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

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-0743-10T4
BOROUGH OF SEASIDE PARK,
SEASIDE PARK BOARD OF APPROVED FOR PUBLICATION
EDUCATION, SUSAN BROSNAN,
August 12, 2013
THOMAS CONNORS, PATRICIA
DEGUTIS, FAYE HARING, JAMES APPELLATE DIVISION
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 SEASIDE
HEIGHTS BOARD OF EDUCATION,1
Defendants-Respondents/
Cross-Appellants.
________________________________
Argued: December 19, 2012 - Decided: August 12, 2013
Before Judges Axelrad, Sapp-Peterson and
Nugent.
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).
1
The Seaside Heights Board of Education also filed a third-party
complaint against all the parties that mirrored the claims of
plaintiffs' second amended complaint. For ease of reference,
the appeal is analyzed based on plaintiffs' second amended
complaint as equally applicable to the third-party complaint.
2 A-0743-10T4
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.
The opinion of the court was delivered by
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
3 A-0743-10T4
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.
2
Cross-appellants only sought dissolution of Central Regional,
and the Seaside Heights Board of Education additionally sought
to withdraw along with Seaside Park.
4 A-0743-10T4
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.
5 A-0743-10T4
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 -
3
In 1990, the Supreme Court ruled that the 1975 Act was
unconstitutional as applied as it did not provide a thorough and
efficient system of education to pupils residing in poorer urban
districts, and ordered the Act to be amended or new legislation
passed in order to ensure proper funding for those districts.
Abbott v. Burke, 119 N.J. 287, 295, 384-85 (1990) (Abbott II).
The Abbott litigation continues to this day. See Abbott v.
Burke, 206 N.J. 332 (2011).
4
Limited purpose regional school districts operate one or more
of the following: "elementary schools, junior high schools,
high schools, vocational schools, special schools, health
facilities or particular educational services or facilities."
N.J.S.A. 18A:13-2(b).
6 A-0743-10T4
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
7 A-0743-10T4
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
8 A-0743-10T4
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
9 A-0743-10T4
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
10 A-0743-10T4
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
11 A-0743-10T4
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:
12 A-0743-10T4
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
13 A-0743-10T4
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
14 A-0743-10T4
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
5
The mayor of Seaside Park served as a member of the task
force, which specifically considered the experience of Central
Regional, Assembly Task Force on School District
Regionalization, Transcript of Feb. 25, 1998, (pp. 84-94);
Central Regional's expert in this litigation, Melvyn Wyns,
testified at the March 26, 1998 hearing, Assembly Task Force on
School District Regionalization, Transcript of March 26, 1998,
(pp. 24-41, 64-67); and one of plaintiffs' experts in this
litigation, James Kirtland, testified at the August 13, 1998
hearing, Assembly Task Force on School District Regionalization,
Transcript of Aug. 13, 1998, (pp. 80-81, 98-120).
15 A-0743-10T4
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
16 A-0743-10T4
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
6
http://www.njleg.state.nj.us/PropertyTaxSession/OPI/bg123.pdf.
17 A-0743-10T4
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.
7
Plaintiffs' counsel testified regarding regional school
districts at the November 1, 2006 hearing. See Transcript of
Public Hearing before Joint Legislative Committee on Government
Consolidation and Shared Services, pp. 33-38 (Nov. 1, 2006),
http://www.njleg.state.nj.us/legislativepub/pubhear/jcgo110106.
pdf.
18 A-0743-10T4
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
8
S. 1585 can be traced back to A. 2623, from the 209th Leg.
(2000-2001 Legislative Session). In 2001, A. 2623 was
(continued)
19 A-0743-10T4
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
(continued)
introduced, referred to two assembly committees, and also
reported out of committee with a second reading and fiscal
estimates (with Seaside Park identified in the 2001 fiscal
estimate as one of the municipalities that would experience tax
savings). However, it did not pass, and was carried over in
legislative sessions through 2006, introduced as S. 1585, but
never went anywhere.
20 A-0743-10T4
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.
9
The boards of education of the constituent municipalities
passed resolutions to hold July 1 and September 1, 1954
referenda to allow voters to decide whether to create the
District. The first referendum did not pass; the second passed.
21 A-0743-10T4
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 regionalized school
districts, no such change has ever been effectuated at Central
Regional.
In 1976, Seaside Heights, Seaside Park, and Lacey Township
petitioned the Department of Education for permission to
withdraw from Central Regional. On May 20, 1977, the Board
permitted Lacey Township to conduct a referendum, but rejected
the petitions of Seaside Heights and Seaside Park on the ground
that the proposed alternative to Central Regional, a sending-
receiving relationship with the Point Pleasant School District,
was not viable. Lacey Township's withdrawal from Central
Regional was approved by voter referendum held in 1977.10
In 1981, Island Heights and Seaside Heights passed
resolutions requesting that the county superintendent
investigate the advisability of their withdrawal from Central
Regional. Island Heights later withdrew its petition after a
10
The withdrawal became effective on July 1, 1978, but for ease
of reference in this opinion we will use the 1977 date.
22 A-0743-10T4
joint meeting of the constituent communities, and the county
superintendent issued his report regarding Seaside Heights. In
l983, Seaside Heights then petitioned the Commissioner for
permission to conduct a referendum regarding withdrawal.
Seaside Park objected, and the Board denied the petition.
In 1985, the Berkeley Township Board of Education (the
respective Boards of Education will hereafter be referred to as
BOE) commissioned a feasibility study regarding its potential
withdrawal from Central Regional. The author recommended
withdrawal, but there is no record of any further action.
In November 1995, the Seaside Park BOE approved withdrawal
from Central Regional and pursued a send-receive relationship
with Point Pleasant under a pilot program. However, this
attempt to withdraw was unsuccessful.
In October 1998, Seaside Park passed a resolution
requesting that Central Regional consider the resolution "as a
petition seeking an alteration in the formula for municipal
contributions to the District, so as to return to a per pupil
cost formula[.]" The resolution otherwise reflected an intent
by Seaside Park "to seek all appropriate legal redress to
withdraw" from Central Regional. The resolution also directs
the Borough Clerk-Administrator to promptly forward it to
Central Regional. The record reflects that Central Regional
23 A-0743-10T4
received the resolution and discussed it, but does not reflect
any decision by Central Regional or further action by Seaside
Park regarding the resolution.
In 2003, Seaside Park adopted a resolution requesting that
Central Regional place a referendum on the ballot for voters in
the constituent municipalities authorizing a change in the
funding formula for Central Regional to sixty percent equalized
valuation and forty percent per pupil. In contrast to the prior
resolution, this resolution contained no provision directing its
submission to Central Regional and the record does not reflect
anything further with respect to this resolution, including
whether it was sent to Central Regional.
In April 2005, at Seaside Park's request, Donald E.
Beineman, Ed.D., and James L. Kirtland, C.P.A., prepared a
preliminary feasibility study, opining that Seaside Park was
subsidizing the other constituent municipalities and could
realize significant cost savings by withdrawing from Central
Regional and entering into a sending-receiving relationship with
nearby Toms River or Point Pleasant, or by Central Regional
being dissolved and Berkeley Township creating its own K-12
district. Accordingly, in June 2005, Seaside Park and its BOE
passed resolutions formally instituting the instant process by
requesting that the Ocean County Superintendent of Schools
24 A-0743-10T4
conduct an investigation into the advisability of Seaside Park's
withdrawal from, or the dissolution of, Central Regional
pursuant to N.J.S.A. 18A:13-51. Seaside Heights and Island
Heights and their Boards of Education passed resolutions
requesting an investigation as to only the dissolution of
Central Regional.
Central Regional retained its own school finance
consultant, Melvin L. Wyns, who authored a report in November
2005. He recommended opposition to both dissolution and
withdrawal based on the adverse tax impact it would have on the
constituent municipalities.
In March 2006, the county superintendent issued a report
advising against dissolution. He found the following advantages
to dissolution: reduced administrative costs by consolidation,
anticipated increases in state aid for select districts,
reallocation of the tax levy, and the ability of each school
district to assess and evaluate their present educational
concerns during the process. He found the following
disadvantages: possible lack of continuity of educational
programs, need to establish new relationships between sending
and receiving districts, effects on staff at Central Regional
and Berkeley Township elementary school regarding tenure and
seniority, negative tax levy impact on Berkeley Township and
25 A-0743-10T4
Ocean Gate, potential increased cost per student ratios in
Berkeley Township, and lost ability to share unique costs among
all constituent districts. The superintendent concluded the
disadvantages of dissolution outweighed the advantages. Most
notable was the negative impact on the taxpayers of Berkeley
Township and Ocean Gate, "who represent over 80% of the resident
population."
In April 2006, Seaside Park and its BOE filed a petition
with the State Department of Education seeking permission to
conduct a referendum on withdrawing from or dissolving Central
Regional pursuant to N.J.S.A. 18A:13-54. They requested, in the
event the Commissioner denied a referendum or the referendum was
defeated, that she "use her inherent power to create an
equitable tax apportionment formula, based in whole or in part
on a per-pupil formulation, to fund the Central Regional School
District." Central Regional opposed the petition.
The Board held hearings in July and August 2006. It voted
to grant Seaside Park's petition for a referendum on dissolution
of Central Regional, memorialized in a written opinion of
September 1, 2006. See N.J.S.A. 18A:13-56. The referendum was
held on March 13, 2007, and was defeated by the voters because
although the majority of the constituent municipalities favored
dissolution, a majority of the overall voters in the District
26 A-0743-10T4
did not. See N.J.S.A. 18A:13-59. The referendum passed in
Seaside Park, Seaside Heights, and Island Heights, but was
defeated in Berkeley Township and Ocean Gate.11
III.
In May 2007, plaintiffs filed a complaint in the Chancery
Division, commencing this litigation, and a month later filed a
first amended complaint. Defendants and cross-appellants filed
responsive pleadings, and the Seaside Heights BOE filed a third-
party complaint. Island Heights and its BOE and the Seaside
Heights BOE sought dissolution of Central Regional, consistent
with the expressed desire of the majority of the voters in their
municipalities. Alternatively, the Seaside Heights BOE sought
permission to withdraw with Seaside Park, but Island Heights did
not seek to withdraw. Both municipalities opposed Seaside
Park's unilateral withdrawal. Moreover, neither Seaside Heights
nor Island Heights, or their respective Boards of Education,
sought alteration of the current funding formula.
In December 2007, plaintiffs filed a second amended
complaint seeking an order: (1) compelling the Commissioner to
exercise her inherent equitable powers to dissolve Central
11
At that time, Berkeley Township had about seven times the
number of registered voters of Seaside Heights, Seaside Park,
and Island Heights, combined. Moreover, Berkeley Township had
1709 pupils in the District while Seaside Heights, Seaside Park,
and Island Heights had a total of 311 pupils in the District.
27 A-0743-10T4
Regional, permit Seaside Park to withdraw, or change Central
Regional's funding method because the current allocation system
is inequitable as applied to them (count one); (2) declaring the
l975 and l993 school funding legislation unconstitutional as
applied to plaintiffs because it impairs their contractual right
to per pupil funding (count two); (3) declaring the subject
legislation unconstitutional as applied to plaintiffs because it
constitutes a taking of their property right to per pupil
funding without just compensation (count three); (4) requesting
the court exercise its equitable power to dissolve Central
Regional, permit plaintiffs' withdrawal, or change the funding
method for Central Regional because the statutory remedy is
illusory due to the larger number of voters in Berkeley Township
(count four); (5) declaring the subject legislation violative of
plaintiffs' procedural due process because it provides Berkeley
Township with the absolute power to block any change in the
allocation method (count five); (6) declaring the subject
legislation violative of plaintiffs' substantive due process
because the amendments are not rationally related to any alleged
legislative objective and deprive them of their property (tax
dollars and contract rights) (count six); and (7) declaring the
current allocation method does not provide Seaside Park's
students with an efficient system of education because of the
28 A-0743-10T4
disproportional monetary burden on its taxpayers (count seven).
Defendants filed responsive pleadings.
Prior to the second amended complaint being filed, the
Commissioner and Berkeley Township moved to dismiss the
complaint and cross-complaint. Central Regional and the
Berkeley Township BOE joined in the motion. Plaintiffs opposed
the motion on the basis that the statutory procedure for
withdrawal or dissolution is illusory given the disparity of
voter registration in Seaside Park and Berkeley Township.
Following argument, Judge Frank A. Buczynski, Jr. issued an oral
decision and order on February 21, 2008, dismissing several of
the claims and remanding an issue for clarification by the
Commissioner.
The Commissioner had sought dismissal of the amended
complaint on the grounds of plaintiffs' failure to exhaust all
administrative remedies of modification of the current funding
allocation, permission to withdraw from the District, and
dissolution of the District. See N.J.S.A. 18A:13-23.3, -54, -
55, -56, and -57. The court noted that Seaside Park had passed
a resolution petitioning Central Regional to alter the formula
for municipal contributions in l998 under N.J.S.A. 18A:13-23,
which apparently was ignored; however, plaintiffs waited a
decade to seek judicial review or assistance to compel
29 A-0743-10T4
compliance. Accordingly, the court concluded that plaintiffs
had not exhausted their statutory remedies for modification of
the current funding method for Central Regional. Dissolution,
however, had already been voted upon by the constituent
municipalities and rejected. The order thus reflected that
count one was dismissed with prejudice insofar as plaintiffs and
third-party plaintiffs sought an order directing the
Commissioner to exercise any authority to dissolve or permit
withdrawal from the District.
The remaining claims in count one relating to the statutory
process for modifying the regional funding allocation method and
the statutory procedures for withdrawal of constituent
municipalities were dismissed without prejudice. The order
further provided that "[a]s to the claim that plaintiffs have
not exhausted all administrative remedies," any public body can
request in writing pursuant to N.J.S.A. 18A:13-23 that Central
Regional consider holding a referendum to change the current
regional funding allocation, and failure of Central Regional to
timely respond will be deemed a denial of the request.
The court, however, remanded the matter to the Commissioner
"for clarification as to whether the Board of Review considered
the petition for an order to conduct a referendum on the issue
of withdrawal on the merits." The court required the Board to
30 A-0743-10T4
advise in writing that it addressed the issue of withdrawal, or
if it did not, to consider the issue "as directed by the
Commissioner."
The court also dismissed the constitutional claims (counts
two, three, five, and six) with prejudice as brought by the
governmental entities, but denied the motion to dismiss as to
the individual taxpayer plaintiffs. Specifically, the court
held that Seaside Park and its BOE lacked standing to pursue the
claims of impairment of contracts, taking of property, and
procedural and substantive due process violations based on the
principle, with citing reference, that municipalities and their
boards of education as political subdivisions generally lack
standing to assert constitutional claims against other political
bodies such as the Commissioner.
The court further dismissed counts four and seven with
prejudice as to all parties based on a failure to state a claim.
As to count four, the court held that the mere fact a
constituent municipality may vote against the relief requested
in a referendum does not make the remedy illusory as a matter of
law, noting Lacey Township's withdrawal from the District
following the 1975 revision. As to count seven, the court found
that plaintiffs failed to challenge any of the ten elements of a
31 A-0743-10T4
"thorough and efficient" education articulated in Abbott II,
supra, 119 N.J. at 350 n.23.
The only claims that survived the court's February 21, 2008
decision were those constitutional claims asserted on behalf of
the taxpayer plaintiffs in counts two, three, five, and six.
Specifically, those claims alleged that the l975 and l993 laws:
(1) substantially impaired taxpayer plaintiffs' "contracts" with
the regional district; (2) constituted a taking of property
without just compensation; (3) violated taxpayer plaintiffs'
procedural due process rights; and (4) violated taxpayer
plaintiffs' substantive due process rights.
Plaintiffs moved for reconsideration. Following oral
argument on May 9, the court denied the motion on the record,
memorialized in an order of June 9, 2008.
On May 19, 2008, the Commissioner notified Judge Buczynski
that the Board only considered the issue of dissolution and not
whether Seaside Park should be granted a referendum on
withdrawal. She explained that in Seaside Park's petition, the
withdrawal relief was only requested in the alternative if the
Board denied its request for a referendum on dissolution, which
it did not.
By resolution dated September 10, 2008, Seaside Park
applied to the county superintendent for another investigation
32 A-0743-10T4
into the advisability of Seaside Park's withdrawal from Central
Regional. Our record reflects no proceedings on this
application.
In response to the court's February 21, 2008 decision, by
resolution of February 27, 2008, Seaside Park requested that
Central Regional conduct a public referendum regarding a revised
funding formula. On April 21, 2009, a referendum was held with
respect to altering Central Regional's cost allocation method
from equalized valuation to per pupil cost. It did not pass.
Seaside Park also pursued modification of the District's
funding formula with the Department of Education. By letters
dated March 11, May 16, and July 29, 2008, the Mayor of Seaside
Park sought the Commissioner's assistance and support in
resolving the "inequitable tax apportionment" in Central
Regional. The Commissioner responded to each of the letters,
and in her letter of August 18, 2008, advised that the
Department had reviewed the data Seaside Park provided and was
aware of the per pupil costs borne by the constituent members of
Central Regional. She added:
The situation you described is not unlike
that of many other constituent
municipalities involved in regional
districts where there is simultaneously a
wide disparity in property value and
enrollment among the constituents. As you
correctly pointed out, the existing tax
apportionment methodology, and any attempt
33 A-0743-10T4
to change it, is governed by statute. I
recognize that it is often difficult and
sometimes impossible to get the statutory
voting majorities to effect the coveted
change. Unfortunately, as Commissioner I
cannot impose that change, as I too must
adhere to the existing statute. However,
with the recent passage of laws giving the
Executive County Superintendent a wide range
of authority to seek out and recommend
programs and services that lead to increased
efficiency at the district level, I will ask
that your district receive swift attention
in this matter.
It is my hope that in cooperation with
the county office it may be possible to find
a solution to your problem that would be
acceptable to all of the parties involved,
and one that will not harm the school
district's ability to provide a quality
public school education to all of the
children.
In 2010, the parties filed cross-motions for summary
judgment. Following oral argument, by opinion and order of
August 30, 2010, Judge Buczynski denied plaintiffs' motions and
granted defendants' motions dismissing the remaining counts
(two, three, five, and six) as to the taxpayer plaintiffs. The
judge found "[t]he record [was] bereft of any evidence
supporting the existence of a contractual relationship between
the parties[,]" expressly concluding the resolutions of the
constituent districts to hold the 1954 referenda to allow voters
to decide whether to create the District did not meet the
requirements of a valid contract. Nor was there a "taking"
34 A-0743-10T4
because "[p]laintiffs did not hold a property right in the
original funding formula." Similarly, the judge held that
"[p]laintiffs were not denied substantive due process because
[they] did not hold a fundamental right in the funding scheme
used for the District."
Judge Buczynski was also convinced that pursuing the
"drastic remedy" of "exercising control over the Commissioner
and usurping her authority is not warranted under the
['undisputed material'] facts of this case" and granting the
extraordinary equitable remedies sought by plaintiffs of "court
ordered dissolution of the District, or court permission
allowing Seaside Park to withdraw, or court ordered modification
of the funding formula, . . . without a finding of
constitutional violations[,] would be an abuse of judicial
discretion."
He concluded:
Property owners' dissatisfaction with
the current funding formula or their belief
that it is unfair is not a basis for the
court to intrude into what is a Legislative
prerogative. Central Regional School
District was created under terms and
conditions outlined by our Legislature.
Moreover, the funding formula was determined
by the Legislature. Controlling costs for
education is one of several significant
issues facing our State. Our Governor and
Legislature are facing complex economic
challenges. It is the Legislature's
obligation to provide for a thorough and
35 A-0743-10T4
efficient education as mandated in Article
VIII, Section 4, Paragraph 1 of the New
Jersey Constitution. Therefore, it is for
the Legislature to determine if the current
educational funding used in Central Regional
School District should be revised or
repealed, not the court.
Plaintiffs appealed. Seaside Heights BOE and Island
Heights and its BOE cross-appealed.
On appeal, plaintiffs argue:12
POINT I13
THE TRIAL COURT ERRED IN DISMISSING, ON THE
PLEADINGS ALONE, COUNTS ONE, FOUR, SIX, AND
SEVEN, BECAUSE EACH COUNT SETS FORTH A VALID
CAUSE OF ACTION.
A. The Trial Court Erred In Finding That
Plaintiffs Had Not Exhausted Their
Administrative Remedies And, As A Result,
Dismissing Count One.
l. The trial court erred in
finding that Plaintiffs failed to
pursue withdrawal from Central.
2. The trial court erred in
finding that Plaintiffs failed to
pursue modification of the cost
allocation method.
B. The Trial Court erred In Finding That
The Commissioner Has No Equitable Authority
To Modify A Regional District's Funding
Formula.
12
Plaintiffs' arguments regarding counts two, three, five, and
six do not challenge the court's ruling that Seaside Park and
its BOE lacked standing.
13
We renumber plaintiffs' arguments as their Point I sets forth
the standard of review.
36 A-0743-10T4
l. The trial court erred by
dismissing an issue of "first
impression" at the pleadings
stage.
2. Plaintiffs are entitled to
equitable modification of the tax
allocation method for Central
pursuant to the Supreme Court's
decision in North Haledon.
C. The Trial Court Erred By Dismissing
Count Four Because Plaintiffs Raised A
Cognizable Claim That The Statutory
Processes For Modification Of The Cost
Apportionment For, As Well As Withdrawal
From Or Dissolution Of, Central Are
Illusory.
D. The Trial Court Erred By Dismissing
Count Seven Because Plaintiffs Raised A
Cognizable Claim That The Current Method Of
Cost Apportionment For Central Does Not
Provide Plaintiffs With An Efficient System
Of Education For Their Students.
POINT II
THE TRIAL COURT ERRED IN GRANTING SUMMARY
JUDGMENT AS TO COUNT TWO BECAUSE THE
LEGISLATION AT ISSUE VIOLATED THE CONTRACTS
CLAUSES OF THE U.S. AND NEW JERSEY
CONSTITUTIONS AS APPLIED.
A. The Trial Court Erred In Ruling That,
As a Matter of Law, There Was No Contract
Between The Various Parties.
B. The Trial Court Erred In Ruling That, As
a Matter of Law, Plaintiffs Were Not The
Third-Party Beneficiaries Of The Contract At
Issue.
C. The Trial Court Failed To Analyze The
Substantial Impact Prong Of The Analysis.
37 A-0743-10T4
D. The Trial Court Erred In Finding That The
Legislation At Issue Furthers A Legitimate
Public Purpose.
POINT III
THE TRIAL COURT ERRED IN GRANTING SUMMARY
JUDGMENT AS TO COUNT THREE BECAUSE THE
LEGISLATION AT ISSUE CONSTITUTED AN
UNCONSTITUTIONAL TAKING OF THE PLAINTIFFS'
PROPERTY RIGHTS.
POINT IV
THE TRIAL COURT ERRED IN GRANTING SUMMARY
JUDGMENT AS TO COUNT SIX BECAUSE THE 1975
REVISION VIOLATED PLAINTIFFS' SUBSTANTIVE
DUE PROCESS RIGHTS.
POINT V
THE TRIAL COURT ERRED WHEN IT REFUSED TO
ADDRESS PLAINTIFFS' EQUITABLE CLAIMS AND
SUBSTANTIVE DUE PROCESS CLAIMS.
POINT VI
PLAINTIFFS DEMONSTRATED GOOD AND JUST CAUSE
FOR THE TRIAL COURT TO EXERCISE ITS
EQUITABLE POWERS TO ADDRESS THE INEQUITIES
OF THE CURRENT SITUATION.
At oral argument before us, counsel for Seaside Park
advised that it sought the direct relief of a judicial
determination on the merits, permitting it to dissolve or
withdraw from Central Regional, or to modify Central Regional's
cost allocation method. Alternatively it sought a remand to the
Commissioner with direction to apply North Haledon remedies.
In its cross-appeal, the Seaside Heights BOE argues that
the court erred in dismissing all counts of its complaint upon a
finding that it lacked standing to assert constitutional claims.
38 A-0743-10T4
At oral argument before us, its attorney reiterated that it
joined plaintiffs' request for dissolution of Central Regional
or alternatively supported the withdrawal of Seaside Park and
Seaside Heights, but did not support unilateral withdrawal by
Seaside Park or revision of the tax apportion formula.
The Island Heights BOE asserts error by the court in: (1)
dismissing count four because the evidence supported a
cognizable claim that the statutory process is an illusory
remedy; (2) granting summary judgment dismissing count two
because the legislation violated the contracts clauses of the
United States and New Jersey Constitutions as applied; (3)
granting summary judgment as to count three because the
legislation constituted an unconstitutional taking; and (4)
granting summary judgment dismissing count six because the 1975
legislation violated the parties' due process rights. It
further contends the evidence before the court demonstrated good
and just cause to address the inequities of the current
situation by ordering dissolution of the District.
Island Heights' arguments echo the abovementioned second,
third, and fourth arguments. It additionally contends the court
should have accepted the allegations of the complaint as true
for purposes of the dismissal motion including, for example,
that the referenda were contracts, that taxpayer plaintiffs were
39 A-0743-10T4
third-party beneficiaries of the contract formed by the 1954
referenda, that the l975 and l993 revisions substantially
impaired any contractual relationship plaintiffs may have had
with the other members of the District, and that plaintiffs had
a property interest as to the 1954 referenda. It further
contends that material factual questions existed as to whether
the l993 revision allowed for a realistic means for a
municipality to remove itself from the District and whether the
funding changes mandated by the l975 revision violated the
constitutional rights of the residents of the plaintiff
municipalities. At oral argument before us, the attorneys for
Island Heights and its BOE reiterated that they joined
plaintiffs' request for dissolution of Central Regional;
however, they did not support unilateral withdrawal by Seaside
Park or revision of the tax apportion formula, and Island
Heights did not seek withdrawal from the District if it were not
dissolved.
IV.
The Commissioner argues that the cross-appeals filed by
Island Heights and its BOE should be dismissed under Rule 2:8-2
because they lack standing to appeal from the dismissal of
claims they did not assert in the trial court. The Commissioner
notes that the Seaside Heights BOE filed cross-claims asserting
40 A-0743-10T4
the same causes of action as plaintiffs but neither Island
Heights nor its BOE asserted affirmative claims other than a
counterclaim for indemnification and cross-claims for
contribution and/or indemnification.
Only parties aggrieved by a judgment may appeal, meaning
those with "a personal or pecuniary interest or property right
adversely affected by the judgment in question." Howard Sav.
Inst. v. Peep, 34 N.J. 494, 499 (1961). Island Heights and its
BOE did not file any affirmative claims for relief. Thus,
although they supported plaintiffs' prayer for dissolution of
the District, they were not aggrieved by the final judgment.
See Donofrio v. Farr Lincoln Mercury, Inc., 54 N.J. Super. 500,
504-07 (App. Div. 1959). Nevertheless, considering the
compelling public policy and public interest at stake, Tiger v.
Am. Legion Post, 125 N.J. Super. 361, 371 (App. Div. 1973), and
the fact that we will be addressing Island Heights' and its
BOE's arguments in the context of plaintiffs' appeal, we discern
no basis to dismiss their cross-appeals at this juncture.
We first address and reject plaintiffs' and the Island
Heights BOE's arguments that the court did not apply the proper
standard for a motion to dismiss and should have permitted
plaintiffs to develop their claims through discovery, and that
41 A-0743-10T4
there were genuine issues of material fact precluding summary
judgment in defendants' favor.
"Appellate review of an order dismissing an action [under
Rule 4:6-2(e), for failure to state a claim upon which relief
may be granted] is governed by a standard no different than that
applied by the trial courts." Seidenberg v. Summit Bank, 348
N.J. Super. 243, 250 (App. Div. 2002). The court examines the
legal sufficiency of the facts alleged on the face of the
complaint, doing so with liberality, and accords every
reasonable inference to the plaintiffs. Printing Mart-
Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989).
Dismissal of a complaint, however, "is mandated where the
factual allegations are palpably insufficient to support a claim
upon which relief can be granted." Rieder v. N.J. Dep't of
Transp., 221 N.J. Super. 547, 552 (App. Div. 1987).
We review the grant of summary judgment de novo, applying
the same standard used by the motion judge under Rule 4:46.
Henry v. N.J. Dep't of Human Servs., 204 N.J. 320, 330 (2010);
Chance v. McCann, 405 N.J. Super. 547, 563 (App. Div. 2009). We
first consider whether the moving party has demonstrated that
there are no genuine disputes as to material facts, viewed in
the light most favorable to the non-moving party, i.e., "whether
the competent evidential materials presented, when viewed in the
42 A-0743-10T4
light most favorable to the non-moving party, are sufficient to
permit a rational factfinder to resolve the alleged disputed
issues in favor of the non-moving party." Brill v. Guardian
Life Ins. Co. of Am., 142 N.J. 520, 540 (1995); see also R.
4:46-2(c). If the evidence is "'so one-sided that one party
must prevail as a matter of law,'" then summary judgment should
be granted. Brill, supra, 142 N.J. at 540 (quoting Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S. Ct. 2505, 2512,
91 L. Ed. 2d 202, 214 (1986)). We then decide whether the
motion judge's application of the law was correct. Atl. Mut.
Ins. Co. v. Hillside Bottling Co., 387 N.J. Super. 224, 231
(App. Div.), certif. denied, 189 N.J. 104 (2006). In so doing,
we accord no deference to the motion judge's conclusions on
issues of law, Estate of Hanges v. Metro. Prop. & Cas. Ins. Co.,
202 N.J. 369, 382-83 (2010); Manalapan Realty, L.P., v. Twp.
Comm. of Manalapan, 140 N.J. 366, 378 (1995), which we review de
novo.
Based on our review of the record, we are satisfied Judge
Buczynski applied the appropriate legal standards in the
challenged orders. Plaintiffs were afforded all favorable
inferences as to their allegations of fact pertaining to the
resolutions, referenda, studies, and financial inequalities of
the funding formula. Their challenges on appeal with respect to
43 A-0743-10T4
this issue, however, involve legal conclusions, such as whether
the municipal entities had standing; whether those facts created
a contract, property right, or established other prima facie
constitutional claims; or whether those facts justified the
extraordinary relief of an exception to the doctrine of
exhaustion of administrative remedies or a unique North Haledon
remedy. For the reasons set forth in the judge's comprehensive
oral decisions and written opinion, we are satisfied he provided
ample legal basis for dismissing some of the counts under Rule
4:6-2(e), and the balance of the complaint subsequently on
cross-motions for summary judgment.
A. Count One - Exhaustion of Remedies
In their first count, plaintiffs sought an order compelling
the Commissioner to use her "inherent power" as set forth in
North Haledon to provide them with equitable relief in the form
of dissolution of Central Regional, authorization for Seaside
Park's withdrawal from Central Regional, or modification of the
cost apportionment used by Central Regional. In February 2008,
Judge Buczynski dismissed this count on the ground that the
referendum had been unsuccessful on dissolution and plaintiffs
had failed to exhaust their administrative remedies regarding
withdrawal from the District or alteration of the District's
funding formula. He directed plaintiffs to pursue alteration of
44 A-0743-10T4
the funding formula through the statutory mechanism, i.e., an
updated request to Central Regional, and remanded to the
Commissioner for consideration of plaintiffs' alternative
request for a referendum on withdrawal.
Then, at plaintiffs' request, Central Regional held a
referendum for alteration of the District's funding formula,
which failed. Seaside Park requested similar relief in letters
to the Commissioner, who responded that she had no authority to
do so. In response to the trial court's remand, the
Commissioner advised that she had only considered plaintiffs'
alternative request for dissolution, which she had authorized by
referendum.
Plaintiffs first assert error by the court in finding they
had not exhausted their administrative remedies as to withdrawal
and modification of the cost apportionment formula. They urge
that they diligently sought relief from Central Regional and the
Commissioner to no avail. Plaintiffs point to the fact that all
of the feasibility studies addressed both Seaside Park's
withdrawal from and dissolution of Central Regional and they
sought alternate relief from the Commissioner. Nevertheless,
the Commissioner chose to only act on their request for a
referendum on dissolution, which was defeated by the voters in
March 2007. Plaintiffs also contend they made repeated requests
45 A-0743-10T4
after 1998 to have the funding method changed, which Central
Regional ignored, a fact the court failed to consider in its
exhaustion analysis.
Plaintiffs further argue that mandating the exhaustion of
remedies would be futile. They note that the referenda on
dissolution and altering the cost apportionment formula failed,
and posit that even if the Commissioner approved a referendum on
withdrawal, it likely would not succeed given that Berkeley
Township has more total voters than the other constituent
municipalities combined.
Requiring exhaustion of administrative remedies before
seeking judicial relief is a tenet of administrative law and
established by court rule. See Abbott v. Burke, 100 N.J. 269,
296 (1985) ("In general, available and appropriate
'administrative remedies should be fully explored before
judicial action is sanctioned.'") (quoting Garrow v. Elizabeth
Gen. Hosp. & Dispensary, 79 N.J. 549, 558 (1979)); R. 2:2-
3(a)(2). The exhaustion requirement serves three primary goals:
(1) it ensures that claims are initially heard by the body with
expertise in the area; (2) it produces a full factual record
facilitating meaningful appellate review; and (3) it conserves
judicial resources because the agency decision may satisfy the
parties. Bd. of Educ. of Bernards v. Bernards Twp. Educ. Ass'n,
46 A-0743-10T4
79 N.J. 311, 317 (1979). We also have recognized the Department
of Education's "fundamental and indispensable jurisdiction" over
controversies and disputes arising under the school laws, and
have held that the doctrine of exhaustion of remedies requires
parties to attempt resolution of such matters using the
administrative process. Theodore v. Dover Bd. of Educ., 183
N.J. Super. 407, 412-14 (App. Div. 1982).
Nevertheless, exhaustion of remedies is not an absolute
prerequisite to litigation. N.J. Civ. Serv. Ass'n v. State, 88
N.J. 605, 613 (1982).
Exceptions are made when the administrative
remedies would be futile, when irreparable
harm would result, when jurisdiction of the
agency is doubtful, or when an overriding
public interest calls for a prompt judicial
decision. We have frequently held that in a
case involving only legal questions, the
doctrine of exhaustion of administrative
remedies does not apply.
[Ibid. (internal citation omitted).]
Thus, "except in those cases where the legislature vests
exclusive primary jurisdiction in an agency, a plaintiff may
seek relief in our trial courts." Abbott, supra, 100 N.J. at
297.
We are satisfied that plaintiffs did not exhaust their
administrative remedies as to withdrawal and failed to
demonstrate why the doctrine should not be invoked under the
47 A-0743-10T4
circumstances of this case. The case can and should be
considered in the first instance by the Commissioner pursuant to
the statutory scheme. The Legislature established a process for
constituent municipalities to seek to withdraw from a regional
school district. N.J.S.A. 18A:13-51 to -59. The statutory
mechanism provides that the Board is the sole entity that can
grant a petition for permission to conduct a referendum on the
issue of dissolution or withdrawal. N.J.S.A. 18A:13-56.
Plaintiff's April 27, 2006 petition requested that the Board,
pursuant to N.J.S.A. 18A:13-56, authorize a referendum on the
issue of dissolution of Central Regional and expressly pled that
if that request were "not to be considered, the Board should
authorize an alternative referendum on the withdrawal of Seaside
Park." (Emphasis added).
Plaintiffs received the relief they requested; the Board
followed the statutory process and granted plaintiffs permission
to hold a referendum on the issue of dissolution of Central
Regional as set forth in a detailed letter of September 1, 2006.
Rather than pursuing their alternate relief of withdrawal
through the administrative channels as mandated by the
Legislature, plaintiffs filed suit. In an abundance of caution,
Judge Buczynski remanded that issue to the Commissioner for
clarification, and we are satisfied an appropriate explanation
48 A-0743-10T4
was provided for the Board's decision solely on the issue of
dissolution.
We are also not persuaded by plaintiffs' argument of
futility based on the premise that that even if Seaside Park
secured a referendum on withdrawal, the resulting tax increase
and the veto power held by Berkeley Township virtually ensure
that passage of such a referendum would never occur. A
speculation is insufficient. See Harrow v. Prudential Ins. Co.,
279 F.3d 244, 249 (3d Cir. 2002) (requiring a plaintiff to make
a "'clear and positive showing of futility'" to warrant waiver
of the exhaustion requirement) (citation omitted)). We
recognize that Seaside Park has an uphill battle but as noted by
Judge Buczynski, the remedy is not illusory, as evidenced by
Lacey Township's withdrawal in 1977. Circumstances and
attitudes of voters change over time. For example, we cannot
speculate as to the potential impact of Superstorm Sandy in
October 2012 on the pupil enrollment and tax base of Seaside
Park and the other constituent municipalities in the District.
The Legislature was well aware of this fluidity when it enacted
and revised the statutes in Title 18A that created and
implemented the comprehensive scheme regarding regional school
districts.
49 A-0743-10T4
Contrary to plaintiffs' assertion, the record amply
supports the court's factual finding that Seaside Park slept on
its rights after it passed the 1998 Resolution petitioning
Central Regional to alter the formula for municipal
contributions. Discovery did not "produce evidence that at
least one request was made each year for the 3 or 4 years
leading up to the filing of the Complaint." Plaintiff David
Meyer's testimony was vague, couched in terms of "I believe,"
was non-specific as to dates, and was largely based on
information provided to him from unidentified persons. No
document was provided other than the 1998 and 2003 Resolutions
and, as previously noted, no testimony or evidence was presented
that the 2003 Resolution was, in fact, sent to Central Regional.
Judge Buczynski correctly concluded that plaintiffs were not
entitled to judicial intervention on this issue. He advised
Seaside Park to pursue its statutory remedy of adopting and
forwarding a new resolution to Central Regional requesting a
referendum authorizing this relief, which it did. The
referendum failed but the process was followed and the voters
spoke, as anticipated by the Legislature in devising this
comprehensive scheme.
50 A-0743-10T4
B. Count One - Commissioner's Authority
Plaintiffs next contend the court erred in dismissing count
one because, as they alternatively requested in their April 2006
Resolution, the Commissioner has inherent authority to alter
Central Regional's funding formula under North Haledon to
provide equitable relief to Seaside Park. They emphasize that
in both cases when the voters initially approved the formation
of the regional school district, costs were to be apportioned on
a per pupil basis, which funding method was changed to an
equalized valuation by the 1975 revision. See N. Haledon,
supra, 181 N.J. at 165. This resulted in a significantly
disproportionate increase in the operating costs of both North
Haledon and Seaside Park as compared with their constituent
districts, even though their students only accounted for a small
portion of the overall student body. See id. at 166.
Seaside Park urges that its plight is "far worse than that
which the Supreme Court identified as inequitable and
disproportionate in North Haledon" and that it meets the two
requisites to equitable relief as articulated by the Attorney
General, i.e., that it is compelled to remain in the district
and it is burdened with a disproportionate tax liability. It
argues that "[w]hile North Haledon was compelled to remain in
the district due to the Court's belief that the Constitution
51 A-0743-10T4
required it, Seaside Park is likewise compelled to remain in its
district," against the wishes of ninety-five percent of its
voters, "because the Legislature believed that the 1975
Revision, which imposed the current cost allocation method [and
gave Berkeley Township and Ocean Gate a '$3 million incentive to
keep Seaside Park a member of Central' Regional], was
constitutionally required." Seaside Park also points to the
growing inequitable burden placed on its taxpayers reflected in
its charts, noting, for example, that in the 2009-2010 school
year alone, its taxpayers paid about twelve times the per pupil
amount than paid by the taxpayers of Ocean Gate and seven times
more than that paid by the taxpayers of Berkeley Township.14
Even if we were to accept plaintiffs' argument that they
exhausted their administrative remedies and are subject to a
substantially inequitable allocation, they would not be entitled
14
During the rebuttal portion of oral argument before us,
counsel for Seaside Park mentioned as persuasive authority a
pending matter in which the Borough of Oradell had made an
application to the Commissioner for equitable relief, which the
Commissioner apparently referred to an administrative law judge.
Following argument, counsel submitted a January 24, 2012 letter
from the Commissioner regarding that matter. The Deputy
Attorney General on behalf of the Commissioner objected to the
submission as it was not part of the trial record, plaintiffs
did not move to supplement the record, and the parties were
deprived of an opportunity to respond during the litigation.
See R. 2:5-4, 2:5-5. The Commissioner's objection was
appropriate, and we thus disregard this post-argument
submission.
52 A-0743-10T4
to the extraordinary equitable relief afforded in the North
Haledon case.
Following passage of the 1993 amendment, North Haledon
unsuccessfully pursued a referendum seeking to return the
district to a per-pupil cost apportionment. Ibid. Here,
however, as previously discussed, Seaside Park had not actively
pursued a referendum seeking to return Central Regional to a
per-pupil cost apportionment at the time of the court's
dismissal of the first count. More critically, however, North
Haledon's application for withdrawal was granted by the Board,
and the referendum was successful. Id. at 172, 176-84.
However, the Court having found it was one of "those rare
circumstances" requiring judicial intervention with
administrative action, id. at 176, compelled North Haledon to
remain a member of a regional school district in order to
maintain a racially diverse student body. Id. at 172, 176-84.
In this unique situation, the Court remanded the case to
the Commissioner to implement an equitable cost allocation
formula for North Haledon's regional school district,
explaining:
There is no suggestion in the record that
North Haledon was racially motivated in
petitioning for withdrawal; rather, North
Haledon was justifiably concerned about the
disproportional tax burden . . . carried by
its citizens in relation to the other
53 A-0743-10T4
constituent municipalities. We are not
unaware of the frustration and anger
expressed by the senior citizens of North
Haledon who have fixed incomes and
escalating property taxes. On the one hand,
North Haledon lost a referendum on the
question whether to alter the apportionment
scheme because the statute, N.J.S.A. 18A:13-
23, grants an effective veto power to
Haledon and Prospect Park who benefit from
the equalized valuation method North Haledon
seeks to change. On the other hand, North
Haledon cannot petition for withdrawal
because of the impact of withdrawal on the
racial balance of the students attending
Manchester Regional.
We confronted a similar issue
subsequent to our decision in Jenkins[ v.
Township of Morris School District, 58 N.J.
483, 492-93, 504 (1971), where we held the
Commissioner possessed the power and duty to
act to prevent withdrawal of Morris Township
students from Morristown High School and to
compel a merger of the two districts to
prevent de facto segregation]. After Jenkins
issued, the Commissioner compelled the
merger of the Morristown and Morris Township
school systems. Twp. Comm. of Twp. of
Morris v. Bd. of Educ. of the Twp. of
Morris, 60 N.J. 186, 188 (1972). The boards
of education from both towns recommended
that the "allocation of costs between the
component municipalities of the regional
district be on the basis of apportionment
valuations rather than pupil enrollment."
Id. at 188-89. The Commissioner agreed, and
ordered the new regional district to
apportion costs in the manner suggested by
the school boards. Id. at 189. The
Township Committee of Morris Township filed
suit, asserting the Commissioner lacked the
power to impose an apportionment scheme on
the new district. Id. at 189-90. The
Township Committee argued that, under
N.J.S.A. 18A:13-34, the power to set the
54 A-0743-10T4
apportionment scheme had been conferred on
the voters of a regional district. Id. at
190.
We rejected the Township's argument
because "[t]he Commissioner's determination
as to allocation of the costs was reasonable
and was well within the ambit of his
powers." Id. at 191. We reasoned that the
controlling statutory provision, N.J.S.A.
18A:13-34 (which calls for a special
election on the apportionment of costs for a
regional district), was not applicable in
the context of a compulsory merger ordered
by the Commissioner, and that requiring
voter approval would "disable effective
action toward fulfillment of the State's
educational and desegregation policies . . .
nullify[ing] the very holding in Jenkins."
Ibid.; cf. N.J.S.A. 18A:7F-6 (authorizing
Commissioner to compel school districts to
make additional expenditures even after
school budgets have been approved by voters
when "necessary to ensure implementation of
[thorough and efficient] standards"). In
this case also, 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. As in
Jenkins, when 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.
[N. Haledon, supra, 181 N.J. at 184-86
(emphasis added).]
Here, however, neither the Commissioner nor the court has
mandated that Seaside Park remain a member of Central Regional
in contravention of the desire of the voters in the District
55 A-0743-10T4
pursuant to the statutory scheme. Rather, the voters rejected
the referendum on dissolution, see N.J.S.A. 18A:13-59, never
voted on the issue of Seaside Park's withdrawal, see ibid., and
rejected a modification of the funding formula after the court's
February 2008 decision, see N.J.S.A. 18A:13-23.3. Seaside Park
may pursue a referendum on withdrawal or other appropriate
administrative action to obtain relief. However, because this
case does not implicate the impact of withdrawal or dissolution
on racial diversity or issues of other constitutional dimension
after a successful referendum, we discern no basis to invoke the
extraordinary remedy of judicial intervention and mandate that
the Commissioner implement an equitable cost allocation.
Plaintiffs' recourse is to lobby the Legislature to change
the statutory mechanisms for dissolving or withdrawing from a
regional school district, or for revising its funding formula.
As is evident from the extensive legislative history set forth
in this opinion, it is clear the Legislature has considered this
issue at length over the years and has chosen not to embrace
plaintiffs' position. We discern no basis here to second-guess
that policy choice, and thus affirm summary judgment dismissal
of plaintiffs' first count.
56 A-0743-10T4
C. Count Four - Court's Equitable Powers
Count four alleged that the statutory remedies available
for plaintiffs to dissolve, withdraw from, or change the funding
formula for Central Regional are illusory because Seaside Park
is unable to achieve any of these results. The court dismissed
this count with prejudice as failing to state a claim, reasoning
that "[t]he mere fact that any of the [constituent] districts
may vote against the change [in the apportionment method] does
not as a matter of law make the remedy illusory" and that Lacey
Township's successful withdrawal from the District in 1977
contradicted plaintiffs' argument as to impossibility.
Judge Buczynski astutely elaborated on this point in his
ruling on plaintiffs' motion for reconsideration, emphasizing
the Legislature's prerogative in enacting this comprehensive
statutory scheme:
This court understands the difficulty that
Plaintiffs face in withdrawing from the
district or in changing the apportionment
method. The Legislature passed these
statutes as part of their legislative
responsibilities as a separate and distinct
branch of government as empowered by the
Constitution of this state.
But the mere fact that one district
enjoys a majority of registered voters does
not, as a matter of law, render this
statutory scheme as illusory. Difficult to
navigate, yes, but an illusion, no. This is
not a cognizable Cause of Action in this
57 A-0743-10T4
state. Voter distribution will vary and
will always vary from district to district.
The circumstances, as argued by the
Plaintiffs, miss the point. Voter
incentives will vary. And I understand that
will change from election to election. But
the argument that one member of the district
enjoys the overwhelming number of registered
voters capable of defeating the referendum,
thereby making the statutory scheme
illusory, is soundly rejected by this Court.
The trial court's ruling on this issue is unassailable.
The Legislature has created a high bar for achieving alteration
of a regional district's cost allocation formula, N.J.S.A.
18A:13-23 and 18A:13-23.3, or withdrawal from or dissolution of
a regional school district, N.J.S.A. 18A:13-59. However, the
statutory procedures are not illusory, as evidenced by Lacey
Township's withdrawal from Central Regional and other instances
in which regional school districts have been dissolved, or
municipalities have obtained voter approval to withdraw. See,
e.g., N. Haledon, supra, 181 N.J. at 172; In re Div. of Assets &
Liabs. Among Constituent Dists. of Lower Camden Cnty. Reg'l High
Sch. Dist. No. 1, 381 N.J. Super. 91 (App. Div. 2005), certif.
denied, 186 N.J. 605 (2006); In re Petition for Authorization to
Conduct a Referendum on the Dissolution of Union Cnty. Reg'l
High Sch. Dist. No. 1, 298 N.J. Super. 1 (App. Div.), certif.
denied, 149 N.J. 37 (1997); Bd. of Educ. of Twp. of Egg Harbor
v. Bd. of Educ. of Greater Egg Harbor Reg'l High Sch. Dist., 188
58 A-0743-10T4
N.J. Super. 92 (App. Div.), certif. denied, 93 N.J. 245 (1982).
The Legislature merely designed the remedy to be difficult to
achieve, and that is a policy decision for the Legislature, not
to be second-guessed by the Judiciary. See, e.g., Aronberg v.
Tolbert, 207 N.J. 587, 602 (2011) ("It is not within our
province to second guess the policymaking decisions of the
Legislature when no constitutional principle is at issue.");
Wildwood Storage Ctr., Inc. v. Mayor & Council of City of
Wildwood, 260 N.J. Super. 464, 474 (App. Div. 1992) (holding
that public policy decisions are not for the judiciary).
D. Count Eight - Efficient System of Education
In count seven, plaintiffs sought relief on the ground that
Central Regional's current system of cost apportionment does not
provide an efficient system of education for the students in
Seaside Park because its taxpayers are paying above the average
State cost of education per pupil, in violation of N.J. Const.
art. VIII, § 4, ¶ 1. They concede that their claim is a novel
attempt to challenge an allegedly "inefficient system of funding
education."
As previously noted, the municipalities and their boards of
education generally lack standing to assert the rights of third-
party taxpayers. See, e.g., Stubaus v. Whitman, 339 N.J. Super.
38, 47-48, 51 (App. Div. 2001), certif. denied, 171 N.J. 44259 A-0743-10T4
(2002); State of N.J., Dep't of Envtl. Prot. & Energy v. Dopp,
268 N.J. Super. 165, 173-74 (App. Div. 1993) (ordinarily,
litigants may not claim standing to assert rights of third
parties, particularly constitutional rights). In particular,
they have no standing to assert a thorough and efficient claim
to the extent it is based upon allegedly disparate and
burdensome tax rates. Stubaus, supra, 339 N.J. Super. at 49-51.
With respect to the thorough and efficient claim, "[t]he real
party in interest is the taxpayers." Id. at 50.
In dismissing this count for failure to state a claim, the
court enumerated the ten elements of a thorough and efficient
education outlined in Abbott II, supra, 119 N.J. at 350 n.23,
which are not encompassed in Seaside Park's sole allegation
"that the cost results in something other than an 'efficient
education.'" As Judge Buczynski elaborated on reconsideration,
"[e]fficiency in taxation is not what is constitutionally
protected" by the thorough and efficient clause; rather, what is
mandated is operational efficiency within school districts.
Nor does Seaside Height's BOE's bald allegation that it
could provide a more thorough and efficient education to its
students if Central Regional were dissolved or if Seaside
Heights were permitted to withdraw from the District, provide a
basis to conclude that the District was unable to serve the
60 A-0743-10T4
needs of its students. In order to justify the "radical"
solution of encroaching upon an area constitutionally reserved
to the Legislature, a finding of constitutional deficiency "must
rest on granite" and not, as here, "hang by a thread." Abbott
II, supra, 119 N.J. at 320-21.
Plaintiffs' arguments on this issue misinterpret the
constitution and relevant case law. The state constitution
provides that "[t]he Legislature shall provide for the
maintenance and support of a thorough and efficient system of
free public schools for the instruction of all the children in
the State between the ages of five and eighteen years." N.J.
Const. art. VIII, § 4, ¶ 1. In interpreting the "thorough and
efficient" clause, our courts have focused primarily on the
education of students, not with equality among taxpayers. See,
e.g., Abbott II, supra, 119 N.J. at 303-22, 348-50, 357-68(1990); Robbiani v. Burke, 77 N.J. 383, 393-95 (1978); Robinson,
supra, 62 N.J. at 513, 515; Stubaus, supra, 339 N.J. Super. at
52-56.
Similarly, in establishing the Department of Education to
supervise and control public education, see N.J.S.A. 18A:4-1 to
18A:7G-48, in defining and designing a thorough and efficient
system of education, and in implementing state monitoring to
determine whether a thorough and efficient system of education
61 A-0743-10T4
is being provided, the Legislature has focused on the quality of
children's education and the operational efficiency of school
districts. See, e.g., N.J.S.A. 18A:4-24; N.J.S.A. 18A:7-8;
N.J.S.A. 18A:7A-10; N.J.S.A. 18A:7A-14a; N.J.S.A. 18A:7C-1;
N.J.S.A. 18A:7F-46; Abbott II, supra, 119 N.J. at 348-52; In re
Trenton Bd. of Educ., 86 N.J. 327, 329-30 (1981); In re
Application of Bd. of Educ. of Upper Freehold Reg'l Sch. Dist.,
86 N.J. 265, 272-78 (1981); Robinson, supra, 69 N.J. at 456-63.
Here, there is no allegation that the students of Central
Regional are not receiving a thorough and efficient education,
i.e., that there are insufficient financial resources in the
District to provide a thorough education, or that financial
resources are being squandered at the expense of the children's
education. Rather, plaintiffs attack the constitutionality of
the equalized valuation method for funding regional school
districts because it imposes a greater financial burden on
municipalities such as Seaside Park, which have high property
values and few students attending the school system. The
distribution of education costs among taxpayers is a policy
decision to be made by the Legislature, which determined that a
wealth-based formula for funding regional districts was an
appropriate option, and plaintiffs' arguments should be directed
to that body. Stubaus, supra, 339 N.J. Super. at 56, 60-61;
62 A-0743-10T4
Twp. of Princeton v. N.J. Dep't of Educ., 163 N.J. Super. 389,
396 (App. Div. 1978). See also Abbott II, supra, 119 N.J. at
304 (court's function limited to constitutional review).
This result is consistent with relevant precedent.
Specifically, in Township of Princeton, supra, we rejected a
constitutional thorough-and-efficient challenge to the phase-in
of the 1975 amendment to the method of allocating costs of
regional school districts, from per pupil to equalized
valuation, stating:
Since the total amount expended for
education in the district is determined by
the regional school district board before
the apportionment among the municipalities,
the mere method of apportionment of the
costs, whether on a per pupil or ratables
basis, has no effect whatever on the quality
or opportunity of education of the children
within that district. It is for that reason
that the Robinson precepts do not come into
play. Although the choice of method of
apportionment may create an unequal tax
burden among the municipalities of the
district, as the record reflects, it does
not influence the level of expenditures made
by the district for educational purposes.
[T]he method of allocation, whether it be on
the basis of ratables (N.J.S.A. 18A:13-23),
or the number of pupils enrolled, or on a
combination of both (N.J.S.A. 18A:13-23.1),
is a matter preeminently within the power of
the Legislature and has no bearing upon the
issue of constitutionality as delineated in
the Robinson cases.
[163 N.J. Super. at 396 (emphasis added)
(internal citations omitted).]
63 A-0743-10T4
Moreover, both the Supreme Court and our court have
rejected other constitutional challenges to equalized valuation
funding. For example, considering a challenge to the 1956
amendments, wherein the Legislature moved from "ratables" to
"apportionment valuations" for purposes of funding certain
regional school districts, the Supreme Court spoke in language
that is equally applicable to plaintiffs' claims here:
In essence, we are presented with a
situation where Berkeley Heights claims a
vested right in unequal distribution of the
burden [of funding a regional school
district], seeking a continuation of the
prior practice. It complains that upon a
per capita student basis the property owners
of that township are paying a
disproportionate share of the regional
burden, thereby subsidizing the education of
students from other municipalities
comprising the regional school district.
The factor has no constitutional
implications. Education is a matter of
public concern; the expenditures necessary
to fulfill the responsibility need not be
met on a basis of direct benefit to the
property charged.
[Berkeley Heights, supra, 23 N.J. at 282.]
The Court went on to state that, if Berkeley Heights wished to
move to apportionment of costs on a per pupil basis, it had to
follow the statutory procedures. Id. at 283-84.
In Borough of Sea Bright v. State, Department of Education,
242 N.J. Super. 225 (App. Div.), certif. denied, 127 N.J. 32064 A-0743-10T4
(1990), we also rejected an equal protection challenge to the
1975 statutory amendments at issue in the present case, stating:
We have no doubt that New Jersey's method of
financing regional school districts is
compatible with the equal protection clauses
of the federal and state constitutions
. . . . Plaintiffs do not contend that
there is any inequality in the school tax
burden of residents of Sea Bright compared
with residents of the other constituent
municipalities in the district. To the
contrary, the objective of apportioning the
costs of a regional school district among
the constituent municipalities according to
their property values is to impose
substantially equivalent tax burdens for
education upon all taxpayers of the district
regardless of the municipalities in which
they reside. Thus, the method of financing
education in a regional school district is
substantially the same as in a single
municipality school district in that school
tax obligations depend upon the value of
each taxpayer's real property.
Consequently, we have no hesitancy in
rejecting plaintiffs' thesis that residents
of a municipality such as Sea Bright, which
has higher property values and/or fewer
children attending public school than other
municipalities in the regional school
district of which it is a part, have a
constitutional right to pay only the actual
costs of educating their resident children
who attend public school. See Berkeley Tp.
Bd. of Ed. v. Bd. of Ed. of Union Co., 40
N.J. Super. 549, 556 (Law Div. 1956), aff'd,
23 N.J. 276 (1957) (observing that education
is a public obligation, and that to hold
that the Legislature could not apportion
regional district costs among constituent
municipalities on the basis of ratables
rather than the number of children sent
"would erase a concept of the distribution
of public tax obligation quite essential to
65 A-0743-10T4
the wellbeing of the public school system
and of the body politic.").
[Id. at 231-33 (emphasis added).]
See also Stubaus, supra, 339 N.J. Super. at 61 (rejecting equal
protection claim stating, "[w]e see nothing unconstitutional
about requiring greater local support for the educational
program from districts that appear able to pay more based upon
the district's property values and average income").
V.
A. Count Two – Contracts Clause
In Point III, plaintiffs challenge summary judgment
dismissal of count two of the complaint. That count alleged the
1975 legislation, mandating that regional school districts be
funded through equalized valuation, violated the contracts
clauses of the federal and state constitutions by substantially
impairing the contract to form Central Regional under which
funding was on a per pupil basis, and that by perpetuating the
1975 violation, the 1993 legislation independently violated the
federal and state constitutions.
Plaintiffs claim the court erred by finding there was no
contract to establish Central Regional, determining the taxpayer
plaintiffs of Seaside Park were not third-party beneficiaries of
the alleged contract, not addressing the "substantial
66 A-0743-10T4
impairment" prong of the legal analysis, and concluding the 1975
legislation furthered a legitimate public purpose.
As previously discussed, Judge Buczynski held that
governmental entity parties lack standing to pursue this
constitutional claim. The judge found the taxpayer plaintiffs
failed to provide a written agreement or evidence of the
requisite elements for a contract and, even if they could
demonstrate the existence of a valid contract, failed to prove
they were intended third-party beneficiaries. The judge further
found the 1975 and 1993 legislation promoted the "public welfare
and education of the students residing in regional school
districts" and thus was not an unconstitutional impairment of
the alleged contract.
We are convinced Judge Buczynski was correct on all points.
However, to resolve this appeal, we need only address the
contract issue and not the third-party beneficiary issue.
Both the federal and state constitutions protect against
government impairment of contractual obligations. U.S. Const.,
art. I, § 10, cl. 1; U.S. Const. amend XIV; N.J. Const., art.
IV, § 7, ¶ 3.
The clauses protect against a change in
the State's obligations that "operates[s] as
a substantial impairment of a contractual
relationship." Allied Structural Steel v.
Spannaus, 438 U.S. 234, 244, 98 S. Ct. 2716,
2722, 57 L. Ed. 2d 727, 736 (1978). "This
67 A-0743-10T4
inquiry has three components: whether there
is a contractual relationship, whether a
change in law impairs that contractual
relationship, and whether the impairment is
substantial." Gen. Motors Corp. v. Romein,
503 U.S. 181, 186, 112 S. Ct. 1105, 1109,
117 L. Ed. 2d 328, 337 (1992).
[N.J. Educ. Ass'n v. State, 412 N.J. Super.
192, 205 (App. Div.), certif. denied, 202
N.J. 347 (2010).]
"[T]he legal standards for a violation of the contract
clause are strict." State Farm Mut. Auto Ins. Co. v. State, 124
N.J. 32, 64 (1991). Accord Nobrega v. Edison Glen Assocs., 167
N.J. 520, 538-39 (2001) (contract clause construed narrowly in
modern cases). Not even a substantial impairment of contract
violates the constitution if the governmental action has a
"significant and legitimate public purpose," is based upon
reasonable conditions, and is related to "appropriate
governmental objectives." State Farm, supra, 124 N.J. at 64
(citing Energy Reserves Group, Inc. v. Kansas Power & Light Co.,
459 U.S. 400, 411-12, 103 S. Ct. 697, 704-05, 74 L. Ed. 2d 569,
580-81 (1983)). Accord Windman v. City of Englewood, 200 N.J.
Super. 218, 225-26 (App. Div. 1985).
The taxpayer plaintiffs never produced a written contract
between any of the parties or any other evidence that the
constituent municipalities entered into a contractual agreement.
Thus they failed to establish that an express contract existed
68 A-0743-10T4
between themselves and the remaining constituents of Central
Regional. The taxpayer plaintiffs similarly failed to establish
a contract "implied-in-fact," which they essentially argue
exists by virtue of the resolutions passed by the governing
bodies of the constituent municipalities acknowledging their
agreement to create Central Regional and apportion the tax levy
based on pupil enrollment. They further argue that in l954,
when the voters approved the formation of Central Regional and
its tax allocation method, they ratified the contractual
agreement of the constituent municipalities. Judge Buczynski
properly rejected these arguments.
Regional school districts are created solely through the
procedures established by the Legislature, and not through any
contractual agreement between municipalities. N.J.S.A. 18A:13-
34. See also N.J. Educ. Ass'n, supra, 412 N.J. Super. at 206-07(statute not presumed to create contractual rights unless intent
to do so is clearly stated) (citing Nat'l R.R. Passenger Corp.
v. Atchinson Topeka & Santa Fe Ry. Co., 470 U.S. 451, 465-66,
105 S. Ct. 1441, 1451, 84 L. Ed. 2d 432, 446 (1985) and Dodge v.
Bd. of Educ., 302 U.S. 74, 78-79, 58 S. Ct. 98, 100, 82 L. Ed.
57, 61-62 (1937)).
The procedure established by the Legislature for the
formation of a regional school district is a referendum.
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N.J.S.A. 18A:13-34. A referendum is not a contract; it is
legislation enacted directly by voters. See City of Eastlake v.
Forest City Enter., Inc., 426 U.S. 668, 678, 96 S. Ct. 2358,
2364, 49 L. Ed. 2d 132, 140 (1976); Great Atl. & Pac. Tea Co. v.
Borough of Pt. Pleasant, 137 N.J. 136, 144 (1994); 42 Am. Jur.
2d Initiative and Referendum § 1 (2010); 35 N.J. Practice, Local
Government Law §§ 20.1 and 20.3 (Michael A. Pane, Jr.) (4th ed.
2007); Black's Law Dictionary 1285 (7th ed. 1999).
Thus, the resolutions were passed by each municipality,
independently, to start the statutory regionalization process
and Central Regional then was formed through referendum, a
legislative act by voters from the constituent municipalities.
The statutory choices at the time for funding the regional
school district were average daily attendance or ratables. The
voters chose average daily attendance. However, that was
subject to change, as there are no vested rights in a statute's
continued existence. Phillips v. Curiale, 128 N.J. 608, 620
(1992). Indeed, as noted in this opinion, the system for
funding regional school districts has been changed many times
over the years; plaintiffs complain about only two of the
changes.
Even if there were a contract to form Central Regional,
however, neither the 1975 nor the 1993 legislation violated the
70 A-0743-10T4
contracts clauses of the federal and state constitutions.
Statutes are presumed constitutional, and plaintiffs bear a
heavy burden in attempting to rebut that presumption. In re
C.V.S. Pharmacy Wayne, 116 N.J. 490, 497 (1989), cert. denied
sub nom. Consumer Value Stores v. Bd. of Pharmacy, 493 U.S.
1045, 110 S. Ct. 841, 107 L. Ed. 2d 836 (1990). This is
particularly so for economic legislation, which does not warrant
or permit close scrutiny. N.J. Ass'n of Health Plans v. Farmer,
342 N.J. Super. 536, 552 (App. Div. 2001).
The challenged legislation served a significant and
legitimate public purpose of addressing the methods for funding
regional school districts, the legislation was based upon
reasonable conditions, and the legislation was related to
appropriate governmental objectives in response to an ongoing
legislative debate as to the appropriate method for funding
public education. We may not second-guess the Legislature's
wisdom in allocating tax burdens. Simon v. Cronecker, 189 N.J.
304, 337 (2007); N.J. Ass'n of Health Plans, supra, 342 N.J.
Super. at 552.
B. Count III – Property Clause
In Point IV, plaintiffs challenge summary judgment
dismissal of count three of the complaint, in which they alleged
that the 1975 and 1993 laws are unconstitutional as applied,
71 A-0743-10T4
constituting a taking of their contractual right to per-pupil
funding, and consequently a taking of significantly more of
their tax monies, without just compensation. Judge Buczynski
correctly found the taxpayer plaintiffs had no property interest
in inter-governmental legislation by referendum, and the method
of taxation for funding Central Regional was a valid exercise of
legislative power and did not constitute a taking.
Both the federal and state constitutions bar the taking of
private property for public use without just compensation. U.S.
Const. amend. V and XIV; N.J. Const. art. I, ¶ 20. Such a
taking may be accomplished in one of two ways:
1) via physical taking, in which the
government takes title to private property
or "authorizes a physical occupation [or
appropriation] of property"; or 2) via
regulatory taking, through which a
government regulation deprives the property
owner of all economically viable use of
their land.
[Klumpp v. Borough of Avalon, 202 N.J. 390,
405 (2010) (alteration in original)(citation
omitted).]
As previously discussed, plaintiffs had no contractual
right to per pupil funding. Therefore, there was no taking of
any such contractual right. Nor have plaintiffs established a
property interest that has been excessively interfered with as a
result of this regulatory scheme. See Gardner v. N.J. Pinelands
Comm'n, 125 N.J. 193, 205 (1991) (holding that an
72 A-0743-10T4
unconstitutional taking of private property for public use
occurs when a statutory scheme does not substantially advance a
legitimate public interest and excessively interferes with
property rights and interests).
This is not a takings issue; it is a taxation issue. All
the 1975 and 1993 legislation did was alter the allocation of
tax burdens for property owners located in regional school
districts. Following the l975 legislation, regional school
districts were funded the same as every K-12 public school
district statewide, i.e., based on property taxes rather than a
per pupil cost. The taxes for Central Regional were allocated
as if the District were one community, with a uniform rate of
school taxes charged to the property owners in the constituent
municipalities based on the equalized value of their respective
property. Under this allocation method, Seaside Park taxpayers
pay regional school taxes at exactly the same rate as property
owners in the other four constituent municipalities forming
Central Regional. The l993 law provided circumstances by which
a district could modify the apportionment method and left the
decision of whether to modify to the voters of the constituent
municipalities. The fact that equalized valuation is
disproportionate does not render the tax unconstitutional.
73 A-0743-10T4
"[T]he power of taxation should not be confused with the
power of eminent domain." Houck v. Little River Drainage Dist.,
239 U.S. 254, 264, 36 S. Ct. 58, 61, 60 L. Ed. 266, 274 (1915).
See also Connolly v. Pension Benefit Guar. Corp., 475 U.S. 211,
223, 106 S. Ct. 1018, 1025, 89 L. Ed. 2d 166, 177 (1986) ("Given
the propriety of the governmental power to regulate, it cannot
be said that the Taking Clause is violated whenever legislation
requires one person to use his or her assets for the benefit of
another."); Penn Cent. Transp. Co. v. City of N.Y., 438 U.S.
104, 124, 98 S. Ct. 2646, 2659, 57 L. Ed. 2d 631, 648 (1978)
("[G]overnment may execute laws or programs that adversely
affect recognized economic values. Exercises of the taxing
power are one obvious example."); City of Pittsburgh v. Alco
Parking Corp., 417 U.S. 369, 94 S. Ct. 2291, 41 L. Ed. 2d 132(1974) (rejecting Fifth Amendment challenge to local tax). "Any
tax is a 'taking' in a literal sense, but a bona fide revenue-
raising measure is not a 'taking' in a constitutional sense."
N.J. Ass’n of Health Plans, supra, 342 N.J. Super. at 553. As
previously discussed, we have also rejected tax clause
challenges to the 1975 legislation in Sea Bright, supra, 242
N.J. Super. at 229-30, and Township of Princeton, supra, 163
N.J. Super. at 397.
74 A-0743-10T4
Plaintiffs contend the 1975 and 1993 legislation were not
bona fide revenue-raising measures because they did not generate
additional tax revenue; all they did was reallocate tax burdens.
However, that is a distinction without a difference. The
Legislature exercised its authority to apportion the costs of a
regional school system in connection with a comprehensive scheme
for creating and funding a thorough and efficient system of
education. The legislation involved taxation and revenue-
raising measures, while advancing a significant public interest.
C. Count Six – Substantive Due Process
In Point V, plaintiffs challenge summary judgment dismissal
of count six of the complaint, in which they alleged that the
1975 and 1993 legislation, as applied, violated their
substantive due process rights by depriving them of their
property.
Judge Buczynski rejected this argument, concluding the
taxpayer plaintiffs failed to present either factual or legal
support for his claims of a protected property interest in the
form of contractual rights to per pupil funding or to their tax
dollars; moreover, the challenged laws furthered a legitimate
public purpose. See Gikas v. Washington Sch. Dist., 328 F.3d
731, 735 (3d Cir. 2003) (holding that "a plaintiff must
establish as a threshold matter that he has a protected property
75 A-0743-10T4
interest to which the Fourteenth Amendment's due process
protection applies") (citation omitted); Greenberg v. Kimmelman,
99 N.J. 552, 563 (1985) (holding that generally "a state statute
does not violate substantive due process if the statute
reasonably relates to a legitimate legislative purpose and is
not arbitrary or discriminatory"). Plaintiffs' argument on this
issue is without merit to warrant further discussion as we are
satisfied Judge Buczynski amply addressed and rejected this
issue with appropriate legal citations. R. 2:11-3(e)(1)(E).
D. Counts Six and Seven - Equities
In Point VI, plaintiffs claim the court erred by failing to
address (1) their equitable claim that the 1975 legislation
frustrated the purpose of their agreement to form Central
Regional and (2) their constitutional claim that the 1975
legislation deprived Seaside Park's parents of their substantive
due process right to direct the upbringing and education of
their children. In Point VII, plaintiffs claim they
demonstrated good and just cause for the court to exercise its
inherent equitable powers to address the inequities of the
current situation.
Judge Buczynski rejected taxpayer plaintiffs' frustration
of purpose argument and their alternate theory of a substantive
due process violation because these claims were not pled by
76 A-0743-10T4
plaintiffs and were not supported by the record. The judge
rejected plaintiffs' general request for equitable relief on the
ground that he had no authority to grant it - the Legislature
had provided statutory means for plaintiffs to pursue the relief
they sought and judicial override of those procedures would
violate the principle of separation of powers. Moreover,
notwithstanding the cost borne by Seaside Park's property
owners, funding of regional school districts on the basis of
equalized valuation was fundamentally fair.
We discern no error in the conclusions reached by Judge
Buczynski. Under Rule 4:5-2, litigants are required to include
in their pleadings "a statement of the facts on which the claim
is based, showing that the pleader is entitled to relief, and a
demand for judgment for the relief to which the pleader claims
entitlement." Even read indulgently, see Van Dam Egg Co. v.
Allendale Farms, Inc., 199 N.J. Super. 452, 455 (App. Div.
1985), the second amended complaint is devoid of any claim of
frustration of purpose, or that the taxpayer plaintiffs have
been deprived of the right to control their children's
education. Therefore, the judge correctly declined to address
these arguments on summary judgment. See Jersey City v. Hague,
18 N.J. 584, 602 (1955) (stating that "however liberal pleadings
may be, the requirement still remains that at least the gist of
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a substantive ground of relief must be set forth").
Nevertheless, even if addressed, these claims would fail on
their merits for the reasons discussed in earlier issues.
Taxpayer plaintiffs' alternative substantive due process
theory fails because the 1975 legislation does not prevent
parents from directing the upbringing of their children. See
Troxel v. Granville, 530 U.S. 57, 65-66, 120 S. Ct. 2054, 2059-
60, 147 L. Ed. 2d 49, 56-57 (2000) (discussing the liberty
interest of parents "in the care, custody, and control of their
children"). Under the 1975 legislation, the funding mechanism
for Central Regional was changed to equalized valuation - a
funding mechanism plaintiffs do not like because it costs them
more than per pupil funding. The 1975 legislation does not
affect their ability to raise their children as they see fit.
They are not required to send their children to Central
Regional. They can send their children to other schools at
their own expense, relocate to another school district, or even
home-school their children. Additionally, taxpayer plaintiffs
can lobby other voters in the constituent municipalities to pass
referenda.
As to taxpayer plaintiffs' request for equitable relief:
[E]quity will generally conform to
established rules and precedents, and will
not change or unsettle rights that are
created and defined by existing legal
78 A-0743-10T4
principles. This is the basis for the
equitable maxim "equity follows the law,"
which instructs that as a rule a court of
equity will follow the legislative and
common-law regulations of rights, and also
obligations of contract.
[Dunkin' Donuts of Am., Inc. v. Middletown
Donut Corp., 100 N.J. 166, 183 (1985)
(internal citations omitted).]
Here, there is no "wrong" to remedy through law or equity.
The Legislature has declared the rights and responsibilities of
the constituent members of regional school districts. Under the
circumstances of this case, the court has no power to override
the Legislature's scheme for funding regional school districts,
or to provide plaintiffs with an alternative to the
legislatively created means for withdrawing from or dissolving
Central Regional, or altering the funding mechanism of Central
Regional.
This lawsuit is an attempt to achieve through the courts a
result that plaintiffs could not achieve pursuant to relevant
legislation or through the Department of Education. We discern
no basis, equitable or constitutional, to invalidate the
challenged statutes, reverse the decisions of either the
Commissioner or the Board, or otherwise interfere with the
legislative and regulatory schemes.
Affirmed.
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