Public entities, however, are not liable for discretionary activities. The section that confers immunity based upon discretionary activities reads as follows:

(a) A public entity is not liable for an injury resulting from the exercise of judgment or discretion vested in the entity;

(d) A public entity is not liable for the exercise of discretion when, in the face of competing demands, it determines whether or how to utilize or apply existing resources, including those allocated for equipment, facilities and personnel unless a court concludes that the determination of the public entity was palpably unreasonable. Nothing in this section shall exonerate a public entity for negligence arising out of acts or omissions of its employees in carrying out their ministerial functions.

[N.J.S.A. 59:2-3.]

Subsection (a) concerns the “exercise of judgment or discretion” in making basic policy — the type made at the planning, rather than the operational level of decision-making. Moreover, immunity is contingent upon proof that discretion was actually exercised at that level by an official who, faced with alternative approaches, weighed the competing policy considerations and made a conscious choice.

In Birchwood Lakes Colony Club v. Medford Lakes, 90 N.J. 582, 601 (N.J. 1982) our Supreme Court acknowledged the validity of a pre-Tort Claims Act case, Barney’s Furniture Warehouse v. Newark, 62 N.J. 456, 467-68 (1973), which held that although a municipality is not liable for the gradually increasing functional incapacity of its sewer system, it remains liable for negligent operation or repairs and would be liable if in actual operation the system expels artificially collected sewage upon a claimant’s property (Barney’s Warehouse, supra, involved claims of damage by property owners whose premises were periodically flooded by water backup following rainfall. The Court concluded that “by far, the greater portion of the floodwaters . . . consists of either precipitation or back-flow of surface water. . . .” Id. at 462. The Court held there was no affirmative municipal duty to keep its storm water system abreast of municipal growth and no showing that “collected waters” were cast upon plaintiffs’ lands. Id. at 468. The court distinguished from the matter before it such cases as those of private damage resulting from lack of repair or from the connection of additional laterals to a sewer whose existing incapacity was already demonstrated, or from the casting into a sewer of “sewage beyond its capacity to conduct to the common outlet so that it must empty itself upon the private property” and the case of a common sewer outlet emptying directly on private property. It was said that in all of such instances the public body is generally held responsible.).

Accordingly, the Medford Lakes court held that a public entity will be immune from liability for claims of damages from public sewer discharges when the amount of discharge is incorporated into the plan and design “approved in advance” by the body exercising “discretionary authority to give such approval,” N.J.S.A. 59:4-6, so long as the works are thereafter operated with reasonable care and in accordance with the permit requirements.

As the Barney’s Furniture court acknowledged, the duties of the municipal authorities in adopting a general plan of drainage and in determining when and where sewers shall be built, of what size and at what level, are of a quasi-judicial nature, involving the exercise of deliberate judgment and discretion, and depending upon considerations affecting the public health and general convenience throughout an extended territory; and the exercise of such judgment and discretion in the selection and adoption of the general plan or system of drainage is not subject to revision by a court or jury in a private action for not sufficiently draining a particular lot of land. However, the construction and repair of sewers, according to the general plan so adopted, are simply ministerial duties, and for any negligence in so constructing a sewer or keeping it in repair, the municipality which has constructed and owns the sewer may be sued by a person whose property is thereby injured.

The view that liability does not attach for defects in the general plan of a municipal sewerage system is generally held. A few jurisdictions, however, have followed a minority rule to the effect that if a sewer system as established proves inadequate “to keep pace with the increasing demands upon the resources of the artificial channels it has established” it must be changed to accommodate such demands at peril of liability. See, e.g., City of Louisville v. Cope, 296 Ky. 207 (Ct. App. 1943); City of Macon v. Cannon, 89 Ga. App. 484 (Ct. App. 1954); City of Holdenville v. Griggs, 411 P.2d 521 (Okl. Sup. Ct. 1966). More frequently, however, it is held that if a sewer is adequate when constructed the municipality is not liable because of subsequent inadequacy occasioned by the growth of the municipality and the increased demands made upon the sewer. This position is qualified to the extent that liability will follow if in actual operation the system expels artificially collected sewage, whether sanitary or storm or both, into plaintiff’s home or onto his land.

Thus, flooding of a plaintiff’s property as a result of waters cast upon it out of sewer lines would be a basis for imposing liability on the public entity in control of the sewer lines through application of the doctrine of the “collected water” cases cited above. Moreover, liability attaches when damage results because of a public entity’s failure to remedy a condition of disrepair.

Accordingly, public entities remain liable for negligent operation or construction. In our State, the operation of a sewer system by a municipality is held to be the exercise of a proprietary function, and liability is determined under ordinary principles of negligence, without regard to the municipal character of the tortfeasor.

When a municipality constructs and operates a sewer system it becomes its duty to keep it in repair and free from conditions that will cause damage to private property. Its duty to keep its sewers in repair is not performed by waiting to be notified by citizens that they are out of repair, and repairing them only when the attention of municipal officials is called to the damage they have occasioned by having become dilapidated and defective. Its duty involves the exercise of a reasonable degree of watchfulness in ascertaining their condition from time to time, and preventing them from becoming dilapidated and defective. Where dilapidation and defects are the ordinary result of the use of the sewer which ought to be anticipated and could be guarded against by an occasional examination by tests or otherwise, the failure to make such examinations is a neglect of duty which renders the municipality liable for damage proximately caused thereby.

The rule of damages applicable to damage sustained to real property of a plaintiff allows recovery based upon the diminution in value of said property caused by the defendant public entity’s negligence. Additionally, evidence of the reasonable cost of repairs necessary to restore such property to its former condition may be considered in determining such loss.