In this action the plaintiff, The Jersey City Sewerage Authority, seeks to recover service charges for the treatment of sewage from the defendant, The Housing Authority of Jersey City. The defendant, as third-party plaintiff, has sued the City of Jersey City as third-party defendant for indemnification in the event of recovery by the plaintiff against the defendant third-party plaintiff. The third-party defendant, City of Jersey City, by its pleading designated "cross claim" has merely iterated the claim of the plaintiff against the defendant. Counsel for the third-party defendant stipulated in court that he is not contesting the right of the Sewerage Authority to a recovery, nor is the Sewerage Authority contesting the right of the third-party defendant to bill and audit the account between plaintiff and defendant at a fixed cost to plaintiff of $5,000.
A concise historical reference to the purpose and authority to function treatment of sewage will be helpful. In 1935 a tri-state compact between New York, Connecticut and New Jersey was formed for, among other things, the elimination of pollution of the navigable streams and waters in the areas set forth in the legislation, R.S. 32:18-1 et seq. By ordinance enacted in 1949 Jersey City created the Jersey City Sewerage Authority pursuant to N.J.S.A. 40:14A-1 et seq. In the interim, however, the defendant Housing Authority had been created pursuant to N.J.S.A. 55:14A-1 et seq. , and in 1939 and again in 1950 had entered into cooperation agreements between itself and the City of Jersey City which, as supplemented, are still in effect. Both authorities have the status of autonomous bodies.
Sewage on the defendant's housing projects has been treated and disposed of by plaintiff since October 1, 1957.
Sewage service charges pursuant to the rate schedule adopted on September 9, 1957 by the plaintiff, and as amended, have been sent to the defendant but have not been paid. Plaintiff has made demand for payment, but the defendant has failed and refused to pay the same. The fairness of the standard by which the service charge and rate is determined is not in dispute.
The Housing Authority in its defense contends: (1) the City of Jersey City has agreed to furnish the services referred to without any charge or imposition upon the Housing Authority, and that since the Sewerage Authority is an agent of said city, it too is bound by this obligation; (2) the Housing Authority is immune from suit and liability with respect to this plaintiff; (3) the Local Housing Authorities Law grants the defendant an exemption from such a charge, N.J.S.A. 55:14A-20; (4) the Sewerage Authorities Law, N.J.S.A. 40:14A-8, in that it may authorize the collection of such service charge from the Housing Authority, is in violation of the Constitution of the United States and the Constitution of the State of New Jersey; it impairs the rights of the Housing Authority to receive such services without charge under the aforementioned cooperation agreements; (5) the rents chargeable by the Housing Authority to its tenants are limited by statute to fixed percentages, and the imposition of the plaintiff to collect its sewage treatment charges as against this defendant would make it impossible for this defendant to comply with the statute in limiting its rent to the aforesaid fixed percentages.
The issue to be initially determined is the liability of the Housing Authority for such a sewage treatment charge. N.J.S.A. 55:14A-20 provides that the property of the Housing Authority "shall be exempt from all taxes and special assessments of the State or any political subdivision thereof * * *." However, this charge for the treatment of sewage to eliminate pollution is not in the nature of a tax or special assessment to be within the meaning of the statute. The Sewerage Authority is "authorized to charge
and collect rents, rates, fees or other charges" and such "being in the nature of use or service charges * * * may be based or computed either on the consumption of water * * * or on any other factors determining the type, class and amount of use or service * * *." N.J.S.A. 40:14A-8(a), (b). The rate charged by the Sewerage Authority, and also used as a basis for the claim sought in the complaint, is, in fact, based directly on the amount of water consumed by the Housing Authority.
The Sewerage Authority has full power over the use and disposition of all service charges collected. N.J.S.A. 40:14A-2(3). It does not depend on moneys raised by taxation. Furthermore, this charge is not one imposed by the local governing body for the purpose of general revenue; it is imposed by an independent corporate agency for the purpose of paying its own private debts. It is therefore not a tax but a fee. Hanson v. Griffiths , 204 Misc. 736, 124 N.Y.S. 2 d 473 (Sup. Ct. 1953). Nor is this charge a special assessment which is a tax or imposition upon property in the immediate vicinity of municipal improvement. The distinction between local taxes and a local assessment is that the latter is made with reference to the special benefit derived therefrom. Cirasella v. Village of South Orange , 57 N.J. Super. 522 (App. Div. 1959).
In State ex rel. Gordon v. Taylor , 149 Ohio St. 427, 79 N.E. 2 d 127 (Sup. Ct. 1948), the City of Columbus agreed to allow the Ohio State University to use the city sewers on the campus without cost or expense. The plaintiff contended that such grant did not exempt the university from payment of future charges for the operation of the city's sewerage system, including treatment of sewage. In 79 N.E. 2 d 127, supra , at page 131, the court said:
"This case does not present a situation where the city is endeavoring to tax property belonging to the state of Ohio, since it is well established that charges for sewer services, or so-called rental charges, are neither taxes nor assessments. Opinion of Justices , 93 N.H. 478, 39 A. ...