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Lincoln North Development Corporation v. Town of Kearny

A-2299-09T1 (N.J. Super. App. Div. 2011) (Unpublished)

TAXATION; UTILITIES — If a municipality has a logical, rational basis to allocate a portion of its municipal utility charges to the general tax rate and a portion to be billed directly to utility users, it may do so without being guilty of double taxation.

A municipality’s trade association of industrial property owners sued the municipality. In its suit, it alleged improper tax and utility charge assessments. The municipality had created a municipal utilities authority and the industrial property owners paid the authority directly for sewer services. These same owners also paid sewer charges to the municipality as part of the local property taxes as billed to all property owners. The case was ultimately heard by the Tax Court which ruled, by way of summary judgment, that the property owners had failed to present expert testimony or evidence as to the cumulative sewer fee it claimed its members should pay or if it would be lower than what was currently paid to both bodies. The Court later explained the property owners, in essence, were filing property tax appeals in that they were arguing that their properties had been assessed above their respective true value because the fees they paid directly to the municipal utilities authority for sewer services were also included in the municipality’s tax base. As a remedy, the owners were seeking to have their assessments lowered and the sewage fees removed from the tax base.

The trade association appealed, but the Appellate Division affirmed the lower court’s order, disagreeing that the property owners were “double taxed” just because they were required to pay both a sewer fee to the municipal utilities authority and local property taxes to the municipality. The municipal tax charge was intended to cover a portion of the overall sewer charge incurred by the municipality. The Court found no equal protection constitutional infirmities with this structure as applied to these industrial property owners because the owners failed to provide any expert report or evidence that the municipality lacked a logical, rational basis for its overall annual budgetary scheme of allocating 20% of the sewer charges to the municipal utility authority as distributed to the industrial properties and funding the balance of the sewer charges through general taxation. Further, there was no evidence that the industrial properties were not taxed by the municipality at the same general rate as all other taxpayers in the municipality and, additionally, the payments to the utility authority were found to be a fee for services, and not a tax. Lastly, the owners never presented any proofs that the utility authority’s portion of the overall sewer charge was an amount other than what was charged.

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