CHARLES J. FEMMINELLA, JR. v. BOARD OF TRUSTEES, PUBLIC EMPLOYEES RETIREMENT SYSTEM

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3950-03T23950-03T2

CHARLES J. FEMMINELLA, JR.,

Appellant,

v.

BOARD OF TRUSTEES, PUBLIC

EMPLOYEES RETIREMENT SYSTEM,

Respondent.

_______________________________

 

Argued: October 25, 2005 - Decided:

Before Judges Axelrad and Levy.

On appeal from a Final Decision of the Board of Trustees of the Public Employees' Retirement System, 2-10-172307.

David P. Skand argued the cause for appellant (Dembo & Saldutti, attorneys; Mr. Skand, on the brief).

Susanne Culliton, Deputy Attorney General, argued the cause for respondent (Peter C. Harvey, Attorney General, attorney; Patrick DeAlmeida, Assistant Attorney General, of counsel; Ms. Culliton, on the brief).

PER CURIAM

Petitioner Charles Femminella, Jr. appeals from the final decision of the Board of Trustees of the Public Employees' Retirement System (Board), reversing the Administrative Law judge's (ALJ) determination. The Board determined that petitioner's salary earned while employed as an assessor for the Borough of Kinnelon to perform its reassessment was not creditable for pension purposes for his veteran's retirement allowance because it was granted in anticipation of retirement and was temporary. On appeal, petitioner contends the Board erred in rejecting the ALJ's factual findings that petitioner held two entirely separate positions with the municipality and that the reassessment position was not granted in anticipation of petitioner's retirement, and the ALJ's conclusion of law that the salary met the definition of base pay or compensation under N.J.S.A. 43:15A-6(r) and N.J.A.C. 17:2-4.1. We reverse.

Petitioner was born on August 10, 1938. He worked for the Division of Taxation, Department of Treasury from l966 through l969. At that time petitioner became a certified tax assessor and began working for various municipalities as a tax assessor, often simultaneously on a part-time basis. He first became enrolled in PERS on November l9, 1975. In 1990 petitioner sent the Division of Pensions and Benefits a letter seeking to be classified as a veteran based on his service in the Marine Corps.

On October 1, 1975, petitioner became employed as Kinnelon's tax assessor. He performed the statutory duties of an assessor, N.J.S.A. 54:4-23, working an average of two days a month, for the most part during the first and third Tuesdays of the month from 7:00 p.m. to 9 p.m. In 1999, his annual salary was approximately $20,000. Petitioner maintained that position until his retirement on April l, 2001.

Independent of his position as part-time assessor in several municipalities, in l976 petitioner formed Certified Valuations, Inc. (Certified), a company that performs revaluations and real estate appraisals primarily for municipalities. On November 4, 1999, Certified bid on a project to perform the court-ordered revaluation of Newark; it was the highest bidder. Subsequently, Newark rejected all the bids, and in March 2000, petitioner received a letter from the Division of Taxation, the agency overseeing the revaluation, that it was considering awarding the project to Certified. A lower bidder filed suit, which it withdrew in July 2000. In August 2000, Certified signed a multi-million dollar contract with Newark to perform the revaluation, which included about 46,000 properties, including the Newark airport, and was an enormous undertaking.

Around March l999, Kinnelon was ordered by the Morris County Tax Board, with the approval of the Division of Taxation, to perform a revaluation or reassessment for the 200l tax year. The borough's prior revaluation had been performed in l986. Kinnelon had the option of hiring an outside firm, as it had done in l986, or performing the reassessment in-house. The mayor approached petitioner in the summer of l999 and requested he perform the reassessment in-house because petitioner was already familiar with the borough and its properties and it would result in a cost-savings. Petitioner submitted a cost estimate to perform this service, which was acceptable to the borough, and the county board approved him as qualified to perform the reassessment.

The governing body passed a salary ordinance for the additional position, commencing January 1, 2000. In 2000 petitioner received an annual salary for this position of $47,700. This was in addition to his regular part-time position of tax assessor/appraiser, for which he earned a salary of $22,173 in 2000. About fifteen staff and field people were hired and additional computer equipment was purchased by the borough to implement the reassessment of approximately 3,600 properties. The reassessment for the 2001 tax year was essentially completed and on the books by mid-February 2001.

In July 1999, petitioner requested an estimate of retirement benefits, identifying a retirement date of May l, 200l. The estimate reflected pension membership credit as of his termination date to be thirty-two years and six months. Based on his veteran's status, petitioner would receive an enhanced pension benefit upon attainment of thirty-five years of service calculated on the final year of his salary rather than an average of the last three years of salary. N.J.S.A. 43:15A-48; N.J.S.A. 43:15A-61(d). He purchased an additional thirty-six months (corresponding to his three years of Marine Corps service) by payment of a $250 deposit on March 20, 2000, and the balance of $69,000 in August 2000.

On September 8, 2000, petitioner applied for retirement from PERS. According to petitioner, the Newark revaluation contract that Certified had just been awarded was extremely time-consuming and required extensive supervision. Petitioner therefore felt it necessary to leave his municipal positions, not only in Kinnelon, but in Pequannock and Dover as well, to devote his efforts to implement a successful revaluation in Newark. The certifying officer of Kinnelon submitted a statement that petitioner's base salary for the preceding twelve months had been $69,873, and detailed the salary and job duties for each of the separate positions.

On December 6, 2000, David Pointer, the PERS' Chief of the Bureau of Retirements recommended the Board not find petitioner's salary for the reassessment position to be pensionable because the new position was a special assignment for a temporary period of time, the new duties appeared to be the same as his duties as assessor, and the large increase in salary for the new position was in anticipation of petitioner's retirement. He noted his recommendation would decrease petitioner's veteran's benefit from about $8,308 per month to about $5,554 per month. On December 22, 2000, the Board approved petitioner's retirement effective January 1, 2001, but did not credit his reassessment salary for pension purposes.

On January 10, 2001, petitioner appealed this determination, and in February the matter was transmitted to the Office of Administrative Law as a contested case. Petitioner continued performing both positions for Kinnelon through March 31, 2001.

On August 19, 2003, the ALJ heard the testimony of petitioner and Pointer, and reviewed affidavits submitted by Glenn L. Sisco, the mayor of Kinnelon, and Ralph Meloro, IV, the administrator of the Morris County Tax Board. As the affidavits were not noted in our prior recitation of facts, we will reference their content at this time.

The mayor explained the reason for the borough's decision to solicit petitioner to perform an in-house reassessment and the benefit derived from that appointment:

To comply with the order we considered the expense of hiring an outside firm and decided against it mainly because of [petitioner's] unique knowledge of the Borough and the revaluation process. . . . [Petitioner] performed his duties expertly, without even depleting the entire budget appropriated for this service. The Borough experienced a significant benefit by utilizing [petitioner's] unique experience which result[ed] in a cost-savings to its residents.

The mayor further explained the process and the reason the borough appointed petitioner to a separate position to perform the revaluation rather than paying him overtime or additional remuneration in his capacity as assessor/appraiser:

The revaluation of an entire municipality is an enormous undertaking, far beyond the regular duties of the municipality's appointed tax assessor.

The tax assessor's duties are set by statute, and an assessor is vested with quasi judicial powers. Accordingly, a municipality does not have the power to order its tax assessor to take on any additional duties, such as those which would be associated with a revaluation.

. . . .

Because the duties pertaining to this process were not part of [petitioner's] regular duties as tax assessor/appraiser, he submitted [a] cost estimate to perform this service.

. . . .

Since the duties associated with this revaluation could not be added to his existing position of tax assessor/appraiser, [petitioner] was given an additional appointment as assessor.

The county board administrator also certified to the difference in job duties between a municipal assessor and the person or company that performs a municipal revaluation or assessment:

It is the normal practice of municipalities performing such revaluations to hire an outside individual or entity to perform the revaluation, in addition to maintaining a tax assessor.

This is done for three reasons. First, tax assessors hold a public office whose duties are specifically set forth in statute. They are appointed to four-year terms, and no additional duties can unilaterally be added by the municipality which employs them. This is so because the statute which creates this office vests it with quasi-judicial functions.

Second, revaluations require an immense amount of work. Even if revaluation duties could be added to the tax assessor's position, these duties would double or triple the work load of the individual.

Third, most individuals employed as tax assessors are not qualified to perform revaluations. . . .

[Petitioner] is, however, qualified to perform such revaluations and was approved by the Director of the Division of Taxation to perform the revaluation of Kinnelon. The services he provided with regard to this revaluation were services beyond his job requirement. They were in addition to his normal obligations as Kinnelon's tax assessor.

Petitioner's testimony further elaborated upon the differences between his duties as a part-time tax assessor and performing the borough-wide reassessment. As a part-time assessor, petitioner: (1) put-together an out-of-assessment list; (2) spoke to taxpayers when they sought information about the valuation of their property; (3) handled applications for farmland assessments; and (4) assessed other properties for improvements that do not require a certificate of occupancy, such as swimming pools. As to the reassessment, petitioner testified that:

[t]here's a tremendous difference and the difference that you have to inspect every property in town and that's a big job . . . You also have to deal with the taxpayers. Answered letters go out and that's a lot of phone calls, a lot of appointments. So you hire people to do it, you just can't do it yourself.

Petitioner further testified he had no intention of retiring either when he accepted the position to perform Kinnelon's borough-wide revaluation or when he requested the pension estimate from PERS. He claimed he did not make this decision until almost a year later when his firm was awarded the contract for the Newark revaluation and he realized how labor-intensive the job was going to be. The lucrative contract also placed him in a much better financial position. This was consistent with the borough's perspective, as certified by the mayor that

[a]t no time during the process which led to [petitioner's] appointment as assessor for the revaluation, did he ever indicate any intention to retire. Neither myself nor the Town Council were aware that [petitioner] had any interest in retiring until long after he had been appointed as assessor for the revaluation.

Following the hearing, the ALJ made findings of fact, consistent with the recitation herein, and analyzed the relevant statutes, regulations and case law to determine petitioner's creditable service. Under the pertinent statute, "'compensation' means the base or contractual salary, for services as an employee, which is in accordance with established salary policies of the member's employer for all employees in the same position. . . ." N.J.S.A. 43:15A-6r. The employee's compensation, however, "shall not include individual salary adjustments which are granted primarily in anticipation of the member's retirement or additional remuneration for performing temporary or extracurricular duties beyond the regular workday or the regular work year." Ibid.

The regulations provide that a member's compensation "creditable for retirement . . . shall be limited to base salary, and shall not include extra compensation." N.J.A.C. 17:2-4.1. "Base salary" is "the annual compensation of a member . . . in accordance with contracts, ordinances, resolutions or other established salary policies of the member's employer for all employees in the same position . . . which is paid in regular, periodic installments in accordance with the payroll cycle of the employer." N.J.A.C. 17:2-4.1(a)1. The "extra compensation" excluded from the definition is "individual salary adjustments which are granted primarily in anticipation of a member's retirement or as additional remuneration for performing temporary duties beyond the regular workday or work year." N.J.A.C. 17:2-4.1(a)2.

The regulations identify, for illustrative purposes, thirteen forms of compensation considered to be "additional" and therefore noncreditable, which in relevant part are:

ii. Pay for extra work, duty or service beyond the normal workday, work year (for 10 month employees) or normal duty assignment;

vii. Individual retroactive salary adjustments where no sufficient justification is provided that the adjustment was granted primarily for a reason other than retirement;

viii. Individual adjustments to place a member at the maximum of his or her salary range in the final year of service where no sufficient justification is provided that the adjustment was granted primarily for a reason other than retirement;

ix. Increments or adjustments granted for retirement credit; and

xiii. Any form of compensation which is not included in a member's base salary during some of the member's service and is included in the member's base salary upon attainment of a specified number of years of service.

[N.J.A.C. 17:2-4.1.]

The ALJ concluded that petitioner was entitled to pension credit for his service as the assessor to perform Kinnelon's reassessment and, as such, his salary for that position was pensionable. In thus concluding, the ALJ made credibility assessments and found the formulation of the position of assessor to perform the reassessment was not done in contemplation of petitioner's retirement. She stated:

Since the County Tax Board had to approve of Mr. Femminella's appointment to the position, as well as the re-assessment plan, collusion between the municipality and the petitioner to increase his retirement benefits would have been more difficult. More importantly, I FIND the petitioner's testimony, that he was just checking into his retirement status and benefits, when he made his earlier pension inquiries, to be credible. I also FIND credible his statements that he could not afford to retire, at the time he took on the assessor position to reassess Kinnelon. On the town's side, there was no evidence presented that the salary that the petitioner received in the "assessor" position was an inducement to retire. Mayor Sisco stated that Mr. Femminella never expressed any interest in retiring at the time of his appointment and the town would have preferred that he stay on to complete the reassessment. This situation is not analogous to Donald G. Wilson v. Board of Trustees of the Police and Fireman's Retirement System, 322 N.J. Super. 477 (App. Div. 1998), where the issue was whether a municipality's policy of permitting a police officer's longevity payment to be included in his base salary, at the employee's option, following twenty years of employment, created a pension creditable benefit. In the Wilson case, the longevity payment was an inducement to retire. In this matter, it appears that the municipality was unaware of any desire by Mr. Femminella to retire, and in fact did not want him to retire. There was no testimony presented that indicated that Mr. Femminella was given the position of assessor to handle the re-assessment as an inducement to retire. It seems clear that, while the petitioner may have longed to retire, that wish did not become a reality until he obtained the "windfall" contract to do the re-assessment of Newark. That contract did not become a reality until August 2000, well after he accepted the assessor position in Kinnelon.

The ALJ further concluded the fact that this new position was temporary and would only last until the reassessment was completed and tax appeals resolved, did not render it non-creditable. In thus concluding, she relied upon our decisions in Rokos v. Dept. of Treas., 236 N.J. Super. 174, 183 (App. Div. 1989) and Cortese v. Bd. of Tr. of PERS, 338 N.J. Super. 607, 611 (App. Div. 2001), where we held that the statutory bar of compensation for "temporary duties" does not refer to a temporary position, rather it precludes pensionability for the performance of "temporary duties" beyond the regular work day or the regular work year. In Rokos we found that a municipal court judge's taking on a pilot position as a presiding judge was creditable service. In discussing the issue of extracurricular and temporary duties, Judge Pressler stated:

it seems clear to us both from the statutory reference to duties "beyond the regular work day or the regular work year" and the regulatory list of examples . . . that the legislative intendment in the use of the term extracurricular was essentially to prohibit creditability for overtime, special assignments and the like.

[Rokos, supra, 236 N.J. Super. at 182.]

The ALJ explained her factual findings based on the credible evidence presented and her legal conclusions as follows:

As tax assessor/appraiser, Mr. Femminella was responsible to re-evaluate individual properties that had been improved and [for] calculating new property taxes. His position, which occupied two days per month, did not envision reassessing every property inside and out, both residential and commercial, in the town and handling the tax appeals that flowed from the reassessments. In addition, the position of assessor required the petitioner to devote close to five days per week to the new endeavor. These were not additional duties added to an already existing position of tax assessor/appraiser. I FIND that this was, in fact, a new position. According to the cases cited and the statutes[] excluding temporary duties from pension eligibility, does not apply to a temporary position. In addition, based on case law, the holding of two positions does not exclude one from pension credit for each position. As in the Chapel case, the two positions were not dependent on one another. Kinnelon did not have to use the services of its tax assessor/appraiser to do the re-assessment of the town. They chose to use the services of the petitioner, because he knew the town and it was fiscally sound to employ him "in house." Therefore, the two distinct positions were pension eligible. The fact that one of the positions, that of "assessor" was temporary is of no moment.

In rejecting the ALJ's decision, the Board found petitioner failed to meet the burden of proving the salary he received as assessor for performing Kinnelon's reassessment met the definition of base pay under the statute and regulations; therefore, his increased salary of $47,700 was not deemed creditable for pension purposes. The Board cited to what it considered to be inaccurate findings of fact by the ALJ, stating "[t]he most significant element that the ALJ did not factor into her determination was that the Petitioner's veteran status enabled him to receive benefits based exclusively on his final year of employment. Had Petitioner's temporary duties ceased and his salary returned to that of a part-time assessor, his pension benefit would have been substantially reduced." The Board disagreed with the ALJ's reliance on Rokos, and concluded the job petitioner was performing during the revaluation was temporary in nature and a special project, and thus was non-pensionable extra compensation. It further concluded that petitioner's request for a quotation of benefits in July 1999 and his subsequent purchase of military service evidenced an intent to retire.

We are cognizant of the Board's concern with "disrupting the funding mechanism and actuarial soundness of the [pension] system," Wilson, supra, 322 N.J. Super. at 483, particularly in view of the projected veteran's retirement benefit of almost $3,000 a month that petitioner would receive if the salary for the reassessment assessor's position was deemed to be pensionable. We are convinced, however, that the Board erred in disregarding the ALJ's factual findings which were supportable by the record. As we held in Cavalieri v. Bd. of Trs. of PERC, 368 N.J. Super. 527, 534 (App. Div. 2004),

[w]hen an ALJ has made factual findings by evaluating the credibility of lay witnesses, the Pension Board may no longer sift through the record anew to make its own decision, which will be affirmed if it is independently supported by credible evidence." (citations omitted). After the 2001 APA amendment, in order to reverse such a factual finding by an ALJ, the agency head must explain why the ALJ's decision was not supported by sufficient credible evidence or was otherwise arbitrary. N.J.S.A. 52:14B-10(c); S.D. v. Div. of Med. Assistance & Health Servs., 349 N.J. Super. 480, 485, 793 A.2d 871 (App. Div. 2002).

We find the Board did not, and in our view, could not adequately explain why the ALJ's findings were inaccurate and not supportable by the record. In fact, for the most part, what the Board noted as inaccurate was not so, and its purported "accurate" findings were merely conclusory statements that neither logically follow nor have any bearing on the issue. For example, the first finding of fact the Board challenged was #18, where the ALJ found "[t]he borough had the option of seeking an outside firm or individual to do the evaluation and soliciting RFPs, bid, hiring a company directly, or doing the re-evaluation in house." The Board stated as error:

(a) a finding that the re-evaluation could be done "in house." While it is true that Mr. Femminella was already employed by the Borough of Kinnelon, both the position and duties of the tax re-evaluation required both temporary and additional job duties (finding #18).

The Board also challenged the ALJ's finding #22 that the mayor approached petitioner to perform the reassessment in-house because there would be cost savings. The Board stated as error:

(c) there was no evidence presented that there would be a cost savings by hiring Mr. Femminella personally as opposed to an outside company such as his own re-evaluation company, Certified Valuations, Inc. (finding #22).

Contrary to the Board's assertions, the mayor, county administrator and petitioner all stated that the borough-wide assessment could be performed in-house by petitioner because of his qualifications and familiarity with the properties in the town. Moreover, the uncontroverted evidence presented by Mayor Sisco was that there was a cost savings in hiring petitioner, who did not even deplete the entire budget appropriated for the reassessment service. Additionally, petitioner pointed out there would be no overhead and profit if he performed the services in-house. Petitioner also testified he was under the impression, based on a memorandum from the Division of Taxation and conversations with its representative, that there may have been an appearance of impropriety for Kinnelon to hire his company to perform the reassessment because of his position as a township official. The Board never disputed this impression or presented any evidence of the cost of hiring Certified as opposed to petitioner in his individual capacity.

Furthermore, contrary to the Board's assertion, the ALJ did factor into her determination that petitioner would receive an enhanced benefit based on his additional salary during the final year of his employment. But that is not a reason to disqualify the increased salary from petitioner's pension if it meets the definition of contractual salary. The ALJ specifically found petitioner's testimony to be credible that he had no intention of retiring when he took the second position at Kinnelon because he was in debt and could not afford to retire at that time, and it was not until he received the contract for the Newark revaluation that he made the decision to retire from municipal service. The mayor's uncontroverted certification corroborated that statement. The ALJ did not disregard petitioner's pension inquiries in l998 and l999, but after assessing petitioner's credibility in light of all the evidence in the record, she was satisfied with his explanation that he was informed he had to list some date in order to get a quotation. Nor did petitioner's purchase of military service after receiving the l999 statement, under the totality of the circumstances, undermine his position. We are satisfied there was sufficient credible evidence in the record to support the ALJ's finding that petitioner's increased salary in the borough by virtue of his additional position as assessor for the 2001 reassessment was not granted primarily in anticipation of his retirement.

We are also convinced the record supports the ALJ's legal conclusion that the salary petitioner received for this position was not "additional remuneration for performing temporary duties beyond the regular work day or work year." We discern no error in her analysis and reliance on the cases of Rokos, Cortese and Chapel. The record clearly demonstrates that petitioner held two separate positions in the borough, neither of which was dependent on the other. Petitioner, a certified tax assessor since l969, detailed at length the duties of each position. His duties as Kinnelon's part-time tax assessor/appraiser pursuant to N.J.S.A. 54:4-23 are separate and distinct from those necessary to perform and implement a borough-wide reassessment of all 3600 properties. Additional credentials are required for the reassessment job and the individual or entity hired must be approved by the Director of the Division of Taxation. As noted by the county tax board administrator, "most individuals employed as tax assessors are not qualified to perform revaluations." Even though petitioner possessed such additional qualifications, the governing body could not have assigned these additional duties to petitioner in his capacity as Kinnelon's part-time tax assessor. They were services beyond his statutory job requirement. Moreover, even though a borough-wide reassessment is a temporary job in that it is performed for a specific tax year and is not mandated on a regular basis, the expertise and quantum of work necessary to implement such program is far beyond that which could be classified as "overtime" or a "special assignment" to be given to a part-time assessor. Thus the ALJ had ample basis in fact and law to conclude that this was a new position, rather than additional duties added to petitioner's existing position of tax assessor/appraiser. Accordingly, petitioner's salary as assessor for implementing the reassessment is creditable for pension purposes.

 
Reversed.

The terms "revaluation" and "reassessment" are used interchangeably throughout the record although they are technically different procedures. The Dictionary of Real Estate Appraisal, 235, 248 (4th Edition, 2002). These differences are immaterial to this opinion.

The filing date for tax appeals for the 200l tax year is April l, 2001. See N.J.S.A. 54:3-21. Hearings before the county board and Tax Court are scheduled after that date.

In October l998, when he turned sixty, petitioner had decided to "test[] the waters" and submitted a request for a retirement estimate, identifying a planned retirement date of December 31, 1998. He subsequently submitted "a few" other requests.

Chapel v. Bd. of Trs. of PERS, 258 N.J. Super. 389 (App. Div. 1992).

When petitioner retired, he apparently had thirty-seven years and one month in the pension system. We were advised at oral argument that there was a mathematical error by Pension and Benefits in its l999 statement as to the amount of petitioner's service time, so he purchased more military time than was needed to reach the thirty-five year threshold for veteran's benefits. As the Board's attorney noted, however, petitioner's benefit will be calculated on 37/55 times his final salary.

(continued)

(continued)

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A-3950-03T2

November 16, 2005