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Mayor and Municipal Council v. Passaic Valley Water Commission

Decided: July 21, 1987.

MAYOR AND MUNICIPAL COUNCIL OF THE CITY OF CLIFTON, A MUNICIPAL CORPORATION AND SUBDIVISION OF THE STATE OF NEW JERSEY, AND JOSEPH J. LYNN, SR., PLAINTIFFS,
v.
PASSAIC VALLEY WATER COMMISSION, A BODY POLITIC AND SUBDIVISION OF THE STATE OF NEW JERSEY, CITY OF PATERSON AND CITY OF PASSAIC, DEFENDANTS. SENATOR JOSEPH BUBBA, MAYOR SAMUEL CHERBA AND ASSEMBLYMAN GERALD ZECKER, PLAINTIFFS, V. PASSAIC VALLEY WATER COMMISSION, A BODY POLITIC AND SUBDIVISION OF THE STATE OF NEW JERSEY, DEFENDANTS. MAYOR AND MUNICIPAL COUNCIL OF THE BOROUGH OF NORTH ARLINGTON, A MUNICIPAL CORPORATION AND SUBDIVISION OF THE STATE OF NEW JERSEY; ROBERT LANDOLFI, PLAINTIFFS, V. PASSAIC VALLEY WATER COMMISSION, A BODY POLITIC AND SUBDIVISION OF THE STATE OF NEW JERSEY, DEFENDANT



Saunders, J.s.c.

Saunders

This consolidated action in lieu of prerogative writs is brought by various plaintiffs against the Passaic Valley Water Commission and two of its owner municipalities, Paterson and Passaic. All plaintiffs challenge a resolution of the Passaic Valley Water Commission (Commission), distributing $500,000 from "surplus" to the three owner cities. Additionally, the City of Clifton as a third owner city, seeks to declare as invalid, paragraph 13 of the 1931 agreement between the cities insofar as it fixes the percentage of ownership among the cities at the ratio established by the 1929 tax assessment level of the municipalities.

I.

Case History.

Suit was originally brought by Clifton and Joseph J. Lynn, Sr. (City Manager) against defendant Commission. The court entered an order requiring that all municipal customers of the Commission be joined as plaintiffs in the litigation or as defendants. R. 4:28-1(a). Thereafter, a second suit was filed by

Senator Joseph Bubba, Mayor Samuel Cherba and Assemblyman Gerald Zecker, and a third suit brought by the Borough of North Arlington and Robert Landolfi. A number of other municipalities entered appearances or filed answers, but eventually all withdrew from active participation and agreed to be bound by the litigation.*fn1

II.

Findings of Fact.

In 1923, the Legislature authorized two or more municipalities to acquire privately owned water works which supplied water to the municipalities. N.J.S.A. 40:62-108 et seq. The governing bodies of Paterson, Passaic and Clifton applied to Justice Black of the Supreme Court for the appointment of a commission to acquire the water works and distribution system of the Passaic Consolidated Water Company. This company served all of Paterson and Passaic and a portion of Clifton. The portion of Clifton not served directly by the water company was served by a distribution system constructed and operated by Clifton and supplied water purchased from the water company. Clifton v. Passaic Valley Water Commission, 59 N.J. Super. 87, 90 (Ch.Div.1960). After the water works was acquired by condemnation, the three cities entered into an agreement dated February 3, 1931 (1931 agreement). See N.J.S.A. 40:62-129. Paragraph 13 of that agreement is the subject matter of this litigation.

13. Reports shall be made to the respective cities quarterly on the first days of March, June, September, and December in each year which shall contain a detailed statement of the operation of the water works and any other information of value to the Cities. The Commission shall transmit all moneys in their hands acquired from such operation beyond what is necessary to meet its obligations, to the TREASURER of the respective Cities in proportion to their

ownership in said water works, that is to say, in the proportion that the assessed valuation for taxation of all real estate of each of said Cities for the year Nineteen Hundred and Twenty-Nine, bears to the total assessed valuation for said year of all the real estate in all said Cities.

This paragraph, in effect, fixed the approximate percentage of ownership of the Commission by the cities as Paterson 4/7ths, Passaic 2/7ths and Clifton 1/7th.*fn2

In 1931, Clifton was generally considered a rural community while Paterson and Passaic were urbanized industrialized cities. Over the past 50 years, the population of the cities has changed somewhat.

POPULATION.*fn3

Year Paterson Passaic Clifton

1930 138,153 62,959 46,875

1940 139,656 61,394 48,827

1950 139,336 57,702 64,511

1980 137,970 52,463 74,388

The ratio of the assessed valuation of real property in the respective cities has changed dramatically over the past 50 years.

ASSESSED VALUATION OF REAL

PROPERTY.*fn4

Year Paterson Passaic Clifton

1929 183,111,610 84,331,875 41,941,270

1940 150,238,455 70,071,575 45,915,575

1986 261,032,600 613,279,519 1,177,432,700

As among the three owner cities, their residents purchased and used water in the following percentages for 1986:

Percentage

Paterson 48

Passaic 20

Clifton 32

As between the three owner cities and all users of water purchased from the Commission, the percentages for the year 1986 were:

three owner cities (Paterson, Passaic, Clifton) 63 1/2%

all other users (20 municipalities) 36 1/2%

Although the 1931 agreement permitted distribution of "all moneys in their hands acquired from such operation beyond what is necessary to meet its obligations, to the TREASURER of the respective cities in proportion to their ownership in said water works, that is to say, in the proportion that the assessed valuation for taxation of all real estate of each of said Cities for the year Nineteen Hundred and Twenty-Nine, bears to the total assessed valuation for said year of all the real estate in all said cities," no distributions were made for the first 20 years of its existence. Thereafter, distributions were made as follows:

1952 $150,000

1953 $125,000

1957 ...


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