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Borough of Seaside Park v. Commissioner of New Jersey Department of Education

Superior Court of New Jersey, Appellate Division

August 12, 2013

BOROUGH OF SEASIDE PARK, SEASIDE PARK BOARD OF EDUCATION, SUSAN BROSNAN, THOMAS CONNORS, PATRICIA DEGUTIS, FAYE HARING, JAMES JABLONSKI, LOUIS MACCHIAVERNA, ROBERT MATTHIES, DAVID MEYER, RICHARD MCMILLAN, MARYANN PALMISANO, ANDREW SBORDONE, ANN WEHRLEN, and MARTY WILK, JR., Plaintiffs-Appellants/ Cross-Respondents,
v.
COMMISSIONER OF THE NEW JERSEY DEPARTMENT OF EDUCATION, CENTRAL REGIONAL SCHOOL DISTRICT BOARD OF EDUCATION, BERKELEY TOWNSHIP, BERKELEY TOWNSHIP BOARD OF EDUCATION, BOROUGH OF OCEAN GATE, OCEAN GATE BOARD OF EDUCATION, and BOROUGH OF SEASIDE HEIGHTS, Defendants-Respondents, and BOROUGH OF ISLAND HEIGHTS, ISLAND HEIGHTS BOARD OF EDUCATION, and SEASIDEHEIGHTS BOARD OF EDUCATION,

Argued: December 19, 2012

On appeal from the Superior Court of New Jersey, Chancery Division, Ocean County, Docket No. C-162-07.

Vito A. Gagliardi, Jr., argued the cause for appellants/cross-respondents (Porzio,

Bromberg & Newman, P.C., attorneys; Mr. Gagliardi, of counsel and on the briefs; Kerri A. Wright and Phillip C. Bauknight, on the briefs).

Melissa T. Dutton, Deputy Attorney General, argued the cause for respondent Commissioner of the New Jersey Department of Education (Jeffrey S. Chiesa, Attorney General, attorney; Lewis A. Scheindlin, Assistant Attorney General, of counsel; Ms. Dutton and Susan M. Huntley, Deputy Attorney General, on the brief).

Arthur Stein argued the cause for respondent Central Regional School District Board of Education (Stein & Supsie, attorneys; Mr. Stein, of counsel and on the brief; Angela M. Koutsouris, on the brief).

Francis J. Campbell argued the cause for respondent Township of Berkeley (Campbell & Pruchnik, LLC, attorneys; Mr. Campbell, of counsel and on the brief).

Dina M. Vicari argued the cause for respondent Berkeley Township Board of Education (R.C. Shea & Associates, attorneys; Ms. Vicari, on the brief).

Robert W. Allen argued the cause for respondents Borough of Ocean Gate and Ocean Gate Board of Education (Gluck & Allen, LLC, attorneys; Gena M. Koutsouris, on the brief).

Kenneth M. Kukfa argued the cause for respondent/cross-appellant Borough of Island Heights (Kenneth M. Kukfa, attorney; Christian E. Schlegel, on the brief).

Ben A. Montenegro argued the cause for respondent/cross-appellant Island Heights Board of Education (Montenegro, Thompson, Montenegro & Genz, P.C., attorneys; Mr. Montenegro, of counsel and on the brief).

David M. Casadonte argued the cause for respondent/cross-appellant Seaside Heights Board of Education.

Respondent Borough of Seaside Heights has not filed a brief.

Before Judges Axelrad, Sapp-Peterson and Nugent.

OPINION

AXELRAD, P.J.A.D.

Plaintiffs-appellants, the Borough of Seaside Park, its Board of Education, and thirteen taxpaying residents, as well as defendants-respondents/cross-appellants, the Seaside Heights Board of Education, and the Borough of Island Heights and its Board of Education, appeal from the Law Division's dismissal of their various claims seeking dissolution of the Central Regional School District (Central Regional or District), permission to withdraw from the District, or alteration of the District's funding formula.[2] We are satisfied the Legislature has established a comprehensive scheme for plaintiffs to seek this relief, which includes a voter referendum. The referendum held on dissolution failed, and plaintiffs did not pursue the statutory processes for withdrawal and modification of the tax allocation method for Central Regional. Plaintiffs have not asserted a cognizable constitutional or other claim that would provide any legal or equitable basis for judicial intervention and relief. Moreover, even if we held that plaintiffs exhausted their administrative remedies and are subject to a substantially inequitable tax allocation, they would not be entitled to the extraordinary equitable relief afforded in Petition for Authorization to Conduct a Referendum on Withdrawal of North Haledon School District from the Passaic County Manchester Regional High School District, 181 N.J. 161 (2004) (North Haledon). Accordingly, we affirm.

We place this appeal in context by first reciting the history of regional school districts, including the history of their funding, and the statutory mechanisms for dissolving or withdrawing from a regional school district. We will then discuss the specifics of Central Regional and the subject litigation.

I.

In l93l the Legislature authorized the establishment of regionalized school districts. L. 1931, c. 275, § 1. Costs were to be apportioned among constituent districts "upon the basis of ratables." L. 1931, c. 275, § 8. The "average daily enrollment" method of apportionment was introduced in 1953, i.e., per pupil basis, as an alternative to the existing ratable method and was made available to all regional school districts in 1955 subject to approval by the electorate. See Berkeley Heights Twp. v. Bd. of Educ., 23 N.J. 276, 283 (1957).

In a series of decisions in the 1970s, the Supreme Court held the existing system of public school funding in New Jersey unconstitutional based upon discrepancies in dollar input per pupil, denying a thorough and efficient education, and required the Legislature to adjust the funding methods. See Robinson v. Cahill, 69 N.J. 133, cert. denied sub nom Klein v. Robinson, 423 U.S. 913, 96 S.Ct. 217, 46 L.Ed.2d 141 (1975); Robinson v. Cahill, 67 N.J. 35 (1975); Robinson v. Cahill, 63 N.J. 196, cert. denied sub nom. Dickey v. Robinson, 414 U.S. 976, 94 S.Ct. 292, 38 L.Ed.2d 219 (1973); Robinson v. Cahill, 62 N.J. 473 (1973).

In response, the Legislature passed an amendment to N.J.S.A. 18A:13-23 in l975 that altered the means by which regional school districts were to be funded from a per pupil basis to an equalized value of real estate situated in each district, which shifted costs to municipalities with higher property values.[3] N. Haledon, supra, 181 N.J. at 165. The Legislature also adopted procedures for initiating withdrawal from a limited purpose regional school district, [4] including an application to the county superintendent to investigate the advisability of withdrawal or dissolution, N.J.S.A. 18A:13-51; a report from the county superintendent, N.J.S.A. 18A:13-52 and - 53; a petition to the Commissioner of Education (Commissioner) for permission to conduct a referendum, N.J.S.A. 18A:13-54 and -55; a report from the Board of Review (Board) granting or denying the petition, N.J.S.A. 18A:13-56; and a referendum, N.J.S.A. 18A:13-57 to -59. L. 1975, c. 360.

In 1993, the Legislature again amended N.J.S.A. 18A:13-23 to allow regional districts to choose among equalized valuation, per pupil enrollment, or a combination of the two through voter approval at an annual or special election. L. 1993, c. 67, § 1; N. Haledon, supra, 181 N.J. at 166. The goal of this legislation was to "encourage[] the formation of regional school districts by allowing school districts considering regionalization greater freedom in determining how costs should be apportioned among the constituent districts." Statement to Assembly Substitute for A. 1822 and 1063 (Feb. 8, 1993). In this regard, the Legislature acknowledged that the requirement of cost apportionment based on equalized valuation acted as "a disincentive to regionalization for certain districts which have high property values and a small pupil population, when considering joining with a municipality that has low property values and a large pupil population." See, e.g., Assembly Education Committee Statement to A. 1822 (Oct. 1, 1992); Senate Education Committee Statement to Assembly Substitute for A. 1822 and 1063 (Dec. 10, 1992).

Also in 1993, the Legislature revised the law which provided a procedure for withdrawal from a regional school district by adding a parallel procedure for the dissolution of a district. L. 1993, c. 255. This amendment set forth the following standard for determining if a referendum on withdrawal or dissolution was successful:

For withdrawal from a regional district, the question shall be deemed adopted if it receives an affirmative vote of a majority of the votes cast within the withdrawing constituent district and it receives an affirmative vote of a majority of the overall votes cast in the entire regional district. For dissolution of a regional district, the question shall be deemed adopted if it receives an affirmative vote in a majority of the individual constituent districts and it receives an affirmative vote of a majority of the overall votes cast in the entire regional district.
[L. 1993, c. 255, § 8; N.J.S.A. 18A:13-59.]

The Legislature also authorized the State Board of Education to promulgate regulations to effectuate the provisions of the Act. L. 1993, c. 255, § 14.

In 2004, the Supreme Court decided North Haledon. There, North Haledon, Haledon, and Prospect Park had formed a limited purpose regional school district in the 1950s, providing secondary education at Manchester Regional High School using a per pupil method for apportioning costs; however, in l975 the funding method was changed to an equalized valuation. Supra, 181 N.J. at 165. Consequently, because North Haledon had the highest tax base of the three municipalities, its share of the operating costs significantly increased disproportionally to the other two districts. Id. at 165-66.

After the 1993 amendment, North Haledon pursued a referendum that would return the district to per pupil cost apportionment, which failed because it did not garner a majority of voters in Haledon and Prospect Park. Id. at 166. By 1994, North Haledon was paying over half of the district's operating costs and more than two to three times per pupil than that paid by Haledon and Prospect Park, respectively. Ibid. In 2001, North Haledon was paying $18, 400 per pupil, while Haledon was paying $5300, and Prospect Park was paying $3400. Id. at 169.

In 1998, North Haledon initiated the process of withdrawal. Although the county superintendent's investigative report did not favor withdrawal, North Haledon petitioned the Commissioner for permission to hold a referendum pursuant to N.J.S.A. 18A:13-54. Id. at 166-67. The Board granted the petition, notwithstanding that North Haledon's withdrawal would result in a nine percent reduction in white students in Manchester Regional's student body. Id. at 167-72. The Board found the racial impact negligible because, based upon demographic changes in the three sending districts, whether North Haledon stayed or withdrew, the minority population at the high school would continue to rise and the white population would continue to decline. Id. at 172.

The Regional Board, Haledon, and Prospect Park appealed the Board's order, but no stay was entered to block the referendum pending appeal. Ibid. The voters approved the referendum at a special election, and the Commissioner set a date for North Haledon's withdrawal from the district. Ibid.

We reversed the Board, 363 N.J.Super. 130, 144 (App. Div. 2003), disagreeing that the anticipated nine percent decrease in the white student population of Manchester Regional was a negligible impact. The Supreme Court affirmed, holding that

the constitutional imperative to prevent segregation in our public schools applies as well to the Board within the ambit of the exercise of its responsibilities under N.J.S.A. 18A:13-56(b)(4), which requires the Board to deny a withdrawal petition for "[a]ny other reason, which it may deem to be sufficient."

[N. Haledon, supra, 181 N.J. at 181.]

The Court concluded that

withdrawal by North Haledon will deny the benefits of the educational opportunity offered by a diverse student body to both the students remaining at Manchester Regional and to the students from North Haledon. We conclude that the Board's decision permitting a referendum on the question of withdrawal is not sustainable as a matter of law, and affirm the decision of the Appellate Division reversing that decision.

[Id. at 184.]

However, the Court acknowledged North Haledon's justifiable concern about the disproportional tax burden shouldered by its citizens as compared to the other constituent municipalities, id. at 184-85, so it modified the judgment and remanded to the Commissioner "to develop, in consultation with the constituent municipalities, an equitable cost apportionment scheme for the Regional District." Id. at 186. In so ruling, the Court held:

the constitutional imperative to address racial segregation requires the Board to compel North Haledon to remain in the Regional District despite the tax burden on its citizens. . . . [W]hen a constituent municipality is compelled to participate in a Regional District, N.J.S.A. 18A:13-23 is not applicable and the Commissioner may determine cost allocations among and between Haledon, Prospect Park, and North Haledon.

[Ibid.]

On remand, by letter dated September 21, 2004, the Attorney General's office advised the Commissioner:

You have requested advice concerning whether the authority granted to you by the Supreme Court in [North Haledon] to equitably revise the cost apportionments among the constituent districts in the Manchester Regional High School District may be utilized in other situations. You are advised that such power may be exercised by the Commissioner where the relative tax burden of the constituent districts in a regional district is inequitable and the Board of Review (or a reviewing court) denies dissolution or withdrawal of constituent districts from the regional school district because dissolution/ withdrawal would result in deficiencies of a constitutional dimension.
In sum, the Commissioner is authorized to act notwithstanding the statutory provisions governing apportionment of costs among constituent school districts of a regional school district as set forth in N.J.S.A. 18A:13-23, in a situation substantially similar to that present in [North Haledon]. Specifically, the Commissioner may determine cost allocations among and between the constituent districts where there is the presence of an inequitable tax burden -- which could be demonstrated by a constituent district unsuccessfully seeking to change the apportionment methodology -- and due to a constitutional imperative such as addressing racial segregation, the Board of Review (or a court reviewing the Board's determination) determines that the regional district must remain intact.

[(Emphasis added).]

By letter of January 18, 2005, the Commissioner advised that cost apportionment in North Haledon would be sixty-seven percent equalized valuation and thirty-three percent pupil enrollment, phased in over four years. In so doing, he cautioned:

I stress that the apportionment methodology [adopted] is a unique response to the circumstances existing in the present matter, and that it is neither binding on the regional district in the event that the voters of the district and its constituents subsequently elect to approve a cost apportionment method of the regional board's own devising pursuant to N.J.S.A. 18A:13-23, nor intended to be precedent-setting in any other situation where cost apportionment is at issue among the constituent members of a regional district.

On numerous occasions both before and after North Haledon, the Legislature has considered issues involving regional school districts, including its funding and the procedures for withdrawal from or dissolution of such districts, but no significant changes have been made. Seaside Park has been an active participant in those discussions.

For example, in 1994, the Senate introduced S. 1313, which would have made it easier for a district to withdraw from a limited purpose regional school district, but it was not enacted. In 1996, the Legislature established a panel to investigate regionalization. L. 1996, c. 138, § 31. The New Jersey Regionalization Advisory Panel issued its final report in January 1998. See N.J. Regionalization Advisory Panel Final Report (Jan. 1998), http://www.njleg.state.nj.us/ PropertyTaxSession/OPI/FinalReport.pdf. It recognized the disincentives to regionalization, including, in part, tax apportionments, and encouraged regionalization and the increased use of shared services to improve efficiency and maximize facilities and professional resources available to local districts. Id. at 2, 6-7. The Panel also recommended "legislation that would direct and empower the Commissioner of Education, supported by the county superintendents and in cooperation with the local boards of education and administrations, to identify school districts that might benefit financially and educationally from either regionalization or consolidation of services with other school districts[, ]" and legally mandated regionalization where appropriate. Id. at 2.

Also in 1996, the Assembly created a task force on school district regionalization "to examine and develop recommendations concerning issues associated with the regionalization of schools, including but not limited to: apportionment of costs; incentives and disincentives for regionalization; the financial impact of State aid on regionalization; and cost savings to taxpayers." Assem. Res. 127, 206th Leg. (Nov. 14, 1996). The task force was continued in the 1998-1999 legislative session, see Assem. Res. 1, 208th Leg. (Jan. 13, 1998), and it held hearings on February 25, 1998, March 26, 1998, and August 13, 1998.[5]

On February 25, 1999, the task force issued a report on its findings and recommendations. See Assembly Task Force on School District Regionalization Findings and Recommendations, http://www.njleg.state.nj.us/legislativepub/reports/school.pdf. It found, in pertinent part, that:

4. The disproportionate distribution of costs among constituent municipalities in regionalized districts is a major disincentive to regionalization. However, any formula change designed to bring parity in the per pupil costs of the constituent municipalities will result in "winners" and "losers."
5. Smaller, more affluent communities in regional school districts, which are locked into paying based on their equalized valuation, as opposed to on a per-pupil basis, may wind up paying more than what they otherwise would pay in a non-regionalized district.
6. Development trends of constituent municipalities within a regional school district can also negatively impact on the cost inequity factor.
. . . .
8. Many districts exhibit concern over regionalizing because the deregionalization process proves rigid and difficult. Major issues relating to division of debt service and assets, personnel retention policies, and the ability of each resulting district to adequately provide for the education of their students, must be considered.
9. Withdrawal from a regionalized arrangement by a constituent municipality may prove overwhelming since the current procedures require a majority of voters across the regional district in addition to a majority of voters in the constituent municipality which wants to exit from the arrangement.

The task force recommended, in pertinent part: (1) restructuring of regionalization agreements "to allow reassessment of cost distribution if the per pupil cost deviates by more than 10% between any two constituent municipalities of the regional district"; (2) modification of the equalized valuation method for apportioning costs to a "fairer formula" that would "provide more equity among constituent municipalities, " with "a realistic mechanism which compels equitable adjustments in the distribution costs among constituent municipalities for the small number of existing regionalized districts which currently evidence an extreme disproportionate distribution of costs"; and (3) amendment of the withdrawal statutes, allowing a municipality to opt out "without major obstacles when a specified threshold deviation in the per pupil amount paid by each constituent municipality is reached, perhaps 10%" and providing a mechanism "to join another regional district or enter into a sending/receiving relationship with another regional district." Ibid.

In 2002, the Legislature considered S. 295, which would have reduced per-pupil cost disparities in certain regional school districts and increased state aid to those districts to offset the reduction in municipal contributions. Central Regional supported the measure, but it did not pass.

In 2005, the Office of Legislative Services (OLS) issued a Background Report, Regional School Districts: Apportionment of Costs in the Constituent Municipalities (July 20, 2005).[6] The OLS acknowledged the disincentives to regionalization, including the perception of inequity felt by wealthier municipalities paying based upon equalized property value. It also noted the difficulty in altering the funding method for currently existing regional school districts:

A referendum on a change in the apportionment method must be approved "by the voters of each municipality." Because of this voting requirement, a change in the method of cost apportionment is quite difficult to accomplish. Such a change will always create "winners" and "losers" among the constituent municipalities, and those municipalities slated to "lose" will not vote in favor of a change that will result in increases in their tax levy. The constituent municipalities which benefit from the current apportionment method are granted effective veto power over any possible change.

In 2006, the Legislature created four joint legislative committees to make recommendations regarding proposals to reform property taxes, including the Joint Legislative Committee on Public School Funding Reform and the Joint Legislative Committee on Government Consolidation and Shared Services. Assem. Con. Res. 3, 212th Leg. (July 28, 2006). The Consolidation and Shared Services Committee held hearings during which it considered, among other items, consolidation of school districts;[7] however, its November 15, 2006 report did not specifically address regional school districts. See 2006 Special Session Joint Legislative Committee Government Consolidation and Shared Services Final Report (Dec. 1, 2006), http://www.njleg.state.nj.us/PropertyTaxSession/OPI/jcgo_final_ report.pdf.

Following hearings, the Funding Reform Committee issued its final report in December 2006. See Special Session Joint Legislative Committee Public School Funding Reform Final Report (Dec. 1, 2006), http://www.njleg.state.nj.us/PropertyTaxSession/ OPI/jcsf_final_report.pdf. Pertinent to the present appeal, the Committee recognized the value of regionalization as well as the financial disincentives to the creation of regional school districts, and recommended adopting the Department of Education's recommendations regarding the apportionment of costs in regional districts as follows:

Under the revisions, State aid and local property tax contributions would be calculated separately for each constituent municipality in a regional district. [And] [n]o jurisdiction in a regional school district would pay a tax levy per pupil which exceeds the actual per pupil expenditures of the regional school district.
While some may be concerned that this change would artificially cap the burden of some taxpayers who have a greater ability to pay under the measures employed, it is believed that the policy and educational benefits of having regional school districts outweigh this concern.

Also in 2006, S. 1585 was introduced, 212th Leg., [8] which would have provided for the reduction of per pupil expenditures for certain constituent municipalities of regional school districts. It apparently was designed to eliminate the funding complained about by Seaside Park. It would have reduced the tax burden for municipalities that are constituents of regional school districts but: (1) comprise less than 10% of the regional school district enrollment; (2) have a tax levy to support the regional school district of more than $1 million; and (3) have a per pupil expenditure that is more than 200% of the average per pupil expenditure of all constituent municipalities of the regional district. State aid would have been provided to the regional school district to compensate for the loss of revenue from the constituent municipality. The bill, however, never proceeded beyond introduction, and it was not carried over or re-introduced in any more legislative sessions.

Additionally, A. 3261/S. 2289 and A. 3422 were introduced in 2008, 213th Leg., which were carried over or reintroduced as A. 1327/S. 1638 in 2010, 214th Leg. These bills would have revised the voting requirements necessary for the dissolution of limited purpose regional school districts. They would have made dissolution easier by eliminating the requirement that there be a majority of the overall vote as cast; instead, dissolution could occur with an affirmative vote in a majority of the individual constituent districts. However, the bills did not progress past introduction in either legislative session.

II.

We turn now to the specifics of our case. In the early 1950s, Seaside Heights, Seaside Park, Island Heights, Ocean Gate, Berkeley Township, and Lacey Township sent students to Toms River schools on a tuition basis. In 1953, however, Toms River advised that it could no longer continue that relationship. By public referendum held in 1954, the six municipalities formed Central Regional as a limited purpose school district to educate their junior and senior high school students (grades seven to twelve).[9] Central Regional's school buildings are located in Berkeley Township, which is the largest municipality in terms of geography, population, registered voters, and student enrollment.

In the 1954 referendum by which Central Regional was formed, the voters agreed to apportion costs based on per pupil enrollment. However, the 1975 legislation altered Central Regional's funding mechanism to an equalized property valuation basis. L. 1975, c. 212. Although the 1993 legislation allowed for changes to the funding structure of ...


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