Opinion ID: 2287895
Heading Depth: 1
Heading Rank: 5

Heading: Bases for payments or credits from the fund in favor of municipality.

Text: The act provides for three types of payments or credits to municipalities out of the fund. (1) Guarantee Payment. The formula as to this is complex but in essence it provides that if the equalized (by application of the Director's ratios  see supra ) aggregate true values of assessed realty of a municipality in the District in a comparison year goes below such equalized assessed values for 1970, and if that decrease is attributable to the intervening exemption of real property in the District from taxation by reason of its acquisition by any governmental body for any public purpose, then such municipality qualifies for a payment or credit out of the fund in the amount produced by multiplying such decrease in equalized assessed true values by the municipality's apportionment rate (see supra ). N.J.S.A. 13:17-68. It will be at once noted that this guarantee payment is activated by acquisitions or condemnations of property by any public agency (whether or not the Meadowlands Commission) and for any public purpose whether or not related to meadowland development. (2) Service Payment for school district purposes. It is provided that for any increase in the number of enrolled pupils resident within the District boundaries of a municipality on September 30 of a comparison year over the number on September 30, 1970 the municipality is to receive from the fund a payment or credit equal to the product of the multiplication of the increase in the number of resident pupils by the per-pupil cost of education in the comparison year. N.J.S.A. 13:17-70. If guarantee payments exhaust the balance in the fund, school service payments are abated. (3) Apportionment Payment. If there is a surplus in the fund in any adjustment year after all due guarantee and school service payments have been made, that surplus is apportioned among all the constituent municipalities in the same ratio as the number of acres of land within the District of each municipality bears to the total number of acres in the entire District. N.J.S.A. 13:17-72(a). The fact case for specialness of Article 9 is best appraised in the light of the leading decision on the point, Jersey City v. Zink, supra (133 N.J.L. 437)  a case strikingly comparable to that before us here. Zink involved the constitutionality of chapters 4, 5, 6 and 34 of the Laws of 1945, attacked as special legislation regulating the internal affairs of municipalities in violation of the prohibition of such legislation contained in the 1875 amendment of the 1844 Constitution cited above. The constitutional issue was activated after the court first held that accrued interest moneys on delinquent Class II railroad property taxes for the years 1932-1940, which interest had been paid by the taxpayers to the State Comptroller and was being held by him pending distribution thereof to the municipalities to which the taxes were due by statute, belonged to such municipalities as a matter of law. The 1945 statutes under attack in the case purported to redistribute the millions of dollars of tax-interest moneys involved in substantially the following manner. The amounts due the municipalities were retroactively reduced from the 12% statutory railroad interest tax rate to 3 1/2%; $4,000,000 of the remainder of the money was appropriated for distribution to all the municipalities of the State as a tax-saving measure on the basis of the proportion of resident pupils of such municipalities in the public schools; after certain other minor dispositions the remainder of the money was provided to be retained by the State. The complaining municipalities [5] in Zink contended that in effect the 1945 laws had created two classes of municipalities  those wherein the delinquent Class II railroad properties were located, which were required to surrender revenues under the statutes  and all the municipalities of the State as a whole, which were made the beneficiaries of the redistribution of $4,000,000 of the money, purportedly for tax relief purposes. It was contended that there was no rational basis to assess the Class II tax-recipient municipalities on the fortuitous basis of the amount of railroad tax interest then due them as a means of defraying the cost of a legislative plan to afford general tax relief to all the municipalities of the State. The Court of Errors and Appeals agreed that the legislation was impermissibly arbitrary, and therefore special, in its classification of the municipalities, and it held that the legislation did concern the regulation of the internal affairs of municipalities, within the absolute prohibition of special legislation in that category under Art. IV, § VII, par. 11 of the then Constitution. 133 N.J.L. at 448-449. The Attorney General has not challenged Zink as continuing authority under the 1947 Constitution for requiring that legislation classifying municipalities for purposes of imposing upon them financial (particularly tax, or tax-related) burdens and benefits be free from arbitrariness or irrationality in terms of the relationship of the effects of such legislation to its purported purposes or objects. The import of Zink is even more emphatic under the 1947 Constitution in view of the addition by that document to the categories of absolutely prohibited special legislation as set forth in the 1875 amendment, that relating to taxation or exemption therefrom. Art IV, § VII, par. 9(6). In the light of the constitutional principles of Zink and the other authorities cited above, I return to a consideration of the question of arbitrariness of the tax-sharing scheme of Article 9 of the Meadowlands Act. The proposition is practically self-demonstrative. [6] Dealing first with the provision for surcharging constituent municipalities on the basis of any increase of the equalized true value of ratables in the District since 1970, it is at once to be noted that Article 9 does not require the increase to be causally related to any activity of the Commission. The Legislature apparently indulged a presumption, as does the Attorney General in defending the provision, that any increase in the equalized true value of any realty in the District after 1970 would be imputable to the fact that zoning of the District is, under the act, exclusively a matter for the Commission. [7] That presumption is the most transparent illusion conceivable. Real property in northeastern New Jersey (indeed, in the State as a whole) of almost every kind has been in a sharp upward trend of value for the past generation and, as of 1970, bid fair to continue on that path for the indefinite future. The hindsight of 1973 confirms the said 1970 prospect, and all indications are for the continued upward realty valuation spiral for the foreseeable future. There is every reason to assume that increases generally in the true value of district realty in the meadowland municipalities after 1970 will be attributable, at least in substantial measure, to the inflationary trend adverted to. This is so notwithstanding it is readily conceivable that constructive zoning changes in some parts of the District might play a part in accelerating or creating rises in value in some locations. It is thus plain that there is no rational basis whatever for the statutory assumption that increases in equalized true value of district realty after 1970 in any particular municipality will be attributable per se to the fact that the Commission has exercised under the act the zoning powers previously vested in the municipalities themselves. In the first place not all the zoning regulations adopted by the Commission have effected changes in land-use permitted under preexisting zoning. But even as to areas where land-use regulations have been altered by the Commission, Article 9 requires no showing of any causal correlation between any zoning regulation and any increases in equalized values which are made the basis for a surcharge against the municipality. The surcharge is automatic. A restrictive zoning change can as well depress as increase the true value of property affected by it. One cannot of course assume that all zoning changes effected by the Commission have increased or will increase rather than decrease the value of realty affected thereby. The arbitrary nature of the surcharge is further accentuated by the circumstance that increases in assessed value of realty can result from improvement of vacant land as well as from appreciation of parcels of land, improved or unimproved. The record shows, for example, that portions of the northwestern segment of the District have for some time been heavily industrialized and that further industrial improvement of land in the area is a fair prospect for the future. Thus even if, as in such a case, the District zoning does not alter the prior zoning as to a particular area and the owners improve the property in any way, the resulting appreciation in assessed value becomes a part of the basis for surcharging the municipality, as Article 9 operates on the basis of mere rise in aggregate true value of ratables per se. How can the portion of a surcharge so generated be thought remotely related to Meadowland Commission activity of any kind, zoning or otherwise? Finally, in respect of measuring increases in equalized value of assessed ratables, we noted above that Article 9 assumes that the Taxation Division Director's ratios for equalization of aggregate municipality-wide realty valuations are automatically usable for an arbitrarily selected segment of the municipality  as here the meadowland district portion of the municipality. This is an utterly unwarranted factual assumption, see Tp. of Willingboro v. Burlington Cty. Bd. Tax., supra , passim, and it further compounds the arbitrariness of the surcharge provisions of Article 9 in the other respects discussed herein. Passing even all the foregoing, one confronts the irrationality of the Article 9 assumption that a municipality having District realty ratables increasing in aggregate true value over that of 1970 is necessarily enriched thereby to the extent of the dollars produced by multiplication of its effective local-purpose tax rate (apportionment rate) by the amount of such ratable increase. It is elementary that increased ratables do not of themselves increase the pecuniary yield of taxation. They merely broaden the base for determination of the rate at which the municipality will tax for its budget requirements, which are not a function of its ratable base, or vice versa. Moreover, as is commonly known, increased ratables are not necessarily beneficial pecuniarily to either a municipality or its preexisting realty taxpayers. That depends on whether the new ratables require more municipal services than the share of the tax levy they absorb. But Article 9 willy-nilly surcharges the municipality for all ratable increases on an automatic basis. Before passing this subject it needs to be noted that it has not at any time been argued on behalf of the validity of Article 9 that the surcharge has a relation to any activity of the Meadowland Commission other than its zoning power. The surcharged increase in tax ratables, for example, need not, under the act, be shown to result from any physical or other development activity of the Commission. Turning now to a consideration of the issue of rationality of the provisions of Article 9 for credits or payments out of the Fund in favor of municipalities, one continues to find a picture of rife illusoriness. First, as indicated above, a municipality gets a credit from the intermunicipal fund for every year in which its aggregate equalized ratables in the District are less than in 1970 if attributable to acquisitions by any governmental body or agency for public purposes of any nature, whether or not related to Meadowland Commission activity. For example, if the federal government condemned or purchased a District plot of land for an atomic energy plant or a post office and the resulting tax exemption of the property caused a reduction of aggregate assessed valuations in the District area of a town below those of 1970 that municipality would in every year forever thereafter have to be compensated out of the fund in a sum equal to the product of the multiplication of the said reduction of ratables by the apportionment rate of the municipality. What relationship a municipality's being in the Meadowland District bears to the legislative purpose of giving it such an annual subsidy (at the expense of all the other municipalities in the District) defies any response. At least none to the point has been afforded by the Attorney General. This basis for benefits-credits out of the fund in favor of municipalities under Article 9 is patently arbitrary as unrelated rationally to any purported purpose of Article 9. It might possibly have been different if compensation were granted only for land acquisitions by the Commission for meadowland development purposes. The second statutory basis for credits in favor of a municipality against the Fund is the school service payment which operates automatically to give a municipality an annual dollar subsidy for each year in which District resident school enrollment of a municipality exceeds the enrollment thereof as of 1970, and in a sum represented by multiplying such increase by the per-pupil cost of education in the municipality for the comparison year. The theoretical justification for this subsidy is that any increase of school children resident in meadowland areas is presumptively attributable to residential zoning by the Commission. The factual falsity of that premise is obvious. Many areas of meadowland zoned residential by the Commission were zoned residential previously, or, in any event, were the sites of residential property continuing as such after the jurisdiction of the Commission began. Residential growth in such areas after 1970 totally independent of Commission zoning may thus well produce increased numbers of District school children in particular municipalities to the same extent as though the Meadowlands Act had never been passed; yet under Article 9 such increases automatically redound financially to the annual benefit of the municipality in question at the expense of all the other municipalities in the District via the independently arbitrary surcharge formula examined above. There is no basis in reason to favor the recipient municipality in this manner in terms of any purported purpose of Article 9. The third basis for benefits from the fund under Article 9 is probably the most arbitrary of any of the formulae of that article for either surcharges upon or benefits to municipalities. This is the so-called apportionment payment proviso which, to reduce it to simple terms, provides that if there is anything left in the fund in any adjustment year after payments out for guarantee or school service claims the balance is distributable among all the constituent municipalities on the basis of the proportionate acreage of total meadowland located in the particular municipality. In other words, even if Town A has contributed 5 times as much as Town B to the intermunicipal account in a given year, but Town B has five times as much meadowland district acreage as Town A, Town B will take from any fund balance at the end of the year 5 times as much money as Town A. There has not been even a pretence of rational justification advanced for this provision in terms of relation to any conceivable legislative purpose of Article 9. [8] As things stand, the combined effect of this provision and that for surcharging is that all the constituent municipalities whose assessed ratables of District land increase in value after 1970 (for whatever reason) pay money into the Fund annually which is then in whole or in part disbursed to all the municipalities (whether or not they pay in) on the basis of the proportion of District acreage in the municipality. I submit that the foregoing considerations conclusively establish the arbitrariness of all the tax-sharing provisions and therefore their specialness, in contravention of the constitutional provisions cited above. Even if only one or more of them were arbitrary, e.g., the surcharge provision, that alone would necessarily taint and stamp the operation of the plan as a whole as arbitrary and invalid. I respectfully dissent from the observation in the majority opinion, which does not examine the tax-sharing plan in any detail, that it is on its face rational and fair to constituent municipalities. I believe the foregoing detailed analysis demonstrates it to be just the opposite. It seems to me the statute subjects the 14 constituent municipalities to a species of mutual tax-diversion under cloak of the euphemism of tax-sharing. The State contributes nothing to the municipalities in compensation for their purported disadvantages, although the project as a whole is hailed as one redounding to the benefit of the State at large, and they are made to go through an essentially random process of feeding off each other's revenues to no purpose realistically related to any discernible object of the statute. I conceive no useful purpose to be served by the suggestion of the majority that should a constituent municipality demonstrate that the tax-sharing provisions as actually applied to it work an arbitrary result, it will have the right to secure judicial relief. It is inevitable that the invitation will result in a plethora of litigation on grounds such as those described above which can warrant judicial relief only if the Court finds the provisions invalid, not merely unfair. Sound policy calls for making the determination of invalidity now, as amply warranted from the face of Article 9, so that such litigation may be averted at the outset and the Legislature be advised accordingly, freeing it to adopt such valid substitutionary provisions as it may desire, if any.