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.
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
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.
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
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:
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: