## Facts

- Medford Township’s sewer system became overburdened in the 1970s and early 1980s, prompting the New Jersey Department of Environmental Protection (DEP) to impose sewer-connection bans and require capacity improvements.
- In 1983, the Township adopted Ordinance 1983-10 to fund expansion of treatment capacity and Ordinance 1983-11 to allocate newly created sewer capacity and help finance the expansion.
- Ordinance 1983-11 permitted owners to purchase sewer connection (allocation) permits in advance of final land-use approvals; permit fees escalated annually.
- The ordinance granted the Township an option to repurchase unused permits, stating the option would be guided by public health, safety, and welfare; proper cost allocation; and allowance of moderate growth, subject to the Township’s control in the best interests of the Township and its residents.
- The Township notified owners of new developments, including First Peoples Bank, of the opportunity to purchase permits; the Bank did not purchase permits while they were available.
- The Township sold 1,770 of 1,800 permits, reserved 30 for emergencies, and suspended further issuances once capacity was allocated.
- After the permits were exhausted, the Bank applied for sewer permits for its property; the Township denied the applications due to lack of remaining capacity.
- The Bank sued, claiming the ordinance was invalid for lack of adequate standards and unlawful as applied because it enabled arbitrary allocation of sewer capacity.

## Issues

1. Whether the sewer allocation ordinance was facially invalid because the Township’s discretionary repurchase authority was guided by allegedly vague or insufficient standards, constituting improper delegation and permitting arbitrary action.
2. Whether the ordinance was unconstitutional or otherwise unlawful as applied to the Bank when the Township denied permits after capacity had been fully allocated under the program.

## Decision

- The Supreme Court of New Jersey affirmed the lower courts and upheld Ordinance 1983-11.
- The Court held the ordinance was facially valid because it contained sufficient guiding standards and served legitimate governmental objectives tied to public health, orderly growth, and cost allocation.
- The Court held the ordinance was lawfully applied to the Bank; denial of the Bank’s late-filed applications after exhaustion of capacity was not arbitrary, capricious, or discriminatory.

## Legal Principles

- A municipal sewer-capacity allocation and financing ordinance is valid if it is reasonably related to legitimate public purposes, including protection of public health, safety, and welfare, and growth management consistent with infrastructure limits.
- Discretionary municipal authority (including repurchase or reallocation mechanisms) is permissible when guided by ascertainable standards; public-welfare and growth-management criteria may be sufficient standards in this context.
- A landowner who declines to participate in an available allocation program and applies only after capacity is exhausted generally cannot require the municipality to reallocate scarce capacity absent proof of arbitrary, selective, or bad-faith administration.

## Conclusion

The court sustained Medford’s sewer-capacity permit program, concluding that its discretionary elements were constrained by adequate standards and that denying the Bank’s applications—submitted only after the Township had lawfully allocated all available capacity—was a non-arbitrary application of a valid growth-and-infrastructure control measure.


First Peoples Bank of N.J. v. Township of Medford, 126 N.J. 413, 599 A.2d 1248 (N.J. 1991)