On Dec. 18, 2017, the Supreme Court of New Jersey agreed to hear a case that will require it to interpret a Highlands Water Protection and Planning Act exemption that appears to have been inserted to enable the construction of a particular Mt. Laurel affordable housing project. N.J.S.A. 13:20-1 et seq.; -28(a)(17). N.J. Highlands Coalition v. N.J. Dept. of Environmental Protec., 2017 WL 3318305 (App. Div.), certif. granted, ___ N.J. ___ (2017).

The case also exemplifies the serious and sustained challenges that developers, especially those proposing affordable housing, face from objectors. It has become clear that the defenders of the status quo rely on the complex and restrictive layers of environmental rules to delay or defeat housing and other proposed developments.

Background

The property in question, owned by Bi-County Development Corporation, comprises 85+ acres in the Borough of Oakland. Since the Highlands Act's enactment in 2004, the property has been included within the Highlands Region. N.J.S.A. 13:20-7(a)(1). For a discussion of the Highlands Act's adoption, see L. Goldshore and M. Wolf, “Something is Stirring in the New Jersey Highlands,” 175 N.J.L.J. 200 (Jan. 19, 2004), and “Highlands Preservation Bill a Priority,” 176 N.J.L.J. 549 (May 17, 2004).

Bi-County's quest to develop the property for residential housing including affordable units has had a protracted and tortuous history. In 1987, the developer commenced a builder's remedy lawsuit to construct 700 units. It resulted in a 1991 settlement in which Oakland agreed to rezone the property to accommodate 370 units.

In 1998, the developer contracted to sell the project. The contract-purchaser sought local planning board approval for a 313 unit inclusionary project. DEP issued a letter of interpretation (LOI) which confirmed that the site's wetlands were of intermediate resource value and the scaled down development conformed with the required 50-foot transition area.

In 2004, a new LOI was required, and DEP then determined that the wetlands were of exceptional value due to threatened and endangered species habitat. As a result, a 150-foot transition area was required and the project yield was reduced to 209 units.

DEP agreed to issue the required wetlands and flood hazard area approvals if the project was redesigned to include the expanded buffer and 16 acres were preserved for habitat purposes. The developer accepted these conditions and proceeded before the local planning board.

Highlands Act Exemption

The Highlands Act, adopted on Aug. 10, 2004, contained an exemption that appears to have been tailor-made for the current situation. It exempted “a major Highlands development … that on or before March 29, 2004, has been the subject of a settlement agreement and stipulation of dismissal filed in the Superior Court, or a builder's remedy issued by the Superior Court ….”

The exemption's duration was limited and would sunset “if construction beyond site preparation does not commence within three years after receiving all final approvals required pursuant to the 'Municipal Land Use Law,' [MLUL] . . . [N.J.S.A. 13:20-28(a)(17)].” (Emphasis added).

In 2005, DEP confirmed that Bi-County's development qualified for the exemption. In 2007, the developer obtained preliminary and final site approval, variances and waivers from Oakland's planning board. But the approvals were subject to 57 additional conditions including the obligation to return to the board if DEP imposed additional restrictions.

In 2014, DEP and the developer entered into another settlement agreement that required the withdrawal of pending administrative appeals, revisions to the plans to satisfy the requirements for general permits and securing other governmental approvals. The unit count was once again reduced, this time to 204 units.

DEP also reconfirmed that the development satisfied both prongs of the exemption test: (i) the property was being developed in accordance with a Mt. Laurel settlement, and (ii) the planning board's 2007 approval was not a “final approval” as defined by N.J.S.A. 40:55D-4 until the site plan approval's conditions were satisfied.

Appellate Division Ruling

In the Appellate Division, the N.J. Highlands Coalition and the Sierra Club, N.J., argued that the planning board's 2007 decision was a final approval because it conferred vested rights, although it was subject to conditions. They contended that the exemption had expired because three years elapsed without the commencement of construction.

In its analysis of the meaning of “all final approvals” in the exemption provision, the appeals court referred to the well-established principles that limit its review of administrative agency decisions. The court noted that it would “grant considerable deference to the agency's expertise, where such expertise is a relevant factor,” including “some deference to its 'interpretation of statutes and regulations within its implementing and enforcing responsibility.'”

The court then turned to the MLUL's definition of the term “final approval”:

the official action of the planning board taken on a preliminarily approved major subdivision or site plan, after all conditions, engineering plans and other requirements have been completed or fulfilled and the required improvements have been installed or guarantees properly posted for their completion, or approval conditioned upon the posting of such guarantees. [N.J.S.A. 40:55D-4 (emphasis added).]

The A ppellate Division reasoned that the planning board's approval was subject to conditions, several of which remained outstanding at the time of the 2014 settlement agreement including approvals by the county planning board and DEP which are required by the MLUL. The court also observed that subsequent to the 2007 site plan approval, DEP required a reduction in the unit count which necessitated that the developer obtain an amended site plan approval.

Based on its review, the court concluded that “the 2007 approval was not a 'final approval' because Bi–County had not received 'all final approvals required pursuant to the [MLUL],' N.J.S.A. 13:20-28(a)(17), and final site plan approval for 204 units. Accordingly, DEP correctly concluded that Bi–County was entitled to the exemption.”

Commentary

The objectors quickly claimed vindication although the Supreme Court had only agreed to consider whether the project qualified for a Highlands Act exemption. According to New Jersey Sierra club Director Jeff Titel, the grant of certification was “a victory for the environment and the Highlands Act.” He also claimed that DEP had “settled the case by giving the permits, instead of defending the Highlands and following the law.” northjersey.com, Dec. 23, 2017.

Titel's views were echoed by Elliott Ruga, policy director for the Highlands Coalition. In assessing possible future events, Ruga observed: “[h]opefully the new DEP will have a less difficult time saying no [to applications for development in the Highlands] than the current one.”

Ruga's comments are likely to prove prophetic. Gov. Murphy has made it clear that his administration would adopt a different and much “greener” approach than his predecessor to environmental policy and regulation. While this will be viewed as good news by environmental activists, landowners and developers, particularly those seeking to construct affordable housing, will confront even more daunting challenges in the future.

Goldshore practices in Princeton. His practice is devoted to environmental, land use and municipal law. He is the author of New Jersey Environmental Law (ICLE 2010).