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In re Division of Assets and Liabilities Among the Constituent Districts of Lower Camden County Regional High School District No. 1

October 26, 2005

IN THE MATTER OF THE DIVISION OF ASSETS AND LIABILITIES AMONG THE CONSTITUENT DISTRICTS OF LOWER CAMDEN COUNTY REGIONAL HIGH SCHOOL DISTRICT NO. 1


On appeal from State Board of Education.

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

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued September 27, 2005

Before Judges Skillman, Axelrad and Francis.

The issue presented by these appeals is whether the Commissioner of Education and State Board of Education reasonably determined, under the authority of In re Distribution of Liquid Assets Upon Dissolution of the Union County Regional High School District No. 1, Union County, 168 N.J. 1 (2001) (hereafter referred to as Union County), that the "liquid assets" of the now-dissolved Lower Camden County Regional High School District No. 1 should be distributed solely to the constituent districts of the former regional district that did not receive any distribution of buildings and real estate.

In 1998, a majority of voters of the constituent districts approved a referendum dissolving the regional school district. The referendum question submitted to the voters did not include any provision regarding distribution of the liquid assets of the regional district after dissolution.

After approval of this referendum, the Commissioner of Education set June 30, 2001 as the effective date for dissolution of the regional district. Pursuant to N.J.S.A. 18A:13-62, it became the responsibility of the Camden County Superintendent of Schools to issue a report setting forth how the assets of the district would be distributed.

While the matter was under consideration by the County Superintendent, he held discussions with the superintendents and business administrators of the constituent districts. The purpose of those discussions, as described in the County Superintendent's report, was "to establish common understandings so that efforts would proceed towards dissolution." However, the County Superintendent "made it abundantly clear . . . throughout this process" that although "consensus or input was desirable . . . the final decision on the distribution of assets was [the County Superintendent's] in accordance with [the] statute."

Before the County Superintendent issued his report, respondent Township of Waterford sent him a letter which asserted that, under the Supreme Court's recent decision in Union County, "an equitable division of 'liquid assets' will require a distribution of such 'liquid assets' only among those former constituents of the Regional District which will not have conveyed to them school buildings in accordance with N.J.S.A. 18A:13-61."

Nevertheless, the County Superintendent concluded that the regional district's liquid assets should be distributed among all the constituent districts, including the three to which all the regional district's buildings and real estate were distributed -- Lindenwold, Pine Hill and Winslow -- referred to hereinafter as the "building districts." The County Superintendent determined that those assets had an adjusted cash value of approximately $8.4 million. In accordance with his discussions with the administrators for the constituent districts, he also determined that those assets would remain in the possession of the building districts and that the non-building districts would receive cash payments for the percentage of liquid assets to which they were entitled under the formula set forth in N.J.S.A. 18A:8-24.

The Township of Waterford filed a petition of appeal to the Commissioner of Education challenging the County Superintendent's determination, contending that all the regional district's liquid assets should be distributed to the non-building districts. The Commissioner referred the dispute to the Office of Administrative Law. At a pretrial conference before the Administrative Law Judge (ALJ) to whom the case was assigned, the parties agreed to submit the matter for decision in a "summary fashion," without an evidentiary hearing. As the case was presented to the ALJ, the sole issue was the applicability of the Court's decision in Union County under the circumstances of this case. None of the parties disputed the values the County Superintendent had assigned to the liquid assets or the proposed method of distribution to the non-building districts of their respective shares of those values.

The ALJ concluded that the distribution of the regional district's liquid assets in strict accordance with the formula set forth in N.J.S.A. 18A:8-24 would be unfair and inequitable. In reaching this conclusion, the ALJ compared the distributions that would be received under that formula by Waterford, one of the non-building districts, and by Pine Hill, one of the building districts:

For instance, Waterford contributed 16.34% towards the cost of the Regional District's total assets, based upon its percentage of tax contributions, and it is receiving 1.95% back upon dissolution. Waterford is incurring a $10.1 million loss. The same is true for the remaining non-building districts. . . . Conversely, the building districts are reaping significant gains in percentage terms and in real dollars. For example, Pine Hill contributed 8.34% towards the cost of the Regional District's total assets, based upon its percentage of tax contributions, and it is receiving 29.13% back upon dissolution. Pine Hill will reap a $14.7 million gain.

Based on this analysis, the ALJ concluded that the circumstances in this case were "almost identical" to those in Union County.

The ALJ also rejected an argument presented by some constituent districts that an "informal, unexecuted" agreement among the districts precluded any deviation from the ...


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