MACK-CALI REALTY CORP. VS. STATE OF NEW JERSEY (L-4903-18, HUDSON COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-3097-18

MACK-CALI REALTY
CORP., CAL-HARBOR
V URBAN RENEWAL
ASSOCIATES, LP,
CAL-HARBOR VII URBAN
RENEWAL ASSOCIATES, LP,
ROSELAND RESIDENTIAL APPROVED FOR PUBLICATION
TRUST, GARY WAGNER, IVAN February 16, 2021
BARON, H.P. ROOSEVELT APPELLATE DIVISION
URBAN RENEWAL COMPANY,
LLC, CAMBRIDGE CORPORATE
SERVICES, INC., LOCAL 621,
UNITED CONSTRUCTION
TRADES INDUSTRIAL UNION,
LOCAL 365, UNITED
EMPLOYEES OF SERVICE
WORKERS, SP PLUS
CORPORATION, LOS CUERNOS
CORP., EXCHANGE PLACE
ALLIANCE DISTRICT
MANAGEMENT CORPORATION,
SPARTAN SECURITY SERVICES,
INC., NEW JERSEY BUSINESS &
INDUSTRY ASSOCATION, and
HUDSON COUNTY CHAMBER
OF COMMERCE & INDUSTRY,

Plaintiffs-Appellants,

v.

STATE OF NEW JERSEY, CITY
OF JERSEY CITY, MAYOR AND
COUNSEL OF THE CITY OF
JERSEY CITY, DONNA MAUER,
in her Official Capacity as Director
and Chief Financial Officer of the
City of Jersey City, and BRIAN
PLATT, in his Official Capacity
as Business Administrator of the
City of Jersey City,

Defendants-Respondents.
______________________________

CITY OF NEWARK,

Intervenor-Respondent.
______________________________

Argued October 19, 2020 – Decided February 16, 2021

Before Judges Messano, Hoffman, and Suter.

On appeal from the Superior Court of New Jersey,
Law Division, Hudson County, Docket No. L-4903-
18.

Clark E. Alpert and Stephen J. Edelstein argued the
cause for appellants (Weiner Law Group, LLP,
attorneys; Clark E. Alpert, of counsel and on the
briefs; Stephen J. Edelstein, Richard L. Rudin, Donald
A. Klein, and Paul S. Grossman, on the briefs).

Jean P. Reilly, Assistant Attorney General, argued the
cause for respondent State of New Jersey (Gurbir S.
Grewal, Attorney General, attorney; Jean P. Reilly, of
counsel and on the brief; Jamie M. Zug, Eileen W.
Siegeltuch, Michael J. Duffy, Heather Lynn Anderson,
and Miles Eckardt, Deputy Attorneys General, on the
brief).

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 Vito A. Gagliardi, Jr., argued the cause for
respondents City of Jersey City, Mayor and Council of
the City of Jersey City, Donna Mauer, and Brian Platt
(Porzio, Bromberg & Newman, PC, attorneys; Vito A.
Gagliardi, Jr., of counsel and on the brief; Jeffrey M.
Pypcznski, Tanya Y. Shah, and Thomas J. Reilly, on
the brief).

Cheyne R. Scott argued the cause for intervenor-
respondent City of Newark (Chasan, Lamparello,
Mallon & Cappuzzo, PC, attorneys; Cheyne R. Scott,
of counsel and on the brief; Cindy Nan Vogelman, on
the brief).

Craig A. Long argued the cause for amici curiae New
Jersey Education Association and Jersey City
Education Association (Zazzali, Fagella, Nowak,
Kleinbaum & Friedman, PC, attorneys; Richard A.
Friedman, of counsel; Craig A. Long, on the brief).

The opinion of the court was delivered by

MESSANO, P.J.A.D.

Plaintiffs — real estate developers and urban renewal entities in Jersey

City; business owners with operations in Jersey City; labor unions, which

members provide personnel and services to Jersey City businesses and some of

which have members that live in Jersey City; and business trade associations

— challenged Jersey City Ordinance 18-133 (the Ordinance), which imposed a

payroll tax of one-percent of an employer's payroll, but exempted from the

calculation employees who were residents of Jersey City (the City). Plaintiffs

filed a verified complaint and order to show cause seeking to declare the

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Ordinance and certain 2018 amendments (Chapter 68) 1 to the Local Tax

Authorization Act (LTAA), N.J.S.A. 40:48C-1 to -42, violated the United

States and New Jersey Constitutions. They also alleged the Ordinance was

ultra vires, void for vagueness and violated contractual rights certain plaintiffs

had under tax abatement agreements with the City pursuant to the Long-Term

Tax Exemption Law (LTTEL), N.J.S.A. 40A:20-1 to -22.

After considering oral argument, the judge denied plaintiffs' request for

a preliminary injunction and scheduled a dispositive nontestimonial hearing.

The City and defendant State of New Jersey moved to dismiss the complaint. 2

The judge granted amicus status to the New Jersey Education Association and

the Jersey City Education Association (collectively, NJEA). Plaintiffs cross -

moved for summary judgment.

In a comprehensive written decision, the judge granted defendants'

motion to dismiss and denied plaintiffs' cross-motion for summary judgment.

He concluded plaintiffs failed to join an indispensable party, the City of

Newark (Newark), and, on the merits, the judge determined the statutory

amendments were constitutional, and the Ordinance was a valid, constitutional

1
This is a reference to the amendments' session law designation, L. 2018, c.
68.
2
Individual City officials were also named as defendants in their official
capacities. We include them collectively in our references to the City.

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exercise of the City's authority. The judge entered conforming orders, and this

appeal followed; we subsequently granted Newark's motion to intervene, and

NJEA's motion to appear as amicus.

Plaintiffs reprise their arguments before us. They contend that Chapter

68, which authorized enactment of the Ordinance, in conjunction with 2018

amendments to the School Funding Reform Act of 2008 (SFRA), N.J.S.A.

18A:7F-43 to -63, violates the Education Clause of our State constitution, N.J.

Const. art. VIII, § 4, ¶ 1, as interpreted by the Court and reaffirmed most

recently in Abbott v. Burke, 199 N.J. 140 (2009) (Abbott XXI), and Abbott v.

Burke, 206 N.J. 332 (2011) (Abbott XXII). Plaintiffs also argue Chapter 68 is

unconstitutional special legislation, N.J. Const. art. IV, § VII, ¶ 9; violates the

constitutional requirement that property be taxed pursuant to general and

uniform laws, N.J. Const. art. VIII, § 1, ¶ 1; and violates the constitutional

prohibition on using payroll taxes for non-employee benefit purposes, N.J.

Const. art. VIII, § 2, ¶ 8. They argue enactment of Chapter 68 was arbitrary,

capricious, and unreasonable.

Plaintiffs further contend that Chapter 68 and the Ordinance violate their

federal constitutional rights under the Commerce Clause of the United States

Constitution, U.S. Const. art. I, § 8, the Equal Protection and Due Process

Clauses of the Fourteenth Amendment, U.S. Const. amend. XIV, § 1, and the

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Privileges and Immunities Clause of the United States Constitution. U.S.

Const. art. IV, § 2, cl. 1.

Plaintiffs also reassert their claim that the Ordinance was void for

vagueness and ultra vires. Finally, they contend the judge misapplied the

standards governing a motion to dismiss under Rule 4:6-2(e) and erred in

dismissing the complaint for lack of an indispensable party, i.e., Newark.

The State, City and Newark oppose these contentions and urge us to

affirm the judge's orders. The NJEA similarly supports this position as

amicus.

I.

We provide some historical background regarding the LTAA, SFRA,

amendments to both enacted in 2018, and relevant provisions of the Ordinance.

A.

As originally enacted in 1970, the LTAA granted municipalities of a

certain population the authority "to enact an ordinance . . . imposing any of the

taxes" thereafter provided in the statute. N.J.S.A. 40:48C-1.3 One tax

3
Only Newark met the then-existing population threshold. See City of Jersey City
v. Farmer, 329 N.J. Super. 27, 31–32 (App. Div. 2000). In 1990, the Legislature
amended N.J.S.A. 40:48C-1 to reduce the population threshold to 200,000, where
it remains today. L. 1990, c. 9. As a result, the City joined Newark as the only
municipalities authorized to enact a payroll tax. Farmer, 329 N.J. Super. at 32.
The City, however, did not adopt a payroll tax until 1995, effective January 1,

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authorized by the LTAA was "an employer payroll tax for general municipal

purposes . . . at a rate of . . . one percent of the employer's payroll." N.J.S.A.

40:48C-15(a) (1970) (emphasis added). Chapter 68 significantly amended this

and other provisions of the LTAA.

First, Chapter 68 authorized adoption of an ordinance that "provide[d]

. . . the employer payroll tax shall not apply to the remuneration paid . . . to

employees who are residents of the municipality." N.J.S.A. 40:48C-15(c).

Second, Chapter 68 expanded the permissible use of payroll tax revenues by

allowing a municipality to impose a payroll tax not only "for general municipal

purposes," but also "for the purposes set forth in subsection d. of this section ."

N.J.S.A. 40:48C-15(a) (emphasis added).

Subsection (d)(1), also part of Chapter 68, provided:

If a municipality adopts an ordinance pursuant to
[N.J.S.A. 40:48C-15(a)] . . . and the municipality has a
median household income of $55,000 or greater
according to the . . . United States Census Bureau, all
employer payroll tax revenues collected . . . pursuant
to the ordinance shall be deposited into a trust fund to
be used exclusively for school purposes . . . .

1996; by then, the Legislature had amended N.J.S.A. 40:48C-19 to retroactively
preclude the City's collection of the tax, which we upheld against constitutional
challenge by the City. Id. at 30–31. A provision of Chapter 68 repealed N.J.S.A.
40:48C-19, see L. 2018, c. 68 § 3, thereby permitting the City to enact and collect a
payroll tax.

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Subsection (d)(2) requires the municipality to pay over from the trust fund to

its school board on a monthly basis "an amount equal to one-twelfth of the

difference in State school aid provided to that school district, pursuant to

[SFRA], between the current State fiscal year and State fiscal year 2018, for

use in lieu of adjustment aid and all other categories of State school aid ." The

balance of any payroll tax revenues collected remain in the trust fund "in the

event the employer payroll tax revenues collected in a year are insufficient to

pay the full amount" required under (d)(2). N.J.S.A. 40:48C-15(d)(3).

B.

The Education Clause of our state Constitution requires the Legislature

to "provide for the maintenance and support of a thorough and efficient system

of free public schools for the instruction of all the children . . . between the

ages of five and eighteen years." N.J. Const. art. VIII, § 4, ¶ 1. When enacted

in 2008, SFRA reflected "the State's most recent, lengthy and painstaking

effort to craft a redesigned school funding formula that satisfies the

constitutional standard." Abbott XXI, 199 N.J. at 147.

SFRA uses a formula to calculate the "adequacy budget" for each school

district, that, in general terms, multiplies enrollment by a "base per pupil

amount" added to the costs of other necessary educational services and district -

specific geographic costs. N.J.S.A. 18A:7F-50(b); N.J.S.A. 18A:17F-51. To

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meet its portion of its adequacy budget, each school district must set a "general

fund tax levy" in an amount equal to that district's "required local share."

N.J.S.A. 18A:7F-5(b). For most districts, the "required local share" equals the

lesser of "the local share 4 calculated at the district's adequacy budget" or the

district's local share from the previous year. N.J.S.A. 18A:7F-5(b). SFRA

directs the State to remit to each school district "equalization aid" in an amount

equal to the remainder after subtracting the local share from the adequacy

budget. N.J.S.A. 18A:7F-53.

For former so-called Abbott districts like the City, the required local

share is calculated differently. N.J.S.A. 18A:7F-5(b). In addition to other

forms of state aid, SFRA established "educational adequacy aid" for former

Abbott districts that were spending beneath their adequacy budget and did not

meet certain educational criteria. N.J.S.A. 18A:7F-58(b). When enacted,

SFRA directed that eligible districts would take the funds received from the

combination of its own tax levy and "equalization aid" received from the State,

and, with minor adjustments, subtract that amount from the adequacy budget;

the result was the amount of "educational adequacy aid" sent to the district.

Ibid.

4
The "local share," distinct from the "required local share," considers the
property values and incomes in a school district. N.J.S.A. 18A:7F-52.

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 Separate from equalization aid, educational adequacy aid, and other

categories of state aid, SFRA also allocated "adjustment aid" to ensure that,

generally speaking, former Abbott districts would receive "the greater of the

amount of State aid" between the amount calculated under SFRA and the

amount the district had received in the prior year plus two percent. N.J.S.A.

18A:7F-58(a)(3) to (4). SFRA also included a two-percent growth limitation

on the amount by which a school district could increase its budget without first

obtaining approval from voters in a local election, N.J.S.A. 18A:7F-38(a),5 and

tiered growth limits on the total aid former Abbott districts could receive from

the State. N.J.S.A. 18A:7F-47.6

The 2018 amendments to SFRA were intended to address concern that,

since its inception nine years earlier, the statute "ha[d] not been fully

implemented" towards its goal of distributing State school aid to districts

"based on the needs of the student population and local fiscal capacity."

Sponsor's Statement to S. 28 (L. 2018, c. 67). The amendments were intended

to "realign[ ] the amount of State aid provided to school districts with their

current needs," and to correct inequities in the amount of school aid districts

5
Initially this was a four-percent cap that applied to districts spending above
adequacy, L. 2007, c. 260, §3, but in 2010, the two-percent cap was set and
extended to all districts. L. 2010, c. 44, § 3.
6
Repealed by L. 2018, c. 67, § 8.

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had been receiving. Ibid.

In pertinent part, the SFRA amendments eliminated adjustment aid going

forward and incorporated a "state aid differential" variable used to recalculate

the distribution of aid more equitably. N.J.S.A. 18A:7F-67. The state aid

differential is calculated by subtracting the district's budget-year state aid —

not including any adjustment aid, educational adequacy aid, or other "non-

SFRA aid" — from the prior year's total state aid — a sum that includes

adjustment and non-SFRA aid. Ibid. Generally, districts with a positive state

aid differential receive the amount of aid received in the prior year, reduced by

a specified percentage that increases annually in gradual increments 7 until the

excess aid is eliminated in the 2024–25 school year. N.J.S.A. 18A:7F-68(b).8

The total amount of adjustment aid cut each year is added to any

increase in the State's total appropriated aid for that year, and that sum is then

allocated proportionately to districts with negative differentials. N.J.S.A.

18A:7F-68(a). The Legislature also repealed the state aid growth limitation, L.

2018, c. 67, §8, and amended the two-percent local tax levy growth limitation

7
Thirteen-percent reduction in the 2019–20 school year, 23% in 2020–21,
37% in 2021–22, 55% in 2022–23, 76% in 2023–24, and 100% in 2024–25.
N.J.S.A. 18A:7F-68(b).
8
Certain former Abbott districts and non-Abbott districts are exempt from the
reductions, but those exemptions are not at issue here. N.J.S.A. 18A:7F-68(c).

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in N.J.S.A. 18A:7F-38 to allow former Abbott districts to increase the amount

of their general fund tax levy irrespective of the cap. N.J.S.A. 18A:7F-38(a).9

It is undisputed that the 2018 SFRA amendments resulted in significant

reductions in State aid to the City's school district commencing in fiscal year

2019.

C.

Our Constitution provides that "corporations may be authorized by law

to undertake . . . clearance, replanning, development, or redevelopment" of

"blighted areas," and "improvements made for these purposes . . . may be

exempted from taxation . . . for a limited period of time" during which the

corporation's "profits . . . and dividends . . . shall be limited by law." N.J.

Const. art. VIII, § 3, ¶ 1. The Legislature enacted the LTTEL "to encourage

private capital and participation by private enterprise" in "the restoration of

deteriorated or neglected properties . . . in the elimination of the blighted

condition," in exchange for "special financial arrangements, including the

granting of property tax exemptions." N.J.S.A. 40A:20-2. Among other

things, the LTTEL authorized qualified "urban renewal entit[ies]" to enter into

financial agreements with municipalities and conduct long-term redevelopment

projects. N.J.S.A. 40A:20-8.

9
See L. 2018, c. 67, §§ 3, 8.

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 "Every approved project shall be evidenced by a financial agreement

between the municipality and the urban renewal entity," and the agreement

shall provide "[t]hat all improvements . . . in the project . . . shall be exempt

from taxation." N.J.S.A. 40A:20-9(b). "During the term of any exemption, in

lieu of any taxes to be paid on the . . . improvements of the project and, . . . the

urban renewal entity shall make payment to the municipality of an annual

service charge . . . ." N.J.S.A. 40A:20-12(b). After the exemption terminates,

the improvements are taxed like any other real property improvements in the

municipality. N.J.S.A. 40A:20-12(c). Several plaintiffs entered into financial

agreements with the City whereby they remit an annual service charge

payment in lieu of property taxes (PILOT payments) on the improvements, but

not the real property, within their redevelopment projects; the assessed value

of the real property is taxed like other real property in the municipality. The

specific terms of these financial agreements are not in the record.

In 2018, the value of real property in the City subject to tax abatements

was $320,932,804. The Education Law Center, a non-profit public interest law

firm that advocates for students, reported that in the 2018–19 school year,

Jersey City received State aid that exceeded the amount needed to meet its

adequacy budget. However, due to the depletion of the property tax base

resulting from LTTEL financial agreements, the City was underfunding its

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local share and spending $103,749,652 below its adequacy level, or $3367 per

pupil.

D.

The City enacted the Ordinance with the stated purpose "to establish a

payroll tax on the payrolls of Non-Jersey City residents for the benefit of

Jersey City schools." The Ordinance became effective on January 1, 2019.

See Jersey City, N.J., Code § 304-18.

The Ordinance imposed a payroll tax "equal to one percent of the

employer's payroll," with those revenues to be placed in a trust fund "used

exclusively for [s]chool purposes." The Ordinance further directed that "[a]ll

tax revenue distributed" through the trust fund "be used in lieu of State

adjustment aid and all other categories of State school aid." Id. at § 19.1(d).

The ordinance provided that "[a]n employer shall incur no payroll tax relative

to its Jersey City-resident [e]mployees." Id. at § 304-19(a). Consistent with

the LTAA,10 the Ordinance defined "payroll," as "the total remuneration paid

by employers to employees . . . for services . . . performed within the City of

Jersey City; or . . . performed outside of the City of Jersey City but . . .

supervised . . . in Jersey City." Ibid.

10
See N.J.S.A. 40:48C-14 (defining "[p]ayroll" for purposes of the LTAA).

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 II.

A.

Plaintiffs contend Chapter 68 violates the Education Clause by enabling

the City to enact the Ordinance, which generates revenue used to relieve the

State of its constitutional obligation to fund a thorough and efficient

educational system as the Court ordered in its Abbott decisions. The motion

judge rejected the argument, noting that because the City faced "extraordinary

circumstances," the Legislature was justified in amending the LTAA to ensure

that Jersey City raised enough revenue for its schools and avoided any

budgetary shortfall.

Plaintiffs argue the judge erred, because revenue from the payroll tax

was not replacing Jersey City's local share under SFRA, but, as the Ordinance

itself made clear, the revenue replaced cuts in State adjustment aid. They

argue that under SFRA, a district's adequacy budget and a municipality's local

share are set by statutory formulae; the only variable to bridge any gap and

meet the State's constitutional obligations under the Education Clause is the

amount of state aid provided in a given year. In plaintiffs' view, the State is

not permitted to empower a municipality to generate aid that the State is

constitutionally obligated to provide pursuant to the Education Clause as

construed by the Abbott cases. We disagree.

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 We set some guideposts that inform our consideration of plaintiffs'

arguments. Against facial constitutional challenges, we "afford every possible

presumption in favor of an act of the Legislature." Town of Secaucus v.

Hudson Cnty. Bd. of Tax'n, 133 N.J. 482, 492 (1993) (citing Holster v. Bd. of

Trs., 59 N.J. 60, 66 (1971)); accord Strategic Env't Partners, LLC v. N.J. Dep't

of Env't Prot., 438 N.J. Super. 125, 144 (App. Div. 2014). Simply put, "the

courts do not act as a super-legislature." Newark Superior Officers Ass'n v.

City of Newark, 98 N.J. 212, 222 (1985) (citing Burton v. Sills, 53 N.J. 86, 95

(1968)). "Only a statute 'clearly repugnant to the constitution' will be declared

void." Secaucus, 133 N.J. at 492–93 (quoting Newark Superior Officers, 98

N.J. at 222–23). Reviewing courts are "not limited to the stated purpose of the

legislation and 'should seek any conceivable rational basis'" to uphold it.

Strategic Env't, 438 N.J. Super. at 145 (quoting Secaucus, 133 N.J. at 494–95).

A statute will not be found "facially unconstitutional if it operates

constitutionally in some instances." Whirlpool Props., Inc. v. Dir., Div. of

Tax'n, 208 N.J. 141, 175 (2011) (quoting Gen. Motors Corp. v. City of Linden,

150 N.J. 522, 532 (1997)).

"[T]he burden is on the party challenging the constitutionality of the

statute to demonstrate clearly that it violates a constitutional provision."

Newark Superior Officers, 98 N.J. at 222 (citing Bd. of Educ. v. Caffiero, 86

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N.J. 308, 318 (1981)). That burden is onerous. See, e.g., In re P.L. 2001,

Chapter 362, 186 N.J. 368, 392 (2006) ("[W]e will not declare void legislation

'unless its repugnancy to the Constitution is clear beyond a reasonable doubt.'"

(emphasis added) (quoting Harvey v. Bd. of Chosen Freeholders, 30 N.J. 381,

388 (1959))). These same principles apply to our review of a challenge to the

constitutionality of an ordinance. Singer v. Twp. of Princeton, 373 N.J. Super.

10, 19–20 (App. Div. 2004). Lastly, because plaintiffs challenge the

constitutionality of tax legislation, we recognize that, "in the field of taxation,

the Court has accorded great deference to legislative judgments." Secaucus,

133 N.J. at 493 (citing McKenny v. Byrne, 82 N.J. 304, 314 (1980)).

We agree with plaintiffs that the purpose of the Ordinance, enabled by

Chapter 68, was to supplement the City's revenue available for school

purposes. However, plaintiffs leap from the ineluctable conclusion that payroll

tax revenues under the Ordinance supplemented municipal, not State, revenues

to a wholly unsupportable result, i.e., that the Ordinance and Chapter 68

violate the Education Clause.

In Stubaus v. Whitman, the plaintiffs challenged the constitutionality of

a predecessor to SFRA, arguing the funding formula's "disparate tax burdens

constitut[ed] violations" of the Education Clause. 339 N.J. Super. 38, 44

(App. Div. 2001). Relying on the Court's interpretation of the Education

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Clause in Abbott's predecessor litigation, Robinson v. Cahill, 62 N.J. 473

(1973), we noted that "taxpayer equality" was "not encompassed within the . . .

constitutional mandate." Id. at 54. Because the Education Clause "does not

protect taxpayers," the plaintiffs' arguments were "more appropriately . . .

made to the Legislature." Id. at 56. In this case, the Legislature has acted; it

passed Chapter 68 to permit the City to supplement its revenues and dedicate

them for school purposes. We fail to see how plaintiffs, none of whom

represent the interest of the City's schoolchildren, are positioned to cha llenge

whether the Ordinance or Chapter 68 violates the Education Clause.

To overcome this obvious impediment, plaintiffs contend that to comply

with the Court's Abbott line of cases, the State must enforce the SFRA funding

formula without resort to other legislative remedies. They assert the Court

"made it crystal clear that . . . the State is not permitted to rely on outside

sources instead of funding its share," emphasizing that in Abbott XXII, the

Court rejected the argument "that the availability of certain non-SFRA funds

[could] be used to deflect the State's responsibility for the provision of a

constitutionally mandated, adequately funded thorough and efficient system of

education." (citing Abbott XXII, 206 N.J. at 364). A closer examination

reveals the fallacy of this argument.

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 The Court made clear early on that "what a thorough and efficient

education consists of is a continually changing concept," and that it may be

necessary for the State to supplement poorer districts' financing to address

educational disparities between districts. Abbott v. Burke, 119 N.J. 287, 303,

319–20 (1990) (Abbott II). The Court did not mandate any specific remedy

and expressly held it was ultimately the responsibility of the Legislative and

Executive branches to adopt a "comprehensive remedy." Abbott v. Burke, 149

N.J. 145, 189 (1997) (Abbott IV). The Legislature crafted such a remedy with

SFRA, leading the Court to release the State from its prior enforcement orders.

Abbott XXI, 199 N.J. at 238–39.

Abbott XXII provides no support for plaintiffs' argument. There, the

Court specifically found that the State had "made a conscious and calculated

decision to underfund the SFRA formula" in its annual appropriations, and the

alternative non-SFRA funding the State pointed to "was insufficient to fill the

gaps left by the reductions in state aid in the individual Abbott districts." 206

N.J. at 359, 365. The overall budgetary shortfall of $1.6 billion in that case

was "spread across various SFRA aid categories, including . . . [e]qualization

[a]id." Id. at 346.

Here, the purpose of expanding the payroll tax was to offset the shock

from cuts in adjustment aid to the City's school district that the Legislature

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determined were necessary to avoid continuation of historic overfunding at the

expense of other, underfunded districts. The Court's admonition in Abbott

XXII that the State could not rely on non-SFRA funds to avoid their

constitutional obligation was premised on the fact that the State was not

meeting its obligation under SFRA and was leaving former Abbott districts

underfunded, a factual premise absent here. Nothing in Abbott XXII suggests

the Education Clause prohibits the Legislature from providing a municipality

with other revenue-raising tools it may employ to supplement its share of

school costs associated with providing its children with an adequate educatio n.

B.

Plaintiffs alleged that Chapter 68 was unconstitutional special

legislation. See N.J. Const. art. IV, § VII, ¶ 9(6),(7) ("The Legislature shall

not pass any private, special or local laws" for certain purposes, including laws

"[r]elating to taxation or exemption therefrom," or "[p]roviding for the

management and control of free public schools."). The motion judge relied

heavily on our decision in Farmer, reasoning that if the prior version of the

LTAA permitted imposition of a payroll tax when the statute only applied to

Newark, adding eligibility for the City did not render the statute

unconstitutional, especially given the City's unique fiscal struggles. He noted

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Newark and Jersey City had the largest student populations in the State, and

the proliferation of PILOT agreements entered into by the City reduced its

ability to meet its "local fair share for school funding" because although the

agreements spurred development, they "depleted [the City's] property tax

revenues and [left it] struggling to fund [its] public schools."

The Court has "established a three-part test to determine whether a

statute constitute[s] special legislation." Secaucus, 133 N.J. at 494 (citing

Vreeland v. Byrne, 72 N.J. 292, 300–01 (1977)).

[T]he method of analysis is this: we first discern the
purpose and object of the enactment. We then
undertake to apply it to the factual situation presented.
Finally we decide whether, as so applied, the resulting
classification can be said to rest upon any rational or
reasonable basis relevant to the purpose and object of
the act.

[Ibid. (alteration in original) (quoting Vreeland, 72
N.J. at 300–01).]

"[T]he Legislature has wide discretion in determining the perimeters of a

classification and an adequate factual basis for the legislative judgment is

presumed to exist." Horizon Blue Cross Blue Shield of N.J. v. State, 425 N.J.

Super. 1, 18 (App. Div. 2012) (alteration in original) (quoting N.J. State Bar

Ass'n v. State, 387 N.J. Super. 24, 52 (App. Div. 2006)). Population has long

been considered a valid criterion on which the Legislature can rely in making a

statutory classification. See Twp. of Mahwah v. Bergen Cnty. Bd. of Tax'n, 98

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N.J. 268, 287 (1985) ("[U]nder the law of the State of New Jersey population

is generally accepted as a means of classification."); Newark Superior

Officers, 98 N.J. at 225 ("Statutes relating to city government classified by

population are generally upheld.").

Plaintiffs argue that the 2018 SFRA amendments resulted in aid cuts to

more than 170 school districts, some of which lost a greater percentage of their

aid than did the City. Plaintiffs contend the legislative classification was

arbitrary because only Jersey City was singled out to receive favorable

replacement aid via a payroll tax. They also contend that the prospect of any

other cities ever qualifying to benefit from Chapter 68 is remote.

To some extent, plaintiffs' argument posits an incomplete classification

scheme. The LTAA permits all municipalities with more than 200,000

residents to impose a payroll tax. Under the Vreeland test, the Legislature

reiterated this as an express purpose of Chapter 68. See Assembly Budget

Committee Statement to A. 4163 (June 18, 2018) (noting purpose of legislation

was to "allow any municipality having a population over 200,000 to impose

and collect an employer payroll tax."). The Legislature then created a sub-

classification, evidencing its intent that a municipality eligible to impose a

payroll tax, and that also met the median household income requirement, was

required to "use employer payroll tax revenues for school purposes," which

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"would help offset certain reductions in State school aid" brought about by the

SFRA amendments. Ibid. The Legislature enacted the 2018 SFRA

amendments simultaneously with Chapter 68, without which Chapter 68 would

not have gone into effect. See L. 2018, c. 68, § 4 (making Chapter 68

effective upon enactment of the SFRA amendments). In short, the two pieces

of legislation were a coordinated response by the Legislature that recognized

the drastic effects the SFRA amendments would have on the City.

Currently, it is true that no other municipality in the State is "similarly

situated" to Jersey City and Newark, which are unique with respect to the size

of their populations. Vreeland, 72 N.J. at 299. See Newark Superior Officers,

98 N.J. at 220 (upholding statute granting only mayors of cities of the first

class the power to appoint police chiefs). More directly, we have already held

"in the case of the payroll tax, there is an obvious State interest in strictly

limiting the municipalities that collect such a tax." Farmer, 329 N.J. Super. at

42. These precedents support the rationality of the population-based statutory

classification employed by Chapter 68.

To the extent a municipality is "singled out" by the median income

classification, it is Newark; yet Newark urges us to affirm the orders under

review. Newark still is permitted to continue using the revenue from its

payroll tax "for general municipal purposes," as the LTAA had authorized it

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alone to do for five decades. N.J.S.A. 40:48C-15(a). Regarding the LTAA,

we have already held that the Legislature had a rational basis to treat Newark

differently than other municipalities given Newark's long history of reliance on

the payroll tax. Farmer, 329 N.J. Super. at 46.

Newark currently does not have a median household income of $55,000

or greater. However, the wealth and income within a school district have long

been variables used by SFRA to calculate the amount municipalities must raise

through a general tax levy. N.J.S.A. 18A:7F-52. The legislative decision to

authorize a different kind of tax levy to fund schools may rationally vary

depending on district wealth, and it was not irrational for the Legislature to

decide that a municipality with a greater median income should be limited in

the permissible uses of any payroll tax imposed.

[O]ur Supreme Court has emphasized "the long
established principle of deference to the will of the
lawmakers whenever reasonable men might differ as
to whether the means devised to meet the public need
conform to the Constitution . . . [and] the equally-
settled doctrine that the means are presumptively
valid, and that reasonably conflicting doubts should be
resolved in favor of validity."

[Farmer, 329 N.J. Super. at 46 (second alteration in
original) (quoting Roe v. Kervick, 42 N.J. 191, 229
(1964)).]

It is not for us to dispute the wisdom of the Legislature's choice.

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 Finally, contrary to plaintiffs' claim, this case is distinguishable from

Secaucus, 133 N.J. at 498–99, where there was no possibility any other

municipality would ever qualify for the tax exemption at issue. Here, any

municipality that exceeds the neutral population threshold in the future is

authorized to impose the payroll tax, N.J.S.A. 40:48C-1, and whether the

school trust fund requirement is triggered will depend on the neutral median

income criterion. N.J.S.A. 40:48C-15(d)(1). Chapter 68 contained no

provision blocking the admission of other municipalities into the classificati on

scheme.

C.

Turning to the balance of plaintiffs' contentions that rely upon provisions

of our State Constitution, the urban renewal entities contend the judge erred in

dismissing claims that the Ordinance violated the Uniformity Clause. That

provides, "Property shall be assessed for taxation under general laws and by

uniform rules. All real property assessed and taxed locally or by the State for

allotment and payment to taxing districts shall be assessed according to the

same standard of value, except as otherwise permitted herein . . . ." N.J.

Const. art. VIII, §1, ¶ 1(a). By its terms, the provision concerns real property

and the "limits on the Legislature's ability to classify real property for purposes

of taxation." Gen. Motors, 150 N.J. at 526.

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 The motion judge held that because the Uniformity Clause speaks only

to the taxation of real property, the City's payroll tax did not violate this

provision. On appeal, plaintiffs appear to argue that the payroll tax violates

the Uniformity Clause because it supplements the City's property tax levy

under SFRA with funds raised from private businesses, some of whom own

real estate in the City, through the payroll tax. They contend that because not

all owners of real estate in the City suffer the burden of the payroll tax, the

substitution of tax revenue derived from the payroll tax violates the

constitutional mandate of uniformity in real estate taxation.

Plaintiffs cite no authority for the position that the Uniformity Clause

limits the State's ability to delegate authority to the City to raise revenue for its

own school district through a payroll tax on businesses operating within it.

Instead, in the context of school funding, the Court has suggested the contrary:

[T]he tax clause was not intended to say that a State
function may not be delegated to local government to
be met by local taxation . . . . [L]ocal government is
simply an arm of the State with respect to the many
State functions which the State decides shall be
performed through local government. The tax clause
does not restrict the State with respect to that decision.

[Robinson, 62 N.J. at 502.]

As a corollary argument, plaintiffs contend the payroll tax was a

"surrogate" or "substitute" real estate tax precluded by the PILOT agreement s.

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They similarly allege that the payroll tax unconstitutionally impaired their

contract rights, noting "[t]he City did not reserve the right in the financial

agreements entered into pursuant to the LTTEL to impose an additional

financial burden" on them through the payroll tax.

The motion judge held the urban renewal entities failed to establish the

PILOT payments were in lieu of anything other than property taxes collected

from assessments on improvements to real property. Because the financial

agreements had nothing to do with Jersey City's authority to impose the payroll

tax, the judge reasoned there was no connection between the Ordinance and

those financial agreements.

Plaintiffs have not pointed to any legal authority to support their claim

that PILOT agreements immunize the contracting urban renewal entities from

being subject to different, generally applicable taxes imposed, not on

improvements to real estate, but on businesses. The LTTEL does not

explicitly state or implicitly suggest that the "special financial agreements"

authorized by the statute effect anything other than financial obligations in lieu

of property taxes. Imposition of the payroll tax through enactment of the

Ordinance did not inhibit in anyway the urban renewal entities from receiving

the fruits of their financial agreements with the City.

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 Plaintiffs also contend that the court erred by dismissing their complaint

alleging that Article VIII, Section 2, Paragraph 8 of our Constitution

prohibited collection of the payroll tax. The provision at issue, adopted in

2010, states:

No contributions from employers, other than the
State, or from employees of those employers,
collected by the State entirely by means of an
assessment exclusively on, or exclusively measured
by, the wages or salaries paid by the employers to the
employees . . . shall be used for any purpose other
than providing and administering benefits to
employees and their families or dependents . . . . All
contributions collected by the State from any
employer . . . shall be dedicated solely to the purpose
of providing and administering [those] benefits . . . .
No part of the contributions, interest or income shall
be directly or indirectly transferred, borrowed,
appropriated or used for any purpose other than
providing and administering benefits pursuant to this
paragraph.

[Ibid. (emphasis added).]

The motion judge held this provision had no bearing on the payroll tax because

by its plain language, it applied only to contributions collected "by the Sta te,"

and not those collected by municipalities.

On appeal, plaintiffs claim the judge's analysis was "overly simplistic,"

because it failed to consider that Chapter 68 "authorize[d the] City to assist in

the State's circumvention of its Abbott obligations." Stated differently,

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plaintiffs contend that the City is acting as an agent of the State; therefore, the

payroll tax violated Article VIII, Section 2, Paragraph 8.

As already noted, we reject plaintiffs' claim that imposition of a payroll

tax to supplement school funding violates our Constitution. More importantly,

"[i]n ascertaining the intent of a constitutional provision, a court must first

look to the precise language used by the drafters. If the language is clear and

unambiguous, the words used must be given their plain meaning." State v.

Trump Hotels & Casino Resorts, Inc., 160 N.J. 505, 527 (1999) (citing

Gangemi v. Berry, 25 N.J. 1, 10 (1957)). We agree with the motion judge; the

meaning of the provision at issue is plain, and the constitutional prohibition

only applies to the State, not the City.

III.

Plaintiffs contend the Ordinance is ultra vires because it exceeded the

grant of legislative authority and was unconstitutionally vague. We disagree.

The motion judge held the Ordinance was not ultra vires because the

Legislature had left municipalities with discretion to define the terms to be

used in any ordinance. The judge found that the City reasonably incorporated

several definitions from Newark's ordinance, which we upheld against

constitutional challenge, and further that the City was entitled to latitude and

deference in how it implemented the tax. On appeal, plaintiffs contend the

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Ordinance exceeded the scope of the LTAA in two respects: (1) the

"supervisor provision" is so expansive that it includes employees who neither

live nor work in Jersey City and may even be located in other countries; and

(2) the Ordinance imposes penal consequences.

"[A] municipality is a creature of the Legislature, and as such is a

government of enumerated powers which can act only by delegated authority."

Inganamort v. Borough of Fort Lee, 72 N.J. 412, 417 (1977) (citing Giannone

v. Carlin, 20 N.J. 511, 517 (1956)). "Any exercise of a delegated power by a

municipality in a manner not within the purview of the governing statute is

capricious and ultra vires of the delegated powers." Giannone, 20 N.J. at 517;

accord Kress v. LaVilla, 335 N.J. Super. 400, 410 (App. Div. 2000). "Two

forms of ultra vires acts exist under the law: ultra vires acts in the primary

sense and ultra vires acts in the secondary sense." City Council of Orange

Twp. v. Edwards, 455 N.J. Super. 261, 272 (App. Div. 2018).

"Ultra vires acts in the primary sense are 'act[s] utterly beyond the

jurisdiction of a municipal corporation' and are void." Ibid. (alteration in

original) (quoting Middletown Twp. Policemen's Benevolent Ass'n Local No.

124 v. Twp. of Middletown, 162 N.J. 361, 368 (2000)). "For a municipal

decision or action to be considered ultra vires in the primary sense, the

municipality must be 'utterly without capacity to perform the act or make the

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appointment.'" Id. at 273 (quoting Maltese v. Twp. of N. Brunswick, 353 N.J.

Super 226, 246 (App. Div. 2002)).

"In contrast, an ultra vires act in the secondary sense arises from the

'irregular exercise of a basic power under the legislative grant in matters not in

themselves jurisdictional.'" Id. at 272 (quoting Middletown Twp. Policemen's

Benevolent Ass'n, 162 N.J. at 368). "[A]n act is ultra vires in the secondary

sense when the action is generally within the power of the municipality but

was carried out improperly or irregularly." Id. at 273.

Although the LTAA does not define "supervision," it does define

"[p]ayroll" to mean "the total remuneration paid by employers to

employees . . . for services . . . performed within the municipality; or . . .

outside the municipality and the place from which the services are supervised,

is in the municipality." N.J.S.A. 40:48C-14. The Ordinance adopted the same

language and further provided that services should be considered to be

"supervised from the City if an individual who either works in or is based in

the City has the right to control and direct the manner of rendition of the

[e]mployee's service, has hiring and firing responsibility and oversees the work

of such employee." Jersey City, N.J., Code § 304-18. This additional

language is clearly consistent with the common usage of the term "supervise";

plaintiffs have not demonstrated the definitional sections of the Ordinance

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were outside "the purview of the governing statute" or "ultra vires of the

delegated powers." Giannone, 20 N.J. at 517.

The LTAA states that "[a]ny ordinance adopted pursuant to this article

shall," among other things, "[p]rovide methods for enforcement of, and for the

imposition of penalties for failure to report and pay, the tax imposed," and

shall "[p]rovide a procedure for claims for refunds, and repayment of

overpayment of taxes." N.J.S.A. 40:48C-16(c) to (d). Consistent with this

legislative mandate, the Ordinance imposes "penalties . . . of up to $2000, and

the imposition of sentences of imprisonment or community service, neither of

which can exceed ninety days." Jersey City, N.J., Code § 304-19.4(e). This is

entirely consonant with the City's general police powers. N.J.S.A. 40:69A -

29(b). Because the LTAA requires a municipality to adopt an enforcement

mechanism, we fail to see how the Ordinance, which incorporates one, is ultra

vires.

We also reject plaintiffs' contention that the Ordinance is

unconstitutionally vague because it imposed "criminal consequences" for

unintended misinterpretations of its provisions. "Vagueness challenges are . . .

typically brought in contexts implicating the enforcement of criminal statutes,

and are usually based on a contention that . . . no one should be prosecuted for

violation of a statute, unless the statute provides adequate warning of the

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proscribed behavior and sufficient guidance to . . . prevent arbitrary

application[]" by law enforcement. In re Loans of N.J. Prop. Liab. Ins. Guar.

Ass'n, 124 N.J. 69, 78 (1991).

By contrast, "civil statutes in general, and economic regulations in

particular, are subject to less stringent scrutiny under the vagueness doctrine."

Ibid.; accord Visiting Homemaker Serv. of Hudson Cnty. v. Bd. of Chosen

Freeholders of Hudson, 380 N.J. Super. 596, 613 (App. Div. 2005). This is in

part "because business entities can be expected to consult legislation

considerations in advance of economic action." Ibid. "[A] commercial

regulatory statute" will be "held unconstitutionally vague only if it is

'substantially incomprehensible.'" In re Farmers' Mut. Fire Assurance Ass'n of

N.J., 256 N.J. Super. 607, 619–20 (App. Div. 1992) (alteration in original)

(quoting In re Loans, 124 N.J. at 78).

Here, the challenged provision of the Ordinance is § 304-19.4(e), which

authorizes three potential penalties for failing to provide or file necessary

records or for making a false report to "avoid the payment in whole or in part

of the payroll tax." The penalties include a monetary fine, community service,

and imprisonment up to ninety days. Ibid. The motion judge held that because

the Ordinance included imprisonment as a potential penalty, it was "penal" in

nature and therefore subject to stricter scrutiny than a civil statute. However,

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because the payroll tax attached only to employees' salaries that are subject to

federal tax withholding, and the Ordinance was consistent with the terms of

the LTAA, it was not unconstitutionally vague.

"To avoid the pitfall of vagueness, a statute must enable a person of

common intelligence to understand its essential terms." Farmers' Mut., 256

N.J. Super. at 619 (citing State v. Lashinsky, 81 N.J. 1, 17 (1979)). A statute

is facially vague only if it is "'impermissibly vague in all its application,' that

is, there is no conduct that it proscribes with sufficient certainty." State v.

Cameron, 100 N.J. 586, 593 (1985) (quoting Vill. of Hoffman Estates v.

Flipside, Hoffman Estates, Inc., 455 U.S. 489, 495 (1982)).

Plaintiffs' arguments fail to present any cogent reason why the motion

judge's analysis was wrong. No further discussion is necessary. R. 2:11-

3(e)(1)(E).

IV.

Plaintiffs contend the Ordinance and Chapter 68 violate the federal

Constitution's "Privileges and Immunities" (P&I) clause because "they

discriminate against out-of-state residents by making it more expensive to

employ them." The P&I clause states: "The [c]itizens of each State shall be

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34
entitled to all Privileges and Immunities of Citizens in the several States."

U.S. Const. art. IV, § 2, cl. 1 (emphasis added). 11

It is settled law that only "citizens" may bring a claim for alleged

violations of the P&I clause; corporations may not. See, e.g., Pembina Consol.

Silver Mining & Milling Co. v. Pa., 125 U.S. 181, 187 (1888) ("Corporations

are not citizens within the meaning of [the P & I] clause)."; accord Am.

Trucking Ass'ns. v. Larson, 683 F.2d 787, 790 (3d Cir. 1982) (the term

"citizen" in the P & I clause only applied to "natural persons" and barred a

trucking association's claim); Am. Fire & Cas. Co. v. N.J. Div. of Tax'n, 375

N.J. Super. 434, 457 (App. Div. 2005) ("[C]orporations are not held to be

'persons' to which that clause applies."). The motion judge dismissed

plaintiffs' P&I clause cause of action on these grounds, and, as to plaintiffs,

Ivan Baron and Gary Wagner, who were "natural persons" employed by two

company plaintiffs, the judge held the payroll "tax neither adversely

affect[ed]" their tax liability "nor restrict[ed] their right to employment."

As to the plaintiffs who are not natural persons or labor unions, we agree

entirely with the motion judge; they have no cognizable claim under the P&I

clause. For the first time before us, plaintiffs contend in a footnote that they

11
Plaintiffs do not rely on the separate "privileges and immunities" clause in
the Fourteenth Amendment. U.S. Const. amend XIV, § 1.

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are also representing the interests of "members of the public similarly situated"

to Messrs. Baron and Wagner, and individual members of the union plaintiffs.

We refuse to consider the argument. See Zaman v. Felton, 219 N.J. 199, 226–

27 (2014) (refusing to consider a claim raised for the first time on appeal

(citing State v. Robinson, 200 N.J. 1, 20 (2009))); Almog v. Israel Travel

Advisory Serv., Inc., 298 N.J. Super. 145, 155 (App. Div. 1997) (noting "the

raising of additional legal issues by" footnotes is inappropriate).

As to the individual plaintiffs and labor unions, we affirm the dismissal

of their P&I clause cause of action for several reasons. "[D]isadvantaged New

Jersey residents have no claim under the Privileges and Immunities Clause."

United Bldg. & Constr. Trades Council v. Mayor & Council of Camden, 465

U.S. 208, 217 (1984) (citing Slaughter-House Cases, 83 U.S. 36, 77 (1873));

accord Taylor v. Rorke, 279 N.J. Super. 63, 68 (App. Div. 1995) (holding the

P&I clause "prevents states from discriminating against out-of-state

individuals" (citing Toomer v. Witsell, 334 U.S. 385, 395 (1948))). Thus,

Wagner and the union members residing in New Jersey have no claim under

the P&I clause.

The P&I clause protects non-New Jersey residents right to pursue their

"livelihood free from economic discrimination." Salorio v. Glaser, 82 N.J.

482, 501 (1980). As the motion judge recognized, however, the payroll tax

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does not burden individual employees; employers are expressly prohibite d

from passing the burden onto their employees through deductions in salaries.

N.J.S.A. 40:48-16(e). Thus, the Ordinance does not impose a "higher tax[] or

imposition[]" on non-resident employees compared to resident employees. Id.

at 502 (citing Austin v. New Hampshire, 420 U.S. 656, 661 (1975)).

Plaintiffs seemingly understand this shortcoming, because they contend

employers are less likely to hire out-of-state residents because of the payroll

tax, and therefore out-of-state residents are economically disadvantaged

compared to New Jersey residents. However, that certainly is not borne out in

Mr. Baron's case, nor is there any other proof for the proposition. Plaintiffs'

P&I clause cause of action was properly dismissed.

V.

We address the most troublesome aspect of the appeal, i.e., whether

Chapter 68, which permits adoption of an ordinance that excludes resident

employees from the payroll calculation, and the Ordinance, which excludes

Jersey City residents from the calculation, violate the Commerce Clause of the

United States Constitution. If there is such a violation, we must also consider

whether these provisions in the LTAA and the Ordinance may be severed.

Article I, Section 8, Clause 3 of the United States Constitution provides,

in pertinent part, that Congress shall have power "[t]o regulate Commerce . . .

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among the several States." Historically, "removing state trade barriers was a

principal reason for the adoption of the Constitution" which precluded the

"notorious[ ] obstruct[ion]" that states had previously engaged in under the

Articles of Confederation. Tennessee Wine & Spirits Retailers Ass'n v.

Thomas, __ U.S. __ , __ (2019), 139 S. Ct. 2449, 2460 (2019). "The negative

or dormant implication of the Commerce Clause prohibits state taxation . . .

that discriminates against or unduly burdens interstate commerce and thereby

'imped[es] free private trade in the national marketplace.'" Gen. Motors Corp.

v. Tracy, 519 U.S. 278, 287 (1997) (alteration in the original) (quoting Reeves,

Inc. v. Stake, 447 U.S. 429, 437 (1980)). "This 'negative' aspect of the

Commerce Clause prohibits economic protectionism — that is, regulatory

measures designed to benefit in-state economic interests by burdening out-of-

state competitors." New Energy Co. v. Limbach, 486 U.S. 269, 273 (1988)

(emphasis added).

The United States Supreme Court has set forth a four-
part test in determining whether a tax can be sustained
against a Commerce Clause challenge: whether the
tax (1) is applied to an activity with a substantial
nexus to the taxing state; (2) is fairly apportioned; (3)
does not discriminate against interstate commerce; and
(4) is fairly related to the services provided by the
state.

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 [Stryker Corp. v. Dir., Div. of Taxation, 168 N.J. 138,
152 (2001) (citing Complete Auto Transit, Inc. v.
Brady, 430 U.S. 274, 282 (1977))]. 12

Plaintiffs do not assert Chapter 68 or the Ordinance fail the first prong of

the Complete Auto test, and the argument regarding prong four is limited to a

single sentence and accompanying footnote. 13 We, therefore, focus on

plaintiffs' challenges under prongs two and three of the Complete Auto test.

We do so in reverse order because "the first step in analyzing any law . . .

under the negative Commerce Clause is to determine whether it 'regulates

evenhandedly with only "incidental" effects on interstate commerce[] or

discriminates against interstate commerce.'" Or. Waste Sys., Inc. v. Dep't of

Env't Quality of Or., 511 U.S. 93, 99 (1994) (quoting Hughes v.

Oklahoma, 441 U.S. 322, 336 (1979)).

The motion judge concluded that plaintiffs failed to meet their burden of

establishing prong three of the Complete Auto test, in part because plaintiffs

conceded the tax only "indirectly violated" the dormant Commerce Clause, and

12
We hereafter refer to these as the four prongs of the Complete Auto test.
13
In Telebright Corp. v. Director, New Jersey Division of Taxation, we
refused to consider a taxpayer's Commerce Clause challenge to the
Corporation Business Tax Act as to three prongs of the Complete Auto test
because its brief addressed the issues in "one sentence in the conclusion
section" and "present[ed] no arguments in support of its contention." 424 N.J.
Super. 384, 393 (App. Div. 2012).

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precedent required a "direct burden or direct discrimination against interstate

commerce," or an explicit "commercial advantage to local businesses." He

further determined that plaintiffs "failed to make a competent showing of their

economic loss attributable to the law, as well as a discriminatory effect on

interstate commerce as a whole." The judge concluded the payroll tax did not

facially discriminate against interstate commerce because it "applie[d] evenly

to all businesses with employees in Jersey City regardless of whether the

business [was] located inside or outside the City limits."

Before us, plaintiffs contend residency exemption provisions of Chapter

68 and the Ordinance are "per se invalid" because they favor "in-state

'economic interests' over out-of-state ones." As we understand the argument,

plaintiffs claim businesses that hire non-resident employees are burdened with

the payroll tax, whereas those who hire Jersey City residents are not, and

because businesses in Jersey City are likely to draw employees from out -of-

state, such as plaintiff Baron, the payroll tax violates the dormant Commerce

Clause.

Discrimination claims under the dormant Commerce Clause require a

two-step analysis. "'[D]iscrimination' simply means differential treatment of

in-state and out-of-state economic interests that benefits the former and

burdens the latter." Or. Waste, 511 U.S. at 99 (emphasis added). "[I]f a state

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40
law discriminates against out-of-state goods or nonresident economic actors,

the law can be sustained only on a showing that it is narrowly tailored to

'advanc[e] a legitimate local purpose.'" Tennessee Wine, ___ U.S. at ___, 139

S. Ct. at 2461 (alteration in original) (quoting Dep't of Revenue of Ky. v.

Davis, 553 U.S. 328, 338 (2008)).

However, "[w]here [a] statute regulates evenhandedly to effectuate a

legitimate local public interest, and its effects on interstate commerce are only

incidental, it will be upheld unless the burden imposed on such commerce is

clearly excessive in relation to the putative local benefits." City of

Philadelphia v. New Jersey, 437 U.S. 617, 624 (1978) (quoting Pike v. Bruce

Church, Inc., 397 U.S. 137, 142 (1970)). "The crucial inquiry, therefore, must

be directed to determining whether [the statute] is basically a protectionist

measure, or whether it can fairly be viewed as a law directed to legitimate

local concerns, with effects upon interstate commerce that are only incidental."

Ibid.

Our Court has recognized that "with respect to the discrimination prong

of Complete Auto," a statute "is not facially discriminatory" if "[i]t does not

differentiate between in-state and out-of-state businesses." Whirlpool, 208

N.J. at 174; accord Ampro Fisheries, Inc. v. Yaskin, 127 N.J. 602, 614 (1992)

(concluding regulation limiting menhaden fishing did not place out-of-state

A-3097-18
41
plaintiff "at a competitive disadvantage in relation to in-state fishing

interests"). However, even if the statute does not directly regulate or

discriminate against interstate commerce, it will be a per se violation of the

Commerce Clause "when its effect is to favor in-state economic interests over

out-of-state interests." Brown-Forman Distillers Corp. v. N.Y. State Liquor

Auth., 476 U.S. 573, 579 (1986); see also, Trinova Corp. v. Mich. Dep't of

Treasury, 498 U.S. 358, 385 (1991) ("The Commerce Clause requires more

than mere facial neutrality.").

Chapter 68 permits, but does not require, that a municipality exclude its

residents from the payroll calculation for tax purposes. The Ordinance

incorporates this provision. The exclusion of Jersey City-resident employees

applies equally, however, to all employers, whether located in Jersey City,

elsewhere in New Jersey or in another state. Plaintiffs have failed to

demonstrate, beyond mere conjecture, that the payroll tax as enacted burdens

out-of-state-resident employees, i.e., that the Ordinance's effect burdens out-

of-state economic interests. In this regard, the facts here are entirely

distinguishable from those in Camps Newfound/Owatonna v. Town of

Harrison, 520 U.S. 564 (1997), a case on which plaintiffs principally rely.

In that case, the plaintiff, a charitable organization which operated a

summer camp to benefit children of the Christian Science faith, challenged a

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42
Maine statute that exempted such institutions from real estate and personal

property taxes, but provided a limited or no tax exemption to those whose

activities principally benefitted non-residents. Id. at 567–69. Ninety-five

percent of the camp's attendees were not Maine residents. Id. at 581. The

Court held that it was obvious from the "text of th[e] statute . . . that it

discriminate[d] against interstate commerce." Id. at 575–76. Further, the

Court held that although the tax was imposed on a Maine property holder, it

was of no moment, because "the burden of Maine's facially discriminatory tax

scheme falls by design in a predictably disproportionate way on out-of-

staters." Id. at 579.

Here, the exclusion of Jersey City residents from the payroll tax

calculation applies without respect to whether the employer is a resident of this

state or another. Chapter 68 and the Ordinance do not, on their face, favor

New Jersey's economic interests over another state's. Nor have plaintiffs

demonstrated that the impact of the payroll tax as enacted was either intended

to, or does, burden out-of-state residents. Chapter 68 and the Ordinance

prohibit employers from collecting the tax from their employees, and the

record lacks any proof that employers are or will be inhibited from hiring out -

of-state residents because they will have to pay a tax on their salaries. We

need not consider the second tier of the discrimination analysis in this case.

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 Addressing the second, "fair apportionment" prong of the Complete

Auto test, plaintiffs argue Chapter 68 and the Ordinance are neither internally

nor externally consistent, because they "allow Jersey City to tax the payroll of

people who work in other states . . . without any effort to ensure that it is

taxing only economic value attributable to New Jersey." The motion judge

found the payroll tax was internally consistent, noting that Newark had

virtually the same ordinance that permitted employees who worked outside the

city to be included in the computation if supervised from within the city. He

noted that the LTAA and the Ordinance limited an employer's obligation to

pay a payroll tax for a specific employee's wages only once, and that conflicts

between municipalities were to be resolved by the Tax Court in accordance

with the Ordinance.

"With regard to the second prong, there are two requirements to fair

apportionment: internal consistency and external consistency." Whirlpool,

208 N.J. at 164. "The internal consistency analysis examines the hypothetical

functioning of a tax formula, not its real[-]world effects on a taxpayer." Id. at

165 (citing Moorman Mfg. Co. v. Bair, 437 U.S. 267, 278–79 (1978)). "A

failure of internal consistency shows as a matter of law that a State is

attempting to take more than its fair share of taxes" when "allowing such a tax

in one State would place interstate commerce at the mercy of those remaining

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States that might impose an identical tax." Okla. Tax Comm'n v. Jefferson

Lines, Inc., 514 U.S. 175, 185 (1995); accord Whirlpool, 208 N.J. at 165. "To

be internally consistent, a tax must be structured so that if every State were to

impose an identical tax, no multiple taxation would result." Goldberg v.

Sweet, 488 U.S. 252, 261 (1989) (citing Container Corp. of Am. v. Franchise

Tax Bd., 463 U.S. 159, 169 (1983)).

The LTAA provides for resolution of tax disputes whenever an employer

is assessed more than one payroll tax on a specific employee. N.J.S.A.

40:48C-18. However, neither the statute nor the Ordinance provide a

mechanism to resolve disputes if two taxing entities, in different states, impose

a payroll tax on the same employee. The violation of the dormant Commerce

Clause in such circumstances is obvious. A simple hypothetical better

expresses the problem.

If a non-Jersey City resident employee of a company works in

Manhattan but is supervised by the company's Jersey City-based supervisor,

the Ordinance imposes a tax on the company for that employee. The LTAA

permits the City to do so. See N.J.S.A. 40:48C-14(b) (including with the

definition of "[p]ayroll" the amount of compensation paid to an employee

whose services are provided outside the municipality but are supervised fr om

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within the municipality). 14 If New York City, for example, were to impose a

payroll tax on the company for that same employee, the supervisor provision

of the LTAA as incorporated in the Ordinance would be internally

inconsistent, i.e., both states' identical taxes would result in multiple taxation

of that employee's services. Goldberg, 488 U.S. at 261. Because an internally

inconsistent tax is, by definition, not fairly apportioned, Whirlpool, 208 N.J. at

164, we need not address whether the LTAA and the Ordinance are externally

inconsistent before concluding that the payroll tax as enacted fails to satisfy

prong two of the Complete Auto test. What then is the appropriate remedy?

"[A] challenged statute will be construed to avoid constitutional defects

if the statute is 'reasonably susceptible' of such construction." N.J. State Bd. of

Higher Educ. v. Bd. of Dirs. of Shelton Coll., 90 N.J. 470, 478 (1982) (quoting

State v. Profaci, 56 N.J. 346, 350 (1970)); accord Gallenthin Realty Dev., Inc.

v. Borough of Paulsboro, 191 N.J. 344, 366 (2007). The question becomes

"whether a construction of the statute is possible that avoids the constitutional

problem." Whirlpool, 208 N.J. at 172 (citing State v. Miller, 170 N.J. 417, 433

(2002)). "When a statute's constitutionality is doubtful, a court has the power

to engage in 'judicial surgery' and through appropriate construction restore the

14
We refer to these portions of the Ordinance and the LTAA as the
"supervisor provisions."

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statute to health." Town Tobacconist v. Kimmelman, 94 N.J. 85, 104 (1983)

(quoting N.J. State Chamber of Com. v. N.J. Election Law Enf't Comm'n, 82

N.J. 57, 75 (1980)).

In Whirlpool, the Court limited the reach of New Jersey's "Throw-Out

Rule," a provision of the Corporate Business Tax used to apportion a multi -

state corporation's local taxable income. 208 N.J. at 150–51. By throwing out

a company's receipts that were untaxed by other states, the Throw-Out Rule

resulted in an apportionment formula that increased the taxpayer's New Jersey

tax liability. Id. at 151. The Court concluded,

that the [Rule] may operate constitutionally . . . when
applied to untaxed receipts from those states that lack
jurisdiction to tax the corporate taxpayer due to the
insufficient business activity in that state, but not
when applied to receipts that are untaxed due to a
state's determination not to have an income or similar
business activity tax.

[Ibid.]

"Faced with a tax formula that predictably operate[d] unconstitutionally in

some circumstances, [the Court] . . . interpret[ed] the statute narrowly so that it

generally operate[d] constitutionally." Id. at 173. The Court further found that

such limited construction was consistent with the legislative history of the

provision. Ibid.

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 Here, the LTAA and the Ordinance could operate constitutionally if both

provided a mechanism to ensure internal consistency in application of a

payroll tax, i.e., that both provided a procedure and remedy for an aggrieved

taxpayer to demonstrate it was being taxed twice for the same employee by

application of the supervisor provisions. Certainly, the Legislature intended

such a result. See N.J.S.A. 40:48C-18 (providing that no employer would be

subject to more than one municipality for the remuneration paid to a particular

employee). However, we are reluctant to order a specific remedy at this time .

"[A] State found to have imposed an impermissibly discriminatory tax

retains flexibility in responding to this determination." McKesson Corp. v.

Div. of Alcoholic Beverages & Tobacco, 496 U.S. 18, 39–40 (1990); see also

Tyler Pipe Indus., Inc. v. Wash. State Dep't. of Rev., 483 U.S. 232, 252–53

(1987) (noting that whenever a tax fails the internal consistency test, it is

generally left to the taxing authority to determine the exact remedy that must

be provided to aggrieved taxpayers). Often, determining what is the most

appropriate remedy to cure the constitutional infirmity "may necessitate more

of a record" than exists. Id. at 252 (quoting Bacchus Imps., Ltd. v. Dias, 468

U.S. 263, 277 (1984)).

The lack of a complete record in this case is obvious. We have no idea

whether plaintiff-businesses and other Jersey City employers actually face

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double taxation. We also do not know whether the State or the City, faced

with the prospect of our holding, would fashion another remedy, including,

possibly striking the supervisor provisions entirely. To be clear, the supervisor

provisions of the LTAA and the Ordinance, left as enacted without limitations,

violate the second prong of the Complete Auto test, and, therefore, violate the

dormant Commerce Clause of the United States Constitution. We therefore

vacate the dismissal of plaintiffs' Commerce Clause cause of action as it

pertains to the supervisor provisions, remand the matter to the trial court to

permit the parties to supplement the record and for any further proceedings

consistent with this opinion.

VI.

Plaintiffs contend the judge misapplied the standard for deciding a

motion to dismiss and placed a burden on plaintiffs to produce evidence

proving allegations of the impact of the payroll tax on their business

operations. The argument is meritless.

With the consent of all parties, the judge entertained oral argument on

plaintiffs' motion for summary judgment and defendants' motion to dismiss

with the common understanding that the court would issue dispositive rulings

on all issues because there were no facts in dispute bearing on the legal

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arguments. For example, in colloquy with the judge prior to oral argument,

plaintiffs' counsel unequivocally stated that the facial constitutional challenges

were ripe for adjudication, there were no real facts in dispute, and the "timing"

was right for a decision "on the merits today."

We agree with the State and the City that plaintiffs' now object to a

procedure they invited. See Brett v. Great Am. Recreation, Inc., 144 N.J. 479,

503 (1996) ("The doctrine of invited error operates to bar a disappointed

litigant from arguing on appeal that an adverse decision below was the product

of error, when that party urged the lower court to adopt the proposition now

alleged to be error.").

Lastly, we agree with plaintiffs that, to the extent he did, it was error for

the judge to premise dismissal of their complaint upon the failure to join

Newark as an indispensable party. "[A]bsence of an indispensable party does

not deprive the court of jurisdiction to adjudicate the issues among

the parties who were joined." Toll Bros. v. Twp. of W. Windsor, 334 N.J.

Super. 77, 91 (App. Div. 2000) (citing Raynor v. Raynor, 319 N.J. Super. 132,

144 (App. Div. 1998)); accord In re Adoption of N.J.A.C. 19:3, 19:4, 19:5 &

19:6, 393 N.J. Super. 173, 186 (App. Div. 2007).

Read together, Rules 4:28-1(a) and 4:30 grant courts authority on their

own motion to join indispensable parties when "in the person's absence

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complete relief cannot be accorded." But, these rules do not provide for

dismissal of a complaint on the merits for failure to join an indispensable party

unless it has been established that the party at issue "cannot be served with

process." R. 4:28-1(b). Nevertheless, we granted Newark's motion to

intervene on appeal, it has addressed plaintiffs' arguments, and, to the extent

there was any error, the issue is moot.

Affirmed in part; vacated in part; remanded for further proceedings

consistent with this opinion. We do not retain jurisdiction.

Further, we stay our judgment for forty-five days to permit the parties to

seek further review.

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