Adopting the legal analysis advocated by Paul Schneider on behalf of the New Jersey Builders Association, the New Jersey Supreme Court ruled that developers may not be required to pay duplicative sewer connection fees.  New Jersey statutes permit utilities authorities and sewerage authorities to charge periodic service fees for those using their wastewater systems.  In addition, an authority may charge a one-time connection fee or tapping fee for each new connection of any property with the sewerage system.  The purpose of the connection fee is to permit an authority that has developed a wastewater collection and treatment system to recover the capital costs and related debt service associated with developing the system.  It is designed to create a mechanism to permit these costs to be fairly spread across all properties that connect with and use the system.

Sometimes the connection involves a single authority that operates both wastewater collection and treatment facilities.  Other times, a local authority only operates a collection system and the wastewater is then sent to a treatment facility operated by a second authority.  Less typical but not uncommon is the situation where the authority to which the new development is “directly” connected and the authority to which the new development is “indirectly” connected both operate collection and treatment systems, yet the first authority only provides collection services to the property while the second authority provides actual treatment of the wastewater.

It is this latter situation that the Supreme Court addressed in 612 Associates, LLC v. North Bergen Municipal Utilities Authority.  The Court was presented with three competing interpretations of the statutes.  One authority argued that only the authority to which the property “directly” connects may charge a connection fee, and that it may require the developer to pay a fee based on the costs of both its collection and treatment facilities, even when the authority does not provide the property with waste treatment services.  Another authority contended that both authorities could charge their full connection fees calculated on the costs of both their respective collection and treatment systems.  In other words, these authorities claimed the non-treating authority may require new development to contribute toward the capital costs of a wastewater treatment plant to which the development will not connect and will not use.  On behalf of the New Jersey Builders Association, Paul Schneider of Giordano, Halleran & Ciesla contended that allowing both authorities to charge a full connection fee would unfairly burden developers with duplicative connection fees and result in a windfall to the authorities.

Adopting the position advocated by Mr. Schneider, the Supreme Court decided that while each authority that serves a property, whether through a direct or indirect connection, is permitted to charge a connection fee, the fees must be apportioned so that the charge to the developer reflects the property’s use of each system and is not duplicative.  That is, each connection fee must be tied to the cost of that part of the system that the particular property uses, so that a property that merely has wastewater transported through the collection system of one authority will be assessed a connection fee based solely on the cost of that authority’s collection system, but will not be charged for the cost of that entity’s treatment system that it does not use.  As stated by the Court, “fairness and equity demand” such a result.