On certification to the Superior Court, Appellate Division.
For affirmance -- Justices Clifford, Handler, Pollock, O'Hern, Garibaldi and Stein. Opposed -- none. The opinion of the Court was delivered by Pollock, J.
First Peoples Bank of New Jersey (the Bank) challenges both facially and as applied the sewer ordinance of Medford Township (Medford or the Township). In unreported opinions, the Law Division and the Appellate Division sustained the ordinance. We granted the Bank's petition for certification, N.J. , A.2d (1991), and now affirm.
In the mid-1970s Medford experienced rapid land use development that overburdened the municipal sewer system. Consequently, the New Jersey Department of Environmental Protection (DEP) imposed a sewer connection ban. Medford's initial response was to adopt a "Flow Equalization Plan," which involved the use of holding tanks to store effluent during peak periods. By 1983, the sewer plant was again at its limit. DEP imposed a second sewer ban ordering the Township to increase the capacity of its pumping station. Land use development came to a halt. The Township's need to construct additional sewer capacity, combined with the problems of financing the
construction, led to the enactment of ordinances 1983-10 and -11.
Not challenged on this appeal is ordinance 1983-10, which appropriates $4.6 million to increase the capacity of the Township's sewage treatment plant from 1.3 to 1.75 million gallons per day. Instead, the Bank challenges ordinance 1983-11, which provides for the administration of the increased sewer capacity.
The intent of the ordinance, according to section 1, is "to establish the rules and regulations for connections to the Sewage Treatment Plant upon expansion, and to establish appropriate fees for the repayment of such notes and bonds as may be issued in order to finance and pay for the expansion to said plant." In that section, the governing body found that
it is in the best interest of the Township to establish a priority list such that proposed users of the system desiring to connect to the system can pay for said connections and receive priority in and to the additional capacity to be generated by virtue of said expansion, subject, however, to the rights and interests of the Township to control the allocation of said capacity in the best interests of the Township and its residents in order that said reservation of capacity is not irrevocably committed to a proposed user who may not construct and/or build a project using part of the expanded capacity.
Thus, the ordinance contemplated the receipt of connection fees to pay for the additional capacity. It also contemplated that Medford would control the issuance of connection permits "in the best interests of the Township."
The central feature of the ordinance provides property owners with the option to purchase connection permits before obtaining municipal land use approvals. Accordingly, section 4H(1)(g) of the Sewer and Water Ordinance provides in pertinent part:
Subject to the right of the Township to repurchase any sewer connection permit, as set forth in subsection (h) below, the owner of any lot, parcel or tract of land in the Township where construction or extension of public sewer is permitted by the Medford Development Ordinance, 1982-22, may purchase sewer connection permits for said lot, parcel or tract. The maximum number of permits which may be purchased shall not exceed the maximum number of residential dwelling units or non-residential units which could be constructed on the lot, parcel or tract under the applicable density, zoning, use, and performance standards and provisions of the said Development Ordinance.
The purpose of the provision allowing a developer to purchase sewer permits before obtaining final approval is to finance the cost of sewer plant improvements and to retire the debt incurred for those improvements. Consistent with this purpose, the cost of permit fees escalated annually until 1987. In effect, the ordinance granted a "discount" for the early purchase of permits.
The Township retains control over sold, but unused, permits in section 4H(1)(h), which provides:
At such time as the committed capacity of the sewage treatment plant equals seventy-five per cent (75%) of the total permitted treatment or design capacity of the sewage treatment plant, and at any time thereafter, the Township may elect, at Township's sole option, to repurchase said permit. This repurchase shall be accomplished by giving written notice to the record owner of any said permit, stating the Township's intention to repurchase six (6) months from the date of said notice.
So essential to the project was the sale of permits that the Township attorney in December 1983 sent a letter to the owners of property who had received land use approvals or who would "require the use of public sewer when the property is developed." The letter warned that "unless there is financial cooperation from those landowners who will benefit from the additional capacity, the project cannot be completed." It continued:
I am writing to advise you of the availability of the sewer connections and to urge you to purchase the required number of connections to serve your development or potential development. While the connections cannot be sold or transferred to another parcel, they are transferrable with your land if a developer, builder or thirty [sic] party purchases your property.
By purchasing your connections prior to December 31, you will (a) save money (b) reserve capacity in the new expansion for your land and (c) help to ...