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Howell Tp. v. Manasquan River Regional Sewerage Authority
Citations: 521 A.2d 858; 215 N.J. Super. 173
Court: New Jersey Superior Court; February 8, 1987; New Jersey; State Appellate Court
The case involves consolidated appeals from Howell Township, Howell Township Municipal Utilities Authority, Borough of Freehold, and Township of Freehold against the Manasquan River Regional Sewerage Authority (MRRSA) and other authorities. The key issue is whether the Chancery Division has the inherent power to dissolve a local sewerage authority established under N.J.S.A. 40:14A-1, et seq. The court concludes that it does not, stating that dissolution can only occur under the statutory framework provided by the relevant laws. The plaintiffs sought to dissolve MRRSA, invalidate service agreements with MRRSA and Ocean County Utilities Authority (OCUA), compel OCUA to assume MRRSA's debt, and require the Borough of Farmingdale and Township of Wall to participate in the dissolution. The court affirms the dismissal of the dissolution and debt assumption claims but reverses the dismissal of other claims, remanding for further proceedings due to unresolved material facts. MRRSA was created in 1972 by ordinances from five municipalities, intending to develop a waste-water treatment facility and a regional collection system. In 1980, federal and state environmental agencies instructed MRRSA to utilize existing wastewater treatment facilities operated by OCUA in Ocean County. During negotiations in 1980-1981, OCUA projected a stable user charge of $850 per 1,000,000 gallons, prompting federal and state authorities to deny MRRSA grants for its own treatment facility, leading MRRSA to abandon its construction plans. Instead, MRRSA opted to build interceptor sewer lines to channel untreated sewage to OCUA's facility. On September 16, 1981, MRRSA and OCUA signed a service contract for wastewater collection and treatment, with MRRSA subsequently entering agreements with its member municipalities to establish the necessary infrastructure. MRRSA issued temporary bonds for these improvements, and in July 1984, it authorized $21,000,000 in permanent bonds, though their sale was delayed pending litigation. Plaintiffs alleged that OCUA raised its rate from $850 in April 1981 to $1,800 in January 1984, leading MRRSA to charge its members a proposed bulk rate of $3,022 per 1,000,000 gallons by February 8, 1985. They claimed MRRSA had become redundant and should be dissolved, demanding OCUA assume MRRSA's debts and implement a uniform sewer service rate. They also sought damages against OCUA for alleged misrepresentations that influenced MRRSA's decisions. MRRSA filed for partial summary judgment to dismiss the dissolution claims, which the Chancery Division judge granted, stating that dissolving a local authority was a legislative matter. The judge noted an ongoing action by MRRSA against OCUA regarding the treatment rate, suggesting that resolution of that case could render the plaintiffs' remaining claims moot, leading to the dismissal of those claims without prejudice. Plaintiffs argue that the Chancery Division incorrectly determined it lacked the power to dissolve the MRRSA, asserting that the Superior Court has inherent equitable authority to do so. However, MRRSA, established under N.J.S.A. 40:14A-1 et seq., is a regional authority with specific powers, including the construction and operation of sewage systems, charging fees, and issuing bonds. Municipalities can create such authorities through parallel ordinances (N.J.S.A. 40:14A-4(c)), and dissolution can occur via parallel resolutions only if there are no outstanding debts or obligations, as per N.J.S.A. 40:14A-4(h). Since MRRSA has incurred debt, no dissolution is permitted under this statute. The Local Authority's Fiscal Control Law (L. 1983, c. 313), codified as N.J.S.A. 40A:5A-1 et seq., grants the Local Finance Board oversight over local authorities' creation, financing, and dissolution, aiming to ensure financial integrity. N.J.S.A. 40A:5A-20 allows dissolution through parallel municipal ordinances, subject to Board approval that ensures creditor payment and service continuity. Alternatively, N.J.S.A. 40A:5A-18 and 40A:5A-21 outline a process for the Board to dissolve an authority facing financial difficulties after a hearing, provided it serves public interest and ensures creditor protection. Any order for dissolution of a local authority must receive approval from the Commissioner of the Department of Community Affairs, the State Treasurer, and the Attorney General, as stipulated in N.J.S.A. 40A:5A-21. The statutory framework indicates that the Legislature intended to restrict the dissolution of authorities burdened by debt to specific circumstances, thereby safeguarding the financial interests of bondholders and fostering confidence in authority financing for necessary infrastructure projects. The process ensures that public services remain uninterrupted post-dissolution. The Superior Court lacks inherent authority to interfere with this legislative scheme, as dissolution of municipal corporations is a legislative function, not a judicial one. Courts are obliged to respect the clear legislative intent and should not create new grounds for dissolution, which could undermine financial stability and lead to uncertainty for bondholders and customers. The court's role is to enforce legislative intent as expressed in the statutes. The conclusion drawn is that the plaintiffs’ attempt to dissolve the MRRSA must adhere strictly to the statutory framework. While plaintiffs may have options for relief, such as a potential plan for dissolution involving the OCUA assuming MRRSA's debts—though it is unclear if OCUA has been approached—any such actions must remain within the confines of the established legislative process. The plan may be submitted for Board approval under N.J.S.A. 40A:5A-20. Plaintiffs potentially have a remedy under N.J.S.A. 40A:5A-21, which allows the Board to dissolve a local authority after a hearing if financial difficulties or mismanagement are found to justify dissolution in the public interest. The process for dissolution cannot be initiated solely by a dissatisfied member; only the director has the authority to convene a hearing following an evaluation of the authority's financial status, as outlined in N.J.S.A. 40A:5A-18. The attorney general clarified that while dissatisfied members can inform the director of financial issues, no formal hearing can be requested by them. As of now, no evidence of mismanagement or financial issues has been presented to the director. Consequently, the question of remedies if the director refuses to act does not need to be addressed at this time. The court affirmed the dismissal of counts seeking to dissolve MRRSA, compel OCUA to take on MRRSA's debt, and require participation in a dissolution plan. However, it reversed the dismissal of remaining counts, which were not part of MRRSA's motion for partial summary judgment. The Chancery Division judge dismissed these remaining counts on grounds that they might be resolved in related litigation, a decision the court found unsupported by authority. The plaintiffs had not been prepared to discuss potential factual issues regarding these remaining claims at the motion hearing. Thus, the remaining counts are reinstated and remanded for further proceedings, with the court not retaining jurisdiction.