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In re Grant of Third Round Substantive Certification to Old Bridge Township


November 19, 2010


On appeal from a Final Decision of the New Jersey Council on Affordable Housing.

Per curiam.


Submitted November 3, 2010

Before Judges Carchman, Messano and Waugh.

Appellant Oaks Development Corporation, a developer of affordable housing and a project known as The Oaks at Glenwood (the Oaks) located in Old Bridge, appeals from a decision of the New Jersey Council on Affordable Housing (COAH), granting to respondent the Township of Old Bridge (Old Bridge or the township) substantive certification for its Third Round Housing Element and Fair Share Plan (the Plan). Included within the Plan was the Oaks proposed 1,384 unit residential development, which included 276 units of affordable housing, representing a substantial portion of respondent's affordable housing obligation. Appellant asserts that COAH erred by including the Oaks project in the Plan since Old Bridge has "frustrated and stalled" the development, acted in bad faith and has failed to provide a realistic opportunity for affordable housing at the Oaks site.

In recognition of the issues raised by appellant, COAH, in its resolution granting substantive certification, included a provision requiring Old Bridge to "submit an update in 6 months" and "to continue to submit updates in 6 month intervals, on approvals and construction of the Oaks at Glenwood." Despite this provision, appellant asserts that the grant of substantive certification was arbitrary, capricious and unreasonable. We disagree and affirm.

To provide proper context for the present appeal, we review events that transpired between the parties more than 20 years ago when appellant contracted with Old Bridge to create affordable housing units.

In 1986, appellant agreed to build a residential development in Old Bridge that would include affordable housing units. This project, known as "The Oaks at Glenwood," obligated appellant to build 1,384 residential units, of which 138 would be allocated for multi-family affordable housing. In 2003, appellant's application came before the township's Planning Board but was denied.

Appellant filed an action in lieu of prerogative writs in the Law Division successfully appealing the decision of the Planning Board, and that Board was mandated to grant a preliminary and final site plan approval. Since that time, more obstacles have arisen resulting in the appointment of a special master to investigate plaintiff's claims and help finalize the development agreement with Old Bridge. In addition to the special master's appointment, appellant sued the Old Bridge Municipal Utilities Authority because it "frustrated [plaintiff's] efforts to obtain water and sewer service" and "impose[d] excessive fees" that have "thwart[ed]" the project. Specifically, appellant sought an order to compel the township to set aside water for appellant because it was a "scarce resource." Subsequent to the filing of this appeal, the Law Division tolled "applicable contract and permit deadlines, such that the expiration dates will not begin to run until the termination of this litigation."

In addition, the judge made the following finding:

The present litigation has been ongoing since 2005. In this case, Plaintiff has diligently pursued their approvals but the ongoing litigation has prevented the Plaintiff from proceeding with development. Similarly, Defendants have acted properly, with the best interests of the township and people of Old Bridge in mind. While this litigation has delayed the construction of the Oaks Development Project, this Court finds that there is no direct fault to be placed on either party. The Plaintiff's accusations of 'dilatory tactics' on the part of Defendant and the Defendant's assertion that Plaintiff refuses to act upon its contractual obligations both lack foundation. This Court is satisfied that both parties have acted in good faith and that neither has acted in a manner specifically designed to deprive the other party of any contractual rights.

Despite appellant's complaint about the project's momentum and pending lawsuits, the township devised a plan to meet COAH's third round housing cycle obligation from 1999-2018. Pursuant to COAH's regulations, all municipalities must describe their plans for constructing affordable housing by addressing three categories: rehabilitation, which is the municipality's current housing need; prior-round obligation, which assesses affordable housing issues not fulfilled by the two prior COAH rounds; and its projected growth share, which is the municipality's proposed affordable housing strategy for the third round time period.

As articulated in its Plan, the township carved out housing measures to satisfy each of these third round requirements. Those measures included: 142 units for the rehabilitation program; 439 units from the prior round; 655 units for its growth share projections. The township's plan only mentioned the Oaks development when it summarized a breakdown of all programs incorporated into its housing projections; it estimated 138 units would be associated with the Oaks project.

On December 31, 2008, the township filed a petition with COAH to obtain third round substantive certification of its Plan. COAH staff deemed the Plan to be complete and, pursuant to regulations, the township published public notice of its petition. No objections were received to the petition during the standard 45-day public comment period. COAH staff inspectors conducted a site visit prior to making their recommendations. The COAH staff inspection concluded that the township had satisfied its housing obligation.

Consequently, COAH filed a compliance report that recommended the council grant certification and detailed the township's plan for affordable housing during the third round period. First, the report demonstrated that the township had adequately addressed all three of its duties by: "allocat[ing] $1,608,300" to rehabilitate 142 units; providing both age-restricted and rental units to satisfy prior round obligations; and projected a reasonable growth share platform. With respect to the growth share component, COAH staff acknowledged that the Oaks development project comprised a large portion of the township's proposed 655 units of affordable housing; specifically, the Oaks development made up a substantial percentage of the anticipated sites. Appellant's development also appeared in COAH's calculation of the township's family rental requirements.

Following COAH staff's recommendation and prior to the council's final's determination of the township's petition, appellant objected to a grant of substantive certification. In a letter to COAH by appellant's then counsel, appellant urged COAH to deny certification because the township "[h]ad sought to exploit the credits associated with th[e] [Oaks] development" and had "presented roadblocks and obstacles" that prevented the development's progress. Specifically, appellant disapproved of the township's reliance on the Oaks development as an "integral part" of its plan; it claimed that Oaks "represent[ed] 50% of [the] [g]rowth [s]hare" estimates and nearly sixty percent of its family-rental unit proposal.

As the proposed remedy, appellant requested that COAH remove the Oaks project from the township's plan or at least delay a final decision pending the end of litigation involving the action against the MUA as to whether water was a "scarce resource." Consequently, appellant implored COAH to "intercede in the allocation of the scarce resource[s]" so it could at least begin construction. Finally, appellant emphasized that the township's "long and checkered history of opposing and litigating against developers" should preclude it from the benefit of substantive certification.

Considering appellant's grievances, COAH granted the petition for certification but on the condition that the township provide regular updates about the Oaks project to ensure that it would provide a realistic opportunity to create affordable housing. The resolution provided:

BE IT FURTHER RESOLVED that Old Bridge shall submit an update in 6 months, and shall continue to submit updates in 6 month intervals, on approvals and construction of the Oaks at Glenwood; and

BE IT FURTHER RESOLVED that if the Oaks at Glenwood ceases to be a realistic opportunity to create affordable housing, the credits and associated bonuses for the Oaks shall be removed from the Housing Element and Fair Share Plan; and

BE IT FURTHER RESOLVED that if the Oaks at Glenwood no longer presents a realistic opportunity for the creation of affordable housing, the Council will direct the municipality to amend its plan to address the shortfall; and....

This appeal followed.

On appeal, appellant asserts that the grant of substantive certification was arbitrary, capricious and unreasonable. The argument is premised on the alleged resistance of Old Bridge to move forward on appellant's approval process resulting in the absence of a realistic possibility for affordable housing. In addition, appellant urges that COAH failed to conduct a hearing to address appellant's objections to the approved plan.

Our standard of review of agency determinations is limited. In re Taylor, 158 N.J. 644, 656 (1999); Brady v. Bd. of Review, 152 N.J. 197, 210 (1997). We must give deference to such decision, unless it is arbitrary, capricious or unsupported by substantial credible evidence in the record as a whole. In re Carter, 191 N.J. 474, 482 (2007), In re Distrib. of Liquid Assets, 168 N.J. 1, 10-11 (2001); Taylor, supra, 158 N.J. at 656-57; R & R Mktg., L.L.C. v. Brown-Forman Corp., 158 N.J. 170, 175 (1999); Brady, supra, 152 N.J. at 210-11; Karins v. City of Atl. City, 152 N.J. 532, 540 (1998); In re S.D., 399 N.J. Super. 107, 121 (App. Div. 2008).

It is not our function "'to substitute [our] independent judgment for that of [an] administrative' agency," such as COAH, "'where there may exist a difference of opinion concerning the evidential persuasiveness of the relevant [proofs].'" In re Certificate of Need Granted to the Harborage, 300 N.J. Super. 363, 379 (App. Div. 1997) (alteration in original) (quoting First Sav. & Loan Ass'n v. Howell, 87 N.J. Super. 318, 321-22 (App. Div. 1965), certif. denied, 49 N.J. (1967)).

Only when the agency's findings are clearly mistaken and "'so plainly unwarranted that the interests of justice demand intervention and correction'" should a reviewing court "'make its own findings and conclusions.'" Campbell v. N.J. Racing Comm'n, 169 N.J. 579, 587-88 (2001) (quoting State v. Johnson, 42 N.J. 146, 162 (1964)). This is especially true when addressing the issue of COAH's determinations regarding the obligations imposed on municipalities to meet their affordable housing obligations. See In re Adoption of N.J.A.C. 5:96 & 5:97, ___ N.J. Super. ___ (App. Div. 2010) (slip op. at 53).

The Fair Housing Act, N.J.S.A. 52:27D-301 to -329, delegates to COAH "broad authority and responsibility" to assess whether a municipality's plan for affordable housing presents a "realistic opportunity for the satisfaction of [COAH] obligations." In re Twp. of Southampton, 338 N.J. Super. 103, 112 (App. Div. 2001). COAH's approval of a municipality's housing plan first requires the municipality to file a petition with COAH for substantive certification. N.J.S.A. 52:27D-313. Once the petition is filed, any party that opposes the grant of such certification must formally object within 45 days of the petition's publication of notice in order to obtain a hearing. N.J.S.A. 52:27D-314, N.J.A.C. 5:96-3.5(a). Where no objections are lodged within the requisite timeframe, COAH may grant certification provided the municipality's plan is "consistent with the rules... adopted by the council" and meets the housing needs of the municipality's "low and moderate income" population. N.J.S.A. 52:27D-314(a).

A grant of substantive certification empowers the municipality with a "presumption of validity." N.J.S.A. 52:27D-317(a). A challenge to the municipality's housing plan may rebut that presumption by proffering "clear and convincing" proof that the plan does not "provide a realistic opportunity" for affordable housing. Ibid. To insulate itself against challenges to its grants of certification, COAH must conduct an "independent evaluation of the compliance plan" that extends well beyond a "paper review of a municipality's submission" or a "perfunctory consideration" of the petition. Southampton, supra, 338 N.J. Super. at 114.

Review of a COAH decision entails the consideration of three questions: "(1) whether the agency's action violated the enabling act's express or implied legislative policies; (2) whether there was substantial evidence in the record to support the findings on which the agency based its action; [and] (3) whether in applying the legislative policies to the facts, the agency clearly erred by reaching a conclusion that could not reasonably have been made after weighing the relevant factors." Non-Profit Affordable Hous. Network v. N.J. Council on Affordable Hous., 265 N.J. Super. 475, 479 (App. Div. 1993) (citing Public Serv. Elec. and Gas Co. v. N.J. Dep't of Envtl. Prot., 101 N.J. 95, 103 (1985)).

Appellant contends that COAH's decision to grant substantive certification was arbitrary and capricious because it failed to adequately weigh the township's allegedly egregious conduct before issuing its resolution. The record, as well as the resolution adopted by COAH, does not support this argument.

COAH met its entrusted burden of engaging in an "independent evaluation" before granting certification when it conducted a site inspection and articulated its findings in a lengthy and comprehensive report. See Southampton, supra, 338 N.J. Super. at 114. The extensive analysis evidenced in that report showed how COAH had employed a methodical approach before approving Old Bridge's petition. The report demonstrates more than a "perfunctory consideration" or a "paper review" and was based on substantial evidence present in the record. Southampton, supra, 338 N.J. Super. at 114.

Appellant also asserts that the township acted in bad faith and "hindered the [Oaks] project by delaying and denying applications and refusing to sign... agreements." Appellant cites to a series of prior cases involving the township to support its contention that the township "has had a long and checkered history of opposing and litigating against developers...."

Reliance on unrelated litigation provides little by way of empirical evidence that a municipality is hostile to developers. In fact, the most recent litigation between appellant and Old Bridge defuses the notion that the municipality acted in bad faith. As we previously noted, the Law Division judge commented:

[appellant] has diligently pursued [its] approvals but the ongoing litigation has prevented the [appellant] from proceeding with development. Similarly, [d]efendant[] ha[s] acted properly, with the best interests of the township and people of Old Bridge in mind. While this litigation has delayed the construction of [appellant's]

[p]roject... [,] no direct fault [can] be placed on either party. The [appellant's] accusations of 'dilatory tactics' on the part of [d]efendant and the [d]efendant's assertion that [appellant] refuses to act upon its contractual obligations both lack foundation.... [B]oth parties have acted in good faith.

However, appellant's objections have not fallen on deaf ears. In response to appellant's concerns, COAH conditioned the certification by mandating continuing six-month updates on the Oaks project's progress. Further, COAH explicitly cautioned the township that if for some reason "the Oaks at Glenwood ceases to be a realistic opportunity... [it] shall be removed from the... [p]lan." Placing these restrictions on the township comported with COAH's responsibilities and was reasonable, as N.J.A.C. 5:96-10.1(a) authorizes COAH to demand six-month updates from Old Bridge; moreover, N.J.A.C. 5:96-10.4(b) permits COAH to take "corrective action[]" and amend or "revo[ke]" certification if the township fails to comply. COAH acknowledged appellant's concern and established the framework for a continued review of Old Bridge's mandate to advance the project.

We reject without an expansive discussion appellant's assertion that COAH was obligated to provide a hearing before adoption of the plan. We need not decide whether appellant filed a timely objection within the mandated 45-day objection period, N.J.S.A. 52:27D-314; however, the comments received from appellant during the 14-day comment period, N.J.A.C. 5:96-6.2(b), were considered and reflected in the resolution adopted by COAH.

We add one additional note. Subsequent to the perfection of this appeal, we decided In re Adoption of N.J.A.C. 5:96 & 5:97, supra, wherein, among other determinations, we invalidated certain of COAH's rules including N.J.A.C. 5:97-3.2(a)(4)(iv) (permitting substantive certifications of housing plans that do not specify location sites or sources of funding), N.J.A.C. 5:94-4.4 (allowing developers to provide affordable housing without any compensating benefit), N.J.A.C. 5:97-3.5 (granting rental bonus credits from prior round obligations), and N.J.A.C. 5:97-3.17 (permitting compliance bonuses). We also invalidated the "growth share methodology" utilized by COAH in determining a municipality's housing obligation.

Although our decision may well impact on Old Bridge's substantive certification as well as those approved for other municipalities throughout the State, we do not see our decision as germane to the issues raised on this appeal by appellant. To the extent that compliance with the mandate in In re Adoption of N.J.A.C. 5:96 & 5:97 requires adjustments to Old Bridge's housing plan, our decision here is without prejudice to the rights of the parties to challenge the impact of such adjustments as may be appropriate.

We conclude that the COAH's action in granting substantive certification with the conditions specifically addressed to appellant was not arbitrary, capricious or unreasonable.



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