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In re Distribution of Liquid Assets Upon Dissolution of the Union County Regional High School Dist. No. 1

January 30, 2001

IN THE MATTER OF THE DISTRIBUTION OF LIQUID ASSETS UPON DISSOLUTION OF THE UNION COUNTY REGIONAL HIGH SCHOOL DISTRICT NO. 1, UNION COUNTY.


The opinion of the court was delivered by: Stein, J.

ON APPEAL FROM ON CERTIFICATION TO Appellate Division, Superior Court

Argued October 23, 2000

On certification to the Superior Court, Appellate Division.

We granted certification to review a decision of the State Board of Education (State Board) ordering distribution of the liquid assets of the now-dissolved Union County Regional High School District No. 1 ("District") to each of the District's six constituent municipalities. The District operated four school buildings and had approximately $3.3 million in liquid assets. Upon dissolution, the District's school buildings and real estate, valued at approximately $110 million, were deeded to their host municipalities. Petitioner Borough of Mountainside, one of the two municipalities that did not host a District school building, contends that the State Board erred by failing to order distribution of the District's liquid assets only to the municipalities that were not deeded real estate. The Appellate Division upheld the State Board ruling. We reverse and remand the matter to the State Board with instructions to distribute the District's liquid assets in the manner specified in this opinion.

I.

Union County Regional High School District No. 1 was established in 1935 by the joint efforts of six municipalities: Clark, Garwood, Kenilworth, Springfield, Mountainside, and Berkeley Heights. The District was a limited purpose school district, serving only high school students. In 1993, the school boards for the six municipalities commissioned a study to consider the feasibility of dissolving the District. Thereafter, five of the six municipalities -- all but Garwood -- applied to the Union County Superintendent of Schools pursuant to N.J.S.A. 18A:13-51, to "make an investigation as to the advisability of the dissolution of the regional district." Ibid. Pursuant to N.J.S.A. 18A:13-52, Dr. Leonard Fitts, the Union County Superintendent, issued a report in April 1995 that was intended to enable the municipalities to

form an intelligent judgment as to the advisability of the proposed . . . dissolution and the effect thereof upon the educational and financial condition . . . of the constituent districts in the event of a dissolution, and setting forth the amount of indebtedness, if any, to be assumed . . . by each constituent district in the event of a dissolution. . . . [N.J.S.A. 18A:13-52.]

Dr. Fitts recommended against dissolution. However, in the event that the District was dissolved and the four school buildings and accompanying real estate were deeded to their host municipalities, Dr. Fitts recommended that Mountainside and Garwood alone share all liquid assets, with Mountainside receiving 76% and Garwood 24% based on an October 1, 1994 equalized valuation of property. The value of the assets each municipality would receive under Dr. Fitts' recommendation is set forth in Table A.

Table A: Union County Superintendent Recommendation for Distribution of Real Property and Liquid Assets

Community

Real Property (totaling $110 million)

Liquid Assets (totaling $3.3 million)

% of Total Assets

% of 1996-97 Budget Contribution

Kenilworth

$24,519,284

$0

22%

13%

Berkeley Heights

$30,214,543

$0

27%

27%

Clark

$30,119,535

$0

27%

22%

Springfield

$25,755,082

$0

23%

19%

Mountainside

$0

$2,483,160

2%

15%

Garwood

$0

$784,1 ...


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