July 21, 2008
WILLIAM E. MISCOSKI, RESPONDENT-APPELLANT,
LOCAL FINANCE BOARD, PETITIONER-RESPONDENT.
On appeal from the Final Decision of the Local Finance Board, Department of Community Affairs, LFB-02-034.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued April 23, 2008
Before Judges Sapp-Peterson, Messano and King.
William E. Miscoski appeals from the March 14, 2007, final decision of the Local Finance Board (the Board) that determined he violated N.J.S.A. 40A:9-22.5(d) and imposed a $500 fine. We have considered the arguments raised in light of the record and applicable legal standards. We reverse.
On May 2, 2005, the Board served Miscoski, then Deputy Mayor and a member of the municipal governing body of the Township of Upper Freehold (Upper Freehold), with a "Notice of Violation" pursuant to the Local Government Ethics Law, N.J.S.A. 40A:9-22.1 to -22.25 (the LGEL). The Board alleged that Miscoski had "violated N.J.S.A. 40A:9-22.5(d)" "when he voted affirmatively on township bond ordinance #100-02 to provide funds to purchase open space which incorporated a list of properties for possible purchase that contained a property . . . owned by  Miscoski's mother and business partner, Ellen Miscoski[.]" The Board concluded after "consider[ation] of the complaint filed . . ., the written response filed on behalf of  Miscoski, and the information and documentation compiled by the Board's staff during the investigation of the complaint," that Miscoski violated the statute "because he had a direct or indirect personal or financial involvement that might reasonably be expected to impair his objectivity or independent judgment." See N.J.S.A. 40A:9-22.5(d). The Board assessed a fine of $500.
Miscoski was advised of his right to contest the determination and, through counsel, requested an administrative hearing before the Office of Administrative Law (OAL). N.J.A.C. 5:35-1.1(i)(2). On January 17, 2006, the hearing was held before the administrative law judge (ALJ), and it commenced with a joint stipulation entered by Miscoski's attorney and the deputy attorney general representing the Board. In particular, the parties agreed 1) that Miscoski served on Upper Freehold's township committee on September 18, 2002; 2) that at a committee meeting on that date, he voted affirmatively to approve ordinance #100-02 (the ordinance); and 3) that one of the properties incorporated by reference in the ordinance was owned by Miscoski's mother, Ellen. The Board rested after the stipulation was entered into the record, and the ordinance and minutes from the township committee meeting were introduced in evidence.*fn1
Miscoski testified that his mother lived in Upper Freehold, and the property in question was a fifty-one acre tract "across the road" from her residence. He also acknowledged that a partnership, Miscoski Associates (the partnership), comprised of his mother, his brother, his sister, his father's trust, and himself, owned 130 additional acres of land upon which "Cream Ridge Golf Course, Incorporated," a corporation owned equally by himself and his brother-in-law, operated a golf course. Miscoski testified that the partnership had no ownership interest in his mother's property.
Noting that Upper Freehold wanted to "stay rural . . . stay a farming community," Miscoski testified that the ordinance in question was required to allow the township to be eligible for a "Planning Incentive Grant (PIG)" by which it could acquire grant monies to purchase "eligible farm[-]assessed properties" and maintain them as open space. According to Miscoski, the township engineer was required to create the list of properties attached to the ordinance, i.e., a list of "all farmland assessed property that's eligible." Miscoski acknowledged that his mother's property was on the list.
Miscoski testified that it was in Upper Freehold's best interests to include more eligible property in the ordinance because more money would be allocated under the PIG program. He further testified that under the PIG program, a landowner could expect to receive approximately $8000 per acre of land if he sold his property to the township for preservation purposes, much less that the $250,000 per acre he estimated was the market rate for developable land in Upper Freehold. He noted, "[F]or someone to go into the farmland preservation program, it's a gift. It's a donation. It's a sacrifice."
Miscoski testified that four affirmative votes from the five-person committee were needed to pass the ordinance, and one of the committee members was sick and absent from the meeting. He further testified that the vote could not be postponed because "the grant was due the following week." Upper Freehold received a million dollars in grant money from its PIG application, and the township used the funds to buy an eighty-three acre parcel that was being turned into a park. Upper Freehold did not use any of the money to purchase or attempt to purchase Ellen Miscoski's land, which she apparently still owns.
On cross-examination Miscoski acknowledged that the township committee ultimately had to approve the actual purchase of any property for preservation purposes, and the monies awarded under the PIG program were "matched" by Upper Freehold in order to do so. He further testified that the value for land purchased through the PIG program had increased to $15,000 per acre. Miscoski reiterated that the list attached to the ordinance contained "every property in Upper Freehold  that is farmland assessed." He also acknowledged that his mother's property was "contiguous to the golf course" owned by the partnership.
The ALJ issued her Initial Decision on February 24, 2006. Citing Wyzykowski v. Rizas, 132 N.J. 509, 525-26 (1993), she concluded that Miscoski's interests did not fit within any of the four categories of disqualifying interests outlined by the Supreme Court. She based her conclusion upon the factual stipulations, and the "competent, credible, [and] unrefuted testimony of  Miscoski." The ALJ found that the list of properties attached to the ordinance "consisted of all [ninety-three] properties in the township that were farmland assessed." She found that Miscoski had no "role in the creation of the list," nor was there "any evidence of any property being excluded" from the list. The ALJ further found that Miscoski's "action . . . was for the benefit of the entire township and consistent with its pre-existing, established master plan." The ALJ concluded that the Board had not established a violation of the statute.
On May 22, 2006, the Board issued a remand order. It noted that in order to accept the ALJ's recommendation, it "must be satisfied that Miscoski's interest in enacting the ordinance was an interest shared by most of the community." Finding the hearing testimony in this regard to be lacking "an adequate factual basis upon which to reach that conclusion," the Board's remand required the ALJ to hold further proceedings to determine:
1. The total area of the Township in acres.
2. The total area of the Township, in acres, that was farm assessed on September 18, 2002, when  Miscoski cast his vote in favor of the bond ordinance.
3. The total number of line items in the Township for tax collection purposes.
4. The number of line items that were farm assessed on September 18, 2002.
5. A list of farm assessed property owners, including the lot and block numbers of the parcel(s) they own.
In lieu of further testimony, both sides agreed to furnish the ALJ with the certification of Donna Taylor, the Upper Freehold Assistant Tax Assessor.
Taylor's certification indicated that Upper Freehold was comprised of 29,038 acres, of which 19,903 were farm-assessed as of September 18, 2002. Of the 2865 total line items for tax purposes, a total of 543 were "farm[-]assessed." The ALJ issued her second "initial" decision, incorporated the facts gleaned from Taylor's certification by reference, and affirmed her earlier decision without further explanation. The Board's final agency decision focused on "discrepancies between the [Taylor] [c]ertification and the testimony provided . . . by  Miscoski." It noted that the ordinance only contained 93 listed properties, while the certification listed 543 "farm[-]assessed" properties; it further noted that the total farm-assessed acreage in Upper Freehold was 19,903, much more than the 8,349 listed in the ordinance attachment. The Board found this inconsistent with the ALJ's decision that "the township engineer prepared a list of every farm[-]assessed property in the township for inclusion on the grant list." (Emphasis added). The Board found Miscoski's testimony in this regard, therefore, to be "incorrect," and concluded,
It has now become evident by sufficient, competent and credible evidence . . . that when  Miscoski voted on the bond ordinance to provide funds to purchase open space, which purportedly incorporated a list of all farm[-]assessed properties for possible purchase (including a property owned by his mother and business partner), that list actually represented only 17.1% of the farm [-]assessed properties in the Township. Furthermore, the acreage of the farm[-] assessed properties impacted by the Ordinance represented approximately 41.9% of the total farm[-]assessed acreage in the Township.  Miscoski's interest in enacting the ordinance was not an interest shared by most of the community.
The Board rejected the ALJ's decision, reinstated its finding that Miscoski violated N.J.S.A. 40A:9-22.5(d), and re-imposed the $500 fine.
Miscoski sought reconsideration by the Board and filed a certification in support of his request. He contended that the Board had misinterpreted his testimony before the ALJ. He noted that he had testified that the list of properties included in the ordinance were "all eligible farm[-]assessed properties which could be purchased" with the grant money. However, Miscoski certified that much of the farm-assessed property in Upper Freehold was no longer "eligible" to be included in the PIG application list, because it was "already under preservation," or was "subject to a pending sale or Planning Board action such as a subdivision." Miscoski argued that when the acreage of the ineligible property was added to that of the properties contained in the ordinance, it comprised more than fifty percent of the total acreage in Upper Freehold. Noting once again, as he did before the ALJ, that the PIG grant monies obtained were used to purchase land for a park, Miscoski contended that his vote on the ordinance was entirely consistent with his public duties.
On May 9, 2007, the Board's counsel responded to the reconsideration request. She noted that the Board's rules and regulations did not "provide for or require the Board to consider a [m]otion to [r]econsider" a final decision, but that the Board "nevertheless . . . reviewed the [m]otion . . . and voted to deny it." This appeal followed.
Our review of the final decision of an administrative agency is limited. Stated succinctly, "such a final decision should not be disturbed on appeal unless it is arbitrary, capricious or unreasonable." In re Zisa, 385 N.J. Super. 188, 194 (App. Div. 2006). The agency's factual findings are entitled to our deference if they could reasonably have been reached on sufficient credible evidence present in the record, considering the proofs as a whole, with due regard to the opportunity of the one who heard the witnesses to judge of their credibility and, in the case of agency review, with due regard also to the agency's expertise where such expertise is a pertinent factor. [Close v. Kordulak Bros., 44 N.J. 589, 599 (1965)(internal quotations omitted).]
We are not bound, however, by the agency's determination of a legal issue. Zisa, supra, 385 N.J. Super. at 195. In this case, we find that the Board reached factual conclusions unsupported by any credible evidence, and thereafter applied them to reach an erroneous legal conclusion, i.e., that Miscoski violated N.J.S.A. 40A:9-22.5(d).
That section of the LGEL provides No local government officer or employee shall act in his official capacity in any matter where he, a member of his immediate family, or a business organization in which he has an interest, has a direct or indirect financial or personal involvement that might reasonably be expected to impair his objectivity or independence of judgment[.] [N.J.S.A. 40A:9-22.5(d).]
The term "member of the immediate family" is defined by the LGEL as "the spouse or dependent child of a local government officer or employee residing in the same household." N.J.S.A. 40A:9-22.3(i). Therefore, the Board concedes that Miscoski's mother, Ellen, is not an immediate family member, and therefore, to the extent she had "direct or indirect financial or personal involvement," it did not present a disqualifying interest for Miscoski under the statute.
Rather, it is the Board's position that Miscoski himself had "a direct or indirect financial or personal involvement" that created grounds for his disqualification. The Board argues that in adopting this language, the Legislature essentially incorporated the standards already established by decisional law, e.g., Wyzykowski, supra, and application of those standards to Miscoski's conduct supports the conclusion that he violated the LGEL. Under the facts presented, we need not decide whether the LGEL's definition of a conflict of interest as contained in N.J.S.A. 40A:9-22.5(d) is entirely co-terminus with the standards set forth in case law. See Wyzykowski, supra, 132 N.J. at 529-30 (discussing relationship between common law and the LGEL).
In Zisa, supra, we reversed the Board's determination that Zisa, the mayor of Hackensack, had violated N.J.S.A. 40A:9-22.5(c) and (d). 385 N.J. Super. at 190. In that case, Hackensack had purchased a piece of property with the intention to create a parking lot to augment the scarcity of parking in its central business district. Id. at 191. Zisa, also a member of the municipal council, voted affirmatively to issue bonds to finance the purchase of the parking lot, and subsequently voted to authorize the purchase of the lot. Ibid. Within two months of the city's purchase of the property, Zisa, as managing member of a limited liability corporation, purchased nearby property with the intention to lease it to the county school district. Id. at 191-92.
Knowing the school district required more parking than was available at the property he was about to purchase, Zisa had his private attorney negotiate the lease of additional parking spaces at the nearby anticipated municipal lot. Id. at 192. Once he secured the city's agreement to lease the additional spaces at the usual monthly rate, Zisa finalized his purchase of the property. Ibid.
In the interim, Hackensack proceeded to solicit bids for the paving of the anticipated municipal parking lot. Id. at 193. Ultimately, after soliciting the advice of the municipal attorney, Zisa voted along with the other council members to award the contract, and thereafter voted repeatedly to authorize progress payments to the contractor. Ibid.
The Board concluded "that the nature of Zisa's interest in the outcome of the vote on the [paving] resolution could 'reasonably be expected to impair his objectivity or independence of judgment.'" Id. at 196. However, we found that conclusion to be "incorrect," because the "entity that had an interest in the outcome of the . . . vote was the bidder,  and Zisa had no interest or connection with [it]." Ibid.
Here, the evidence in the record supported only one conclusion regarding who had an interest in the passage of ordinance #100-02--the citizens of Upper Freehold. There was no evidence that Miscoski, his partnership, or his mother would receive some especial benefit, and in fact they did not. The Board seemed to rest its decision upon the fact that Miscoski's testimony was "incorrect" regarding the properties included on the list. However, as our recitation of the testimony clearly reveals, on at least one occasion Miscoski testified that all of the "eligible" farmland was included on the list.*fn2 Moreover, even if the ordinance did not include all the eligible farm-assessed properties, the Board seems to have used a simple mathematical calculation as the basis to determine whether the ordinance served the public interest and was otherwise consistent with Miscoski's public obligations. In other words, the Board apparently concluded that since the ordinance included less that fifty percent of the "total farm assessed acreage," it was evidence that Miscoski's personal interests displaced those of the public at large. We must conclude, therefore, that when the Board decided "Miscoski's interest in enacting the ordinance was not an interest shared by most of the community," it was a factual conclusion unsupported by any evidence whatsoever.
This faulty factual conclusion led to the Board's erroneous legal determination, i.e., that Miscoski "had both an indirect financial interest and a direct personal interest," in the passage of the ordinance. N.J.S.A. 40A:9-22.5(d). An "indirect pecuniary interest" was defined by the Wyzykowski Court as "when an official votes on a matter that financially benefits one closely tied to the official, such as an employer, or family member." 132 N.J. at 525-26. The Court defined a "direct personal interest" as "when an official votes on a matter that benefits a blood relative or close friend in a non-financial way, but [on] a matter of great importance." Ibid.
First, the inclusion of Miscoski's mother's property in the ordinance did not bestow a financial benefit upon either of them. Although the Board contends the inclusion of her property on the list was the necessary first step to the township's acquisition of the property, there was no evidence that the township actually intended to purchase the property. Clearly, based upon the limited amount of funds anticipated from the ordinance and the PIG grant, the township was not in a position to purchase all the property on the list. The undisputed evidence was that the inclusion of more properties in the ordinance enhanced the amount of money that Upper Freehold would likely receive from the PIG program. Therefore, the only financial benefit obtained from the passage of the ordinance was one that was bestowed upon the citizens of the township at large, i.e., more grant money to expand the preservation of open space.*fn3
Secondly, there is no evidence that the inclusion of Ellen Miscoski's property in the list of eligible properties bestowed a "non-financial benefit" upon her, such that Miscoski had a "direct personal interest" in the outcome of the vote. The Board did not, and has not, articulated in any specific way what that non-financial benefit might be. Moreover, every one of the ninety-three properties included in the ordinance would have seemingly obtained the same "non-financial benefit."
In determining whether agency action is arbitrary, capricious and unreasonable,
[T]he scope of judicial review is restricted to four inquiries:
(1) whether the agency's decision offends the State or Federal Constitution; (2) whether the agency's action violates express or implied legislative policies; (3) whether the record contains substantial evidence to support the findings on which the agency based its action; and (4) whether in applying the legislative policies to the facts, the agency clearly erred in reaching a conclusion that could not reasonably have been made on a showing of the relevant factors. [Karins v. Atlantic City, 152 N.J. 532, 540 (1998)(quoting George Harms Constr. Co. v. New Jersey Turnpike Auth., 137 N.J. 8, 27 (1994).]
We must conclude that the Board lacked substantial evidence upon which to base its finding that any benefit bestowed upon Miscoski or his mother was in any meaningful way different from that received by the other residents of Upper Freehold. The purposes of the LGEL are not advanced unless the Board can demonstrate a disqualifying interest based upon the credible evidence in the record. Under these circumstances, it failed to do so.