New Jersey Supreme Court Strikes Down Environmental Investment Charges

After a lower court ruled that Passaic County, N.J.'s environmental investment charges (EICs) are lawful, the New Jersey Supreme Court has overturned that decision.

In its opinion issued in late June, the Supreme Court ruled that state law does not authorize an EIC. Justice J. Stein, who wrote the opinion, described Passaic's arguments in favor of its EIC as a "strained and unintended application" of the state law.

Noting the complexity of the state's solid waste debt problem, the court concluded that legislative intervention is "essential," and directed the state legislature to take action.

Several New Jersey counties, including Passaic, first imposed EICs in 1998 on municipalities and solid waste haulers after a federal appeals court struck down the state's flow control system.

Passaic County needed an EIC to pay off about $77 million in debt, and began to assess a $30 per ton EIC.

The city of Paterson refused to pay and filed a lawsuit in New Jersey Superior Court, arguing that the city was not using the county's facilities and should not have to subsidize other communities' use.

In May 1999, the lower court ruled in favor of Passaic County, and ordered Paterson to pay $3 million for the next 10 years to the county [see "Court Upholds New Jersey Garbage Charge," Waste Age July 1999, page 38].

Passaic County's debt comes from the purchase of disposal rights in a Pennsylvania landfill and an aborted effort to build an incinerator. Following the demise of flow control, Paterson had begun bypassing Passaic's $103 per ton solid waste system in favor of other facilities that charged less than half that amount.

In overturning the Superior Court decision, Stein wrote, "The complex and unanticipated events that resulted in the invalidation of the state's carefully crafted system of solid waste regulation and produced the need for a new funding source to address the stranded debt ... is an even more compelling reason for concluding that [the municipal and county utilities law] does not authorize an EIC to be imposed on non-users of solid waste services."

The court wrote that the EIC was not created to impose hardship on any municipalities. "We fully recognize the complexity and significance of the stranded debt problem that the EIC was intended to address," according to the written opinion. "We appreciate that the executive branch agencies that recommend implementation of an EIC did so in a good-faith attempt to ameliorate, if not resolve, an unanticipated financial crisis of unprecedented magnitude."

It is likely that some legislative activity will take place in coming months in response to the New Jersey Supreme Court's decision in City of Paterson v. Passaic County Board of Chosen Freeholders. Several bills over the past six years have been introduced to the state legislature to address the debt.

The National Solid Wastes Management Association (NSWMA), Washington, D.C., and several of its members filed lawsuits challenging EICs in other New Jersey counties, and filed briefs supporting Paterson's lawsuit. The suits still are pending.