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Borough of Pitman v. Skokowski

Decided: February 1, 1984.

BOROUGH OF PITMAN, PLAINTIFF-APPELLANT,
v.
BARRY SKOKOWSKI, DIRECTOR OF THE DIVISION OF LOCAL GOVERNMENT SERVICES, DEFENDANT-RESPONDENT



On appeal from Local Finance Board of State of New Jersey.

Botter, Pressler and O'Brien. The opinion of the court was delivered by O'Brien, J.A.D.

O'brien

This case involves the effect of the transfer by a municipality to a lighting district of its expense in providing street lighting upon its "CAP base" under N.J.S.A. 40A:4-45.2.

On January 26, 1981 plaintiff Borough of Pitman (Borough) created a lighting district pursuant to N.J.S.A. 40:91-1 et seq. to

which it transferred responsibility for providing and paying for the Borough's street lighting services. Under that statute, the lighting district becomes a separate corporate entity with its budget to be approved annually by the voters.*fn1

The procedure adopted resulted in "freeing up" moneys in the municipal budget which were previously expended for street lighting services as a way of increasing the "CAP base" upon which the municipality calculates its permissible spending limit for the year pursuant to the "CAP law."*fn2 To address this problem the Legislature supplemented N.J.S.A. 40A:4-45.2 by L. 1981, c. 64, ยง 1, which added a paragraph providing:

In each budget year subsequent to 1981, whenever any municipality shall have transferred to any local public utility, any local public authority or any special purposes district, during the immediately preceding budget year, or at any time during the current budget year prior to the final adoption of the budget, any service or function funded during the immediately preceding budget year, either partially or wholly from appropriations in the municipal budget, the municipality shall deduct from its final appropriations upon which its permissible expenditures are calculated pursuant to this section the amount which the municipality expended for that service or function during the last full budget year throughout which the service or function so transferred was funded from appropriations in the municipal budget.

The act was approved on March 9, 1981 to "take effect immediately, and shall be retroactive, except as specifically provided therein, to August 18, 1976."

The introductory statement attached to this bill referred to the establishment of fire districts or garbage districts or other municipal authorities to furnish certain services as a "legal maneuver" which promotes the splintering of local government. The statement then describes the intent of the amendment to be that ". . . whenever a municipality transfers to a local public utility . . . a service or function previously funded in the municipal budget . . . [the municipality] shall subtract from its 'CAP base' in the next [budget] year the amount it previously expended on that service or function."

On May 4, 1982 defendant Director of the Division of Local Government Services (Director) disapproved the Borough's municipal budget for 1982. He ruled that the budget exceeded the CAP law spending limitation because the Borough had not deducted from its 1981 final appropriations total an amount equal to what it had expended to provide street lighting services in 1980. The Director concluded that such deduction for purposes of computing the Borough's 1982 spending limitation was mandated by the March 9, 1981 supplement to N.J.S.A. 40A:4-45.2. The Director's decision was affirmed by the Local Finance Board of the Division of Local Finance (Board) on May 11, 1982. While the Board made no findings of fact nor conclusions of law in support of its resolution upholding the Director, at the hearing granted on the Borough's petition the Board indicated its understanding of the Borough's plight, but followed the advice of its counsel that the statute had to be applied as written.

The Borough concedes that the language of the statute requires retroactive application. Applying the statute, it is clear that in considering the Borough's budget for 1982 (a budget year subsequent to 1981) the Borough had transferred to a special purpose street lighting district during the immediately preceding budget year, i.e., on January 26, 1981, a service which had been partially funded during the immediately preceding budget year (1981) ...


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