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Procedural History

Complaint filed.  On November 22, 2022, via email, a Complaint was filed by Brian Chewcaskie, Esq., on behalf of the Borough of Leonia, in which it submits that NJ - S1368 imposes an undue burden on the municipality by requiring the borough to create and maintain an unfunded business registry.  The State did not make any preparation for the cost of municipalities to establish the business insurance registry and enforce the provisions of the statute.  The legislation initially provided that this business insurance registry would be maintained by the Department of Community Affairs, but was amended to impose this burden on the municipality.  The State did not take into account the funds necessary to create and maintain a business insurance registry which cost will now be a burden on the municipality.

A summary of the Borough of Leonia Complaint, may be viewed under Pleading Summaries.

View the full version of the Borough of Leonia Complaint.

Council publication.  Because of the identity of the issue raised, on November 29, 2022, via email and hand delivered letter, the Council ordered that the complaint should be served on the Attorney General, the Department of Law & Public Safety, the Director at the Department of Law & Public Safety, and the officials listed in Council Rule 9a.  The Council also determined that the Attorney General would be directed to file an Answer to the Complaint, and that any other official served with the Complaint that chose to do so might file an Answer, as Respondent.

View the full version of the Council’s correspondence to all interested parties.

Council grants Respondents’ request for an extension of thirty days to file an Answer.  On December 20, 2022, George Cohen, DAG, on behalf of the Respondent, State of NJ, requested an extension of thirty days to file an Answer.  The Council approved the request for an extension of thirty days to file an answer, and that filing is due January 23, 2023.

Complaint filed.  On December 29, 2022, via email, a Complaint was filed by Brian Chewcaskie, Esq., on behalf of the Borough of Fort Lee, in which it submits that NJ - S1368 imposes an undue burden on the municipality by requiring the borough to create and maintain an unfunded business registry.  The State did not make any preparation for the cost of municipalities to establish the business insurance registry and enforce the provisions of the statute.  The legislation initially provided that this business insurance registry would be maintained by the Department of Community Affairs, but was amended to impose this burden on the municipality.  The State did not take into account the funds necessary to create and maintain a business insurance registry which cost will now be a burden on the municipality.

A summary of the Borough of Fort Lee Complaint, may be viewed under Pleading Summaries.

View the full version of the Borough of Fort Lee Complaint

Respondent issues questions to Council on consolidation and pleading schedule.  On January 20, 2023, George Cohen, DAG, on behalf of the Respondent, State of NJ, contacted the Council about consolidation of this matter, with the Borough of Fort Lee joining the Complaint on December 29, 2022, and a two week extension to file a Consolidated Answer.  The Respondent also inquired about the pleading schedule for their forthcoming Motion to Consolidate and Motion to Dismiss.

Council issues Order of Consolidation and Pleading Schedule.  On January 23, 2023, The Council issued an Order of Consolidation, joining the matters filed by the Borough of Leonia and the Borough of Fort Lee in COLM 0011-22 (Consolidated Actions).

The Council also granted the request for an extension of two weeks for the Respondent to file a Motion to Dismiss in COLM 0011-22 (Consolidated Actions), by February 6, 2023.  The Claimants’ Response to the Motion to Dismiss, shall be filed by March 1, 2023.

View the full version of the Council’s Order to all interested parties.

Respondent, State of NJ, files Motion to Dismiss.  On February 6, 2023, via email and hand delivery, George Cohen, DAG, on behalf of the Respondent, filed their Notice of Motion to Dismiss, Motion to Dismiss, and Certification of Service in COLM 0011-22. 

A summary of the Respondent’s Motion to Dismiss, may be viewed under Pleading Summaries .

View the full version of the Respondent, State of NJ, Motion to Dismiss.

Claimants' files Letter Brief In Opposition to Motion to Dismiss.  On February 27, 2023, via email, Brian Chewcaskie, Esq., on behalf of Claimants, Borough of Leonia and Borough of Fort Lee, in opposition to the motion to dismiss the consolidated case filed by the State of New Jersey in COLM 0011-22.

A summary of the Claimants' Letter Brief In Opposition to the Respondents' Motion to Dismiss, may be viewed under Pleading Summaries.

View the full version of the Claimants' Letter Brief In Opposition to the Motion to Dismiss.

The Respondents' Response to the Letter Brief In Opposition to the Motion to Dismiss, shall be filed by March 20, 2023.

Respondent, SONJ issues Response to Letter Brief in Opposition to the Motion to Dismiss the consolidated complaints. On March 20, 2023, via email and hand delivery, George N. Cohen, DAG, submitted a letter on behalf of the Respondent, State of New Jersey, in reply to the opposition of the Boroughs of Leonia and Fort Lee ("Boroughs"), to the State's motion to dismiss the consolidated complaints filed by the Boroughs in the above-captioned matter.  Nothing in the Boroughs' opposition supports their claim that N.J.S.A. 40A-1 to -3 (the "Act") constitutes an unfunded mandate.  Moreover, the Boroughs' argument that the Act operates as an impermissable annual tax is not within the jurisdiction of this forum.  Therefore, the Council should dism the Boroughs' complaints.

A summary of the Respondent's Letter Brief in Opposition to the Motion to Dismiss the consolidated complaints, may be viewed under Pleading Summaries.

View the full version of the Respondent's Letter Brief in Opposition to the Motion to Dismiss the consolidated complaints.

Council issues Notice of Hearing.  On April 12, 2023, the Council submitted their Notice of Hearing to the Secretary of State and all interested parties.  The hearing has been scheduled in I/M/O Complaint filed by the Borough of Leonia (Consolidated Actions) (COLM-0011-22) (Does the requirement of NJSA 40A:10A-2 that municipalities create and maintain a business registry, constitute an unfunded mandate):

Date/Time of Hearing:	April 28, 2023, at 11:00 a.m.
Place of Hearing:	Virtual - MS TEAMS 140 East Front Street, 8th fl. Trenton, NJ 08608
Purpose of Hearing:	To hear oral argument(s) on Motion to Dismiss.

Council Issues Written Decision. On August 31, 2023, via email and hand delivery, the Council issued their Written Decision granting the Respondent's Motion to Dismiss and the matter is dismissed with prejudice.

View the full version of the Council's Written Decision.

PLEADING SUMMARIES

Claimant Borough of Leonia Summary of Complaint:

  “A Complaint was filed by Brian Chewcaskie, Esq., on behalf of the Borough of Leonia, in which it submits that NJ - S1368 imposes an undue burden on the municipality by requiring the borough to create and maintain an unfunded business registry.  The State did not make any preparation for the cost of municipalities to establish the business insurance registry and enforce the provisions of the statute.  The legislation initially provided that this business insurance registry would be maintained by the Department of Community Affairs, but was amended to impose this burden on the municipality.  The State did not take into account the funds necessary to create and maintain a business insurance registry which cost will now be a burden on the municipality.”

The above summary is a quotation from the Complaint filed by Brian Chewcaskie, Esq., on behalf of the Borough of Leonia, on November 22, 2022.

Claimant Borough of Fort Lee Summary of Complaint:

  “A Complaint was filed by Brian Chewcaskie, Esq., on behalf of the Borough of Fort Lee, in which it submits that NJ - S1368 imposes an undue burden on the municipality by requiring the borough to create and maintain an unfunded business registry.  The State did not make any preparation for the cost of municipalities to establish the business insurance registry and enforce the provisions of the statute.  The legislation initially provided that this business insurance registry would be maintained by the Department of Community Affairs, but was amended to impose this burden on the municipality.  The State did not take into account the funds necessary to create and maintain a business insurance registry which cost will now be a burden on the municipality.”

The above summary is a quotation from the Complaint filed by Brian Chewcaskie, Esq., on behalf of the Borough of Fort Lee, on December 29, 2022.

Respondent, State of NJ, files Motion to Dismiss:

  "On August 5, 2022, Governor Murphy signed L. 2022, c. 92 ("the Act") into law.  N.J.S.A. 40A-1 to -3.  In essence, the Act requires business owners or the owner of at least one rental unit, to provide proof of liability insurance (a "certificate of insurance") with their respective municipality.  N.J.S.A. 40A:10A-1 (a), (b) -2 (a).  In turn, the municipality is to issue the business owner or rental unit owner a "certificate of registration."  N.J.S.A. 40A:10A-2 (b).  The Act grants municipalities, through their municipal governing body, the option to enact an ordinance for the recovery of costs associated with the municipality's registration of each certificate of insurance submitted to it as required by the Act.  N.J.S.A. 40a:10a-2 (b).

This provision took effect November 3, 2022.

  Claimants, the Borough of Leonia and the Borough of Fort Lee, ("Leonia," "Fort Lee" or "Boroughs") challenge the Act and allege that it imposes an unfunded mandate upon the Boroughs.  However, the basis for this challenge is entirely unfounded.  By its plain language, the Act clearly provides a mechanism for a municipality to recover the costs associated with the requirements of the Act, as well as the recovery of penalties for failure of a covered property owner or business to comply with the Act.  Thus, there is no basis to conclude that the Act imposes unfunded costs to the municipalities.  Accordingly, the Council on Local Mandates should grant the State's motion to dismiss Leonia and Fort Lee's complaints."

The above is a quotation from the Motion to Dismiss filed by George Cohen, DAG, on behalf of Respondent, State of NJ, on February 6, 2023.

Claimants' Letter Brief In Opposition to Motion to Dismiss:

  "On August 5, 2022, Governor Murphy signed L. 2022, c.92 ("the Act") into law. N.J.S.A. 40A - 1 to -3.  In essence, the Act requires the owners of a business, owners of a rental unit or units, and the owners of multi-family homes of four or fewer units, one of wihich is owner occupied, to maintain liability insurance in a minimum amount.  N.J.S.A. 40A:10A-1.  The Act further requires the property owner to annually register a certificate of insurance with the municipality and the municipality to issue a "certificate of registration."  N.J.S.A. 40A:10A-2.  The Act provided no funding from the State to support the enforcement of the Act by municipalities.  Instead, the Act states that municipalities may enact an ordinance establishing a "reasonable administrative fee" for the municipality registration of each certificate of insurance submitted to it as required by the Act and permits summary proceedings to collect fines between $500 and $5,000 against owners who do not comply with the Act.  N.J.S.A. 40A:10A-2(b).  This provision took effect November 3, 2022.

  The Act imposes an unfunded mandate upon the Claimants and all municipalities since the "administrative fee" authorized in the Act designed to allow the municipality to recover costs essentially operates as annual tax on all business owners and owners of rental units and multifamily properties.  In addition, the costs to ensure compliance with the Act, including maintaining an insurance registry and dedicating resources to monitoring and enforcing compliance on an annual basis, far exceeds the permitted fees and penalties under the Act so as to make these funding sources completely illusory.  Accordingly, the Act constitutes an unfunded mandate and the Council on Local Mandates should deny the State's motion to dismiss Leonia and Fort Lee's complaints."

The above is a quotation from the Letter Brief In Opposition to the Motion to Dismiss, filed by Brian Chewcaskie, Esq., on behalf of Claimants' Borough of Leonia and Borough of Fort Lee, on February 27, 2023.

Respondent's Letter Brief in Opposition to the Motion to Dismiss the consolidated complaints:

"First, the Act irrefutably provides a funding mechanism that permits a municipality to “establish a reasonable administrative fee for the certificate of registration” required by the Act. N.J.S.A 40A:10A-2(b). The Act requires certain property owners to purchase liability insurance for their property and file a proof of insurance with the municipality. In turn, municipalities are required to issue a “certificate of registration” to the property owner acknowledging receipt of the “certificate of insurance” submitted to the municipality by the affected property owner. N.J.S.A. 40A:10A-2(a), (b).

There is also no factual basis for the Boroughs’ claims that efforts required by a municipality to ensure compliance with the Act will not cover a municipality’s costs through a summary proceeding to collect a fine of not less than $500 but no more than $5,000 against an owner who fails to comply with the provisions of the Act. N.J.S.A 40A:10A-2(b). The extent of compliance of the affected property owners is entirely unknown and the cost of any summary proceeding to enforce is unknown. Neither is a basis for asserting an unfunded mandate.

What is known is that a municipality may adopt a reasonable administrative fee to recover all costs associated with the Act. Such costs may be recovered by a municipality through the adoption of an ordinance for “a reasonable administrative fee for the certificate of registration,” such registration demonstrating “compliance with section 1 of [the Act] with the municipality. . . .” N.J.S.A. 40A:10A-2(a), (b). Far from the recovery of costs being “illusory,” as asserted by the Boroughs, the Act could not be clearer in providing municipalities the ability to recover all costs through adoption of a reasonable administrative fee.

“Reasonable administrative fee” cannot be interpreted other than to permit a municipality to recover those costs associated with the administrative costs incurred by a municipality in complying with the Act. The Council made this clear in addressing this particular issue in Ocean Township (Monmouth County) and Frankford Township:

[T]here is no obvious reason why the Legislature would have chosen to authorize a fee that offsets part, but not all, of the zoning permit system, particularly given that professional services, those that Claimants assert are non-compensable, would foreseeably be the largest component of the costs of administering the system. Absent a showing by Claimants of an authoritative legislative statement or judicial interpretation limiting §18 fees as they propose, the Council will read §18 as authorizing municipalities to recover all of the reasonable costs of operating the zoning permit system.

Id. at 11 (emphasis added).

Because the Act provides a municipality with the ability to take the necessary steps to recover all costs associated with the registration of proof of insurance, as well the costs for enforcement of the required filing of proof of insurance, there is no unfunded mandate. The municipalities are required to accept certificates of insurance and to issue certificates of registration. How they implement the statute is left to each municipality. Nevertheless, the Act plainly states a municipality may adopt an administrative fee for the costs of the insurance certificate registration process. Therefore, no matter how a municipality determines to best implement the Act (i.e., building a data registry, adding to an existing registry structure, etc.), the Act authorizes resources to fund such endeavor through a reasonable administrative fee.

The Boroughs’ also argue that the Council’s decision in In the Matter of A Complaint Filed By Ocean Township (Monmouth County) and Frankford Township, is distinguishable from the instant case. This argument is without merit. As noted above, contrary to the Boroughs’ assertion, applying the Council’s analysis in Ocean Township to the instant case demonstrates that the reasonable administrative fee afforded to municipalities for recovery of all costs related to the Act, meets the criteria set forth by the Council in the Ocean Township decision.

As to what a municipality may deem to be a “reasonable” administrative fee, the potential costs of carrying out the provisions of the Act will likely vary from one municipality to another, as illustrated by the significant difference in alleged expenditures provided by the two Boroughs in their respective complaints. The costs alleged by the municipalities are speculative at best and are irrelevant because whatever the real costs are, they may be recovered under the Act, through the adoption of an ordinance by the municipality for the collection of a reasonable administrative fee.

The crux of the analysis before the Council is whether or not the costs associated with the Act are permitted to be offset by the municipal governing body’s adoption of a reasonable administrative fee. They are. Therefore, there is no unfunded mandate created by the Act.

Second, the Council does not have jurisdiction of the Boroughs’ argument that the Act operates as an impermissible annual tax. Such a claim belongs in the New Jersey Superior Court, Tax Court, and is to be evaluated under the applicable tax laws. See American Trucking Ass’ns v. State, 164 N.J. 183 (2000); American Trucing Ass’ns v. State, 34 N.J. Super. 1, 10 (App. Div. 1999), rev’d on other grounds, 180 N.J. 377 (2004); Dep’t of Transp. V. Barton Inv., 326 N.J. Super. 282, 287 (App. Div. 1999); Weisbrod v. Township of Springfield, 1 N.J. Tax 583, 590 (Ta Ct. 1980).

To the extent the Council reviews such a claim, because the administrative fee is limited in its application to the affected property owners under the Act and limits the “reasonable” administrative fee to those costs associated with the Act, there is no basis for the Boroughs’ assertion that the administrative fee operates as an annual tax. There is no municipal-wide application of the Act to anyone other than the specified property owners required to purchase the necessary liability insurance and to register proof of such insurance with the municipality.

Moreover, as noted in the State’s previously filed letter in support of its motion to dismiss, the Council’s decision in In the Matter of A Complaint Filed By Ocean Township (Monmouth County) and Frankford Township, COLM 10-01 (August 2, 2002), held that authorization by the Legislature for a municipality to establish reasonable fees to cover administrative costs is different from a tax. Id. at 8. Additionally, the Council found in Ocean Township that the administrative fee authorized under the Municipal Land Use Law (“MLUL”) was specific to individual properties that fell within the specific category set forth in the MLUL; that is, those applying for a zoning permit. Ibid. In so ruling, the Council noted that the administrative fee was specific to affected properties and thus was not the equivalent of a general property tax impacting all property owners. Ibid.

That is exactly what is presented to the Council in this case: the ability of municipalities to recover costs from the Act through an administrative fee that applies only to the affected property owners and not to municipal residents as a whole. Therefore, the Boroughs’ argument that the Act operates as an impermissible annual tax is without merit and the Council should dismiss the Boroughs’ complaints.

CONCLUSION

For all of these reasons and those set forth in the State’s motion and this reply, L. 2022, c. 92 is not an unfunded mandate and the State’s motion to dismiss should be granted and the Boroughs’ complaints dismissed with prejudice."

The above is a quotation from the Letter Brief in Opposition to the Motion to Dismiss the consolidated complaints, filed by George N. Cohen, DAG, on behalf of the Respondent, State of New Jersey on March 20, 2023.