A Hudson County judge ruled in favor of Jersey City’s new payroll tax on Friday, dismissing a lawsuit challenging the tax that was filed by a group led by real estate developers Mack-Cali and LeFrak.

The developers and the other plaintiffs failed to demonstrate that the ordinance approving the tax should not be enforced as written, Hudson County Superior Court Judge Peter Bariso says in his 61-page decision. The ordinance is “valid as a matter of law,” Bariso wrote.

The payroll tax — a 1 percent levy on businesses — was approved by the City Council last year and went into effect on Jan. 1. It is intended to offset cuts to state education aid that local officials believe could devastate the 30,000-student school district.

Bariso’s ruling refers to the slashed state aid as a “monetary crisis” and says if the tax is not imposed, the district could see teacher layoffs, increased classroom sizes, cut bus routes and more.

"Taxing businesses in a city that needs to make up for a school funding deficit is rational,” the ruling says.

Jersey City Mayor Steve Fulop called the ruling “a great win for Jersey City and our schools” on Twitter Friday. A spokesman for the plaintiffs could not immediately be reached to comment.

Both sides expect there to be an appeal.

State lawmakers approved a bill last summer allowing the city to collect the tax, at about the time the state approved a separate bill that eliminates a form of state school funding that would have brought Jersey City $175 million this year. The revenue is earmarked exclusively for public schools.

The removal of the aid will happen over time, with the cut for the 2019-2020 year equaling about $27 million. The district had a $660 million budget for 2018-19.

The plaintiffs sued the city and the state in December, arguing: the state law allowing the payroll tax is unconstitutional “special legislation,” which refers to bills that excludes towns it should include; the city law discriminates against non-residents by exempting the wages of city residents; the local ordinance violates the dormant commerce clause of the U.S. Constitution; and more. Bariso’s ruling dismisses all of these arguments.

When Bariso heard arguments in the case on March 8, he indicated he had largely made up his mind except on the plaintiffs’ argument that taxes only the wages of non-residents is unconstitutional. In Friday’s ruling, the judge argued that it is not.

“Applying the tax to non-residents only helps compensate the city for costs associated with the volume of people commuting into Jersey City daily who do not pay property taxes,” he wrote. "Employees commute into Jersey City daily (and) take advantage of the safety brought by a vibrant police and fire presence and use the city’s roads, water, and resources.”

Terrence T. McDonald may be reached at tmcdonald@jjournal.com. Follow him on Twitter @terrencemcd. Find The Jersey Journal on Facebook.