Superior Court Judge Faustino J. Fernandez-Vina in Camden ruled against the petitioners, saying such an ordinance would unduly bind future Councils.
The appeals panel rejected that reasoning as invalid, but sent the matter back to the trial court to decide whether the aim of state oversight and measures, including transitional aid, to enable the cash-strapped city to function and recover might have blocked the petitioners' effort anyway.
The Metro Division has been policing the city for months. Officials have said the county force, when at full strength, will be larger than the disbanded city police thanks to savings from a shared services agreement. Critics have called the move a union-busting measure.
Dan Keashen, a spokesman for the county, said the issue of the petition was moot and the focus is on "making the city and county a safer place to live and work."
Camden City officials, in a statement, said the county force had already "paid huge dividends" by putting more officers on the street.
Anthony Valenti, the attorney for the group who filed the petition last year, said he was pleased with the ruling. But he said he was unsure what impact a favorable ruling by the trial court could have, since the city force is already dismantled.
Still, one of the residents named as defendants in the case hailed the appellate decision.
"This is a victory for us," said Eulisis Delgado, a petitioner and defendant in the case. "We knew we were right to petition the government. I'm happy it's back in the hands of the court. All we want is for the court to listen to the residents when residents speak."
The dispute dates to April, when Delgado and other activists gathered about 2,800 signatures asking Council to vote on a proposed ordinance to maintain the nearly 184-year-old city force. If the ordinance was rejected by Council, voters would get to decide.
But before a date could be set for consideration of the ordinance, city attorneys filed for an injunction and for declaring the ordinance invalid.
In June 2012, Fernandez-Vina ruled that the ordinance was invalid because it would create "an undue restraint on the future exercise of municipal legislative power," and thereby prohibited a likely referendum.
Under a state law known as the Faulkner Act, voters can propose ordinances or put them on the ballot except for certain matters, including municipal budgets. The appellate court said state law "has given voters . . . the power to restrict the legislative actions of the present governing body and its successor for three years." A voter-approved ordinance cannot be amended or repealed for three years except by another ballot question, according to the law.
But Fernandez-Vina, whom Gov. Christie in August nominated to the state Supreme Court, did not address the issue the trial court must now take up - whether the municipal recovery act intended to temporarily address the needs of financially strapped cities such as Camden and a state program that doles out money to those towns preempted the proposed ordinance.
In accepting the transitional aid, the city agreed to wean itself off state dollars and work on reducing costs.
The appeals court acknowledged that "elimination of the police force" to create a county force "was an integral part of the city's overall financial strategy," as various agreements between the city and the state have mapped out.
But the court said it did not have enough information regarding those agreements and their impact on the city's finances, and asked state officials to provide details to the lower court.