Holmdel Builders Ass'n v. Township of Holmdel

Page 182

232 N.J.Super. 182

556 A.2d 1236

HOLMDEL BUILDERS ASSOCIATION, Plaintiff-Respondent, v. TOWNSHIP OF HOLMDEL; the Township Committee of Holmdel and the Planning Board of the Township of Holmdel,

Defendants-Appellants.

NEW JERSEY CHAPTER OF the NATIONAL ASSOCIATION OF INDUSTRIAL AND OFFICE PARKS, Plaintiff-Respondent, v. TOWNSHIP OF SOUTH BRUNSWICK in the County of Middlesex, a

municipal corporation of the State of New Jersey, the

Township Committee of the Township of South Brunswick, the

Planning Board of the Township of South Brunswick and the

Zoning Board of Adjustment of the Township of South

Brunswick, Defendants-Appellants.

NEW JERSEY BUILDERS ASSOCIATION, Plaintiff-Respondent and Cross-Appellant, v. The TOWNSHIP OF CHESTER in the County of Morris, a municipal

corporation of the State of New Jersey and the

Mayor and Council of the Township of

Chester, Defendants-Appellants

and Cross-Respondents.

CALTON HOMES, INC., Plaintiff-Respondent, v. TOWNSHIP OF MIDDLETOWN, a municipal corporation, and Township Committee of the Township of Middletown,

Defendants-Appellants.

Superior Court of New Jersey Appellate Division.

Argued Jan. 18, 1989.

Decided March 30, 1989.

Eugene A. Iadanza and Ronald Lee Reisner, for defendants-appellants Tp. of Holmdel and Tp. Committee of Holmdel (Gagliano, Tucci, Iadanza and Reisner, attorneys, Eugene A. Iadanza, Long Branch, of counsel, Shaun R. Schlich, on the briefs).

Dowd & Reilly, Red Bank, for defendant-appellant Planning Bd. of Tp. of Holmdel (Bernard M. Reilly, New Brunswick, on the brief).

Joseph J. Benedict, for defendants-appellants Tp. of South Brunswick and Tp. Committee of the Tp. of South Brunswick (Benedict and Altman, attorneys), New Brunswick, David Mask, for appellant Planning Bd. of the Tp. of South Brunswick (McGimpsey and Cafferty, attorneys, Somerset, Joseph J. Benedict, New Brunswick, and Thomas J. Cafferty, Somerset, on the joint brief).

Alfred L. Ferguson, for defendants-appellants and cross-respondents, Tp. of Chester and Mayor and Council of the Tp. of Chester (McCarter & English, attorneys, Alfred L. Ferguson of counsel and on the brief with Gary T. Hall, Newark).

Bernard M. Reilly, New Brunswick, for defendants-appellants, Tp. of Middletown and Tp. Committee of the Tp. of Middletown (Dowd & Reilly, attorneys, Red Bank, William F. Dowd, Edison, on the brief).

Henry A. Hill, for plaintiffs-respondents and cross-appellants (Brener, Wallack & Hill, attorneys, Henry A. Hill on the briefs with Thomas F. Carroll, III, Steven H. Merman and Mitchell Newman, Princeton).

Stephen Eisdorfer, Asst. Deputy Public Advocate, of amicus curiae New Jersey Dept. of the Public Advocate (Alfred A. Slocum, Public Advocate of New Jersey, attorney, Stephen Eisdorfer, on the briefs).

Ralph J. Kmiec, Mun. Atty., on behalf of intervenor Tp. of Cherry Hill (Ralph J. Kmiec, Cherry Hill, on the briefs).

Before Judges ANTELL, DREIER and HAVEY.

The opinion of the court was delivered by

HAVEY, J.A.D.

In these actions in lieu of prerogative writs, consolidated for the purpose of this appeal, we are called upon to decide whether a municipality may exact development fees as a condition to constructing residential and nonresidential units within the municipality. Each of the challenged ordinances provide that the fees shall be paid by developers into an affordable housing trust fund, utilized by the municipality to satisfy its Mt. Laurel II obligation. ¹ Specifically, the issue raised is whether or not such ordinances have been authorized by the Legislature under the Municipal Land Use Law (MLUL), N.J.S.A. 40:55D-1, et seq., the Fair Housing Act (Act), N.J.S.A. 52:27D-301, et seq., or the municipality's general police power, N.J.S.A. 40:48-1 and N.J.S.A. 40:48-2. We must also determine whether an ordinance requiring a mandatory set-aside of affordable units as a condition to residential subdivision approval must provide for a compensating benefit, by density bonus or other zoning incentive.

The four ordinances challenged here were adopted by the Townships of Chester, South Brunswick, Middletown and Holmdel. In separate actions, each trial court declared the ordinance before it facially invalid, each holding that the ordinance constituted a revenue-raising device which had no legislative authority. ²

Although the issues raised by these consolidated appeals are similar, it is necessary to describe briefly the components of each ordinance.

CHESTER TOWNSHIP ORDINANCE

Chester Township's ordinance imposes a development fee on all new commercial and residential construction, except developments which provide low or moderate-income housing. Issuance of a certificate of occupancy is conditioned upon payment of the fee. The fee is paid into a fund designed to (1) provide technical assistance to small lot owners to encourage them to construct low-cost housing; (2) permit the township itself to develop low-cost housing; (3) aid the township in managing low-cost housing programs, and (4) provide for grants, subsidies or loans in satisfaction of its Mt. Laurel II obligation. The amount of the fee varies depending upon the size of the project, ranging from 25cents to 75cents per square foot of the unit or units being constructed.

Plaintiff in the Chester litigation, New Jersey Builders Association, is a trade organization consisting of more than 2,500 residential and commercial developers doing business statewide. Prior to commencement of the action, Chester Township had collected over $200,000 in fees from plaintiff's members. Plaintiff has cross-appealed the order of the trial court dismissing its demand for a refund on behalf of its owners.

SOUTH BRUNSWICK TOWNSHIP ORDINANCE

South Brunswick's ordinance also imposes a development fee on all new residential and nonresidential development, with exceptions not here pertinent. The fee must be paid as a condition to subdivision or site plan approval, and is computed based on square footage, ranging from 10cents to 15cents per square foot for residential development, and 25cents to 50cents per square foot for nonresidential development. The declared purpose of the ordinance was to receive contributions into a fund to permit rehabilitation of substandard housing by the municipality in order to provide its fair share of affordable housing. Plaintiff is an association of developers and owners of nonresidential property doing business throughout the State.

MIDDLETOWN TOWNSHIP ORDINANCE

Middletown's ordinance provides that all new major residential subdivision and site plan applications must set aside 7% of the development's total dwelling units for lower income housing. On tracts other than those zoned specifically for inclusionary development, a developer may make a cash contribution to the affordable housing trust fund in lieu of constructing the affordable units. All nonresidential developers are required to pay a development fee into the fund. For residential construction, the fee ranges from 80cents to $1.80 per square foot, depending upon total gross floor area. The nonresidential development fee is based on a complex formula, using various "coefficients." The intended purpose of the ordinance is to permit the township to participate in regional contribution agreements, offer grants for the rehabilitation of existing structures and allow the township itself to build affordable housing. Plaintiff is a contract purchaser of a large tract of land situate within the municipality.

HOLMDEL TOWNSHIP ORDINANCE

Prior to 1986, the residentially-zoned land in Holmdel designated R-40A permitted a maximum density of .8 dwelling units per acre. In 1986, the governing body passed on first reading an amendment to the ordinance, creating an R-40B zone, affecting specific parcels originally zoned R-40A. The R-40B zone downgraded density from .8 to .4 units per acre. However, developers were given the option of building at a density of .6 units per acre by agreeing to pay a fee equal to 2.5% of the sales price of the residential units into the municipality's housing trust fund.

Various property owners filed a statutory protest against the zoning change. See N.J.S.A. 40:55D-63. Also, the planning board had various technical objections to the ordinance. Nevertheless, the governing body adopted the ordinance in December 1986 and plaintiff, an association of property owners and builders, responded by filing the present action. Plaintiff not only challenged the development fee, it also asserted that the reduction in density from .8 to .4 units per acre was not a valid exercise of the zoning power, and that the ordinance was adopted in a procedurally improper manner. The trial court essentially invalidated all of the ordinance, concluding first that the development fee was an invalid revenue-raising device, and second that reducing density and then permitting a density increase upon payment of a development fee constituted an abuse of the township's zoning power. The court characterized Holmdel's actions as a "municipal slight-of-hand."

The challenged ordinances were adopted in response to our Supreme Court's pronouncements in So. Burl. Cty. N.A.A.C.P. v. Tp. of Mt. Laurel, 67 N.J. 151, 174, 336 A.2d 713 (1975), app. dis. sub. nom. Township of Mount Laurel v. Southern Burlington County NAACP, et al., 423 U.S. 808, 96 S.Ct. 18, 46 L.Ed.2d 28 (1975) (Mt. Laurel I ) and Mt. Laurel II, supra, 92 N.J. at 260-261, 456 A.2d 390, that municipalities must adopt land use regulations which create a realistic opportunity for the construction of low and moderate income housing. Mt. Laurel II set forth a number of techniques available to municipalities in order to meet their obligation, including removing cost-generating restrictions not essential to the general welfare, obtaining available governmental subsidies, and utilizing incentive zoning and mandatory set-asides. 92 N.J. 265-270, 456 A.2d 390. The court held that use of such inclusionary devices ...