Opinion
DOCKET NO. A-0200-14T1
01-06-2017
SB BUILDING ASSOCIATES, L.P., SB MILLTOWN INDUSTRIAL REALTY HOLDINGS, L.L.C. and ALSOL, CORP., Plaintiffs-Appellants, v. PLANNING BOARD OF THE BOROUGH OF MILLTOWN and BOROUGH OF MILLTOWN, Defendants-Respondents. and BORAIE DEVELOPMENT, L.L.C., Defendant/Third-Party Plaintiff-Respondent, v. MILLTOWN FORD AVENUE REDEVELOPMENT AGENCY, Third-Party Defendant.
Stephen M. Eisdorfer argued the cause for appellants (Hill Wallack L.L.P. and Berger & Bornstein, L.L.C., attorneys; Mr. Eisdorfer, of counsel and on the briefs; Cameron W. MacLeod, on the briefs). Donna M. Jennings argued the cause for respondents The Borough of Milltown and Milltown Ford Avenue Redevelopment Agency (Wilentz, Goldman & Spitzer, P.A., attorneys; Ms. Jennings, of counsel and on the brief; Richard J. Byrnes, on the brief). Marotta & Garvey, attorneys for respondent Planning Board of the Borough of Milltown, joins in the brief of respondent Borough of Milltown and Milltown Ford Avenue Redevelopment Agency.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R.1:36-3. Before Judges Espinosa, Rothstadt, and Currier. On appeal from Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-7215-13. Stephen M. Eisdorfer argued the cause for appellants (Hill Wallack L.L.P. and Berger & Bornstein, L.L.C., attorneys; Mr. Eisdorfer, of counsel and on the briefs; Cameron W. MacLeod, on the briefs). Donna M. Jennings argued the cause for respondents The Borough of Milltown and Milltown Ford Avenue Redevelopment Agency (Wilentz, Goldman & Spitzer, P.A., attorneys; Ms. Jennings, of counsel and on the brief; Richard J. Byrnes, on the brief). Marotta & Garvey, attorneys for respondent Planning Board of the Borough of Milltown, joins in the brief of respondent Borough of Milltown and Milltown Ford Avenue Redevelopment Agency. The opinion of the court was delivered by ROTHSTADT, J.A.D.
Plaintiffs SB Building Associates, L.P. (SBBA), SB Milltown Industrial Realty Holdings, L.L.C. (SBMIRH), and Alsol Corporation (Alsol) appeal from the Law Division's July 28, 2014 judgment dismissing without prejudice their complaint in lieu of prerogative writs that they filed against defendants Planning Board of the Borough of Milltown (Board), Borough of Milltown (Milltown), and Boraie Development, L.L.C. (Boraie). Milltown is one of the few municipalities in New Jersey to maintain a municipal electric utility. Boraie was designated by Milltown as the redeveloper of plaintiffs' property pursuant to a plan it had adopted earlier. The complaint sought to invalidate a condition imposed by the Board to its approval of Boraie's development plan that required that Boraie pay "fair share contributions for off-tract improvements to [Milltown's] infrastructure," including its electric utility facilities. The Law Division dismissed the complaint after a bench trial because, although it observed that the requirement for contribution to the electrical utilities facilities was "definitely lawful," it determined that the complaint was "premature" and should not have been filed "until such time as final approval" was granted by the Board. We disagree and reverse.
On appeal, the parties contend that the issues raised by the complaint were not premature and should have been decided by the court. They argue that we should exercise original jurisdiction and determine the purely legal issues raised in the pleadings. We agree. The parties' dispute was ripe for resolution by the Law Division because it did not entail any need for the development of any facts and required only the determination of a purely legal issue — the legality of a condition imposed by the Board with its approval of Boraie's development plan. See Comm. to Recall Robert Menendez from the Office of U.S. Senator v. Wells, 204 N.J. 79, 99 (2010)(citation omitted).
For the same reason, we agree with the parties that in the interest of judicial economy we should exercise original jurisdiction in this matter. See R. 2:10-5. "[R]esort to original jurisdiction is particularly appropriate to avoid unnecessary further litigation, as where the record is adequate to terminate the dispute and no further fact-finding or administrative expertise or discretion is involved, and thus a remand would be pointless because the issue to be decided is one of law and implicates the public interest." Price v. Himeji, LLC, 214 N.J. 263, 294 (2013) (quoting Vas v. Roberts, 418 N.J. Super. 509, 523-24 (App. Div. 2011)).
The facts developed in the record are generally not disputed and can be summarized as follows. Plaintiffs own nearly twenty-two-and-a-half contiguous acres of land in Milltown (Site). In 2001, pursuant to the Local Redevelopment and Housing Law (LRHL), N.J.S.A. 40A:12A-1 to -49, Milltown designated the Site as an area in need of redevelopment, and enacted an ordinance creating the Ford Avenue Redevelopment Agency (Agency) as the entity "responsible for the clearance, planning development and redevelopment of [the Site]." Milltown, N.J., Code ch. 2, art. VII, § 2-53.1(d). In 2002, it passed another ordinance adopting the Milltown Ford Avenue Redevelopment Plan for the Ford Avenue Redevelopment Area (Plan). The Agency subsequently selected Boraie as the redeveloper of the Site, and the two entered into a redevelopment agreement (Agreement) in May 2004.
See Milltown, N.J., Code ch. 31, § 31-4. The full text of the Revised General Ordinances of the Borough of Milltown are available online. Milltown, N.J., Code ch. 1- to -34, http://clerkshq.com/default.ashx? clientsite=Milltown-nj (follow the link to the respective chapter roman numeral in the left hand column).
Milltown, N.J., Code ch. 31, § 31-1 (citing Milltown, N.J., Ordinance 02-1120 § 1 (Mar. 15, 2002)).
That same year, the Agency was renamed the Milltown Ford Avenue Redevelopment Agency. Milltown, N.J., Code ch. 31 § 31-4.
The Plan was amended by Milltown, N.J., Ordinance 04-1185 (Aug. 23, 2004) in August 2004, Milltown, N.J., Code ch. 31, § 31-7, and the Agency and Boraie executed an amendment to the Agreement in November 2005.
In September 2006, Boraie submitted an application to the Board for preliminary and final major site plan and subdivision approval. Before a decision was reached on the application, plaintiffs filed an action in lieu of prerogative writs in the Law Division against defendants, the Agency, and others, challenging the application and seeking declaratory and injunctive relief. That action resulted in the Law Division dismissing all claims, except plaintiffs' demand for a builder's remedy, and the entry of a judgment ordering "Milltown to amend [the P]lan to provide for a specific number of affordable units," based on the court's finding that the Plan failed to satisfy affordable housing obligations. The court did not, however, grant a builder's remedy.
"[A] 'builder's remedy' suit was a scheme devised by the Court in [S. Burlington Cty. NAACP v. Twp. of Mount Laurel, 92 N.J. 158 (1983),] 'for the consistent and hopefully expeditious resolution of litigation.'" Fair Share Hous. Ctr., Inc. v. Zoning Bd. of Hoboken, 441 N.J. Super. 483, 487 n.2 (App. Div. 2015) (quoting In re Adoption of N.J.A.C. 5:94 & 5:95 by the N.J. Council on Affordable Hous., 390 N.J. Super. 1, 17 (App. Div.), certif. denied, 192 N.J. 71 (2007)), certif. denied, 224 N.J. 246 (2016).
Applicable to this appeal, the court's decision in the earlier action specified:
The cost of improving the infrastructure (i.e., water, sewer, electric) may be borne by [Boraie] upon the proviso that Milltown and [Boraie] enter into a reimbursement agreement whereby Milltown is to reimburse [Boraie] a pro[-]rata share of costs which are not directly related to the redevelopment project.
[(emphasis added).]
Furthermore, the court's order stated in pertinent part:
[Boraie] shall be responsible only for its pro rata share of the cost of any improvements to infrastructure (i.e., water, sewer, electric) that are not directly related to the redevelopment project and which may benefit other users. The entire cost of improving the infrastructure necessary to support the [redevelopment p]roject may be borne by [Boraie] upon the proviso that [Milltown] . . . and [Boraie] enter into a reimbursement agreement whereby [Milltown] is to reimburse [Boraie] a pro[-]rata share of the costs which are not directly related to the redevelopment project; the terms of such
an agreement are to be mutually agreed upon and incorporated into the amended . . . [A]greement.
[(emphasis added).]
In June 2012, Milltown revised the Plan "to comply with the [court's] written [decision]." The revised Plan detailed Boraie's obligation for on-site and off-site infrastructure improvements. It stated in pertinent part:
Milltown, N.J., Code ch. 31, § 31-7(c)(4) (citing Milltown, N.J., Ordinance 12-1354 (June 2012)).
The required pro-rata share of off-tract improvements for electric, roadway, water and sewer, as determined by the appropriate governmental entity, shall be paid by the Redeveloper.
The requirements of [Milltown, N.J., Code ch. 22-1 to -40.5], Electrical Service, as may be amended, relating to electric service, shall be met by the Redeveloper, consistent with the foregoing paragraph regarding pro-rata share.
The terms of any agreement relating to utility costs shall be incorporated either into the . . . Agreement or a separate Development Agreement with the Borough.
[(emphasis added).]
Under Milltown, N.J., Code ch. 22, § 22-39.15(a), the distributor, defined as Milltown "or any of its committees or departments involved in the distribution of electric service within the Borough," id. at § 22-1, is authorized to "require contributions toward its investment and may establish such minimum charges and facilities charges as may be equitable under the circumstances where . . . [l]arge or special investment is necessary for the supply of service."
The Agency and Boraie amended the Agreement on February 14, 2013, to provide in pertinent part:
[Boraie] is responsible for its pro rata share of the costs of improvements to infrastructure (i.e. water, sewer, electric, traffic light) that are not directly related to the project but are necessary for both the benefit of the project and other users. [Boraie]'s pro rata share shall be determined in connection with [it]s site plan application and approval and shall either be set forth in a Developer's Agreement with the . . . Board . . . and the governing body of [Milltown] . . . or as an amendment to this Agreement.
[(emphasis added).]
Milltown also adopted an ordinance establishing the following method by which "off-site and off-tract improvements" may be financed:
Before final approval of a subdivision or site plan, the Approving Authority may require, in accordance with the standards of this chapter and an adopted circulation plan and utility plan, the installation, or as a condition of final approval, the furnishing of a performance guarantee in lieu thereof, of a developer's, pro-rata share of the cost of the following off-site and off-tract improvements which are necessary to appropriate for the protection of the public interest by reason of the developer's effect on land other than the developer's property: street improvements, water system, sewerage, drainage facilities and easements therefor.
[Milltown, N.J., Code ch. 34, § 34-33.17(a) (emphasis added) (citing Ordinance No. 919, art. XVIII).]
The day after Milltown adopted that ordinance, Boraie filed a second application with the Board seeking preliminary major subdivision and site plan approval to construct a mixed-use development consisting of an apartment complex, townhouses, a retail building, and public open space. The Board considered Boraie's application at four public hearings held on intermittent days between July and September 2013.
At a hearing, Boraie's civil engineer, George Kelly, testified in response to a local resident's inquiry about the proposal's effect on electrical service provided in the Borough, that "the existing substation in [Mill]town has been the subject of a lot of discussion. And this project will require some upgrades to that substation. . . . It should have no negative impact whatsoever on the rest of the town. But that substation will need to have an upgrade,"(emphasis added), and any associated costs would be "apportioned between the town and [Boraie]." Kelly also commented on the status of engineering studies regarding the impact of "off[-]site infrastructure" by noting that Boraie had begun such studies and had "agreed to work with [Milltown's] engineers [to] complet[e] th[em]."
The municipal engineer, Michael McClelland, discussed the concept of "fair share" payment of costs for infrastructure improvements, and confirmed that "[t]hose improvements [we]re being analyzed and the studies . . . [we]re ongoing," but described that a ratio would be employed to allocate proportional contributions. McClelland anticipated that the Board would condition approval on Boraie entering into a developer's agreement with its "fair share amount" to be determined after the completion of negotiations. The Board's chairman verified that impact studies relating to the costs of infrastructure improvements would "be done between preliminary and final [approval]."
On September 24, 2013, at the conclusion of the final hearing, the Board adopted a resolution approving the application subject to various conditions. The resolution required Boraie to enter into a developer's agreement that was to require it to make "[p]ayment of [its] fair share contributions for off-tract improvements to the Borough's infrastructure, i.e., Sewerage System, Water System and Electrical System." The contributions were to include "the cost of improvements to the sanitary sewerage system force main, including the 'gravity portion[;]' the water distribution and supply systems[; and,] the cost of improvements to the electrical utility system."
In November 2013, plaintiffs filed a three-count complaint in lieu of prerogative writs against defendants. See R. 4:69-1 to -7. The complaint sought to invalidate and excise the "developer's agreement" provision of the resolution, or, alternatively, to remand to the Board for a determination of "what off-tract improvements . . . are 'reasonable and necessary,' to the [re]development" (count one); to declare "Milltown Code § 34-33.17 ultra vires" (count two); and to declare unlawful the "developer's agreement" provision of the resolution (count three). However, the complaint did not challenge "the approval itself[.]"
Boraie filed an amended answer asserting a cross-claim against the Borough and the Board, and a third-party complaint against the Agency, which the court dismissed in response to a motion filed by those parties.
Plaintiffs argue that as a matter of law, the Board's condition for payment of contributions to off-tract improvements was illegal. They contend "the statutory preconditions for obligating a developer to pay a pro rata share of the cost of off-tract improvements were not satisfied[;]" the Board failed to make "the essential factual findings required by N.J.S.A. 40:55D-42; it "unlawfully left [the issue] to be resolved privately by negotiations between the developer and municipal officials[;]" and, any requirement for contribution to the "municipal electrical system" was not authorized by the Municipal Land Use Law (MLUL), N.J.S.A. 40:55D-1 to -163.
Defendants contend that the requirement for a contribution to the "electrical improvements," even if prohibited by the MLUL, was required by the Agreement between the "borough and the redeveloper" and should be enforced. Contrary to plaintiffs' contentions, however, defendants argue that the Board had authority to require the contribution to the electrical improvements because "a rational nexus exists between the proposed off-tract improvement and Boraie's proposed development" and "the imposition of a contribution for electrical is specifically permitted by statute." Similarly, they contend contributions to "the off-tract water and sewer improvements" should be enforced because they were required as a result of the redevelopment project.
Having considered these arguments in light of our review of the record and applicable legal principles, we vacate the dismissal of plaintiffs' complaint and remand for entry of a judgment voiding the requirement for payment of impact fees for off-tract improvements imposed by the resolution and remanding the matter back to the Board for reconsideration.
We begin our consideration of plaintiffs' complaint by recognizing the limited nature of our review. "[W]hen a party challenges a zoning board's decision through an action in lieu of prerogative writs, the zoning board's decision is entitled to deference." Kane Props., LLC v. City of Hoboken, 214 N.J. 199, 229 (2013). "[Z]oning boards, 'because of their peculiar knowledge of local conditions[,] must be allowed wide latitude in the exercise of delegated discretion.'" Price, supra, 214 N.J. at 284 (alteration in original) (quoting Kramer v. Bd. of Adjustment, 45 N.J. 268, 296 (1965)). "The questions on appeal are only whether or not the action of the board was arbitrary, capricious or patently unreasonable, and whether it acted properly under the statute, that is, in accordance with the statutory standard." Paruszewski v. Twp. of Elsinboro, 154 N.J. 45, 54-55 (1998) (citation omitted).
We conclude from our review that the condition was ultra vires because the imposition of a requirement for a contribution to off-tract electrical improvements was not authorized by the MLUL, thus it could not be the object of a developer's agreement with the municipality. Also, the remaining requirements for permissible impact fees were not properly addressed by the Board.
"The MLUL is a carefully constructed and comprehensive framework governing the powers of municipalities relating to land use and development. . . . [M]unicipalities must exercise their powers relating to zoning and land use in a manner that will strictly conform with that statute's provisions." N.J. Shore Builders Ass'n v. Twp. of Jackson, 199 N.J. 449, 452 (2009); see also Toll Bros., Inc. v. Bd. of Chosen Freeholders of Burlington, 194 N.J. 223, 243 (2008).
The MLUL is also the paramount authority in the context of redevelopment. See Britwood Urban Renewal, LLC v. City of Asbury Park, 376 N.J. Super. 552, 566-68 (App. Div. 2005). The LRHL allows a redevelopment plan to include improvements to public infrastructure and bonds to fund those improvements. Id. at 564-65. N.J.S.A. 40A:12A-13 requires, however, that all developmental or redevelopment plans be considered by a planning board in accordance with the MLUL. See id. at 568-69. The LRHL recognizes that the MLUL is fully applicable to all activity undertaken pursuant to the LRHL. Id. at 567-68.
Developer contributions to off-tract improvements as a condition to subdivision or site plan approval are governed by N.J.S.A. 40:55D-42. As provided in N.J.S.A. 40:55D-39a, "[a]n ordinance requiring approval by the planning board of . . . site plans . . . may include . . . [p]rovisions for off-tract water, sewer, drainage, and street improvements which are necessitated by a . . . land development, subject to the provisions of [N.J.S.A. 40:55D-42.]" "[A] land use board's imposition of a financial contribution for an off-tract purpose 'must be authorized by statute and implemented by municipal ordinance.'" Pond Run Watershed Ass'n v. Twp. of Hamilton Zoning Bd. of Adjustment, 397 N.J. Super. 335, 358-59 (App. Div. 2008) (quoting Nunziato v. Planning Bd. of Edgewater Borough, 225 N.J. Super. 124, 131 (App. Div. 1988)). The MLUL's authority to impose contributions requires a planning board to make certain findings, and for that reason an ordinance may not delegate that authority to the governing body or a redevelopment agency because "when the MLUL establishes criteria for a specific situation or confers authority on a specific entity, a municipality is not free to chart its own course." Builders League of S. Jersey, Inc. v. Twp. of Franklin, 395 N.J. Super. 46, 58 (App. Div. 2007).
"'Off-tract' means not located on the property which is the subject of a development application nor on the closest half of the abutting street or right-of-way." N.J.S.A. 40:55D-5 ("offsite" means outside a lot line, but still within the property "or the closest half of the street or right-of-way abutting the property . . . ."). That clarified definition was added in 1998. L. 1998, c. 95, § 1. It was incorporated in N.J.S.A. 40:55D-42 at the same time to replace language that had created a general ambiguity in the MLUL about which areas contiguous to a property were covered. L. 1998, c. 95, § 8; Assem. Local Gov't & Hous. Comm. Statement to S-170 (June 1, 1998); Sen. Cmty. & Urban Affairs Comm. Statement to S-170 (Feb. 10, 1998).
The statute states:
The governing body may by ordinance adopt regulations requiring a developer, as a condition for approval of a subdivision or site plan, to pay the pro-rata share of the cost of providing only reasonable and necessary street improvements and water, sewerage and drainage facilities, and easements therefor, located off-tract but necessitated or required by construction or improvements within such subdivision or development. Such regulations shall . . . establish fair and reasonable standards to determine the proportionate or pro-rata amount of the cost of such facilities that shall be borne by each developer or owner within a related and common area, which standards shall not be altered subsequent to preliminary approval. Where a developer pays the amount determined as his pro-rata share under protest he shall institute legal action within one year of such payment in order to preserve the right to a judicial determination as to the fairness and reasonableness of such amount.
[N.J.S.A. 40:55D-42 (emphasis added).]
"[T]he statutory authority that permits a municipality to require contributions for off-tract improvements is itself limited." N.J. Shore Builders Ass'n, supra, 199 N.J. at 453 (citing N.J.S.A. 40:55D-42); see also Nunziato, supra, 225 N.J. Super. at 131. The statute expressly limits contributions toward "off-tract improvements to water, sewer, drainage, and street improvements only[.]" N.J. Shore Builders Ass'n, supra, 199 N.J. at 453. In enacting the statute, the Legislature expressly rejected the broader objects of such contributions that existed under the statute's predecessor, N.J.S.A. 40:55-1.21, which included "street improvements and water, sewerage and drainage facilities," and such other "improvements as the municipal governing body may find necessary in the public interest." N.J. Builders Ass'n v. Mayor of Bernards Twp., 211 N.J. Super. 290, 296 (Law Div. 1985), aff'd, 219 N.J. Super. 539 (App. Div. 1986), aff'd, 108 N.J. 223 (1987). The omission of the former "omnibus grant of authority" made the current statute stricter by changing the list from inclusive to exclusive. Ibid.
The statute authorizes contributions to the cost of "providing only reasonable and necessary street improvements and water, sewerage and drainage facilities, and easements therefor, located off-tract[.]" N.J.S.A. 40:55D-42 (emphasis added). The improvements must be "necessitated or required by construction or improvements within such subdivision or development." Ibid. The contributions included in the statute are permitted, therefore, "only with respect to street improvements and water, sewerage and drainage facilities, and only to the extent necessitated by the reasonably anticipated impact of the development on those facilities." Twp. of Marlboro v. Planning Bd. of Holmdel, 279 N.J. Super. 638, 642-43 (App. Div.), certif. denied, 141 N.J. 98 (1995). N.J.S.A. 40:55D-42 prohibits a municipality from "demand[ing] contributions for off-tract improvements" unless they are "necessitated by the development itself, or [are] a direct consequence of the development." Toll Bros., Inc., supra, 194 N.J. at 244 (alteration in original) (quoting Holmdel Builders Ass'n v. Twp. of Holmdel, 121 N.J. 550, 571 (1990)). There must be "a strong, almost but-for, causal nexus between off-site public facilities and private development in order to justify exactions." Ibid. (quoting Holmdel Builders Ass'n, supra, 121 N.J. at 571).
These impact fees — e.g., financial contributions for roads and other public utilities — imposed as a condition of a land use approval have been approved only when the fees have been adopted by ordinance, which in turn was authorized by the MLUL and which bear a logical nexus to the needs created by the proposed development, and are based on a methodology or formula that accounts for impact of the development. Holmdel Builders Ass'n, supra, 121 N.J. at 572, 585-86. When, however, the ordinance has not been based on authority derived from the MLUL or imperfectly implements the authority bestowed by the MLUL, such required contributions are not valid. Toll Bros., Inc., supra, 194 N.J. at 256; see also Britwood Urban Renewal, LLC, supra, 376 N.J. Super. at 570. Moreover, when fees have been calculated on an ad hoc basis as a condition of an approval, the fees have been declared invalid. See Twp. of Marlboro, supra, 279 N.J. Super. at 643; Nunziato, supra, 225 N.J. Super. at 129-35. Therefore, as "N.J.S.A. 40:55D-42 limits a municipality's authority to require contributions for off-site improvements to those specifically enumerated in the statute [and electric utilities] are not listed in N.J.S.A. 40:55D-42, a municipality may not condition a development approval on those exactions." N.J. Shore Builders Ass'n v. Twp. of Jackson, 401 N.J. Super. 152, 170 (App. Div. 2008), aff'd, 199 N.J. 449 (2009).
If a municipality chooses to require a permissible contribution for a delineated utility, it must provide for it "by ordinance," N.J.S.A. 40:55D-42; see also N.J.S.A. 40:55D-39(a), as "[t]he Legislature carefully has circumscribed the power of planning boards by requiring that the power be exercised in conformity with standards set forth by ordinance." Longridge Builders, Inc. v. Planning Bd. of Princeton, 52 N.J. 348, 351 (1968). The ordinance must contain "fair and reasonable standards to determine the proportionate or pro-rata amount of the cost of such facilities that shall be borne by each developer or owner within a related and common area[.]" N.J.S.A. 40:55D-42. Those standards may not be altered after the grant of conditional preliminary approval. Ibid. When an optional ordinance is authorized by statute, it must contain all of the "safeguards" that the statute requires. Builders League of S. Jersey, Inc., supra, 395 N.J. Super. at 59 (ordinance invalid for lacking many safeguards required by State Transfer of Development Rights Act, N.J.S.A. 40:55D-137 to -163).
In order to enact a proper ordinance, it must conform to the municipality's master plan. The statute requires the master plan to have "circulation and comprehensive utility service plans pursuant to" the provisions that now appear in N.J.S.A. 40:55D-28(b)(4) and (5). N.J.S.A. 40:55D-42. A predicate to the determination of a developer's contribution is an "analysis of 'circulation and comprehensive utility service plans pursuant to [N.J.S.A. 40:55D-28].'" Britwood, supra, 376 N.J. Super. at 568 (alteration in original) (quoting N.J.S.A. 40:55D-42); see L. 1975, c. 291, § 30. The circulation plan is limited to transportation facilities, N.J.S.A. 40:55D-28(b)(4), and the "utility service plan element" is limited to addressing the need and future general location for "water supply and distribution facilities, drainage and flood control facilities, sewerage and waste treatment, solid waste disposal and provision for other related utilities, and including any storm water management plan required pursuant to" the MLUL statutes on storm water management. N.J.S.A. 40:55D-28(b)(5). Using those plans, only "reasonable and necessary" pro-rata costs can be imposed. N.J.S.A. 40:55D-42.
The pro-rata shares of the developer and other landowners must be calculated both to "protect[] a developer from paying a disproportionate share of the cost of improvements that also benefit other persons," and "to insure that other landowners do not enjoy a free ride at the expense of another's toil." Toll Bros., Inc., supra, 194 N.J. at 245 (citation and internal quotation marks omitted). Under the MLUL, it is "impermissible to saddle the developer with the full cost where other property owners receive a special benefit from the improvement." Ibid. (quoting Longridge Builders, Inc., supra, 52 N.J. at 350); accord Divan Builders, Inc. v. Planning Bd. of Wayne, 66 N.J. 582, 603 (1975); see also Swanson v. Planning Bd. of Twp. of Hopewell, 149 N.J. 59, 65 (1997) (Stein, J., concurring).
Like the list of municipal services identified in N.J.S.A. 40:55D-42, the list for the utility service plan element excludes electric utilities. A pro-rata contribution ordinance therefore does not conform to a legally valid master plan's utility service plan if it addresses electrical service.
A planning board must act within its legislated powers and may require a pro-rata contribution to off-tract improvements only pursuant to a pre-existing ordinance that does not exceed what N.J.S.A. 40:55D-42 allows. See Britwood, supra, 376 N.J. Super. at 568-69. If a proper ordinance exists, a planning board must make determinations, akin to those now required by N.J.S.A. 40:55D-42, pursuant to an ordinance with sufficient standards for making them, and it must do so by the time it grants conditional approval. Divan Builders, Inc., supra, 66 N.J. at 594, 602-03. A planning board's requirement for contributions to off-tract improvements is ultra vires in the absence of an ordinance with the requisite standards. Id. at 598-600 (citing Longridge Builders, Inc., supra, 52 N.J. at 348-50); see also F & W Assocs. v. Cty. of Somerset, 276 N.J. Super. 519, 522, 529 (App. Div. 1994) (upholding imposition of assessment upon developer where ordinance contained "a formula for computing . . . developer's 'pro rata share of [development] impact fees'" that were derived from a "comprehensive study" and "suggested . . . [the] improvements . . . needed to accommodate the increased demands, and estimated the cost of those improvements.").
In order to pass muster, therefore, an ordinance's standards must ensure that an applicant "could be compelled only to bear that portion of the cost which bears a rational nexus to the needs created by, and benefits conferred upon, the subdivision." Longridge Builders, Inc., supra, 52 N.J. at 350. A land use ordinance is fatally deficient if it fails to "establish any procedures or standards by which the cost of off-site improvements might be apportioned" among all the properties that would benefit from the off-tract improvement that the municipality wanted the applicant to construct. Ibid. "Without an appropriate ordinance setting forth standards and procedures, the planning body would be left with an impermissibly broad range of discretion in exacting off-site improvements from subdividers; landowners and developers would have no basis for planning; and reviewing courts would be without a measuring rod to gauge the validity of the imposition." Id. at 351. The absence of those standards from the ordinance leaves the planning board powerless to condition approval on such contributions. Id. at 350-52.
Milltown's ordinance lacks any standards for determining the impact of Boraie's project on off-tract improvements or determining the applicant's pro-rata share. Milltown, N.J., Code ch. 34, § 34-33.17. The ordinance states the purpose of conditioning subdivision or site plan approval on a contribution is to ensure the provision of "off-tract improvements which are necessary to appropriate for the protection of the public interest by reason of the developer's effect on land other than the developer's property: street improvements, water system, sewerage, drainage facilities and easements therefor." Milltown, N.J., Code ch. 34, § 34-33.17(a). The ordinance limits the Board to requiring a contribution toward such improvements "in accordance with the standards of this chapter and an adopted circulation plan and utility plan. . . ." Ibid. However, Chapter 34, and the Ordinance as a whole, lack the standards for determining whether any off-tract improvement is "necessary . . . by reason of the developer's effect on land other than the developer's property. . . ." Ibid.
The ordinance states, in pertinent part:
34-33.17 Off-Site and Off-Tract Improvements; Performance Guarantees.--------
a. When Required. Before final approval of a subdivision or site plan, the Approving Authority may require, in accordance with the standards of this chapter and an adopted circulation plan and utility plan, the installation, or as a condition of final approval, the furnishing of a performance guarantee in lieu thereof, of a developers, pro-rata share of the cost of the following off-site and off-tract improvements which are necessary to appropriate for the protection of the public interest by reason of the developer's effect on land other than the developer's property: street improvements, water system, sewerage, drainage facilities and easements therefor.
b. Approval. Where such improvements are required, the Approving Authority shall refer the requirements to the Governing Body for concurrence and for approval of a performance guarantee, if any. If the Governing Body does not take action on the improvements and the applicable performance guarantees within the time the Approving Authority must act, the Approving Authority may grant conditional approval of the plan.
c. The Governing Body shall determine as to each required improvement whether it is to be paid for entirely by the municipality, entirely by the developer or cooperatively by the developer and the municipality in accordance with fair and reasonable standards to determine the proportionate or pro rata amount of the cost of such facilities that shall be borne by each developer or owner within a related or common area.
d. The financing and construction of the improvements shall be arranged in one (1) of the following manners:
1. If constructed by the municipality and all or a portion of the improvements are the financial responsibility of the developer, the developer's share shall be paid to the municipality in cash or certified check prior to the final approval of the plan.
2. If constructed by the developer and all or a portion of the improvements are the financial responsibility of the municipality, the developer shall be paid the municipal share in accordance with the terms of the construction contract and the completion of the work shall be guaranteed in an amount and under the terms set forth in Guarantees and Inspections.
[Milltown, N.J., Code ch. 34 § 34-33.17 (citing Milltown, N.J., Ordinance 919, art. XVIII).]
A planning board cannot remedy defects in the ordinance by resorting to a requirement that impact fees be paid through a developer's agreement between the applicant and the municipal authority, even if the applicant consents. A planning board lacks authority under N.J.S.A. 40:55D-42 not only to require pro-rata contributions for off-tract improvements outside the scope of MLUL or based upon a defective ordinance, but also to accept a developer's voluntary contribution to such off-tract improvements. Toll Bros., Inc., supra, 194 N.J. at 241, 250-54 (reversing an incorrect ruling that the N.J.S.A. 40:55D-42 limitations were "inapplicable to a voluntary agreement"). N.J.S.A. 40:55D-42 limits upon a developer's obligation for off-tract street improvements apply even if the applicant agreed in a developer's agreement to pay a greater amount. Id. at 229-30.
A developer's contribution cannot be established through negotiation. "The intolerable spectacle of a planning board haggling with an applicant over money too strongly suggests that variances are up for sale." Nunziato, supra, 225 N.J. Super. at 134. A developer's agreement is not a private contract completely independent of the MLUL, but rather a contract with a public agency, which was a creature of statute that prevented the agency from agreeing to contract provisions that exceeded its statutory authority. Toll Bros., Inc., supra, 194 N.J. at 242-44, 251-52. The limitation is necessary to prevent "the line between true volunteerism and compulsion[, which] is a fragile one," from being crossed so that other developers who were unwilling or unable to pay more than their pro-rata share would be disadvantaged against those who could. Id. at 251 (citing Nunziato, supra, 225 N.J. Super. at 133-34). The conditions that local agencies may impose are accordingly limited by N.J.S.A. 40:55D-42, and local agencies may not use a contract to enlarge them. Id. at 230.
A developer's agreement can therefore do no more than "detail[] the manner in which the conditions of approval" permitted by statute "will be fulfilled." Id. at 230. "It is ancillary to those conditions and is only enforceable to the extent that the conditions on which it is based are enforceable," meaning only to the extent of the statutory authorization. Id. at 230, 243. A developer's right to prevent "other landowners [from] enjoy[ing] a free ride at the expense of [a developer]'s toil" cannot be circumvented by agreement. Id. at 245. The MLUL accordingly made those constraints an affirmative right of developers that cannot be waived in a developer's agreement or another nominally voluntary vehicle. Id. at 230. Municipalities must be "scrupulously careful to avoid" requiring unauthorized contributions as a condition to approval regardless of the applicant's amenability. Id. at 250 (quoting Swanson, supra, 149 N.J. at 68 (Stein, J. concurring).
Courts must be "extremely sensitive to the threat presented by unlawful exactions imposed by a municipality on developers whether the developers are reluctant or enthusiastic participants in the transaction," ibid. (quoting Swanson, supra, 149 N.J. at 67 (Stein, J., concurring)), including participation in private settlements that are similarly impermissible as unreviewable expedients for developers to waive provisions of governing law. See Warner Co. v. Sutton, 274 N.J. Super. 464, 467 (App. Div. 1994); Whispering Woods at Bamm Hollow, Inc. v. Twp. of Middletown Planning Bd., 220 N.J. Super. 161, 171-73 (Law Div. 1987). "[A] developer's voluntary contribution to defray the cost of a municipal obligation, should not be permitted to influence or affect municipal zoning decisions." Toll Bros., Inc., supra, 194 N.J. at 250 (alteration in original) (quoting Swanson, supra, 149 N.J. at 66 (Stein, J., concurring)).
The payment of a pro-rata contribution for off-tract electric utility improvements is therefore illegal under N.J.S.A. 40:55D-42, no matter how it is requested or proffered. The February 10, 2015, settlement of the question among defendants, in which the applicant agreed to pay a per-unit fee for all utility infrastructure including electric is unenforceable.
The Board's resolution's provision, therefore, violated the MLUL. The contributions for electric service were not authorized by the narrow statute. The requirement to pay permissible impact fees was equally impermissible because the Board did not determine the impact of the proposed construction on off-tract improvements, if any, or, if there was an impact, Boraie's pro-rata share based upon an ordinance with any standards. Rather, it merely designated the municipality to make those determinations through an agreement with Boraie.
The Board's approval conditioned upon the developer's agreement must be vacated, see Pond Run Watershed Ass'n, supra, 397 N.J. Super. at 361-64 (vacating a zoning approval because of an improper contribution even though "the parties had acted in good faith"). As noted above, however, there were indications in the reports and testimony of the witnesses that the proposed development would necessitate some off-tract improvements and to determine whether a contribution is required, but it must do so only in strict compliance with N.J.S.A. 40:55D-42. The Board may rely upon the transcripts of the hearings and receive additional evidence on such improvements and any new developments since it issued its resolution.
Reversed and remanded to the Law Division for entry of an order vacating the dismissal of the complaint, entering judgment in favor of plaintiffs, and remanding the matter to the Board for further proceedings consistent with our opinion. We do not retain jurisdiction. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION