MORRISTOWN – Officials chose to settle tax appeal litigation with BMW North America in 2014 to avoid “devastating” financial impacts on Woodcliff Lake, Mayor Carlos Rendo testified in state Tax Court on Friday.

The mayor, along with Councilman Corrado Belgiovine and Frank Wieczorek, BMW’s tax manager, were called to the stand Friday as part of a lawsuit filed by borough resident William E. Dolan. Dolan alleges that the Borough Council did not do its due diligence before agreeing to the settlement and that BMW’s 2014 property assessment of $110 million should be considerably higher.

The borough agreed in the settlement to refund BMW $3.95 million without interest over four years starting in 2015 after the auto company, which keeps its North American headquarters on an 86-acre campus in the borough, filed appeals for the 2006-2013 tax years. Those payments have yet to start, due to the ongoing litigation.

But in questioning led by Dolan’s attorney, Michael Scully, Rendo said BMW’s initial refund demand was $12 million – more than an entire annual budget for the town at the time, he said.

“The council wasn’t going to play Russian roulette with the taxpayers’ money,” Rendo, who was a councilman at the time of the settlement, said on the stand. “If we were to take it to trial and lose, that could bankrupt the municipality. We looked at the exposure report and made the business decision to save taxpayers from a devastating result.”

But Scully said his client challenges the validity of the settlement, calling it “arbitrary, unreasonable and capricious.” The plaintiff claims the borough failed to have an independent valuation of the property done, despite advice from its experts to do so. The settlement could end up hurting taxpayers, Scully said.

“There’s no need for taxpayers to question, wonder or suspect if they are being made to subsidize a major corporation,” Scully said, noting that the property had previously been valued at $180 million, before facing a “drastic reduction” in 2014.

Wieczorek said BMW filed the tax appeals because the company believed the value of its property was over-assessed. BMW had its own valuations done by Izenberg Appraisal Associates. The north and south campuses of the lot were appraised separately in 2008 and 2009, and the total combined value was $88 million, according to the reports.

Wieczorek said BMW initially asked for $12 million in tax appeals from the borough. When asked by Scully why the company decided to settle, Wieczorek said it was BMW’s intention come to an amicable agreement with the town.

Rendo said during his testimony that another concern for him was that BMW would leave Woodcliff Lake, though no one from the company indicated that they planned to, he said.

“I knew companies were leaving Pascack Valley and northern Bergen County at that time,” he said, adding he felt it was important to “protect residents” by keeping the town’s highest taxpayer in town.

The trial before state Tax Court Judge Joshua Novin will continue on Monday when former borough tax assessor, Barbara Potash, is expected to testify. Former mayor Jeffrey Goldsmith and former borough tax appeal attorney Steven Muhlstock are expected to testify in early May.