(This syllabus is not part of the opinion of the Court. 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 Supreme Court. Please note that, in
the interests of brevity, portions of any opinion may not have been summarized).
Financial Difficulty and Application for Refinancing Approval (A-19-99)
Argued February 2, 2000 -- Decided June 22, 2000
STEIN, J., writing for a majority of the Court.
The issue in this appeal is whether, under section 22.1 of the Municipal and County Utilities Authorities
Law, N.J.S.A. 40:14B-1 to -78 (MCUAL), a local solid waste authority can impose on municipalities and
commercial waste generators that no longer use the authority's facilities a charge to cover the authority's debt
obligations. Such Environmental Investment Charges (EICs) have been imposed by other solid waste authorities as
an alternative source of revenue since the dismantling by the federal courts of New Jersey's solid waste regulatory
system.
New Jersey enacted legislation in 1970 that strictly controlled the collection, transportation and processing
of solid waste generated in the State. Under these laws, a waste disposal facility was required to contract with one
of New Jersey's twenty-two waste management districts or the districts' designated local authorities, and also must
have obtained the approval of the NJDEP. Districts desiring to enter into agreements with out-of-state facilities had
to certify that no other sites within the district met the district's waste disposal needs. Thus, out-of-state facilities
rarely were authorized to dispose of New Jersey's solid waste.
Under the waste flow laws, all waste generated within the State must have been directed to the facility
designated by the district or authority. Many waste disposal authorities assumed substantial debt obligations to
build waste disposal facilities. The facilities serviced their debt by charging “tipping fees” for disposing of waste.
The fees charged were significantly higher than those charged by out-of-state facilities.
The Third Circuit found that New Jersey's waste flow laws discriminated against interstate commerce by
disfavoring the disposal of waste at out-of-state facilities. It held that the laws were an unconstitutional violation of
the dormant Commerce Clause and enjoined their enforcement. Atlantic Coast Demolition & Recycling, Inc. v.
Board of Chosen Freeholders of Atlantic County,
113 F.3d 652 (1997), amended by 135 F.3d Cir. 1998)(Atlantic
Coast II).
During the federal litigation, the State argued that no alternative regulatory scheme could protect the fiscal
integrity of the districts and authorities that had issued bonds in reliance on the existing waste flow system. It
asserted that general revenues from the counties or State to cover the debt burden could not be assured from year to
year and legislature to legislature. The State also claimed that there were significant legal and factual impediments
to the imposition of a “systems benefit surcharge” such as an EIC. The State expressly stated that it was an
“unanswered legal question” whether such a charge was authorized under the MCUAL. The Third Circuit's partial
response to DEP's arguments was that the legality of EICs under State law was irrelevant because the legislature
could re-write its statutes if it had the desire or need to do so. Consistent with this observation, legislation was
introduced to authorize imposition of an EIC by a solid waste authority. The bill was not, however, enacted into
law.
The DEP adopted emergency regulations in September 1997 pursuant to which solid waste management
districts were urged to amend their plans and set forth the method for ensuring the payment of outstanding debt and
other financial obligations. In its published comments, the DEP stated that the imposition of an EIC would
constitute an acceptable funding mechanism to deal with outstanding debt.
In November 1997, the PCUA applied to the Local Finance Board in the Department of Community
Affairs for approval of a refinancing proposal involving the issuance of refunding bonds in an amount over $40
million, part of which was to be used to retire over $21 million (subsequently increased by amended application to
$28 million) of the balance of a 1991 revenue bond issue that was unsecured; the imposition of an EIC for ten years
on all prior users of PCUA's waste disposal facilities in an amount sufficient to pay the debt service on all of the
PCUA's outstanding debt; and execution of the 1997 Refunding Bond Deficiency Agreement with Passaic County
(Deficiency Agreement) pursuant to which, in return for solid waste services, the County agreed to pay to the PCUA
any amounts necessary to enable the PCUA to pay the debt service on its outstanding obligations if its revenues are
inadequate. In executing the Deficiency Agreement, the County anticipated, consistent with PCUA's
representations, that the PCUA's revenues from the EIC would be sufficient to maintain all debt service payments.
On December 6, 1997, the Local Finance Board adopted resolutions pursuant to the Local Authorities Fiscal Control
Law, respectively approving the PCUA's proposed refunding bond issue and ordering implementation of its
proposed financial plan, including imposition and collection of an EIC.
In January 1998, the City of Paterson filed two actions against Passaic County and the PCUA in the Law
Division. These suits challenged the Deficiency Agreement, the EIC imposed on Paterson by the PCUA, and the
validity of the County's adoption of an amendment to its District Solid Waste Management Plan which included the
issuance of the refunding bonds and imposition of the EIC. Paterson also filed a notice of appeal in the Appellate
Division challenging the orders of the Local Finance Board.
The Law Division judge consolidated the actions and transferred them to the Appellate Division. Plaintiffs
filed a notice of appeal to challenge the correctness of that transfer order. The Appellate Division consolidated
plaintiffs' appeal of the transfer order with their appeal of the orders of the Local Finance Board, and subsequently
consolidated those appeals with the actions that had been transferred from the Law Division.
Prior to its transfer order, the Law Division had granted a motion to intervene by ten Passaic County
municipalities. These municipalities supported the validity of the EIC, contending that Paterson's opposition to the
EIC reflected a preference that the PCUA's stranded debt be paid through the imposition of property taxes rather
than through user fees. Because of Paterson's relatively low property valuations, this would reduce Paterson's share
of the aggregate debt.
The Appellate Division held that the PCUA was authorized to impose an EIC for the purpose of funding its
outstanding indebtedness.
321 N.J. Super. 186 (1999). The Supreme Court granted Paterson's petition for
certification.
HELD: The Environmental Investment Charge imposed by the Passaic County Utilities Authority is not statutorily
authorized. The Municipal and County Utilities Authorities Law neither expressly nor impliedly contemplates
imposition of such charges on non-users of an authority's facilities to liquidate debt previously incurred in reliance
on a regulatory system declared unconstitutional by the federal courts. Because Passaic County entered into the
1997 Deficiency Agreement in express reliance on the validity of the Environmental Investment Charge, that
agreement also is invalid.
1. As originally enacted in 1957, the MCUAL authorized the establishment and operation of county and municipal
authorities to deal only with water supply and distribution and sewage collection and disposal. The design of the
statute was to impose the cost of the water or sewer services on users of those services. An issue arose concerning
the power of authorities that construct such systems to recover their capital expenditures absent the power to impose
an assessment for benefits. The courts addressed that issue and recognized the principle that owners of unimproved
properties electing to defer connection to a water or sewer system until their properties could make use of the
system should in fairness, upon connection, contribute their fair share of the debt incurred to construct the system.
Conversely, nonusers of the system could not be compelled to pay any fees or connection charges. (Pp. 30-40)
2. In 1977, amendments to the MCUAL empowered authorities to provide solid waste services in addition to sewer
and water services. Those amendments added N.J.S.A. 40:14B-22.1, the section at issue in this appeal. Notably,
that provision provides that service charges may be collected “from the owner or occupant . . . of any real property
from which or on which originates or has originated any solid waste to be treated . . ..” Unlike the provisions for
water and sewerage systems, section 22.1, by its use of the phrase “to be treated,” is the only one that qualifies the
power to impose a service charge on the condition that the authority render a future service. And, although the
MCUAL specifically authorizes connection charges to be imposed in part to recapture debt service costs, that
provision is applicable only with respect to sewer and water services, not solid waste services. (Pp. 40-44)
3. In the context of the statutory scheme of the MCUAL that precludes sewer and water service charges from being
imposed on non-users, to construe the more restrictive statutory language of section 22.1 as permitting an EIC to be
imposed on non-users would be illogical, anomalous, and incongruent with the understanding and application of the
MCUAL during the past four decades. Further, such a construction would sustain the strained and unintended
application of a mundane 1977 statutory amendment to address an unanticipated statewide solid waste financial
crisis arising twenty years later. No principle of statutory construction could condone so extraordinary an
interpretation. (Pp. 44-53)
4. Because the Deficiency Agreement was dependent on the validity of the proposed EIC, both as between the
parties and as a component of the PCUA's refinancing application to the Local Finance Board, the Court holds that
the Agreement itself is invalid and unenforceable. (Pp. 53-56)
5. The Court accords little weight to the argument that the Legislature's silence signals its acquiescence concerning
the imposition of EICs. That silence more likely reflects the elusiveness of a legislative resolution of the problem.
Notwithstanding the complexity of the issues, legislative intervention appears to be essential, and in any event is
decidedly preferable to reliance on a 1977 statutory amendment that was never intended to address these perplexing
financial issues of statewide importance.
The judgment of the Appellate Division is REVERSED. The effective date of the judgment is stayed for
ninety days to provide an opportunity for legislative action.
JUSTICE LONG, dissenting, is of the view that the Appellate Division's decision honors the
interpretation of the MCUAL by the executive branch as articulated by the PCUA, the Local Finance Board and the
DEP, and has the effect of carrying out the Local Finance Board's mission of averting a debt crisis. She sees no
reason for the adoption of an equal (not better) interpretation that would have the effect of creating a fiscal
emergency that requires legislative intervention.
JUSTICES O'HERN, COLEMAN, and JUDGE PRESSLER, temporarily assigned, join in JUSTICE
STEIN'S opinion. JUSTICE LONG filed a separate dissenting opinion, in which CHIEF JUSTICE PORITZ
and JUSTICE VERNIERO join. JUSTICE LaVECCHIA did not participate.
SUPREME COURT OF NEW JERSEY
A-
19 September Term 1999
IN THE MATTER OF PASSAIC
COUNTY UTILITIES AUTHORITY
PETITION REQUESTING
DETERMINATION OF FINANCIAL
DIFFICULTY AND APPLICATION
FOR REFINANCING APPROVAL
CITY OF PATERSON and MARTIN
G. BARNES,
Plaintiffs-Appellants,
v.
PASSAIC COUNTY BOARD OF
CHOSEN FREEHOLDERS and
PASSAIC COUNTY UTILITIES
AUTHORITY,
Defendants-Respondents,
and
TOWNSHIP OF WAYNE, BOROUGH OF
TOTOWA, BOROUGH OF WEST
PATERSON, CITY OF CLIFTON,
BOROUGH OF WANANQUE, BOROUGH
OF BLOOMINGDALE, BOROUGH OF
HAWTHORNE, BOROUGH OF
RINGWOOD, BOROUGH OF POMPTON
LAKES, and TOWNSHIP OF WEST
MILFORD,
Intervenors-Respondents.
CITY OF PATERSON and MARTIN
G. BARNES,
Plaintiffs-Appellants,
v.
PASSAIC COUNTY BOARD OF
CHOSEN FREEHOLDERS and
PASSAIC COUNTY UTILITIES
AUTHORITY,
Defendants-Respondents,
and
TOWNSHIP OF WAYNE, BOROUGH OF
TOTOWA, BOROUGH OF WEST
PATERSON, CITY OF CLIFTON,
BOROUGH OF WANANQUE, BOROUGH
OF BLOOMINGDALE, BOROUGH OF
HAWTHORNE, BOROUGH OF
RINGWOOD, BOROUGH OF POMPTON
LAKES, and TOWNSHIP OF WEST
MILFORD,
Intervenors-Respondents.
Argued February 2, 2000-- Decided June 22, 2000
On certification to the Superior Court,
Appellate Division, whose opinion is
reported at
321 N.J. Super. 186 (1999).
Sandra T. Ayres argued the cause for
appellants (Schwartz, Tobia, Stanziale,
Rosensweig & Sedita, attorneys).
Benjamin Clarke argued the cause for
respondent Passaic County Utilities
Authority (DeCotiis, Fitzpatrick & Gluck,
attorneys; Michael R. Cole, of counsel).
Joseph J. Maraziti, Jr., argued the cause
for respondent Passaic County Board of
Chosen Freeholders (Maraziti, Falcon &
Healey, attorneys; Leah C. Healey, of
counsel; Brent T. Carney, on brief).
John Fiorello, Wayne Township Attorney,
argued the cause for intervenors
respondents.
Daniel P. Reynolds, Deputy Attorney General,
argued the cause for respondent Local
Finance Board (John J. Farmer, Jr., Attorney
General of New Jersey, attorney; Nancy
Kaplen, Assistant Attorney General, of
counsel; Mr. Reynolds and Leslie D.
Rosenthal, Deputy Attorney General, on the
brief).
Michael A. Lampert submitted a brief on
behalf of amici curiae National Solid Waste
Management Association, Waste Management
Association of New Jersey, BFI Waste Systems
of New Jersey, Inc., Super Kwik, Inc., USA
Waste of New Jersey, Inc. and Waste
Management of New Jersey, Inc. (Saul, Ewing,
Remick & Saul, attorneys; Mr. Lampert, Alan
V. Klein and Jane Kozinski, on the brief).
The opinion of the Court was delivered by
STEIN, J.
This appeal fairly may be regarded as but the tip of an
iceberg. It purports to present for resolution what is primarily
a straightforward issue of statutory interpretation: whether
section 22.1 of the Municipal and County Utilities Authorities
Law, N.J.S.A. 40:14B-1 to -78, authorizes the Passaic County
Utilities Authority (PCUA) to impose on municipalities and
commercial waste generators that no longer use its facilities an
Environmental Investment Charge (EIC) over the next ten years to
raise funds sufficient to pay principal and interest obligations
on approximately $80 million of bonded debt. Stated more simply,
the narrow issue is the validity of the EIC imposed by the PCUA.
A collateral issue concerns the validity of the 1997 Refunding
Bond Deficiency Agreement (1997 Deficiency Agreement) pursuant to
which Passaic County agreed to guarantee the payment of
approximately $28 million in unsecured revenue bonds issued by
the PCUA in 1991 to finance an incinerator construction project
that subsequently was abandoned.
Realistically, however, the issues before us cannot be
circumscribed so narrowly. We are informed that to date four
other counties have adopted and imposed EICs, and that litigation
challenging the validity of EIC's imposed in three of those
counties is now pending in various courts. As of January 1999,
nine of the State's solid waste management districts had
submitted proposed plan amendments to the Department of
Environmental Protection (DEP) proposing the assessment of an
EIC. Christine LaRocca, New Jersey's Solid Waste Flow Control
Regulations Have Been Trashed: Are Environmental Investment
Charges the Answer? 17 Pace Envtl. L. Rev. 123, 136 (1999).
Moreover, the federal court litigation that precipitated the
perceived need for New Jersey counties to adopt and impose EICs
illuminates the issue before us and provides its context. In
1997 the Third Circuit Court of Appeals in Atlantic Coast
Demolition & Recycling, Inc. v. Board of Chosen Freeholders of
Atlantic County,
112 F.3d 652 (1997), amended by
135 F.3d 891 (3d
Cir. 1998), cert. denied sub nom. Essex County Utilities
Authority v. Atlantic Coast Demolition & Recycling, Inc.,
552 U.S. 966,
118 S. Ct. 412,
139 L. Ed.2d 316 (1997)(Atlantic Coast
II), held that New Jersey's comprehensive statutory and
regulatory controls over the disposal of state-generated solid
waste discriminated against out-of-state solid waste facilities
and thereby violated the Commerce Clause of the United States
Constitution. As the Third Circuit noted, in reliance on the
regulatory scheme invalidated by Atlantic Coast II New Jersey
counties and utilities authorities had incurred substantial debt
to plan and construct waste disposal facilities designed to
process a statutorily-guaranteed solid waste flow. That public
debt as of December 31, 1994 aggregated approximately $1.65
billion dollars, a result of fifty-three separate bond issues by
New Jersey counties and local authorities. Atlantic Coast II,
supra, 112 F.
3d at 658. The unanticipated invalidation of the
State's solid waste regulatory scheme permitted waste generators
to bypass the facilities operated by counties and local
authorities in favor of cheaper out-of-state disposal facilities.
The result was that the counties and authorities experienced a
drastic reduction in revenue, threatening the default of millions
of dollars in outstanding public debt. The authorization and
imposition by the PCUA and other authorities of EICs on
municipalities and solid waste generators that formerly used
their facilities was a direct consequence of the unprecedented
dismantling by the federal courts of New Jersey's solid waste
regulatory system.
Informed by those events, we address the issues presented by
this appeal. We conclude that the EIC imposed by the PCUA is not
statutorily authorized because the statute neither expressly nor
impliedly contemplates imposition of such unprecedented charges
on non-users of the authority's facilities to liquidate debt
previously incurred in reliance on a regulatory system declared
unconstitutional by the federal courts. Because Passaic County
entered into the 1997 Deficiency Agreement in express reliance on
the validity of the EIC, we also invalidate that agreement.
The conduct and chronology of the federal court litigation invalidating New Jersey's solid waste regulatory system is highly pertinent to the issues before us. An appropriate starting point is a brief description of the challenged regulatory scheme, which we borrow from the Third Circuit's succinct summary:
In response to a waste disposal crisis, New Jersey enacted the Solid Waste Management Act ("SWMA"), N.J.S.A. §§ 13:1E-1 et seq., and the Solid Waste Utility Control Act ("SWUCA"), N.J.S.A. §§ 48:13A-1 et seq. in 1970 to provide a safe, comprehensive and effective means of solid waste disposal within the state. These statutes strictly control the collection, transportation and processing of solid waste generated within the state, thus earning the appellation "flow control laws." Under these laws, any waste disposal facility, regardless of its ownership or location, must clear two substantial hurdles before it disposes of solid waste generated within New Jersey. First, the facility must obtain a contract with one of New Jersey's twenty-two waste management districts. Unless a facility has been designated by a waste management district, that facility cannot dispose of locally generated waste. Second, even if the facility contracts with a district for service, the waste disposal facility must obtain the approval of the State's Department of Environmental Protection (hereinafter "the State" or NJDEP). Under this regime, out-of-state facilities have rarely been authorized to dispose of New Jersey's solid waste.
Under SWMA, New Jersey is divided into
twenty-two solid waste management districts,
which include the State's twenty-one counties
and the Hackensack-Meadowlands District.
N.J.S.A. § 13:1E-19. The districts have
formulated long-term solid waste disposal
plans in accordance with the State's laws and
regulations. N.J.S.A. § 13:1E-20. These
plans have had to meet NJDEP's approval. See
N.J.S.A. § 13:1E-24. Management districts
have chosen between delegating their waste
disposal responsibilities to designated
municipal authorities within the district or
exercising direct control over waste disposal
themselves. Municipal authorities and
districts in turn have met the State's waste
disposal obligations by contracting with or
operating their own waste disposal and
recycling facilities.
Pursuant to the flow control laws,
several waste disposal authorities have
assumed substantial debt obligations to build
waste disposal facilities "to assure the safe
and efficient disposal of solid waste
generated in their districts." Atlantic
Coast II,
931 F. Supp. at 347 ¶ 5. The
district court found that "[t]he solid waste
public debt outstanding in New Jersey as of
December 31, 1994, was $1.65 billion, which
is the total of 53 separate bonds issued by
New Jersey local authorities or counties."
Id., at 348 ¶ 12. Currently, the disposal
facilities service their debt by charging
"tipping fees" for disposing of waste. The
fees charged by the designated facilities are
significantly higher than the fees charged by
their out-of-state counterparts. Id., at 349
¶ 17.
Once an authority has chosen a
particular private or public entity to
service its waste disposal needs, that entity
must seek approval from NJDEP (through
registration and issuance of a permit) prior
to commencing service. N.J.S.A. § 13:1E-5.
A facility cannot obtain a permit unless it
is designated by the municipal district or
authority in its waste disposal plan.
N.J.S.A. § 13:1E-4(b). Regional Recycling,
Inc. v. State Dep't of Environmental
Protection,
256 N.J. Super. 94,
606 A.2d 817
(App. Div. 1991). All waste generated within
the state must be directed to the processing
facility designated by the district or
municipal authority. See N.J.S.A. § 48:13A
4(c). The designation of the particular
facility for waste disposal in each waste
management district is codified in NJDEP
regulations. N.J. Admin. Code tit. 7, §
7:26-6.5 (Supp. 1996).
Although a waste management district or
authority may contract with an out-of-state
facility for waste disposal, NJDEP's policy
of attaining self-sufficiency has favored
operators that have facilities within the
state or that are willing to construct a
facility there. See Atlantic Coast I, 48
F.3d at 707-708. Waste management districts
desiring to enter into agreements with
out-of-state facilities have had to certify
to NJDEP that no other sites within the
district meet the district's waste disposal
needs. N.J.S.A. § 13:1E-21(b)(3). The
certification provision on its face does not
appear to prohibit out-of-state solid waste
facility operators from competing for an
agreement to process a district's waste.
Nevertheless, the certified processors for
each district, presently listed in N.J.A.C. §
7:26-6.5, have been chosen under the NJDEP
policy of reducing dependence on facilities
outside the state for waste disposal
services. See Atlantic Coast I, 48 F.3d at
707 (discussing NJDEP's self-sufficiency
policy). As the district court stated at the
first Atlantic Coast trial: "Although it is
not the subject of a clear legislative
direction [sic], it is equally clear that
[NJDEP] administers the law with the specific
goal that all waste generated in New Jersey
be disposed of within the borders of the
state." Atlantic Coast I, 48 F.3d at 707
(quoting district court) ([sic] in original).
The imposition of this self-sufficiency
policy on the selection of waste disposal
facilities has resulted in the discrimination
against out-of-state processors which we
found in Atlantic Coast I.
Under the present flow control system,
those who violate New Jersey law by disposing
of solid waste at facilities not designated
in N.J.A.C. § 7:26-6.5 risk the imposition of
significant penalties. Section 13:1E-9 of
the SWMA authorizes NJDEP's commissioner to
take various civil and administrative actions
against those who violate any provision of
P.L.1970, c. 39 (the SWMA), or any code, rule
or regulation adopted pursuant to that law.
In addition, Section 13:1E-9(e) authorizes
civil penalties totaling as much as $50,000
for each violation of the solid waste laws
"provided that each day during which the
violation continues shall constitute an
additional, separate and distinct offense."
N.J.S.A. § 13:1E-9(e). The State has
employed this provision to penalize
undesignated waste disposal facilities and
enjoin them from engaging in the unauthorized
collection and disposal of solid waste
generated within the state. See e.g. State,
Dep't of Environmental Protection v.
Interstate Recycling, Inc.,
267 N.J. Super. 574,
632 A.2d 526 (App. Div. 1993) (NJDEP may
pursue injunction against unlicensed waste
disposal facility).
Other provisions enforcing the
requirement that waste disposal facilities be
designated under N.J.A.C. § 7:26-6.5 include
Section 13:1E-9.4 of SWMA, which authorizes
civil forfeiture of all conveyances used or
intended for use in the transport or unlawful
disposal of solid waste. N.J.S.A. § 13:1E
9.4(d). In addition, persons who collect,
dispose of or transport solid waste to
undesignated sites subject themselves
individually to civil fines of up to $10,000
for each day of violation. N.J.S.A. §
13:1E-9.4. Finally, an individual who
engages in the unauthorized collection,
transport or disposal of solid waste is
guilty of a crime in the fourth degree, which
carries with it the penalty of up to 18
months in prison. N.J.S.A. § 48:13A-12(a).
Taken as a whole, the waste disposal
laws present substantial barriers to out
of-state firms wishing to collect, transport
and process any of the waste generated within
New Jersey. The State is able to enforce
this regulatory system through its impressive
array of rules, regulations, fines and other
penalties.
[Id. at 657-59 (footnotes omitted).]
Following the United States Supreme Court's decision in C &
A Carbone, Inc. v. Town of Clarkstown,
511 U.S. 383,
114 S. Ct. 1677,
128 L. Ed.2d 399 (1994), in which the Court invalidated as
violative of the dormant Commerce Clause a local waste flow
control ordinance of the Town of Clarkstown, New York, the Third
Circuit concluded that New Jersey's waste-flow control statutes
and regulations discriminated against interstate commerce by
obstructing the shipment of solid waste from New Jersey and
disfavoring the disposal of such waste at out-of-state
facilities. Atlantic Coast Demolition & Recycling, Inc. v. Board
of Chosen Freeholders of Atlantic County,
48 F.3d 701, 712-13
(1995) (Atlantic Coast I). The Court of Appeals then remanded
the matter to the district court to ascertain whether New Jersey
could satisfy the Commerce Clause's heightened scrutiny standard
by demonstrating that it did not possess alternative means of
achieving a safe and effective solid waste disposal system. Id.
at 718.
Concluding that New Jersey had not satisfied that demanding
burden of proof, the district court found New Jersey's waste
control laws unconstitutional and enjoined the enforcement of
those laws, but stayed its injunction for two years except with
respect to processors of construction and demolition waste.
Atlantic Coast Demolition & Recycling, Inc. v. Board of Chosen
Freeholders of Atlantic County,
931 F. Supp. 341, 359 (D.N.J.
1996). Responding to the State's contention before it that no
alternative waste disposal regulatory scheme adequately could
protect the fiscal integrity of the public entities that had
issued bonds in reliance on the existing system of regulation,
the district court observed:
The above-market tipping fees that
constitute the heart of New Jersey's flow
control system are more or less a hidden tax
paid by New Jersey residents. The tipping
fees are used to cover not only the debt
service of the bonds issued to fund
facilities under flow control, but also to
cover the fixed costs of operating waste
disposal facilities, financing recycling
programs and other environmentally friendly
recovery projects, and developing long-term
disposal plans. Those activities could be
financed through up-front taxes, user fees or
other charges which do not discriminate
against interstate commerce. Even if there
are significant costs to implementing the
necessary revisions to the current flow
control system, nothing in the record
suggests that these would be exorbitant or
beyond the capabilities of reasonable
fundraising alternatives. And, in any case,
the threat of some increase in costs cannot
negate the constitutional mandate of the
dormant Commerce Clause.
[Id. at 353-54.]
On appeal to the Third Circuit, the DEP disputed the
district court's conclusion that plausible alternative methods of
financing were available to the State. Addressing the
plaintiffs' contention that pursuant to N.J.S.A. 40A:5A-19 the
State's Local Finance Board (LFB) would be obligated to order
adoption of a financial recovery plan if an authority were in
fiscal difficulty, the DEP asserted in its brief that that
statute “does not itself provide the solution but only the
procedural mechanism for addressing the problem. In fact, it has
hardly ever been triggered since the Great Depression . . . and
its use on the scale and magnitude at stake herein is
unprecedented and unproven.” Responding to the contention that
the counties could assume the authorities' outstanding debt, the
DEP argued that
[a] number of counties would be drastically
affected by any obligation to refund the
local solid waste authority debt because the
size of that obligation in relation to their
current total outstanding debt would bring
them close to or over the debt limit, making
it virtually impossible for them to raise
capital for other essential services.
Moreover, the DEP observed that county tax revenue increases
would be an unsatisfactory source of funding because “the current
bonds are not formally secured by that type of revenue stream and
because reliance on property taxes is an inherently inequitable
mechanism for a use-based service.” Similarly, the DEP rejected
the assertion that the authorities' debt could be serviced out of
county or state general revenues on a year-to-year basis, noting
that “[that] revenue source cannot be assured from year to year
and from legislature to legislature.”
Finally, the DEP contended that the district court
“overlooked” significant legal and factual impediments to the
imposition of a “systems benefit surcharge” (such as an EIC),
expressly questioning both the legality and constitutionality of
such a surcharge:
One of the unanswered legal questions is
whether such a subsidy of revenues from non
users of the system is authorized under the
current rate covenants or the statutes
governing these county authorities.
See, e.g., N.J.S.A. 40:14B-22.1.
Another serious and unresolved “cloud”
hanging over this financing alternative is
the question whether the industry parties
will successfully challenge this solution as
equally unconstitutional _ a position they
steadfastly refused to reveal.
[Emphasis added.]
Thus, the DEP in its briefs to the Third Circuit in Atlantic
Coast II expressed doubt about the legality and constitutionality
of an EIC. We note that the Third Circuit's partial response to
DEP's arguments concerning the illegality of user charges was to
observe that “the legality of the proposed alternative under
state law is irrelevant to a court's heightened scrutiny inquiry
because the legislature can re-write its statutes if it has the
desire or the need to do so.” Atlantic Coast II, supra, 112 F.
3d
at 667 (second emphasis added).
Consistent with the Third Circuit's observation, and
apparently in anticipation of the final judgment in Atlantic
Coast II, Assembly Bill No. 50 (A-50) was introduced in the New
Jersey Assembly in late 1996 to address the problem of the county
authorities' outstanding debt. A-50, as amended, authorized the
imposition of an Environmental Investment Charge. The bill was
voted out of the Assembly Agriculture and Waste Management
Committee in mid-1997. The Committee Statement impliedly
acknowledged the need to
revise the solid waste management statutes
and provide a mechanism for the recovery of
the environmental investment costs incurred
by public authorities and counties . . . The
bill authorizes every public authority and
county to establish and implement a system to
calculate, charge and collect environmental
investment charges (EIC's) as may be
necessary to recover the environmental
investment costs incurred by the public
authority or county.
[Assembly Agriculture and Waste Management
Committee Statement to A-50, June 12, 1997.]
A-50 was not posted for vote in the Assembly and was not enacted
into law.
In August 1997, approximately three months after the Third
Circuit's decision in Atlantic Coast II, the DEP issued a report
entitled “Guidance Document In Response to the May 1, 1997 Court
Decision on Solid Waste Flow Control.” That document addressed a
wide range of issues relating to solid waste regulation and
disposal, and included the following series of questions and
answers in a section of the document entitled “EIC Questions.”
Question: What is the legal authority to
impose an EIC?
Answer: The legal authority to impose an EIC
derives from each authority's enabling
statutes. See, N.J.S.A. 40:14B-1 et seq.
(Municipal and County Utilities Authorit[ies]
Law); N.J.S.A. 40:37A-1 et seq. (County
Improvement Authorit[ies] Law). In addition,
the Local Finance Board has broad authority
to order the imposition of fees and/or
charges necessary for local government
entities in financial difficulty to assure
satisfaction of outstanding obligations
(N.J.S.A. 40A:5A-18 & 19), and the DEP has
broad authority over solid waste utility
rates to ensure adequate and proper service,
N.J.S.A. 48:13A-1 et seq.
Question: Will the EIC charge be approved by
the DEP or the Local Finance Board or both
agencies?
Answer: The EIC will be reviewed by the DEP
to assure that it is consistent with the
local government entity's obligation to
assess just and reasonable charges. The
Local Finance Board will review the EIC to
ensure that it is sufficient for the local
government entity to meet its financial
obligations. A single county plan amendment
can be prepared for submission to DEP for its
review.
Question: What eligible charges may be
contained within an EIC?
Answer: The most certain component of an EIC
is debt service. Other potentially
acceptable components of an EIC charge
include host community benefits, state taxes
(Solid Waste Services Tax and Landfill
Closure and Contingency Fund Taxes),
system-wide rate components, and standby
operating costs (minimal operating costs
required to keep a facility open).
As noted by the Appellate Division opinion, In re Passaic
County Utilities Authority Petition,
321 N.J. Super. 186, 195
(1999), the DEP adopted emergency regulations in September 1997
pursuant to which solid waste management districts were urged to
amend their plans and set forth “[t]he method of financing solid
waste management in the district, including any mechanism to be
instituted by the district for ensuring the payment of
outstanding debt and other financial obligations.” N.J.A.C.
7:26-6.10(b)(6). In its published comments the DEP stated that
imposition of an EIC would constitute an acceptable funding
mechanism to deal with outstanding debt.
29 N.J.R. 5084, 5087
(Dec. 1, 1997).
B
The PCUA's EIC
In November 1997 the PCUA, pursuant to section 6 of the
Local Authorities Fiscal Control Law, N.J.S.A. 40A:5A-1 to -27,
applied to the Local Finance Board of the Department of Community
Affairs for approval of a refinancing proposal involving the
issuance of refunding bonds in an amount not to exceed
$40,165,000, the use of part of the proceeds of the refunding
bonds to retire $21.4 million of the approximately $27 million
balance of a 1991 revenue bond issue, the imposition of an EIC
for ten years on all prior users of the PCUA's waste disposal
facilities in an amount sufficient to pay the debt service on all
of the PCUA's outstanding debt (including the proposed refunding
bond issue), and execution of the 1997 Deficiency Agreement with
Passaic County pursuant to which, in return for solid waste
services, the County agreed to pay to PCUA any amounts necessary
to enable PCUA to pay the debt service on its outstanding
obligations if its revenues are inadequate. In executing the
1997 Deficiency Agreement, the County anticipated, consistent
with the PCUA's representations to the LFB, that the PCUA's
revenues from the EIC would be sufficient to maintain all debt
service payments.
When the PCUA submitted its application to the LFB, its
outstanding indebtedness was approximately $76.9 million, almost
all of which was attributable either to costs incurred in
connection with land acquisition and planning for construction of
an incinerator, a project ultimately abandoned by the PCUA, or to
cost incurred in connection with the purchase of waste disposal
rights in Pennsylvania landfills. The PCUA's outstanding debt as
of December 1, 1997 consisted of the following items:
PASSAIC COUNTY UTILITIES AUTHORITY
DEBT OUTSTANDING DECEMBER 1, 1997
Project Notes
Solid Waste System Taxable Project Notes,
Series, 1997, Due August 4, 1998, 5.95" $ 2,546,000
Solid Waste System Taxable Project Notes,
Series 1997A, Due August 4, 1998, 5.95" 2,500,000
Solid Waste System Tax Exempt Project Notes,
Series 1997B Due August 4, 1998, 3.90" 6,400,000
$ 11,446,000
Landfill Bonds and Notes
Solid Waste System Project Notes, Series 1996
Due March 1, 1999, 5.00" (Accreted Value at
Maturity $3,725,000) (Includes Accretion of
$263,673 at E.O.P.) 3,502,263
Solid Waste Disposal Revenue Bonds; Refunding
Series 1997 - Landfill Bonds Payable 5.00-5.42"
(Accreted Value at Maturity $31,535,000)
(Includes Accretion of $1,837,975 at E.O.P.) 25,428,216
Solid Waste (Landfill) Revenue Bond,
Refunding Series 1992A
Due March 1, 1998, 5.70" 8,690,000
37,620,470
Resource Recovery Bonds
Solid Waste System Revenue Bonds 1991 Series
Revenue Serial Bonds Payable 6.25" 2,035,000
Term Bonds Payable 7.00" 25,870,000
27,905,000
TOTAL $ 76,971,479
PCUA's application to the LFB revealed that the $27.9
million outstanding in 1991 Series Solid Waste Systems Revenue
Bonds, issued to finance costs incurred for the Authority's
aborted incinerator project, were secured only by PCUA tipping
fees, which accounted for their Baa-1 Moody's Investor service
rating and relatively high interest rates. The Refunding Series
1996 and 1992A Revenue Bonds, which accounted for approximately
$34 million of the PCUA's outstanding debt, had been issued to
finance the refunding of the outstanding balance of the PCUA's
1987 Landfill Bonds issued to finance the acquisition of certain
easement and license rights for the disposal of solid waste at
out-of-state landfills. The 1987 Landfill Bonds, as well as the
1992 and 1996 Refunding Bonds issued to retire the balance of the
1987 bond issue, were secured by a 1987 County Deficiency
Agreement pursuant to which the County agreed to pay the PCUA
such amounts as the PCUA may require to maintain debt service
payments on those bond issues.
The PCUA's remaining indebtedness included three series of
Project Notes issued in 1997 aggregating approximately $11.4
million. Approximately $2.5 million of those notes were issued
in connection with the financing of a settlement with an owner of
property condemned for the abandoned incinerator project; another
$2.5 million in notes were issued in connection with the
settlement of litigation relating to a Passaic County transfer
station; and the balance of $6.4 million in Notes were issued in
connection with a contract to acquire disposal rights at the
Empire landfill in Pennsylvania. The final item of outstanding
debt was $3.5 million in Series 1996 Project Notes, but PCUA's
application to the LFB did not disclose the reason for their
issuance.
A critical component of the PCUA's LFB submission, for which
the LFB's approval was sought, was the 1997 Deficiency Agreement
pursuant to which Passaic County would agree to pay the PCUA any
amounts required to meet its debt service obligations on the
proposed 1997 Refunding Bonds. Because those Refunding Bonds
were intended to refinance $21.4 million of the unsecured Series
1991 Revenue Bonds, the holders of those Bonds would benefit
substantially by obtaining the added security provided by the
County's guarantee. Pursuant to a December 1997 amendment to the
Deficiency Agreement Passaic County also agreed to guarantee
payment of the debt service on the approximately $6.5 million of
the 1
991 Series Rev.nue Bonds not originally to be refinanced by
the 1997 Refunding Bonds, but which pursuant to the PCUA's
amended application would be refunded by the 1997 bond issue.
Concurrently with the submission of its application to the
LFB, the PCUA retracted and renewed a previously filed petition
with the LFB, pursuant to N.J.S.A. 40A:5A-18 and -19, seeking a
determination of financial difficulty and ordering implementation
of the proposed EIC to alleviate that difficulty. In support of
its submissions to the LFB, the PCUA asserted that the changes in
waste flow rules required by the Third Circuit's decision in
Atlantic II “have resulted in significant tonnage losses through
the Authority's system which have resulted in revenue shortfalls
that place in jeopardy the Authority's ability to pay these
bonds.”
Although we need not and do not address in this opinion
plaintiff City of Paterson's (Paterson) objections to the lack of
process afforded it by the LFB, we note with concern Paterson's
allegations. Despite its obvious financial interest that we
elaborate on subsequently, infra at ___ (slip op. at 24-26),
Paterson asserts that it received no notice of the PCUA's
financing application and petition to the LFB, was afforded less
than twenty-four hours to review the pertinent documents, was
allotted five minutes to speak at the LFB hearing, and was
afforded three working days to prepare and submit written
comments. If proved, those allegations significantly would
diminish the reliability of the proceedings before the LFB.
On December 6, 1997 the LFB adopted resolutions pursuant to
sections 6 and 19 of the Local Authorities Fiscal Control Law,
N.J.S.A. 40A:5A-6 and -19, respectively approving the PCUA's
proposed refunding bond issue and ordering implementation of its
proposed financial plan, which included imposition and collection
of an EIC. The LFB's authority to authorize imposition of an EIC
is an issue sharply contested by the parties.
C
In January 1988 Paterson and Martin G. Barnes, a Paterson
resident and taxpayer, filed two actions in lieu of prerogative
writ against Passaic County and the PCUA in the Law Division.
The first action primarily sought a declaration that the 1997
Deficiency Agreement between the County and the PCUA was invalid
and unenforceable, and sought an injunction restraining its
enforcement. That suit also challenged the validity of the EIC
imposed on Paterson by the PCUA. The second suit primarily
challenged the validity of Passaic County's adoption of an
amendment to its District Solid Waste Management Plan, including
the PCUA's issuance of refunding bonds and imposition of the EIC
authorized by the LFB. In that same month plaintiffs filed in
the Appellate Division a Notice of Appeal from the LFB's orders,
and subsequently filed an amended Notice of Appeal challenging
the LFB's grant of the PCUA's supplemental application to
increase the amount of refunding bonds issuable by $6.5 million
to enable Passaic County to guarantee the balance of the
heretofore unsecured 1991 revenue bonds.
Early in 1998 the PCUA gave Paterson formal notice of its
EIC obligation. EIC assessments on municipalities were based on
the volume of municipal waste collected for disposal in 1996, and
assessments to commercial generators were based on average
commercial flows between 1993 and 1996. Paterson's 1998 EIC rate
was $29.64 per ton and its 1998 assessment was $2,500,122,
payable quarterly. Paterson's aggregate EIC obligation over ten
years is in excess of $20 million, of which it estimates that
approximately $7.5 million would be allocated to payment of debt
service on that portion of the 1997 refunding bonds that refunded
the heretofore unsecured 1991 revenue bonds. On receipt of its
EIC bill, plaintiffs amended their complaint to assert a direct
challenge to the PCUA's authority to assess an EIC against
Paterson.
To provide a frame of reference against which to compare the
EIC assessed against Paterson, the record informs us that prior
to the Third Circuit's decision in Atlantic Coast II, the PCUA
charged Paterson $103 per ton for waste removal, a fee that
included all of the PCUA's costs for operating and administrative
expenses, as well as debt service. After the Atlantic Coast II
decision, the PCUA offered to Paterson and other prior users of
its system waste-disposal services for processible waste at a
rate of $47.75 per ton, a rate the PCUA asserts is less than the
rate Paterson presently pays. Paterson asserts that neither it
nor any other Passaic County municipalities are disposing of
waste through the PCUA, and that its current costs are $75,000
less per month than the price offered by the PCUA. In any event,
the EIC charge of $29.64 per ton, for which Paterson receives no
current PCUA services, is about two-thirds of the cost per ton
Paterson would have to pay the PCUA to dispose of its solid
waste.
The Law Division judge consolidated the prerogative writ
actions and transferred the consolidated action to the Appellate
Division. Plaintiffs filed a Notice of Appeal of that transfer
order. (Although petitioners continue to challenge the
correctness of that transfer order, we need not and do not
address that issue.) The Appellate Division consolidated
plaintiffs' appeal of the transfer order with their appeal of the
LFB orders, and subsequently consolidated those appeals with the
prerogative writ actions that had been transferred by the Law
Division.
The Law Division also granted a motion to intervene in the
consolidated prerogative writ actions filed on behalf of ten
Passaic County municipalities. The brief filed on behalf of
those municipalities supported the validity of the EIC,
contending that Paterson's opposition to the EIC reflected a
preference that the PCUA's stranded debt be paid through the
imposition of property taxes rather than through user fees
calculated on the basis of the 1996 waste generation. For
example, the intervenors noted that the Township of Wayne
contributes approximately twenty-six percent of the county's
property tax revenue, but generated only 5.24" of the County's
1996 solid waste flow. The intervenors asserted that if the EIC
were invalidated, Wayne's 1998 share of the PCUA's stranded debt
would increase from approximately $575,000 to over $3.8 million.
Similarly, invalidation of the EIC would increase Clifton's 1998
share of the PCUA's stranded debt from approximately $900,000 to
over $3.7 million. We note that Paterson's opposition to the EIC
in part reflects its preference that the portion of the PCUA's
stranded debt validly guaranteed by Passaic County be paid out of
county general revenues rather than an EIC, with the result that
Paterson's share, because of its relatively low property
valuations, would be reduced from over thirty percent of the
aggregate debt to approximately eleven percent.
D
Before addressing the legal issues presented by this appeal,
we take note of other pending litigation that involves
substantially similar issues.
1. Township of Galloway v. Atlantic County
Utilities Authority (A-1083-98T5) and
National Solid Wastes Management Association
v. Atlantic County Utilities Authority (A
1126-98T5)
These consolidated appeals, argued in the Appellate Division
in February 2000, and awaiting decision, were transferred by the
Chancery Division to the Appellate Division in September 1998.
In the first action, plaintiffs were two Atlantic County
municipalities, a waste hauler, and three Galloway Township
residents. Plaintiffs in the second action were two solid waste
hauler associations and four waste haulers collecting waste in
Atlantic County. Both suits challenged the authority of the
Atlantic County Utilities Authority (ACUA) to impose an EIC on
municipalities and waste haulers to supplement the ACUA's
tipping-fee revenues and enable it to pay debt service
obligations on approximately $87 million of revenue bonds issued
to fund the costs of a transfer station, expansion of the ACUA's
landfill, and the Authority's obligations under its waste
disposal contract with a Pennsylvania landfill owner. In ruling
on plaintiffs' application for injunctive relief, the Chancery
Division reached the preliminary conclusion that the EIC “does
not appear to be authorized by statute,” but that court later
determined that it was without jurisdiction to decide the matter.
2. IMO Certain Amendments to the Adopted and
Approved Solid Waste Management Plan (A-5964
97T3)
This appeal, now pending in the Appellate Division with its
disposition stayed pending our resolution of the matter before
us, originated as a suit filed by two associations of solid waste
haulers and three solid waste collection companies challenging
the DEP's decision to approve an amendment to the Union County
District Solid Waste Management Plan (Plan Amendment). The Plan
Amendment proposed a substantial reduction in the outstanding
bonded indebtedness of the Union County Utilities Authority
(UCUA) consisting of approximately $294 million, incurred to
finance acquisition and construction costs associated with a
resource-recovery facility and other ancillary solid-waste
disposal facilities, as well as for recycling and landfill costs.
The debt reduction was achieved in part by using funds on hand to
reduce part of the debt, by refinancing and extending the debt's
maturity, and by leasing the resource-recovery facility to its
private operator in return for lease payments totaling $180
million. That lease agreement was facilitated by long-term waste
delivery contracts with thirteen Union County municipalities
guaranteeing substantial annual flow of waste to the resource
recovery facility. The balance of the UCUA's debt is to be
funded by an EIC imposed on non-users of the UCUA's facilities,
specifically haulers that pick up waste generated in Union County
and dispose of the waste elsewhere. Appellants contend that the
UCUA's EIC is unauthorized by statute and that it violates the
Commerce Clause in view of the principles established by the
United States Supreme Court in C & A Carbone, Inc. v. Town of
Clarkstown, supra,
511 U.S. 383,
114 S. Ct. 1677,
128 L. Ed.2d 399.
3. National Solid Waste Management
Association v. Gloucester County Improvement
Authority (A-1041-98T3)
This action, instituted by two solid waste management
associations and four solid waste haulers, challenges the
imposition of an EIC by the Gloucester County Improvement
Authority (GCIA) that is assessed against solid waste haulers not
using the facilities of the GCIA to dispose of solid waste
generated in Gloucester County. Approval to impose an EIC was
sought by the GCIA because of a shortfall of revenue to pay debt
service on approximately $28 million of outstanding bonded
indebtedness issued to finance the landfill operated by the GCIA.
Analogous to the legal issue in the appeal before us that
requires an interpretation of section 22.1 of the Municipal and
County Utilities Authorities Law, the validity of the EIC imposed
by the GCIA is to be determined by the provisions of the County
Improvement Authorities Law, N.J.S.A. 40:37A-44 to -135, under
which it is organized. After the Appellate Division remanded the
matter to the Law Division to develop a factual record,
appellants filed a Petition for Certification with this Court
seeking review of the Appellate Division's disposition. That
Petition remains pending.
II
The parties agree that the validity of the PCUA's EIC
depends on the Court's interpretation of N.J.S.A. 40:14B-22.1, a
provision of the “municipal and county utilities authorities
law,” N.J.S.A. 40:14B-1 to -78 (MCUAL or the Law), which reads as
follows:
40:14B-22.1. Solid waste service charges
Every municipal authority is hereby
authorized to charge and collect rents,
rates, fees or other charges (in this act
sometimes referred to as "solid waste service
charges") for the use or services of the
solid waste system. Such solid waste service
charges may be charged to and collected from
any municipality or any person contracting
for such use or services or from the owner or
occupant, or both of them, of any real
property from or on which originates or has
originated any solid waste to be treated by
the solid waste system of the authority, and
the owner of any such real property shall be
liable for and shall pay such solid waste
service charges to the municipal authority at
the time when and place where such solid
waste service charges are due and payable.
Such rents, rates, fees and charges, being in
the nature of use or service charges, shall
as nearly as the authority shall deem
practicable and equitable be uniform
throughout the county for the same type,
class and amount of use or service of the
solid waste system, except as permitted by
section 1 of P.L.1992, c. 215 (C.
40:14B-22.2), and may be based or computed on
any factors determining the type, class and
amount of use or service of the solid waste
system, and may give weight to the
characteristics of the solid waste and any
other special matter affecting the cost of
treatment and disposal of the same.
Before addressing that issue of statutory interpretation, we
shall review some of the background and relevant chronology of
the material provisions of the MCUAL to provide a foundation for
resolving the interpretative issue before us.
As originally enacted in 1957, the MCUAL authorized
counties, or municipalities acting separately or with other
municipalities, “through the agency of a municipal authority,” to
“acquire, construct, maintain, operate or improve works for the
accumulation, supply or distribution of water and works for the
collection, treatment, purification or disposal of sewage or
other wastes.” L. 1957, c. 183, § 2(1). In short, the MCUAL's
original purpose was to authorize the establishment and operation
of county and municipal authorities to deal only with water
supply and distribution, and sewerage collection and disposal.
The design of the statute was to impose the cost of the water or
sewer services, to be provided by an authority established under
the statute, on residential or commercial users of those
services, including counties or municipalities contracting for
such services. The original statute stated that the purpose and
object of the MCUAL included:
(5) In general, granting to counties and
municipalities and to such municipal
authorities discretionary powers to provide
for utility services designed to provide or
distribute such a supply of water or to
relieve pollution of such waters in or
bordering the State at the expense of the
users of such services or of counties or
municipalities or other persons contracting
for or with respect to the same.
[Id. at § 2(5)(emphasis added).]
Significantly, the provisions of the “Local Improvements”
law, N.J.S.A. 40:56-1 to -89, pursuant to which municipalities
are authorized to construct local improvements, including sewer
lines and water mains, and assess the cost thereof immediately on
the properties benefitted, N.J.S.A. 40:56-1, -21, which
assessments constituted first liens on the property assessed,
N.J.S.A. 40:56-33, were inapplicable to sewer and water systems
constructed pursuant to the MCUAL as the statute originally was
enacted. (Similarly, the provisions of the Local Improvements
law were inapplicable to sewer and water systems constructed
pursuant to the sewerage authorities law, L. 1946, c. 138,
N.J.S.A. 40:14A-1 to -45 (SAL), the material provisions of which
are analogous to those of the MCUAL.) See Darrah v. Township of
Evesham,
111 N.J. Super. 62, 66-67 (App. Div. 1970).
Accordingly, an important interpretative issue that arose under
those laws concerned the power of authorities that construct
sewer or water systems under those statutes to recover their
capital expenditures absent the power to impose an assessment for
benefits.
This Court addressed that issue under the SAL in Airwick
Industries, Inc. v. Carlstadt Sewerage Authority,
57 N.J. 107,
122 (1970)See footnote 11, and subsequently in White Birch Realty Corporation
v. Gloucester Township Municipal Utilities Authority,
80 N.J. 165, 176 (1979), we applied our holding in Airwick to authorities
created under the MCUAL. In Airwick, the Carlstadt Sewerage
Authority constructed a sewerage collection system to service
approximately 650 acres in the eastern section of the Borough,
financing the construction with the proceeds of a $5.8 million
bond issue. In addition to annual user charges imposed only on
users of the system, the Authority imposed a graduated schedule
of connection fees for new users of the system, as follows:
$1,500 for users connecting within one year
of availability;
$3,000 for users connecting within two years;
$4,500 for users connecting within three
years;
$5,000 for users connecting after three years
of availability.
A group of commercial users contested the validity of their sewer
bills, including the graduated connection fees. Id. at 111-12.
Without sustaining the specific incremental connection fee
schedule imposed by the Carlstadt Sewer Authority, this Court
recognized the principle that owners of unimproved properties
that elect to defer connection to a sewer system until their
properties can make use of the system should in fairness be
required, upon connection, to contribute a fair share of the debt
service costs incurred to construct the