On appeal from Superior Court of New Jersey, Law Division, Monmouth County.
Botter, Antell and Furman. The opinion of the court was delivered by Botter, P.J.A.D. Antell, J.A.D. (dissenting).
The Township of Ocean invited bids for towing, at the township's request, motor vehicles that were disabled, impounded, stolen and illegally parked on township streets. A one-year contract was to be awarded to the highest public bidder. Bidders were invited to compete for the privilege of being called by the municipality to furnish towing and storage services, with the tower having the right to charge vehicle owners for the cost of the services according to an established rate schedule.*fn1 Only plaintiff William Gross, trading as Colonial Auto Body, and defendant Fahoury Brothers Auto Body, trading as Fahoury Brothers Towing Service (Fahoury), submitted bids. Plaintiff bid approximately $7,700; defendant Fahoury bid $13,751 and was awarded the towing contract for 1981.
Plaintiff then filed suit against the township and Fahoury seeking, among other things, a judgment declaring the township's bidding procedure "invalid as an indirect tax." An order to show cause was issued and the case was decided as a matter of law with some factual background provided in affidavits submitted by the parties. The trial judge ruled in favor of plaintiff, holding that the procedure constituted an improper and unauthorized revenue-raising scheme. We disagree with this conclusion and reverse.
In his affidavit the township manager explained the circumstances which led to the bidding process. He stated that the township has the duty to remove disabled vehicles from its streets, particularly those involved in automobile accidents. Since the township did not have the equipment and manpower to do this work, it elected to contract for its performance. Prior experience indicated that towing services would be needed in Ocean Township on 350 to 400 occasions in 1981. Since the cost of this service would exceed $4,500, public bidding was required.
N.J.S.A. 40A:11-4; Kurman v. Newark , 124 N.J. Super. 89 (App.Div.1973), certif. den. 63 N.J. 562 (1973). No minimum bids were required. A contractor would presumably bid according to the value it placed on the right to be called upon for these services, despite the limitation placed on the amount that the contractor could charge a motorist for the towing and storage services. (Apparently a tower can anticipate that some motorists will contract for body work and other repairs after being towed to his place of business.) The fee schedule was said to represent "standard towing charges allowed by insurance companies." Moreover, the specifications preserved the right of an owner to make his own arrangements for removal of his vehicle and required the contractor to advise him of that right. The township manager noted that other municipalities in New Jersey customarily bid out towing service in a similar fashion. He also noted that the municipality incurs various costs related to the subject. Police dispatchers and officers expend time in investigating and keeping records of motor vehicle accidents, and other legal and administrative costs are incurred in contracting for the service.
In response, plaintiff asserted that in 1980 Ocean Township had invited bids for towing, dividing the municipality into zones. Apparently, the contract was awarded on the basis of the lowest charge to the vehicle owner. As a result, plaintiff was given the contract in 1980 for one zone, at the rate of 99 cents a tow, and Fahoury was the successful bidder in another zone at the rate of $2 a tow.
The trial judge noted that, while the award of towing contracts "does not appear on its face to be controlled by the public bidding statute, N.J.S.A. 40A:11-1 et seq. , it has been held to be subject thereto," citing Kurman v. Newark, supra; Schnell v. Millburn Tp. , 127 N.J. Super. 155 (App.Div.1974), aff'd 66 N.J. 137 (1974), and Pied Piper Ice Cream, Inc. v. Essex Cty. Park Comm'n , 132 N.J. Super. 480 (App.Div.1975). He correctly noted that the contention that the practice constitutes an "impermissible charge or tax for licensing" was neither raised nor discussed
in the Kurman case. He concluded that the bidding procedure constituted "an improper revenue raising scheme which taxes the towing company for the right and advantage of receiving the municipally referred towing business." He also noted that the township made "no attempt to justify the $13,000 bid as being reasonably related to the costs of regulation." Consequently, judgment was entered setting aside Fahoury's contract, and this appeal followed.
Municipalities have no revenue-raising power except as granted by the Legislature. Moyant v. Paramus , 30 N.J. 528, 543 (1959). However, we agree with the township's contention on appeal that its bidding procedure is valid and does not constitute a tax or a license fee.
The essential characteristic of a tax is a compulsory contribution to the support of government, imposed upon individuals or property pursuant to legislative authority. See Bayonne v. Murphy & Perrett Co. , 7 N.J. 298, 309 (1951); In re Oshkosh Foundry Co. , 28 F. Supp. 412, 414 (E.D.Wis.1939). Regulations requiring a license to engage in certain activity apply generally to all persons engaged in a particular business, trade, profession or calling, and the license fee is ordinarily aimed at defraying the expense fairly attributable to the cost of regulation. See Bellington v. East Windsor Tp. , 17 N.J. 558, 564 (1955); N.J.S.A. 40:52-1 and N.J.S.A. 40:52-2. Here the township imposed no charge by way of a tax or license fee on all towers operating within the municipality. Towers were not required to submit a bid or to bid any minimum amount. Likewise, the regulatory aspects of the bid specifications were binding only on the successful bidder; all others could provide towing services in the township without regulation. In short, the township did not regulate the towing business generally. However, for the privilege ...