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Township of North Bergen v. City of Jersey City

Decided: April 13, 1989.


On appeal from the Superior Court, Law Division, Hudson County.

Shebell, Gruccio and Landau. The opinion of the court was delivered by Landau, J.A.D.


Plaintiffs-appellants, the Township of North Bergen (North Bergen) and the Town of Secaucus (Secaucus), appeal from the entry of summary judgment in favor of the defendants-respondents, the City of Jersey City (Jersey City), Newport City Development Company (Newport) and the Hudson County Board of Taxation (Board).

Newport, a limited partnership, is developing a large previously blighted area on the Jersey City waterfront. It applied to Jersey City for a tax abatement on Phase I of the proposed development, a 1500 residential rental unit, offering to set aside 270 units (18%) for moderate income families at an estimated annual loss of revenue of $3,000,000, in exchange for exemption from local property taxes for 40 years. Tax abatement for a limited period of time is authorized under N.J.S.A. 55:14K-37(b). Newport proposed to pay to Jersey City a yearly service charge of approximately $1.3 million in lieu of local taxes. (Plaintiffs allege that without the exemption Newport would have to pay between $4,000,000 and $6,000,000 per year in local property taxes.)

The Jersey City Municipal Council (the Council) reviewed the application on October 21 and October 25, 1985. On October 28 and November 1, 1985, the Council met to consider the abatement application. These meetings were open to the public. Prior to the meetings the Secretary of the Tax Abatement Committee for Jersey City gave notice in the Jersey Journal and the Hudson Dispatch in accordance with N.J.S.A. 10:4-6 et seq. The Council adopted Resolution C-360 on November 1, 1985, granting Newport a tax abatement pursuant to N.J.S.A. 55:14K-37(b) and upon execution of a tax abatement agreement authorized thereunder.

Newport then entered into financing agreements for $150,000,000 with the New Jersey Housing Mortgage and Finance Agency (the Agency), covering Phases I and II. Their supplemental letter-contract dated December 24, 1985, incorporated a copy of "Rules" regarding the rate of return on equity. The agreement provided in pertinent part:

The rate of return on equity permitted annually shall be calculated in accordance with Subchapter 3 of the Agency's Rules and Regulations, attached hereto as Exhibit A. Furthermore, subject to approval by the Agency Members, these rules and regulations will be conformed to the policies and procedures for CCRC's [Continuing-Care Retirement Communities] regarding return on equity approved by the Agency on May 23, 1985, a copy of which is attached hereto as Exhibit B.

The Exhibit A rule had been proposed for adoption, 17 N.J.R. 505(a) (March 4, 1985), but then withdrawn by the Agency, 17 N.J.R. 1258(b) (April 29, 1985). A new rule, however, was formally adopted shortly thereafter, utilizing the same rate of return formula agreed to by Newport.

North Bergen, its Board of Education and Secaucus challenged the propriety of the tax abatement by filing actions in lieu of prerogative writ in the Law Division, but defendants' motion for summary judgment was granted following extended arguments.

In these consolidated appeals, North Bergen and Secaucus urge that the trial court erred in determining that granting a tax abatement to Newport by resolution was proper, that the

abatement violates Article VIII, Section 3, Paragraph 1 of the Constitution of the State of New Jersey because Newport's profits and dividends are not limited by law, that the full value of all improvements made by Newport should be included in county and state equalization tables, and that N.J.S.A. 55:14K-37(b) is unconstitutional because it improperly delegates taxing power to municipalities and authorizes arbitrary allotment of tax revenue.



Appellants assert that it was improper for Jersey City to grant Newport a tax abatement by resolution. N.J.S.A. 55:14K-37(b) provides in pertinent part:

The governing body of any municipality in which a housing project financed or to be financed by the agency is or is to be located may by ordinance or resolution, as appropriate, provide that such project shall be exempt from real property taxation, if the housing sponsor enters into an agreement with the municipality for payments to the municipality in lieu of taxes for municipal services. (emphasis added).

Appellants claim that the words "as appropriate" as used in N.J.S.A. 55:14K-37(b) required Jersey City to adopt an ordinance when granting the present tax abatement, as determined by "the ...

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