Toscano, J.c.c. (temporarily assigned).
Plaintiffs, residents of the Borough of Oakland, filed a complaint in lieu of prerogative writs as consumers of water from the borough and as representatives of all the consumers of water in the borough, challenging the validity of an ordinance dated September 10, 1970 which increased the water charges retroactively to cover a period from July 1 to September 10, 1970. They allege that the ordinance is illegal, violates the constitution and laws of New Jersey and also impairs the constitutional provision on contracts.
The facts disclose that the borough operates its own water utility on a self-liquidating basis. Due to an increase in the costs of operation during the early part of 1970, the borough officials became aware of a need for an increase in the rates charged for water. The public was made aware of this at various meetings in the early part of the year and of the fact that such an increase would be made necessary unless water revenues increased. The mayor and council held off introducing of the ordinance in hope of anticipated increase in revenues. This did not materialize. As a result, the ordinance was adopted in September 1970 and expressly made effective as of July 1, 1970.
Plaintiffs seek a return of monies to the residents of the borough using water during the period from July 1 until the effective date of the ordinance in 1970, claiming that it was unlawful to have a retroactive date for a rate increase. There is approximately $4,000 in monies that would have to be returned, and based upon the number of water users, this would amount to $1 a family. The result of being
required to return the monies would necessitate the inclusion of an additional amount in the municipal budget for 1971. In addition, a deficit would be created under the law and would affect the bonding capacity of the borough.
The argument advanced by plaintiffs is that the retrospective application of the ordinance would impair contractual obligations and divest vested rights. Consequently, the ordinance as applied contravenes the Constitution of the United States. See Gilman v. Newark , 73 N.J. Super. 562, 598 (Law Div. 1962).
The Borough adopted the ordinance under the statutory authority of N.J.S.A. 40:62-77:
The governing body * * * may make * * * all such ordinances * * * as it may deem necessary and proper * * * for fixing and collecting the water rents or prices for water * * *.
The statute is silent as to retroactive ordinances, but in 1928 the Chancery Court explained that this provision:
The court referred to Jones v. Bloomfield , 69 A. 1106 (N.J. Ch. 1908), to support this statutory construction. Both the factual and legal situations in Jones were not on all fours with that before the Chancery Court in 1928. In Jones a municipal ordinance established flat rates for water charges and reserved the right of the municipality to set meters and charge accordingly. Bloomfield did set up water meters, but it failed to notify the consumers to that effect, and mistakenly billed the consumers pursuant to the flat rate charge. The court concerned itself solely with the interpretation of the ordinance, and concluded that merely setting the meters without adequately notifying the consumers was not an effectual election of the reserved right to change from the flat rate. The fact that the failure to notify
was the result of a mistake in billing did not give Bloomfield the legal right to collect the difference between ...