Mack-Cali Realty Corp. v. State

• Citation: 246 A.3d 847,466 N.J.Super. 402
• Decision Date: 16 February 2021
• Docket Number: DOCKET NO. A-3097-18
• Parties: MACK-CALI REALTY CORP., Cal-Harbor V Urban Renewal Associates, LP, Cal-Harbor Vii Urban Renewal Associates, LP, Roseland Residential Trust, Gary Wagner, Ivan Baron, H.P. Roosevelt Urban Renewal Company, LLC, Cambridge Corporate Services, Inc., Local 621, United Construction Trades Industrial Union, Local 365, United Employees of Service Workers, SP Plus Corporation, Los Cuernos Corp., Exchange Place Alliance District Management Corporation, Spartan Security Services, Inc., New Jersey Business & Industry Assocation, and Hudson County Chamber of Commerce & Industry, Plaintiffs-Appellants, v. STATE of New Jersey, City of Jersey City, Mayor and Counsel of the City of Jersey City, Donna Mauer, in her Official Capacity as Director and Chief Financial Officer of the City of Jersey City, and Brian Platt, In his Official Capacity as Business Administrator of the City of Jersey City, Defendants-Respondents. City of Newark, Intervenor-Respondent.
• Court: New Jersey Superior Court – Appellate Division

466 N.J.Super. 402

246 A.3d 847

MACK-CALI REALTY CORP., Cal-Harbor V Urban Renewal Associates, LP, Cal-Harbor Vii Urban Renewal Associates, LP, Roseland Residential Trust, Gary Wagner, Ivan Baron, H.P. Roosevelt Urban Renewal Company, LLC, Cambridge Corporate Services, Inc., Local 621, United Construction Trades Industrial Union, Local 365, United Employees of Service Workers, SP Plus Corporation, Los Cuernos Corp., Exchange Place Alliance District Management Corporation, Spartan Security Services, Inc., New Jersey Business & Industry Assocation, and Hudson County Chamber of Commerce & Industry, Plaintiffs-Appellants,

v. STATE of New Jersey, City of Jersey City, Mayor and Counsel of the City of Jersey City, Donna Mauer, in her Official Capacity as Director and Chief Financial Officer of the City of Jersey City, and Brian Platt, In his Official Capacity as Business Administrator of the City of Jersey City, Defendants-Respondents.City of Newark, Intervenor-Respondent.

DOCKET NO. A-3097-18

Superior Court of New Jersey, Appellate Division.

Argued October 19, 2020

Decided February 16, 2021

Clark E. Alpert, Parsippany, and Stephen J. Edelstein argued the cause for appellants (Weiner Law Group, LLP, attorneys; Clark E. Alpert, of counsel and on the briefs; Stephen J. Edelstein, Richard L. Rudin, Donald A. Klein, and Paul S. Grossman, Parsippany, on the briefs).

Jean P. Reilly, Assistant Attorney General, argued the cause for respondent State of New Jersey (Gurbir S. Grewal, Attorney General, attorney; Jean P. Reilly, of counsel and on the brief; Jamie M. Zug, Eileen W. Siegeltuch, Michael J. Duffy, Heather Lynn Anderson, and Miles Eckardt, Deputy Attorneys General, on the brief).

Vito A. Gagliardi, Jr., Morristown, argued the cause for respondents City of Jersey City, Mayor and Council of the City of Jersey City, Donna Mauer, and Brian Platt (Porzio, Bromberg & Newman, PC, attorneys; Vito A. Gagliardi, Jr., of counsel and on the brief; Jeffrey M. Pypcznski, Morristown, Tanya Y. Shah, Princeton, and Thomas J. Reilly, Morristown, on the brief).

Cheyne R. Scott, Secaucus, argued the cause for intervenor-respondent City of Newark (Chasan, Lamparello, Mallon & Cappuzzo, PC, attorneys; Cheyne R. Scott, of counsel and on the brief; Cindy Nan Vogelman, Secaucus, on the brief).

Craig A. Long argued the cause for amici curiae New Jersey Education Association and Jersey City Education Association (Zazzali, Fagella, Nowak, Kleinbaum & Friedman, PC, attorneys; Richard A. Friedman, Summit, of counsel; Craig A. Long, on the brief).

Before Judges Messano, Hoffman, and Suter.

The opinion of the court was delivered by

MESSANO, P.J.A.D.

Plaintiffs — real estate developers and urban renewal entities in Jersey City; business owners with operations in Jersey City; labor unions, which members provide personnel and services to Jersey City businesses and some of which have members that live in Jersey City; and business trade associations — challenged Jersey City Ordinance 18-133 (the Ordinance), which imposed a payroll tax of one-percent of an employer's payroll, but exempted from the calculation employees who were residents of Jersey City (the City). Plaintiffs filed a verified complaint and order to show cause seeking to declare the Ordinance and certain 2018 amendments (Chapter 68)¹ to the Local Tax Authorization Act (LTAA), N.J.S.A. 40:48C-1 to -42, violated the United States and New Jersey Constitutions. They also alleged the Ordinance was ultra vires, void for vagueness and violated contractual rights certain plaintiffs had under tax abatement agreements with the City pursuant to the Long-Term Tax Exemption Law (LTTEL), N.J.S.A. 40A:20-1 to -22.

After considering oral argument, the judge denied plaintiffs' request for a preliminary injunction and scheduled a dispositive nontestimonial hearing. The City and defendant State of New Jersey moved to dismiss the complaint.² The judge granted amicus status to the New Jersey Education Association and the Jersey City Education Association (collectively, NJEA). Plaintiffs cross-moved for summary judgment.

In a comprehensive written decision, the judge granted defendants' motion to dismiss and denied plaintiffs' cross-motion for summary judgment. He concluded plaintiffs failed to join an indispensable party, the City of Newark (Newark), and, on the merits, the judge determined the statutory amendments were constitutional, and the Ordinance was a valid, constitutional exercise of the City's authority. The judge entered conforming orders, and this appeal followed; we subsequently granted Newark's motion to intervene, and NJEA's motion to appear as amicus.

Plaintiffs reprise their arguments before us. They contend that Chapter 68, which authorized enactment of the Ordinance, in conjunction with 2018 amendments to the School Funding Reform Act of 2008 (SFRA), N.J.S.A. 18A:7F-43 to -63, violates the Education Clause of our State constitution, N.J. Const. art. VIII, § 4, ¶ 1, as interpreted by the Court and reaffirmed most recently in Abbott v. Burke, 199 N.J. 140, 971 A.2d 989 (2009) ( Abbott XXI ), and Abbott v. Burke, 206 N.J. 332, 20 A.3d 1018 (2011) ( Abbott XXII ). Plaintiffs also argue Chapter 68 is unconstitutional special legislation, N.J. Const. art. IV, § VII, ¶ 9 ; violates the constitutional requirement that property be taxed pursuant to general and uniform laws, N.J. Const. art. VIII, § 1, ¶ 1 ; and violates the constitutional prohibition on using payroll taxes for non-employee benefit purposes, N.J. Const. art. VIII, § 2, ¶ 8. They argue enactment of Chapter 68 was arbitrary, capricious, and unreasonable.

Plaintiffs further contend that Chapter 68 and the Ordinance violate their federal constitutional rights under the Commerce Clause of the United States Constitution, U.S. Const. art. I, § 8, the Equal Protection and Due Process Clauses of the Fourteenth Amendment, U.S. Const. amend. XIV, § 1, and the Privileges and Immunities Clause of the United States Constitution. U.S. Const. art. IV, § 2, cl. 1.

Plaintiffs also reassert their claim that the Ordinance was void for vagueness and ultra vires. Finally, they contend the judge misapplied the standards governing a motion to dismiss under Rule 4:6-2(e) and erred in dismissing the complaint for lack of an indispensable party, i.e., Newark.

The State, City and Newark oppose these contentions and urge us to affirm the judge's orders. The NJEA similarly supports this position as amicus.

I.

We provide some historical background regarding the LTAA, SFRA, amendments to both enacted in 2018, and relevant provisions of the Ordinance.

A.

As originally enacted in 1970, the LTAA granted municipalities of a certain population the authority "to enact an ordinance ... imposing any of the taxes" thereafter provided in the statute. N.J.S.A. 40:48C-1.³ One tax authorized by the LTAA was "an employer payroll tax for general municipal purposes ... at a rate of ... one percent of the employer's payroll." N.J.S.A. 40:48C-15(a) (1970) (emphasis added).

Chapter 68 significantly amended this and other provisions of the LTAA.

First, Chapter 68 authorized adoption of an ordinance that "provide[d] ... the employer payroll tax shall not apply to the remuneration paid ... to employees who are residents of the municipality." N.J.S.A. 40:48C-15(c). Second, Chapter 68 expanded the permissible use of payroll tax revenues by allowing a municipality to impose a payroll tax not only "for general municipal purposes," but also "for the purposes set forth in subsection d. of this section." N.J.S.A. 40:48C-15(a) (emphasis added).

Subsection (d)(1), also part of Chapter 68, provided:

If a municipality adopts an ordinance pursuant to [ N.J.S.A. 40:48C-15(a) ] ... and the municipality has a median household income of $55,000 or greater according to the ... United States Census Bureau, all employer payroll tax revenues collected ... pursuant to the ordinance shall be deposited into a trust fund to be used exclusively for school purposes ....

Subsection (d)(2) requires the municipality to pay over from the trust fund to its school board on a monthly basis "an amount equal to one-twelfth of the difference in State school aid provided to that school district, pursuant to [SFRA], between the current State fiscal year and State fiscal year 2018, for use in lieu of adjustment aid and all other categories of State school aid." The balance of any payroll tax revenues collected remain in the trust fund "in the event the employer payroll tax revenues collected in a year are insufficient to pay the full amount" required under (d)(2). N.J.S.A. 40:48C-15(d)(3).

B.

The Education Clause of our state Constitution requires the Legislature to "provide for the maintenance and support of a thorough and efficient system of free public schools for the instruction of all the children ... between the ages of five and eighteen years." N.J. Const. art. VIII, § 4, ¶ 1. When enacted in 2008, SFRA reflected "the State's most recent, lengthy and painstaking effort to craft a redesigned school funding formula that satisfies the constitutional standard." Abbott XXI, 199 N.J. at 147, 971 A.2d 989.

SFRA uses a formula to calculate the "adequacy budget" for each school district, that, in general terms, multiplies enrollment by a "base per pupil amount" added to the costs of other necessary educational services and district-specific geographic costs. N.J.S.A. 18A:7F-50(b) ; N.J.S.A. 18A:17F-51. To meet its portion of its adequacy budget, each school district must set a "general fund tax levy" in an amount equal to that district's "required local share." N.J.S.A. 18A:7F-5(b). For most districts, the "required local share" equals the lesser of "the local share⁴ calculated at the district's adequacy budget" or the district's local share from the previous year. N.J.S.A. 18A:7F-5(b). SFRA directs the State to remit to each school district "equalization aid" in an amount equal to the remainder after subtracting the local share from the...