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Aventis Holdings, LLC v. Kearny Municipal Utilities Authority

March 4, 2011


On appeal from the Superior Court of New Jersey, Law Division, Hudson County, L-5848-09.

Per curiam.


Argued November 17, 2010 -- Decided Before Judges R.B. Coleman and J.N. Harris.

Plaintiff Aventis Holdings, LLC (Aventis) appeals from an order entered January 29, 2010, by Judge Barry P. Sarkisian dismissing with prejudice plaintiff's verified complaint in lieu of prerogative writs. In that complaint, Aventis sought to compel defendant Kearny Municipal Utilities Authority (the KMUA) to issue a new sewer bill with sewer charges based on actual water usage during plaintiff's ownership of the Kearny property. We affirm the dismissal.

The KMUA is a body created pursuant to the Municipal and County Utilities Authorities Law, N.J.S.A. 40:14B-1 to -78. The KMUA operates a sanitation system in Kearny that it bifurcates into two districts for purposes of wastewater treatments, the South Kearny District and the Meadowlands District. The South Kearny District is served by a combined sewer system, which receives both storm water drainage and sewage. The Meadowlands District is served by a separate sewer system, which does not receive storm water drainage inflows.

The KMUA pumps its sewage to the Passaic Valley Sewerage Commission (PVSC) treatment facility, where it receives secondary treatment and is then discharged. The PVSC bills the KMUA directly for its services. In order to acquire funds for the KMUA's operation and maintenance, the KMUA has established a user charge system.

Kearny receives sewer services from the KMUA and its property owners pay the KMUA directly for such services.*fn1 On October 10, 2007, Aventis acquired its property, a vacant commercial property from Radial Casting. Aventis sold the property to Power Property, LLC on or about July 16, 2009. From March 1, 2008 through July 16, 2009, Aventis did not use any water and incurred the minimum charge of $25.86 per billing cycle. The KMUA billed Aventis $11,860.18 for each of the four quarters*fn2 of 2008 and $2,363 for the first two quarters of 2009. The KMUA's bill for the property had been paid through the first quarter of 2008, but outstanding bills exist for the second, third and fourth quarters of 2008 and the first and second quarters of 2009, totaling $44,882 for sewer usage. In connection with the closing of the sale from Aventis to Power Property, defendant CTL Title Insurance Agency, Inc. (CTL), a title company, held and is still holding $67,019.28 in escrow pending a resolution of the amount of the outstanding sewer charges at the property in order to secure payment.*fn3

The KMUA's rate structure is adopted each year at a public hearing following the completion of a user charge study prepared by a professional engineering firm. N.J.S.A. 40:14B-23 provides a schedule of revision for service charges, which is accomplished via an open public process including a public hearing. N.J.S.A. 40:14B-23 provides in pertinent part:

Every municipal authority shall prescribe and from time to time when necessary revise a schedule of all its service charges . . . and may be such that the revenues of the municipal authority will at all times be adequate to pay the expenses of operation and maintenance of the utility system.

The municipal authority shall likewise fix and determine the time or times when and the place or places where such service charges shall be due and payable and may require that such service charges shall be paid in advance for periods of not more than one year.

For the rate at issue, a public hearing was held on June 4, 2009 for KMUA to adopt its 2009 user charge schedule. A 2009 Sanitary Sewer User Charge Study (UCS), prepared by the engineering firm Hatch Mott MacDonald, to determine the annual sewer charge (ASC) for each property, was introduced into evidence. John J. Scheri, an engineer with the firm, testified.

In explaining the KMUA's methodology to determine the ASC, Scheri testified that the UCS "involves review of the [KMUA's] annual budget, evaluation of the water consumption and wastewater discharge data for the users of the system, and the setting of the rate based on that data." Explaining how the user rate charge was derived for 2009, he testified that the rate structure divides the KMUA's customers into three groups: Class I, customers billed based on municipal water utility meters; Class II, customers based upon "incoming potable water meters, less the amount of water that is either evaporated or consumed in product"; and Class III, customers billed based upon wastewater meters. Aventis is a Class I customer.

Additionally, Scheri explained that "the basis of the User Charge Study is the [KMUA's] budget and the revenue requirement [a]nd then the amount of wastewater flow handled by the [KMUA] is used to derive the rate." He continued to articulate how the ASC is derived by stating:

[T]he revenue requirement is identified and then the User Charge is . . . split into two components: The base User Charge Rate, which is applicable to all users of the system; and then we differentiate and calculate the rate for the User Charge associated solely with the PVSC user charges.

The local revenue requirement for the KMUA operations is the [KMUA's] budget less the amount of their budget that is associated with PSVC charges and the sewer [biological oxygen ...

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