Fairness In Taxes

Taxpayer Protection Ordinance Update

Upon remand from the New Jersey Supreme Court, the Appellate Division reached the same conclusion on the Taxpayer Protection Ordinance (TPO) as it did the first time it reviewed this case last year. It held that that the “TPO in this case, proposed by initiative petition, and which caps municipal budget, debt, and salary of municipal employees, would be invalid.” This holding is limited to caps created by initiative petition. The opinion does not specifically hold that it is beyond the power of a municipal governing body to enact its own budget caps. Several years ago the governing body of , passed a TPO similar to the one proposed here without the resulting “chaos” opponents of our TPO predicted.

However, several passages in the Court’s opinion seem to go farther. The Court reasoned that the State had “preempted” the field in budgetary matters. Although no state statute expressly prohibits a municipality from enacting its own cap laws, and the Faulkner Act grants municipalities the right to subject “any ordinance” to initiative, the court cited the existence of the state Budget Cap Law, Local Budget Law, Local Bond Law and specific referendum provisions as evidence that the legislature reserved to itself the power to limit municipal spending.

It is fair to ask whether FIT’s three-year fight to limit uncontrolled increases in City spending, borrowing, salaries and benefit increases was worth it. We think sometimes the battles lost are the ones most worth fighting. Indeed, the fact that the state passed a Budget Cap Law for municipalities shows someone in was paying attention to what was happening in . You can’t be on the cutting edge without drawing some blood.

Attempt to tie city spending to cost of living remains alive

By Michael Miller, The Press of Atlantic City

(Published: Wednesday, May 28, 2008)

OCEAN CITY - Taxpayers who want to tie city spending to the federal cost of living have new hope.

The state Supreme Court this month remanded the proposal to the Appellate Court for further review.

The proposal called the Taxpayer Protection Initiative would tie city spending to the annual cost of living. If the city wanted more money in a given year, it would have to ask voters first. The same system would apply to union contracts and city debt.

A state Appellate Court last year rejected the proposal, saying the state Legislature never intended for municipal budgets to be subject to public referendums.

The court agreed with case law that determined that "such a scheme threatens to place municipal governments in a straitjacket and make it impossible for the city's officers to carry out the public's business."

Superior Court Judge Joseph C. Visalli last October ruled in the city's favor, saying the proposed measure would lead to financial chaos.

But the state Supreme Court sent the proposal back to the lower court after overturning another New Jersey budget case.

The federal cost of living adjustment for 2008 was 2.3 percent. By contrast, City Council approved a 10 percent tax hike this year.

"I don't know that financial chaos is how I would describe it," said Mayor Sal Perillo, who opposed the group's plan.

"We have the state caps, which have turned out to be pretty effective restraints on municipal spending," he said.

Perillo noted that the city has trimmed staff by 10 percent from 291 in 2004 to 263 full-time employees this year.

The city initiated the lawsuit by asking the court to rule on the legality of the issue.

Among the taxpayers pushing the initiative are James Tweed, Joseph Somerville, Dennis Myers, Fred Hoffman and Pete Guinosso. Their lawyer, Frank L. Corrado, said the Appellate Court still might rule against them.

"The real issue in the case is whether there are other statutes in New Jersey that pre-empt a municipality from enacting a budget-cap ordinance," he said.

Taxpayer Protection Ordinance Update

The Supreme Court of New Jersey has summarily remanded the Taxpayer Protection Ordinance case to the Appellate Division. This means the Appellate Court must reconsider the case in light of a recent the Supreme Court decision that overturns a 40-year-old lower court case upon which both the Appellate Court and the Superior Court relied.

The Superior Court held, and the Appellate Division affirmed, that the Taxpayer Protection Ordinance was invalid and could not be adopted by initiative. That decision was based partly on the rationale of Cuprowski v. Jersey City, which held municipal budgets were “administrative” rather than “legislative” acts, whose adoption or nullification by popular vote would result in “chaos.” The lower courts were not persuaded by our argument that an ordinance adopting a prospective budget cap by initiative differs significantly from a retroactive attack, by referendum, on an already-adopted budget.

By summarily remanding the case, the state Supreme Court has merely said the Appellate Court must rethink the case in light of its inability to rely on the Cuprowski rationale. The Appellate Court could again rule against us. But if it does, it must come up with a better reason.

We hope the Appellate Court will now apply the same “plain language” rule that the state Supreme Court applied to the Faulkner Act when it overturned Cuprowski. That Act, under which Ocean City is governed, grants citizens the unequivocal right to propose and vote on “any ordinance” through the initiative process. The issue on remand will likely be whether other state laws except the Taxpayer Protection Ordinance from this plain and unequivocal language.

What’s next? The Appellate Court may, or may not request additional briefs and/or oral argument on the case.

Reasons For Appeal of Taxpayer Protection Initiative

On September 26th in a case involving the City of Trenton, the New Jersey Supreme Court overruled the Cuprowski decision as it applied to public referendums. The Court adopted the plain language of N.J.S.A. 40:69A-185 providing voters of Faulkner Act municipalities the right to subject any ordinance to referendum unless exempted by State Statute. The Court is most likely to apply the same “plain language” rule to citizen initiatives as well. Although the Court did refer to local budget ordinances as being exempt from referendum, it clearly referred to annual budgets which are held in suspension for 20 days and not to budget cap laws which are effective in advance of any annual ordinance being passed.

We have always believed our case, decided on September 13th by the Appellate Division, met the standards for appeal to the New Jersey Supreme Court, both as an issue of substantial public importance, and having sufficient potential for impacting legal precedent. The reason we initially decided not to appeal after the Appellate Division’s decision was because we were aware that the odds of even a good case being accepted for review were not in our favor. We did not wish to cause more taxpayer dollars to be spent by our local government in its fight against the taxpayers. However, the September 26th ruling by the N.J. Supreme Court in the Trenton case changes those odds.

Taking a case all the way to the top Court in the State is always an uphill struggle. We wish to thank our many supporters, both the thousand signatories of our petition and those who contributed generously to our legal fund after the Knight Administration decided to prevent a citizen referendum by filing suit against us. We know that many of you were disappointed when we initially decided not to appeal the Appellate Division’s decision. We will now by this appeal to the N.J. Supreme Court receive for all of you the final answer.

Taxpayers do not forget. All this could have been avoided if either of two things had happened:

1. If the Knight Administration had allowed the question to be decided by the voters of Ocean City, or


2. If the City Council had enacted the Taxpayer Protection Ordinance as did the municipality of Bogata, New Jersey. That ordinance has been successfully in effect for several years without incurring any of the “chaos” they are trying to scare you with.

None of this is for free. We need those of you who have stood with us before to do so again and if you haven’t donated before please consider doing so. Send your contributions, payable to Fairness In Taxes Legal Fund, P.O. Box 565, Ocean City, NJ 08226-0565.

Committee of Petitioners:
Joseph Somerville
Peter Guinosso
Dennis Myers
John Bryson (deceased)
Frederick Hoffman

Submitted by James Tweed, Coordinator for the Committee