Mall is “the subject of a long-term PILOT program in which the payments in lieu of taxes are equal to 90% of the taxes which would otherwise be due”. As a result, the question was raised during the pendency of the litigation as to whether any of the PILOT payments, which are committed to debt service on bonds issued to finance the Mall, could be recouped if the tax case was successful since tax payments for these years had been used to pay the bond holders.
The New Jersey Tax Court concluded that the Mall was overvalued by hundreds of millions of dollars. Its ruling was based on a standard analysis of net operating income and the selection of an appropriate cap rate after which costs to complete construction of the unfinished 3 million+ square foot Mall and attached waterpark were deducted.
Awaiting decision, however, is whether the tax refunds now determined to be due for past years can be obtained from the bond holders’ trustee or whether payments of these monies to the bond holders by the trustee rendered the tax appeal moot because monetary relief in the form of refunds or credits for these years would not be available.
As the Tax Court commented in footnote 3 to its opinion: “the specific issues involving the PILOT… which cast doubt on the viability of traditional remedies will be addressed in the Court’s future decision on the parties’ motions for partial summary judgment for the prior years under appeal. But it is (in fact) an open question (which will determine whether or not the appeals for the prior years are moot.)”
Millions of tax refund dollars consequently hang in the balance.
Ameram LLC v. Borough of East Rutherford (August 18, 2025).
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