On appeal from Superior Court, Law Division.
For affirmance -- Chief Justice Weintraub, and Justices Heher, Wachenfeld, Burling, Jacobs, Francis and Proctor. For reversal -- None. The opinion of the court was delivered by Burling, J.
This is a taxpayers' suit challenging the validity of an ordinance of the City of Summit. The ordinance proposes to lay out, open and establish a street known as Dennis Place, and authorizes the improvement of the street, including the installation of storm and sanitary sewers. The Superior Court, Law Division, entered an order for a summary judgment in favor of the defendant, the City of Summit, and the intervenor defendant, the Summit Civic Foundation. Appellants pursued an appeal to the Superior Court, Appellate Division, and we certified the cause on our motion while pending in that court.
In the course of enforcing an ordinance designed to cause the repair, closing and demolition of dwellings found unfit for human habitation, the City of Summit was confronted with the problem of finding adequate housing for persons obliged to vacate submarginal dwellings. One such building found unfit for human habitation was known as "Weaver Arms," a dilapidated project containing 28 apartments with no provisions for hot water or indoor toilet facilities. Of the families forced to move from Weaver Arms, some moved out of Summit and others doubled up in other substandard dwellings in the city.
In 1956 the mayor of Summit appointed a special committee to study the problem of providing adequate housing primarily for those citizens of the city dispossessed by the enforcement of the substandard housing regulation ordinance. The committee, after reviewing a number of alternatives for achieving its desired ends, finally concluded that the best approach would be to establish a private non-profit corporation to finance, construct and administer a housing project.
On October 9, 1956 seven citizens of the city formed the Summit Civic Foundation, a non-pecuniary profit corporation, pursuant to Title 15 of the Revised Statutes. The certificate of incorporation provides that in the event of dissolution, the assets of the corporation shall be distributed to a charity in a manner to be determined by its board of
trustees acting in accordance with the objects and purposes of the corporation.
Thereupon the Summit Civic Foundation undertook a campaign to raise funds through subscriptions to 3% interest notes of the Foundation. $89,270 in subscriptions to the notes were obtained from local citizens and religious and charitable groups. At the time of trial nearly $80,000 of the subscriptions were paid.
On May 14, 1957 the Foundation purchased a tract of land fronting on Weaver Street in the City of Summit and located opposite the Weaver Arms, at a cost of $20,018.52. The proposed plan was to erect 14 two-family dwelling houses (duplex type) on lots with a minimum area of 8,000 square feet. The estimated cost of each building was $20,584, which was to be met by funds derived from note subscriptions of $5,584 and $15,000 by a conventional 20-year mortgage at 4 1/2% interest. The projected rental was $79.10 per month for each apartment excluding heat and utilities.
The city agreed to accept a deed of dedication of land for street purposes from the Foundation and to open and improve a street, including the installation of storm and sanitary sewers.
The proposed street, "Dennis Place," is to be located entirely within the confines of the tract owned by the Foundation. The proposed new street is in the form of an inverted "L" running at a right angle to Weaver Street and abutting lots owned by the Foundation.
On December 3, 1957 the city council approved and enacted the ordinance here under attack. The ordinance, after reciting the work, conclusions and plans of the special committee appointed to study the question of providing housing for displaced persons, provides for the opening and improvement of Dennis Place and appropriates the sum of $16,500 to meet the estimated costs of the improvement.
The financing arrangements are as follows: An $825 down payment is appropriated and included in the budget of the municipality and the remainder of $15,675 is to be met by the issuance of bonds pursuant to the Local Bond
Law, R.S. 40:1-1 to 88. The ordinance further provides that "No part of the cost of said improvement has been or shall be specially assessed on property specially benefitted." The ordinance also contains provisions that no expenditures shall be incurred prior to receipt by the city of a satisfaction bond from the Foundation assuring repayment to the city of any funds expended in the event the Foundation does not complete a minimum of ten dwelling units within two years from the time of the commencement of the improvement of Dennis Place, and further that, in the event the Foundation sells any lot, it shall pay to the city one-fourteenth of the cost of the improvements. The Foundation has tendered to the city a bond in the sum of $20,000 as provided by the ordinance and has agreed to assume liability for the pro rata cost of the improvement in the event any of the lots are sold.
The proposed housing project is not exempt from taxation and it is estimated that the tax return to the city will be in the vicinity of $4,000 to $5,000 per year, whereas the current return from the unimproved tract is much smaller.
The initial question is whether a municipality may undertake the opening and improvement of a street and the installation of sewers as a general improvement to be paid for out of tax revenues generally. We think it plain that it may. N.J.S.A. 40:56-1 provides in part:
"A local improvement is one, the cost of which, or a portion thereof, may be assessed upon the lands in the ...