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In re CAFRA Permit No. 87-0959-5 Issued to Gateway Associates

May 21, 1996


On appeal from New Jersey Department of Environmental Protection.

Reargued April 16, 1996. Approved for Publication May 21, 1996. As Corrected June 4, 1996.

Before Judges Baime, Villanueva and Kimmelman. The opinion of the court was delivered by Baime, J.A.D.

The opinion of the court was delivered by: Baime

The opinion of the court was delivered by BAIME, J.A.D.

Appellants, the American Littoral Society and its members, D.W. Bennett and Richard Crema individually, appeal the decision of the Commissioner of the Department of Environmental Protection (DEP) granting Gateway Associates' (Gateway) application for a major modification of its permit issued under the Coastal Area Facility Review Act (CAFRA) (N.J.S.A. 13:19-1 to -21). In granting the original permit, the DEP's Division of Coastal Resources (Division) waived the requirements of its bay island corridor policy, which restricts development of non-oceanfront islands surrounded by tidal waters. The development plans approved under the original CAFRA permit envisioned construction of an intercept parking lot designed to facilitate employee transportation to Atlantic City's casino and hotel complexes. The major modification granted by the DEP altered that component by replacing the intercept parking lot with a retail shopping center. The Division's prior waiver of its bay island corridor policy was "grandparented" in the DEP's approval of the major modification. Appellants, who did not appeal from the DEP's grant of the original CAFRA permit, now seek review of the major modification, contending that the agency lacked the power to waive its bay island corridor policy in the absence of a regulation authorizing such a waiver and establishing appropriate standards to guide the agency's decision to grant one. We agree and reverse.


The tortured procedural history and facts of this case are intertwined and require elucidation in order to understand the complex issues presented. In 1984, Boardwalk Associates, Inc., a Los Angeles-based real estate and investment company, agreed with the City of Pleasantville that it would acquire and develop a 475 acre tract adjacent to a four mile stretch of the Atlantic City Expressway.

Boardwalk Associates proposed a multi-phased development of this property into, among other things: (1) fourteen major non-casino hotels (4,013 rooms); (2) a day care center and other commercial-type facilities including office space (200,000 square feet) and retail space (170,000 square feet); (3) a 115-acre wetlands mitigation site; and (4) a large permanent combination bus- and public-parking intercept facility for casino patrons and casino employees (with 1,550 parking spaces and an area for buses). Building would take place on 100 acres.

The site of the project was located between Pleasantville and Atlantic City on a former dredge disposal site set between Absecon Bay and Lakes Bay. A large part of the property consisted of coastal wetlands. The area was zoned for multi-use commercial activities and public facilities.

Informal Discussions occurred on the "Gateway Project" between the DEP, Boardwalk Associates, and local officials throughout 1984 and 1985. On July 31, 1984, John Weingart, then the Director of the DEP's Division of Coastal Resources and the ultimate decision-maker on coastal developments, advised Boardwalk Associates that its proposed project would be considered acceptable if the company (1) satisfactorily addressed the project's impact on redevelopment in Atlantic City, and (2) showed (a) that the project's intercept parking component was feasible and (b) that the project would improve the ecological value of the site.

In the spring of 1985, Boardwalk Associates formally acquired the property. In the fall of 1985, the company transferred its ownership rights to a newly formed joint venture, Gateway Associates.

In June 1986, the DEP held public hearings to discuss a proposal to reclassify approximately ninety-six acres of Gateway's property from tidal wetlands to uplands. At the Conclusion of the hearings, the DEP amended the coastal wetlands maps and approved the proposed reclassification.

Meanwhile, in February 1986, the DEP adopted the bay island corridor policy by promulgating N.J.A.C. 7:7E-3.24. The bay island corridor "is composed of non-oceanfront islands surrounded by tidal waters," N.J.A.C. 7.7E-3.24(a)(2), consisting of "that portion lying upland of wetlands and beaches but including the filled water's edge." N.J.A.C. 7.7E-3.24(a)(3). Although the bay island corridor policy has since been altered in various particulars and is now codified in N.J.A.C. 7:7E-3.21, see 26 N.J.R. 2990(a), 3046-47 (July 18, 1994), the essential outlines of its restrictions remain the same. "Water dependent development is discouraged on bay island corridors which do not abut a paved public road and [are] not served by a sewerage system with adequate capacity," while "all other types of development are prohibited in these areas." N.J.A.C. 7:7E-3.24(c). "On bay island corridors which abut a paved public road and sewerage system with adequate capacity, water dependent development is acceptable and all other development is acceptable only at a low intensity. . . ." N.J.A.C. 7:7E-3.24(d).

Although the exact chronology of events is not altogether clear, at some point questions were raised concerning the applicability of the bay island corridor policy to Gateway's property. In light of appropriate "set asides," Gateway would have been permitted to develop twenty percent of the site if the policy was not applied. Application of the policy would have reduced permitted development to between three and five percent of the property. Gateway contended that the policy was not applicable because the site was not surrounded by tidal waters. On November 20, 1986, the Division apprised Gateway of its determination that the project site was an island corridor as defined in the regulation. Despite this finding, the Division concluded that it would be unfair to apply the bay island corridor policy because it had never apprised Gateway or its predecessor in title of the "pending" change in use restrictions.

We digress to note that Atlantic City, Pleasantville and the DEP itself had long encouraged development of Gateway's property. It was envisioned that the project would create tax revenues, reduce unemployment, and solve traffic congestion problems. The proposed intercept parking facility was considered critical to achievement of these objectives. Among other documents contained in the voluminous record, this is perhaps best illustrated by an advisory memorandum prepared by the DEP's Planning Coordinator, in which he emphasized "the need for a major intercept facility within five miles of [the] center [of] Atlantic City. . . ." Other documents also disclose that the DEP accorded priority to. Gateway's proposed development because of the parking component. For example, applications by other developers to relax the requirements of the bay island corridor policy were rejected because, unlike the Gateway project, these proposals did not contain "any components which would serve the public interest." In one instance, the Division explained that Gateway's "proposed 4,000 space intercept parking area and transportation center [were] essential to the State's transportation planning for the Atlantic City region."

This point was further emphasized in the Division's decision not to apply the bay island corridor policy to Gateway's proposed development. In its decision letter, the Division stressed, "if the current proposal does not reach [fruition] and a different type of development is proposed for the site . . . the [bay] island corridor policy would apply." In a subsequent letter "clarifying" its position, the DEP noted "the exemption from the [bay island corridor] policy remains predicated upon the . . . determination that the proposed public transportation component satisfies the original intent of the exemption."

Further evidence of the critical nature of the intercept parking component was provided at the public hearings on Gateway's application for a CAFRA permit. For example, Atlantic County supported the project because of its "strategic transportation importance and potential." Virtually all of the testimony supporting Gateway's application focused on the reduction in traffic congestion that would result from the intercept parking facility.

In August 1988, appellants for the first time objected to the proposed development and requested that the newly appointed Commissioner of the DEP, Christopher Daggett, review and reverse the decision not to apply the bay island corridor policy to the Gateway Project. Appellants also submitted written objections to the project, stating their belief that the proposed development violated the bay island corridor policy. Appellants continued to advance their position at the second public hearing conducted on April 18, 1989. Appellants objected to the waiver of the bay is land corridor policy through both oral testimony and submission of extensive documentation. These objections were repeated after Gateway revised its proposal at the behest of the DEP's staff. The revised plan relocated the intercept parking facility to the largest area of contiguous uplands on the site, increased the number of parking spaces, eliminated all commercial office space ...

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