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Hamilton Township Municipal Utilities Authority v. Apple Tree Corp.

Decided: June 27, 1985.

HAMILTON TOWNSHIP MUNICIPAL UTILITIES AUTHORITY, PLAINTIFF-RESPONDENT,
v.
APPLE TREE CORPORATION, A NEW YORK CORPORATION, T/A POWDER MILL SPRINGS, DEFENDANT-APPELLANT



On appeal from Superior Court of New Jersey, Law Division, Atlantic County.

McElroy and Dreier. The opinion of the court was delivered by Dreier, J.A.D.

Dreier

Defendant has appealed from a judgment entered in favor of plaintiff for $30,638.99 representing "sewer reservation charges" for 36 units which had been set aside for defendant. These units were originally contemplated as a portion of phase two of defendant's residential development. Phase one consisted of 104 units built at a time when plaintiff had no problem in granting permits to connect to its sewerage system. Defendant was initially granted reservations for an additional 224 units, the second phase of its development, but the New Jersey Department of Environmental Protection determined that plaintiff had over-committed for the issuance of development permits to various developers. Defendant's 224 permits were reduced to 100, but, as defendant contended, when it could not proceed as to the full second phase of its development, it lost its financing commitment and was able to build only an additional 64 units, leaving unused 36 connection permits.

The original developer apparently was never advised by plaintiff that there would be any future reservation of capacity fee nor were any bills received for such fees. In 1977 he sold his interest to defendant's principal who testified that when he purchased the project there were no liens against the property for unpaid municipal utility authority fees. It was not until 1979, when the authority rescinded its commitment for the unused 36 units, that he was advised of outstanding "reservation" fees. Parenthetically, in 1981 defendant agreed to pay $95,000 to plaintiff to purchase an additional 160 sewer units to finish phase two of the project.

The issue before us is the validity of the charges until April 11, 1979 plus interest for the stand-by reservation fees. Plaintiff's authority to collect rents, rates, fees or other

charges for sewerage is contained in N.J.S.A. 40:14B-22. This statute provides for the assessment of two classes of charges: "sewer service charges" and "connection fees." Specifically, the statute provides:

Every municipal authority is hereby authorized to charge and collect rents, rates, fees or other charges (in this act sometimes referred to as "sewer service charges") for direct or indirect connection with, or the use or services of, the sewerage system . . . in addition to any such sewer service charges, a separate charge in the nature of a connection fee or tapping fee . . . may be imposed.

N.J.S.A. 40:14B-22 further provides that the amount of the connection charges "shall otherwise be entirely within the discretion of the authority in order that the combination of such connection fee or tapping fee and the aforesaid sewer service charges shall meet the requirements of section 23." Section 23 mandates that the revenues of the municipal authority at all times should be "adequate to pay the expenses of operation and maintenance of the utility system." Thus, the combination of service charges and connection fees combined must be sufficient to run the system. That being the case, a "reservation of capacity" charge which exacts an amount in excess of the authorized service or connection charges is ultra vires.

Plaintiff contends that the fees charged are authorized by N.J.S.A. 40:14B-20(10) [now 40:14B-20(12) pursuant to L. 1980 c. 77 ยง 4] generally giving a municipal utility authority the power:

To make and enforce bylaws or rules and regulations for the management and regulation of its business and affairs and for the use, maintenance and operation of the utility system and any other of its properties, and to amend the same;

For the disputed fees to be imposed under the authority of this general powers section, such fees would be by definition something other than a "sewer service charge" or a "connection fee or tapping fee." Since these two types of fees must, as noted above, be "adequate to pay the expenses of operation and maintenance of the utility system," the general powers section can authorize no additional ...


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