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Township of Galloway v. Atlantic County Utilities Authority

A-0705-01T2 and A-1222-01T2, (N.J. Super. App. Div. 2003) (Unpublished)

ENVIRONMENTAL INVESTMENT CHARGES—Environmental Investment Charges by a public utility authority are unconstitutional and cannot be charged even against its utility users alone.

A 2000 case “held invalid an ‘environmental investment charge’ (EIC) that was intended to pay for debt incurred for building a utility authority’s solid waste treatment facility.” The concept of an “environmental investment charge” was itself a response to a 1997 federal court decision holding that New Jersey’s waste disposal regulatory scheme violated the United States Constitution. The EIC was developed to fill the resulting funding shortfall. The EIC was found to be invalid, and a lower court ordered that a utility authority was “liable for refunds of EIC payments made by any property owner” in two particular municipalities. The utility authority appealed and claimed that it had a statutory right to impose fees on users of its facility. Consequently, it “argued that refunds need only be given to nonusers who had been charged a fee.” The Appellate Division, in that earlier appeal, agreed that a utility authority has a general right to collect user fees, but pointed out that when the EIC was found to be invalid, it was “invalid in its entirety.” That earlier appeal resulted in a remand and, on remand, the utility authority was ordered to make a particular refund “less a pro-rated share of the attorney’s fees incurred by the municipalities who had represented the class that sought the refunds in the first place.”

The utility authority again appealed, arguing that the law permitted “county authorities to recoup debt and service charges billed to general contractors who use their system; (2) the fee imposed by the [utility authority was] a valid service charge to users of its solid waste system; (3) any invalidation of an EIC of non-users should apply prospectively only; and (4) the issuance of a stay by the Supreme Court [supported] the prospective application of its ruling.” The Appellate Division dismissed the first two contentions as having been previously addressed. It pointed out that it expected that the utility authority would go back to “square one” and “implement a new revenue scheme.” It refused to design a revenue raising scheme for the utility authority and would not accept the argument that the utility authority could claim that the EIC charge was properly assessed against its users even if the assessment against non-users was invalid. As a consequence, the Court held that the utility authority would need “to design its new, post-EIC revenue raising scheme, implement it by sending out the bills, and, if there is a legal challenge, then the courts would adjudicate the issue.”

As to whether the case that invalided the EIC was to be applied retroactively or only prospectively, the Court asked itself whether the invalidating decision constituted a “new rule,” that is, whether ‘it breaks new ground or ... was not dictated by precedent existing at the time of the [decision].’” It decided that when the earlier court invalidated the EIC, it did so by determining that New Jersey state law did not authorize an EIC. “That is not a new rule.” Further, it understood from other case law that “the Supreme Court did not intend that [the earlier opinion invalidating the EIC] be applied prospectively only.”


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