In re Passaic County Utilities Auth.

• Decision Date: 22 June 2000
• Citation: 164 N.J. 270,753 A.2d 661
• Parties: In the Matter of PASSAIC COUNTY UTILITIES AUTHORITY PETITION REQUESTING DETERMINATION OF FINANCIAL DIFFICULTY AND APPLICATION FOR REFINANCING APPROVAL. City of Paterson and Martin G. Barnes, Plaintiffs-Appellants, v. Passaic County Board of Chosen Freeholders and Passaic County Utilities Authority, Defendants-Respondents, and Township of Wayne, Borough of Totowa, Borough of West Paterson, City of Clifton, Borough of Wananque, Borough of Bloomingdale, Borough of Hawthorne, Borough of Ringwood, Borough of Pompton Lakes, and Township of West Milford, Intervenors-Respondents (Two Cases).
• Court: New Jersey Supreme Court

753 A.2d 661

164 N.J. 270

In the Matter of PASSAIC COUNTY UTILITIES AUTHORITY PETITION REQUESTING DETERMINATION OF FINANCIAL DIFFICULTY AND APPLICATION FOR REFINANCING APPROVAL.

City of Paterson and Martin G. Barnes, Plaintiffs-Appellants, v. Passaic County Board of Chosen Freeholders and Passaic County Utilities Authority, Defendants-Respondents, and Township of Wayne, Borough of Totowa, Borough of West Paterson, City of Clifton, Borough of Wananque, Borough of Bloomingdale, Borough of Hawthorne, Borough of Ringwood, Borough of Pompton Lakes, and Township of West Milford, Intervenors-Respondents (Two Cases).

Supreme Court of New Jersey.

Argued February 2, 2000.

Decided June 22, 2000.

Sandra T. Ayres, Montclair, for plaintiffs-appellants (Schwartz, Tobia, Stanziale, Rosensweig & Sedita, attorneys).

Benjamin Clarke, Teaneck, for defendant-respondent Passaic County Utilities Authority (DeCotiis, Fitzpatrick & Gluck, attorneys; Michael R. Cole, of counsel).

Joseph J. Maraziti, Jr., Short Hills, for defendant-respondent Passaic County Board of Chosen Freeholders (Maraziti, Falcon & Healey, attorneys; Leah C. Healey, of counsel; Brent T. Carney, on brief).

John Fiorello, Wayne, Wayne Township Attorney, for intervenors-respondents.

Daniel P. Reynolds, Deputy Attorney General, for respondent Local Finance Board (John J. Farmer, Jr., Attorney General of New Jersey, attorney; Nancy Kaplen, Assistant Attorney General, of counsel; Mr. Reynolds and Leslie D. Rosenthal, Deputy Attorney General, on the brief).

Michael A. Lampert, Princeton, submitted a brief on behalf of amici curiae National Solid Waste Management Association, Waste Management Association of New Jersey, BFI Waste Systems of New Jersey, Inc., Super Kwik, Inc., USA Waste of New Jersey, Inc. and Waste Management of New Jersey, Inc. (Saul, Ewing, Remick & Saul, attorneys; Mr. Lampert, Alan V. Klein and Jane Kozinski, on the brief).

The opinion of the Court was delivered by STEIN, J.

This appeal fairly may be regarded as but the tip of an iceberg. It purports to present for resolution what is primarily a straightforward issue of statutory interpretation: whether section 22.1 of the Municipal and County Utilities Authorities Law, N.J.S.A. 40:14B-1 to -78, authorizes the Passaic County Utilities Authority (PCUA) to impose on municipalities and commercial waste generators that no longer use its facilities an Environmental Investment Charge (EIC) over the next ten years to raise funds sufficient to pay principal and interest obligations on approximately $80 million of bonded debt. Stated more simply, the narrow issue is the validity of the EIC imposed by the PCUA. A collateral issue concerns the validity of the 1997 Refunding Bond Deficiency Agreement (1997 Deficiency Agreement) pursuant to which Passaic County agreed to guarantee the payment of approximately $28 million in unsecured revenue bonds issued by the PCUA in 1991 to finance an incinerator construction project that subsequently was abandoned.

Realistically, however, the issues before us cannot be circumscribed so narrowly. We are informed that to date four other counties have adopted and imposed EICs, and that litigation challenging the validity of EIC's imposed in three of those counties is now pending in various courts. As of January 1999, nine of the State's solid waste management districts had submitted proposed plan amendments to the Department of Environmental Protection (DEP) proposing the assessment of an EIC. Christine LaRocca, New Jersey's Solid Waste Flow Control Regulations Have Been Trashed: Are Environmental Investment Charges the Answer? 17 Pace Envtl. L.Rev. 123, 136 (1999).

Moreover, the federal court litigation that precipitated the perceived need for New Jersey counties to adopt and impose EICs illuminates the issue before us and provides its context. In 1997 the Third Circuit Court of Appeals in Atlantic Coast Demolition & Recycling, Inc. v. Board of Chosen Freeholders of Atlantic County, 112 F.3d 652 (1997),amended by 135 F.3d 891 (3d Cir.1998), cert. denied sub nom. Essex County Utilities Authority v. Atlantic Coast Demolition & Recycling, Inc., 522 U.S. 966, 118 S.Ct. 412, 139 L.Ed.2d 316 (1997)(Atlantic Coast II), held that New Jersey's comprehensive statutory and regulatory controls over the disposal of state-generated solid waste discriminated against out-of-state solid waste facilities and thereby violated the Commerce Clause of the United States Constitution. As the Third Circuit noted, in reliance on the regulatory scheme invalidated by Atlantic Coast II New Jersey counties and utilities authorities had incurred substantial debt to plan and construct waste disposal facilities designed to process a statutorily-guaranteed solid waste flow. That public debt as of December 31, 1994 aggregated approximately $1.65 billion dollars, a result of fifty-three separate bond issues by New Jersey counties and local authorities. Atlantic Coast II, supra, 112 F.3d at 658. The unanticipated invalidation of the State's solid waste regulatory scheme permitted waste generators to bypass the facilities operated by counties and local authorities in favor of cheaper out-of-state disposal facilities. The result was that the counties and authorities experienced a drastic reduction in revenue, threatening the default of millions of dollars in outstanding public debt. The authorization and imposition by the PCUA and other authorities of EICs on municipalities and solid waste generators that formerly used their facilities was a direct consequence of the unprecedented dismantling by the federal courts of New Jersey's solid waste regulatory system.

Informed by those events, we address the issues presented by this appeal. We conclude that the EIC imposed by the PCUA is not statutorily authorized because the statute neither expressly nor impliedly contemplates imposition of such unprecedented charges on non-users of the authority's facilities to liquidate debt previously incurred in reliance on a regulatory system declared unconstitutional by the federal courts. Because Passaic County entered into the 1997 Deficiency Agreement in express reliance on the validity of the EIC, we also invalidate that agreement.

I

A

The conduct and chronology of the federal court litigation invalidating New Jersey's solid waste regulatory system is highly pertinent to the issues before us. An appropriate starting point is a brief description of the challenged regulatory scheme, which we borrow from the Third Circuit's succinct summary:

In response to a waste disposal crisis, New Jersey enacted the Solid Waste Management Act ("SWMA"), N.J.S.A. §§ 13:1E-1 et seq., and the Solid Waste Utility Control Act ("SWUCA"), N.J.S.A. §§ 48:13A-1 et seq. in 1970 to provide a safe, comprehensive and effective means of solid waste disposal within the state. These statutes strictly control the collection, transportation and processing of solid waste generated within the state, thus earning the appellation "flow control laws." Under these laws, any waste disposal facility, regardless of its ownership or location, must clear two substantial hurdles before it disposes of solid waste generated within New Jersey. First, the facility must obtain a contract with one of New Jersey's twenty-two waste management districts. Unless a facility has been designated by a waste management district, that facility cannot dispose of locally generated waste. Second, even if the facility contracts with a district for service, the waste disposal facility must obtain the approval of the State's Department of Environmental Protection (hereinafter "the State" or NJDEP). Under this regime, out-of-state facilities have rarely been authorized to dispose of New Jersey's solid waste.

Under SWMA, New Jersey is divided into twenty-two solid waste management districts, which include the State's twenty-one counties and the Hackensack-Meadowlands District. N.J.S.A. § 13:1E-19. The districts have formulated long-term solid waste disposal plans in accordance with the State's laws and regulations. N.J.S.A. § 13:1E-20. These plans have had to meet NJDEP's approval. See N.J.S.A. § 13:1E-24. Management districts have chosen between delegating their waste disposal responsibilities to designated municipal authorities within the district or exercising direct control over waste disposal themselves. Municipal authorities and districts in turn have met the State's waste disposal obligations by contracting with or operating their own waste disposal and recycling facilities.

Pursuant to the flow control laws, several waste disposal authorities have assumed substantial debt obligations to build waste disposal facilities "to assure the safe and efficient disposal of solid waste generated in their districts." Atlantic Coast II, 931 F.Supp. at 347 ¶ 5. The district court found that "[t]he solid waste public debt outstanding in New Jersey as of December 31, 1994, was $1.65 billion, which is the total of 53 separate bonds issued by New Jersey local authorities or counties." Id., at 348 ¶ 12. Currently, the disposal facilities service their debt by charging "tipping fees" for disposing of waste. The fees charged by the designated facilities are significantly higher than the fees charged by their out-of-state counterparts. Id., at 349 ¶ 17.

Once an authority has chosen a particular private or public entity to service its waste disposal needs, that entity must seek approval from NJDEP (through registration and issuance of a permit) prior to commencing service. N.J.S.A. § 13:1E-5. A facility cannot obtain a permit unless it is designated by the municipal district or authority in its waste disposal plan. N.J.S.A. § 13:1E-4(b). Regional Recycling, Inc. v. State Dep't of Environmental Protection, 256 N.J.Super. 94, 606 A.2d 817 (App.Div.1991). All waste generated within the state must be directed to the processing facility designated by the district or municipal authority. See

...