After the publication of the trial court's opinion in Robinson v. Cahill , 118 N.J. Super. 223 (Law Div. 1972)*fn1 and before the decision of the New Jersey Supreme Court in Robinson v. Cahill , 62 N.J. 473 (1973),*fn2 the complaint in this action was filed.
The action is brought on behalf of seven separate classes of plaintiffs.
The essence of the complaint is that the present system of distributing fiscal burdens whereby the 21 counties are required to pay for the residual costs of operation of
1. The County, County District and Juvenile and Domestic Relations Courts, as well as certain costs of the Law Division, Superior Court (count I);
2. The office of the prosecutor (count II);
3. The jury commissioners, including costs for grand and petit juries (count II);
4. The probation departments (count II), and
5. 12 1/2% of the benefits paid under the federally assisted categorical welfare programs, plus the cost of administration thereof not paid by the Federal Government (count III),
denies to each of the seven classes of plaintiffs equal protection of the law and due process of law as guaranteed by the Fourteenth Amendment and the State Constitution.
Plaintiffs are separated into classes as follows: (1) all persons residing in Essex County (residents); (2) all persons paying real estate taxes in Essex County (taxpayers); (3) Essex County (county); (4) the 22 municipalities located within the county (municipalities); (5) all blacks residing within the county (Blacks) (count IV); (6) all low-income families residing within the county, who are defined as those receiving an income less than 125% of the poverty level income (the poor) (count V);*fn3 and (7) all owners of real estate designed or intended to produce an income and which has been, or is about to be, foreclosed for nonpayment of real estate taxes (count VI).
The claims of residents, taxpayers, county and municipalities are based on the first three counts. Counts IV, V and VI contain allegations incorporating counts I to III plus an allegation that because the cost burdens are unduly concentrated in the county which has the greatest concentration of these respective groups, there is "invidious" discrimination as to such groups.*fn4
Count VII and count VIII relate to all classes and basically allege that since the taxes to defray such costs were being raised for state purposes under N.J. Const. (1947), Art. VIII, § I, par. 1 they had to be levied on a uniform basis throughout the State. Count IX alleges that all statutes in question are tax statutes which had originated in the Senate, instead of the Assembly, contrary to N.J. Const. (1947), Art. IV, § VI, par. 1.
The relief sought is an injunction against the collection of real estate taxes for the payment of these costs, even though the injunction would necessarily run against the county and municipalities.
The named defendants are: the State of New Jersey (State), the Governor and other heads of departments in the Executive Branch, the President of the Senate and the Speaker of the Assembly in the Legislative Branch, and the Administrative Director of the Courts in the Judicial Branch. The court will refer to them collectively as defendants.
The Administrative Director of the Courts filed a statement in lieu of answer in which he stated he would abide by the final judgment entered by the courts. The Attorney General filed an answer on behalf of all other defendants, admitting references to statutes and the Federal and State Constitutions but denying that a cause of action was stated.
Defendants moved to dismiss. The motion was denied. The Appellate Division affirmed, Bonnett v. State , 126 N.J. Super. 239 (1974),*fn5 and remanded for trial, noting that in Robinson v. Cahill, supra , 62 N.J. at 500-501, the New Jersey Supreme Court had not foreclosed the possibility
that there could be a cause of action under either the concept of equal protection of the law or under the concept of an implicit premise of local government that the State could not use local governments as a means to unfairly distribute its fiscal responsibilities.
It reminded plaintiffs that they had the burden of proof, citing Ring v. North Arlington , 136 N.J.L. 494, 498 (Sup. Ct. 1948), aff'd 1 N.J. 24 (1948). In terms of the rights asserted under the Fourteenth Amendment, plaintiffs also have the burden of proof as to federally protected rights. McGowan v. Maryland , 366 U.S. 420, 535, 81 S. Ct. 1101, 1194, 6 L. Ed. 2d 393, 461 (1961).
A pretrial conference was held. Plaintiffs did not amend the complaint but added an issue that the present system of distributing the cost burdens for the above-mentioned services violated the implicit premise of local government. The State preserved its contentions that some of the plaintiffs had no standing to bring the action. The case was then assigned to this court for trial. The trial has been held and an extensive record developed, particularly in terms of stipulated exhibits.
Certain issues may be determined immediately. No evidence was submitted in support of count IX and it was dismissed at the conclusion of the trial without objection. In respect to the foreclosed, the class embraced in count VI, no representative appeared at trial and no evidence was introduced as to any specific piece of real property owned by any individual. Neither the pleadings nor the testimony of Dr. Sternlieb about economic effects of the tax rate on values of property identify with precision that class of owners of real property. Dr. Sternlieb is identified and his testimony is examined at section IV-B, infra.
At the trial the tax collector for the City of Newark testified about Newark's extensive holdings of income-producing real estate as a result of foreclosure of tax liens. However, the need for extensive rehabilitation of many of the structures due to age is also obvious from such testimony.
One structure required over $100,000 of masonry work to prevent its stone work from falling onto persons and vehicles using a major intersection. The testimony also indicates that a host of factors contributed to the conditions of the buildings that he testified about, other than the tax burdens imposed by the present system. The court finds that this testimony did not fill the void in the proof left by the representatives of the foreclosed. The court dismisses count VI for lack of proof.
Counts VII and VIII are premised upon what is now N.J. Const. (1947), Art. VIII, § I, par. 1(a), which provides:
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.
The essence of count VII is found in paragraph 6 of that count which states:
The essence of count VIII is that under the aforesaid Article, taxes levied by a county or a municipality can only be levied and assessed locally "for the use of such taxing district * * *" and that the statutes in question compel the levying and assessing of taxes for state purposes.
In respect to this provision of the State Constitution, in Robinson v. Cahill, supra , the Supreme Court said:
The Supreme Court also held that the Article guaranteeing a thorough and efficient education to school children was not intended to, and did not, guarantee statewide equality to taxpayers in respect to taxes to pay for education.
Neither in the briefs submitted nor in argument after trial did counsel for plaintiffs state how the interpretation of the tax clause by the Supreme Court in Robinson v. Cahill , quoted above, is inapplicable in this case. There is no express provision in the State Constitution comparable to that found in constitutions of other states which bar a state from imposing costs for certain state functions on local units of government. See Colbert v. Bond , 110 Tenn. 370, 75 S.W. 1061 (Sup. Ct. 1903); but see, Davidson Cty. v. Kirkpatrick , 150 Tenn. 546, 266 S.W. 107 (Sup. Ct. 1924).
Plaintiffs have not shown that any provision of the State Constitution, other than the Articles already referred to, results by implication in a limitation upon the State's power to require a local unit of government to perform a function and to bear the costs of doing so.
In State v. County Court of Malheur County , 185 Or. 392, 203 P. 2d 305 (Sup. Ct. 1949), the state sued for, and obtained, a writ of mandamus to compel county officials to include in the county budget the estimated cost of the county paying for its local share of benefits and costs of administration of federally assisted categorical welfare programs. Among the defenses raised was that the state was imposing a state tax and therefore under the Oregon Constitution the tax had to be on a uniform basis throughout the
state. After the Oregon Supreme Court noted that a county is not an independent government, but is a quasi corporation created by legislative fiat for governmental purposes, and the legislature, subject to constitutional limitations, may compel a county to raise taxes for a specific purpose, it concluded that county failed "to distinguish between a legislative mandate requiring counties to levy a tax and the act of a county in making a levy pursuant to the mandate." 185 Or. at 411, 203 P. 2d at 314. It concluded that the tax was a county, and not a state, tax; hence there was no violation of the Oregon constitutional provision requiring the tax to be uniform throughout the state.
For the foregoing reasons, counts VII and VIII are dismissed.
It is appropriate to note at the outset that some of the commentators on Robinson v. Cahill, supra , have suggested that the present action may be one where the existing structure of state and local governments may be changed. See Tractenberg, Reforming School Finance Through State Constitutions: Robinson v. Cahill Points the Way, 27 Rutgers L. Rev. 365, 460-463 (1974); some authors on public finance referred to in the exhibits submitted pursuant to sitpulation of the parties have suggested that programs for redistribution of income, such as the federally assisted categorical welfare programs, are inappropriate for financing by local real estate taxes and local governments, see Netzer, "Federal, State, and Local Finance In a Metropolitan Context," in Perloff and Wingo, Issues in Urban Economics , (1968); Heilbrun, "Organizing and Financing the Metropolitan Public Sector," Urban Economics and Public Policy , c. 12 (1974), and that for over 40 years various committees appointed by the Legislature and/or the Governor have recommended that the State assume all the costs at issue.*fn6
The chambers of the court are in Newark. The problems of Newark to which witnesses testified are obvious to the eye as one looks out the window. They cannot be ignored as one travels the streets. They can be poignant when they emerge from the background in the cases that are tried in the courtrooms in Newark. However, in a democratic society choices between alternative policies are to be made by elected representatives in the Legislature, subject to the restraints imposed on the Legislature by the Federal and State Constitutions to protect the rights of individuals or groups. It is the function of the court to protect the rights of individuals and groups within the constitutional framework and to apply and develop the law, but not to substitute the court's judgment as to what is better policy. A court is not a super legislature. See Justice Stone's dissenting opinion in Colgate v. Harvey , 296 U.S. 404, 436, 56 S. Ct. 252, 262, 80 L. Ed. 299, 314 (1935).
Neither the complaint nor the pretrial order contains any allegation that any individual has been denied access to, or service from, any institution or agency, the costs of which are the subject matter of this suit, or that the level of service of such institutions or agencies is inadequate. No proof was offered that there was such a denial or inadequacy. In the absence of such a claim and proof thereof this case differs from that presented in Robinson v. Cahill, supra where Robinson established he was denied the thorough and efficient education guaranteed him by State Constitution.
The issue presented here is the unfairness of the present system in distributing the burden of payment. The first question for resolution is which individuals or groups have a right that the Legislature may have violated, i.e. , who has standing. The second question is what is the appropriate
standard for judicial review of the Legislature's action in respect to the rights of those who do have standing. The third question is what does the evidence show. The balance of this opinion is organized in that order. The legal arguments will be presented with the specific issues as they are considered.
Although courts should not resort to legal niceties to dismiss cases for procedural reasons on questions of standing rather than reaching the merits of the case, see Vanderwart v. Civil Service Dept. , 19 N.J. 341, 347 (1955); Bergen Cty. v. Port of N.Y. Authority , 32 N.J. 303, 316 (1960) (dissenting opinion), the determination of standing questions avoids trials, particularly on public questions, that may not result in a determination of any question.
Cases involving the question of standing arise most frequently in the federal courts because their jurisdiction is limited to "cases and controversies" by the language of U.S. Const. , Art. III, § 2. See 59 Am. Jur. 2d, Parties , §§ 26-27 at 374-379.
In Warth v. Seldin , 422 U.S. 490, 95 S. Ct. 2197, 45 L. Ed. 2d 343 (1975), Justice Powell, writing for the majority, said:
In its constitutional dimension, standing imports justiciability: whether the plaintiff has made out a 'case or controversy' between himself and the defendant within the meaning of Art. III. This is the threshold question in every federal case, determining the power of the court to entertain the suit. As an aspect of justiciability, the standing question is whether the plaintiff has 'alleged
such a personal stake in the outcome of the controversy' to warrant his invocation of federal court jurisdiction and to justify exercise of the court's remedial powers on his behalf. Baker v. Carr , 369 U.S. 186, 204, 82 S. Ct. 691, 703, 7 L. Ed. 2d 663 (1962).*fn7 The Art. III judicial power exists only to redress or otherwise to protect against injury to the complaining party, even though the court's judgment may benefit others collaterally.
After he stated that there are other limitations such as that plaintiff must not have a "generalized grievance" but must assert that his, her or its own interests are violated, and not base his, her or its claims on the rights of third parties, Justice Powell said:
The limitations of "case and controversy," as found in Art. III of the Federal Constitution, do not apply to state courts. If a state court passes upon a federal question and there is no standing, the United States Supreme Court may dismiss an appeal from a state court based on an asserted right guaranteed by the Federal Constitution on the ground appellant lacks standing to raise the question, with the result that the action of the state court results in no meaningful determination to the parties or the public. See Doremus v. Board of Education , 342 U.S. 429, 72 S. Ct. 394, 96 L. Ed. 475 (1952). Since plaintiffs are asserting rights under both the Constitutions of the United States and the State, standing should be considered.
In denying the standing of a temporary foster mother to challenge the statute requiring immunization of school age
children before admission to school on grounds it deprived her of guarantees of religious freedom because her religion forbade immunization, the Appellate Division, after pointing out that the religion of the children was different, said in Mountain Lakes Bd. of Ed. v. Maas , 56 N.J. Super. 245 (App. Div. 1959), aff'd per curiam , 31 N.J. 537, cert. den. 363 U.S. 843, 80 S. Ct. 1613, 4 L. Ed. 2d 1727 (1960):
Basically, the constitutionality of a statute, ordinance or regulation is open to attack only by a person whose rights are adversely affected. The burden of proof is upon the individual who claims himself harmed to show how, as to him, the statute is unconstitutional. Jones v. Opelika , 316 U.S. 584, 62 S. Ct. 1231, 86 L. Ed. 1691, 141 A.L.R. 514 (1942). No one can obtain a decision as to the invalidity of a law on the ground that it impairs the rights of others; such a one 'is not the champion of any rights except his own.' 11 Am. Jur., Constitutional Law , § 111, pp. 752-753 (1937) * * *.
Insofar as defendant seeks to assert her own right to religious freedom, she has no standing. [56 N.J. Super. at 259]
Many New Jersey cases recognize the requirement that a party, whether an individual or a class, must show an injury distinct from injury to public in general in order to maintain a suit. See Sprissler v. Pennsylvania-Reading S.S. Lines , 45 N.J. 127, 137 (1965); State v. Smith , 102 N.J. Super. 325, 335 (Law Div. 1968). In Koons v. Atlantic City , 134 N.J.L. 329 (Sup. Ct. 1946), aff'd per curiam , 135 N.J.L. 204 (E. & A. 1947), the court held plaintiff who was a resident of, but not an owner of real property in, Atlantic City had standing to challenge the constitutionality of a sales tax limited to Atlantic City for she would have to pay it. The court stated:
Residents are defined as the 929,984 persons residing in the county, according to the 1970 census. Careful review of the 39-page complaint does not reveal any allegation that residents suffer special injury distinct from other members of the general public.
The residents urge that if the county did not have to spend that portion of the money it now receives from real estate taxes to defray the costs in question, the board of freeholders might then engage in other activities. The implementation of such desires, or hopes, may well require the Legislature to authorize such activity, and the court's decision in this matter would not independently authorize such activity. Similar statements were made by a witness for Newark. On the other hand, it is equally possible that the board of freeholders and the Newark City Council might vote not to spend money, but to keep real estate taxes down. The latter course of action is urged by Dr. Sternlieb, who testified for plaintiffs.
Residents differ from the residents in Southern Burlington Cty. N.A.A.C.P. v. Township of Mt. Laurel Tp. , 119 N.J. Super. 164 (Law Div. 1972), aff'd 67 N.J. 151 (1975). In that case plaintiff residents showed that they occupied, or had occupied, substandard housing in defendant township and could not obtain standard sanitary housing in defendant township. The trial judge held that the residents had standing to attack the zoning ordinance which had the practical effect of excluding from the township housing under federally subsidized programs which said plaintiff residents could afford. In essence, they showed a direct personal injury not suffered by members of the general public. In the case at bar residents have made no such showing.
The court concludes that the residents have no standing; therefore, the action is dismissed as to them.
Harry Bonnet is an owner of real estate subject to tax in one of the municipalities and as such is compelled to pay real estate taxes to defray the residual costs which are the subject of this suit. Bonnet's testimony regarding his real estate taxes utilized equalized values which were actually higher than his assessed value. Computations were made based on equalized values to establish that Bonnet had paid taxes in 1973 aggregating $386.01 for county purposes. Based on the evidence in this case the amount of his tax attributable to state-mandated costs, and thus at issue here, was $133.95 on an equalized basis.
When a property owner is asked to pay his or her fair share to defray the lawfully incurred expenses of the community, that is taxation. If an individual is asked to pay more and, upon failure to do so, the property may be sold to satisfy the charge, that is confiscation. It is the taking of private property for public use without compensation. Agens v. Newark , 37 N.J.L. 415 (E. & A. 1874); Baldwin v. Fuller , 39 N.J.L. 576 (Sup. Ct. 1877), aff'd 40 N.J.L. 615 (E. & A. 1878); Vail's Ex'rs v. Runyon , 41 N.J.L. 98 (Sup. Ct. 1879).
In constitutional terms, the imposition of unfair tax burdens, to the point where they are discriminatory, with the power to sell the taxed property to collect payment, violates N.J. Const. (1947), Art. 1, par. 20, which provides:
Private property shall not be taken for public use without just compensation. Individuals or private corporations shall not be authorized to take private property for public use without just compensation first made to the owners.
Also in constitutional terms, the imposition of taxes unequally upon persons similarly situated is a denial of the equal protection of the law guaranteed by the State Constitution and Fourteenth Amendment. See Washington National Ins. Co. v. Board of Review , 1 N.J. 545 (1949);
Hillsborough Tp. v. Cromwell , 326 U.S. 620, 623, 66 S. Ct. 445, 448, 90 L. Ed. 358, 363 (1946).
In addition to listing Harry Bonnet and the other named individuals who own real property subject to tax in the county, the complaint describes the class as consisting of all who pay taxes on real estate in the county. The court concludes that the taxpayers have standing as a class, for they are subject to paying any excess burden based upon the alleged violations of constitutional guarantees.
To the extent that any concept of local government implies that the State is limited in distributing its fiscal burdens equitably, this class, which must pay any excess burden, has standing to raise that question. What other persons may, or may not, have standing to raise the latter question will have to await decision in the future. The court concludes taxpayers have standing.
The county was created by the State for purpose of administering governmental functions. In Bergen Cty. v. Port of N.Y. Authority , 32 N.J. 303 (1960), the Supreme Court said:
See State v. County Court of Malheur County, supra. See also 1 McQuillin, Municipal Corporations (rev. vol. 1971), §§ 1.24, 1.25 and 2.46(a).
The county alleges that discriminatory burdens resulting from the State not paying the costs for the services which the county must provide from state revenues, or from a uniform statewide real property tax, result in ever-spiraling tax rates which the county must pass on to municipalities, and they, in turn, to their taxpayers, with consequent loss of essential services which the county and said municipalities should provide. There was no proof at trial that any of the statutes in question have prevented the county from rendering any essential service which it is authorized to provide. The county's interest in the case is in its governmental capacity only.
The municipalities are required to levy taxes adequate to pay to the county determined amounts, N.J.S.A. 54:4-74, and are further required to pay that amount to the county, whether or not the municipalities collect it, N.J.S.A. 54:4-76. If a municipality collects 100% of the levy, then in respect to taxes for the county it is acting as a conduit in its capacity as governmental agent.
The United States Supreme Court has held that counties and municipalities have no rights in their governmental capacities under the Fourteenth Amendment as against the state which created them. See Williams v. Mayor and City Council of Baltimore , 289 U.S. 36, 53 S. Ct. 431, 77 L. Ed. 1015 (1933); Trenton v. New Jersey , 262 U.S. 182, 43 S. Ct. 534, 67 L. Ed. 937 (1923); Newark v. New Jersey , 262 U.S. 192, 43 S. Ct. 539, 67 L. Ed. 943 (1923). In Williams v. Mayor and City Council of Baltimore, supra , Justice Cardozo said:
A municipal corporation, created by a state for the better ordering of government, has no privileges or immunities under the Federal Constitution which it may invoke in opposition to the will of its creator. [289 U.S. at 40, 53 S. Ct. at 432, 77 L. Ed. at 1020]
See City of New York v. Richardson , 473 F.2d 923 (2d Cir.) (compelling local governmental units to pay money
which otherwise would be available to defray costs for functions reserved to states under Tenth Amendment was not unconstitutional, and remanding to a three-judge district court the question of denial of equal protection), cert. den. 412 U.S. 950, 93 S. Ct. 3012, 37 L. Ed. 2d 1002 (1973); on remand, Lindsay v. Wyman , 372 F. Supp. 1360 (S.D. N.Y.), aff'd sub nom. Beame v. Lavine , 419 U.S. 806, 95 S. Ct. 21, 42 L. Ed. 2d 35 (1974) (denying standing of City of New York to challenge burden of paying local share of welfare costs when states provided counties should make payments of remainder to state, but recognizing standing of taxpayers to raise issue under Equal Protection Clause).
Plaintiffs cite East Orange v. Palmer , 47 N.J. 307 (1966); Jersey City v. Zink , 133 N.J.L. 437 (E. & A. 1945), cert. den. 326 U.S. 797, 66 S. Ct. 493, 90 L. Ed. 485 (1946), and Morristown Bd. of Ed. v. Palmer , 88 N.J. Super. 378 (App. Div. 1965), as holding that a municipality may sue the State and its appropriate officers where the State is taking a municipality's property, or acting in an arbitrary or capricious manner which is forbidden by the concept of the equal protection of the law. Those cases do hold a municipality may bring such a suit, but they are not applicable here.
In the first two cases cited above the municipalities sued to collect taxes which had been levied upon private property, included in local budgets as required by laws of the State, and which taxes the State by its action, or threatened action, would have taken from said municipalities. Such taxes are property of the municipalities in which they have an interest in protecting, in the same sense as the cash in their bank accounts, and which no other person could protect. In the third case the municipality sued to have the State condemn a school which, the municipality alleged, the construction of an interstate highway for all practical purposes would destroy -- i.e. , the State was taking its property without just compensation.
In the case before this court the county and municipalities seek to have the court order a redistribution of the burdens of governmental operations, and not the enforcement of property rights previously established or acquired. The former require resolution of choices of policy which are initially the consideration of the Legislature. The latter do not.
At trial, Steven Rother, the Newark Tax Collector, (Rother) testified as to the status of real estate in Newark and the operations of Newark in the real estate field. There are 47,000 separate line items, reflecting a like number of lots or parcels, on Newark's tax books. 60% of the tax parcels are tax exempt. He also testified that 60% of the ratable base in terms of value is tax exempt as well. He explained that the relationship in the percentages is coincidental, and not causal. In substance, there are 18,800 parcels potentially subject to real estate tax in Newark.
At the time he testified in late 1974 Newark had acquired tax sale certificates on 3,000 parcels. He further testified that there were liens on an additional 2,000 parcels which Newark would put up for sale within 30 days.
Under N.J.S.A. 54:5-104.34 Newark could not convert the tax sale certificates into an absolute title until two years had elapsed in order to permit the owner to redeem.*fn8 During that period of time the parcels are carried on the tax rolls and form a basis for allocating to Newark taxes payable to the county.
When Newark acquires title to the parcels they are removed from the tax rolls, unless Newark rents the property. In the latter event the parcels are kept on the tax rolls for purposes of payment of taxes to the county. Rother testified this was due to rulings of the Essex County Board of Taxation.
In 1967 the public bought 45 out of 834 certificates. The public now buys only four or five such certificates a year.
Newark is required to bid in over 1,000 such certificates a year. In earlier years the public actively bid for tax certificates and Newark owned little potentially taxable real estate. At homestead auctions Newark sells dwelling units for up to four families to persons who will undertake to rehabilitate them. There have been some purchases.
Newark has title to 26% of the taxable real estate in Newark. It currently manages 300 to 400 residential properties which Newark has acquired for nonpayment of back taxes, exclusive of the ones run by the Newark Housing Authority, and exclusive of units for four families or less. Newark manages a number of commercial buildings, including the Military Park Building, the Griffith Building, and the Broad and Market Building. It also manages numerous others. Newark has title to the Essex House as well as the Industrial Building alongside it, and the Hotel Douglas. They are empty and completely vandalized inside.
Under these conditions Newark is actively engaged in the real estate market, however unwillingly. Although its action in such a market stems from its governmental role, and is necessitated by it, Newark is looking to the rents from, and not taxes on, such properties paid by others to meet its share of the taxes payable to the county. On the evidence in this record this court holds that Newark has standing under such circumstances to maintain this action, for it is in practical effect suffering the same type of injury as other taxpayers and no one else can object in respect to taxes paid to the county on these properties. See Koons v. Atlantic, supra.
Since there is no definition, or clarification, of what circumstances may result in a finding that the delegation by the State of its fiscal responsibility to local governments has resulted in such inequality that the concept of local government is violated, this court holds that on the facts in this record Newark at least has standing to raise the question because its interest is the same as other taxpayers.
Neither the county nor any other municipality has made a showing similar to that of Newark. As stated earlier, the county is in a different position from the municipalities and, in many respects, does not have the broad responsibilities of a local government such as a municipality.
There was no evidence at the trial that any municipality, other than Newark, has not been able to function as a local government as contemplated by the statutes, i.e. , having an ability to resell parcels acquired through tax foreclosure within a reasonable period of time.
On the grounds that the county and the municipalities, other than Newark, appear only in their governmental capacities, the court concludes that they have no standing and dismisses the action as to them.
There remains for consideration the class representing the blacks and the poor.
The fourth count sets forth the claims for the blacks. The allegations therein are summarized herein. Blacks constitute 11% of the State's population: 36.3% of all blacks live in the county and constitute about 30% of the county's population of 929,984. Since World War II many blacks have migrated to industrial centers in the northern United States. Because of a variety of factors and state policies in zoning and job hiring, blacks have had to concentrate in areas such as the county. It is asserted that, by using a geographic basis for distributing the tax burden of defraying the costs for the state services in question, the State has employed a classification that imposes a disproportionate burden of such costs on blacks by concentrating the burden in areas where blacks live. Invidious discrimination against blacks in the county is the alleged result.
The fifth count sets forth the claims on behalf of the poor. The allegations in that count are summarized herein. Based on the 1970 Census, 11.27% of the residents of the State have incomes that are below 125% of the federally defined standard for poverty; 21% of such persons live in the county. Dense concentrations of poor persons is a nationally
recognized factor in increasing the need for law enforcement, courts, welfare and other governmental services. State policies in zoning, planning and other areas have led to such concentration of low-income families in the county and a few other counties. It is asserted that by using a geographic basis for distributing the tax burden for defraying the costs of the state services in question, the State has employed a classification that imposes a disproportionate burden of such costs on the poor. This results in invidious discrimination.
From these allegations the blacks and the poor have pleaded a denial of the equal protection of the laws. Bonnett v. State, supra. The determination of whether the proof establishes that the present system results in such a denial must await examination of the evidence.
In summary, the classes that the court finds have standing are the taxpayers, blacks and poor.
The traditional standard for judicial review of legislative action in the fields of taxation and economic regulation which is used to determine whether the concept of equal protection of the law has been violated may be summarized as follows:
1. The concept of equal protection of the law allows the State power to classify and allows it a wide scope of discretion in making classifications. The action of the State in making classifications is presumptively valid. Such action of the State is set aside only when there is no reasonable basis to support the action and such action is therefore arbitrary.
2. The State having made a classification that is grounded upon some reasonable basis, the classification does not violate the concept of equal protection because not made with mathematical certainty or it results in some inequality.
3. When the classification is called into question, if any set of facts can be reasonably conceived that will sustain the
classification, the existence of that set of facts at the time the law was enacted must be assumed. The same principle should apply to subsequent amendments to the law.
See McGowan v. Maryland, supra; Carmichael v. Southern Coal & Coke Co. , 301 U.S. 495, 57 S. Ct. 868, 81 L. Ed. 1245 (1937); Lindsley v. Natural Carbonic Gas Co. , 220 U.S. 61, 31 S. Ct. 337, 55 L. Ed. 369 (1911); Washington National Ins. Co. v. Board of Review , 1 N.J. 545 (1949); Ring v. North Arlington, supra , 136 N.J.L. at 497-498.
This is the standard that the United States Supreme Court applied in San Antonio Indep. School Dist. v. Rodriguez , 411 U.S. 1, 93 S. Ct. 1278, 36 L. Ed. 2d 16 (1973), in respect to the problem of financing public school education. The same standard was applied in Dandridge v. Williams , 397 U.S. 471, 90 S. Ct. 1153, 25 L. Ed. 2d 491 (1970), where the Supreme Court held that the limit of $250 a month on a maximum grant under Maryland's AFDC program did not violate the concept of equal protection of the law so as to deprive children of large families because they received less per child than children of smaller families.
Where there is an allegation of discrimination based on color or some other invidious basis, and a prima facie showing of discrimination on such basis is made, the United States Supreme Court has applied the "close scrutiny" test to determine if rights protected by the Federal Constitution, or law, have been violated; i.e. , it has required that the particular state show there is some compelling reason under valid state policy to justify the existence of the discrimination. Eisenstadt v. Baird , 405 U.S. 438, 92 S. Ct. 1029, 31 L. Ed. 2d 349 (1972); Dunn v. Blumstein , 405 U.S. 330, 92 S. Ct. 995, 31 L. Ed. 2d 274 (1972); Police Dept. of Chicago v. Mosley , 408 U.S. 92, 92 S. Ct. 2286, 33 L. Ed. 2d 212 (1972); McLaughlin v. Florida , 379 U.S. 184, 85 S. Ct. 283, 13 L. Ed. 2d 222 (1964); Skinner v. Oklahoma , 316 U.S. 535, 62 S. Ct. 1110, 86 L. Ed. 1655 (1942); "Developments in the Law, Equal Protection," 82 Harv. L. Rev. 1065 (1969).
The decision of the United States Supreme Court in San Antonio Indep. School Dist. v. Rodriguez, supra , was handed down before the New Jersey Supreme Court announced its decision in Robinson v. Cahill, supra; hence, the latter did not have to apply the "close scrutiny" test because there was neither any allegation of invidious discrimination in that case nor any other problem under rights based on federal questions to apply it to in light of the aforesaid decision. However, Chief Justice Weintraub, writing for a unanimous court, said that the New Jersey Supreme Court had rejected that test for determining whether rights had been violated within the concept of equal protection of the law embodied in State Constitution.
Since there are allegations in the pleadings which set forth a claim that there is invidious discrimination in violation of federally protected rights, the court will first consider
from the evidence whether plaintiffs have established a case of invidious discrimination, for the resolution of that question will determine the type of analysis which is to be applied in deciding whether plaintiffs have been denied equal protection of their rights.
The allegation that the State has violated the implicit premise of local government is examined after the determination of whether there is a violation of the concept of equal protection of the law, for if the latter has been violated, there is no need to consider the former.
(A) Plaintiffs' claim of invidious discrimination as to blacks and poor.
The claims asserted are not on behalf of all blacks and poor in the state but only those in the county. If these classes are paying a disproportionately high burden as a result of state action, then even in the absence of intentional state action, Hawkins v. Town of Shaw , 437 F.2d 1286 (5 Cir. 1971), they have established a prima facie case and the close scrutiny test must be applied as to their rights under federal law. In that case the Court of Appeals for the Fifth Circuit reversed the District Court's dismissal of the action after trial, based upon the findings of the District Court which it made employing the standard of review of a "rational basis for State action" that produced differences between classifications of persons.
In respect to intent, the Court of Appeals said:
In a civil rights suit alleging racial discrimination in contravention of the Fourteenth Amendment, actual intent or motive need not be directly proved, for:
'"equal protection of the laws" means more than merely the absence of governmental action designed to discriminate; * * * we now firmly recognize that the arbitrary quality of thoughtlessness can be as disastrous and unfair to private rights and the public interest as the perversity of a willful scheme.' Norwalk
CORE v. Norwalk Redevelopment Agency , 395 F.2d 920, 931 (2d Cir., 1968) * * *. [at 1291-1292]
In respect to statistics, the opinion reveals that they reflected physical conditions in the town, i.e. , the number of paved and unpaved streets, location of sanitary and storm sewers in terms of homes occupied by blacks and whites, number of street lights of various types, etc., and percentages developed therefrom.
The Court of Appeals stated:
Nearly 98% of all homes that front on unpaved streets in Shaw are occupied by blacks. Ninety-seven percent of the homes not served by sanitary sewers are in black neighborhoods. Further, while the town has acquired a significant number of medium and high intensity mercury vapor street lighting fixtures, every one of them has been installed in white neighborhoods. The record further discloses that similar statistical evidence of grave disparities in both the level and kind of services * * * was also brought forth and not disputed. * * *
Surely, this was enough evidence to establish a prima facie case of racial discrimination. * * * [437 F.2d at 1288]
Judge Bell, in a concurring opinion, stated that the Town of Shaw had paid for all the improvements and services from annual general taxes levied on real estate, had a cash surplus in each year, and had no bonded indebtedness.
In this case, as in Hawkins v. Town of Shaw, supra , plaintiffs are relying primarily upon statistical data. This data was utilized in several computations for the purpose of isolating and comparing different variable factors and relationships. Plaintiffs' position is that significant patterns are thereby revealed which indicate the existence of invidious discrimination.
No representative of either the blacks or poor testified.
By means of stipulated evidence the underlying costs reflected in the budgets for the functions at issue were established for each of the 21 counties.*fn9 Plaintiffs then established the number of blacks and poor in the respective counties from the 1970 census.
Plaintiffs relied upon Dr. Purcell Benson, who holds a doctorate in Sociological Statistics and has served as Director of the Business Research Center of Rutgers University to explain and verify their statistical data.
The court has summarized a number of underlying exhibits in Tables I, II and III and presented those facts around which the witnesses concentrated their testimony, i.e. , the unfortunate seven and the favored three counties. Full tables are in the Appendix.
COSTS PER $1,000 EQUALIZED VALUATION
JUDICIARY -- ADMINISTRATION*fn10
Cumberland 1.11 1.34 (5) **
Total for all counties .86 1.00
Total state equalized valuation adjusted to $1,000 basis
** Order of rank in 1974 from among counties highest to lowest, based on budget.
COSTS PER $1,000 EQUALIZED VALUATION
Total for all counties 1.02 1.11
POPULATION CHARACTERISTICS BY COUNTY*fn13
Black Residents Poor Residents
as Percent of as Percent of
Seven Highest County County
Counties Population Population Population
Atlantic 17.3313.0 175,043
Mercer 16.43 9.3 (8)*fn13 303,968
Salem 15.3011.9 (5) 60,343
Cumberland 13.6411.8 (6) 121,374
Camden 11.34 8.9 (10) 456,291
Union 11.19 6.1 (17) 543,116
Cape May 7.89(13)*fn14 12.4 (3) 59,554
Hudson 10.07(9) 11.9 (4) 609,261
Passaic 18.45(8) 9.3 (7) 460,782
Bergen 2.78(17) 4.1 (20) 898,012
Morris 2.19(18) 3.8 (21) 383,454
Hunterdon 1.75(19) 6.3 (15) 69,718
Warren less than 1.00(20) 7.0 (13) 73,879
Sussex less than .50(21) 6.8 (14) 77,528
Somerset 3.57(15) 4.3 (19) 198,372
The court has summarized in Table IV a number of exhibits prepared by others with the assistance of a computer under the direction of Benson. Benson testified that the variable of the costs for the various functions in terms of a $1,000 of equalized valuation of tax ratables per county was plotted against the variable of percent poor, percent black, and population density to see if there was any correlation between the variables.*fn15 Did the cost of courts increase as the variable for the poor increased, as the variable for the blacks increased, or as the variable for population increased?
If one variable increases as another does, there is a positive correlation. If each increase of one is matched by a proportionate increase in the other, there is a perfect positive correlation. If one plotted these factors on a simple X-Y graph, the left axis (X) listing the cost data and the right axis (Y) listing the quantities for the other variables, and then placed a dot on the graph where lines drawn from each axis for each unit of measure intersected, one would obtain
a plot. If the correlation is perfect, a line drawn through these dots would be a straight line. Such a correlation is expressed mathematically as . If one variable decreases in proportion to another, a line drawn through such dots would still be a straight line but would slope down to the left. Such a correlation is expressed mathematically as -1.
The plot of the dots of intersection from the data for two independent variables is referred to as a scatter diagram. The pattern of such a diagram for .5 and .9 correlations is shown in figures 1 and 2. The court thanks Benson for the use of the illustrative charts.
[REFER TO THE BOOK FOR FIGURE 1. AND FIGURE 2.]
Benson's testimony from the record and indicated by the exhibits is that statistically the correlations set forth in Table IV are probably not the result of chance. The State did not present any testimony that disputed this and the court accepts it.
The correlations Benson found are set forth below in Table IV.
CORRELATIONS -- COST PER $1,000 EQUALIZED VALUATION TO:
Percent Concentration Percent Concentration
of Cost 1970 1973 1974 1970 1973 1974
Total - courts .461 .445 .484 .403 .575 .648
office .746 .415 .547 .903 .690 .723
and fees .189 .491 .409 .210 .553 .462
Department -.141 .584 .564 .034 .851 .772
Welfare .731 .763 .749 .766 .819 .820
CORRELATIONS -- COST PER $1,000 EQUALIZED VALUATION TO:
Category Density Multiple Regression on
of Cost 1970 1973 1974 1970 1973 1974
Total - courts .895 .653 .716 .936 .753 .854
office .357 .725 .529 .912 .872 .782
and fees -.087 .362 .374 .269 .596 .527
Department .021 .509 .434 .245 .850 .793
Welfare .197 .400 .415 .809 .863 .860
Benson explained that multiple regression is a statistical method to check which of several variables contributes most to a correlation. Using this technique, a computer program was written to determine which of the three variables contributed the most to the correlations. Population was the variable most frequently rejected.
Benson testified that on the scale -1 to , "0" indicated no correlation and said:
On that scale, a value of .50 represents you're half way up the scale towards 1.0 and would to me indicate the convincing evidence that there is serious involvement of poor people or black people or those who live in the high population ghetto areas of cities in these [sic] tax difficulties as far as paying the burden of county expenses is concerned.
In looking at lower correlations they still tell us something four or even point five, they are, however, less over-powering in calling one's attention as a statistician to the existence of some tax discrepancy.
He also explained that the revisions in the budget manual issued for counties by the Division of Local Finance in 1973 and 1974 improved the reporting process for all counties in those years, so that relevant data for all counties was available for those years. In 1970 the budgets for some counties did not sufficiently identify cost items, so that information for not more than 19 or 20 counties was available for some categories in 1970. Thus the 1970 calculations are not as reliable as those for 1973 and 1974.
Benson also testified that strong correlation mathematically does not establish that there is a causal connection between the action of any two variables.
Mr. James A. Arnold, Jr., holds a B.S. in Business Administration and a Master's Degree in Economics, and has taught statistics at the college and university level. He testified for the State as an expert in statistics. He has an extensive background in research, particularly in the area of tax policy in New Jersey and as a consultant on tax policy matters in some 25 states. Arnold has served as Chief
of Tax Research and Statistics in the Division of Taxation in the State's Treasury Department for the past 16 years and served as the consultant to the State Tax Policy Commission from its formation in 1945 until joining the State's Treasury Department sometime around 1954.
He stated that in his opinion, since the data was based on only 21 observations, correlations which are not fairly high, such as .9, should not command much attention. He said that if one had only two observations, there would have to be a perfect correlation, because one could draw a straight line through them. In his opinion, it would be difficult to draw a straight line through a scatter diagram of points for a correlation of .48. He also expressed the opinion that the multiple regression factors added very little because there is a tendency for statistics relating to blacks and the poor to overlap; hence, they measure the same factor twice.
On cross-examination he conceded that the poor and blacks, when examined in terms of Table III, were not identical; e.g. , Sussex, Warren and Hunterdon have small percentages of blacks but significant percentages of poor; hence they do not always measure the same factors.
He also questioned using state equalized valuations as a base for comparison to show unequal tax burdens. This approach did not take into account a myriad of other factors, such as cost differences between counties. In his opinion, one should look at what percentage of the respective county budgets are being spent for the different services and, if there are significant differences, what causes them. Neither the State, nor plaintiffs, offered such an analysis.
He also said that one should expect to find a high correlation of costs for welfare to assessed valuation in those areas where there are a large number of poor. Based on his earlier observation about statistical data showing the overlap between the blacks and poor, he said that a high correlation between areas with concentration of blacks and such costs was also to be expected.
Evaluating the testimony about the correlations, the court finds that there is not such a showing of correlation between costs for courts and juries and concentrations of blacks and the poor as to invite suspicion. Using Benson's criteria of .5 as a guide, population appears to be a far more important factor. If one disregards the year 1970, population appears to have about the same degree of correlation to cost, if not more, than blacks.
In respect to the Probation Department, there are correlations for 1973 and 1974 that suggest a much higher correlation between cost and blacks than poor or population. This may be due in part to the efforts of county welfare boards to collect support payments for families under the AFDC programs. Director Lazaro of the County's Welfare Board testified that there was a staff of 16 attorneys bringing such cases in the county. To the extent that there is a high correlation between costs for probation and concentrations of blacks, this may be attributable to welfare problems.
Accepting Arnold's criteria of .9, the correlations between welfare costs and concentration of blacks and the poor are statistically significant, and not unexpectedly high. As Arnold testified, one expects local costs for welfare to be highest where the poor are concentrated.
The question then arises as to whether the present system unfairly concentrates the cost burden on these two classes in an invidious manner.
The testimony at trial was given in terms of the aggregate of the mandated costs for 1973, except in the case of Benson's exhibits. Director of Freeholders Cook testified that the aggregate of mandated costs for the county was $34,726,316 and the net mandated costs to the county were $32,912,066 for all costs at issue. The aggregate for all counties in the State was $128,781,000.
Rother testified that Newark paid about 24.53% of the taxes paid to the county; hence, Newark pays 24.53% of the net mandated costs, or $8,518,365.
According to the underlying data from which Benson's exhibits were prepared, the aggregate of the welfare costs for the county in 1973 was $21,890,982, and $79,072,781 for all counties.
Lazaro testified that about 80% of the county's welfare cases come from Newark.
If Newark pays 24.53% of the county costs, then Newark pays $5,369,857 of the county's welfare costs. If Newark paid 80% of such costs, the amount would be $17,512,785. Although one cannot assume a constant cost per case, the reasonable inference is that under the present system there is a shift of a major portion of the welfare burden from Newark, where blacks and poor are concentrated, to other municipalities in the county where there are fewer members of these classes. The same principle applies to the balance of the mandated costs, except that the shift between cost and benefit received between residents of Newark and other areas of the county is probably not as great. There are no statistics in the record that state who receives the benefits of other programs.
The 1970 census data, which is the basis for the population data in this action, shows that 207,302 blacks reside in Newark. This is 74.3% of the 36% of blacks of the State who live in the county.
In Newark there are approximately 12,800 units of public housing for low income families under the Newark Housing Authority, of which 3,000 units are used for senior citizens. Such real property is exempt from taxation, N.J.S.A. 55:14A-20, although the Newark Housing Authority does make payments to Newark in small amounts for services and facilities provided by Newark, N.J.S.A. 55:14A-27. There are a number of other statutes under which the taxation of low income housing is limited. N.J.S.A. 55:16-18 (limited dividend) and (nonprofit); N.J.S.A. 55:14I-5 (senior citizen). There are approximately 1,000 of such units in existence. Other units are under construction pursuant to these laws and are in various stages of completion.
In respect to moderate income housing, provision is made for payment of 20% of gross shelter rent as payment in lieu of taxes, with power granted to county boards of taxation to include in the tables of equalized values an "assumed assessed value of the property represented by the amount of payments in lieu ...