KATHY MCBRIDE VS. LT. GOVERNOR SHEILA Y. OLIVER (L-0919-19, MERCER COUNTY AND STATEWIDE) ( 2021 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-4683-18
KATHY MCBRIDE, PRESIDENT,
TRENTON CITY COUNCIL,
MARGE CALDWELL-WILSON,
VICE PRESIDENT, TRENTON
CITY COUNCIL, ROBIN M.
VAUGHN, SANTIAGO
RODRIGUEZ and GEORGE
MUSCHAL, MEMBERS,
TRENTON CITY COUNCIL,
Plaintiffs-Appellants,
v.
LT. GOVERNOR SHEILA Y.
OLIVER, COMMISSIONER,
NEW JERSEY DEPARTMENT
OF COMMUNITY AFFAIRS,
DIVISION OF LOCAL
GOVERNMENT SERVICES,
REED GUSCIORA, MAYOR,
CITY OF TRENTON,
Defendants,
and
MELANIE R. WALTER,
DIRECTOR, NEW JERSEY
DEPARTMENT OF
COMMUNITY AFFAIRS,
DIVISION OF LOCAL
GOVERNMENT SERVICES,
Defendant-Respondent.
Submitted October 15, 2020 - Decided June 15, 2021
Before Judges Ostrer, Accurso and Vernoia.
On appeal from the Superior Court of New Jersey, Law
Division, Mercer County, Docket No. L-0919-19.
Grace, Marmero & Associates, LLP, attorneys for
appellants (Albert K. Marmero, on the briefs).
Gurbir S. Grewal, Attorney General, attorney for
respondent (Melissa H. Raksa, Assistant Attorney
General, of counsel; Steven M. Gleeson and Dominic
Giova, Deputy Attorneys General, on the brief).
PER CURIAM
Plaintiffs Trenton City Council President Kathy McBride, Vice President
Marge Caldwell-Wilson, and Council Members Robin M. Vaughn, Santiago
Rodriguez and George Muschal, 1 appeal from a June 7, 2019 order entered by
Judge Jacobson transferring to this court their complaint to permanently enjoin
defendants Lieutenant Governor Sheila Y. Oliver, Commissioner, New Jersey
1
Council Members Santiago Rodriguez and George Muschal joined the suit
after the filing of the complaint.
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Department of Community Affairs; Melanie R. Walter, Director, New Jersey
Department of Community Affairs, Division of Local Government Services; and
Trenton Mayor Reed Gusciora from taking any action to implement any budget
or tax rate inconsistent with the budget approved by City Council on March 28,
2019, and dismissing the claims against the Lieutenant Governor and the Mayor
with prejudice. Because the City Council's subsequent adoption of a Fiscal Year
2019 budget inconsistent with the one it approved on March 28 has made the
relief requested by plaintiffs impossible, leaving aside their failure to avail
themselves of the administrative remedies provided them by the Legislature
under N.J.S.A. 52:27BB-15, we dismiss the matter as moot.
Although the dispute has a tortured history, the essential facts, for our
purposes, are easily summarized. Under the State's Local Budget law, N.J.S.A.
40A:4-1 to -89, every municipality must adopt an annual budget on a cash basis,
N.J.S.A. 40A:4-3, which must have been previously approved by the Director
of the Division of Local Government Services, N.J.S.A. 40A:4 -10. See City of
Atlantic City v. Cynwyd Invs., 148 N.J. 55, 65 (1997) (explaining the
requirement "insures that, absent unforeseen emergencies, local gove rnments
will pay for the expenses they incur with cash actually collected or received
during the fiscal year"). For those municipalities, such as Trenton, that are
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dependent on discretionary state aid under the Transitional Aid to Localities
program, N.J.S.A. 52:27D-118.42a, the Director "exercises broad oversight of
the municipality's operations, focusing on, but not limited to, its fiscal
management." Redd v. Bowman, 223 N.J. 87, 113 (2015) (noting "[t]he Senate
Budget and Appropriations Committee declared that '[a]pplying for aid under
this program is a declaration that the municipality is not capable of managing
its finances without special State assistance and intervention'" (quoting S.
Budget & Appropriations Comm. Statement to S. 3118 (Dec. 8, 2011))).
Trenton has been a recipient of discretionary aid through the Transitional
Aid to Localities program since the program's inception in 2011, and thus is well
acquainted with the program's requirements. One of those requirements is that
it enter annually into a Memorandum of Understanding with the Division
subjecting the City to specific terms and conditions of Division oversight and
control of its finances. See N.J.S.A. 52:27D-118.42a(a). 2
2
The statute provides in pertinent part:
a. The Director of the Division of Local Government
Services in the Department of Community Affairs shall
determine conditions, requirements, orders, and
oversight for the receipt of any amount of grants, loans,
or any combination thereof, provided to any
municipality through the Transitional Aid to Localities
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Trenton operates under a Mayor and Council form of government under
the Faulkner Act. See N.J.S.A. 40:69A-32. In October 2018, Mayor Gusciora
submitted his proposed budget for Fiscal Year 2019 to the City Council. That
budget included a 0.114 tax rate levy increase, that is 11.4 cents per $100 of
assessed value, a total tax rate increase of approximately three percent. The City
Council accepted the budget but did not take action on it.
On March 21, 2019, following receipt of the City's final Transitional Aid
award letter, the Mayor submitted the draft budget to the Division, which the
Director approved as amended. The City Council failed to adopt the approved
budget. Instead, the City Council made amendments to the Director's approved
budget, including cutting several line-item expenses, such as reserves for
uncollected taxes and municipal liability, and reducing the tax levy increase to
program or any successor discretionary aid programs
for municipalities in fiscal distress. Conditions,
requirements, or orders deemed necessary by the
director may include, but not be limited to, the
implementation of government, administrative, and
operational efficiency and oversight measures
necessary for the fiscal recovery of the municipality,
including but not limited to requiring approval by the
director of personnel actions, professional services and
related contracts, payment in lieu of tax agreements,
acceptance of grants from State, federal or other
organizations, and the creation of new or expanded
public services.
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0.05, which it resolved on March 28 to file with the Division "for certification
of the municipal [b]udget so amended." According to the Director, the City
Council's proposed six cent reduction in the tax rate would result in in a $1.5
million reduction in the municipal purposes tax levy compared to FY2018 and
would exacerbate a future deficit projected at over $10 million and a projected
structural gap of approximately $23 million.
The Director wrote to the Mayor and the City Council President in early
April cataloging the City's several financial violations of the Transitional Aid
MOU, including budget amendments that "reflect[] unsupported increases in
spending, declining reserves and fund balance, [and] under-budgeting of
essential line items," while decreasing the municipal levy, "resulting in an
expanding structural and operational deficit." Based on the City's "ongoing
failure to meet its Transitional Aid Program obligations," the Director advised
Trenton's Transitional Aid award would be reduced by over a quarter of a million
dollars. The Director instructed the City to make appropriate budget
amendments recognizing the reduction in aid and "adopt a budget reflecting
same" by April 11. The Director advised, however, that if the City immediately
came into compliance with its Transitional Aid obligations, the Division could
restore the City's full award by the June 30 close of the FY2019 budget year.
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Plaintiff McBride responded on behalf of the City Council, advising it
would not meet the Director's "arbitrary" deadline to adopt a budget.
On April 24, the Director wrote to the Mayor and City Council explaining,
again, that the deadline had been based on the need for Trenton to authorize the
issuance of fourth quarter tax bills, which would allow it to conduct an
accelerated tax sale prior to the close of the fiscal year on June 30. But having
since been notified by the County Board of Taxation that the City had not
adopted a budget as directed, the Director advised she would exercise her
authority under the Local Budget law, N.J.S.A. 40A:4-17(b), to herself establish
the amount to be raised by taxation.
The Director accordingly advised the City that Trenton's municipal
purposes tax levy for the Fiscal Year 2019 would be $80,845,541.17, reflecting
the 0.114 tax rate levy increase, and that the City had forty-five days, to June 8,
2019, to finally adopt its Division of Local Government Services' approved 2019
budget in accordance with N.J.S.A. 40A:4-17(b).3 The Director further advised
3
The Director asserts that the City issued fourth quarter tax bills based on the
0.114 tax rate levy increase notwithstanding its failure to have "struck a levy,
thereby billing residents without any authority" under N.J.S.A. 40A:4-12.1. She
maintains that by establishing the levy for FY2019 in the sum of
$80,845,541.17, she "effectively ratified the tax bills in the absence of an
adopted budget and allowed the City more time to resolve its budget challenges."
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"the members of the governing body" they would each be assessed a personal
penalty of $25 a day retroactive to April 11, "for each day after June 8, 2019,
that they failed or refused to adopt a compliant City budget" for FY2019.
Finally, the Director advised that "any appeal of this determination must be
made to the Local Finance Board, in accordance with the requirements of
N.J.S.A. 52:27BB-15."
Plaintiffs did not appeal the Director's decision to establish the City's
municipal tax levy to the Local Finance Board in accordance with N.J.S.A.
52:27BB-15. Instead, on April 29 they filed a pro se complaint in the Law
Division to enjoin defendants from imposing the 0.114 tax rate levy increase.
On June 6, the same day Judge Jacobson heard argument on the parties'
dueling applications, and announced from the bench that she would be
transferring plaintiff's complaint to this court, the City Council unanimously, in
the absence of plaintiff McBride, voted to approve a FY2019 budget with a
0.114 tax rate levy increase. On June 25, the Director, noting the budget
approved by the City Council had not been reviewed and approved by the
Division in advance of its adoption as required by N.J.S.A. 40A:4-10, but
nevertheless "mindful of the close of FY2019 in five days" and desiring "to
effectuate a statutorily compliant close to the City's budget year without further
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delay," certified the budget conditioned on certain mandatory corrections
specified in the approval, which amendments were subsequently adopted by the
City.
Plaintiffs appeal, contending the Director failed to act on the budget
submitted by the City Council pursuant to its resolution of March 28 reducing
the mayor's proposed tax rate levy increase of 0.114 to 0.05, but failing to
address the City Council's subsequent adoption of the budget approved by the
Director premised on the 0.114 increase.
While we agree with Judge Jacobson that the matter was properly
transferred to this court, the City Council's adoption of the FY2019 budget
approved by the Director on June 25, 2019, makes it impossible for this court to
provide plaintiffs the relief they sought in their complaint, namely that
defendants be permanently enjoined "[f]rom unilaterally transmitting to the
County Board and imposing a USD 0.114 cents increase in taxes upon the City
of Trenton's citizenry." The seven-member City Council, including four of the
five plaintiffs, voted unanimously in plaintiff McBride's absence to approve a
budget with that increase. That circumstance, coupled with Fiscal Year 2019
having ended on June 30, 2019, meaning all taxes have been levied and all funds
expended in accordance with the Division approved budget adopted by City
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Council in the waning days of the fiscal year, makes this matter moot. See Redd,
223 N.J. at 104 (explaining "[a]n issue is 'moot when our decision . . . can have
no practical effect on the existing controversy'" (quoting Deutsche Bank Nat'l
Tr. Co. v. Mitchell, 422 N.J. Super. 214, 221-22 (App. Div. 2011))). "[C]ourts
of this state do not resolve issues that have become moot due to the passage of
time or intervening events." City of Camden v. Whitman, 325 N.J. Super. 236,
243 (App. Div. 1999).
We do not perceive the issue presented to be of any substantial importance
likely to reoccur, see Zirger v. Gen. Accident Ins. Co., 144 N.J. 327, 330 (1996),
but in the event it does, recourse is properly made to the Local Finance Board
in accordance with N.J.S.A. 52:27BB-15.
Appeal dismissed.
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