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Mount Olive Complex v. Township of Mount Olive

June 04, 2001


On appeal from Superior Court of New Jersey, Law Division, Morris County, Docket No. L- 3301-95.

Before Judges Havey, Cuff and Lisa.

The opinion of the court was delivered by: Havey, P.J.A.D.


Argued February 26, 2001

This zoning dispute implicates Mount Laurel*fn1 issues and the extent to which a municipality may rely on the State Development and Redevelopment Plan (State Plan) in rezoning property located in the State Plan's "planning area 5" from single-family dwellings on small lots to one residential unit per five acres.

In the 1970s, plaintiff, a partnership consisting of experienced developers, assembled more than 1,000 acres of land in Mount Olive Township and secured approval for a Planned Unit Development (PUD) in an undeveloped portion of the Township. By the late 1970s, plaintiff had built Section I of the PUD, consisting of 833 units, mostly apartments. Mount Laurel litigation ensued against the Township. Although plaintiff was not a party to that action, pursuant to a court-ordered settlement it agreed to construct a 400-unit apartment complex with a forty-unit set aside for affordable housing within Section II of the PUD. The Mount Laurel litigation ended in a consent judgment of compliance entered on August 2, 1985.

In 1988, the Township declared that plaintiff's PUD approval had expired and, in 1996, it placed the remainder of plaintiff's property in its R-A zone, permitting cluster development, with one residential unit per two acres. By separate complaints, plaintiff sought a builder's remedy, and challenged the rezoning of its property. During the pendency of the consolidated matters, the Township increased the minimum lot size applicable to plaintiff's property from two to five acres. After a bench trial, the trial court rejected plaintiff's claim for a builder's remedy, but struck the Township's five-acre zoning as overly restrictive, and ordered the municipality to rezone within one year.

We affirm the judgment denying plaintiff a builder's remedy. However, we reverse the judgment invalidating the Township's zoning ordinance. In our view, a municipality's voluntary compliance with the State Plan should be a significant factor in a reviewing court's determination respecting the validity of a zoning or rezoning ordinance. We conclude that the ordinance adopted by the Township advances the goals of the State Plan, and indeed, was tailored for that purpose. Further, the ordinance advances several of the purposes of zoning set forth in the Municipal Land Use Law (MLUL), N.J.S.A. 40:55D-1 to -136.

In 1971, plaintiff owned 941 acres in the Township bounded on the north by Route 46, Bartley-Drakestown Road and Washington Township on the west, Flanders-Drakestown Road on the south and Wolfe Road on the east. The site was characterized by wetlands, steep slopes, farmlands and woodlands, and traversed the south branch of the Raritan River, a trout-production stream. Plaintiff obtained preliminary approval for a PUD on the site, calling for commercial and industrial development and 3,063 mixed residential units.

In October 1972, plaintiff obtained final approval for Section I of the PUD, consisting of 203 acres and providing for forty-five single-family dwelling units, 152 townhouses, 636 apartment units, 42.63 acres reserved for a school site and open space, and a portion of the tract for commercial or industrial development. In addition, plaintiff agreed to acquire a 206-acre tract from the YMCA to serve as a drainage basin for Section I. All of the units in Section I were constructed by the late 1970s. The portion of Section I designated for commercial/industrial use was never developed.

By 1979, the Township had repealed the PUD ordinance and rezoned plaintiff's property R-3, permitting three single-family residential units per acre. Plaintiff had constructed a 250,000 gallon per day (gpd) sewer plant to serve Section I. That plant discharges treated sewage into three spray irrigation fields, including a field located in proposed Section II, south of Section I.

In 1980, plaintiff was prepared to move forward with the development of its remaining tract but could not proceed without an expanded sewer plant. The Township sought a plant large enough to service approximately 2,200 homes in the Budd Lake area which then had septic systems causing pollution of the lake. In September 1983, plaintiff and the Township agreed on a plan for a treatment plant having a capacity of 1.55 million gpd; plaintiff agreed to secure the necessary approvals from the Department of Environmental Protection (DEP). In December 1984, plaintiff applied to the DEP for a Discharge Allocation Permit (DAC) for a discharge of 1.55 million gpd into the south branch of the Raritan River.

During this period, the Township was in the process of updating its 1975 master plan. However, work on the plan was delayed because of a pending exclusionary zoning law suit filed by the Public Advocate and others in the 1970s. On May 14, 1985, the Township, Public Advocate, the Morris County Fair Housing Council, the Morris branch of the N.A.A.C.P., and a builder (not plaintiff) reached a settlement, which was approved by the trial court on August 2, 1985. The parties fixed the Township's fair share through 1990 at 500 units, 250 low-income and 250 moderate- income. However, in order to ensure "full and adequate compliance" with Mount Laurel II, the Township agreed to provide an additional forty moderate-income units to be built within plaintiff's PUD. Although not a party to the litigation, plaintiff agreed to construct forty moderate income rentals within a 400-unit complex to be constructed as part of Section II of the development. In addition, the Township agreed that the 250 garden apartment units designated as Mount Laurel units under the judgment of compliance would be subject to voluntary rent controls. Accordingly, the Township negotiated an agreement with plaintiff under which ten percent of the 400 units to be constructed in Section II would be subject to income and affordability controls.

The Township's 1986 master plan continued to designate plaintiff's undeveloped property as R-3, three units per acre. The State Development Guide Plan, predecessor to the State Plan, had classified much of the Township as limited growth area, and plaintiff's property as either agricultural or limited growth. At that time, approximately two-thirds of the Township remained undeveloped, and a significant percentage of those undeveloped tracts were remote, wet, or characterized with steep terrain.

On June 25, 1986, the DEP issued a draft DAC to plaintiff for its proposed 1.55 million gpd sewer plant containing very strict conditions because of the purity of the south branch of the Raritan River. According to Omni Environmental Corporation (Omni), an expert retained by plaintiff for this litigation, the DEP determined that the discharge quality must be the same as that of the receiving water, and imposed effluent limitations which, in the opinion of Omni, "have never been achieved by domestic wastewater treatment plants in New Jersey." On March 27, 1987, the DEP imposed even more stringent effluent limitations in its final DAC. In May 1987, the Township's attorney notified plaintiff that the Township had not committed to a 1.55 million gpd sewer plant and that plaintiff must proceed at its own risk in incurring costs for the design and for obtaining necessary approvals. Thereafter, the DAC approval expired.

In 1987, the Council on Affordable Housing (COAH) reduced the Township's fair share from 500 to 227 units. In 1988, Township officials expressed concerns about the density of development throughout the Township. As a consequence, the parties met in July 1988. During negotiations with the Township plaintiff proposed: (1) changing the zoning on the YMCA property from R-1 to R-3, permitting construction of 411 homes, rather than retaining the property for drainage purposes; (2) reinstating the PUD ordinance for the balance of the tract; and (3) eliminating the requirement that a portion of the PUD be developed for commercial and industrial uses.

At approximately the same time, plaintiff's engineer submitted a feasibility study reporting that a 1.55 million gpd system would cost approximately $22,000,000. The engineer stated that the high cost was attributable to the "very stringent requirements" imposed by the DEP concerning discharge into the south branch of the Raritan River. The Township's engineer testified that the Township could not have afforded that amount of money in 1988.

In October 1988, the Township terminated negotiations with plaintiff and, in November 1988, declared that plaintiff's PUD had expired. The Township also notified the DEP that because of the expiration of the DEP's DAC approval, there would be no need for the proposed sewer plant and that the Township had never committed itself to financing the facility. Plaintiff's partners met to discuss the Township's actions. Salvatore Garofalo, one of the principals, recommended that plaintiff institute suit against the Township. However, a majority decided not to pursue litigation.

In 1989, John Lynch, the Township's planning consultant, cautioned the Township that large parts of plaintiff's undeveloped land were environmentally sensitive and a preliminary draft of the State Plan had designated the property as outside the growth area. In a follow-up memorandum, Lynch suggested that the property be placed in the R-A zone, permitting one residential unit per two acres. Lynch reported:

The map on the reverse side of this memorandum shows the suggested zoning changes in the vicinity of Wolfe Road, River Road and Drakestown Road. They are proposed in recognition of low density zoning in Washington Township, recent development patterns along River Road, and awareness of environmental sensitivities related to steep slopes, and the preservation of water quality in the South Branch of the Raritan River. The proposed changes decrease the potential for nonresidential development impacts on Drakestown Road and Flanders-Drakestown Road, remove the opportunity for high density residential development in the environmentally sensitive areas lying south of River Road and west of Shop Lane, and provide a more suitable zoning response to the 1980 State Development Guide Plan and the emerging State Development and Redevelopment Plan.

On April 30, 1990, plaintiff sold approximately sixteen acres of its YMCA tract to the Township for $470,400, on which the Township intended to construct a municipal complex.

In 1992 or 1993 the Planning Board began a comprehensive review of the Township's land use ordinances. These efforts resulted in a September 28, 1995 master plan reexamination report. The report noted several significant events since the 1986 master plan, including regulatory changes which placed wetlands and stream protection under the jurisdiction of the State agencies, case law invalidating a "central assumption" of the 1986 master plan, that is, that environmentally sensitive areas such as wetlands, flood hazard zones and steep slopes should be excluded from lot size and floor area calculations,*fn2 and, finally, promulgation of the State Plan in 1992,*fn3 which placed almost all of the Township in "planning area 5," the environment-ally sensitive planning area, or "planning area 4B," a rural/environmentally sensitive planning area. The report stated that the "most important concept" in the State Plan, from the Township's perspective, was "to concentrate much of the new development in areas already served by sanitary sewer, potable water, and modern roads or areas scheduled for reasonable expansion of such infrastructure," areas which the State Plan designates as "centers." The plan indicated that the area around Budd Lake and certain other sections of the Township could qualify as centers, but not plaintiff's property. In 1995, the governing body implemented the reexamination report by zoning plaintiff's property R-A, permitting clustering on two-acre lots. In October 1995, plaintiff filed suit seeking to validate its rights under the 1971 PUD approval. It also sought to invalidate the R-1 zone as contrary to sound zoning principles, irrational and confiscatory. The Planning Board continued review of the master plan. On July 18, 1996, the Planning Board adopted a housing element and fair share plan with the view toward obtaining substantive certification from COAH. By that time, COAH had further reduced the Township's fair share to 181 units.

In November 1996, Lynch prepared a draft land use plan which recommended changing minimum lot size in the Township's most environmentally sensitive areas from two acres to five acres, but allowing lot-size averaging and clustering rather than the former approach, which required site adjustments for environmentally constrained land. The goals of the revised plan included guiding residential development toward areas to be served by public water and sewer and encouraging low-density residential development in areas characterized by steep slopes, flood plains and wetlands. The draft zoning map showed substantial areas of the western and southwestern portion of the Township recommended for two-acre lots, five-acre lots or public conservation.

In March 1997, plaintiff filed a Mount Laurel action demanding a builder's remedy to vindicate its rights under the 1985 judgment of compliance. The matter was consolidated with plaintiff's action filed in October 1995. The Township petitioned COAH for substantive certification on April 11, 1997, but COAH would not accept jurisdiction while plaintiff's Mount Laurel action (filed one month earlier) was pending in the trial court.

During the pendency of the consolidated actions, the Township amended its zoning ordinance changing the RA-1 designation to RR-AA, permitting one unit per five acres. The 1998 zoning map reveals that a substantial portion of plaintiff's tract falls within the RR-AA zone. The zone extends beyond plaintiff's property in a southerly direction approximately 8,000 feet to Chester Road. A substantial portion of the Township north of Route 46 is also zoned RR-AA. The RR-AA five-acre zone has a cluster option designed to allow the construction of twenty units on a 100-acre tract, with minimum lot size being determined by the developer, so long as it was larger than 60,000 square feet.

At the close of the bench trial, the trial court denied plaintiff's request for a builder's remedy, concluding that plaintiff was not a "major player" in the settlement of the Mount Laurel litigation resulting in the 1985 judgment of compliance. The court also rejected plaintiff's claim that there had been "massive noncompliance by the township" with the judgment of compliance justifying the grant of a builder's remedy to plaintiff. The judge viewed the Township's delay in seeking substantive certification from COAH not as defiance to the judgment of compliance, but merely "taking one's chances, in a certain sense, with the judgment."

However, the trial court invalidated the Township's RR-AA zone and the predecessor R-A zone. It determined that the Township's motivation was to slow down growth because the Township was "overdeveloped, that it was becoming unbalanced, in terms of its density." It acknowledged the relevance of the passage of the State Plan and that "upscale" subdivisions had recently been built reflecting the Township's policy favoring low-density, cluster developments in the subject area. However, the court found that five-acre zoning was "just enormous overkill" and the two-acre zoning, under the predecessor R-3 zone, a "substantial overkill." Concluding that a "plausible case" can be made for some larger lot zoning, the court gave the Township one year within which to enact an ordinance compliant with its findings.


Plaintiff argues that it is entitled to a builder's remedy in order to vindicate its right under the 1985 judgment of compliance because the Township has ignored its constitutionally- mandated obligation to provide affordable housing in adherence with the mandates of the 1985 judgment. Plaintiff's argument is predicated on the assumption that the judgment fixed the Township's fair share ...

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