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Secure Heritage, Inc. v. City of Cape May

June 24, 2003

SECURE HERITAGE, INC., D/B/A ALEXANDERS'S INN; THE ABBEY OF BAYBERRY INN, L.L.C.; BUTTONWOOD BED & BREAKFAST, INC., D/B/A BUTTONWOOD MANOR; COLUMBIA HOUSE; THE INN AT JOURNEY'S END, L.L.C.; KING'S COTTAGE PARTNERSHIP, D/B/A KING'S COTTAGE; SUSAN AND ELAN ZINGMAN-LEITH PARTNERSHIP, D/B/A LEITH HALL; THE MANSE BED & BREAKFAST; CAPE MAY MANAGEMENT, INC., D/B/A MARQUIS DE LAFAYETTE; MONTREAL INN, INC.; MOORING, INC., D/B/A THE MOORING; THE PRIMROSE INN; RUBOB, INC., D/B/A SANDPIPER BEACH INN; HENRY SAWYER INN; KEYSTONE, INC., D/B/A SEA CREST INN; SPRINGSIDE GUESTHOUSE; VELIAS SEASIDE INN; THE VICTORIAN INNS, INC. AND THE VICTORIAN LOOK, PLAINTIFFS-RESPONDENTS/ CROSS-APPELLANTS,
v.
CITY OF CAPE MAY; WILLIAM G. GAFFNEY; JEROME E. INDERWIES; DR. EDWARD J. MAHANEY, JR. AND HARRY A. STOTZ, DEFENDANTS-APPELLANTS/ CROSS-RESPONDENTS.



On appeal from the Superior Court of New Jersey, Law Division, Cape May County, L-240-01.

Before Judges Braithwaite, Lintner and Parker.

The opinion of the court was delivered by: Lintner, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued May 12, 2003

Defendants, the City of Cape May (the City) and City Council members, appeal from a portion of a Law Division order granting summary judgment in favor of plaintiffs, various innkeepers doing business in the City. The summary judgment order, dated May 3, 2002, declared the provisions of the City's Ordinance 1214-2000 (the Ordinance) prohibiting individuals from purchasing more than five seasonal beach tags and banning hotels, motels, inns, bed and breakfasts, and other rental units from transferring seasonal beach tags unconstitutional, and declared such tags transferable. The order also required the City to: (1) maintain complete and accurate records of the revenue generated from its beach tag program, including a separate and distinct"beach tag program" account into which all beach tag revenue is to be deposited and from which all expenses are to be paid, (2) prepare a quarterly analysis and year-end report of the indirect costs of its beach tag program, and (3) publish modifications to an amended ordinance no later than March 30, 2003.

Defendants' cross motion for summary judgment seeking to dismiss plaintiffs' complaint insofar as it challenged the City's 2001 and 2002 budgets was granted, and plaintiffs' application for counsel fees and costs was denied. Plaintiffs cross appeal the order dismissing their challenge to the City's 2002 budget and the denial of counsel fees and costs.

We affirm the order insofar as it declared the provisions of the Ordinance banning the sale and transfer of seasonal beach tags to the lodging industry unconstitutional. We reverse the order insofar as it strikes down the provisions of the Ordinance limiting the sale of seasonal beach tags to five per person. We also reverse and remand for further proceedings those provisions of the order requiring the City to account for all the indirect expenses and maintain a separate bank account into which all beach tag revenue is to be deposited and from which all expenses are to be paid.

The combined procedural history and relevant facts are as follows. Until the mid-twentieth century, beaches in New Jersey were free and open to the public. Borough of Neptune City v. Borough of Avon-by-the-Sea, 61 N.J. 296, 300 (1972). In 1955, the Legislature granted municipalities bordering the Atlantic Ocean the authority to charge the public for access to their beaches and bathing facilities.*fn1 N.J.S.A. 40:61-22.20. In 1977, pursuant to this statute, the City enacted its first beach revenue ordinance, which required users of its beach to purchase"beach tags." The 1977 ordinance provided six categories of beach tags: (1) a seasonal tag ($13 if purchased before May 1 and $16 if purchased thereafter); (2) a weekly tag ($10); (3) a daily tag ($4); (4) a"20th Century" tag (entitling the owner to one seasonal tag annually up to and including the year 2000 for a cost of $100); (5) a three day tag ($7); and (6) a"decade certificate" (entitling the owner to one seasonal tag annually for a period of ten consecutive years at a cost of $100). That ordinance also provided that the tags, except for the daily tags, could not be"sold or leased or transferred to any person or entity by any one other than the City or its duly authorized representatives."*fn2

Despite the prohibition on the transfer of beach tags, plaintiffs purchased large quantities of seasonal beach tags, which they would provide to their guests as amenities for their stay. Such a practice was thought to be necessary for plaintiffs to compete with other seaside resort towns, such as Wildwood and Atlantic City, that did not charge for admission to their beaches. From 1997 to 1999, the City's beach operation ran at a deficit, thus requiring the City to subsidize the operation from its general revenue fund.*fn3

According to Luciano V. Corea, City Administrator for the City of Cape May,

[n]otwithstanding a provision prohibiting the transfer of any but daily beach tags, the practice was widespread, and [the] City Council began to question its advisability. In fact, as we approached the 2000 summer season, proposals were made to enforce the non-transferability of various beach tags. However, we received numerous complaints by owners of various hotel, motel and bed and breakfast facilities, who advised us that they had already created and disseminated marketing materials which provided for the use of free beach tags as supplied by those institutions. Those businesses were, quite understandably, concerned that any enforcement of the then existing beach tag ordinance would render their advertisements incorrect.

As a result, in 1999, the City enacted Ordinance 1209-2000 (1999 ordinance), amending the 1977 ordinance to provide two classes of seasonal beach tags: a personal seasonal beach tag and a commercial seasonal tag. The personal seasonal tag was defined as"a beach tag... for personal use by the purchaser of such beach tag or by any person to whom such beach tag is transferred gratuitously and without consideration, remuneration or other financial benefit, directly or indirectly." A personal seasonal tag cost $13 before May 1 and $17 thereafter, and a limit of ten tags per person was imposed. The commercial seasonal beach tag, which was created as an accommodation to the lodging industry and to increase revenue, was defined as"a beach tag... for commercial use and which may be transferred by the purchaser for consideration, remuneration or other financial benefit."

A commercial seasonal tag cost $22, and there was no limit on the number that could be purchased. The daily, three-day, and weekly beach tags were still available.*fn4 With the addition of commercial seasonal beach tags for the 2000 season, the City's beach operation deficit shrank to $35,595.

The 1999 ordinance was only in effect for the 2000 bathing season. During the summer of 2000, the City Council conducted hearings concerning the advisability of the commercial seasonal beach tag and the transferability of beach tags. According to Corea,

many owners of hotels, bed and breakfast facilities requested the elimination of the commercial beach tag -- these owners simply did not feel that it was right or proper for those establishments to supply beach tags and felt it would be better if those beach tags were purchased by a guest in a [manner] much like most other New Jersey municipalities.

In August 2000, the City enacted the Ordinance to take effect on September 4, 2000, in time for the 2001 bathing season. The Ordinance dropped the commercial seasonal beach tag and limited seasonal tags to personal seasonal beach tags. Section 8-2 of the Ordinance defined"Seasonal Beach Tags" as follows:

"Seasonal beach tag" shall mean a beach tag to use the public beaches in the City of Cape May during a bathing season for personal use by the purchaser of such beach tag or by any person to whom such beach tag is transferred gratuitously and without consideration, remuneration or other financial benefit, directly or indirectly. No more than five (5) seasonal beach tags may be purchased by one (1) person.

Additionally, section 8-7(a) provided:

Seasonal beach tags shall not be sold, leased or transferred for consideration, remuneration or other financial benefit, directly or indirectly, such as, without limitation, for use by hotel, motel, inn, bed and breakfast or other rental unit guests.

As a result of the Ordinance, the lodging industry was effectively precluded from purchasing seasonal beach tags, thereby forcing its guests to buy daily, weekly, three-day or seasonal tags, which, like the general public, they could do by mail or via the Internet. In 2001, for the first time in five years, the City's beach operation ran at a surplus, $109,838.

During discovery, several members of the City Council gave their reasons for voting for the Ordinance. Former Mayor William G. Gaffney testified as follows:

[T]he city council was always trying to obtain the proper funds from the sale of tags to pay for the beach operation. We felt over the years that we were not able to do that, that the taxpayers had to subsidize the beach operation.....

[S]ome people, council members in particular felt that the sale of tags to the individual tourist on a one-on-one situation with no business transferring tags back and forth, that that particular way of selling tags would generate more income. I can only assume that, I don't know of no [sic] feasibility study that would say you will gain this X number of thousands of dollars more if you don't do it. I can only assume that they were -people felt that that would happen and what the numbers are producing right now, as we sit here, the sale of beach tags so far this year [2001]... I think those numbers will show that by doing it the way we're doing it with this ordinance, it's producing the needed revenue.

Councilmember Edward J. Mahaney, Jr., recalled as follows:

[A] draft [of the Ordinance] was proposed, it was circulated widely throughout the city to find out what people felt of it. And it was truly impressive that every segment thought this was a good compromise and that they could live with it. Okay? I wasn't personally happy with it because I felt we still had a distinction between the residents and the businesses and I voiced that at council meetings that I had great reservations, that I would have preferred that the residents buying seasonal beach tags wouldn't be able to transfer them, even if it was gratuitously, you know, a beach tag was a beach tag and it belonged to that person and I felt that was fair. However, when we had the public hearing on this ordinance, all the special interest groups were there. And they all testified that they were in favor of this and that they thought it was fair and they could live with it, and it was a good way to start. So, in the spirit of cooperation, I voted for it. There was no pressure on me there.

Councilmember Jerome E. Inderwies was asked:

Q: [T]he reason that you voted for the change from [the 1999 ordinance] to [the Ordinance] wasn't just the transfer of a beach tag, but you felt that you want[ed] to prohibit transfer to guests or as an incentive to conduct business?

A: Yes.

Q: Because that's what the statute did?

A: Yes.....

Q: Was there any other reason that you voted for the change?

A: No.

Q: Was there an economic reason why you voted for the change?

A: Well, we felt that - I guess I felt that the sale of beach tags should pay for the use of the - should pay for the beach maintenance and everything related to it.

Q: ... Did anybody do a feasibility study for you that you would either make or lose money as compared to the old ordinance by the passing of a new one?

A: Yes.

Q: And who did that feasibility study?

A: CFO.

Q: That would be your chief financial officer, ...


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