Case Title: Bi-County Development of Clinton, Inc. v. Borough of High Bridge, et al

Citation: 

Docket Number: a-46-01

State: new-jersey

Court: New Jersey Supreme Court

Date: 2002-08-05T00:00:00Z

Document:
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). Bi-County Development of Clinton (Bi-County) is the owner and developer of a 46.2 acre parcel of land located in the Township of Clinton (Township or Clinton). At the time Bi-County acquired the property, it was zoned to permit residential development of eight units per acre. In December 1986, Clinton filed its first Housing Element and Fair Share Plan (HE/FSP) with the Council on Affordable Housing (COAH). In that plan, the Township included Bi-County s property for inclusionary development. In July 1987, Bi-County initiated an exclusionary zoning builder s-remedy lawsuit, challenging Clinton s compliance with its Mount Laurel obligation. That litigation was transferred to COAH for mediation and review. Thereafter, in December 1987, the Township filed an amended HE/FSP deleting the Bi-County site as a component of its affordable housing plan. Thereafter, in September 1990, Bi-County resolved its litigation by entering into an agreement with the Township that allowed Bi-County to develop its parcel with up to 187 residential units and up to ten thousand square feet of commercial and/or office space. The Agreement further provided Bi-County the option either to seek approval for an on-site set aside for affordable housing of ten percent of the total units or, in the alternative, and at its sole discretion, Bi-County could elect to make a contribution to the Township of two thousand dollars for each of the 187 units to be approved by the Planning Board, to be used by the Township solely for the satisfaction of its Mount Laurel obligation to provide low and moderate income housing off-site. In addition, and in recognition of limited sewer capacity in the Township, the Township agreed to assist Bi-County in obtaining access and treatment capacity and to otherwise support Bi-County in its efforts to achieve sewer treatment capacity. Bi-County eventually elected to pay the development fee to the Township, in lieu of constructing lower income housing. In April 1994, the Clinton Township Planning Board granted preliminary major subdivision approval for the Bi-County development project. However, listed as one of the unresolved issues before final approval would be granted was public water and sewer capacity for the Bi-County development. After negotiations with the Township to obtain sewerage treatment capacity failed, Bi-County instituted litigation against the Township to obtain the necessary reservation of sewer treatment capacity. In January 1997, the trial court entered an order requiring the Township to reserve for the benefit of Bi-County 56,100 gallons per day of sewage treatment capacity at the Clinton Sewage Treatment Plant (STP). However, although that litigation resolved the issue of transmitting sewage from the Bi-County development to the Clinton STP, Bi-County subsequently sought an alternative plan to avoid construction of a new sewer line along Route 31 as it originally had planned. Thus, Bi-County sought access to the State sewer conveyancing system that eventually runs to the Borough of High Bridge sewage conveyancing system that ultimately empties into the Clinton STP. Bi-County was unsuccessful in its efforts to obtain access to the High Bridge sewer system. Thus, Bi-County filed an action seeking declaratory and injunctive relief against High Bridge, the Clinton Township Sewerage Authority, and the State of New Jersey. Bi-County alleged that the only alternative to achieve public water and sewage capacity for the development would be by constructing an entirely new pumping station on its property and a new force main line that would parallel the High Bridge line to a connection point in the Town of Clinton. Bi-County further claimed that that alternative would be unduly costly ($676,830), time consuming, and unnecessarily duplicative. In comparison, it asserted that the cost to connect to High Bridge s system would be only $13,750. However, High Bridge submitted an expert report indicating that costly improvements would have to be made to accommodate the anticipated flow from Bi-County s development. Bi-County further asserted that it was an inclusionary development and that, as such, High Bridge had an obligation to eliminate any undue cost generating practices pursuant to the FHA and COAH regulations. High Bridge asserted that the Bi-County development was not entitled to any such preferential treatment and further that since Bi-County is building in Clinton, High Bridge had no obligation to minimize its costs. In September 1999, the trial court granted Bi-County s motion for summary judgment and ordered High Bridge to permit Bi-County access to its sewage conveyancing system. In reaching its ruling, the court held that Bi-County s development qualified as an inclusionary development and that the costs of constructing a new line constituted undue expenses because they [were] unnecessary. The trial court further found that health and safety issues were not implicated. The Appellate Division reversed the grant of summary judgment, concluding that a developer that pays money into a municipality s affordable housing fund in lieu of constructing units affordable to low and moderate income households does not have a right to connect into the sewer system of an adjoining municipality that has elected to reserve the use of its system for its own residents. The panel further found that to compel High Bridge to allow Bi-County access to its system would not facilitate the construction of lower income housing, but rather would only lower the costs and thereby increase the potential profits from a development of single family homes and a commercial building. Finally, the Appellate Division concluded that Bi-County s obligation to pay into Clinton s affordable housing fund did not transform its proposed development into an inclusionary development that can assert a right to compel an adjoining municipality to allow the developer to connect into its municipal sewer system. The Supreme Court granted Bi-County s petition for certification. HELD : Bi-County Development s payment of a development fee to the Township of Clinton in lieu of constructing affordable housing does not justify disturbing the general rule that a municipality is not obligated to provide access to its sewer system to residents of a neighboring municipality. 1. As a general rule, a municipality that provides services for the benefit of its residents is under no obligation to extend its services beyond its borders. (pp. 21-28) 2. Developing municipalities in New Jersey are constitutionally required to provide a realistic opportunity for the development of low and moderate income housing, and every municipality has an affirmative obligation to remove unnecessary cost-producing requirements and restrictions that are barrier to the construction of their fair share of lower income housing. (pp. 28-30) 3. Developer fees are among the types of devices or methods municipalities may consider, in addition to mandatory set-asides and density bonuses, to meet their fair share obligations. (pp. 30-33) 4. Since COAH s regulations on their face apply to the cost generating restrictions only of the municipality seeking substantive certification and the benefit of cost avoidance relates to ordinances within the municipality where the inclusionary site is located, the Court need not resolve whether the Bi-County development is an inclusionary development for purposes of benefiting from COAH s cost generating regulations. (pp. 33-37) 5. The payment of a development fee, either by commercial developers, non-inclusionary residential developers, or by the owners of inclusionary residential sites in the form of in lieu payments, does not have a sufficient nexus to the actual production of low income housing to justify infringing on another municipality s right to restrict access to its sewer system. (pp. 38-40) 6. Compelling circumstances should exist in order to justify, under Mount Laurel principles, disturbing the general rule that a municipality may exclude another municipality or its residents from using or connecting to its sewer system. That general rule will be disturbed only in the case of developments that substantially and directly serve important regional and environmental interests. (pp. 40-41) As modified, judgment of the Appellate Division is AFFIRMED. JUSTICE VERNIERO has filed a separate dissenting opinion in which JUSTICE LONG joins. Justice Verniero believes that the Court s holding limits a municipality s flexibility in addressing its Mount Laurel obligations. He further believes that High Bridge has a regional obligation to assist in a neighboring inclusionary development so long as such assistance presents no detriment or burden to High Bridge or to its taxpayers. Thus, Justice Verniero would permit Bi-County to connect to the High Bridge system so long as that connection does not burden that system or otherwise affect High Bridge s current or future needs, and would remand for a full hearing to explore those issues. CHIEF JUSTICE PORITZ and JUSTICES COLEMAN, LaVECCHIA, and ZAZZALI join in JUSTICE STEIN s opinion. JUSTICE VERNIERO has filed a separate dissenting opinion in which JUSTICE LONG joins. v. BOROUGH OF HIGH BRIDGE, a municipal corporation of the State of New Jersey and STATE OF NEW JERSEY, Defendants-Respondents, and CLINTON TOWNSHIP SEWERAGE AUTHORITY, a New Jersey Public Utility, Defendants. Argued February 11, 2002 Decided August 5, 2002 On certification to the Superior Court, Appellate Division, whose opinion is reported at 341 N.J. Super. 229 (2001). Carl S. Bisgaier argued the cause for appellant (Flaster/Greenberg, attorneys; Mr. Bisgaier and Sharon A. Morgenroth, on the briefs). Valerie K. Bollheimer argued the cause for respondent (Purcell, Ries, Shannon, Mulcahy & O'Neill, attorneys). Daren R. Eppley, Deputy Attorney General, submitted a letter in lieu of brief on behalf of respondent State of New Jersey, Department of Environmental Protection (David N. Samson, Attorney General of New Jersey, attorney). William P. Malloy, Deputy Attorney General, submitted a brief on behalf of amicus curiae, Council on Affordable Housing (David N. Samson, Attorney General of New Jersey, attorney; Douglas K. Wolfson, Assistant Attorney General, of counsel). The opinion of the Court was delivered by STEIN, J. The issue before the Court is whether a developer that pays money into a municipality s affordable housing fund instead of constructing housing units affordable to lower income households may compel an adjoining municipality to allow it to connect into its municipal sewer system. The Law Division granted summary judgment in favor of plaintiff, Bi-County Development of Clinton, Inc. (Bi-County), holding that Bi-County s proposed development qualified as an inclusionary development and that the refusal of defendant, Borough of High Bridge (High Bridge), to permit access to its sewer system had a cost generating impact on the development. Therefore, it determined that High Bridge was obligated to permit Bi-County access to its sewer system. The Appellate Division reversed the judgment of the trial court and held that payment of a development fee in lieu of constructing low and moderate income housing does not entitle Bi-County to connect into a neighboring municipality s sewer system. We affirm the judgment of the Appellate Division. We hold that payment of a development fee in lieu of constructing affordable housing does not justify disturbing the general rule that a municipality is not obligated to provide access to its sewer system to residents of a neighboring municipality. The court found that there was a very substantial cost differential to Bi-County if it were required to construct a new line as opposed to using the State line and the High Bridge system. The court also found that the significant costs of constructing a new line were undue expenses because they are unnecessary. Health and safety issues are not implicated. Finally, the court concluded: The record demonstrates that the refusal of the defendants to cooperate with plaintiff to enable the Bi-County property to connect to the State line and the High Bridge conveyancing system would have an undue cost-generative impact on this inclusionary development. Because the court found that the High Bridge system had the capacity to accommodate the anticipated sewerage flow from the Bi-County development, the court concluded that there was no reason for High Bridge not to cooperate with Bi-County. On appeal, High Bridge argued that (1) Bi-County was not an inclusionary developer entitled to preferential treatment simply because it made a monetary contribution in lieu of actually constructing affordable housing; and (2) that the trial court erred in determining that there were no contested facts concerning the capacity of the High Bridge system to accommodate increased flow from the Bi-County development. The Appellate Division reversed the trial court s summary judgment in favor of Bi-County, concluding that a developer that pays money into a municipality s affordable housing fund in lieu of constructing units affordable to low and moderate income households does not have a right to connect into the sewer system of an adjoining municipality that has elected to reserve the use of its system for its own residents. Bi-County v. Borough of High Bridge, 341 N.J. Super. 229, 231 (2001). That determination made it unnecessary for the court to decide whether there was a genuine issue of material fact concerning the capacity of the High Bridge system to accommodate the flow from the Bi-County development or whether the denial of access to the system imposed undue costs upon Bi-County. Id. at 235. The court observed that to compel High Bridge to provide access to its system to Bi-County would not facilitate the construction of lower income housing. Id. at 237. Rather, it would only lower the costs and thereby increase the potential profits from a development of single family homes and a commercial building. Ibid. The court noted that although Bi-County s payment of a development fee to Clinton presumably will assist in the construction of lower income housing somewhere, this does not mean that Bi-County s development should be considered a residential development for lower income households [that] may demand that a municipal government minimize its development fee and costs. Id. at 237-38. The court reasoned that if we were to hold that this payment entitles Bi-County to connect its proposed sewer system into High Bridge s sewer system, any other developer who pays a development fee to a municipal affordable housing fund pursuant to a development fee ordinance could claim similar entitlement. Id. at 239. The court further noted Bi-County s reliance on this Court s statement in Holmdel, that development fees are the functional equivalent of mandatory set-aside schemes authorized by Mount Laurel II and the FHA. Id. at 239-40 (quoting Holmdel, supra, 121 N.J. at 576). However, the Appellate Division explained that that reliance was misplaced because the Court s statement was intended to explain its conclusion that the FHA impliedly authorizes the adoption of a development fee ordinance as part of a municipal Mount Laurel compliance plan. Id. at 240 (referring to Holmdel, supra, 121 N.J. at 566-80). The Appellate Division emphasized that the Court did not say that any developer [who] pays a development fee pursuant to such an ordinance has the same right to insist upon the elimination of any undue cost generating expenses as an actual developer of lower income housing, and characterized a development for which the developer has paid a fee in lieu of constructing low income housing as a non-inclusionary residential property. Ibid. (citing Holmdel, supra, 121 N.J. at 571-73). The court further stated that Bi-County s interpretation of Holmdel distorts the Supreme Court s rationale for upholding the validity of development fees and the Mount Laurel doctrine. Ibid. Finally, the Appellate Division found that pursuant to the Fair Housing Act, N.J.S.A. 52:27D-304(f), and COAH regulation N.J.A.C. 5:93-1.3, the designation of a residential property as an inclusionary development requires the construction of housing units affordable to moderate and low income households. Id. at 240-41. Therefore, the court concluded that Bi-County s obligation to pay into Clinton s affordable housing fund does not transform its proposed development into an inclusionary development that can assert a right to compel an adjoining municipality to allow the developer to connect into its municipal sewer system. Id. at 241. This Court granted Bi-County s petition for certification. Bi-County Development of Clinton, Inc. v. Borough of High Bridge, 170 N.J. 387 (2001). C Subsequent to oral argument, this Court requested the New Jersey Attorney General s Office to submit an amicus curiae brief on behalf of COAH addressing the following questions: Whether COAH considers a project to be inclusionary when payment are made by the developer in lieu of actually constructing affordable housing, and Whether COAH views the FHA and its implementing regulations as permitting an inclusionary development to demand access to a neighboring community s water/sewer system if such access will result in substantial cost savings while presenting no public health or safety concerns to the neighboring community. COAH responded that it considers a project to be inclusionary when payments are made by the developer in lieu of constructing affordable housing for the purposes of its administration of Mount Laurel obligations. However, COAH responded that it lacked the jurisdiction to decide whether an inclusionary developer in one municipality can compel another municipality to allow access to its sewer system and declined to take any position on that issue. We also note that in April 2002, High Bridge filed a motion to dismiss the appeal. High Bridge claimed that the appeal had been rendered moot because Bi-County had sold the subject property on January 10, 2002, and that therefore Bi-County lacked standing in the litigation. Bi-County asserts that its contract of sale provides for additional compensation if it prevails in the matter at hand, and that accordingly it retains a financial stake in the litigation. The Court denied High Bridge s motion to dismiss the appeal, concluding that Bi-County s contractual right to additional compensation if it prevails prevents the sale from rendering the appeal moot. This opinion does not attempt to establish the outer limits of that responsibility. That is not necessary for this matter. Suffice to say, however, that as a minimum, in this case, Englishtown has shown no credible reason for outright denying plaintiffs access to water and sewer service by connection to proximate and cost effective Englishtown lines in order to practically enhance a most important public policy concern. There is no obvious practical detriment, disadvantage or burden to Englishtown weighed against its obligation to facilitate and assist the housing need of the most needy in the region of which it is a necessary part. . . . the focus shall be whether the design of the inclusionary development is consistent with the zoning ordinance and the mandate of the Fair Housing Act regarding unnecessary cost generating features. Municipalities shall be expected to cooperate with developers of inclusionary developments in granting reasonable variances necessary to construct the inclusionary development. 1. The combined impact of requirements that cumulatively prevent an inclusionary development from achieving the density and set-aside necessary to address the municipal fair share. Examples of such requirements include but are not limited to: building set-backs, spacing between buildings, impervious surface requirements and open space requirements; 2. Requirements to provide oversize water and sewer mains to accommodate future development without a reasonable prospect for reimbursement; 3. Excessive road width, pavement specifications and parking requirements; 4. Excessive requirements for sidewalks and paved paths; 5. Excessive culvert and pumping station requirements; and 6. Excessive landscape, buffering and reforestation requirements. In the Comment and Response period following the publication of the proposed amendments to N.J.A.C. 5:93-10, COAH suggested that the benefits of that rule also were available to developers who paid in-lieu fees. COMMENT 279: The relief available under subchapter 10 should be available to all developers who participate in a housing plan, not just inclusionary developers with low and moderate income units on their properties. There is no reason for excluding developers who have agreed to pay a contribution rather than actually constructing low and moderate income housing units. RESPONSE: Developers that are paying a fee that is the equivalent of a low or moderate income unit are entitled to the relief discussed in subchapter 10. [ 25 N.J.R. 5782, Comment 279, Dec. 20, 1993.] Thus, although COAH s own regulatory definition of inclusionary development does not include developers who pay a fee in lieu of constructing affordable housing, COAH asserts that such developers nevertheless are entitled to the benefits of the protections against unnecessary cost generating features contained in COAH s regulations. We recognize the principle of judicial deference accorded COAH as an administrative agency, and its broad powers in implementing the Mount Laurel doctrine and the goals of the FHA. See In re Warren Township, 132 N.J. 1, 26-27 (1993). We also recognize that we have had occasion to invalidate COAH s exercise of its regulatory power under the FHA. Id. at 31. However, COAH concedes that it lacks jurisdiction to decide whether an inclusionary developer in one municipality can compel another municipality to allow access to its sewer infrastructure and capacity. COAH s cost generation regulations, as COAH recognizes in its brief, do not expressly deal with the claimed cost-generating practices of contiguous municipalities or sewer authorities outside the Council s jurisdiction. To the contrary, only the cost-generating features of municipal ordinances of the municipality that has a fair share plan under review by the Council are the focus of these rules which are drafted under the authority of N.J.S.A. 52:27D-314(b). COAH regulations on their face apply to the cost generating restrictions only of the municipality seeking substantive certification. The benefit of cost avoidance relates to ordinances within the municipality where the inclusionary site is located. COAH asserts that inclusionary developments, including developments for which the developer pays a fee in lieu of constructing affordable housing, are entitled to relief from such restrictions. But COAH acknowledges that it lacks statutory authorization to grant relief from cost generating restrictions imposed by a neighboring municipality. Accordingly, we need not resolve in this appeal whether the Bi-County development is an inclusionary development for purposes of benefiting from COAH s cost generating regulations. We acknowledge that COAH already has made that determination. But because COAH s restrictions on cost generating local ordinances expressly apply, for Bi-County s purposes, only to Clinton Township and, as COAH concedes, are of no force and effect with regard to High Bridge, those restrictions do not assist us in resolving the issue at the root of this appeal. BI-COUNTY DEVELOPMENT OF CLINTON, INC., a New Jersey Corporation, Plaintiff-Appellant, v. BOROUGH OF HIGH BRIDGE, a municipal corporation of the State of New Jersey and STATE OF NEW JERSEY, Defendants-Respondents, and CLINTON TOWNSHIP SEWERAGE AUTHORITY, a New Jersey Public Utility, Defendants. VERNIERO, J., dissenting. The Court holds that Bi-County, a developer that has agreed to pay up to $374,000 toward the construction of low- and moderate-income housing units, cannot connect to High Bridge s sewer line. In so doing, it forces Bi-County to spend in excess of $600,000 on an alternative sewer connection without any determination concerning whether the connection to High Bridge s sewer system would place a burden on that system or on the municipality s taxpayers. More significant than requiring the needless expenditure of funds by this one developer, the Court s holding limits a municipality s flexibility in addressing its Mount Laurel obligations. I respectfully dissent. The critical element of our Mount Laurel jurisprudence is that municipalities must undertake an affirmative act to make it realistically possible for lower income housing to be built. S. Burlington County N.A.A.C.P. v. Township of Mount Laurel, 92 N.J. 158, 261 (1983) (Mount Laurel II). This Court consistently has encouraged creativity in the ways in which municipalities can meet their affordable housing obligations. Eschewing rigid mandates, we have stated: There are several inclusionary zoning techniques that municipalities must use if they cannot otherwise assure the construction of their fair share of lower income housing. Although we will discuss some of them here, we in no way intend our list to be exhaustive; municipalities and trial courts are encouraged to create other devices and methods for meeting fair share obligations. NO. A-46 SEPTEMBER TERM 2001 ON CERTIFICATION TO Appellate Division, Superior Court BI-COUNTY DEVELOPMENT OF CLINTON, INC., a New Jersey Corporation, Plaintiff-Appellant, v. BOROUGH OF HIGH BRIDGE, a Municipal corporation of the State of New Jersey and STATE OF NEW JERSEY Defendants-Respondents. DECIDED August 5, 2002 Chief Justice Poritz PRESIDING OPINION BY Justice Stein CONCURRING OPINION BY DISSENTING OPINION BY Justice Verniero