Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Rumana v. County of Passaic

December 3, 2007

SCOTT RUMANA, A CITIZEN OF WAYNE TOWNSHIP IN PASSAIC COUNTY, A TAXPAYER, AND MAYOR OF THE TOWNSHIP OF WAYNE; ANN MARY O'ROURKE, A CITIZEN OF WAYNE TOWNSHIP IN PASSAIC COUNTY, A TAXPAYER, AND TOWNSHIP OF WAYNE COUNCILPERSON; CHRISTOPHER VERGANO, A CITIZEN OF WAYNE TOWNSHIP IN PASSAIC COUNTY, A TAXPAYER, AND TOWNSHIP OF WAYNE COUNCILPERSON; PAUL MARGIOTTA, A CITIZEN OF WAYNE TOWNSHIP IN PASSAIC COUNTY, A TAXPAYER, AND TOWNSHIP OF WAYNE COUNCIL PRESIDENT; JOSEPH SCHWEIGHARDT, A CITIZEN OF WAYNE, PASSAIC COUNTY, A TAXPAYER, AND WAYNE COUNCILPERSON; ALAN PURCELL, A CITIZEN OF WAYNE, PASSAIC COUNTY, A TAXPAYER, AND WAYNE COUNCILPERSON AND THE TOWNSHIP OF WAYNE, PLAINTIFFS-APPELLANTS,
v.
COUNTY OF PASSAIC; PASSAIC COUNTY BOARD OF CHOSEN FREEHOLDERS; PASSAIC COUNTY IMPROVEMENT AUTHORITY; DEPARTMENT OF COMMUNITY AFFAIRS, DIVISION OF LOCAL GOVERNMENT SERVICES; DEPARTMENT OF COMMUNITY AFFAIRS, DIVISION OF LOCAL GOVERNMENT SERVICES, LOCAL FINANCE BOARD, DEFENDANTS-RESPONDENTS.



On appeal from the Superior Court of New Jersey, Law Division, Civil Part, Passaic County, L-3397-07.

The opinion of the court was delivered by: C.L. Miniman, J.A.D.

APPROVED FOR PUBLICATION

Argued: November 26, 2007

Before Judges A.A. Rodriguez, C.S. Fisher and C.L. Miniman.

Plaintiffs Scott Rumana, Ann Mary O'Rourke, Christopher Vergano, Paul Margiotta, Joseph Schweighardt, Alan Purcell and the Township of Wayne appeal administrative determinations by defendants Division of Local Government Services (DLGS) and Local Finance Board (LFB), both in the New Jersey Department of Community Affairs. Plaintiffs also raise various claims by way of an action in lieu of prerogative writs against defendants County of Passaic (the County), Passaic County Board of Chosen Freeholders (the Freeholders) and Passaic County Improvement Authority (the PCIA), a public entity authorized to undertake projects to promote recreational uses in Passaic County, all in connection with the proposed sale of the Passaic County Golf Course (Golf Course) to the PCIA.

This action requires us to decide whether the prohibitions of the New Jersey Local Budget Law, N.J.S.A. 40A:4-1 to -88, on deficit financing, N.J.S.A. 40A:4-3, and the New Jersey Local Bond Law, N.J.S.A. 40A:2-1 to -64, on using bond proceeds to finance current expenses, N.J.S.A. 40A:2-3(b), override the provisions of the Local Budget Law, N.J.S.A. 40A:4-1 to -88, permitting counties to recognize proceeds from the sale of county property as miscellaneous revenue, N.J.S.A. 40A:4-27, and the New Jersey County Improvement Authorities Law, N.J.S.A. 40:37A-44 to -135, permitting counties to guarantee bonds issued by county improvement authorities, N.J.S.A. 40:37A-80.

Because we conclude as a matter of law that the Local Budget Law and the Local Bond Law preclude a county from guaranteeing bonds issued by a county improvement authority in connection with the purchase of county property where the county is recognizing the sale proceeds as miscellaneous revenue, we reverse the June 13, 2007, resolution of the LFB approving the County guaranty of the PCIA bonds and the LFB Director's approval of the County 2007 Budget.

I.

The following facts, which are undisputed, provide the context for our analysis. The Golf Course is located in Wayne and the Borough of Totowa. It is presently owned by the County. The Golf Course was developed in the 1930s with additional expansion taking place in the 1950s and 1960s. A portion of the Golf Course was acquired with Green Acres funds.*fn1 The property consists of approximately 374 acres. The County operates two 18-hole golf courses, known as the "Red Course" and the "Blue Course." These courses encompass approximately 264 acres with the remaining 110 acres available for additions to the golf course or other recreational use.

The Golf Course had been appraised by Zimel Realty Associates in March 2002 as having a market value of $18 million based on its highest and best use as a golf course. The value was determined by comparable sales of five golf courses, only one of which was purchased by a county or municipal entity. The per-acre prices for four of the golf courses ranged from $46,500 to $67,200 but the per-acre price for the golf course purchased by the county or municipal entity was $33,100. The condition of the buildings, tees, fairways, greens and traps at the subject Golf Course was not discussed in the appraisal, although the tennis court was noted to be in poor condition. The appraiser opined that the per-acre value of the Golf Course was $60,000, yielding the above-stated market value.

Early in 2007 the County realized that it was facing a budget shortfall of $33 million for the year. As required by N.J.S.A. 40A:4-5, the County had until January 26, 2007, to introduce a budget. The County missed this deadline and extended the time to February 25, 2007, as permitted by N.J.S.A. 40A:4-19. In the interim, it made use of temporary appropriations under N.J.S.A. 40A:4-20.

In February 2007 the County commissioned Salmon Ventures Limited (Salmon) to conduct a management study of the Golf Course. The Salmon Report, issued on February 20, 2007, indicated that the Golf Course: is included in the Green Acres Open Space Inventory for Passaic County. Under this program, with a deed restriction, the State and County have agreed that the property cannot be developed and must remain as a public recreational use property. However, under the terms of this restriction, the use of the property as a public golf course, with reasonable fees, is permitted.

The County's request also indicated that the revenue versus expenditure analysis revealed an $847,652 deficit for 2005 and $920,009 for 2006. The Salmon Report author opined:

The Passaic County Golf Course has been operating at a deficit level for several years. What is contained in this report is a short term plan to increase fees and revenues to offset all costs associated with managing the golf course. . . .

There are other issues that need to be addressed at this time. These issues are the improvements that need to [be] completed at the golf course. The new irrigation system that needs to be installed, most of the buildings are in need of major repair and lastly the flooding of several holes that during a heavy rain eliminates nine holes from play. The future, and not so distant future capital improvements that need to be planned, designed, authorized and paid for will be very expensive. In all probability, a $2 to $3 million bond will be necessary to meet those needs. Given the County's extremely sensitive financial and tax situation, this solution is probably not feasible. Other opportunities include getting out of the golf course management business. Two options are to RFP for a management team to run the operation or market the golf course for a potential buyer. Based on prior appraisals that the County requested, the property has an estimated value between $12 million and $18 million.

The Salmon report summarized the following three options:

(1) keep management control of the golf course and increase greens fees while reducing the number of full-time employees and improving and upgrading the course; (2) hire a management team to administer the day-to-day operations of the golf course; or (3) market and sell the golf course. According to the Salmon report, the latter option "would produce an influx of several million dollars (between $12 and $18 million) to the County Treasury, the annual expense of nearly $2.6 million to manage the course [would] no longer [be] an issue and there would be a reduction of over 67 full and part-time employees."

Following review of the Salmon Report, the County adopted a resolution on March 22, 2007, authorizing all necessary steps to negotiate and sell the Golf Course to the PCIA. In the resolution, the Freeholders recited that "declining revenues and drastically rising expenses have created a crisis situation that cannot be cured by even the maximum tax increase permitted under the 'Cap' provisions of the Local Budget Law." They also recited that massive layoffs would be required even with such maximum tax increase. The Freeholders recognized that only a substantial asset sale would prevent the layoff of 700 to 750 employees. Accordingly, they determined that the County needed to sell the Golf Course. The County then revised its temporary budget on March 27, 2007.

On April 11, 2007, the County submitted an application for the sale of the Golf Course to the PCIA for the sum of $18.5 million. The County also proposed to guarantee the Authority's issuance of bonds totaling $22 million to fund the purchase of the Golf Course and subsequent improvements. Debt service on the bonds in 2008 was projected at almost $1 million and was projected to rise to over $2 million by 2037.

The County revised its temporary budget on April 10, 2007. That same day the County adopted a resolution increasing the greens fees for the Golf Course. The PCIA submitted an application to the LFB on April 18, 2007, seeking review and approval with respect to the proposed financing in connection with the acquisition of the Golf Course. The PCIA proposed to issue bonds not to exceed $22 million in order to fund the acquisition, capital improvements and working capital reserves and pay costs in connection with the issuance of the bonds. The County was to receive $18.5 million of the bond proceeds and would contribute $3 million through its Open Space Fund for capital improvements to the Golf Course. Attached to the application were two proposed PCIA resolutions to be adopted on April 25, 2007, and one County ordinance to guarantee the bonds to be introduced on April 24, 2007.

On April 24, 2007, the County adopted a resolution authorizing County Counsel to file an application with the New Jersey State House Commission for the sale of the Golf Course. On April 25, 2007, the PCIA passed a resolution granting preliminary approval and authorizing the submission of an application to the LFB seeking positive findings with respect to the PCIA's issuance of bonds to fund the purchase of the Golf Course. The PCIA preliminarily approved the purchase and the issuance of $22 million in bonds, $18.5 million to finance the purchase, $1.5 million to be expended for capital improvements to the Golf Course and $1.3 million to be held in a rate stabilization fund.*fn2 Subsequently, the PCIA passed a resolution granting final approval for the purchase of the Golf Course. The application filed by the PCIA requested that the LFB consent to and approve the proposed County guaranty of payments due on the bonds to be issued. While this application was pending, the County introduced the 2007 Budget on May 9, 2007. This time the budget included a $10 million item reflecting "miscellaneous revenue" stemming from the sale of the Golf Course. The County then submitted its proposed budget to the Director of the Division of Local Government Services (Director) for review and approval.

On June 12, 2007, the New Jersey Department of Environmental Protection approved the County's transfer of the property pursuant to the Green Acres Land Acquisition and Recreational Opportunities Act, N.J.S.A. 13:8A-35 to -55, subject to several requirements, including continued application of Green Acres restrictions and continued use of the property for recreational purposes as required by the deed by which the County acquired title.

Following a public hearing, the LFB granted both requests by issuing positive findings on June 13, 2007. The LFB's resolution relating to the County's guaranty provides, in relevant part, that the LFB had examined the estimates, computations or calculations made in connection with the application. The LFB found:

a) that the County guaranty has been determined by reasonable and acceptable methods;

b) that the County guaranty is not unreasonable nor impracticable, and would not impose an undue and unnecessary financial burden on the local inhabitants within the Authority's jurisdiction or would not materially impair the ability to pay promptly the principal and the interest on the outstanding indebtedness thereof or to provide essential public services to the inhabitants thereof.

The Director certified his approval of the 2007 Budget on July 3, 2007. On the same day, the County adopted the 2007 Budget. Also on the same day, the County adopted Ordinance No. 2007-05 (the Guaranty Ordinance) authorizing the guaranty of the proposed Authority bonds to fund the purchase and improvement of the Golf Course.*fn3

II.

Plaintiffs, a group of six individuals, including the Mayor and five council members of Wayne, as well as the municipality itself, filed an action in lieu of prerogative writs on August 10, 2007. The complaint, subsequently amended, contained fourteen counts alleging various violations of the New Jersey Constitution and statutes by the named defendants: the County and its Freeholders, the Authority, the Division of Local Government Services and the Board.*fn4

All defendants, thereafter, moved to dismiss the complaint. Plaintiffs moved for partial summary judgment and sought a preliminary injunction. Following a telephone conference with the court, the parties entered into a "consent order to maintain the status quo" which provided that the parties agreed to be temporarily restrained from encumbering the Golf Course or issuing bonds to accomplish the sale of the course ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.