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In re Rockaway Township

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


May 27, 2009

IN RE: ROCKAWAY TOWNSHIP, MORRIS COUNTY, ORDER TO SHOW CAUSE OF THE COUNCIL AS TO THE DISMISSAL OF ROCKAWAY'S THIRD ROUND FAIR SHARE PLAN PETITION AND MOTION OF ROCKAWAY FOR PARTIAL RELIEF.

On appeal from the New Jersey Council on Affordable Housing, Docket No. 06-1817.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued April 21, 2009

Before Judges Skillman, Graves and Grall.

Rockaway Township appeals from a final decision of the Council on Affordable Housing (COAH), which dismissed its petition for third round substantive certification on the ground that Rockaway had failed to comply with COAH's directives regarding the provision of water to the affordable housing development site owned by respondent Pondview Estates.

The Pondview site has been a component of Rockaway's affordable housing compliance plans since the mid-1980s and was one of the main components of the compliance plan for which Rockaway received second round substantive certification on April 2, 1997. Pondview's revised development plan was granted final major subdivision and site plan approval by the Rockaway Planning Board on July 17, 2000. Pondview has constructed all of the on-site sewer collection and water distribution system and some of the other infrastructure required for its development.

However, the provision of adequate water supply for the development has been an ongoing problem that has not yet been resolved. When Pondview was granted subdivision and site plan approval, it had a developers' agreement with Rockaway under which Pondview agreed to construct an on-site water supply, treatment and distribution system and Rockaway agreed to submit an application to the Department of Environmental Protection (DEP) for the water allocation permit required for construction of this system. The DEP indicated that it would grant the required water allocation permit, conditioned upon the installation of a hydraulic barrier system to protect the on-site wells from groundwater contamination from the Picatinny Arsenal Superfund site. However, Rockaway indicated that it would not support the hydraulic barrier system without first running a pilot test of the proposed on-site wells. Thereafter, the parties devised such a pilot test in cooperation with the DEP.

In addition to the hydraulic barrier system, the DEP also required Pondview to provide an alternative water supply source by contracting with another municipality or private supplier. To fulfill this requirement, Pondview entered into a preliminary agreement with the Borough of Wharton under which Wharton agreed to provide 284,000 gallons per day (gpd) of water for the Pondview development.

On December 9, 2005, Rockaway petitioned COAH for third round substantive certification. The Pondview development site continued to be part of Rockaway's compliance plan submitted in support of this petition.

Pondview alleges that it became clear by the middle of 2006 that Rockaway would not allow the proposed on-site wells to be approved or utilized and would only allow Wharton to provide water to Pondview if Pondview agreed to a $6 million contribution to Rockaway, in addition to the $4.3 million Pondview would be required to pay to Wharton. As a result of this alleged failure by Rockaway to comply with its obligations under the agreement with Pondview, Pondview filed a motion with COAH on December 16, 2006 for various relief, including that Rockaway be ordered to take all necessary steps to pursue its application for a water allocation permit for the on-site wells for the Pondview development, to consent to Pondview's use of any water available from Wharton Borough, without requiring any payment by Pondview to Rockaway, and to reserve any new water supply capacity available to Rockaway for the Pondview development.

In response to this motion and a cross-motion filed by Rockaway, COAH issued a resolution on June 13, 2007, which found that "it is questionable whether there is sufficient water capacity available to the Pondview Estates affordable housing development or other elements of Rockaway's affordable housing plan," and "if there is not available water capacity for the elements of Rockaway's affordable housing plan, Rockaway no longer has a plan that meets the criteria of its substantive certification as granted by COAH." Based on these findings, COAH issued a "scarce resource restraint," which prohibited Rockaway "from issuing any approval or taking any action that would lead to the provision of public water for any project not included in [its affordable housing plan]." This resolution also directed Rockaway to show cause why COAH should not dismiss Rockaway's third round petition "unless Rockaway could demonstrate that there is sufficient water capacity to service Pondview[,]" and satisfy the other elements of its affordable housing compliance plan.

On the return date of this order to show cause, September 12, 2007, COAH issued another resolution, which concluded that "as a result of the failure of Rockaway to provide definite data concerning the available water supply to Rockaway, it is necessary to continue to maintain the scarce resource restraint upon Rockaway's water supply[.]" In addition, this resolution ordered Rockaway to immediately take the necessary steps to 1) provide COAH with accurate data from the MCMUA and SEMCMUA evidencing the total amount of water supply available to Rockaway, and the sites where any water supply has been committed, as well the volume committed; 2) immediately submit the on-site well pilot tests for the Pondview site to DEP for its review and decision regarding their viability; and 3) immediately take any and all steps necessary to secure a sufficient water supply for the Pondview site pursuant to the wheeling agreements with Wharton Borough, as well as any other actions necessary to meet this requirement[.]

On October 4, 2007, Rockaway's counsel sent a letter to COAH, which stated in part:

At the October 2, 2007 meeting, the Township of Rockaway declined to authorize the submission of the pilot test results and report to the NJDEP and requests that COAH reconsider its direction that the Township do so. . . .

The Township Council unanimously declined (with one absentee member) to submit the same to the NJDEP primarily for two reasons. First, it has been acknowledged by all parties that the utilization of any on-site water system on the Pondview Site creates the distinct risk of the contamination plume from the adjacent Superfund site of Picatinny Arsenal being drawn into these wells and ultimately contaminating the entire water system of the Township of Rockaway since this system will eventually be interconnected with the Township's water system. Second, and equally persuasive, is the fact that before any on-site system with an approved hydraulic barrier system can be utilized on the Pondview Site, the NJDEP has required that there be a back-up system immediately available in the event of a failure of the hydraulic barrier system. . . .

In its simplest terms, there is no reason for the Township to risk the contamination of the water system when an alternate system that does not create that risk is required to be established as a condition of the utilization of the on-site system. The Township should not be compelled to endorse a water system for this COAH project that creates a real and acknowledged risk of contamination when an alternate water supply system is available.

If an alternate water system is not available, the submission of the hydraulic barrier pilot test results will be an exercise in futility since the NJDEP has already declared that it will not allow the on-site system to be utilized without a back-up system from another source or sources.

On October 23, 2007, Rockaway submitted a motion to COAH for relief from the part of COAH's September 12, 2007 resolution that required Rockaway to submit the on-site pilot well tests for the Pondview site to the DEP for its review.

On November 7, 2007, COAH issued the resolution dismissing Rockaway's petition for third round substantive certification from which this appeal has been taken. In dismissing the petition, COAH stated:

Despite [COAH's] best efforts at requiring Rockaway to provide it with the actual water supply data from the MCMUA and the SEMCMUA, Rockaway has failed to provide [COAH] with data evidencing the actual water available to Rockaway, or the water committed to projects other than Pondview. In addition, while Rockaway asserts that meetings and discussions are on-going involving Rockaway, Wharton and the MCMUA, no agreements have been reached concerning any additional allocation of water to Rockaway or the Pondview site. Finally, . . . the Rockaway Township Council has formally declined to submit the Pondview on-site pilot wells test results and report to DEP for its determination as to whether to permit the on-site wells. The action of Rockaway in refusing to submit the on-site wells data to DEP is in contravention of both COAH's requirement that it do so and the agreement between Rockaway and Pondview for the use of on-site wells for the Pondview site.

COAH's resolution included a lengthy discussion of Rockaway's refusal to submit the results of the pilot testing for the proposed wells on the Pondview site to the DEP for its review:

Rockaway has stated, and the action of the Township Council has confirmed, that it will not submit the required data and report to DEP that could lead to the permitting of on-site wells for the Pondview site. Rockaway's rationale for refusing to allow the possible permitting of these wells by DEP is its concern with possible contamination to such wells, and as asserted by Rockaway, to the Township's water supply, from the adjacent Picatinny Arsenal site. If this is the rationale for Rockaway's action, the Council notes that refusal to submit the necessary data for DEP's review is not the proper approach for Rockaway to address its concerns. As with any environment issues, where the Legislature has empowered the DEP to issue or deny permits for development and its effects on ground, water or air, the proper regulatory procedures must be followed.

[I]f Rockaway's concerns regarding potential contamination to on-site wells on the Pondview site have merit, the facts supporting such claims should be presented to DEP. For Rockaway to simply refuse to allow the consideration by DEP of on-site wells for Pondview, without any review of the actual facts, is improper. As with all DEP permit[s], Rockaway may certainly present any scientific fact, expert reports or any other data which supports its concerns. However, at this point in time in this specific case, Rockaway's refusal to permit DEP to review the Pondview on-site pilot wells data and report must be viewed by COAH as Rockaway's refusal to take the necessary steps for the implementation of its third round petition.

Based on Rockaway's failure to reach the agreements required to provide water to the Pondview site or to provide the data COAH's September 12, 2007 resolution had ordered it to provide to the DEP, COAH concluded that "Rockaway's third round petition fails to provide a realistic opportunity for the provision of affordable housing to meet Rockaway's affordable housing obligation." Accordingly, COAH denied Rockaway's "motion for partial relief regarding [COAH's] requirement for the submission of the Pondview on-site pilot wells data and report to DEP[,]" and dismissed Rockaway's petition for third round substantive certification.

On appeal, Rockaway argues that (1) COAH lacked authority to dismiss its third round petition for substantive certification because of the stay issued by this court in In re the Adoption of N.J.A.C. 5:94 and 5:95 by the New Jersey Council on Affordable Housing, 390 N.J. Super. 1, 88 (App. Div. 2007) (In re Third Round Substantive Certification Rules); (2) COAH abused its discretion by dismissing Rockaway's third round petition without allowing Rockaway to satisfy its affordable housing obligations with alternative sites; (3) COAH's dismissal of Rockaway's third round petition for certification was arbitrary and capricious; and (4) COAH lacked authority to compel Rockaway to submit the results of its pilot tests of Pondview's proposed on-site wells to the DEP. We reject these arguments and affirm COAH's November 7, 2007 resolution dismissing Rockaway's petition for substantive certification.

Rockaway also presents several arguments regarding the scarce resource orders imposed by COAH's June 13 and September 12, 2007 resolutions. However, the parties agreed at oral argument that as a result of COAH's dismissal of Rockaway's petition for substantive certification, COAH no longer has jurisdiction over Rockaway and the scarce resource orders are no longer in effect. In fact, Pondview has secured restraints in its pending Law Division Mount Laurel action similar to the restraints imposed by COAH's scarce resource orders. Therefore, there is no need for us to consider Rockaway's arguments regarding the June 13 and September 12, 2007 scarce resource orders.

I.

In In re Third Round Substantive Certification Rules, supra, 390 N.J. Super. 1, we affirmed in part and reversed in part COAH rules regarding third round substantive certification and remanded to COAH to adopt amended rules that would satisfy constitutional and statutory requirements. In addition, we directed that pending "applications for substantive certification must be stayed pending the amendment process[,]" and also "stay[ed] the filing of any builder's remedy actions for any municipality whose application for substantive certification is affected by this opinion." Id. at 88. In imposing these stays, we stated:

A stay furthers the policy of the FHA to resolve affordable housing disputes through COAH rather than in the courts. Municipalities that have acted in good faith in devising fair share plans to comply with the existing third round rules should not be subjected to an exclusionary zoning law suit. [Ibid.]

Rockaway argues that these stays barred COAH from dismissing its petition for substantive certification and subjecting it to builder's remedy actions by Pondview and other developers. We recently rejected substantially the same argument in In re Motion of Landmark at Radburn Seeking Amendment or Dismissal of Fair Lawn's Third Round Fair Share Plan Petition, ___ N.J. Super. ___ (App. Div. 2009), in which "we confirm[ed] [COAH's] authority to dismiss a municipality's third round petition, based on a municipality's persistent failure to comply with the terms of its second round certification." Id. at ___ (slip op. at 2). In reaching this conclusion, we stated:

[W]e find no basis to disturb COAH's decision to dismiss the third round petition, thus effectively leaving Landmark free to seek a builder's remedy in Superior Court. See N.J.S.A. 52:27D-318; N.J.A.C. 5:95-5.5. The agency's decision was based on sound policy reasons, consistent with the fundamental purpose of the FHA, and on substantial credible evidence of a history of persistent non-compliance with Fair Lawn's second round fair share plan. COAH considered the policy expressed in the FHA to avoid builder's remedy litigation where possible, see N.J.S.A. 52:27D-303, but reasonably concluded that in this case, litigation could not be avoided. The agency properly exercised its authority to dismiss the petition. See Hills Dev. Co. v. Twp. of Bernards, supra, 103 N.J. at 56-57.

We also find no abuse of discretion in the agency's declining to delay a decision on the third round plan, while the Borough decided whether to submit an amendment proposing to remove the Landmark tract from the plan. [Id. at ___ (slip op. at 12).]

We reach the same conclusion in this case. The court's statement in In re Third Round Substantive Certification Rules, that "[m]unicipalities that have acted in good faith in devising fair share plans to comply with the existing third round rules should not be subjected to an exclusionary zoning law suit[,]" 390 N.J. Super. at 88, implicitly authorizes COAH to dismiss a petition for third round substantive certification if it concludes that a municipality has failed to comply with the obligations it assumed under a compliance plan for which it received second round substantive certification and thus has failed to "act[] in good faith." COAH's finding that Rockaway has failed to take reasonable steps to secure a water supply for the Pondview site, which has been an essential component of Rockaway's affordable housing compliance plan since 1985, supports the conclusion in this case, as in Fair Lawn, that Rockaway has failed to act "in good faith" to satisfy its existing obligations to provide a realistic opportunity for the construction of affordable housing.

II.

Rockaway's argument that COAH abused its discretion by dismissing Rockaway's petition without allowing Rockaway to satisfy its affordable housing obligations with alternative sites is clearly without merit and only requires brief discussion. R. 2:11-3(e)(1)(E).

N.J.A.C. 5:94-4.17(a) provides that a site zoned for inclusionary development that was used to address a second round affordable housing obligation shall be retained in a municipality's third round fair share plan if "[t]he site was subject to an agreement pursuant to the Council's mediation process or part of a negotiated settlement in court . . . ." Under N.J.A.C. 5:94-4.17(b), a municipality may not remove such a site from its affordable housing plan unless it has demonstrated to COAH that it has satisfied its affordable housing obligation for the period in question, which in this case is 1987-1999.

We have previously recognized that the "obvious purpose" of these and other related COAH rules "was to provide protection to owners of sites previously designated by the municipality as suitable for inclusionary development." Toll Bros., Inc. v. Twp. of W. Windsor, 334 N.J. Super. 77, 104 (App. Div. 2000). We reaffirmed our view of the reasonableness of these rules in Fair Lawn, supra, noting that "[a]bsent convincing proof that a long-included site is no longer appropriate for inclusion, COAH is under no obligation to allow a municipality to remove the site from its fair share plan based only on the town's policy preference to meet its fair share obligation in another way." ___ N.J. Super. at ___ (slip op. at 12-13).

It is undisputed that the Pondview inclusionary development is the subject of a COAH-mediated agreement and that Rockaway has not satisfied its entire second round affordable housing obligation for the period of 1987-1999. Consequently, under N.J.A.C. 5:94-17(a) and (b), Rockaway was required to maintain the Pondview site as part of its third round compliance plan. Therefore, COAH properly dismissed Rockaway's petition for substantive certification without allowing Rockaway to satisfy its affordable housing obligations with alternatives to the Pondview site.

III.

We next consider Rockaway's argument that COAH's dismissal of its third round petition for substantive certification was arbitrary and capricious.

"Municipalities have an affirmative obligation to facilitate provision of infrastructure necessary to make development [of affordable housing] realistically likely." Toll Bros., Inc. v. Twp. of W. Windsor, 303 N.J. Super. 518, 543 (Law Div. 1996). Therefore, "COAH . . . must obtain verification [from the municipality or other sources] that the infrastructure required for a proposed development that includes affordable housing is available or that there is a realistic prospect it will become available." In re Petition for Substantive Certification, Twp. of Southampton, 338 N.J. Super. 103, 114 (App. Div. 2001).

To this end, COAH's rules provide for the issuance of an order requiring a municipality to provide information relevant to compliance with its affordable housing obligations or to take action to satisfy those obligations, and if the municipality fails to comply with such an order, to dismiss its petition for substantive certification. N.J.A.C. 5:95-10.3 provides:

At any time, upon its own determination, or upon the application of an interested party, [COAH] may issue an administrative order for a municipality to provide information or take an action that expedites [COAH's] administrative process and/or the production of low- and moderate-income housing. [COAH] may dismiss a municipal Housing Element and Fair Share plan by administrative order.

The order shall set forth in detail the reasons for the dismissal and the actions the municipality must take before it may refile its Housing Element and Fair Share Plan.

Acting in accordance with this authority, COAH ordered Rockaway to immediately take the necessary steps to 1) provide COAH with accurate data from the MCMUA and SEMCMUA evidencing the total amount of water supply available to Rockaway, and the sites where any water supply has been committed, as well [as] the volume committed; 2) immediately submit the on-site well pilot tests for the Pondview site to DEP for its review and decision regarding their viability; and 3) immediately take any and all steps necessary to secure a sufficient water supply for the Pondview site pursuant to the wheeling agreements with Wharton Borough, as well as any other actions necessary to meet this requirement[.]

Despite this unequivocal order, Rockaway simply refused to submit the on-site well pilot tests for the Pondview site to the DEP for its review. Moreover, Rockaway failed to submit evidence that the water needed for development of the Pondview site could be obtained from Wharton or any other alternative source. Therefore, the record provides an adequate factual foundation for COAH's conclusion that Rockaway failed to provide the information required to show that its third round petition provides a realistic opportunity for the discharge of its affordable housing obligations and COAH's dismissal of Rockaway's third round petition for substantive certification was not arbitrary or capricious.

IV.

Finally, we consider Rockaway's argument that COAH lacks authority to compel a municipality to apply to the DEP for a water allocation permit and therefore COAH exceeded its authority in ordering Rockaway to submit the results of its pilot tests of Pondview's proposed on-site wells to the DEP. COAH has the responsibility in reviewing a municipality's petition for substantive certification to determine whether its compliance plan actually provides a realistic opportunity for the construction of affordable housing. N.J.S.A. 52:27D-314; see Hills Dev. Co. v. Twp. of Bernards, 103 N.J. 1, 31-47 (1986). In making this determination, COAH must verify that the infrastructure required for the development of those sites, including water, is available or that there is a realistic prospect it will become available. In re Petition for Substantive Certification, Twp. of Southampton, supra, 338 N.J. Super. at 117-20. Therefore, even though COAH lacks authority to direct a municipality to utilize a particular method to provide water to a site the municipality has designated for affordable housing, COAH has authority to determine whether the municipality has shown that there is a realistic prospect a water source for the site is available.

In this case, it was Rockaway, not COAH, which determined that on-site wells are a suitable source of water for Pondview's proposed development. Rockaway entered into developer's agreements with Pondview in 1991 and again in 2002 under which Pondview agreed to construct an on-site water supply, treatment and distribution system and Rockaway agreed to submit an application to the DEP for the water allocation permit required for construction of this system. In accordance with this agreement, Rockaway applied to the DEP in November 1998 for the water allocation permit required for the construction of the proposed Pondview water supply system, including on-site wells. Thus, COAH's order to Rockaway to transmit the results of its pilot tests of the proposed on-site wells to the DEP was designed to enforce Rockaway's voluntarily undertaken contractual commitment to Pondview.

Moreover, COAH's orders did not direct Rockaway to provide water to the Pondview site by means of on-site wells. COAH simply required Rockaway to show that there was a realistic prospect of available water for the site from some source.

Thus, the September 12, 2007 COAH resolution not only directed Rockaway to submit the results of the pilot tests for on-site wells for the Pondview site to the DEP for its review but also to submit data concerning the availability of water from the Morris County Municipal Utilities Authority and the Southeast Morris County Municipal Utilities Authority and to take "any and all steps necessary to secure a sufficient water supply for the Pondview site pursuant to the . . . agreement with Wharton Borough." Similarly, COAH's dismissal of Rockaway's petition for third round substantive certification was based not solely on Rockaway's failure to submit the on-site well pilot tests to the DEP but also its failure to show the availability of water for the Pondview site from any alternative source. Therefore, COAH properly discharged its responsibilities in dismissing Rockaway's third round petition for substantive certification based on Rockaway's failure to undertake the steps necessary to show the availability of a water source for the proposed Pondview affordable housing development.

Affirmed.

20090527

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