Case Law Summaries

Millennium Towers Urban Renewal Ltd. Liability Co. v. Municipal Council of the City of Jersey

• Opinion Date: January 22, 2001
• Real Property Law
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TAXATION; EXEMPTION—The Long Term Exemption Law is not subject to the Initiative and Referendum Law.

A developer of two 43-story mixed-use buildings applied for a 20-year long-term tax exemption under the Long Term Tax Exemption Law, N.J.S. 40A:20-1. The development was located in an area designated by the municipality as a redevelopment area pursuant to the Local Redevelopment and Housing Law, N.J.S. 40A:12A-1. The municipality passed an ordinance granting the tax exemption to the developer in exchange for various payments in the form of a service charge, an annual administrative fee, and employment for municipal residents. Thereafter, a group of citizens gathered signatures for a referendum petition to protest the granting of the tax exemption. The developer filed suit seeking (a) a permanent injunction against the municipality prohibiting it from taking any action under the Initiative and Referendum Law, N.J.S. 40:69A-184 to repeal the grant of the tax exemption, and (b) a declaration from the Court that the Long Term Tax Exemption Law is not subject to the Initiative and Referendum Law. The Court began by recognizing that the right of the people to engage in local initiative or referendum can only be granted by statute. “Although referendum provisions are to be liberally construed, it was not the intent for such provisions to grant unlimited and unqualified rights to citizens to challenge the acts of local municipal governments.” The Court then recognized that although municipal corporations have both legislative and administrative powers, only those acts which are legislative in nature are subject to the referendum provisions of N.J.S. 40:69A-185. Courts have generally held that actions which tend to be of permanent and general character are legislative in nature, but actions that are temporary or of special character are administrative in nature. However, in Menendez v. City of Union, 211 N.J. Super. 169 (App. Div. 1986), the Court held that “when a municipal governing body has latitude within its discretion in adopting the specific provisions of an ordinance, its enactment is legislative and subject to referendum, even though its authority to legislate on the subject has been delegated to it by State law. When a municipal governing body is merely complying with and putting into execution a State or local legislative mandate in adopting an ordinance, its enactment is administrative and not subject to referendum.” On this basis, the Court held that the ordinance granting the tax exemption to the developer was legislative in nature. The Court reasoned that the municipality exercised its own discretion in adopting the ordinance, and the ability of a municipality to exercise such discretion demonstrates the legislative intent of its actions. However, “there are certain ordinances, whether administrative or legislative in character, which are simply not subject to referendum because of the subject matter involved or because they are statutorily excluded from referendum provisions.” One such statute is the Local Redevelopment and Housing Law. For that reason, the developer argued that the Long Term Tax Exemption Law was an integral part of the Local Redevelopment and Housing Law and therefore was not subject to referendum. The Court agreed, holding that “although the Long Term Tax Exemption law does not provide for public hearing or judicial review, it nevertheless is an integral part of and means of accomplishing the goals of the Local Redevelopment and Housing Law and therefore is not subject to referendum or initiative.” Its reasoning was that the “Legislature intended the Long Term Tax Exemption Law to work hand in hand with the Local Redevelopment and Housing Law, to form a comprehensive legislative scheme to encourage and support local economic initiatives targeted at economically depressed areas.”

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