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City of Passaic v. Local Finance Board of Department of Community Affairs

Decided: February 3, 1982.

CITY OF PASSAIC, A MUNICIPAL CORPORATION OF THE STATE OF NEW JERSEY, RESPONDENT,
v.
THE LOCAL FINANCE BOARD OF THE DEPARTMENT OF COMMUNITY AFFAIRS OF THE STATE OF NEW JERSEY, APPELLANT



On certification to the Superior Court, Appellate Division.

For affirmance -- Chief Justice Wilentz and Justices Pashman, Clifford, Schreiber, Handler and Pollock. For reversal -- None. The opinion of the Court was delivered by Schreiber, J.

Schreiber

This case, like the companion case of Camden v. Skokowski, 88 N.J. 304 (1982), also decided today, involves the refusals of the Director of the Division of Local Government Services, and the Local Finance Board to approve the City of Passaic's request for an emergency appropriation pursuant to N.J.S.A. 40A:4-46.

When the City of Passaic prepared its budget for the calendar year 1980, it had not resolved labor costs for municipal employees who were represented by five different bargaining units. These were the Patrolmen's Benevolent Association (PBA), the Firemen's Mutual Benevolent Association (FMBA), the Fire Officers Association (representing supervisors of the fire department), Teamster's Union No. 866 (representing the City's blue collar employees), and the Passaic City Employees Civil Service Association (representing the City's white collar employees). The City compiled its 1980 budget within the perimeter of the Cap Law, N.J.S.A. 40A:4-45.1 et seq., so that in general its 1980 expenditures would not exceed its 1979 expenditures by more than 5%. Within that framework the City set aside $80,967 for salary increases for the municipal employees in question.

The City and the Patrolmen's Benevolent Association (PBA) had commenced negotiations on August 8, 1979, which ultimately led to binding arbitration. Negotiations between the City and the Firemen's Mutual Benevolent Association also resulted in binding arbitration.

The arbitration awards for the police and firemen were made on June 4, 1980 and July 18, 1980, long after the 1980 municipal budget had been completed. These awards substantially exceeded the $80,967 reserve. Moreover, these awards established the pattern of increases for the municipal employees covered by the other bargaining units. The City signed contracts with all five bargaining units in September and October 1980. The effective

dates of the increases ranged between February 15, 1980 and March 15, 1980.

The aggregate salary increases caused a 1980 budget shortfall of $505,400. The City had previously adopted an emergency appropriation of $60,000 for general municipal purposes -- $20,000 for Headstart Grant Program, $15,000 for Summer Youth Employment Program and $25,000 for Public Assistance State Aid Agreement. The total amount, $565,400, exceeded the 3% limit in N.J.S.A. 40A:4-49, which requires that the Director of the Division of Local Government Services (Director) must approve appropriations that exceed 3% of the total current and utility operating appropriations in the budget for the year. The City, having passed the necessary resolution in November 1980, sought the Director's approval pursuant to N.J.S.A. 40A:4-49. The Director, relying on an Attorney General's opinion, Formal Opinion No. 10-1980, as modified by Formal Opinion No. 26-1980, rejected the City's request and the City appealed to the Local Finance Board as authorized by N.J.S.A. 52:27BB-10(4).

The Board held a hearing and by a four-to-two vote refused to reverse the Director's decision. The Board acknowledged that the proposed expenditures "may be necessary for the protection of the health, safety and general welfare of the citizens of Passaic," but disapproved the expenditure because the City had failed to demonstrate that the proposed appropriations were due to sudden, unanticipated or unexpected events that occurred subsequent to the adoption of the City's 1980 budget. The City appealed. The Appellate Division ordered the Director to approve the City's emergency appropriation request, subject to the Director's approval of the method of financing. It also ordered the City to prepare and submit to the Director a plan for balancing projected expenses and revenues for 1981. We granted the Director's petition for certification. 87 N.J. 379 (1981).

I

The statutory structure for budget making requires that for each fiscal year the municipal ...


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