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Town of Secaucus v. Hudson County Board of Taxation

Decided: August 4, 1993.


On certification to the Superior Court, Appellate Division, whose opinion is[Table] (1992).

For modification and affirmance -- Chief Justice Wilentz and Justices Handler, Clifford, Pollock and Garibaldi. For reversal -- Justices Stein and O'Hern. The opinion of the Court was delivered by Handler, J. Stein, J., Dissenting.


This case asks the Court to resolve the question whether a statute enacted under the education laws that exempts the City of Bayonne from paying its share of taxes committed to the operation of the Hudson County Vocational School violates the State Constitution. In implementing the tax exemption, Hudson County established a two-tier tax system under which Bayonne paid a county tax rate lower than that of all other municipalities in Hudson County. The Town of Secaucus challenged that two-tier system as violating both the prohibition on special legislation, article IV, section 7, paragraph 9(6), and the uniformity clause, article VIII, section 1, paragraph 1, of the New Jersey Constitution. The trial court found for Secaucus on both those grounds. The Appellate Division affirmed that decision on uniformity clause grounds, but failed to reach the question of whether N.J.S.A. 18A:54-37 constituted special legislation. Secaucus v. Hudson County, 255 N.J. Super. 665, 605 A.2d 1151 (1992).

The Hudson County Board of Taxation petitioned this Court from that decision and we granted certification, 130 N.J. 396, 614 A.2d 618 (1993), to decide whether the exemption statute is constitutionally invalid.


The City of Bayonne, located in Hudson County, has operated a vocational-educational program since 1931. Originally, Bayonne implemented that program through a separate vocational high school. In the 1960s, however, Bayonne created a comprehensive high school that fully integrated the vocational program into its general high school curriculum. Bayonne's vocational-education program, which has been widely praised, allows vocational students

to participate fully in school activities and attend many classes with general education high school students.

In 1972, the Board of Education of the Hudson County Vocational School (hereafter "HCVS" or "county vocational school") passed a resolution authorizing the acquisition of a building for a new county vocational school. The following year, a $2 million budget was proposed for the operation of HCVS, and in 1974 HCVS began operating from its own facility. Realizing that the Bayonne vocational program, by that time in existence more than forty years, would not be discontinued, and wanting to spare Bayonne the double expense of supporting its own and the county's vocational programs, State legislators from Hudson County proposed legislation exempting Bayonne from contributing to the maintenance of the county vocational school.

The terms of the original legislation, proposed as Senate Bill 74 in the 1972 Legislative Session, were quite broad. Those terms provided that

each municipality included within a school district maintaining a system of vocational education approved for the purposes of Federal or State Allotment of vocational funds by the Commissioner of Education under the regulations of the State Board of Education shall be exempt from assessment, levy or collection of taxes based on any apportionment of amounts appropriated for the use of a county vocational school district.

The effect of the original legislation would have exempted virtually every municipality with a vocational-education program from contributing to the support of its county's vocational school. Recognizing that, Senate Education Committee amendments to Senate Bill 74 significantly narrowed the scope of the exemption in order to exempt only Bayonne from the general obligation to support county vocational-educational programs. That narrowing was achieved by limiting the effect of the legislation in two ways. First, the amendments restricted the municipalities affected only to those in a "county of the first class having a population of not more than 700,000 according to the 1970 Federal Census." L. 1973, c. 305, § 1. In 1973, N.J.S.A. 40A:6-1 defined a first class county as "a county having a population of more than 600,000." By that criterion, Bergen County (1970 population 897,148), Essex

County (1970 population 932,526), and Hudson County (1970 population 607,839) qualified as first class counties. Only Hudson, however, met the amended statute's population requirement for the tax exemption.

Second, the amendments required that in order for a municipality to qualify for the exemption, its vocational program would have to have been in existence, as a program approved by the State Board of Education for state or federal funding, for at least twenty years. Because, among the Hudson County municipalities, only Bayonne had a vocational education program in existence and approved by the State for at least twenty years, the amended statute applied only to Bayonne. The statement to the bill, from the Senate Education Committee, left no doubt about the intent of the legislation: "This bill, as amended, would exempt the City of Bayonne from any assessment of taxes due to the cost of supporting the county vocational school in Hudson County."

When the 1980 census revealed a reduction in Hudson County's population to 556,972, thereby jeopardizing its first-class status, the Legislature, by L. 1981 c. 462, § 44, established population density as a new criterion and amended N.J.S.A. 40A:6-1 to redefine counties of the first class as "counties having a population of more than 550,000 and a population density of more than 3,000 persons per square mile." Under that reclassification, Hudson County, with a density of 12,801.1 residents per square mile, retained its status as a county of the first class. At the same time, the Legislature, by L. 1981, c. 462, § 20, amended N.J.S.A. 18A:54-37 to substitute "latest federal decennial census" for "1970 federal census." Consequently, Bayonne remained the sole New Jersey municipality exempt from county-vocational-school tax payments.

The exemption statute, N.J.S.A. 18A:54-37, now reads:

Notwithstanding any of the provisions of chapter 54 of Title 18A of the New Jersey Statutes, in any county of the first class having a population of not more than 700,000 according to the latest decennial census, each municipality included within a school district which has maintained for a minimum of 20 years a vocational educational program approved for the purposes of federal or State allotment of vocational funds by the Commissioner under the regulation of the State Board of Education shall be exempt from assessment, levy or collection of taxes based on

any apportionment of amounts appropriated for the use of a county vocational school district.

To implement the mandate of N.J.S.A. 18A:54-37, Hudson County devised a two-tier tax system for assessing the county tax burden on its municipalities. The system, administered by defendant Hudson County Board of Taxation (HCBT), provided a higher rate (which included the costs of operating the county vocational school) for eleven of Hudson County's twelve municipalities, including plaintiff, Secaucus, and a lower rate (which excluded the costs of operating the county vocational school) for Bayonne. The dual rate was necessary because appropriations for county vocational education must be assessed, levied, and collected in the same manner as general county appropriations pursuant to N.J.S.A. 18A:54-29.2. Lacking any statutory authorization, HCBT could not separate the county vocational-school component from the common purpose budgetary requirements of the county. Under the two-tier system, the other eleven Hudson County municipalities, by paying proportionally more tax than Bayonne, compensated for the revenue lost through Bayonne's exemption from the cost of maintaining HCVS. As the Appellate Division noted: "Put more bluntly, and more precisely, Hudson County struck two county tax rates for its municipalities, the lower one solely for Bayonne." 255 N.J. Super. at 668, 605 A.2d 1151.

The two-tier system of taxation, however, operated not only in the assessment of regular county taxes but also in the determination of what each Hudson County municipality had to pay in added and omitted assessments. As the trial court in the litigation below explained:

On February 15, each year, municipalities must also pay to the county a share of the revenues derived pursuant to N.J.S.A. 54:4-63.1, et seq., (added assessments of real estate), N.J.S.A. 54:4-63.12, et seq., and N.J.S.A. 54:4-63.31, et seq., (omitted assessments of real estate). These provisions prevent new properties constructed after the October 1 assessment date, or properties which were not included in the regular assessment list of October 1 for the tax year, from escaping taxation until the following year. Under N.J.S.A. 54:4-63.19, -63.38, the added or omitted property assessment list is multiplied by the county rate to calculate the sums due to the county for added and omitted taxes.

[ Secaucus v. Hudson County Bd. of Taxation, No. 094204-86W (Law Div. June 29, 1990).]

By applying its two-tier system of taxation to the added-and-omitted assessments list, HCBT afforded Bayonne the benefit of a lower rate, while imposing on the other Hudson County municipalities a higher rate. Exacerbating the perception of unfairness in the two-tier tax system was the fact that the revenues generated by the added and omitted assessments were applied only to general county operating expenses and were not separately allocated to HCVS.

Accordingly, on October 17, 1986, Secaucus, as one of the eleven Hudson County municipalities subjected to the higher tax rate, brought a complaint in lieu of prerogative writs against Hudson County and HCBT. Secaucus initially challenged only the methodology by which HCBT calculated the two rates. Secaucus sought to have the county vocational school component excluded from the added and omitted assessments. By leave of the Appellate Division, Secaucus subsequently amended its complaint to include the claim that N.J.S.A. 18A:54-37 was unconstitutional as violating the special-legislation and uniformity provisions of the State Constitution. Bayonne was included as a necessary party.

Finding the effect of N.J.S.A. 18A:54-37 to be clearly discriminatory, the trial court ordered HCBT to adopt a single county tax rate, to debit Bayonne for its underpayment of county taxes, and to credit the eleven other municipalities for excess payments. On the constitutional claims, the trial court determined that N.J.S.A. 18A:54-37 violated both the uniformity clause of the New Jersey Constitution, article VIII, section 1, paragraph 1, and the special-legislation prohibition of article IV, paragraph 9, section 6. The trial court found a violation of the uniformity clause because N.J.S.A. 18A:54-37 granted a tax exemption to Bayonne based on the mere incidence of location, rather than on the use of its property. Applying the three-step special-legislation analysis of Vreeland v. Byrne, 72 N.J. 292, 300-01, 370 A.2d 825 (1977), the trial court also found the statute to be special legislation.

On August 31, 1990, this Court Ordered HCBT to comply with the trial court judgment requiring a single 1990 tax rate among all Hudson County municipalities, but stayed that part of the judgment requiring HCBT to credit and debit the Hudson County municipalities for prior years' payments under the two-tier tax system. The single Hudson County tax rate now in effect was computed for the 1990 tax year, pursuant to the Court's order.

The Appellate Division agreed with the trial court that N.J.S.A. 18A:54-37 violated the uniformity clause. The Appellate Division, however, applied an entirely different rationale. In its view, the lack of uniformity was caused "by excusing a taxpayer (Bayonne) from having to pay its proportionate share of the cost of an item in the budget of the taxing district (Hudson County)." 255 N.J. Super. at 669, 605 A.2d 1151. Because the uniformity clause requires that all real property "be taxed at the general rate of the taxing district in which the property is situated, for the use of such taxing district," the Appellate Division found that a uniform county tax rate as among the municipalities of a county is mandated by article VIII, section 1, paragraph 1. Id. at 668-69, 605 A.2d 1151. Having found N.J.S.A. 18A:54-37 unconstitutional under the uniformity clause, the Appellate Division did not reach the special legislation question.



We now consider whether N.J.S.A. 18A:54-37 is unconstitutional because it is special legislation or because it violates the uniformity clause under the New Jersey Constitution. In answering the constitutional question, we consider as a preliminary matter two issues: the standing of HCBT to address the constitutionality of the exemption statute and the standard for reviewing claims challenging the constitutionality of legislation.

Secaucus claims that HCBT lacks standing to urge the constitutionality of N.J.S.A. 18A:54-37. That to have standing a

party must have "a sufficient stake and real adverseness with respect to the subject matter of the litigation" is well settled. N.J. Chamber of Commerce v. N.J. Election Law Enforcement Commission, 82 N.J. 57, 67, 411 A.2d 168 (1980). Additionally, "[a] substantial likelihood of some harm visited upon the plaintiff in the event of an unfavorable decision is needed for the purposes of standing." Ibid. By those criteria, HCBT clearly has standing. Indeed, HCBT's present position is not unlike that of the Bergen County Board of Taxation in Township of Mahwah v. Bergen County Bd. of Taxation, 98 N.J. 268, 486 A.2d 818, cert. denied sub nom. Borough of Demarest v. Township of Mahwah, 471 U.S. 1136, 105 S. Ct. 2677, 86 L. Ed. 2d 696 (1985). In that case, the Court heard the Bergen County Board of Taxation's cross-appeal on the constitutionality of county tax rebate statutes. Like the situation in Mahwah, the decision here will affect how the county tax board calculates the municipalities' apportioned share of county taxes. County boards of taxation are regarded as state agencies with the jurisdiction, authority, and responsibility over county taxes. N.J.S.A. 54:3-11; see DeFeo v. Smith, 17 N.J. 183, 188, 110 A.2d 553 (1955). As a state agency, HCBT will be affected by the determination of the constitutionality of the statute it is charged with enforcing. Significantly, HCBT has been involved in every step of this litigation, having been named by Secaucus as a defendant in both the original and amended complaints. Accordingly, we hold that HCBT has standing to be heard.

With respect to the standard for reviewing the constitutionality of State statutes, the Court will afford every possible presumption in favor of an act of the Legislature. Holster v. Board of Trustees of Passaic County College, 59 N.J. 60, 66, 279 A.2d 798 (1971). Where alternative interpretations of a statute are equally plausible, the view sustaining the statute's constitutionality is favored. David v. Vesta Co., 45 N.J. 301, 212 A.2d 345 (1965); In re Loch Arbor, 25 N.J. 258, 135 A.2d 663 (1957); see Edgewater Inv. Assocs. v. Borough of Edgewater, 103 N.J. 227, 510 A.2d 1178 (1986). Only a statute "clearly repugnant to the constitution" will

be declared void. Newark Superior Officers Ass'n v. City of Newark, 98 N.J. 212, 222-23, 486 A.2d 305 (1985).

Further, in the field of taxation, the Court has accorded great deference to legislative judgments. McKenny v. Byrne, 82 N.J. 304, 314, 412 A.2d 1041 (1980). The Court has recognized that absolute equality in taxation is a practical impossibility, Borough of Totowa v. Passaic County Board of Taxation, 5 N.J. 454, 464, 75 A.2d 874 (1950), and that absolute mathematical precision is not required. Murnick v. Asbury Park, 95 N.J. 452, 471 A.2d 1196 (1984). Additionally, in constitutional challenges based on the special-legislation prohibition of article IV, "the burden is on the party challenging the constitutionality of the statute to demonstrate clearly that it violates a constitutional provision." Mahwah, supra, 98 N.J. at 283, 486 A.2d 818.

No statute, however, can authorize an unconstitutional practice. Township of West Milford v. Van Decker, 120 N.J. 354, 357, 576 A.2d 881 (1990). Wherever a statute and the constitution come into conflict, the statute must give way. Id. at 364, 576 A.2d 881.

Accordingly, we must examine N.J.S.A. 18A:54-37 to see if it clearly and irremediably violates the constitutional provisions prohibiting special legislation, art. IV, § 7, para. 9, and mandating uniformity of taxation of real property within a taxing district, art. VIII, § 1, para. 1.


The New Jersey Constitution provides that:

9. The Legislature shall not pass any private, special or local laws:

(6) Relating to taxation or exemption therefrom. [ N.J. Const. art. IV, § 7, para. 9(6).]

As Justice Garibaldi observed in Town of Morristown v. Woman's Club, "the guiding principles of taxation as embodied in the constitution, requir[e] that taxation of all real property be imposed only by uniform rules and exemption be accomplished only by

general laws." 124 N.J. 605, 612, 592 A.2d 216 (1991). Town of Morristown involved only a challenge under the uniformity provision of article VIII. We need not resolve whether the "general law" requirement of article VIII and the prohibition on special legislation of article IV are functionally identical for the purposes of tax laws challenged as special legislation. Whatever the case, the second principle that Justice Garibaldi enunciated is relevant to an article IV special-legislation analysis, i.e., exemptions to taxation shall be accomplished only by general laws.

The concept of special legislation "has been well established in this state for almost a century." Town of Morristown, supra, 124 N.J. at 622, 592 A.2d 216 (Clifford, J., Dissenting). From a constitutional standpoint, a law is regarded as special legislation "'when, by force of an inherent limitation, it arbitrarily separates some persons, places or things from others upon which, but for such limitation, it would operate. The test of a special law is the appropriateness of its provisions to the objects that it excludes.'" Ibid. (quoting Budd v. Hancock, 66 N.J.L. 133, 135, 48 A. 1023 (Sup.Ct.1901)); see Kimball Hosp. v. Brick Township Hosp., 86 N.J. 429, 446, 432 A.2d 36 (1981).

In Vreeland v. Byrne, the Court established a three-part test to determine whether a statute constituted special legislation. As Justice Mountain described it:

[T]he method of analysis is this: we first discern the purpose and object of the enactment. We then undertake to apply it to the factual situation presented. Finally we decide whether, as so applied, the resulting classification can be said to rest upon any ...

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