NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-0743-10T4

BOROUGH OF SEASIDE PARK, SEASIDE PARK BOARD OF APPROVED FOR PUBLICATION EDUCATION, SUSAN BROSNAN, August 12, 2013 THOMAS CONNORS, PATRICIA DEGUTIS, FAYE HARING, JAMES APPELLATE DIVISION JABLONSKI, LOUIS MACCHIAVERNA, ROBERT MATTHIES, DAVID MEYER, RICHARD MCMILLAN, MARYANN PALMISANO, ANDREW SBORDONE, ANN WEHRLEN, and MARTY WILK, JR.,

Plaintiffs-Appellants/ Cross-Respondents,

v.

COMMISSIONER OF THE NEW JERSEY DEPARTMENT OF EDUCATION, CENTRAL REGIONAL SCHOOL DISTRICT BOARD OF EDUCATION, BERKELEY TOWNSHIP, BERKELEY TOWNSHIP BOARD OF EDUCATION, BOROUGH OF OCEAN GATE, OCEAN GATE BOARD OF EDUCATION, and BOROUGH OF SEASIDE HEIGHTS,

Defendants-Respondents,

and

BOROUGH OF ISLAND HEIGHTS, ISLAND HEIGHTS BOARD OF EDUCATION, and SEASIDE HEIGHTS BOARD OF EDUCATION,1

Defendants-Respondents/ Cross-Appellants. ________________________________

Argued: December 19, 2012 - Decided: August 12, 2013

Before Judges Axelrad, Sapp-Peterson and Nugent.

On appeal from the Superior Court of New Jersey, Chancery Division, Ocean County, Docket No. C-162-07.

Vito A. Gagliardi, Jr., argued the cause for appellants/cross-respondents (Porzio, Bromberg & Newman, P.C., attorneys; Mr. Gagliardi, of counsel and on the briefs; Kerri A. Wright and Phillip C. Bauknight, on the briefs).

Melissa T. Dutton, Deputy Attorney General, argued the cause for respondent Commissioner of the New Jersey Department of Education (Jeffrey S. Chiesa, Attorney General, attorney; Lewis A. Scheindlin, Assistant Attorney General, of counsel; Ms. Dutton and Susan M. Huntley, Deputy Attorney General, on the brief).

Arthur Stein argued the cause for respondent Central Regional School District Board of Education (Stein & Supsie, attorneys; Mr. Stein, of counsel and on the brief; Angela M. Koutsouris, on the brief).

1 The Seaside Heights Board of Education also filed a third-party complaint against all the parties that mirrored the claims of plaintiffs' second amended complaint. For ease of reference, the appeal is analyzed based on plaintiffs' second amended complaint as equally applicable to the third-party complaint.

2 A-0743-10T4 Francis J. Campbell argued the cause for respondent Township of Berkeley (Campbell & Pruchnik, LLC, attorneys; Mr. Campbell, of counsel and on the brief).

Dina M. Vicari argued the cause for respondent Berkeley Township Board of Education (R.C. Shea & Associates, attorneys; Ms. Vicari, on the brief).

Robert W. Allen argued the cause for respondents Borough of Ocean Gate and Ocean Gate Board of Education (Gluck & Allen, LLC, attorneys; Gena M. Koutsouris, on the brief).

Kenneth M. Kukfa argued the cause for respondent/cross-appellant Borough of Island Heights (Kenneth M. Kukfa, attorney; Christian E. Schlegel, on the brief).

Ben A. Montenegro argued the cause for respondent/cross-appellant Island Heights Board of Education (Montenegro, Thompson, Montenegro & Genz, P.C., attorneys; Mr. Montenegro, of counsel and on the brief).

David M. Casadonte argued the cause for respondent/cross-appellant Seaside Heights Board of Education.

Respondent Borough of Seaside Heights has not filed a brief.

The opinion of the court was delivered by

AXELRAD, P.J.A.D.

Plaintiffs-appellants, the Borough of Seaside Park, its

Board of Education, and thirteen taxpaying residents, as well as

defendants-respondents/cross-appellants, the Seaside Heights

Board of Education, and the Borough of Island Heights and its

3 A-0743-10T4 Board of Education, appeal from the Law Division's dismissal of

their various claims seeking dissolution of the Central Regional

School District (Central Regional or District), permission to

withdraw from the District, or alteration of the District's

funding formula.2 We are satisfied the Legislature has

established a comprehensive scheme for plaintiffs to seek this

relief, which includes a voter referendum. The referendum held

on dissolution failed, and plaintiffs did not pursue the

statutory processes for withdrawal and modification of the tax

allocation method for Central Regional. Plaintiffs have not

asserted a cognizable constitutional or other claim that would

provide any legal or equitable basis for judicial intervention

and relief. Moreover, even if we held that plaintiffs exhausted

their administrative remedies and are subject to a substantially

inequitable tax allocation, they would not be entitled to the

extraordinary equitable relief afforded in Petition for

Authorization to Conduct a Referendum on Withdrawal of North

Haledon School District from the Passaic County Manchester

Regional High School District,

(2004) (North

Haledon). Accordingly, we affirm.

2 Cross-appellants only sought dissolution of Central Regional, and the Seaside Heights Board of Education additionally sought to withdraw along with Seaside Park.

4 A-0743-10T4 We place this appeal in context by first reciting the

history of regional school districts, including the history of

their funding, and the statutory mechanisms for dissolving or

withdrawing from a regional school district. We will then

discuss the specifics of Central Regional and the subject

litigation.

I.

In l93l the Legislature authorized the establishment of

regionalized school districts. L. 1931, c. 275, § 1. Costs

were to be apportioned among constituent districts "upon the

basis of ratables." L. 1931, c. 275, § 8. The "average daily

enrollment" method of apportionment was introduced in 1953,

i.e., per pupil basis, as an alternative to the existing ratable

method and was made available to all regional school districts

in 1955 subject to approval by the electorate. See Berkeley

Heights Twp. v. Bd. of Educ.,

(1957).

In a series of decisions in the 1970s, the Supreme Court

held the existing system of public school funding in New Jersey

unconstitutional based upon discrepancies in dollar input per

pupil, denying a thorough and efficient education, and required

the Legislature to adjust the funding methods. See Robinson v.

Cahill,

, cert. denied sub nom Klein v. Robinson,

,

,

(1975); Robinson v.

5 A-0743-10T4 Cahill,

(1975); Robinson v. Cahill,

,

cert. denied sub nom. Dickey v. Robinson,

,

,

(1973); Robinson v. Cahill,

(1973).

In response, the Legislature passed an amendment to

N.J.S.A. 18A:13-23 in l975 that altered the means by which

regional school districts were to be funded from a per pupil

basis to an equalized value of real estate situated in each

district, which shifted costs to municipalities with higher

property values.3 N. Haledon, supra,

. The

Legislature also adopted procedures for initiating withdrawal

from a limited purpose regional school district,4 including an

application to the county superintendent to investigate the

advisability of withdrawal or dissolution, N.J.S.A. 18A:13-51; a

report from the county superintendent, N.J.S.A. 18A:13-52 and -

3 In 1990, the Supreme Court ruled that the 1975 Act was unconstitutional as applied as it did not provide a thorough and efficient system of education to pupils residing in poorer urban districts, and ordered the Act to be amended or new legislation passed in order to ensure proper funding for those districts. Abbott v. Burke,

(1990) (Abbott II). The Abbott litigation continues to this day. See Abbott v. Burke,

(2011). 4 Limited purpose regional school districts operate one or more of the following: "elementary schools, junior high schools, high schools, vocational schools, special schools, health facilities or particular educational services or facilities." N.J.S.A. 18A:13-2(b).

6 A-0743-10T4 53; a petition to the Commissioner of Education (Commissioner)

for permission to conduct a referendum, N.J.S.A. 18A:13-54 and -

55; a report from the Board of Review (Board) granting or

denying the petition, N.J.S.A. 18A:13-56; and a referendum,

N.J.S.A. 18A:13-57 to -59. L. 1975, c. 360.

In 1993, the Legislature again amended N.J.S.A. 18A:13-23

to allow regional districts to choose among equalized valuation,

per pupil enrollment, or a combination of the two through voter

approval at an annual or special election. L. 1993, c. 67, § 1;

N. Haledon, supra,

. The goal of this

legislation was to "encourage[] the formation of regional school

districts by allowing school districts considering

regionalization greater freedom in determining how costs should

be apportioned among the constituent districts." Statement to

Assembly Substitute for A. 1822 and 1063 (Feb. 8, 1993). In

this regard, the Legislature acknowledged that the requirement

of cost apportionment based on equalized valuation acted as "a

disincentive to regionalization for certain districts which have

high property values and a small pupil population, when

considering joining with a municipality that has low property

values and a large pupil population." See, e.g., Assembly

Education Committee Statement to A. 1822 (Oct. 1, 1992); Senate

7 A-0743-10T4 Education Committee Statement to Assembly Substitute for A. 1822

and 1063 (Dec. 10, 1992).

Also in 1993, the Legislature revised the law which

provided a procedure for withdrawal from a regional school

district by adding a parallel procedure for the dissolution of a

district. L. 1993, c. 255. This amendment set forth the

following standard for determining if a referendum on withdrawal

or dissolution was successful:

For withdrawal from a regional district, the question shall be deemed adopted if it receives an affirmative vote of a majority of the votes cast within the withdrawing constituent district and it receives an affirmative vote of a majority of the overall votes cast in the entire regional district. For dissolution of a regional district, the question shall be deemed adopted if it receives an affirmative vote in a majority of the individual constituent districts and it receives an affirmative vote of a majority of the overall votes cast in the entire regional district.

[L. 1993, c. 255, § 8; N.J.S.A. 18A:13-59.]

The Legislature also authorized the State Board of Education to

promulgate regulations to effectuate the provisions of the Act.

L. 1993, c. 255, § 14.

In 2004, the Supreme Court decided North Haledon. There,

North Haledon, Haledon, and Prospect Park had formed a limited

purpose regional school district in the 1950s, providing

secondary education at Manchester Regional High School using a

8 A-0743-10T4 per pupil method for apportioning costs; however, in l975 the

funding method was changed to an equalized valuation. Supra,

. Consequently, because North Haledon had the

highest tax base of the three municipalities, its share of the

operating costs significantly increased disproportionally to the

other two districts.

.

After the 1993 amendment, North Haledon pursued a

referendum that would return the district to per pupil cost

apportionment, which failed because it did not garner a majority

of voters in Haledon and Prospect Park.

. By 1994,

North Haledon was paying over half of the district's operating

costs and more than two to three times per pupil than that paid

by Haledon and Prospect Park, respectively.

In 2001,

North Haledon was paying $18,400 per pupil, while Haledon was

paying $5300, and Prospect Park was paying $3400.

.

In 1998, North Haledon initiated the process of withdrawal.

Although the county superintendent's investigative report did

not favor withdrawal, North Haledon petitioned the Commissioner

for permission to hold a referendum pursuant to N.J.S.A. 18A:13-

54.

. The Board granted the petition,

notwithstanding that North Haledon's withdrawal would result in

a nine percent reduction in white students in Manchester

Regional's student body.

. The Board found the

9 A-0743-10T4 racial impact negligible because, based upon demographic changes

in the three sending districts, whether North Haledon stayed or

withdrew, the minority population at the high school would

continue to rise and the white population would continue to

decline.

.

The Regional Board, Haledon, and Prospect Park appealed

the Board's order, but no stay was entered to block the

referendum pending appeal.

The voters approved the

referendum at a special election, and the Commissioner set a

date for North Haledon's withdrawal from the district.

We reversed the Board,

(App. Div.

2003), disagreeing that the anticipated nine percent decrease in

the white student population of Manchester Regional was a

negligible impact. The Supreme Court affirmed, holding that

the constitutional imperative to prevent segregation in our public schools applies as well to the Board within the ambit of the exercise of its responsibilities under N.J.S.A. 18A:13-56(b)(4), which requires the Board to deny a withdrawal petition for "[a]ny other reason, which it may deem to be sufficient."

[N. Haledon, supra,

.]

The Court concluded that

withdrawal by North Haledon will deny the benefits of the educational opportunity offered by a diverse student body to both the students remaining at Manchester Regional and to the students from North

10 A-0743-10T4 Haledon. We conclude that the Board's decision permitting a referendum on the question of withdrawal is not sustainable as a matter of law, and affirm the decision of the Appellate Division reversing that decision.

[Id. at 184.]

However, the Court acknowledged North Haledon's justifiable

concern about the disproportional tax burden shouldered by its

citizens as compared to the other constituent municipalities,

, so it modified the judgment and remanded to the

Commissioner "to develop, in consultation with the constituent

municipalities, an equitable cost apportionment scheme for the

Regional District."

. In so ruling, the Court held:

the constitutional imperative to address racial segregation requires the Board to compel North Haledon to remain in the Regional District despite the tax burden on its citizens. . . . [W]hen a constituent municipality is compelled to participate in a Regional District, N.J.S.A. 18A:13-23 is not applicable and the Commissioner may determine cost allocations among and between Haledon, Prospect Park, and North Haledon.

[Ibid.]

On remand, by letter dated September 21, 2004, the Attorney

General's office advised the Commissioner:

You have requested advice concerning whether the authority granted to you by the Supreme Court in [North Haledon] to equitably revise the cost apportionments among the constituent districts in the Manchester Regional High School District may be

11 A-0743-10T4 utilized in other situations. You are advised that such power may be exercised by the Commissioner where the relative tax burden of the constituent districts in a regional district is inequitable and the Board of Review (or a reviewing court) denies dissolution or withdrawal of constituent districts from the regional school district because dissolution/ withdrawal would result in deficiencies of a constitutional dimension.

. . . .

In sum, the Commissioner is authorized to act notwithstanding the statutory provisions governing apportionment of costs among constituent school districts of a regional school district as set forth in N.J.S.A. 18A:13-23, in a situation substantially similar to that present in [North Haledon]. Specifically, the Commissioner may determine cost allocations among and between the constituent districts where there is the presence of an inequitable tax burden -- which could be demonstrated by a constituent district unsuccessfully seeking to change the apportionment methodology -- and due to a constitutional imperative such as addressing racial segregation, the Board of Review (or a court reviewing the Board's determination) determines that the regional district must remain intact.

[(Emphasis added).]

By letter of January 18, 2005, the Commissioner advised

that cost apportionment in North Haledon would be sixty-seven

percent equalized valuation and thirty-three percent pupil

enrollment, phased in over four years. In so doing, he

cautioned:

12 A-0743-10T4 I stress that the apportionment methodology [adopted] is a unique response to the circumstances existing in the present matter, and that it is neither binding on the regional district in the event that the voters of the district and its constituents subsequently elect to approve a cost apportionment method of the regional board's own devising pursuant to N.J.S.A. 18A:13-23, nor intended to be precedent-setting in any other situation where cost apportionment is at issue among the constituent members of a regional district.

On numerous occasions both before and after North Haledon,

the Legislature has considered issues involving regional school

districts, including its funding and the procedures for

withdrawal from or dissolution of such districts, but no

significant changes have been made. Seaside Park has been an

active participant in those discussions.

For example, in 1994, the Senate introduced S. 1313, which

would have made it easier for a district to withdraw from a

limited purpose regional school district, but it was not

enacted. In 1996, the Legislature established a panel to

investigate regionalization. L. 1996, c. 138, § 31. The New

Jersey Regionalization Advisory Panel issued its final report in

January 1998. See N.J. Regionalization Advisory Panel Final

Report (Jan. 1998), http://www.njleg.state.nj.us/

PropertyTaxSession/OPI/FinalReport.pdf. It recognized the

disincentives to regionalization, including, in part, tax

13 A-0743-10T4 apportionments, and encouraged regionalization and the increased

use of shared services to improve efficiency and maximize

facilities and professional resources available to local

districts. Id. at 2, 6-7. The Panel also recommended

"legislation that would direct and empower the Commissioner of

Education, supported by the county superintendents and in

cooperation with the local boards of education and

administrations, to identify school districts that might benefit

financially and educationally from either regionalization or

consolidation of services with other school districts[,]" and

legally mandated regionalization where appropriate. Id. at 2.

Also in 1996, the Assembly created a task force on school

district regionalization "to examine and develop recommendations

concerning issues associated with the regionalization of

schools, including but not limited to: apportionment of costs;

incentives and disincentives for regionalization; the financial

impact of State aid on regionalization; and cost savings to

taxpayers." Assem. Res. 127, 206th Leg. (Nov. 14, 1996). The

task force was continued in the 1998-1999 legislative session,

see Assem. Res. 1, 208th Leg. (Jan. 13, 1998), and it held

14 A-0743-10T4 hearings on February 25, 1998, March 26, 1998, and August 13,

1998.5

On February 25, 1999, the task force issued a report on its

findings and recommendations. See Assembly Task Force on School

District Regionalization Findings and Recommendations,

http://www.njleg.state.nj.us/legislativepub/reports/school.pdf.

It found, in pertinent part, that:

4. The disproportionate distribution of costs among constituent municipalities in regionalized districts is a major disincentive to regionalization. However, any formula change designed to bring parity in the per pupil costs of the constituent municipalities will result in "winners" and "losers."

5. Smaller, more affluent communities in regional school districts, which are locked into paying based on their equalized valuation, as opposed to on a per-pupil basis, may wind up paying more than what they otherwise would pay in a non- regionalized district.

6. Development trends of constituent municipalities within a regional school

5 The mayor of Seaside Park served as a member of the task force, which specifically considered the experience of Central Regional, Assembly Task Force on School District Regionalization, Transcript of Feb. 25, 1998, (pp. 84-94); Central Regional's expert in this litigation, Melvyn Wyns, testified at the March 26, 1998 hearing, Assembly Task Force on School District Regionalization, Transcript of March 26, 1998, (pp. 24-41, 64-67); and one of plaintiffs' experts in this litigation, James Kirtland, testified at the August 13, 1998 hearing, Assembly Task Force on School District Regionalization, Transcript of Aug. 13, 1998, (pp. 80-81, 98-120).

15 A-0743-10T4 district can also negatively impact on the cost inequity factor.

. . . .

8. Many districts exhibit concern over regionalizing because the deregionalization process proves rigid and difficult. Major issues relating to division of debt service and assets, personnel retention policies, and the ability of each resulting district to adequately provide for the education of their students, must be considered.

9. Withdrawal from a regionalized arrangement by a constituent municipality may prove overwhelming since the current procedures require a majority of voters across the regional district in addition to a majority of voters in the constituent municipality which wants to exit from the arrangement.

The task force recommended, in pertinent part: (1)

restructuring of regionalization agreements "to allow

reassessment of cost distribution if the per pupil cost deviates

by more than 10% between any two constituent municipalities of

the regional district"; (2) modification of the equalized

valuation method for apportioning costs to a "fairer formula"

that would "provide more equity among constituent

municipalities," with "a realistic mechanism which compels

equitable adjustments in the distribution costs among

constituent municipalities for the small number of existing

regionalized districts which currently evidence an extreme

disproportionate distribution of costs"; and (3) amendment of

16 A-0743-10T4 the withdrawal statutes, allowing a municipality to opt out

"without major obstacles when a specified threshold deviation in

the per pupil amount paid by each constituent municipality is

reached, perhaps 10%" and providing a mechanism "to join another

regional district or enter into a sending/receiving relationship

with another regional district." Ibid.

In 2002, the Legislature considered S. 295, which would

have reduced per-pupil cost disparities in certain regional

school districts and increased state aid to those districts to

offset the reduction in municipal contributions. Central

Regional supported the measure, but it did not pass.

In 2005, the Office of Legislative Services (OLS) issued a

Background Report, Regional School Districts: Apportionment of

Costs in the Constituent Municipalities (July 20, 2005).6 The

OLS acknowledged the disincentives to regionalization, including

the perception of inequity felt by wealthier municipalities

paying based upon equalized property value. It also noted the

difficulty in altering the funding method for currently existing

regional school districts:

A referendum on a change in the apportionment method must be approved "by the voters of each municipality." Because of this voting requirement, a change in the method of cost apportionment is quite

6 http://www.njleg.state.nj.us/PropertyTaxSession/OPI/bg123.pdf.

17 A-0743-10T4 difficult to accomplish. Such a change will always create "winners" and "losers" among the constituent municipalities, and those municipalities slated to "lose" will not vote in favor of a change that will result in increases in their tax levy. The constituent municipalities which benefit from the current apportionment method are granted effective veto power over any possible change.

In 2006, the Legislature created four joint legislative

committees to make recommendations regarding proposals to reform

property taxes, including the Joint Legislative Committee on

Public School Funding Reform and the Joint Legislative Committee

on Government Consolidation and Shared Services. Assem. Con.

Res. 3, 212th Leg. (July 28, 2006). The Consolidation and

Shared Services Committee held hearings during which it

considered, among other items, consolidation of school

districts;7 however, its November 15, 2006 report did not

specifically address regional school districts. See 2006

Special Session Joint Legislative Committee Government

Consolidation and Shared Services Final Report (Dec. 1,2006),

http://www.njleg.state.nj.us/PropertyTaxSession/OPI/jcgo_final_

report.pdf.

7 Plaintiffs' counsel testified regarding regional school districts at the November 1, 2006 hearing. See Transcript of Public Hearing before Joint Legislative Committee on Government Consolidation and Shared Services, pp. 33-38 (Nov. 1, 2006), http://www.njleg.state.nj.us/legislativepub/pubhear/jcgo110106. pdf.

18 A-0743-10T4 Following hearings, the Funding Reform Committee issued its

final report in December 2006. See Special Session Joint

Legislative Committee Public School Funding Reform Final Report

(Dec. 1, 2006), http://www.njleg.state.nj.us/PropertyTaxSession/

OPI/jcsf_final_report.pdf. Pertinent to the present appeal, the

Committee recognized the value of regionalization as well as the

financial disincentives to the creation of regional school

districts, and recommended adopting the Department of

Education's recommendations regarding the apportionment of costs

in regional districts as follows:

Under the revisions, State aid and local property tax contributions would be calculated separately for each constituent municipality in a regional district. [And] [n]o jurisdiction in a regional school district would pay a tax levy per pupil which exceeds the actual per pupil expenditures of the regional school district.

While some may be concerned that this change would artificially cap the burden of some taxpayers who have a greater ability to pay under the measures employed, it is believed that the policy and educational benefits of having regional school districts outweigh this concern.

Also in 2006, S. 1585 was introduced, 212th Leg.,8 which

would have provided for the reduction of per pupil expenditures

8 S. 1585 can be traced back to A. 2623, from the 209th Leg. (2000-2001 Legislative Session). In 2001, A. 2623 was (continued)

19 A-0743-10T4 for certain constituent municipalities of regional school

districts. It apparently was designed to eliminate the funding

complained about by Seaside Park. It would have reduced the tax

burden for municipalities that are constituents of regional

school districts but: (1) comprise less than 10% of the regional

school district enrollment; (2) have a tax levy to support the

regional school district of more than $1 million; and (3) have a

per pupil expenditure that is more than 200% of the average per

pupil expenditure of all constituent municipalities of the

regional district. State aid would have been provided to the

regional school district to compensate for the loss of revenue

from the constituent municipality. The bill, however, never

proceeded beyond introduction, and it was not carried over or

re-introduced in any more legislative sessions.

Additionally, A. 3261/S. 2289 and A. 3422 were introduced

in 2008, 213th Leg., which were carried over or reintroduced as

A. 1327/S. 1638 in 2010, 214th Leg. These bills would have

revised the voting requirements necessary for the dissolution of

(continued) introduced, referred to two assembly committees, and also reported out of committee with a second reading and fiscal estimates (with Seaside Park identified in the 2001 fiscal estimate as one of the municipalities that would experience tax savings). However, it did not pass, and was carried over in legislative sessions through 2006, introduced as S. 1585, but never went anywhere.

20 A-0743-10T4 limited purpose regional school districts. They would have made

dissolution easier by eliminating the requirement that there be

a majority of the overall vote as cast; instead, dissolution

could occur with an affirmative vote in a majority of the

individual constituent districts. However, the bills did not

progress past introduction in either legislative session.

II.

We turn now to the specifics of our case. In the early

1950s, Seaside Heights, Seaside Park, Island Heights, Ocean

Gate, Berkeley Township, and Lacey Township sent students to

Toms River schools on a tuition basis. In 1953, however, Toms

River advised that it could no longer continue that

relationship. By public referendum held in 1954, the six

municipalities formed Central Regional as a limited purpose

school district to educate their junior and senior high school

students (grades seven to twelve).9 Central Regional's school

buildings are located in Berkeley Township, which is the largest

municipality in terms of geography, population, registered

voters, and student enrollment.

9 The boards of education of the constituent municipalities passed resolutions to hold July 1 and September 1, 1954 referenda to allow voters to decide whether to create the District. The first referendum did not pass; the second passed.

21 A-0743-10T4 In the 1954 referendum by which Central Regional was

formed, the voters agreed to apportion costs based on per pupil

enrollment. However, the 1975 legislation altered Central

Regional's funding mechanism to an equalized property valuation

basis. L. 1975, c. 212. Although the 1993 legislation allowed

for changes to the funding structure of regionalized school

districts, no such change has ever been effectuated at Central

Regional.

In 1976, Seaside Heights, Seaside Park, and Lacey Township

petitioned the Department of Education for permission to

withdraw from Central Regional. On May 20, 1977, the Board

permitted Lacey Township to conduct a referendum, but rejected

the petitions of Seaside Heights and Seaside Park on the ground

that the proposed alternative to Central Regional, a sending-

receiving relationship with the Point Pleasant School District,

was not viable. Lacey Township's withdrawal from Central

Regional was approved by voter referendum held in 1977.10

In 1981, Island Heights and Seaside Heights passed

resolutions requesting that the county superintendent

investigate the advisability of their withdrawal from Central

Regional. Island Heights later withdrew its petition after a

10 The withdrawal became effective on July 1, 1978, but for ease of reference in this opinion we will use the 1977 date.

22 A-0743-10T4 joint meeting of the constituent communities, and the county

superintendent issued his report regarding Seaside Heights. In

l983, Seaside Heights then petitioned the Commissioner for

permission to conduct a referendum regarding withdrawal.

Seaside Park objected, and the Board denied the petition.

In 1985, the Berkeley Township Board of Education (the

respective Boards of Education will hereafter be referred to as

BOE) commissioned a feasibility study regarding its potential

withdrawal from Central Regional. The author recommended

withdrawal, but there is no record of any further action.

In November 1995, the Seaside Park BOE approved withdrawal

from Central Regional and pursued a send-receive relationship

with Point Pleasant under a pilot program. However, this

attempt to withdraw was unsuccessful.

In October 1998, Seaside Park passed a resolution

requesting that Central Regional consider the resolution "as a

petition seeking an alteration in the formula for municipal

contributions to the District, so as to return to a per pupil

cost formula[.]" The resolution otherwise reflected an intent

by Seaside Park "to seek all appropriate legal redress to

withdraw" from Central Regional. The resolution also directs

the Borough Clerk-Administrator to promptly forward it to

Central Regional. The record reflects that Central Regional

23 A-0743-10T4 received the resolution and discussed it, but does not reflect

any decision by Central Regional or further action by Seaside

Park regarding the resolution.

In 2003, Seaside Park adopted a resolution requesting that

Central Regional place a referendum on the ballot for voters in

the constituent municipalities authorizing a change in the

funding formula for Central Regional to sixty percent equalized

valuation and forty percent per pupil. In contrast to the prior

resolution, this resolution contained no provision directing its

submission to Central Regional and the record does not reflect

anything further with respect to this resolution, including

whether it was sent to Central Regional.

In April 2005, at Seaside Park's request, Donald E.

Beineman, Ed.D., and James L. Kirtland, C.P.A., prepared a

preliminary feasibility study, opining that Seaside Park was

subsidizing the other constituent municipalities and could

realize significant cost savings by withdrawing from Central

Regional and entering into a sending-receiving relationship with

nearby Toms River or Point Pleasant, or by Central Regional

being dissolved and Berkeley Township creating its own K-12

district. Accordingly, in June 2005, Seaside Park and its BOE

passed resolutions formally instituting the instant process by

requesting that the Ocean County Superintendent of Schools

24 A-0743-10T4 conduct an investigation into the advisability of Seaside Park's

withdrawal from, or the dissolution of, Central Regional

pursuant to N.J.S.A. 18A:13-51. Seaside Heights and Island

Heights and their Boards of Education passed resolutions

requesting an investigation as to only the dissolution of

Central Regional.

Central Regional retained its own school finance

consultant, Melvin L. Wyns, who authored a report in November

2005. He recommended opposition to both dissolution and

withdrawal based on the adverse tax impact it would have on the

constituent municipalities.

In March 2006, the county superintendent issued a report

advising against dissolution. He found the following advantages

to dissolution: reduced administrative costs by consolidation,

anticipated increases in state aid for select districts,

reallocation of the tax levy, and the ability of each school

district to assess and evaluate their present educational

concerns during the process. He found the following

disadvantages: possible lack of continuity of educational

programs, need to establish new relationships between sending

and receiving districts, effects on staff at Central Regional

and Berkeley Township elementary school regarding tenure and

seniority, negative tax levy impact on Berkeley Township and

25 A-0743-10T4 Ocean Gate, potential increased cost per student ratios in

Berkeley Township, and lost ability to share unique costs among

all constituent districts. The superintendent concluded the

disadvantages of dissolution outweighed the advantages. Most

notable was the negative impact on the taxpayers of Berkeley

Township and Ocean Gate, "who represent over 80% of the resident

population."

In April 2006, Seaside Park and its BOE filed a petition

with the State Department of Education seeking permission to

conduct a referendum on withdrawing from or dissolving Central

Regional pursuant to N.J.S.A. 18A:13-54. They requested, in the

event the Commissioner denied a referendum or the referendum was

defeated, that she "use her inherent power to create an

equitable tax apportionment formula, based in whole or in part

on a per-pupil formulation, to fund the Central Regional School

District." Central Regional opposed the petition.

The Board held hearings in July and August 2006. It voted

to grant Seaside Park's petition for a referendum on dissolution

of Central Regional, memorialized in a written opinion of

September 1, 2006. See N.J.S.A. 18A:13-56. The referendum was

held on March 13, 2007, and was defeated by the voters because

although the majority of the constituent municipalities favored

dissolution, a majority of the overall voters in the District

26 A-0743-10T4 did not. See N.J.S.A. 18A:13-59. The referendum passed in

Seaside Park, Seaside Heights, and Island Heights, but was

defeated in Berkeley Township and Ocean Gate.11

III.

In May 2007, plaintiffs filed a complaint in the Chancery

Division, commencing this litigation, and a month later filed a

first amended complaint. Defendants and cross-appellants filed

responsive pleadings, and the Seaside Heights BOE filed a third-

party complaint. Island Heights and its BOE and the Seaside

Heights BOE sought dissolution of Central Regional, consistent

with the expressed desire of the majority of the voters in their

municipalities. Alternatively, the Seaside Heights BOE sought

permission to withdraw with Seaside Park, but Island Heights did

not seek to withdraw. Both municipalities opposed Seaside

Park's unilateral withdrawal. Moreover, neither Seaside Heights

nor Island Heights, or their respective Boards of Education,

sought alteration of the current funding formula.

In December 2007, plaintiffs filed a second amended

complaint seeking an order: (1) compelling the Commissioner to

exercise her inherent equitable powers to dissolve Central

11 At that time, Berkeley Township had about seven times the number of registered voters of Seaside Heights, Seaside Park, and Island Heights, combined. Moreover, Berkeley Township had 1709 pupils in the District while Seaside Heights, Seaside Park, and Island Heights had a total of 311 pupils in the District.

27 A-0743-10T4 Regional, permit Seaside Park to withdraw, or change Central

Regional's funding method because the current allocation system

is inequitable as applied to them (count one); (2) declaring the

l975 and l993 school funding legislation unconstitutional as

applied to plaintiffs because it impairs their contractual right

to per pupil funding (count two); (3) declaring the subject

legislation unconstitutional as applied to plaintiffs because it

constitutes a taking of their property right to per pupil

funding without just compensation (count three); (4) requesting

the court exercise its equitable power to dissolve Central

Regional, permit plaintiffs' withdrawal, or change the funding

method for Central Regional because the statutory remedy is

illusory due to the larger number of voters in Berkeley Township

(count four); (5) declaring the subject legislation violative of

plaintiffs' procedural due process because it provides Berkeley

Township with the absolute power to block any change in the

allocation method (count five); (6) declaring the subject

legislation violative of plaintiffs' substantive due process

because the amendments are not rationally related to any alleged

legislative objective and deprive them of their property (tax

dollars and contract rights) (count six); and (7) declaring the

current allocation method does not provide Seaside Park's

students with an efficient system of education because of the

28 A-0743-10T4 disproportional monetary burden on its taxpayers (count seven).

Defendants filed responsive pleadings.

Prior to the second amended complaint being filed, the

Commissioner and Berkeley Township moved to dismiss the

complaint and cross-complaint. Central Regional and the

Berkeley Township BOE joined in the motion. Plaintiffs opposed

the motion on the basis that the statutory procedure for

withdrawal or dissolution is illusory given the disparity of

voter registration in Seaside Park and Berkeley Township.

Following argument, Judge Frank A. Buczynski, Jr. issued an oral

decision and order on February 21, 2008, dismissing several of

the claims and remanding an issue for clarification by the

Commissioner.

The Commissioner had sought dismissal of the amended

complaint on the grounds of plaintiffs' failure to exhaust all

administrative remedies of modification of the current funding

allocation, permission to withdraw from the District, and

dissolution of the District. See N.J.S.A. 18A:13-23.3, -54, -

55, -56, and -57. The court noted that Seaside Park had passed

a resolution petitioning Central Regional to alter the formula

for municipal contributions in l998 under N.J.S.A. 18A:13-23,

which apparently was ignored; however, plaintiffs waited a

decade to seek judicial review or assistance to compel

29 A-0743-10T4 compliance. Accordingly, the court concluded that plaintiffs

had not exhausted their statutory remedies for modification of

the current funding method for Central Regional. Dissolution,

however, had already been voted upon by the constituent

municipalities and rejected. The order thus reflected that

count one was dismissed with prejudice insofar as plaintiffs and

third-party plaintiffs sought an order directing the

Commissioner to exercise any authority to dissolve or permit

withdrawal from the District.

The remaining claims in count one relating to the statutory

process for modifying the regional funding allocation method and

the statutory procedures for withdrawal of constituent

municipalities were dismissed without prejudice. The order

further provided that "[a]s to the claim that plaintiffs have

not exhausted all administrative remedies," any public body can

request in writing pursuant to N.J.S.A. 18A:13-23 that Central

Regional consider holding a referendum to change the current

regional funding allocation, and failure of Central Regional to

timely respond will be deemed a denial of the request.

The court, however, remanded the matter to the Commissioner

"for clarification as to whether the Board of Review considered

the petition for an order to conduct a referendum on the issue

of withdrawal on the merits." The court required the Board to

30 A-0743-10T4 advise in writing that it addressed the issue of withdrawal, or

if it did not, to consider the issue "as directed by the

Commissioner."

The court also dismissed the constitutional claims (counts

two, three, five, and six) with prejudice as brought by the

governmental entities, but denied the motion to dismiss as to

the individual taxpayer plaintiffs. Specifically, the court

held that Seaside Park and its BOE lacked standing to pursue the

claims of impairment of contracts, taking of property, and

procedural and substantive due process violations based on the

principle, with citing reference, that municipalities and their

boards of education as political subdivisions generally lack

standing to assert constitutional claims against other political

bodies such as the Commissioner.

The court further dismissed counts four and seven with

prejudice as to all parties based on a failure to state a claim.

As to count four, the court held that the mere fact a

constituent municipality may vote against the relief requested

in a referendum does not make the remedy illusory as a matter of

law, noting Lacey Township's withdrawal from the District

following the 1975 revision. As to count seven, the court found

that plaintiffs failed to challenge any of the ten elements of a

31 A-0743-10T4 "thorough and efficient" education articulated in Abbott II,

supra,

n.23.

The only claims that survived the court's February 21, 2008

decision were those constitutional claims asserted on behalf of

the taxpayer plaintiffs in counts two, three, five, and six.

Specifically, those claims alleged that the l975 and l993 laws:

(1) substantially impaired taxpayer plaintiffs' "contracts" with

the regional district; (2) constituted a taking of property

without just compensation; (3) violated taxpayer plaintiffs'

procedural due process rights; and (4) violated taxpayer

plaintiffs' substantive due process rights.

Plaintiffs moved for reconsideration. Following oral

argument on May 9, the court denied the motion on the record,

memorialized in an order of June 9, 2008.

On May 19, 2008, the Commissioner notified Judge Buczynski

that the Board only considered the issue of dissolution and not

whether Seaside Park should be granted a referendum on

withdrawal. She explained that in Seaside Park's petition, the

withdrawal relief was only requested in the alternative if the

Board denied its request for a referendum on dissolution, which

it did not.

By resolution dated September 10, 2008, Seaside Park

applied to the county superintendent for another investigation

32 A-0743-10T4 into the advisability of Seaside Park's withdrawal from Central

Regional. Our record reflects no proceedings on this

application.

In response to the court's February 21, 2008 decision, by

resolution of February 27, 2008, Seaside Park requested that

Central Regional conduct a public referendum regarding a revised

funding formula. On April 21, 2009, a referendum was held with

respect to altering Central Regional's cost allocation method

from equalized valuation to per pupil cost. It did not pass.

Seaside Park also pursued modification of the District's

funding formula with the Department of Education. By letters

dated March 11, May 16, and July 29, 2008, the Mayor of Seaside

Park sought the Commissioner's assistance and support in

resolving the "inequitable tax apportionment" in Central

Regional. The Commissioner responded to each of the letters,

and in her letter of August 18, 2008, advised that the

Department had reviewed the data Seaside Park provided and was

aware of the per pupil costs borne by the constituent members of

Central Regional. She added:

The situation you described is not unlike that of many other constituent municipalities involved in regional districts where there is simultaneously a wide disparity in property value and enrollment among the constituents. As you correctly pointed out, the existing tax apportionment methodology, and any attempt

33 A-0743-10T4 to change it, is governed by statute. I recognize that it is often difficult and sometimes impossible to get the statutory voting majorities to effect the coveted change. Unfortunately, as Commissioner I cannot impose that change, as I too must adhere to the existing statute. However, with the recent passage of laws giving the Executive County Superintendent a wide range of authority to seek out and recommend programs and services that lead to increased efficiency at the district level, I will ask that your district receive swift attention in this matter.

It is my hope that in cooperation with the county office it may be possible to find a solution to your problem that would be acceptable to all of the parties involved, and one that will not harm the school district's ability to provide a quality public school education to all of the children.

In 2010, the parties filed cross-motions for summary

judgment. Following oral argument, by opinion and order of

August 30, 2010, Judge Buczynski denied plaintiffs' motions and

granted defendants' motions dismissing the remaining counts

(two, three, five, and six) as to the taxpayer plaintiffs. The

judge found "[t]he record [was] bereft of any evidence

supporting the existence of a contractual relationship between

the parties[,]" expressly concluding the resolutions of the

constituent districts to hold the 1954 referenda to allow voters

to decide whether to create the District did not meet the

requirements of a valid contract. Nor was there a "taking"

34 A-0743-10T4 because "[p]laintiffs did not hold a property right in the

original funding formula." Similarly, the judge held that

"[p]laintiffs were not denied substantive due process because

[they] did not hold a fundamental right in the funding scheme

used for the District."

Judge Buczynski was also convinced that pursuing the

"drastic remedy" of "exercising control over the Commissioner

and usurping her authority is not warranted under the

['undisputed material'] facts of this case" and granting the

extraordinary equitable remedies sought by plaintiffs of "court

ordered dissolution of the District, or court permission

allowing Seaside Park to withdraw, or court ordered modification

of the funding formula, . . . without a finding of

constitutional violations[,] would be an abuse of judicial

discretion."

He concluded:

Property owners' dissatisfaction with the current funding formula or their belief that it is unfair is not a basis for the court to intrude into what is a Legislative prerogative. Central Regional School District was created under terms and conditions outlined by our Legislature. Moreover, the funding formula was determined by the Legislature. Controlling costs for education is one of several significant issues facing our State. Our Governor and Legislature are facing complex economic challenges. It is the Legislature's obligation to provide for a thorough and

35 A-0743-10T4 efficient education as mandated in Article VIII, Section 4, Paragraph 1 of the New Jersey Constitution. Therefore, it is for the Legislature to determine if the current educational funding used in Central Regional School District should be revised or repealed, not the court.

Plaintiffs appealed. Seaside Heights BOE and Island

Heights and its BOE cross-appealed.

On appeal, plaintiffs argue:12

POINT I13 THE TRIAL COURT ERRED IN DISMISSING, ON THE PLEADINGS ALONE, COUNTS ONE, FOUR, SIX, AND SEVEN, BECAUSE EACH COUNT SETS FORTH A VALID CAUSE OF ACTION.

A. The Trial Court Erred In Finding That Plaintiffs Had Not Exhausted Their Administrative Remedies And, As A Result, Dismissing Count One.

l. The trial court erred in finding that Plaintiffs failed to pursue withdrawal from Central.

2. The trial court erred in finding that Plaintiffs failed to pursue modification of the cost allocation method.

B. The Trial Court erred In Finding That The Commissioner Has No Equitable Authority To Modify A Regional District's Funding Formula.

12 Plaintiffs' arguments regarding counts two, three, five, and six do not challenge the court's ruling that Seaside Park and its BOE lacked standing. 13 We renumber plaintiffs' arguments as their Point I sets forth the standard of review.

36 A-0743-10T4 l. The trial court erred by dismissing an issue of "first impression" at the pleadings stage.

2. Plaintiffs are entitled to equitable modification of the tax allocation method for Central pursuant to the Supreme Court's decision in North Haledon.

C. The Trial Court Erred By Dismissing Count Four Because Plaintiffs Raised A Cognizable Claim That The Statutory Processes For Modification Of The Cost Apportionment For, As Well As Withdrawal From Or Dissolution Of, Central Are Illusory.

D. The Trial Court Erred By Dismissing Count Seven Because Plaintiffs Raised A Cognizable Claim That The Current Method Of Cost Apportionment For Central Does Not Provide Plaintiffs With An Efficient System Of Education For Their Students.

POINT II THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT AS TO COUNT TWO BECAUSE THE LEGISLATION AT ISSUE VIOLATED THE CONTRACTS CLAUSES OF THE U.S. AND NEW JERSEY CONSTITUTIONS AS APPLIED.

A. The Trial Court Erred In Ruling That, As a Matter of Law, There Was No Contract Between The Various Parties.

B. The Trial Court Erred In Ruling That, As a Matter of Law, Plaintiffs Were Not The Third-Party Beneficiaries Of The Contract At Issue.

C. The Trial Court Failed To Analyze The Substantial Impact Prong Of The Analysis.

37 A-0743-10T4 D. The Trial Court Erred In Finding That The Legislation At Issue Furthers A Legitimate Public Purpose.

POINT III THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT AS TO COUNT THREE BECAUSE THE LEGISLATION AT ISSUE CONSTITUTED AN UNCONSTITUTIONAL TAKING OF THE PLAINTIFFS' PROPERTY RIGHTS.

POINT IV THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT AS TO COUNT SIX BECAUSE THE 1975 REVISION VIOLATED PLAINTIFFS' SUBSTANTIVE DUE PROCESS RIGHTS.

POINT V THE TRIAL COURT ERRED WHEN IT REFUSED TO ADDRESS PLAINTIFFS' EQUITABLE CLAIMS AND SUBSTANTIVE DUE PROCESS CLAIMS.

POINT VI PLAINTIFFS DEMONSTRATED GOOD AND JUST CAUSE FOR THE TRIAL COURT TO EXERCISE ITS EQUITABLE POWERS TO ADDRESS THE INEQUITIES OF THE CURRENT SITUATION.

At oral argument before us, counsel for Seaside Park

advised that it sought the direct relief of a judicial

determination on the merits, permitting it to dissolve or

withdraw from Central Regional, or to modify Central Regional's

cost allocation method. Alternatively it sought a remand to the

Commissioner with direction to apply North Haledon remedies.

In its cross-appeal, the Seaside Heights BOE argues that

the court erred in dismissing all counts of its complaint upon a

finding that it lacked standing to assert constitutional claims.

38 A-0743-10T4 At oral argument before us, its attorney reiterated that it

joined plaintiffs' request for dissolution of Central Regional

or alternatively supported the withdrawal of Seaside Park and

Seaside Heights, but did not support unilateral withdrawal by

Seaside Park or revision of the tax apportion formula.

The Island Heights BOE asserts error by the court in: (1)

dismissing count four because the evidence supported a

cognizable claim that the statutory process is an illusory

remedy; (2) granting summary judgment dismissing count two

because the legislation violated the contracts clauses of the

United States and New Jersey Constitutions as applied; (3)

granting summary judgment as to count three because the

legislation constituted an unconstitutional taking; and (4)

granting summary judgment dismissing count six because the 1975

legislation violated the parties' due process rights. It

further contends the evidence before the court demonstrated good

and just cause to address the inequities of the current

situation by ordering dissolution of the District.

Island Heights' arguments echo the abovementioned second,

third, and fourth arguments. It additionally contends the court

should have accepted the allegations of the complaint as true

for purposes of the dismissal motion including, for example,

that the referenda were contracts, that taxpayer plaintiffs were

39 A-0743-10T4 third-party beneficiaries of the contract formed by the 1954

referenda, that the l975 and l993 revisions substantially

impaired any contractual relationship plaintiffs may have had

with the other members of the District, and that plaintiffs had

a property interest as to the 1954 referenda. It further

contends that material factual questions existed as to whether

the l993 revision allowed for a realistic means for a

municipality to remove itself from the District and whether the

funding changes mandated by the l975 revision violated the

constitutional rights of the residents of the plaintiff

municipalities. At oral argument before us, the attorneys for

Island Heights and its BOE reiterated that they joined

plaintiffs' request for dissolution of Central Regional;

however, they did not support unilateral withdrawal by Seaside

Park or revision of the tax apportion formula, and Island

Heights did not seek withdrawal from the District if it were not

dissolved.

IV.

The Commissioner argues that the cross-appeals filed by

Island Heights and its BOE should be dismissed under Rule 2:8-2

because they lack standing to appeal from the dismissal of

claims they did not assert in the trial court. The Commissioner

notes that the Seaside Heights BOE filed cross-claims asserting

40 A-0743-10T4 the same causes of action as plaintiffs but neither Island

Heights nor its BOE asserted affirmative claims other than a

counterclaim for indemnification and cross-claims for

contribution and/or indemnification.

Only parties aggrieved by a judgment may appeal, meaning

those with "a personal or pecuniary interest or property right

adversely affected by the judgment in question." Howard Sav.

Inst. v. Peep,

(1961). Island Heights and its

BOE did not file any affirmative claims for relief. Thus,

although they supported plaintiffs' prayer for dissolution of

the District, they were not aggrieved by the final judgment.

See Donofrio v. Farr Lincoln Mercury, Inc.,

(App. Div. 1959). Nevertheless, considering the

compelling public policy and public interest at stake, Tiger v.

Am. Legion Post,

(App. Div. 1973), and

the fact that we will be addressing Island Heights' and its

BOE's arguments in the context of plaintiffs' appeal, we discern

no basis to dismiss their cross-appeals at this juncture.

We first address and reject plaintiffs' and the Island

Heights BOE's arguments that the court did not apply the proper

standard for a motion to dismiss and should have permitted

plaintiffs to develop their claims through discovery, and that

41 A-0743-10T4 there were genuine issues of material fact precluding summary

judgment in defendants' favor.

"Appellate review of an order dismissing an action [under

Rule 4:6-2(e), for failure to state a claim upon which relief

may be granted] is governed by a standard no different than that

applied by the trial courts." Seidenberg v. Summit Bank,

(App. Div. 2002). The court examines the

legal sufficiency of the facts alleged on the face of the

complaint, doing so with liberality, and accords every

reasonable inference to the plaintiffs. Printing Mart-

Morristown v. Sharp Elecs. Corp.,

(1989).

Dismissal of a complaint, however, "is mandated where the

factual allegations are palpably insufficient to support a claim

upon which relief can be granted." Rieder v. N.J. Dep't of

Transp.,

(App. Div. 1987).

We review the grant of summary judgment de novo, applying

the same standard used by the motion judge under Rule 4:46.

Henry v. N.J. Dep't of Human Servs.,

(2010);

Chance v. McCann,

(App. Div. 2009). We

first consider whether the moving party has demonstrated that

there are no genuine disputes as to material facts, viewed in

the light most favorable to the non-moving party, i.e., "whether

the competent evidential materials presented, when viewed in the

42 A-0743-10T4 light most favorable to the non-moving party, are sufficient to

permit a rational factfinder to resolve the alleged disputed

issues in favor of the non-moving party." Brill v. Guardian

Life Ins. Co. of Am.,

(1995); see also R.

4:46-2(c). If the evidence is "'so one-sided that one party

must prevail as a matter of law,'" then summary judgment should

be granted.

(quoting Anderson v.

Liberty Lobby, Inc.,

,

,

(1986)). We then decide whether the

motion judge's application of the law was correct. Atl. Mut.

Ins. Co. v. Hillside Bottling Co.,

(App. Div.), certif. denied,

(2006). In so doing,

we accord no deference to the motion judge's conclusions on

issues of law, Estate of Hanges v. Metro. Prop. & Cas. Ins. Co.,

(2010); Manalapan Realty, L.P., v. Twp.

Comm. of Manalapan,

(1995), which we review de

novo.

Based on our review of the record, we are satisfied Judge

Buczynski applied the appropriate legal standards in the

challenged orders. Plaintiffs were afforded all favorable

inferences as to their allegations of fact pertaining to the

resolutions, referenda, studies, and financial inequalities of

the funding formula. Their challenges on appeal with respect to

43 A-0743-10T4 this issue, however, involve legal conclusions, such as whether

the municipal entities had standing; whether those facts created

a contract, property right, or established other prima facie

constitutional claims; or whether those facts justified the

extraordinary relief of an exception to the doctrine of

exhaustion of administrative remedies or a unique North Haledon

remedy. For the reasons set forth in the judge's comprehensive

oral decisions and written opinion, we are satisfied he provided

ample legal basis for dismissing some of the counts under Rule

4:6-2(e), and the balance of the complaint subsequently on

cross-motions for summary judgment.

A. Count One - Exhaustion of Remedies

In their first count, plaintiffs sought an order compelling

the Commissioner to use her "inherent power" as set forth in

North Haledon to provide them with equitable relief in the form

of dissolution of Central Regional, authorization for Seaside

Park's withdrawal from Central Regional, or modification of the

cost apportionment used by Central Regional. In February 2008,

Judge Buczynski dismissed this count on the ground that the

referendum had been unsuccessful on dissolution and plaintiffs

had failed to exhaust their administrative remedies regarding

withdrawal from the District or alteration of the District's

funding formula. He directed plaintiffs to pursue alteration of

44 A-0743-10T4 the funding formula through the statutory mechanism, i.e., an

updated request to Central Regional, and remanded to the

Commissioner for consideration of plaintiffs' alternative

request for a referendum on withdrawal.

Then, at plaintiffs' request, Central Regional held a

referendum for alteration of the District's funding formula,

which failed. Seaside Park requested similar relief in letters

to the Commissioner, who responded that she had no authority to

do so. In response to the trial court's remand, the

Commissioner advised that she had only considered plaintiffs'

alternative request for dissolution, which she had authorized by

referendum.

Plaintiffs first assert error by the court in finding they

had not exhausted their administrative remedies as to withdrawal

and modification of the cost apportionment formula. They urge

that they diligently sought relief from Central Regional and the

Commissioner to no avail. Plaintiffs point to the fact that all

of the feasibility studies addressed both Seaside Park's

withdrawal from and dissolution of Central Regional and they

sought alternate relief from the Commissioner. Nevertheless,

the Commissioner chose to only act on their request for a

referendum on dissolution, which was defeated by the voters in

March 2007. Plaintiffs also contend they made repeated requests

45 A-0743-10T4 after 1998 to have the funding method changed, which Central

Regional ignored, a fact the court failed to consider in its

exhaustion analysis.

Plaintiffs further argue that mandating the exhaustion of

remedies would be futile. They note that the referenda on

dissolution and altering the cost apportionment formula failed,

and posit that even if the Commissioner approved a referendum on

withdrawal, it likely would not succeed given that Berkeley

Township has more total voters than the other constituent

municipalities combined.

Requiring exhaustion of administrative remedies before

seeking judicial relief is a tenet of administrative law and

established by court rule. See Abbott v. Burke,

(1985) ("In general, available and appropriate

'administrative remedies should be fully explored before

judicial action is sanctioned.'") (quoting Garrow v. Elizabeth

Gen. Hosp. & Dispensary,

(1979)); R. 2:2-

3(a)(2). The exhaustion requirement serves three primary goals:

(1) it ensures that claims are initially heard by the body with

expertise in the area; (2) it produces a full factual record

facilitating meaningful appellate review; and (3) it conserves

judicial resources because the agency decision may satisfy the

parties. Bd. of Educ. of Bernards v. Bernards Twp. Educ. Ass'n,

46 A-0743-10T4

(1979). We also have recognized the Department

of Education's "fundamental and indispensable jurisdiction" over

controversies and disputes arising under the school laws, and

have held that the doctrine of exhaustion of remedies requires

parties to attempt resolution of such matters using the

administrative process. Theodore v. Dover Bd. of Educ.,

(App. Div. 1982).

Nevertheless, exhaustion of remedies is not an absolute

prerequisite to litigation. N.J. Civ. Serv. Ass'n v. State,

(1982).

Exceptions are made when the administrative remedies would be futile, when irreparable harm would result, when jurisdiction of the agency is doubtful, or when an overriding public interest calls for a prompt judicial decision. We have frequently held that in a case involving only legal questions, the doctrine of exhaustion of administrative remedies does not apply.

[Ibid. (internal citation omitted).]

Thus, "except in those cases where the legislature vests

exclusive primary jurisdiction in an agency, a plaintiff may

seek relief in our trial courts." Abbott, supra,

.

We are satisfied that plaintiffs did not exhaust their

administrative remedies as to withdrawal and failed to

demonstrate why the doctrine should not be invoked under the

47 A-0743-10T4 circumstances of this case. The case can and should be

considered in the first instance by the Commissioner pursuant to

the statutory scheme. The Legislature established a process for

constituent municipalities to seek to withdraw from a regional

school district. N.J.S.A. 18A:13-51 to -59. The statutory

mechanism provides that the Board is the sole entity that can

grant a petition for permission to conduct a referendum on the

issue of dissolution or withdrawal. N.J.S.A. 18A:13-56.

Plaintiff's April 27, 2006 petition requested that the Board,

pursuant to N.J.S.A. 18A:13-56, authorize a referendum on the

issue of dissolution of Central Regional and expressly pled that

if that request were "not to be considered, the Board should

authorize an alternative referendum on the withdrawal of Seaside

Park." (Emphasis added).

Plaintiffs received the relief they requested; the Board

followed the statutory process and granted plaintiffs permission

to hold a referendum on the issue of dissolution of Central

Regional as set forth in a detailed letter of September 1, 2006.

Rather than pursuing their alternate relief of withdrawal

through the administrative channels as mandated by the

Legislature, plaintiffs filed suit. In an abundance of caution,

Judge Buczynski remanded that issue to the Commissioner for

clarification, and we are satisfied an appropriate explanation

48 A-0743-10T4 was provided for the Board's decision solely on the issue of

dissolution.

We are also not persuaded by plaintiffs' argument of

futility based on the premise that that even if Seaside Park

secured a referendum on withdrawal, the resulting tax increase

and the veto power held by Berkeley Township virtually ensure

that passage of such a referendum would never occur. A

speculation is insufficient. See Harrow v. Prudential Ins. Co.,

(3d Cir. 2002) (requiring a plaintiff to make

a "'clear and positive showing of futility'" to warrant waiver

of the exhaustion requirement) (citation omitted)). We

recognize that Seaside Park has an uphill battle but as noted by

Judge Buczynski, the remedy is not illusory, as evidenced by

Lacey Township's withdrawal in 1977. Circumstances and

attitudes of voters change over time. For example, we cannot

speculate as to the potential impact of Superstorm Sandy in

October 2012 on the pupil enrollment and tax base of Seaside

Park and the other constituent municipalities in the District.

The Legislature was well aware of this fluidity when it enacted

and revised the statutes in Title 18A that created and

implemented the comprehensive scheme regarding regional school

districts.

49 A-0743-10T4 Contrary to plaintiffs' assertion, the record amply

supports the court's factual finding that Seaside Park slept on

its rights after it passed the 1998 Resolution petitioning

Central Regional to alter the formula for municipal

contributions. Discovery did not "produce evidence that at

least one request was made each year for the 3 or 4 years

leading up to the filing of the Complaint." Plaintiff David

Meyer's testimony was vague, couched in terms of "I believe,"

was non-specific as to dates, and was largely based on

information provided to him from unidentified persons. No

document was provided other than the 1998 and 2003 Resolutions

and, as previously noted, no testimony or evidence was presented

that the 2003 Resolution was, in fact, sent to Central Regional.

Judge Buczynski correctly concluded that plaintiffs were not

entitled to judicial intervention on this issue. He advised

Seaside Park to pursue its statutory remedy of adopting and

forwarding a new resolution to Central Regional requesting a

referendum authorizing this relief, which it did. The

referendum failed but the process was followed and the voters

spoke, as anticipated by the Legislature in devising this

comprehensive scheme.

50 A-0743-10T4 B. Count One - Commissioner's Authority

Plaintiffs next contend the court erred in dismissing count

one because, as they alternatively requested in their April 2006

Resolution, the Commissioner has inherent authority to alter

Central Regional's funding formula under North Haledon to

provide equitable relief to Seaside Park. They emphasize that

in both cases when the voters initially approved the formation

of the regional school district, costs were to be apportioned on

a per pupil basis, which funding method was changed to an

equalized valuation by the 1975 revision. See N. Haledon,

supra,

. This resulted in a significantly

disproportionate increase in the operating costs of both North

Haledon and Seaside Park as compared with their constituent

districts, even though their students only accounted for a small

portion of the overall student body. See

.

Seaside Park urges that its plight is "far worse than that

which the Supreme Court identified as inequitable and

disproportionate in North Haledon" and that it meets the two

requisites to equitable relief as articulated by the Attorney

General, i.e., that it is compelled to remain in the district

and it is burdened with a disproportionate tax liability. It

argues that "[w]hile North Haledon was compelled to remain in

the district due to the Court's belief that the Constitution

51 A-0743-10T4 required it, Seaside Park is likewise compelled to remain in its

district," against the wishes of ninety-five percent of its

voters, "because the Legislature believed that the 1975

Revision, which imposed the current cost allocation method [and

gave Berkeley Township and Ocean Gate a '$3 million incentive to

keep Seaside Park a member of Central' Regional], was

constitutionally required." Seaside Park also points to the

growing inequitable burden placed on its taxpayers reflected in

its charts, noting, for example, that in the 2009-2010 school

year alone, its taxpayers paid about twelve times the per pupil

amount than paid by the taxpayers of Ocean Gate and seven times

more than that paid by the taxpayers of Berkeley Township.14

Even if we were to accept plaintiffs' argument that they

exhausted their administrative remedies and are subject to a

substantially inequitable allocation, they would not be entitled

14 During the rebuttal portion of oral argument before us, counsel for Seaside Park mentioned as persuasive authority a pending matter in which the Borough of Oradell had made an application to the Commissioner for equitable relief, which the Commissioner apparently referred to an administrative law judge. Following argument, counsel submitted a January 24, 2012 letter from the Commissioner regarding that matter. The Deputy Attorney General on behalf of the Commissioner objected to the submission as it was not part of the trial record, plaintiffs did not move to supplement the record, and the parties were deprived of an opportunity to respond during the litigation. See R. 2:5-4, 2:5-5. The Commissioner's objection was appropriate, and we thus disregard this post-argument submission.

52 A-0743-10T4 to the extraordinary equitable relief afforded in the North

Haledon case.

Following passage of the 1993 amendment, North Haledon

unsuccessfully pursued a referendum seeking to return the

district to a per-pupil cost apportionment.

Here,

however, as previously discussed, Seaside Park had not actively

pursued a referendum seeking to return Central Regional to a

per-pupil cost apportionment at the time of the court's

dismissal of the first count. More critically, however, North

Haledon's application for withdrawal was granted by the Board,

and the referendum was successful.

.

However, the Court having found it was one of "those rare

circumstances" requiring judicial intervention with

administrative action,

, compelled North Haledon to

remain a member of a regional school district in order to

maintain a racially diverse student body.

.

In this unique situation, the Court remanded the case to

the Commissioner to implement an equitable cost allocation

formula for North Haledon's regional school district,

explaining:

There is no suggestion in the record that North Haledon was racially motivated in petitioning for withdrawal; rather, North Haledon was justifiably concerned about the disproportional tax burden . . . carried by its citizens in relation to the other

53 A-0743-10T4 constituent municipalities. We are not unaware of the frustration and anger expressed by the senior citizens of North Haledon who have fixed incomes and escalating property taxes. On the one hand, North Haledon lost a referendum on the question whether to alter the apportionment scheme because the statute, N.J.S.A. 18A:13- 23, grants an effective veto power to Haledon and Prospect Park who benefit from the equalized valuation method North Haledon seeks to change. On the other hand, North Haledon cannot petition for withdrawal because of the impact of withdrawal on the racial balance of the students attending Manchester Regional.

We confronted a similar issue subsequent to our decision in Jenkins[ v. Township of Morris School District,

(1971), where we held the Commissioner possessed the power and duty to act to prevent withdrawal of Morris Township students from Morristown High School and to compel a merger of the two districts to prevent de facto segregation]. After Jenkins issued, the Commissioner compelled the merger of the Morristown and Morris Township school systems. Twp. Comm. of Twp. of Morris v. Bd. of Educ. of the Twp. of Morris,

(1972). The boards of education from both towns recommended that the "allocation of costs between the component municipalities of the regional district be on the basis of apportionment valuations rather than pupil enrollment."

. The Commissioner agreed, and ordered the new regional district to apportion costs in the manner suggested by the school boards.

. The Township Committee of Morris Township filed suit, asserting the Commissioner lacked the power to impose an apportionment scheme on the new district.

. The Township Committee argued that, under N.J.S.A. 18A:13-34, the power to set the

54 A-0743-10T4 apportionment scheme had been conferred on the voters of a regional district.

.

We rejected the Township's argument because "[t]he Commissioner's determination as to allocation of the costs was reasonable and was well within the ambit of his powers."

. We reasoned that the controlling statutory provision, N.J.S.A. 18A:13-34 (which calls for a special election on the apportionment of costs for a regional district), was not applicable in the context of a compulsory merger ordered by the Commissioner, and that requiring voter approval would "disable effective action toward fulfillment of the State's educational and desegregation policies . . . nullify[ing] the very holding in Jenkins." Ibid.; cf. N.J.S.A. 18A:7F-6 (authorizing Commissioner to compel school districts to make additional expenditures even after school budgets have been approved by voters when "necessary to ensure implementation of [thorough and efficient] standards"). In this case also, the constitutional imperative to address racial segregation requires the Board to compel North Haledon to remain in the Regional District despite the tax burden on its citizens. As in Jenkins, when a constituent municipality is compelled to participate in a Regional District, N.J.S.A. 18A:13-23 is not applicable and the Commissioner may determine cost allocations among and between Haledon, Prospect Park, and North Haledon.

[N. Haledon, supra,

(emphasis added).]

Here, however, neither the Commissioner nor the court has

mandated that Seaside Park remain a member of Central Regional

in contravention of the desire of the voters in the District

55 A-0743-10T4 pursuant to the statutory scheme. Rather, the voters rejected

the referendum on dissolution, see N.J.S.A. 18A:13-59, never

voted on the issue of Seaside Park's withdrawal, see ibid., and

rejected a modification of the funding formula after the court's

February 2008 decision, see N.J.S.A. 18A:13-23.3. Seaside Park

may pursue a referendum on withdrawal or other appropriate

administrative action to obtain relief. However, because this

case does not implicate the impact of withdrawal or dissolution

on racial diversity or issues of other constitutional dimension

after a successful referendum, we discern no basis to invoke the

extraordinary remedy of judicial intervention and mandate that

the Commissioner implement an equitable cost allocation.

Plaintiffs' recourse is to lobby the Legislature to change

the statutory mechanisms for dissolving or withdrawing from a

regional school district, or for revising its funding formula.

As is evident from the extensive legislative history set forth

in this opinion, it is clear the Legislature has considered this

issue at length over the years and has chosen not to embrace

plaintiffs' position. We discern no basis here to second-guess

that policy choice, and thus affirm summary judgment dismissal

of plaintiffs' first count.

56 A-0743-10T4 C. Count Four - Court's Equitable Powers

Count four alleged that the statutory remedies available

for plaintiffs to dissolve, withdraw from, or change the funding

formula for Central Regional are illusory because Seaside Park

is unable to achieve any of these results. The court dismissed

this count with prejudice as failing to state a claim, reasoning

that "[t]he mere fact that any of the [constituent] districts

may vote against the change [in the apportionment method] does

not as a matter of law make the remedy illusory" and that Lacey

Township's successful withdrawal from the District in 1977

contradicted plaintiffs' argument as to impossibility.

Judge Buczynski astutely elaborated on this point in his

ruling on plaintiffs' motion for reconsideration, emphasizing

the Legislature's prerogative in enacting this comprehensive

statutory scheme:

This court understands the difficulty that Plaintiffs face in withdrawing from the district or in changing the apportionment method. The Legislature passed these statutes as part of their legislative responsibilities as a separate and distinct branch of government as empowered by the Constitution of this state.

But the mere fact that one district enjoys a majority of registered voters does not, as a matter of law, render this statutory scheme as illusory. Difficult to navigate, yes, but an illusion, no. This is not a cognizable Cause of Action in this

57 A-0743-10T4 state. Voter distribution will vary and will always vary from district to district.

The circumstances, as argued by the Plaintiffs, miss the point. Voter incentives will vary. And I understand that will change from election to election. But the argument that one member of the district enjoys the overwhelming number of registered voters capable of defeating the referendum, thereby making the statutory scheme illusory, is soundly rejected by this Court.

The trial court's ruling on this issue is unassailable.

The Legislature has created a high bar for achieving alteration

of a regional district's cost allocation formula, N.J.S.A.

18A:13-23 and 18A:13-23.3, or withdrawal from or dissolution of

a regional school district, N.J.S.A. 18A:13-59. However, the

statutory procedures are not illusory, as evidenced by Lacey

Township's withdrawal from Central Regional and other instances

in which regional school districts have been dissolved, or

municipalities have obtained voter approval to withdraw. See,

e.g., N. Haledon, supra,

; In re Div. of Assets &

Liabs. Among Constituent Dists. of Lower Camden Cnty. Reg'l High

Sch. Dist.

(App. Div. 2005), certif.

denied,

(2006); In re Petition for Authorization to

Conduct a Referendum on the Dissolution of Union Cnty. Reg'l

High Sch. Dist. No. 1,

(App. Div.), certif.

denied,

(1997); Bd. of Educ. of Twp. of Egg Harbor

v. Bd. of Educ. of Greater Egg Harbor Reg'l High Sch. Dist., 188

58 A-0743-10T4 N.J. Super. 92 (App. Div.), certif. denied,

(1982).

The Legislature merely designed the remedy to be difficult to

achieve, and that is a policy decision for the Legislature, not

to be second-guessed by the Judiciary. See, e.g., Aronberg v.

Tolbert,

(2011) ("It is not within our

province to second guess the policymaking decisions of the

Legislature when no constitutional principle is at issue.");

Wildwood Storage Ctr., Inc. v. Mayor & Council of City of

Wildwood,

(App. Div. 1992) (holding

that public policy decisions are not for the judiciary).

D. Count Eight - Efficient System of Education

In count seven, plaintiffs sought relief on the ground that

Central Regional's current system of cost apportionment does not

provide an efficient system of education for the students in

Seaside Park because its taxpayers are paying above the average

State cost of education per pupil, in violation of N.J. Const.

art. VIII, § 4, ¶ 1. They concede that their claim is a novel

attempt to challenge an allegedly "inefficient system of funding

education."

As previously noted, the municipalities and their boards of

education generally lack standing to assert the rights of third-

party taxpayers. See, e.g., Stubaus v. Whitman,

(App. Div. 2001), certif. denied,

59 A-0743-10T4 (2002); State of N.J., Dep't of Envtl. Prot. & Energy v. Dopp,

(App. Div. 1993) (ordinarily,

litigants may not claim standing to assert rights of third

parties, particularly constitutional rights). In particular,

they have no standing to assert a thorough and efficient claim

to the extent it is based upon allegedly disparate and

burdensome tax rates.

.

With respect to the thorough and efficient claim, "[t]he real

party in interest is the taxpayers."

.

In dismissing this count for failure to state a claim, the

court enumerated the ten elements of a thorough and efficient

education outlined in Abbott II, supra,

n.23,

which are not encompassed in Seaside Park's sole allegation

"that the cost results in something other than an 'efficient

education.'" As Judge Buczynski elaborated on reconsideration,

"[e]fficiency in taxation is not what is constitutionally

protected" by the thorough and efficient clause; rather, what is

mandated is operational efficiency within school districts.

Nor does Seaside Height's BOE's bald allegation that it

could provide a more thorough and efficient education to its

students if Central Regional were dissolved or if Seaside

Heights were permitted to withdraw from the District, provide a

basis to conclude that the District was unable to serve the

60 A-0743-10T4 needs of its students. In order to justify the "radical"

solution of encroaching upon an area constitutionally reserved

to the Legislature, a finding of constitutional deficiency "must

rest on granite" and not, as here, "hang by a thread." Abbott

II, supra,

.

Plaintiffs' arguments on this issue misinterpret the

constitution and relevant case law. The state constitution

provides that "[t]he Legislature shall provide for the

maintenance and support of a thorough and efficient system of

free public schools for the instruction of all the children in

the State between the ages of five and eighteen years." N.J.

Const. art. VIII, § 4, ¶ 1. In interpreting the "thorough and

efficient" clause, our courts have focused primarily on the

education of students, not with equality among taxpayers. See,

e.g., Abbott II, supra,

(1990); Robbiani v. Burke,

(1978); Robinson,

supra,

;

.

Similarly, in establishing the Department of Education to

supervise and control public education, see N.J.S.A. 18A:4-1 to

18A:7G-48, in defining and designing a thorough and efficient

system of education, and in implementing state monitoring to

determine whether a thorough and efficient system of education

61 A-0743-10T4 is being provided, the Legislature has focused on the quality of

children's education and the operational efficiency of school

districts. See, e.g., N.J.S.A. 18A:4-24; N.J.S.A. 18A:7-8;

N.J.S.A. 18A:7A-10; N.J.S.A. 18A:7A-14a; N.J.S.A. 18A:7C-1;

N.J.S.A. 18A:7F-46; Abbott II, supra,

; In re

Trenton Bd. of Educ.,

(1981); In re

Application of Bd. of Educ. of Upper Freehold Reg'l Sch. Dist.,

(1981); Robinson, supra,

.

Here, there is no allegation that the students of Central

Regional are not receiving a thorough and efficient education,

i.e., that there are insufficient financial resources in the

District to provide a thorough education, or that financial

resources are being squandered at the expense of the children's

education. Rather, plaintiffs attack the constitutionality of

the equalized valuation method for funding regional school

districts because it imposes a greater financial burden on

municipalities such as Seaside Park, which have high property

values and few students attending the school system. The

distribution of education costs among taxpayers is a policy

decision to be made by the Legislature, which determined that a

wealth-based formula for funding regional districts was an

appropriate option, and plaintiffs' arguments should be directed

to that body.

;

62 A-0743-10T4 Twp. of Princeton v. N.J. Dep't of Educ.,

(App. Div. 1978). See also Abbott II, supra,

(court's function limited to constitutional review).

This result is consistent with relevant precedent.

Specifically, in Township of

we rejected a

constitutional thorough-and-efficient challenge to the phase-in

of the 1975 amendment to the method of allocating costs of

regional school districts, from per pupil to equalized

valuation, stating:

Since the total amount expended for education in the district is determined by the regional school district board before the apportionment among the municipalities, the mere method of apportionment of the costs, whether on a per pupil or ratables basis, has no effect whatever on the quality or opportunity of education of the children within that district. It is for that reason that the Robinson precepts do not come into play. Although the choice of method of apportionment may create an unequal tax burden among the municipalities of the district, as the record reflects, it does not influence the level of expenditures made by the district for educational purposes.

[T]he method of allocation, whether it be on the basis of ratables (N.J.S.A. 18A:13-23), or the number of pupils enrolled, or on a combination of both (N.J.S.A. 18A:13-23.1), is a matter preeminently within the power of the Legislature and has no bearing upon the issue of constitutionality as delineated in the Robinson cases.

[

(emphasis added) (internal citations omitted).]

63 A-0743-10T4 Moreover, both the Supreme Court and our court have

rejected other constitutional challenges to equalized valuation

funding. For example, considering a challenge to the 1956

amendments, wherein the Legislature moved from "ratables" to

"apportionment valuations" for purposes of funding certain

regional school districts, the Supreme Court spoke in language

that is equally applicable to plaintiffs' claims here:

In essence, we are presented with a situation where Berkeley Heights claims a vested right in unequal distribution of the burden [of funding a regional school district], seeking a continuation of the prior practice. It complains that upon a per capita student basis the property owners of that township are paying a disproportionate share of the regional burden, thereby subsidizing the education of students from other municipalities comprising the regional school district. The factor has no constitutional implications. Education is a matter of public concern; the expenditures necessary to fulfill the responsibility need not be met on a basis of direct benefit to the property charged.

[Berkeley Heights, supra,

.]

The Court went on to state that, if Berkeley Heights wished to

move to apportionment of costs on a per pupil basis, it had to

follow the statutory procedures.

.

In Borough of Sea Bright v. State, Department of Education,

(App. Div.), certif. denied,

64 A-0743-10T4 (1990), we also rejected an equal protection challenge to the

1975 statutory amendments at issue in the present case, stating:

We have no doubt that New Jersey's method of financing regional school districts is compatible with the equal protection clauses of the federal and state constitutions . . . . Plaintiffs do not contend that there is any inequality in the school tax burden of residents of Sea Bright compared with residents of the other constituent municipalities in the district. To the contrary, the objective of apportioning the costs of a regional school district among the constituent municipalities according to their property values is to impose substantially equivalent tax burdens for education upon all taxpayers of the district regardless of the municipalities in which they reside. Thus, the method of financing education in a regional school district is substantially the same as in a single municipality school district in that school tax obligations depend upon the value of each taxpayer's real property. Consequently, we have no hesitancy in rejecting plaintiffs' thesis that residents of a municipality such as Sea Bright, which has higher property values and/or fewer children attending public school than other municipalities in the regional school district of which it is a part, have a constitutional right to pay only the actual costs of educating their resident children who attend public school. See Berkeley Tp. Bd. of Ed. v. Bd. of Ed. of Union Co.,

(Law Div. 1956), aff'd,

(1957) (observing that education is a public obligation, and that to hold that the Legislature could not apportion regional district costs among constituent municipalities on the basis of ratables rather than the number of children sent "would erase a concept of the distribution of public tax obligation quite essential to

65 A-0743-10T4 the wellbeing of the public school system and of the body politic.").

[Id. at 231-33 (emphasis added).]

See also

(rejecting equal

protection claim stating, "[w]e see nothing unconstitutional

about requiring greater local support for the educational

program from districts that appear able to pay more based upon

the district's property values and average income").

V.

A. Count Two – Contracts Clause

In Point III, plaintiffs challenge summary judgment

dismissal of count two of the complaint. That count alleged the

1975 legislation, mandating that regional school districts be

funded through equalized valuation, violated the contracts

clauses of the federal and state constitutions by substantially

impairing the contract to form Central Regional under which

funding was on a per pupil basis, and that by perpetuating the

1975 violation, the 1993 legislation independently violated the

federal and state constitutions.

Plaintiffs claim the court erred by finding there was no

contract to establish Central Regional, determining the taxpayer

plaintiffs of Seaside Park were not third-party beneficiaries of

the alleged contract, not addressing the "substantial

66 A-0743-10T4 impairment" prong of the legal analysis, and concluding the 1975

legislation furthered a legitimate public purpose.

As previously discussed, Judge Buczynski held that

governmental entity parties lack standing to pursue this

constitutional claim. The judge found the taxpayer plaintiffs

failed to provide a written agreement or evidence of the

requisite elements for a contract and, even if they could

demonstrate the existence of a valid contract, failed to prove

they were intended third-party beneficiaries. The judge further

found the 1975 and 1993 legislation promoted the "public welfare

and education of the students residing in regional school

districts" and thus was not an unconstitutional impairment of

the alleged contract.

We are convinced Judge Buczynski was correct on all points.

However, to resolve this appeal, we need only address the

contract issue and not the third-party beneficiary issue.

Both the federal and state constitutions protect against

government impairment of contractual obligations. U.S. Const.,

art. I, § 10, cl. 1; U.S. Const. amend XIV; N.J. Const., art.

IV, § 7, ¶ 3.

The clauses protect against a change in the State's obligations that "operates[s] as a substantial impairment of a contractual relationship." Allied Structural Steel v. Spannaus,

,

,

(1978). "This

67 A-0743-10T4 inquiry has three components: whether there is a contractual relationship, whether a change in law impairs that contractual relationship, and whether the impairment is substantial." Gen. Motors Corp. v. Romein,

,

,

(1992).

[N.J. Educ. Ass'n v. State,

(App. Div.), certif. denied,

(2010).]

"[T]he legal standards for a violation of the contract

clause are strict." State Farm Mut. Auto Ins. Co. v. State,

(1991). Accord Nobrega v. Edison Glen Assocs.,

(2001) (contract clause construed narrowly in

modern cases). Not even a substantial impairment of contract

violates the constitution if the governmental action has a

"significant and legitimate public purpose," is based upon

reasonable conditions, and is related to "appropriate

governmental objectives." State Farm, supra,

(citing Energy Reserves Group, Inc. v. Kansas Power & Light Co.,

,

,

(1983)). Accord Windman v. City of Englewood,

(App. Div. 1985).

The taxpayer plaintiffs never produced a written contract

between any of the parties or any other evidence that the

constituent municipalities entered into a contractual agreement.

Thus they failed to establish that an express contract existed

68 A-0743-10T4 between themselves and the remaining constituents of Central

Regional. The taxpayer plaintiffs similarly failed to establish

a contract "implied-in-fact," which they essentially argue

exists by virtue of the resolutions passed by the governing

bodies of the constituent municipalities acknowledging their

agreement to create Central Regional and apportion the tax levy

based on pupil enrollment. They further argue that in l954,

when the voters approved the formation of Central Regional and

its tax allocation method, they ratified the contractual

agreement of the constituent municipalities. Judge Buczynski

properly rejected these arguments.

Regional school districts are created solely through the

procedures established by the Legislature, and not through any

contractual agreement between municipalities. N.J.S.A. 18A:13-

34. See also N.J. Educ. Ass'n, supra,

(statute not presumed to create contractual rights unless intent

to do so is clearly stated) (citing Nat'l R.R. Passenger Corp.

v. Atchinson Topeka & Santa Fe Ry. Co.,

,

,

(1985) and Dodge v.

Bd. of Educ.,

,

,

(1937)).

The procedure established by the Legislature for the

formation of a regional school district is a referendum.

69 A-0743-10T4 N.J.S.A. 18A:13-34. A referendum is not a contract; it is

legislation enacted directly by voters. See City of Eastlake v.

Forest City Enter., Inc.,

,

,

(1976); Great Atl. & Pac. Tea Co. v.

Borough of Pt. Pleasant,

(1994); 42 Am. Jur.

2d Initiative and Referendum § 1 (2010); 35 N.J. Practice, Local

Government Law §§ 20.1 and 20.3 (Michael A. Pane, Jr.) (4th ed.

2007); Black's Law Dictionary 1285 (7th ed. 1999).

Thus, the resolutions were passed by each municipality,

independently, to start the statutory regionalization process

and Central Regional then was formed through referendum, a

legislative act by voters from the constituent municipalities.

The statutory choices at the time for funding the regional

school district were average daily attendance or ratables. The

voters chose average daily attendance. However, that was

subject to change, as there are no vested rights in a statute's

continued existence. Phillips v. Curiale,

(1992). Indeed, as noted in this opinion, the system for

funding regional school districts has been changed many times

over the years; plaintiffs complain about only two of the

changes.

Even if there were a contract to form Central Regional,

however, neither the 1975 nor the 1993 legislation violated the

70 A-0743-10T4 contracts clauses of the federal and state constitutions.

Statutes are presumed constitutional, and plaintiffs bear a

heavy burden in attempting to rebut that presumption. In re

C.V.S. Pharmacy Wayne,

(1989), cert. denied

sub nom. Consumer Value Stores v. Bd. of Pharmacy,

,

,

(1990). This is

particularly so for economic legislation, which does not warrant

or permit close scrutiny. N.J. Ass'n of Health Plans v. Farmer,

(App. Div. 2001).

The challenged legislation served a significant and

legitimate public purpose of addressing the methods for funding

regional school districts, the legislation was based upon

reasonable conditions, and the legislation was related to

appropriate governmental objectives in response to an ongoing

legislative debate as to the appropriate method for funding

public education. We may not second-guess the Legislature's

wisdom in allocating tax burdens. Simon v. Cronecker,

(2007); N.J. Ass'n of Health Plans, supra,

.

B. Count III – Property Clause

In Point IV, plaintiffs challenge summary judgment

dismissal of count three of the complaint, in which they alleged

that the 1975 and 1993 laws are unconstitutional as applied,

71 A-0743-10T4 constituting a taking of their contractual right to per-pupil

funding, and consequently a taking of significantly more of

their tax monies, without just compensation. Judge Buczynski

correctly found the taxpayer plaintiffs had no property interest

in inter-governmental legislation by referendum, and the method

of taxation for funding Central Regional was a valid exercise of

legislative power and did not constitute a taking.

Both the federal and state constitutions bar the taking of

private property for public use without just compensation. U.S.

Const. amend. V and XIV; N.J. Const. art. I, ¶ 20. Such a

taking may be accomplished in one of two ways:

1) via physical taking, in which the government takes title to private property or "authorizes a physical occupation [or appropriation] of property"; or 2) via regulatory taking, through which a government regulation deprives the property owner of all economically viable use of their land.

[Klumpp v. Borough of Avalon,

(2010) (alteration in original)(citation omitted).]

As previously discussed, plaintiffs had no contractual

right to per pupil funding. Therefore, there was no taking of

any such contractual right. Nor have plaintiffs established a

property interest that has been excessively interfered with as a

result of this regulatory scheme. See Gardner v. N.J. Pinelands

Comm'n,

(1991) (holding that an

72 A-0743-10T4 unconstitutional taking of private property for public use

occurs when a statutory scheme does not substantially advance a

legitimate public interest and excessively interferes with

property rights and interests).

This is not a takings issue; it is a taxation issue. All

the 1975 and 1993 legislation did was alter the allocation of

tax burdens for property owners located in regional school

districts. Following the l975 legislation, regional school

districts were funded the same as every K-12 public school

district statewide, i.e., based on property taxes rather than a

per pupil cost. The taxes for Central Regional were allocated

as if the District were one community, with a uniform rate of

school taxes charged to the property owners in the constituent

municipalities based on the equalized value of their respective

property. Under this allocation method, Seaside Park taxpayers

pay regional school taxes at exactly the same rate as property

owners in the other four constituent municipalities forming

Central Regional. The l993 law provided circumstances by which

a district could modify the apportionment method and left the

decision of whether to modify to the voters of the constituent

municipalities. The fact that equalized valuation is

disproportionate does not render the tax unconstitutional.

73 A-0743-10T4 "[T]he power of taxation should not be confused with the

power of eminent domain." Houck v. Little River Drainage Dist.,

,

,

(1915).

See also Connolly v. Pension Benefit Guar. Corp.,

,

,

(1986) ("Given

the propriety of the governmental power to regulate, it cannot

be said that the Taking Clause is violated whenever legislation

requires one person to use his or her assets for the benefit of

another."); Penn Cent. Transp. Co. v. City of N.Y.,

,

,

(1978)

("[G]overnment may execute laws or programs that adversely

affect recognized economic values. Exercises of the taxing

power are one obvious example."); City of Pittsburgh v. Alco

Parking Corp.,

,

,

(1974) (rejecting Fifth Amendment challenge to local tax). "Any

tax is a 'taking' in a literal sense, but a bona fide revenue-

raising measure is not a 'taking' in a constitutional sense."

N.J. Ass’n of Health Plans, supra,

. As

previously discussed, we have also rejected tax clause

challenges to the 1975 legislation in Sea Bright, supra,

, and Township of Princeton, supra,

.

74 A-0743-10T4 Plaintiffs contend the 1975 and 1993 legislation were not

bona fide revenue-raising measures because they did not generate

additional tax revenue; all they did was reallocate tax burdens.

However, that is a distinction without a difference. The

Legislature exercised its authority to apportion the costs of a

regional school system in connection with a comprehensive scheme

for creating and funding a thorough and efficient system of

education. The legislation involved taxation and revenue-

raising measures, while advancing a significant public interest.

C. Count Six – Substantive Due Process

In Point V, plaintiffs challenge summary judgment dismissal

of count six of the complaint, in which they alleged that the

1975 and 1993 legislation, as applied, violated their

substantive due process rights by depriving them of their

property.

Judge Buczynski rejected this argument, concluding the

taxpayer plaintiffs failed to present either factual or legal

support for his claims of a protected property interest in the

form of contractual rights to per pupil funding or to their tax

dollars; moreover, the challenged laws furthered a legitimate

public purpose. See Gikas v. Washington Sch. Dist.,

, 735 (3d Cir. 2003) (holding that "a plaintiff must

establish as a threshold matter that he has a protected property

75 A-0743-10T4 interest to which the Fourteenth Amendment's due process

protection applies") (citation omitted); Greenberg v. Kimmelman,

(1985) (holding that generally "a state statute

does not violate substantive due process if the statute

reasonably relates to a legitimate legislative purpose and is

not arbitrary or discriminatory"). Plaintiffs' argument on this

issue is without merit to warrant further discussion as we are

satisfied Judge Buczynski amply addressed and rejected this

issue with appropriate legal citations. R. 2:11-3(e)(1)(E).

D. Counts Six and Seven - Equities

In Point VI, plaintiffs claim the court erred by failing to

address (1) their equitable claim that the 1975 legislation

frustrated the purpose of their agreement to form Central

Regional and (2) their constitutional claim that the 1975

legislation deprived Seaside Park's parents of their substantive

due process right to direct the upbringing and education of

their children. In Point VII, plaintiffs claim they

demonstrated good and just cause for the court to exercise its

inherent equitable powers to address the inequities of the

current situation.

Judge Buczynski rejected taxpayer plaintiffs' frustration

of purpose argument and their alternate theory of a substantive

due process violation because these claims were not pled by

76 A-0743-10T4 plaintiffs and were not supported by the record. The judge

rejected plaintiffs' general request for equitable relief on the

ground that he had no authority to grant it - the Legislature

had provided statutory means for plaintiffs to pursue the relief

they sought and judicial override of those procedures would

violate the principle of separation of powers. Moreover,

notwithstanding the cost borne by Seaside Park's property

owners, funding of regional school districts on the basis of

equalized valuation was fundamentally fair.

We discern no error in the conclusions reached by Judge

Buczynski. Under Rule 4:5-2, litigants are required to include

in their pleadings "a statement of the facts on which the claim

is based, showing that the pleader is entitled to relief, and a

demand for judgment for the relief to which the pleader claims

entitlement." Even read indulgently, see Van Dam Egg Co. v.

Allendale Farms, Inc.,

(App. Div.

1985), the second amended complaint is devoid of any claim of

frustration of purpose, or that the taxpayer plaintiffs have

been deprived of the right to control their children's

education. Therefore, the judge correctly declined to address

these arguments on summary judgment. See Jersey City v. Hague,

(1955) (stating that "however liberal pleadings

may be, the requirement still remains that at least the gist of

77 A-0743-10T4 a substantive ground of relief must be set forth").

Nevertheless, even if addressed, these claims would fail on

their merits for the reasons discussed in earlier issues.

Taxpayer plaintiffs' alternative substantive due process

theory fails because the 1975 legislation does not prevent

parents from directing the upbringing of their children. See

Troxel v. Granville,

,

, 2059-

60,

(2000) (discussing the liberty

interest of parents "in the care, custody, and control of their

children"). Under the 1975 legislation, the funding mechanism

for Central Regional was changed to equalized valuation - a

funding mechanism plaintiffs do not like because it costs them

more than per pupil funding. The 1975 legislation does not

affect their ability to raise their children as they see fit.

They are not required to send their children to Central

Regional. They can send their children to other schools at

their own expense, relocate to another school district, or even

home-school their children. Additionally, taxpayer plaintiffs

can lobby other voters in the constituent municipalities to pass

referenda.

As to taxpayer plaintiffs' request for equitable relief:

[E]quity will generally conform to established rules and precedents, and will not change or unsettle rights that are created and defined by existing legal

78 A-0743-10T4 principles. This is the basis for the equitable maxim "equity follows the law," which instructs that as a rule a court of equity will follow the legislative and common-law regulations of rights, and also obligations of contract.

[Dunkin' Donuts of Am., Inc. v. Middletown Donut Corp.,

(1985) (internal citations omitted).]

Here, there is no "wrong" to remedy through law or equity.

The Legislature has declared the rights and responsibilities of

the constituent members of regional school districts. Under the

circumstances of this case, the court has no power to override

the Legislature's scheme for funding regional school districts,

or to provide plaintiffs with an alternative to the

legislatively created means for withdrawing from or dissolving

Central Regional, or altering the funding mechanism of Central

Regional.

This lawsuit is an attempt to achieve through the courts a

result that plaintiffs could not achieve pursuant to relevant

legislation or through the Department of Education. We discern

no basis, equitable or constitutional, to invalidate the

challenged statutes, reverse the decisions of either the

Commissioner or the Board, or otherwise interfere with the

legislative and regulatory schemes.

Affirmed.

79 A-0743-10T4