(Bloomberg) -- Investors prizing Princeton University bonds have fueled gains relative to top-graded municipal debt. Some residents of the Ivy League school’s New Jersey hometown are less impressed: They’re suing to strip the institution of its property-tax exemption.

The lawsuit hangs over a $200 million sale of tax-exempt debt that the New Jersey Educational Facilities Authority plans to issue today for the school, one of 15 colleges nationwide with top grades from Moody’s Investors Service and Standard & Poor’s. It boasts one of the biggest endowments among U.S. universities and its alumni include First Lady Michelle Obama, Amazon.com Inc. founder Jeffrey Bezos and Google Inc. Chairman Eric Schmidt.

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