On certification to the Superior Court, Appellate Division, whose opinion is reported at 341 N.J. Super. 229 (2001).
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
In this appeal, the Court considers whether a developer that pays money into a municipality's affordable housing fund, instead of constructing housing units affordable to lower income households, may compel an adjoining municipality to allow it to connect into its municipal sewer system.
Bi-County Development of Clinton (Bi-County) is the owner and developer of a 46.2 acre parcel of land located in the Township of Clinton (Township or Clinton). At the time Bi-County acquired the property, it was zoned to permit residential development of eight units per acre. In December 1986, Clinton filed its first Housing Element and Fair Share Plan (HE/FSP) with the Council on Affordable Housing (COAH). In that plan, the Township included Bi-County's property for inclusionary development. In July 1987, Bi-County initiated an exclusionary zoning builder's-remedy lawsuit, challenging Clinton's compliance with its Mount Laurel obligation. That litigation was transferred to COAH for mediation and review. Thereafter, in December 1987, the Township filed an amended HE/FSP deleting the Bi-County site as a component of its affordable housing plan.
Thereafter, in September 1990, Bi-County resolved its litigation by entering into an agreement with the Township that allowed Bi-County to develop its parcel with up to 187 residential units and up to ten thousand square feet of commercial and/or office space. The Agreement further provided Bi-County the option either to seek approval for an on-site set aside for affordable housing of ten percent of the total units or, in the alternative, and at its sole discretion, Bi-County could elect to make a contribution to the Township of two thousand dollars for each of the 187 units to be approved by the Planning Board, to be used by the Township solely for the satisfaction of its Mount Laurel obligation to provide low and moderate income housing off-site. In addition, and in recognition of limited sewer capacity in the Township, the Township agreed to assist Bi-County in obtaining access and treatment capacity and to otherwise support Bi-County in its efforts to achieve sewer treatment capacity. Bi-County eventually elected to pay the development fee to the Township, in lieu of constructing lower income housing.
In April 1994, the Clinton Township Planning Board granted preliminary major subdivision approval for the Bi-County development project. However, listed as one of the unresolved issues before final approval would be granted was public water and sewer capacity for the Bi-County development. After negotiations with the Township to obtain sewerage treatment capacity failed, Bi-County instituted litigation against the Township to obtain the necessary reservation of sewer treatment capacity. In January 1997, the trial court entered an order requiring the Township to reserve for the benefit of Bi-County 56,100 gallons per day of sewage treatment capacity at the Clinton Sewage Treatment Plant (STP). However, although that litigation resolved the issue of transmitting sewage from the Bi-County development to the Clinton STP, Bi-County subsequently sought an alternative plan to avoid construction of a new sewer line along Route 31 as it originally had planned. Thus, Bi-County sought access to the State sewer conveyancing system that eventually runs to the Borough of High Bridge sewage conveyancing system that ultimately empties into the Clinton STP.
Bi-County was unsuccessful in its efforts to obtain access to the High Bridge sewer system. Thus, Bi- County filed an action seeking declaratory and injunctive relief against High Bridge, the Clinton Township Sewerage Authority, and the State of New Jersey. Bi-County alleged that the only alternative to achieve public water and sewage capacity for the development would be by constructing an entirely new pumping station on its property and a new force main line that would parallel the High Bridge line to a connection point in the Town of Clinton. Bi-County further claimed that that alternative would be unduly costly ($676,830), time consuming, and unnecessarily duplicative. In comparison, it asserted that the cost to connect to High Bridge's system would be only $13,750. However, High Bridge submitted an expert report indicating that costly improvements would have to be made to accommodate the anticipated flow from Bi-County's development. Bi-County further asserted that it was an "inclusionary" development and that, as such, High Bridge had an obligation to eliminate any "undue cost generating practices" pursuant to the FHA and COAH regulations. High Bridge asserted that the Bi-County development was not entitled to any such preferential treatment and further that since Bi-County is building in Clinton, High Bridge had no obligation to minimize its costs.
In September 1999, the trial court granted Bi-County's motion for summary judgment and ordered High Bridge to permit Bi-County access to its sewage conveyancing system. In reaching its ruling, the court held that Bi-County's development qualified as an inclusionary development and that the costs of constructing a new line constituted "undue expenses because they [were] unnecessary." The trial court further found that health and safety issues were not implicated.
The Appellate Division reversed the grant of summary judgment, concluding that a developer that pays money into a municipality's affordable housing fund in lieu of constructing units affordable to low and moderate income households does not have a right to connect into the sewer system of an adjoining municipality that has elected to reserve the use of its system for its own residents. The panel further found that to compel High Bridge to allow Bi-County access to its system would not facilitate the construction of lower income housing, but rather would only lower the costs and thereby increase the potential profits from a development of single family homes and a commercial building. Finally, the Appellate Division concluded that Bi-County's obligation to pay into Clinton's affordable housing fund did not transform its proposed development into an inclusionary development that can assert a right to compel an adjoining municipality to allow the developer to connect into its municipal sewer system.
The Supreme Court granted Bi-County's petition for certification.
HELD: Bi-County Development's payment of a development fee to the Township of Clinton in lieu of constructing affordable housing does not justify disturbing the general rule that a municipality is not obligated to provide access to its sewer system to residents of a neighboring municipality.
1. As a general rule, a municipality that provides services for the benefit of its residents is under no obligation to extend its services beyond its borders. (pp. 21-28)
2. Developing municipalities in New Jersey are constitutionally required to provide a realistic opportunity for the development of low and moderate income housing, and every municipality has an affirmative obligation to remove unnecessary cost-producing requirements and restrictions that are barrier to the construction of their fair share of lower income housing. (pp. 28-30)
3. Developer fees are among the types of devices or methods municipalities may consider, in addition to mandatory set-asides and density bonuses, to meet their fair share obligations. (pp. 30-33)
4. Since COAH's regulations on their face apply to the cost generating restrictions only of the municipality seeking substantive certification and the benefit of cost avoidance relates to ordinances within the municipality where the inclusionary site is located, the Court need not resolve whether the Bi-County development is an inclusionary development for purposes of benefiting from COAH's cost generating regulations. (pp. 33-37)
5. The payment of a development fee, either by commercial developers, non-inclusionary residential developers, or by the owners of inclusionary residential sites in the form of in lieu payments, does not have a sufficient nexus to the actual production of low income housing to justify infringing on another municipality's right to restrict access to its sewer system. (pp. 38-40)
6. Compelling circumstances should exist in order to justify, under Mount Laurel principles, disturbing the general rule that a municipality may exclude another municipality or its residents from using or connecting to its sewer system. That general rule will be disturbed only in the case of developments that substantially and directly serve important regional and environmental interests. (pp. 40-41)
As modified, judgment of the Appellate Division is AFFIRMED.
JUSTICE VERNIERO has filed a separate dissenting opinion in which JUSTICE LONG joins.
The opinion of the court was delivered by: Stein, J.
Justice Verniero believes that the Court's holding limits a municipality's flexibility in addressing its Mount Laurel obligations. He further believes that High Bridge has a regional obligation to assist in a neighboring inclusionary development so long as such assistance presents no detriment or burden to High Bridge or to its taxpayers. Thus, Justice Verniero would permit Bi-County to connect to the High Bridge system so long as that connection does not burden that system or otherwise affect High Bridge's current or future needs, and would remand for a full hearing to explore those issues.
CHIEF JUSTICE PORITZ and JUSTICES COLEMAN, LaVECCHIA, and ZAZZALI join in JUSTICE STEIN's opinion.
JUSTICE VERNIERO has filed a separate dissenting opinion in which JUSTICE LONG joins.
The issue before the Court is whether a developer that pays money into a municipality's affordable housing fund instead of constructing housing units affordable to lower income households may compel an adjoining municipality to allow it to connect into its municipal sewer system.
The Law Division granted summary judgment in favor of plaintiff, Bi-County Development of Clinton, Inc. (Bi-County), holding that Bi-County's proposed development qualified as an inclusionary development and that the refusal of defendant, Borough of High Bridge (High Bridge), to permit access to its sewer system had a cost generating impact on the development. Therefore, it determined that High Bridge was obligated to permit Bi-County access to its sewer system. The Appellate Division reversed the judgment of the trial court and held that payment of a development fee in lieu of constructing low and moderate income housing does not entitle Bi-County to connect into a neighboring municipality's sewer system.
We affirm the judgment of the Appellate Division. We hold that payment of a development fee in lieu of constructing affordable housing does not justify disturbing the general rule that a municipality is not obligated to provide access to its sewer system to residents of a neighboring municipality.
Bi-County is the owner and developer of a 46.2 acre parcel of land located near the intersection of State Highway No. 31 (Route 31) and County Road No. 513 (Route 513) in Clinton Township, New Jersey. There is direct access to Route 31 along the easterly side of the property. On the north, west and south sides of the property is the Spruce Run Reservoir Recreation Area, owned and operated by the State of New Jersey (State).
Bi-County's parcel is identified as Block 68, Lot 9, on the tax map of Clinton Township. At the time Bi-County acquired the property it was zoned to permit residential development of eight units per acre. Following a builders remedy lawsuit initiated by Bi-County, the property since has been zoned by the Township for an "inclusionary development" pursuant to the Township's certified Housing Element and Fair Share Plan (HE/FSP). Bi- County has received preliminary subdivision approval from the Planning Board of Clinton Township (Planning Board) permitting the development of 187 single family residential units. Subsequently, Bi-County has proposed construction of only 105 single family units with 10,000 square feet of land reserved for a commercial component of the development.
Defendant High Bridge, Clinton Township, and the Town of Clinton are neighboring municipalities. High Bridge, through its Department of Public Works, owns and operates a sewage conveyancing system that includes a sewage pumping station located on Route 513. Sewage is pumped through a force main that transmits effluent from High Bridge to the Town of Clinton Collection System where it flows to the Town of Clinton Sewage Treatment Plant (STP). In 1968, High Bridge contracted with the Town of Clinton to allow it to send its sewage to the Town of Clinton STP.
The State owns and operates a sewage transmission line, including a pumping station, that conveys sewage from the Spruce Run Reservoir Recreation Area to the High Bridge sewer system. That transmission line runs directly along the frontage of Bi- County's property proceeding in a southerly direction along Route 31 to the intersection of Route 513. The sewer line then proceeds in an easterly direction along Route 513 to a connection point with the High Bridge system. In 1970, the State and High Bridge entered into an agreement whereby the State was permitted to connect its Spruce Run sewer line into High Bridge's line that eventually empties into the Town of Clinton STP.
In order for Bi-County's proposed development to be constructed, Bi-County must obtain sufficient sewage treatment capacity as well as a connection to a sewage treatment facility. As a result of prior litigation, the Town of Clinton STP will provide 56,100 gallons per day (gpd) of sewage treatment capacity for the Bi-County development. Although originally planning to construct its own sewer line to connect to the Town of Clinton STP, which may have required constructing a new pumping station as well, Bi-County now proposes as an alternative that it use available sewer capacity in the State owned sewer line and the High Bridge system.
In October of 1985, pursuant to the Fair Housing Act, N.J.S.A. 52:27D-309(a), Clinton Township (Clinton) timely filed a Resolution of Participation with the Council on Affordable Housing (COAH) and, on December 31, 1986, filed its first Housing Element and Fair Share Plan. Clinton included Bi- County's property in its HE/FSP as a site for inclusionary development. However, Clinton did not petition for substantive certification at that time.
In July of 1987, Bi-County initiated an exclusionary zoning builder's-remedy lawsuit, challenging Clinton's compliance with its Mount Laurel obligation and alleging that Clinton had 1) failed to act on Bi-County's preliminary site plan application that included an affordable housing set aside; 2) failed to adopt the necessary ordinances consistent with its HE/FSP; and 3) failed to seek COAH review for substantive certification. In November 1987, Bi-County's motion to transfer the case to COAH's jurisdiction in order to exhaust the mediation and review process pursuant to N.J.S.A. 52:27D-316(b) was granted and the matter was transferred to COAH by court order.
In early 1987, Clinton apparently became aware of potential problems with the construction of a large development on the Bi- County site. A committee was formed to investigate the issue and to amend the HE/FSP accordingly. On December 1, 1987, the Planning Board approved a resolution amending its Master Plan and recommending amendments to the Municipal Zoning Ordinance. On December 3, 1987, Clinton filed an amended HE/FSP deleting the Bi-County site as a component of its affordable housing plan. With regard to the ongoing builder's remedy suit, a dispute arose about which of the two filed plans should be subject to the mediation before COAH. However, in March 1988, COAH issued an Order and decided that the plan on file when Bi-County's case was transferred from the courts, the initial HE/FSP, was subject to the mediation.
COAH ultimately transferred the case to the Office of Administrative Law (OAL) for review. The matter was eventually resolved when both parties executed a comprehensive thirty-two page Settlement Agreement (Agreement) in September 1990. The Agreement provided that Bi-County could develop its parcel with "up to one hundred eighty-seven (187) residential units and up to ten thousand (10,000) square feet of commercial and/or office space." The Agreement further provided Bi-County the option either to seek approval for "an on-site set aside for affordable housing of ten percent (10%) of the total units (evenly distributed between low and moderate units)" or,
[a]lternatively, at Bi-County's sole discretion, [it could make a] Contribution to the Township of Two Thousand Dollars ($2,000) for each of the up to 187 market rate units to be approved by the Planning Board pursuant to this Agreement, to be used by the Township for the satisfaction of its Mt. Laurel obligation to provide low and moderate income housing off-site by means of such COAH approved mechanisms ...