Opinion ID: 2287895
Heading Depth: 1
Heading Rank: 6

Heading: Invalidity of the Tax-Sharing Provisions under the Tax Clause of the 1947 Constitution.

Text: Appellant Town of Secaucus contends, and I agree, that Art. VIII, § I, par. 1(a) of the 1947 Constitution prohibits what Article 9 of this statute does  i.e., forces particular municipalities to raise money by taxation of local real property for payment over to and for the exclusive use of other municipalities. Article 9 does this in the manner described above when any municipality which in any later year has equalized aggregate assessed valuations of District ratables exceeding those of 1970 is compelled to raise by general taxation as part of its annual budgeted appropriation a sum equal to such excess times the apportionment rate, and such sum is then required to be paid out pro tanto to or to the credit of the other constituent municipalities to satisfy their statutory credits as described above. It seems clear to me that this practice is literally and intentionally proscribed by the constitutional provision cited above, which reads: 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,] and such real property shall be taxed at the general tax rate of the taxing district in which the property is situated, for the use of such taxing district. (Emphasis added) [9] The tax clause of the 1844 Constitution, as amended in 1875, Art. IV, § VII, par. 12, read: Property shall be assessed for taxes under general laws, and by uniform rules, according to its true value. A comparison of the 1875 and 1947 tax clauses demonstrates two major changes in the latter; first, the elimination of true value as a constitutionally requisite standard of valuation for assessment, and second, a specific treatment of real property taxation. The second mandate is to the effect that if the Legislature chooses to provide either for the direct local assessment of real property or for its assessment by the State for allotment and payment to taxing districts, all realty assessed in either such manner shall be assessed according to the same standard of value, and at the local general tax rate, and that the proceeds of any such real property taxation shall be for the use of the taxing district where the property is situate. The 1947 tax clause had a specific historical genesis  one which has recently been adverted to by this Court. See Robinson v. Cahill, 62 N.J. 473 at 504-05 (1973). Briefly, Governor Driscoll, who spearheaded the movement for revision of the Constitution, wanted the elimination of true value from the tax clause. V 1947 Constitutional Convention Proceedings, pp. 771-72. The Hudson County municipalities, wherein the bulk of valuable Class II railroad property was situated, wanted the nullification of the Railroad Tax Law of 1941 ( L. 1941, c. 291) which provided for the taxation by the State of such property for local municipal use at the fixed rate of 3%, whereas previously such property had been taxed at the general tax rate of the municipality where situate; rates which, as of 1941, averaged over 5%, and higher by 1947. See the argument propounded at the Convention on behalf of the municipalities through counsel for the State League of Municipalities, V 1947 Constitutional Convention Proceedings, op. cit. supra at 566 et seq. The 1941 law had been sustained as constitutional in Jersey City v. State Board of Tax Appeals, 133 N.J.L. 202 (Sup. Ct. 1945), modified sub nom. Jersey City v. Kelly, 134 N.J.L. 239 (E. & A. 1946). The Hudson County municipalities were willing to take their chances that no later legislature would change the existing allocation of Class II railroad taxes from their traditional disposition for the use of the municipalities wherein situate but they felt the need of constitutional assurance that, even if so allocated, the taxes would not be reduced by a legislative variation in either the standard of valuation or the tax rate applicable thereto as contrasted with the tax treatment of real property generally. Accepting these demands as the price of elimination of the true value language from the tax clause and of insuring the success of the constitutional proposals as a whole at the forthcoming referendum, representatives of Governor Driscoll met privately at the home of the president of the Convention with members of the taxation and finance committee of the convention and delegates representing the interests of the Hudson County municipalities on the evening of August 25, 1947, when the finally adopted tax language was agreed upon. See Connors, The Process of Constitutional Revision in New Jersey : 1940-1947 (1970) (National Municipal League, State Constitutional Convention Studies, No. 4), p. 181; [10] I 1947 Constitutional Convention Proceedings, op. cit. supra at 773. The language draft thus negotiated was formally approved by the delegates in open convention the next day, August 26, 1947. I 1947 Constitutional Convention Proceedings, op. cit. supra at 785. The crux of the instant dispute centers on the language at the end of the clause, calling for the taxation of such real property    for the use of such taxing district. Appellant Secaucus argues that this clause (for the use of etc.) applies to both of the categories of real property dealt with in the paragraph, i.e., such as is taxed locally and such as is taxed by the State for allotment and payment to taxing districts ( e.g., Class II railroad property). [11] The brief of the Attorney General is in apparent agreement on that limited issue but the trial court was not. That tribunal thought the for the use of language appertained only to the designation of property taxed by the State for local allotment and payment and not to the designation of property assessed and taxed locally. 112 N.J. Super. 89, 119, n. 8. I disagree with the trial court and agree with Secaucus. Both the syntactical structure and the underlying sense of the provision point to the intent that the direction for local use of the tax proceeds is applicable both to locally assessed and state assessed realty otherwise covered by the tax paragraph as a whole. [12] Certainly the for the use of language cannot be regarded as in any sense surplusage. It seems obvious that at least from the standpoint of the municipalities the purpose was to lock the door against any device whereby they might indirectly be deprived of the fruit of their constitutional campaign by a later legislative diversion of the realty tax proceeds after they had labored to compel the burden of taxation on locally situated real property to be equal. The foregoing is not to say that the tax clause proscribes the proceeds of local real estate taxation being made available for programs or purposes having scope beyond the particular municipality so long as the taxing municipality has a substantial beneficial interest in such a program or purpose. Taxation for county government or for regional school purposes affords stock examples. Another is the former state school tax levied locally on property statewide for support of education. So, too, as to local taxation for support of a state-maintained policemen and firemen's pension fund which redounds to the benefit of pensions of local policemen and firemen. Cf. Passaic v. Consolidated Police, etc. Pension Fund Commission, 18 N.J. 137 (1955). Innumerable similar examples could be cited of valid local taxation for purposes transcending strictly local needs provided the localities share in the benefit of the expenditure. But undoubtedly the for the use of provision of Art. VIII, § I, par. 1(a) would be offended if, for example, the Legislature were to enact a law calling, without more, for Newark to raise by local taxation and to pay over to Jersey City a sum equal to the latter's annual requirements for street maintenance (apart from the incidence of violation thereby also of the constitutional prohibition of special and local legislation). The 1947 Constitution was adopted only two years after the decision in Jersey City v. Zink, supra . As appellant Secaucus correctly points out, that case rested not only on the rationale of the specialness of the classifications of the municipalities benefited and burdened by the statutes there of concern, but also on the fundamental principle of representative government that where there is a delegation of the taxing power, or an essential element thereof, to a local taxing district, the tax raised thereunder can only be used for the sole purpose [italics by court] of enabling such districts to exercise the powers of government conferred on them within the territorial limits of the district. 133 N.J.L. at 445-446. This philosophy is thoroughly consonant with the product of the 1947 constitution-makers in the area under discussion, and there is nothing about the adoption of the 1947 tax clause to indicate any intent for a departure from what the Court of Errors and Appeals deemed fundamental organic law in 1945. The surcharges levied by Article 9 of the instant act on the constituent municipalities will therefore survive the mandate of Art. VIII, § I, par. 1(a) only if the contributing municipalities can be regarded as having a substantial beneficial interest in the purposes for which the surcharged funds are to be expended. Review of the analysis of the operation of Article 9 as set out in Part I of this opinion can yield only a negative answer to the criterion posed. Passing all considerations therein discussed as to the arbitrariness of the basis for the surcharge itself, certainly the governmental needs or purposes of Secaucus or North Bergen would not, for example, be served by the acquisition by the federal government of land for a post office or atomic energy plant in Moonachie or Rutherford. Yet Article 9 would in effect require Secaucus and North Bergen to raise by taxation on local real estate moneys to be paid over or credited to Moonachie or Rutherford to assuage its loss of District ratables because of that kind of acquisition. As already noted, this applies to any acquisition by any public agency for any public purpose no matter how irrelevant to the operations of the Meadowland Commission. The same inter-municipal subsidization occurs if Moonachie's or Rutherford's resident school population within the meadowland district increases over what it was in 1970. Further, as noted above, as to part of what Secaucus or North Bergen are surcharged for, it is possible and probable, under Article 9, that such moneys will be distributed, without any rhyme or reason, to Moonachie and Rutherford and all the other constituent municipalities on the basis of their respective proportions of meadowland acreage. In fine, Article 9 compels each of the constituent municipalities to raise by local taxation money for purposes or uses which afford them no benefit whatever, and it therefore plainly violates the tax clause of the Constitution.