NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3097-18

MACK-CALI REALTY 

CORP., CAL-HARBOR 

V URBAN RENEWAL 

ASSOCIATES, LP,

CAL-HARBOR VII URBAN

RENEWAL ASSOCIATES, LP,

ROSELAND RESIDENTIAL 

TRUST, GARY WAGNER, IVAN 

BARON, H.P. ROOSEVELT 

URBAN RENEWAL COMPANY, 

LLC, CAMBRIDGE CORPORATE 

SERVICES, INC., LOCAL 621,

UNITED CONSTRUCTION 

TRADES INDUSTRIAL UNION,

LOCAL 365, UNITED 

EMPLOYEES OF SERVICE 

WORKERS, SP PLUS

CORPORATION, LOS CUERNOS

CORP., EXCHANGE PLACE

ALLIANCE DISTRICT 

MANAGEMENT CORPORATION, 

SPARTAN SECURITY SERVICES, 

INC., NEW JERSEY BUSINESS & 

INDUSTRY ASSOCATION, and

HUDSON COUNTY CHAMBER 

OF COMMERCE & INDUSTRY,

Plaintiffs-Appellants,

v.

STATE OF NEW JERSEY, CITY 

OF JERSEY CITY, MAYOR AND 

APPROVED FOR PUBLICATION

February 16, 2021

APPELLATE DIVISION
A-3097-18 2

COUNSEL OF THE CITY OF

JERSEY CITY, DONNA MAUER,

in her Official Capacity as Director

and Chief Financial Officer of the

City of Jersey City, and BRIAN 

PLATT, in his Official Capacity 

as Business Administrator of the 

City of Jersey City,

Defendants-Respondents.

______________________________

CITY OF NEWARK,

Intervenor-Respondent.

______________________________

Argued October 19, 2020 – Decided February 16, 2021

Before Judges Messano, Hoffman, and Suter.

On appeal from the Superior Court of New Jersey, 

Law Division, Hudson County, Docket No. L-4903-

18.

Clark E. Alpert and Stephen J. Edelstein argued the 

cause for appellants (Weiner Law Group, LLP, 

attorneys; Clark E. Alpert, of counsel and on the 

briefs; Stephen J. Edelstein, Richard L. Rudin, Donald 

A. Klein, and Paul S. Grossman, on the briefs).

Jean P. Reilly, Assistant Attorney General, argued the 

cause for respondent State of New Jersey (Gurbir S. 

Grewal, Attorney General, attorney; Jean P. Reilly, of 

counsel and on the brief; Jamie M. Zug, Eileen W. 

Siegeltuch, Michael J. Duffy, Heather Lynn Anderson,

and Miles Eckardt, Deputy Attorneys General, on the 

brief).
A-3097-18 3

Vito A. Gagliardi, Jr., argued the cause for 

respondents City of Jersey City, Mayor and Council of 

the City of Jersey City, Donna Mauer, and Brian Platt 

(Porzio, Bromberg & Newman, PC, attorneys; Vito A. 

Gagliardi, Jr., of counsel and on the brief; Jeffrey M. 

Pypcznski, Tanya Y. Shah, and Thomas J. Reilly, on 

the brief).

Cheyne R. Scott argued the cause for intervenorrespondent City of Newark (Chasan, Lamparello, 

Mallon & Cappuzzo, PC, attorneys; Cheyne R. Scott, 

of counsel and on the brief; Cindy Nan Vogelman, on 

the brief).

Craig A. Long argued the cause for amici curiae New 

Jersey Education Association and Jersey City 

Education Association (Zazzali, Fagella, Nowak, 

Kleinbaum & Friedman, PC, attorneys; Richard A. 

Friedman, of counsel; Craig A. Long, on the brief).

The opinion of the court was delivered by

MESSANO, P.J.A.D.

Plaintiffs — real estate developers and urban renewal entities in Jersey 

City; business owners with operations in Jersey City; labor unions, which

members provide personnel and services to Jersey City businesses and some of 

which have members that live in Jersey City; and business trade associations 

— challenged Jersey City Ordinance 18-133 (the Ordinance), which imposed a 

payroll tax of one-percent of an employer's payroll, but exempted from the 

calculation employees who were residents of Jersey City (the City). Plaintiffs 

filed a verified complaint and order to show cause seeking to declare the 
A-3097-18 4

Ordinance and certain 2018 amendments (Chapter 68)1to the Local Tax 

Authorization Act (LTAA), N.J.S.A. 40:48C-1 to -42, violated the United 

States and New Jersey Constitutions. They also alleged the Ordinance was 

ultra vires, void for vagueness and violated contractual rights certain plaintiffs 

had under tax abatement agreements with the City pursuant to the Long-Term 

Tax Exemption Law (LTTEL), N.J.S.A. 40A:20-1 to -22.

After considering oral argument, the judge denied plaintiffs' request for 

a preliminary injunction and scheduled a dispositive nontestimonial hearing. 

The City and defendant State of New Jersey moved to dismiss the complaint. 2 

The judge granted amicus status to the New Jersey Education Association and 

the Jersey City Education Association (collectively, NJEA). Plaintiffs crossmoved for summary judgment.

In a comprehensive written decision, the judge granted defendants' 

motion to dismiss and denied plaintiffs' cross-motion for summary judgment. 

He concluded plaintiffs failed to join an indispensable party, the City of 

Newark (Newark), and, on the merits, the judge determined the statutory 

amendments were constitutional, and the Ordinance was a valid, constitutional 

1

 This is a reference to the amendments' session law designation, L. 2018, c.

68.

2

 Individual City officials were also named as defendants in their official 

capacities. We include them collectively in our references to the City. 
A-3097-18 5

exercise of the City's authority. The judge entered conforming orders, and this 

appeal followed; we subsequently granted Newark's motion to intervene, and 

NJEA's motion to appear as amicus. 

Plaintiffs reprise their arguments before us. They contend that Chapter 

68, which authorized enactment of the Ordinance, in conjunction with 2018 

amendments to the School Funding Reform Act of 2008 (SFRA), N.J.S.A. 

18A:7F-43 to -63, violates the Education Clause of our State constitution, N.J. 

Const. art. VIII, § 4, ¶ 1, as interpreted by the Court and reaffirmed most 

recently in Abbott v. Burke, 199 N.J. 140 (2009) (Abbott XXI), and Abbott v. 

Burke, 206 N.J. 332 (2011) (Abbott XXII). Plaintiffs also argue Chapter 68 is 

unconstitutional special legislation, N.J. Const. art. IV, § VII, ¶ 9; violates the 

constitutional requirement that property be taxed pursuant to general and 

uniform laws, N.J. Const. art. VIII, § 1, ¶ 1; and violates the constitutional 

prohibition on using payroll taxes for non-employee benefit purposes, N.J. 

Const. art. VIII, § 2, ¶ 8. They argue enactment of Chapter 68 was arbitrary, 

capricious, and unreasonable. 

Plaintiffs further contend that Chapter 68 and the Ordinance violate their 

federal constitutional rights under the Commerce Clause of the United States 

Constitution, U.S. Const. art. I, § 8, the Equal Protection and Due Process 

Clauses of the Fourteenth Amendment, U.S. Const. amend. XIV, § 1, and the 
A-3097-18 6

Privileges and Immunities Clause of the United States Constitution. U.S. 

Const. art. IV, § 2, cl. 1. 

Plaintiffs also reassert their claim that the Ordinance was void for 

vagueness and ultra vires. Finally, they contend the judge misapplied the 

standards governing a motion to dismiss under Rule 4:6-2(e) and erred in 

dismissing the complaint for lack of an indispensable party, i.e., Newark. 

The State, City and Newark oppose these contentions and urge us to 

affirm the judge's orders. The NJEA similarly supports this position as 

amicus. 

I.

We provide some historical background regarding the LTAA, SFRA, 

amendments to both enacted in 2018, and relevant provisions of the Ordinance. 

A.

As originally enacted in 1970, the LTAA granted municipalities of a 

certain population the authority "to enact an ordinance . . . imposing any of the 

taxes" thereafter provided in the statute. N.J.S.A. 40:48C-1.3 One tax 

3

 Only Newark met the then-existing population threshold. See City of Jersey City 

v. Farmer, 329 N.J. Super. 27, 31–32 (App. Div. 2000). In 1990, the Legislature 

amended N.J.S.A. 40:48C-1 to reduce the population threshold to 200,000, where 

it remains today. L. 1990, c. 9. As a result, the City joined Newark as the only 

municipalities authorized to enact a payroll tax. Farmer, 329 N.J. Super. at 32. 

The City, however, did not adopt a payroll tax until 1995, effective January 1, 
A-3097-18 7

authorized by the LTAA was "an employer payroll tax for general municipal 

purposes . . . at a rate of . . . one percent of the employer's payroll." N.J.S.A. 

40:48C-15(a) (1970) (emphasis added). Chapter 68 significantly amended this 

and other provisions of the LTAA. 

First, Chapter 68 authorized adoption of an ordinance that "provide[d] 

. . . the employer payroll tax shall not apply to the remuneration paid . . . to 

employees who are residents of the municipality." N.J.S.A. 40:48C-15(c). 

Second, Chapter 68 expanded the permissible use of payroll tax revenues by 

allowing a municipality to impose a payroll tax not only "for general municipal 

purposes," but also "for the purposes set forth in subsection d. of this section." 

N.J.S.A. 40:48C-15(a) (emphasis added). 

Subsection (d)(1), also part of Chapter 68, provided:

If a municipality adopts an ordinance pursuant to 

[N.J.S.A. 40:48C-15(a)] . . . and the municipality has a 

median household income of $55,000 or greater 

according to the . . . United States Census Bureau, all 

employer payroll tax revenues collected . . . pursuant 

to the ordinance shall be deposited into a trust fund to 

be used exclusively for school purposes . . . .

1996; by then, the Legislature had amended N.J.S.A. 40:48C-19 to retroactively 

preclude the City's collection of the tax, which we upheld against constitutional 

challenge by the City. Id. at 30–31. A provision of Chapter 68 repealed N.J.S.A. 

40:48C-19, see L. 2018, c. 68 § 3, thereby permitting the City to enact and collect a 

payroll tax. 
A-3097-18 8

Subsection (d)(2) requires the municipality to pay over from the trust fund to 

its school board on a monthly basis "an amount equal to one-twelfth of the 

difference in State school aid provided to that school district, pursuant to 

[SFRA], between the current State fiscal year and State fiscal year 2018, for 

use in lieu of adjustment aid and all other categories of State school aid." The 

balance of any payroll tax revenues collected remain in the trust fund "in the 

event the employer payroll tax revenues collected in a year are insufficient to 

pay the full amount" required under (d)(2). N.J.S.A. 40:48C-15(d)(3).

B.

The Education Clause of our state Constitution requires the Legislature 

to "provide for the maintenance and support of a thorough and efficient system 

of free public schools for the instruction of all the children . . . between the 

ages of five and eighteen years." N.J. Const. art. VIII, § 4, ¶ 1. When enacted 

in 2008, SFRA reflected "the State's most recent, lengthy and painstaking 

effort to craft a redesigned school funding formula that satisfies the 

constitutional standard." Abbott XXI, 199 N.J. at 147. 

SFRA uses a formula to calculate the "adequacy budget" for each school 

district, that, in general terms, multiplies enrollment by a "base per pupil 

amount" added to the costs of other necessary educational services and districtspecific geographic costs. N.J.S.A. 18A:7F-50(b); N.J.S.A. 18A:17F-51. To 
A-3097-18 9

meet its portion of its adequacy budget, each school district must set a "general 

fund tax levy" in an amount equal to that district's "required local share." 

N.J.S.A. 18A:7F-5(b). For most districts, the "required local share" equals the 

lesser of "the local share4calculated at the district's adequacy budget" or the 

district's local share from the previous year. N.J.S.A. 18A:7F-5(b). SFRA 

directs the State to remit to each school district "equalization aid" in an amount 

equal to the remainder after subtracting the local share from the adequacy 

budget. N.J.S.A. 18A:7F-53. 

For former so-called Abbott districts like the City, the required local 

share is calculated differently. N.J.S.A. 18A:7F-5(b). In addition to other 

forms of state aid, SFRA established "educational adequacy aid" for former 

Abbott districts that were spending beneath their adequacy budget and did not 

meet certain educational criteria. N.J.S.A. 18A:7F-58(b). When enacted, 

SFRA directed that eligible districts would take the funds received from the 

combination of its own tax levy and "equalization aid" received from the State, 

and, with minor adjustments, subtract that amount from the adequacy budget; 

the result was the amount of "educational adequacy aid" sent to the district. 

Ibid. 

4

 The "local share," distinct from the "required local share," considers the 

property values and incomes in a school district. N.J.S.A. 18A:7F-52. 
A-3097-18 10

Separate from equalization aid, educational adequacy aid, and other 

categories of state aid, SFRA also allocated "adjustment aid" to ensure that, 

generally speaking, former Abbott districts would receive "the greater of the 

amount of State aid" between the amount calculated under SFRA and the 

amount the district had received in the prior year plus two percent. N.J.S.A. 

18A:7F-58(a)(3) to (4). SFRA also included a two-percent growth limitation 

on the amount by which a school district could increase its budget without first 

obtaining approval from voters in a local election, N.J.S.A. 18A:7F-38(a),5and 

tiered growth limits on the total aid former Abbott districts could receive from 

the State. N.J.S.A. 18A:7F-47.6

The 2018 amendments to SFRA were intended to address concern that, 

since its inception nine years earlier, the statute "ha[d] not been fully 

implemented" towards its goal of distributing State school aid to districts 

"based on the needs of the student population and local fiscal capacity." 

Sponsor's Statement to S. 28 (L. 2018, c. 67). The amendments were intended 

to "realign[ ] the amount of State aid provided to school districts with their 

current needs," and to correct inequities in the amount of school aid districts 

5

 Initially this was a four-percent cap that applied to districts spending above 

adequacy, L. 2007, c. 260, §3, but in 2010, the two-percent cap was set and 

extended to all districts. L. 2010, c. 44, § 3.

6

 Repealed by L. 2018, c. 67, § 8.
A-3097-18 11

had been receiving. Ibid. 

In pertinent part, the SFRA amendments eliminated adjustment aid going 

forward and incorporated a "state aid differential" variable used to recalculate 

the distribution of aid more equitably. N.J.S.A. 18A:7F-67. The state aid 

differential is calculated by subtracting the district's budget-year state aid —

not including any adjustment aid, educational adequacy aid, or other "nonSFRA aid" — from the prior year's total state aid — a sum that includes 

adjustment and non-SFRA aid. Ibid. Generally, districts with a positive state 

aid differential receive the amount of aid received in the prior year, reduced by 

a specified percentage that increases annually in gradual increments 7 until the 

excess aid is eliminated in the 2024–25 school year. N.J.S.A. 18A:7F-68(b).8 

The total amount of adjustment aid cut each year is added to any 

increase in the State's total appropriated aid for that year, and that sum is then 

allocated proportionately to districts with negative differentials. N.J.S.A. 

18A:7F-68(a). The Legislature also repealed the state aid growth limitation, L.

2018, c. 67, §8, and amended the two-percent local tax levy growth limitation 

7

 Thirteen-percent reduction in the 2019–20 school year, 23% in 2020–21, 

37% in 2021–22, 55% in 2022–23, 76% in 2023–24, and 100% in 2024–25. 

N.J.S.A. 18A:7F-68(b).

8

 Certain former Abbott districts and non-Abbott districts are exempt from the 

reductions, but those exemptions are not at issue here. N.J.S.A. 18A:7F-68(c). 
A-3097-18 12

in N.J.S.A. 18A:7F-38 to allow former Abbott districts to increase the amount 

of their general fund tax levy irrespective of the cap. N.J.S.A. 18A:7F-38(a).9

It is undisputed that the 2018 SFRA amendments resulted in significant 

reductions in State aid to the City's school district commencing in fiscal year 

2019. 

C.

Our Constitution provides that "corporations may be authorized by law 

to undertake . . . clearance, replanning, development, or redevelopment" of 

"blighted areas," and "improvements made for these purposes . . . may be 

exempted from taxation . . . for a limited period of time" during which the 

corporation's "profits . . . and dividends . . . shall be limited by law." N.J. 

Const. art. VIII, § 3, ¶ 1. The Legislature enacted the LTTEL "to encourage 

private capital and participation by private enterprise" in "the restoration of 

deteriorated or neglected properties . . . in the elimination of the blighted 

condition," in exchange for "special financial arrangements, including the 

granting of property tax exemptions." N.J.S.A. 40A:20-2. Among other 

things, the LTTEL authorized qualified "urban renewal entit[ies]" to enter into 

financial agreements with municipalities and conduct long-term redevelopment 

projects. N.J.S.A. 40A:20-8. 

9

 See L. 2018, c. 67, §§ 3, 8.
A-3097-18 13

"Every approved project shall be evidenced by a financial agreement 

between the municipality and the urban renewal entity," and the agreement 

shall provide "[t]hat all improvements . . . in the project . . . shall be exempt 

from taxation." N.J.S.A. 40A:20-9(b). "During the term of any exemption, in 

lieu of any taxes to be paid on the . . . improvements of the project and, . . . the 

urban renewal entity shall make payment to the municipality of an annual 

service charge . . . ." N.J.S.A. 40A:20-12(b). After the exemption terminates, 

the improvements are taxed like any other real property improvements in the 

municipality. N.J.S.A. 40A:20-12(c). Several plaintiffs entered into financial 

agreements with the City whereby they remit an annual service charge 

payment in lieu of property taxes (PILOT payments) on the improvements, but 

not the real property, within their redevelopment projects; the assessed value 

of the real property is taxed like other real property in the municipality. The 

specific terms of these financial agreements are not in the record. 

In 2018, the value of real property in the City subject to tax abatements 

was $320,932,804. The Education Law Center, a non-profit public interest law 

firm that advocates for students, reported that in the 2018–19 school year, 

Jersey City received State aid that exceeded the amount needed to meet its 

adequacy budget. However, due to the depletion of the property tax base 

resulting from LTTEL financial agreements, the City was underfunding its 
A-3097-18 14

local share and spending $103,749,652 below its adequacy level, or $3367 per 

pupil. 

D.

The City enacted the Ordinance with the stated purpose "to establish a 

payroll tax on the payrolls of Non-Jersey City residents for the benefit of 

Jersey City schools." The Ordinance became effective on January 1, 2019. 

See Jersey City, N.J., Code § 304-18.

The Ordinance imposed a payroll tax "equal to one percent of the 

employer's payroll," with those revenues to be placed in a trust fund "used 

exclusively for [s]chool purposes." The Ordinance further directed that "[a]ll 

tax revenue distributed" through the trust fund "be used in lieu of State 

adjustment aid and all other categories of State school aid." Id. at § 19.1(d). 

The ordinance provided that "[a]n employer shall incur no payroll tax relative 

to its Jersey City-resident [e]mployees." Id. at § 304-19(a). Consistent with 

the LTAA,10 the Ordinance defined "payroll," as "the total remuneration paid 

by employers to employees . . . for services . . . performed within the City of 

Jersey City; or . . . performed outside of the City of Jersey City but . . . 

supervised . . . in Jersey City." Ibid. 

10

 See N.J.S.A. 40:48C-14 (defining "[p]ayroll" for purposes of the LTAA).
A-3097-18 15

II.

A.

Plaintiffs contend Chapter 68 violates the Education Clause by enabling 

the City to enact the Ordinance, which generates revenue used to relieve the 

State of its constitutional obligation to fund a thorough and efficient 

educational system as the Court ordered in its Abbott decisions. The motion 

judge rejected the argument, noting that because the City faced "extraordinary 

circumstances," the Legislature was justified in amending the LTAA to ensure 

that Jersey City raised enough revenue for its schools and avoided any 

budgetary shortfall.

Plaintiffs argue the judge erred, because revenue from the payroll tax 

was not replacing Jersey City's local share under SFRA, but, as the Ordinance 

itself made clear, the revenue replaced cuts in State adjustment aid. They 

argue that under SFRA, a district's adequacy budget and a municipality's local 

share are set by statutory formulae; the only variable to bridge any gap and 

meet the State's constitutional obligations under the Education Clause is the 

amount of state aid provided in a given year. In plaintiffs' view, the State is 

not permitted to empower a municipality to generate aid that the State is 

constitutionally obligated to provide pursuant to the Education Clause as 

construed by the Abbott cases. We disagree.
A-3097-18 16

We set some guideposts that inform our consideration of plaintiffs' 

arguments. Against facial constitutional challenges, we "afford every possible 

presumption in favor of an act of the Legislature." Town of Secaucus v. 

Hudson Cnty. Bd. of Tax'n, 133 N.J. 482, 492 (1993) (citing Holster v. Bd. of 

Trs., 59 N.J. 60, 66 (1971)); accord Strategic Env't Partners, LLC v. N.J. Dep't 

of Env't Prot., 438 N.J. Super. 125, 144 (App. Div. 2014). Simply put, "the 

courts do not act as a super-legislature." Newark Superior Officers Ass'n v. 

City of Newark, 98 N.J. 212, 222 (1985) (citing Burton v. Sills, 53 N.J. 86, 95 

(1968)). "Only a statute 'clearly repugnant to the constitution' will be declared 

void." Secaucus, 133 N.J. at 492–93 (quoting Newark Superior Officers, 98 

N.J. at 222–23). Reviewing courts are "not limited to the stated purpose of the 

legislation and 'should seek any conceivable rational basis'" to uphold it. 

Strategic Env't, 438 N.J. Super. at 145 (quoting Secaucus, 133 N.J. at 494–95). 

A statute will not be found "facially unconstitutional if it operates 

constitutionally in some instances." Whirlpool Props., Inc. v. Dir., Div. of 

Tax'n, 208 N.J. 141, 175 (2011) (quoting Gen. Motors Corp. v. City of Linden, 

150 N.J. 522, 532 (1997)). 

"[T]he burden is on the party challenging the constitutionality of the 

statute to demonstrate clearly that it violates a constitutional provision." 

Newark Superior Officers, 98 N.J. at 222 (citing Bd. of Educ. v. Caffiero, 86 
A-3097-18 17

N.J. 308, 318 (1981)). That burden is onerous. See, e.g., In re P.L. 2001, 

Chapter 362, 186 N.J. 368, 392 (2006) ("[W]e will not declare void legislation 

'unless its repugnancy to the Constitution is clear beyond a reasonable doubt.'" 

(emphasis added) (quoting Harvey v. Bd. of Chosen Freeholders, 30 N.J. 381, 

388 (1959))). These same principles apply to our review of a challenge to the 

constitutionality of an ordinance. Singer v. Twp. of Princeton, 373 N.J. Super. 

10, 19–20 (App. Div. 2004). Lastly, because plaintiffs challenge the 

constitutionality of tax legislation, we recognize that, "in the field of taxation, 

the Court has accorded great deference to legislative judgments." Secaucus, 

133 N.J. at 493 (citing McKenny v. Byrne, 82 N.J. 304, 314 (1980)).

We agree with plaintiffs that the purpose of the Ordinance, enabled by 

Chapter 68, was to supplement the City's revenue available for school 

purposes. However, plaintiffs leap from the ineluctable conclusion that payroll 

tax revenues under the Ordinance supplemented municipal, not State, revenues 

to a wholly unsupportable result, i.e., that the Ordinance and Chapter 68 

violate the Education Clause. 

In Stubaus v. Whitman, the plaintiffs challenged the constitutionality of 

a predecessor to SFRA, arguing the funding formula's "disparate tax burdens 

constitut[ed] violations" of the Education Clause. 339 N.J. Super. 38, 44 

(App. Div. 2001). Relying on the Court's interpretation of the Education 
A-3097-18 18

Clause in Abbott's predecessor litigation, Robinson v. Cahill, 62 N.J. 473 

(1973), we noted that "taxpayer equality" was "not encompassed within the . . . 

constitutional mandate." Id. at 54. Because the Education Clause "does not 

protect taxpayers," the plaintiffs' arguments were "more appropriately . . . 

made to the Legislature." Id. at 56. In this case, the Legislature has acted; it 

passed Chapter 68 to permit the City to supplement its revenues and dedicate 

them for school purposes. We fail to see how plaintiffs, none of whom 

represent the interest of the City's schoolchildren, are positioned to challenge 

whether the Ordinance or Chapter 68 violates the Education Clause.

To overcome this obvious impediment, plaintiffs contend that to comply 

with the Court's Abbott line of cases, the State must enforce the SFRA funding 

formula without resort to other legislative remedies. They assert the Court 

"made it crystal clear that . . . the State is not permitted to rely on outside 

sources instead of funding its share," emphasizing that in Abbott XXII, the 

Court rejected the argument "that the availability of certain non-SFRA funds 

[could] be used to deflect the State's responsibility for the provision of a 

constitutionally mandated, adequately funded thorough and efficient system of 

education." (citing Abbott XXII, 206 N.J. at 364). A closer examination 

reveals the fallacy of this argument.
A-3097-18 19

The Court made clear early on that "what a thorough and efficient 

education consists of is a continually changing concept," and that it may be 

necessary for the State to supplement poorer districts' financing to address 

educational disparities between districts. Abbott v. Burke, 119 N.J. 287, 303, 

319–20 (1990) (Abbott II). The Court did not mandate any specific remedy 

and expressly held it was ultimately the responsibility of the Legislative and 

Executive branches to adopt a "comprehensive remedy." Abbott v. Burke, 149 

N.J. 145, 189 (1997) (Abbott IV). The Legislature crafted such a remedy with 

SFRA, leading the Court to release the State from its prior enforcement orders. 

Abbott XXI, 199 N.J. at 238–39. 

Abbott XXII provides no support for plaintiffs' argument. There, the 

Court specifically found that the State had "made a conscious and calculated 

decision to underfund the SFRA formula" in its annual appropriations, and the 

alternative non-SFRA funding the State pointed to "was insufficient to fill the 

gaps left by the reductions in state aid in the individual Abbott districts." 206 

N.J. at 359, 365. The overall budgetary shortfall of $1.6 billion in that case 

was "spread across various SFRA aid categories, including . . . [e]qualization 

[a]id." Id. at 346.

Here, the purpose of expanding the payroll tax was to offset the shock 

from cuts in adjustment aid to the City's school district that the Legislature 
A-3097-18 20

determined were necessary to avoid continuation of historic overfunding at the 

expense of other, underfunded districts. The Court's admonition in Abbott 

XXII that the State could not rely on non-SFRA funds to avoid their 

constitutional obligation was premised on the fact that the State was not 

meeting its obligation under SFRA and was leaving former Abbott districts 

underfunded, a factual premise absent here. Nothing in Abbott XXII suggests 

the Education Clause prohibits the Legislature from providing a municipality 

with other revenue-raising tools it may employ to supplement its share of 

school costs associated with providing its children with an adequate education.

B.

Plaintiffs alleged that Chapter 68 was unconstitutional special 

legislation. See N.J. Const. art. IV, § VII, ¶ 9(6),(7) ("The Legislature shall 

not pass any private, special or local laws" for certain purposes, including laws 

"[r]elating to taxation or exemption therefrom," or "[p]roviding for the 

management and control of free public schools."). The motion judge relied 

heavily on our decision in Farmer, reasoning that if the prior version of the 

LTAA permitted imposition of a payroll tax when the statute only applied to 

Newark, adding eligibility for the City did not render the statute 

unconstitutional, especially given the City's unique fiscal struggles. He noted 
A-3097-18 21

Newark and Jersey City had the largest student populations in the State, and 

the proliferation of PILOT agreements entered into by the City reduced its 

ability to meet its "local fair share for school funding" because although the 

agreements spurred development, they "depleted [the City's] property tax 

revenues and [left it] struggling to fund [its] public schools."

The Court has "established a three-part test to determine whether a 

statute constitute[s] special legislation." Secaucus, 133 N.J. at 494 (citing 

Vreeland v. Byrne, 72 N.J. 292, 300–01 (1977)). 

[T]he method of analysis is this: we first discern the 

purpose and object of the enactment. We then 

undertake to apply it to the factual situation presented. 

Finally we decide whether, as so applied, the resulting 

classification can be said to rest upon any rational or 

reasonable basis relevant to the purpose and object of 

the act.

[Ibid. (alteration in original) (quoting Vreeland, 72 

N.J. at 300–01).]

"[T]he Legislature has wide discretion in determining the perimeters of a 

classification and an adequate factual basis for the legislative judgment is 

presumed to exist." Horizon Blue Cross Blue Shield of N.J. v. State, 425 N.J. 

Super. 1, 18 (App. Div. 2012) (alteration in original) (quoting N.J. State Bar 

Ass'n v. State, 387 N.J. Super. 24, 52 (App. Div. 2006)). Population has long 

been considered a valid criterion on which the Legislature can rely in making a 

statutory classification. See Twp. of Mahwah v. Bergen Cnty. Bd. of Tax'n, 98 
A-3097-18 22

N.J. 268, 287 (1985) ("[U]nder the law of the State of New Jersey population 

is generally accepted as a means of classification."); Newark Superior 

Officers, 98 N.J. at 225 ("Statutes relating to city government classified by 

population are generally upheld.").

Plaintiffs argue that the 2018 SFRA amendments resulted in aid cuts to 

more than 170 school districts, some of which lost a greater percentage of their 

aid than did the City. Plaintiffs contend the legislative classification was 

arbitrary because only Jersey City was singled out to receive favorable 

replacement aid via a payroll tax. They also contend that the prospect of any 

other cities ever qualifying to benefit from Chapter 68 is remote. 

To some extent, plaintiffs' argument posits an incomplete classification 

scheme. The LTAA permits all municipalities with more than 200,000 

residents to impose a payroll tax. Under the Vreeland test, the Legislature 

reiterated this as an express purpose of Chapter 68. See Assembly Budget 

Committee Statement to A. 4163 (June 18, 2018) (noting purpose of legislation 

was to "allow any municipality having a population over 200,000 to impose 

and collect an employer payroll tax."). The Legislature then created a subclassification, evidencing its intent that a municipality eligible to impose a 

payroll tax, and that also met the median household income requirement, was 

required to "use employer payroll tax revenues for school purposes," which 
A-3097-18 23

"would help offset certain reductions in State school aid" brought about by the 

SFRA amendments. Ibid. The Legislature enacted the 2018 SFRA 

amendments simultaneously with Chapter 68, without which Chapter 68 would 

not have gone into effect. See L. 2018, c. 68, § 4 (making Chapter 68 

effective upon enactment of the SFRA amendments). In short, the two pieces 

of legislation were a coordinated response by the Legislature that recognized 

the drastic effects the SFRA amendments would have on the City. 

Currently, it is true that no other municipality in the State is "similarly 

situated" to Jersey City and Newark, which are unique with respect to the size 

of their populations. Vreeland, 72 N.J. at 299. See Newark Superior Officers, 

98 N.J. at 220 (upholding statute granting only mayors of cities of the first 

class the power to appoint police chiefs). More directly, we have already held 

"in the case of the payroll tax, there is an obvious State interest in strictly 

limiting the municipalities that collect such a tax." Farmer, 329 N.J. Super. at 

42. These precedents support the rationality of the population-based statutory 

classification employed by Chapter 68.

To the extent a municipality is "singled out" by the median income 

classification, it is Newark; yet Newark urges us to affirm the orders under 

review. Newark still is permitted to continue using the revenue from its 

payroll tax "for general municipal purposes," as the LTAA had authorized it 
A-3097-18 24

alone to do for five decades. N.J.S.A. 40:48C-15(a). Regarding the LTAA, 

we have already held that the Legislature had a rational basis to treat Newark 

differently than other municipalities given Newark's long history of reliance on 

the payroll tax. Farmer, 329 N.J. Super. at 46. 

Newark currently does not have a median household income of $55,000 

or greater. However, the wealth and income within a school district have long 

been variables used by SFRA to calculate the amount municipalities must raise 

through a general tax levy. N.J.S.A. 18A:7F-52. The legislative decision to

authorize a different kind of tax levy to fund schools may rationally vary 

depending on district wealth, and it was not irrational for the Legislature to 

decide that a municipality with a greater median income should be limited in 

the permissible uses of any payroll tax imposed. 

[O]ur Supreme Court has emphasized "the long 

established principle of deference to the will of the 

lawmakers whenever reasonable men might differ as 

to whether the means devised to meet the public need 

conform to the Constitution . . . [and] the equallysettled doctrine that the means are presumptively 

valid, and that reasonably conflicting doubts should be 

resolved in favor of validity."

[Farmer, 329 N.J. Super. at 46 (second alteration in 

original) (quoting Roe v. Kervick, 42 N.J. 191, 229 

(1964)).]

It is not for us to dispute the wisdom of the Legislature's choice.
A-3097-18 25

Finally, contrary to plaintiffs' claim, this case is distinguishable from 

Secaucus, 133 N.J. at 498–99, where there was no possibility any other 

municipality would ever qualify for the tax exemption at issue. Here, any 

municipality that exceeds the neutral population threshold in the future is 

authorized to impose the payroll tax, N.J.S.A. 40:48C-1, and whether the 

school trust fund requirement is triggered will depend on the neutral median 

income criterion. N.J.S.A. 40:48C-15(d)(1). Chapter 68 contained no 

provision blocking the admission of other municipalities into the classification 

scheme. 

C.

Turning to the balance of plaintiffs' contentions that rely upon provisions 

of our State Constitution, the urban renewal entities contend the judge erred in 

dismissing claims that the Ordinance violated the Uniformity Clause. That 

provides, "Property shall be assessed for taxation under general laws and by 

uniform rules. All real property assessed and taxed locally or by the State for 

allotment and payment to taxing districts shall be assessed according to the 

same standard of value, except as otherwise permitted herein . . . ." N.J. 

Const. art. VIII, §1, ¶ 1(a). By its terms, the provision concerns real property 

and the "limits on the Legislature's ability to classify real property for purposes 

of taxation." Gen. Motors, 150 N.J. at 526.
A-3097-18 26

The motion judge held that because the Uniformity Clause speaks only 

to the taxation of real property, the City's payroll tax did not violate this 

provision. On appeal, plaintiffs appear to argue that the payroll tax violates 

the Uniformity Clause because it supplements the City's property tax levy 

under SFRA with funds raised from private businesses, some of whom own 

real estate in the City, through the payroll tax. They contend that because not 

all owners of real estate in the City suffer the burden of the payroll tax, the 

substitution of tax revenue derived from the payroll tax violates the 

constitutional mandate of uniformity in real estate taxation.

Plaintiffs cite no authority for the position that the Uniformity Clause 

limits the State's ability to delegate authority to the City to raise revenue for its 

own school district through a payroll tax on businesses operating within it. 

Instead, in the context of school funding, the Court has suggested the contrary:

[T]he tax clause was not intended to say that a State 

function may not be delegated to local government to 

be met by local taxation . . . . [L]ocal government is 

simply an arm of the State with respect to the many 

State functions which the State decides shall be 

performed through local government. The tax clause 

does not restrict the State with respect to that decision. 

[Robinson, 62 N.J. at 502.]

As a corollary argument, plaintiffs contend the payroll tax was a 

"surrogate" or "substitute" real estate tax precluded by the PILOT agreements. 
A-3097-18 27

They similarly allege that the payroll tax unconstitutionally impaired their 

contract rights, noting "[t]he City did not reserve the right in the financial 

agreements entered into pursuant to the LTTEL to impose an additional 

financial burden" on them through the payroll tax. 

The motion judge held the urban renewal entities failed to establish the 

PILOT payments were in lieu of anything other than property taxes collected 

from assessments on improvements to real property. Because the financial 

agreements had nothing to do with Jersey City's authority to impose the payroll 

tax, the judge reasoned there was no connection between the Ordinance and 

those financial agreements. 

Plaintiffs have not pointed to any legal authority to support their claim 

that PILOT agreements immunize the contracting urban renewal entities from 

being subject to different, generally applicable taxes imposed, not on 

improvements to real estate, but on businesses. The LTTEL does not 

explicitly state or implicitly suggest that the "special financial agreements" 

authorized by the statute effect anything other than financial obligations in lieu 

of property taxes. Imposition of the payroll tax through enactment of the 

Ordinance did not inhibit in anyway the urban renewal entities from receiving 

the fruits of their financial agreements with the City. 
A-3097-18 28

Plaintiffs also contend that the court erred by dismissing their complaint 

alleging that Article VIII, Section 2, Paragraph 8 of our Constitution 

prohibited collection of the payroll tax. The provision at issue, adopted in 

2010, states:

No contributions from employers, other than the 

State, or from employees of those employers, 

collected by the State entirely by means of an 

assessment exclusively on, or exclusively measured 

by, the wages or salaries paid by the employers to the 

employees . . . shall be used for any purpose other 

than providing and administering benefits to 

employees and their families or dependents . . . . All 

contributions collected by the State from any 

employer . . . shall be dedicated solely to the purpose 

of providing and administering [those] benefits . . . . 

No part of the contributions, interest or income shall 

be directly or indirectly transferred, borrowed, 

appropriated or used for any purpose other than 

providing and administering benefits pursuant to this 

paragraph. 

[Ibid. (emphasis added).]

The motion judge held this provision had no bearing on the payroll tax because 

by its plain language, it applied only to contributions collected "by the State," 

and not those collected by municipalities. 

On appeal, plaintiffs claim the judge's analysis was "overly simplistic," 

because it failed to consider that Chapter 68 "authorize[d the] City to assist in 

the State's circumvention of its Abbott obligations." Stated differently, 
A-3097-18 29

plaintiffs contend that the City is acting as an agent of the State; therefore, the 

payroll tax violated Article VIII, Section 2, Paragraph 8.

As already noted, we reject plaintiffs' claim that imposition of a payroll 

tax to supplement school funding violates our Constitution. More importantly, 

"[i]n ascertaining the intent of a constitutional provision, a court must first 

look to the precise language used by the drafters. If the language is clear and 

unambiguous, the words used must be given their plain meaning." State v. 

Trump Hotels & Casino Resorts, Inc., 160 N.J. 505, 527 (1999) (citing 

Gangemi v. Berry, 25 N.J. 1, 10 (1957)). We agree with the motion judge; the 

meaning of the provision at issue is plain, and the constitutional prohibition 

only applies to the State, not the City. 

III.

Plaintiffs contend the Ordinance is ultra vires because it exceeded the 

grant of legislative authority and was unconstitutionally vague. We disagree.

The motion judge held the Ordinance was not ultra vires because the 

Legislature had left municipalities with discretion to define the terms to be 

used in any ordinance. The judge found that the City reasonably incorporated 

several definitions from Newark's ordinance, which we upheld against 

constitutional challenge, and further that the City was entitled to latitude and 

deference in how it implemented the tax. On appeal, plaintiffs contend the 
A-3097-18 30

Ordinance exceeded the scope of the LTAA in two respects: (1) the 

"supervisor provision" is so expansive that it includes employees who neither 

live nor work in Jersey City and may even be located in other countries; and 

(2) the Ordinance imposes penal consequences.

"[A] municipality is a creature of the Legislature, and as such is a 

government of enumerated powers which can act only by delegated authority." 

Inganamort v. Borough of Fort Lee, 72 N.J. 412, 417 (1977) (citing Giannone 

v. Carlin, 20 N.J. 511, 517 (1956)). "Any exercise of a delegated power by a 

municipality in a manner not within the purview of the governing statute is 

capricious and ultra vires of the delegated powers." Giannone, 20 N.J. at 517; 

accord Kress v. LaVilla, 335 N.J. Super. 400, 410 (App. Div. 2000). "Two 

forms of ultra vires acts exist under the law: ultra vires acts in the primary 

sense and ultra vires acts in the secondary sense." City Council of Orange

Twp. v. Edwards, 455 N.J. Super. 261, 272 (App. Div. 2018).

"Ultra vires acts in the primary sense are 'act[s] utterly beyond the 

jurisdiction of a municipal corporation' and are void." Ibid. (alteration in 

original) (quoting Middletown Twp. Policemen's Benevolent Ass'n Local No. 

124 v. Twp. of Middletown, 162 N.J. 361, 368 (2000)). "For a municipal 

decision or action to be considered ultra vires in the primary sense, the 

municipality must be 'utterly without capacity to perform the act or make the 
A-3097-18 31

appointment.'" Id. at 273 (quoting Maltese v. Twp. of N. Brunswick, 353 N.J. 

Super 226, 246 (App. Div. 2002)).

"In contrast, an ultra vires act in the secondary sense arises from the 

'irregular exercise of a basic power under the legislative grant in matters not in 

themselves jurisdictional.'" Id. at 272 (quoting Middletown Twp. Policemen's 

Benevolent Ass'n, 162 N.J. at 368). "[A]n act is ultra vires in the secondary 

sense when the action is generally within the power of the municipality but 

was carried out improperly or irregularly." Id. at 273.

Although the LTAA does not define "supervision," it does define 

"[p]ayroll" to mean "the total remuneration paid by employers to 

employees . . . for services . . . performed within the municipality; or . . . 

outside the municipality and the place from which the services are supervised, 

is in the municipality." N.J.S.A. 40:48C-14. The Ordinance adopted the same 

language and further provided that services should be considered to be 

"supervised from the City if an individual who either works in or is based in 

the City has the right to control and direct the manner of rendition of the 

[e]mployee's service, has hiring and firing responsibility and oversees the work 

of such employee." Jersey City, N.J., Code § 304-18. This additional 

language is clearly consistent with the common usage of the term "supervise"; 

plaintiffs have not demonstrated the definitional sections of the Ordinance 
A-3097-18 32

were outside "the purview of the governing statute" or "ultra vires of the 

delegated powers." Giannone, 20 N.J. at 517.

The LTAA states that "[a]ny ordinance adopted pursuant to this article 

shall," among other things, "[p]rovide methods for enforcement of, and for the 

imposition of penalties for failure to report and pay, the tax imposed," and 

shall "[p]rovide a procedure for claims for refunds, and repayment of 

overpayment of taxes." N.J.S.A. 40:48C-16(c) to (d). Consistent with this 

legislative mandate, the Ordinance imposes "penalties . . . of up to $2000, and 

the imposition of sentences of imprisonment or community service, neither of 

which can exceed ninety days." Jersey City, N.J., Code § 304-19.4(e). This is 

entirely consonant with the City's general police powers. N.J.S.A. 40:69A29(b). Because the LTAA requires a municipality to adopt an enforcement 

mechanism, we fail to see how the Ordinance, which incorporates one, is ultra 

vires.

We also reject plaintiffs' contention that the Ordinance is 

unconstitutionally vague because it imposed "criminal consequences" for 

unintended misinterpretations of its provisions. "Vagueness challenges are . . . 

typically brought in contexts implicating the enforcement of criminal statutes, 

and are usually based on a contention that . . . no one should be prosecuted for 

violation of a statute, unless the statute provides adequate warning of the 
A-3097-18 33

proscribed behavior and sufficient guidance to . . . prevent arbitrary 

application[]" by law enforcement. In re Loans of N.J. Prop. Liab. Ins. Guar. 

Ass'n, 124 N.J. 69, 78 (1991). 

By contrast, "civil statutes in general, and economic regulations in 

particular, are subject to less stringent scrutiny under the vagueness doctrine." 

Ibid.; accord Visiting Homemaker Serv. of Hudson Cnty. v. Bd. of Chosen 

Freeholders of Hudson, 380 N.J. Super. 596, 613 (App. Div. 2005). This is in 

part "because business entities can be expected to consult legislation 

considerations in advance of economic action." Ibid. "[A] commercial 

regulatory statute" will be "held unconstitutionally vague only if it is 

'substantially incomprehensible.'" In re Farmers' Mut. Fire Assurance Ass'n of 

N.J., 256 N.J. Super. 607, 619–20 (App. Div. 1992) (alteration in original) 

(quoting In re Loans, 124 N.J. at 78).

Here, the challenged provision of the Ordinance is § 304-19.4(e), which 

authorizes three potential penalties for failing to provide or file necessary 

records or for making a false report to "avoid the payment in whole or in part 

of the payroll tax." The penalties include a monetary fine, community service, 

and imprisonment up to ninety days. Ibid. The motion judge held that because 

the Ordinance included imprisonment as a potential penalty, it was "penal" in 

nature and therefore subject to stricter scrutiny than a civil statute. However, 
A-3097-18 34

because the payroll tax attached only to employees' salaries that are subject to 

federal tax withholding, and the Ordinance was consistent with the terms of 

the LTAA, it was not unconstitutionally vague. 

"To avoid the pitfall of vagueness, a statute must enable a person of 

common intelligence to understand its essential terms." Farmers' Mut., 256 

N.J. Super. at 619 (citing State v. Lashinsky, 81 N.J. 1, 17 (1979)). A statute 

is facially vague only if it is "'impermissibly vague in all its application,' that 

is, there is no conduct that it proscribes with sufficient certainty." State v. 

Cameron, 100 N.J. 586, 593 (1985) (quoting Vill. of Hoffman Estates v.

Flipside, Hoffman Estates, Inc., 455 U.S. 489, 495 (1982)). 

Plaintiffs' arguments fail to present any cogent reason why the motion 

judge's analysis was wrong. No further discussion is necessary. R. 2:11-

3(e)(1)(E).

IV.

Plaintiffs contend the Ordinance and Chapter 68 violate the federal 

Constitution's "Privileges and Immunities" (P&I) clause because "they 

discriminate against out-of-state residents by making it more expensive to 

employ them." The P&I clause states: "The [c]itizens of each State shall be 
A-3097-18 35

entitled to all Privileges and Immunities of Citizens in the several States." 

U.S. Const. art. IV, § 2, cl. 1 (emphasis added).11 

It is settled law that only "citizens" may bring a claim for alleged 

violations of the P&I clause; corporations may not. See, e.g., Pembina Consol. 

Silver Mining & Milling Co. v. Pa., 125 U.S. 181, 187 (1888) ("Corporations 

are not citizens within the meaning of [the P & I] clause)."; accord Am. 

Trucking Ass'ns. v. Larson, 683 F.2d 787, 790 (3d Cir. 1982) (the term 

"citizen" in the P & I clause only applied to "natural persons" and barred a 

trucking association's claim); Am. Fire & Cas. Co. v. N.J. Div. of Tax'n, 375 

N.J. Super. 434, 457 (App. Div. 2005) ("[C]orporations are not held to be 

'persons' to which that clause applies."). The motion judge dismissed 

plaintiffs' P&I clause cause of action on these grounds, and, as to plaintiffs, 

Ivan Baron and Gary Wagner, who were "natural persons" employed by two 

company plaintiffs, the judge held the payroll "tax neither adversely 

affect[ed]" their tax liability "nor restrict[ed] their right to employment." 

As to the plaintiffs who are not natural persons or labor unions, we agree 

entirely with the motion judge; they have no cognizable claim under the P&I 

clause. For the first time before us, plaintiffs contend in a footnote that they 

11

 Plaintiffs do not rely on the separate "privileges and immunities" clause in 

the Fourteenth Amendment. U.S. Const. amend XIV, § 1.
A-3097-18 36

are also representing the interests of "members of the public similarly situated" 

to Messrs. Baron and Wagner, and individual members of the union plaintiffs. 

We refuse to consider the argument. See Zaman v. Felton, 219 N.J. 199, 226–

27 (2014) (refusing to consider a claim raised for the first time on appeal 

(citing State v. Robinson, 200 N.J. 1, 20 (2009))); Almog v. Israel Travel 

Advisory Serv., Inc., 298 N.J. Super. 145, 155 (App. Div. 1997) (noting "the 

raising of additional legal issues by" footnotes is inappropriate).

As to the individual plaintiffs and labor unions, we affirm the dismissal 

of their P&I clause cause of action for several reasons. "[D]isadvantaged New 

Jersey residents have no claim under the Privileges and Immunities Clause." 

United Bldg. & Constr. Trades Council v. Mayor & Council of Camden, 465 

U.S. 208, 217 (1984) (citing Slaughter-House Cases, 83 U.S. 36, 77 (1873)); 

accord Taylor v. Rorke, 279 N.J. Super. 63, 68 (App. Div. 1995) (holding the 

P&I clause "prevents states from discriminating against out-of-state 

individuals" (citing Toomer v. Witsell, 334 U.S. 385, 395 (1948))). Thus, 

Wagner and the union members residing in New Jersey have no claim under 

the P&I clause.

The P&I clause protects non-New Jersey residents right to pursue their 

"livelihood free from economic discrimination." Salorio v. Glaser, 82 N.J. 

482, 501 (1980). As the motion judge recognized, however, the payroll tax 
A-3097-18 37

does not burden individual employees; employers are expressly prohibited 

from passing the burden onto their employees through deductions in salaries. 

N.J.S.A. 40:48-16(e). Thus, the Ordinance does not impose a "higher tax[] or 

imposition[]" on non-resident employees compared to resident employees. Id.

at 502 (citing Austin v. New Hampshire, 420 U.S. 656, 661 (1975)). 

Plaintiffs seemingly understand this shortcoming, because they contend 

employers are less likely to hire out-of-state residents because of the payroll 

tax, and therefore out-of-state residents are economically disadvantaged 

compared to New Jersey residents. However, that certainly is not borne out in 

Mr. Baron's case, nor is there any other proof for the proposition. Plaintiffs' 

P&I clause cause of action was properly dismissed.

V.

We address the most troublesome aspect of the appeal, i.e., whether 

Chapter 68, which permits adoption of an ordinance that excludes resident 

employees from the payroll calculation, and the Ordinance, which excludes 

Jersey City residents from the calculation, violate the Commerce Clause of the 

United States Constitution. If there is such a violation, we must also consider 

whether these provisions in the LTAA and the Ordinance may be severed.

Article I, Section 8, Clause 3 of the United States Constitution provides, 

in pertinent part, that Congress shall have power "[t]o regulate Commerce . . . 
A-3097-18 38

among the several States." Historically, "removing state trade barriers was a 

principal reason for the adoption of the Constitution" which precluded the 

"notorious[ ] obstruct[ion]" that states had previously engaged in under the 

Articles of Confederation. Tennessee Wine & Spirits Retailers Ass'n v. 

Thomas, __ U.S. __ , __ (2019), 139 S. Ct. 2449, 2460 (2019). "The negative 

or dormant implication of the Commerce Clause prohibits state taxation . . . 

that discriminates against or unduly burdens interstate commerce and thereby 

'imped[es] free private trade in the national marketplace.'" Gen. Motors Corp. 

v. Tracy, 519 U.S. 278, 287 (1997) (alteration in the original) (quoting Reeves, 

Inc. v. Stake, 447 U.S. 429, 437 (1980)). "This 'negative' aspect of the 

Commerce Clause prohibits economic protectionism — that is, regulatory 

measures designed to benefit in-state economic interests by burdening out-ofstate competitors." New Energy Co. v. Limbach, 486 U.S. 269, 273 (1988) 

(emphasis added). 

The United States Supreme Court has set forth a fourpart test in determining whether a tax can be sustained 

against a Commerce Clause challenge: whether the 

tax (1) is applied to an activity with a substantial 

nexus to the taxing state; (2) is fairly apportioned; (3) 

does not discriminate against interstate commerce; and 

(4) is fairly related to the services provided by the 

state.
A-3097-18 39

[Stryker Corp. v. Dir., Div. of Taxation, 168 N.J. 138, 

152 (2001) (citing Complete Auto Transit, Inc. v. 

Brady, 430 U.S. 274, 282 (1977))].12

Plaintiffs do not assert Chapter 68 or the Ordinance fail the first prong of 

the Complete Auto test, and the argument regarding prong four is limited to a 

single sentence and accompanying footnote.13 We, therefore, focus on 

plaintiffs' challenges under prongs two and three of the Complete Auto test. 

We do so in reverse order because "the first step in analyzing any law . . . 

under the negative Commerce Clause is to determine whether it 'regulates 

evenhandedly with only "incidental" effects on interstate commerce[] or 

discriminates against interstate commerce.'" Or. Waste Sys., Inc. v. Dep't of 

Env't Quality of Or., 511 U.S. 93, 99 (1994) (quoting Hughes v. 

Oklahoma, 441 U.S. 322, 336 (1979)).

The motion judge concluded that plaintiffs failed to meet their burden of 

establishing prong three of the Complete Auto test, in part because plaintiffs 

conceded the tax only "indirectly violated" the dormant Commerce Clause, and 

12

 We hereafter refer to these as the four prongs of the Complete Auto test.

13

 In Telebright Corp. v. Director, New Jersey Division of Taxation, we

refused to consider a taxpayer's Commerce Clause challenge to the 

Corporation Business Tax Act as to three prongs of the Complete Auto test 

because its brief addressed the issues in "one sentence in the conclusion 

section" and "present[ed] no arguments in support of its contention." 424 N.J. 

Super. 384, 393 (App. Div. 2012). 
A-3097-18 40

precedent required a "direct burden or direct discrimination against interstate 

commerce," or an explicit "commercial advantage to local businesses." He 

further determined that plaintiffs "failed to make a competent showing of their 

economic loss attributable to the law, as well as a discriminatory effect on 

interstate commerce as a whole." The judge concluded the payroll tax did not 

facially discriminate against interstate commerce because it "applie[d] evenly 

to all businesses with employees in Jersey City regardless of whether the 

business [was] located inside or outside the City limits." 

Before us, plaintiffs contend residency exemption provisions of Chapter 

68 and the Ordinance are "per se invalid" because they favor "in-state 

'economic interests' over out-of-state ones." As we understand the argument, 

plaintiffs claim businesses that hire non-resident employees are burdened with 

the payroll tax, whereas those who hire Jersey City residents are not, and 

because businesses in Jersey City are likely to draw employees from out-ofstate, such as plaintiff Baron, the payroll tax violates the dormant Commerce 

Clause.

Discrimination claims under the dormant Commerce Clause require a 

two-step analysis. "'[D]iscrimination' simply means differential treatment of 

in-state and out-of-state economic interests that benefits the former and 

burdens the latter." Or. Waste, 511 U.S. at 99 (emphasis added). "[I]f a state 
A-3097-18 41

law discriminates against out-of-state goods or nonresident economic actors, 

the law can be sustained only on a showing that it is narrowly tailored to 

'advanc[e] a legitimate local purpose.'" Tennessee Wine, ___ U.S. at ___, 139 

S. Ct. at 2461 (alteration in original) (quoting Dep't of Revenue of Ky. v. 

Davis, 553 U.S. 328, 338 (2008)). 

However, "[w]here [a] statute regulates evenhandedly to effectuate a 

legitimate local public interest, and its effects on interstate commerce are only 

incidental, it will be upheld unless the burden imposed on such commerce is 

clearly excessive in relation to the putative local benefits." City of 

Philadelphia v. New Jersey, 437 U.S. 617, 624 (1978) (quoting Pike v. Bruce 

Church, Inc., 397 U.S. 137, 142 (1970)). "The crucial inquiry, therefore, must 

be directed to determining whether [the statute] is basically a protectionist 

measure, or whether it can fairly be viewed as a law directed to legitimate 

local concerns, with effects upon interstate commerce that are only incidental." 

Ibid.

Our Court has recognized that "with respect to the discrimination prong 

of Complete Auto," a statute "is not facially discriminatory" if "[i]t does not 

differentiate between in-state and out-of-state businesses." Whirlpool, 208 

N.J. at 174; accord Ampro Fisheries, Inc. v. Yaskin, 127 N.J. 602, 614 (1992) 

(concluding regulation limiting menhaden fishing did not place out-of-state 
A-3097-18 42

plaintiff "at a competitive disadvantage in relation to in-state fishing 

interests"). However, even if the statute does not directly regulate or 

discriminate against interstate commerce, it will be a per se violation of the 

Commerce Clause "when its effect is to favor in-state economic interests over 

out-of-state interests." Brown-Forman Distillers Corp. v. N.Y. State Liquor 

Auth., 476 U.S. 573, 579 (1986); see also, Trinova Corp. v. Mich. Dep't of 

Treasury, 498 U.S. 358, 385 (1991) ("The Commerce Clause requires more 

than mere facial neutrality."). 

Chapter 68 permits, but does not require, that a municipality exclude its 

residents from the payroll calculation for tax purposes. The Ordinance 

incorporates this provision. The exclusion of Jersey City-resident employees 

applies equally, however, to all employers, whether located in Jersey City, 

elsewhere in New Jersey or in another state. Plaintiffs have failed to 

demonstrate, beyond mere conjecture, that the payroll tax as enacted burdens 

out-of-state-resident employees, i.e., that the Ordinance's effect burdens outof-state economic interests. In this regard, the facts here are entirely 

distinguishable from those in Camps Newfound/Owatonna v. Town of 

Harrison, 520 U.S. 564 (1997), a case on which plaintiffs principally rely. 

In that case, the plaintiff, a charitable organization which operated a 

summer camp to benefit children of the Christian Science faith, challenged a 
A-3097-18 43

Maine statute that exempted such institutions from real estate and personal 

property taxes, but provided a limited or no tax exemption to those whose 

activities principally benefitted non-residents. Id. at 567–69. Ninety-five 

percent of the camp's attendees were not Maine residents. Id. at 581. The 

Court held that it was obvious from the "text of th[e] statute . . . that it 

discriminate[d] against interstate commerce." Id. at 575–76. Further, the 

Court held that although the tax was imposed on a Maine property holder, it 

was of no moment, because "the burden of Maine's facially discriminatory tax 

scheme falls by design in a predictably disproportionate way on out-ofstaters." Id. at 579. 

Here, the exclusion of Jersey City residents from the payroll tax 

calculation applies without respect to whether the employer is a resident of this 

state or another. Chapter 68 and the Ordinance do not, on their face, favor 

New Jersey's economic interests over another state's. Nor have plaintiffs 

demonstrated that the impact of the payroll tax as enacted was either intended 

to, or does, burden out-of-state residents. Chapter 68 and the Ordinance 

prohibit employers from collecting the tax from their employees, and the 

record lacks any proof that employers are or will be inhibited from hiring outof-state residents because they will have to pay a tax on their salaries. We 

need not consider the second tier of the discrimination analysis in this case.
A-3097-18 44

Addressing the second, "fair apportionment" prong of the Complete 

Auto test, plaintiffs argue Chapter 68 and the Ordinance are neither internally 

nor externally consistent, because they "allow Jersey City to tax the payroll of 

people who work in other states . . . without any effort to ensure that it is 

taxing only economic value attributable to New Jersey." The motion judge 

found the payroll tax was internally consistent, noting that Newark had 

virtually the same ordinance that permitted employees who worked outside the 

city to be included in the computation if supervised from within the city. He 

noted that the LTAA and the Ordinance limited an employer's obligation to 

pay a payroll tax for a specific employee's wages only once, and that conflicts 

between municipalities were to be resolved by the Tax Court in accordance 

with the Ordinance.

"With regard to the second prong, there are two requirements to fair 

apportionment: internal consistency and external consistency." Whirlpool, 

208 N.J. at 164. "The internal consistency analysis examines the hypothetical 

functioning of a tax formula, not its real[-]world effects on a taxpayer." Id. at 

165 (citing Moorman Mfg. Co. v. Bair, 437 U.S. 267, 278–79 (1978)). "A 

failure of internal consistency shows as a matter of law that a State is 

attempting to take more than its fair share of taxes" when "allowing such a tax 

in one State would place interstate commerce at the mercy of those remaining 
A-3097-18 45

States that might impose an identical tax." Okla. Tax Comm'n v. Jefferson 

Lines, Inc., 514 U.S. 175, 185 (1995); accord Whirlpool, 208 N.J. at 165. "To 

be internally consistent, a tax must be structured so that if every State were to 

impose an identical tax, no multiple taxation would result." Goldberg v. 

Sweet, 488 U.S. 252, 261 (1989) (citing Container Corp. of Am. v. Franchise 

Tax Bd., 463 U.S. 159, 169 (1983)).

The LTAA provides for resolution of tax disputes whenever an employer 

is assessed more than one payroll tax on a specific employee. N.J.S.A. 

40:48C-18. However, neither the statute nor the Ordinance provide a 

mechanism to resolve disputes if two taxing entities, in different states, impose 

a payroll tax on the same employee. The violation of the dormant Commerce 

Clause in such circumstances is obvious. A simple hypothetical better 

expresses the problem. 

If a non-Jersey City resident employee of a company works in 

Manhattan but is supervised by the company's Jersey City-based supervisor, 

the Ordinance imposes a tax on the company for that employee. The LTAA 

permits the City to do so. See N.J.S.A. 40:48C-14(b) (including with the 

definition of "[p]ayroll" the amount of compensation paid to an employee 

whose services are provided outside the municipality but are supervised from 
A-3097-18 46

within the municipality).14 If New York City, for example, were to impose a 

payroll tax on the company for that same employee, the supervisor provision 

of the LTAA as incorporated in the Ordinance would be internally 

inconsistent, i.e., both states' identical taxes would result in multiple taxation 

of that employee's services. Goldberg, 488 U.S. at 261. Because an internally 

inconsistent tax is, by definition, not fairly apportioned, Whirlpool, 208 N.J. at 

164, we need not address whether the LTAA and the Ordinance are externally 

inconsistent before concluding that the payroll tax as enacted fails to satisfy 

prong two of the Complete Auto test. What then is the appropriate remedy?

"[A] challenged statute will be construed to avoid constitutional defects 

if the statute is 'reasonably susceptible' of such construction." N.J. State Bd. of 

Higher Educ. v. Bd. of Dirs. of Shelton Coll., 90 N.J. 470, 478 (1982) (quoting 

State v. Profaci, 56 N.J. 346, 350 (1970)); accord Gallenthin Realty Dev., Inc. 

v. Borough of Paulsboro, 191 N.J. 344, 366 (2007). The question becomes 

"whether a construction of the statute is possible that avoids the constitutional 

problem." Whirlpool, 208 N.J. at 172 (citing State v. Miller, 170 N.J. 417, 433 

(2002)). "When a statute's constitutionality is doubtful, a court has the power 

to engage in 'judicial surgery' and through appropriate construction restore the 

14

 We refer to these portions of the Ordinance and the LTAA as the 

"supervisor provisions."
A-3097-18 47

statute to health." Town Tobacconist v. Kimmelman, 94 N.J. 85, 104 (1983) 

(quoting N.J. State Chamber of Com. v. N.J. Election Law Enf't Comm'n, 82 

N.J. 57, 75 (1980)). 

In Whirlpool, the Court limited the reach of New Jersey's "Throw-Out 

Rule," a provision of the Corporate Business Tax used to apportion a multistate corporation's local taxable income. 208 N.J. at 150–51. By throwing out 

a company's receipts that were untaxed by other states, the Throw-Out Rule 

resulted in an apportionment formula that increased the taxpayer's New Jersey 

tax liability. Id. at 151. The Court concluded, 

that the [Rule] may operate constitutionally . . . when 

applied to untaxed receipts from those states that lack 

jurisdiction to tax the corporate taxpayer due to the 

insufficient business activity in that state, but not 

when applied to receipts that are untaxed due to a 

state's determination not to have an income or similar 

business activity tax. 

[Ibid.] 

"Faced with a tax formula that predictably operate[d] unconstitutionally in 

some circumstances, [the Court] . . . interpret[ed] the statute narrowly so that it 

generally operate[d] constitutionally." Id. at 173. The Court further found that 

such limited construction was consistent with the legislative history of the 

provision. Ibid.
A-3097-18 48

Here, the LTAA and the Ordinance could operate constitutionally if both 

provided a mechanism to ensure internal consistency in application of a 

payroll tax, i.e., that both provided a procedure and remedy for an aggrieved 

taxpayer to demonstrate it was being taxed twice for the same employee by 

application of the supervisor provisions. Certainly, the Legislature intended 

such a result. See N.J.S.A. 40:48C-18 (providing that no employer would be 

subject to more than one municipality for the remuneration paid to a particular 

employee). However, we are reluctant to order a specific remedy at this time.

"[A] State found to have imposed an impermissibly discriminatory tax 

retains flexibility in responding to this determination." McKesson Corp. v. 

Div. of Alcoholic Beverages & Tobacco, 496 U.S. 18, 39–40 (1990); see also

Tyler Pipe Indus., Inc. v. Wash. State Dep't. of Rev., 483 U.S. 232, 252–53 

(1987) (noting that whenever a tax fails the internal consistency test, it is 

generally left to the taxing authority to determine the exact remedy that must 

be provided to aggrieved taxpayers). Often, determining what is the most 

appropriate remedy to cure the constitutional infirmity "may necessitate more 

of a record" than exists. Id. at 252 (quoting Bacchus Imps., Ltd. v. Dias, 468 

U.S. 263, 277 (1984)). 

The lack of a complete record in this case is obvious. We have no idea 

whether plaintiff-businesses and other Jersey City employers actually face 
A-3097-18 49

double taxation. We also do not know whether the State or the City, faced 

with the prospect of our holding, would fashion another remedy, including, 

possibly striking the supervisor provisions entirely. To be clear, the supervisor 

provisions of the LTAA and the Ordinance, left as enacted without limitations, 

violate the second prong of the Complete Auto test, and, therefore, violate the 

dormant Commerce Clause of the United States Constitution. We therefore 

vacate the dismissal of plaintiffs' Commerce Clause cause of action as it 

pertains to the supervisor provisions, remand the matter to the trial court to 

permit the parties to supplement the record and for any further proceedings 

consistent with this opinion. 

VI.

Plaintiffs contend the judge misapplied the standard for deciding a 

motion to dismiss and placed a burden on plaintiffs to produce evidence 

proving allegations of the impact of the payroll tax on their business 

operations. The argument is meritless.

With the consent of all parties, the judge entertained oral argument on 

plaintiffs' motion for summary judgment and defendants' motion to dismiss 

with the common understanding that the court would issue dispositive rulings 

on all issues because there were no facts in dispute bearing on the legal 
A-3097-18 50

arguments. For example, in colloquy with the judge prior to oral argument, 

plaintiffs' counsel unequivocally stated that the facial constitutional challenges 

were ripe for adjudication, there were no real facts in dispute, and the "timing" 

was right for a decision "on the merits today."

We agree with the State and the City that plaintiffs' now object to a 

procedure they invited. See Brett v. Great Am. Recreation, Inc., 144 N.J. 479, 

503 (1996) ("The doctrine of invited error operates to bar a disappointed 

litigant from arguing on appeal that an adverse decision below was the product 

of error, when that party urged the lower court to adopt the proposition now 

alleged to be error.").

Lastly, we agree with plaintiffs that, to the extent he did, it was error for 

the judge to premise dismissal of their complaint upon the failure to join 

Newark as an indispensable party. "[A]bsence of an indispensable party does 

not deprive the court of jurisdiction to adjudicate the issues among 

the parties who were joined." Toll Bros. v. Twp. of W. Windsor, 334 N.J. 

Super. 77, 91 (App. Div. 2000) (citing Raynor v. Raynor, 319 N.J. Super. 132, 

144 (App. Div. 1998)); accord In re Adoption of N.J.A.C. 19:3, 19:4, 19:5 & 

19:6, 393 N.J. Super. 173, 186 (App. Div. 2007). 

Read together, Rules 4:28-1(a) and 4:30 grant courts authority on their 

own motion to join indispensable parties when "in the person's absence 
A-3097-18 51

complete relief cannot be accorded." But, these rules do not provide for 

dismissal of a complaint on the merits for failure to join an indispensable party 

unless it has been established that the party at issue "cannot be served with 

process." R. 4:28-1(b). Nevertheless, we granted Newark's motion to 

intervene on appeal, it has addressed plaintiffs' arguments, and, to the extent 

there was any error, the issue is moot.

Affirmed in part; vacated in part; remanded for further proceedings 

consistent with this opinion. We do not retain jurisdiction. 

Further, we stay our judgment for forty-five days to permit the parties to 

seek further review.