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Aqn Associates Inc. v. Township of Florence

Decided: June 7, 1991.


On appeal from the Superior Court of New Jersey, Law Division, Burlington County.

Shebell, Havey and Skillman. The opinion of the court was delivered by Shebell, J.A.D.


Plaintiff, AQN Associates, Inc. (AQN), appeals contesting grants of summary judgment dismissing its complaints that sought to invalidate bond ordinances adopted by the Township of Florence (Florence). The bonds were to finance Florence's obligation to the Township of Pemberton (Pemberton). The obligation arose out of a Regional Contribution Agreement (RCA) between the two municipalities, under which Florence transferred 103 units of its fair share obligation to Pemberton in exchange for the payment of $15,000 per unit. Pemberton will use the monies to rehabilitate units of housing within its borders.

In January 1987, Florence filed a petition for substantive certification with the Council on Affordable Housing (COAH), which petition is currently pending. AQN owns approximately 130 acres in Florence. AQN has filed an objection with COAH to Florence's fair share plan asserting essentially that AQN's property was more appropriate for high density development than the property identified in Florence's plan. See N.J.S.A. 52:27D-314; N.J.S.A. 52:27D-315. Mediation failed to resolve AQN's objections. Issues raised in the mediation have been referred to the Office of Administrative Law. See N.J.S.A. 52:27D-315.

A major element of the fair share plan supporting Florence's petition is the RCA, which it seeks to bond. Florence and Pemberton entered into their RCA on June 21, 1989. The RCA was made contingent on adoption of a bond ordinance by Florence. The RCA was approved by the Burlington County Planning Board on February 27, 1990, and by COAH on March 19, 1990. See N.J.S.A. 52:27D-312(c).

On February 7, 1990, Florence held a public hearing and adopted an ordinance that authorized the issuance of $1,545,000 in general obligation bonds to finance its RCA payments. On March 2, 1990, AQN filed an action in lieu of prerogative writs claiming that the ordinance was "illegal and invalid." Florence

received notice that AQN had filed a complaint challenging the ordinance, and on March 23, 1990, Florence obtained an order to show cause why AQN's complaint should not be dismissed by way of summary judgment or for failure to state a claim. The hearing was scheduled for April 2, 1990.

On March 19, 1990, Florence issued a $245,000 bond anticipation note, and used the proceeds to make the non-refundable first payment due to Pemberton under the RCA. On March 28, 1990, AQN amended its complaint to include six counts, each of which set forth a specific reason why the bond ordinance should be invalidated.

On April 2, 1990, the court, by consent, proceeded as if it had received cross-motions for summary judgment. The Law Division judge rendered an oral opinion dismissing all but one of AQN's claims. The only claim not dismissed at that time was the assertion that the ordinance had been adopted in violation of the Open Public Meetings Act, N.J.S.A. 10:4-6 to -21. The court directed Florence to file an affidavit from the municipal clerk providing details of the notice given. Florence submitted an affidavit from its clerk, which demonstrated that the notice required by the Open Public Meetings Act had been given. AQN then asserted that although the clerk's affidavit demonstrated that Florence had complied with N.J.S.A. 10:4-18, there was a failure to comply with N.J.S.A. 10:4-10(a). On April 11, 1990, the judge rejected this assertion and entered an order for summary judgment in favor of Florence. AQN filed a timely notice of appeal from that order.

On September 4, 1990, Florence adopted an ordinance "amending and supplementing" its original bond ordinance. The supplemental bond ordinance revised section one of the original ordinance and authorized the raising of $1,665,000 by bonding. It also revised section five of the original bond ordinance to increase the amount to be raised to cover Florence's interest costs, issuance costs, and "other items of expense listed and permitted under Section 40A:2-20 of the [Local

Bond] Law." The amended ordinance preserved the declaration in the original bond ordinance that its purpose was not to satisfy a "current expense" and that the period of usefulness of the purpose was not less than ten years.

On October 10, 1990, AQN filed a complaint raising virtually the same challenges to the supplemental ordinance that it had raised to the original ordinance. On November 2, 1990, the court, with the consent of the parties, executed an order dismissing the complaint for the reasons set forth in its April 2 oral opinion and April 11 order regarding the earlier action. AQN filed a timely notice of appeal. We have consolidated both appeals.

Appellant asserts that Florence's obligations pursuant to its RCA with Pemberton constitute "current expenses" because the municipality's payments are due and payable within twenty-five months. It therefore urges that bonds may not issue to finance Florence's RCA obligations as N.J.S.A. 40A:2-3(b) prohibits the bonding of current expenses. Florence contends that the trial court correctly determined that the satisfaction of its RCA obligations has a useful life of at least six years and therefore may be financed with bonds. We hold that the RCA payments under review are bondable.

The Local Bond Law, N.J.S.A. 40A:2-1 to -64, grants municipalities the power to issue bonds for "any capital improvement . . ., or any purpose for which it is authorized or required by law to make an appropriation, except current expenses. . . ." N.J.S.A. 40A:2-3(a) and (b) (emphasis added). The statute does not define the term "current expenses." AQN contends that if RCA contributions were capital expenditures and not current expenses, there would have been no reason for the Legislature to include a specific exemption from the Cap Law, N.J.S.A. 40A:4-45.2 et seq., in N.J.S.A. 52:27D-312(d). N.J.S.A. 40A:4-45.2 prohibits municipalities from increasing their "final appropriations" by more than five percent per annum. Excepted from the Cap Law are a variety of expenditures, including

"capital expenditures." N.J.S.A. 40A:4-45.3(b). N.J.S.A. 52:27D-312(d) specifically provides that RCA contributions are exempt from the limitations imposed by the Cap Law. AQN reasons that because the Legislature created the specific exemption in N.J.S.A. 52:27D-312(d), it must have considered RCA contributions to be current expenses covered by the Cap Law.

It is just as likely that the Legislature enacted N.J.S.A. 52:27D-312(d) out of an abundance of caution rather than because of a perception that, without that provision, RCA contributions would be non-capital expenditures subject to the Cap Law. The mere enumeration by the Legislature of its intention to exempt RCA contributions from the Cap Law need not be interpreted to reflect anything more than a desire to avoid requiring judicial determination of whether RCA contributions are capital or non-capital expenditures. In any event, it is clear that non-capital expenditures may, nonetheless, be financed by bonds as long as they are not current expenses. N.J.S.A. 40A:2-3(b).

AQN further argues that because N.J.S.A. 52:27D-312(d) requires that RCA monies be "appropriated annually by the sending municipality," RCA monies therefore constitute expense in each year and are clearly current expenses within the meaning of the Local Bond Law. We are convinced that neither N.J.S.A. 52:27D-312(d) nor any other provision of the Fair Housing Act, N.J.S.A. 52:27D-301 to -329, evidences a legislative intent to prohibit municipalities from bonding their RCA obligations. The purpose of N.J.S.A. 52:27D-312(d) is to provide a mechanism for the enforcement of a sending municipality's obligations. That mechanism is not compromised if the obligation is financed through bonding rather than with the collection of annual taxes. Each of the municipality's payments will still have to appear in its budget for the year in which that payment is due, and its budget will be subject to the usual monitoring by the Division of Local Government Services.

Although silent as to the definition of current expenses, the statute specifically prohibits bonding for "any improvement or purpose having a period of usefulness of less than 5 years." N.J.S.A. 40A:2-21. Thus, even if an expenditure is not clearly a current expense, if the useful life of its purpose is less than five years, it may not be bonded.

The bondability of a given purpose under N.J.S.A. 40A:2-21 should be determined with reference to the intent and purposes of the five-year provision. This limitation protects taxpayers in the bonding municipality from being saddled with debt from which they obtain no benefit at a time when their repayment obligation is nonetheless continuing. Therefore, we focus our bondability analysis on what the taxpayers of the bonding municipality obtain as a benefit in exchange for the bond proceeds, rather than the use to which the payments are put by the receiving municipality ...

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