A second subsection, N.J.S.A. 5:91-14.3(b) establishes the mechanism for a municipality “[t]o remain under the jurisdiction of [COAH.]” The regulation does not specify when the third-round rules will be promulgated.
The Supreme Court’s order of April 27, 2004, recognizes COAH’s “obligation . . . under N.J.A.C. 1:30-6.2(c) to promulgate its Third Round Fair Share Methodology regulations no later than October 6, 2004, or the proposal expires[.]” In re Failure of New Jersey Council on Affordable Housing to Adopt Third Round Fair Share Methodology and to Allocate Third Round Fair Share Obligations, 180 N.J. 148 (2004). Also, COAH recently announced the reproposal of its third-round methodology rules with public hearings scheduled during the month of September 2004. See 36 N.J.R. 3691-874 (Aug. 16, 2004).
Appellants in these seven appeals contend that N.J.A.C. 5:91-14.3 on its face and as applied is ultra vires, violates the state constitution and the intent and goals of the FHA, and frustrates the essential holdings in the Mount Laurel cases and in Hills Dev. Co. v. Bernards Tp., 103 N.J. 1 (1986). Appellants also argue that the review process embodied in N.J.A.C. 5:91-14.3 violates the state constitution and the FHA, and that the procedures provided in that regulation � specifically, the lack of any requirement for public notice, comment and hearing � violate state and federal constitutional rights to procedural due process, principles of administrative fairness underlying the Administrative Procedure Act (APA), and the FHA.
II. COAH has promulgated procedural and substantive rules setting forth its calculations for determining state and regional needs and municipal precredited needs, and detailing the procedures governing its evaluation of the voluntarily submitted municipal housing elements and fair-share plans.
Since the enactment of the FHA, COAH has provided those determinations for two periods of time. Commonly known as the “first-round” rules, the initial promulgation covered the period from 1987 to 1993. They were followed by criteria covering the cumulative period from 1987 to 1999, the “second-round” rules.
In 1986, COAH promulgated the first set of substantive rules, N.J.A.C. 5:92, which included its allocation formulas and calculations of municipal affordable-housing obligations for the first round, 1987 (the base year for determining “present need”) to 1993.
In 1994, after proposal, public hearings, reproposal and further public hearings, COAH promulgated a set of substantive rules for the second round, which covered the cumulative period from 1987 to 1999. These standards were due to expire in June 1999. See N.J.A.C. 5:93. In May 1999, COAH readopted N.J.A.C. 5:93 without change, providing for expiration in May 2004.
On October 6, 2003, after the notices of appeal in these cases had been filed, COAH proposed new regulations for the third round: substantive rules for adoption as N.J.A.C. 5:94 and procedural rules for adoption as N.J.A.C. 5:95. Under the substantive standards of the third-round methodology, a municipality’s fair share is to be computed by three components: (1) the rehabilitation share; (2) any remaining prior round obligation for 1987-99; and (3) a completely new component, “growth share,” which is “generated by Statewide residential and nonresidential growth during the period from 1999 through 2014.” 35 N.J.R. 4638. The proposed procedural rules contain standards for amending a substantive certification, but no interim procedures similar to those in N.J.A.C. 5:91-14.3.
In December 2003, COAH proposed readopting the second-round substantive rules, N.J.A.C. 5:93, before their expiration.
These appeals bear on COAH’s latest promulgation of subchapter 14 of its procedural rules in N.J.A.C. 5:91, particularly N.J.A.C. 5:91-14.3, re-adopted effective April 2, 2003, for expiration on April 2, 2008.
COAH first promulgated subchapter 14, effective January 1989, during the period of its first-round methodology, to provide a mechanism for amending the terms of a housing element and fair-share plan after a municipality had received substantive certification. The section was originally titled “Amendment of Substantive Certification” and was due to expire in June 1991. In February 1991, COAH readopted the 1989 version of subchapter 14 without change, and set it to expire in February 1996.
During the drafting phase of the second-round substantive rules, COAH repealed subchapter 14 and promulgated a new rule effective December 1992. COAH also retitled subchapter 14 as “Interim Substantive Certification,” and provided for expiration in December 1997. The new rule established a procedure for granting an “interim substantive certification” to municipalities that had received a substantive certification scheduled to expire prior to July 1, 1993. On motion by such a municipality, COAH could issue an interim certification if it found that the municipality had complied with the terms of its substantive certification. The regulation provided for the imposition of conditions to ensure continued compliance. The municipality was also required to provide notice to any objector or litigant that had participated in the original certification process or court settlement. The objector or litigant could oppose the interim substantive certification only by contending the municipality had not complied with the terms of its original substantive certification.
During the comment period for its proposed and reproposed second-round substantive rules in 1993, COAH again repealed subchapter 14 and promulgated new and more extensive rules for its interim substantive certification process, renaming subchapter 14 “Interim Procedures.” The new rules were designed to address situations involving: municipalities that had periods of repose or had substantive certification due to expire or already expired before adoption of the second-round substantive rules; municipalities that had petitioned for, but had not yet received, substantive certification prior to the effective date of the second-round rules; and, other municipalities that would be affected by the proposed comprehensive changes in the second-round substantive rules.
Specifically, under the 1993 version of subchapter 14, a municipality that had already received its first-round substantive certification could file a motion for “an interim substantive certification” if its certification had expired prior to the effective date of COAH’s procedural rules for the second-round methodology or would expire within nine months after the effective date. In the absence of objections from the public, COAH could issue the interim certification for up to nine months following the effective date of the second-round methodology, conditioning its grant as necessary.
In order to qualify a municipality for consideration, its motion was required: to comply with established COAH motion practice, and to be served on all objectors or litigants that had participated in first-round substantive certification or court settlement processes. The rules also required the application to be accompanied by: the municipality’s current housing element and fair-share plan; a resolution of the governing body expressing its intent to submit, within nine months after COAH’s adoption of the second-round methodology, a housing element and fair-share plan addressing the municipality’s fair-share housing obligation; a proposed schedule for the submission; and a statement as to the progress of the municipality’s compliance with the terms of its first-round substantive certification. Objectors were required to specify the relief they sought and show how the municipality had failed to comply with the terms of its substantive certification or otherwise satisfy its fair-share obligation. A municipality that received interim substantive certification could not change its ordinances implementing its original substantive certification during the period, unless it demonstrated good cause for the change.
A municipality that had filed a petition for, but had not yet received, first-round substantive certification could either amend its housing element and fair-share plan to address its new second-round obligation and then re-petition for substantive certification of the amended plan within nine months of COAH’s promulgation of the new rules, or choose to continue seeking substantive certification on its first-round obligation. If the municipality continued to seek first-round substantive certification, COAH would condition its grant of substantive certification by a requirement that, within two years, the municipality file a housing element and fair-share plan for round two and re-petition for substantive certification.
Any municipality that filed its housing element and fair-share plan more than two years before promulgation of the second-round methodology but did not petition for substantive certification was vulnerable to an exclusionary zoning lawsuit. If filing had occurred less than two years before promulgation, the municipality was required to address its second-round obligation within two years of the initial filing or four months of the effective date of the second-round methodology, whichever was earlier.
On Aug. 16, 1999, pending the adoption of its third-round methodology, which was not proposed until October 2003, COAH proposed repealing the regulations in subchapter 14, still titled “Interim Procedures,” and replacing them with new rules, allowing municipalities either to file for interim second-round certification if they had not already addressed their 1987 to 1999 fair-share housing obligations by June 6, 2000, the end of the second-round certification period; or to file for an extension if they already had an approved second-round substantive certification that was due to expire.
These newly proposed interim procedural rules would allow a municipality that petitioned COAH on or before June 6, 2000, with an adopted housing element and fair-share plan meeting the criteria of N.J.A.C. 5:93, to receive a six-year substantive certification. See N.J.A.C. 5:91-14.1. A municipality that petitioned after June 6, 2000, with a housing element and fair-share plan meeting the criteria of N.J.A.C. 5:93, would receive an “interim substantive certification” that was valid for up to one year after the effective date of the adoption of COAH’s third-round methodology. See N.J.A.C. 5:91-14.2.
For municipalities that had second-round substantive certifications expiring prior to or after the effective date of the adoption of COAH’s third-round methodology, the proposal allowed requests for extension of the second-round substantive certification for up to one year after the effective date of the third-round methodology, i.e., an “extended substantive certification.” N.J.A.C. 5:91-14.3(a).
COAH adopted the proposed rules and procedures on Oct. 6, 1999, effective Nov. 1, 1999, to expire on Nov. 5, 2002. COAH proposed readoption of the regulations on Oct. 21, 2002, and readopted them without change on April 2, 2003, with an expiration date of April 2008.
In 2001, COAH began announcing directly to those municipalities whose substantive certifications were due to expire that the then-current version of subchapter 14 would allow for extension of a substantive certification for up to one year after the effective date of the third-round methodology and rules. COAH explained that it had promulgated the new rules “[i]n order to protect municipalities that have expiring substantive certifications.” COAH also advised: “By requesting an extension of substantive certification, your municipality must commit to continuing to implement your certified second round plan and to addressing your third round affordable housing obligation with either a filed or petitioned new housing element and fair share plan.”
By June 2002, 46 municipalities had received extended substantive certifications before their second-round certifications expired. Nine other municipalities � respondents Allamuchy Township, Lawrence Township, Harding Township, Union Township (Hunterdon County), Manalapan Township, Glen Rock Borough, Cranbury Township, Bayonne City and Ridgefield Borough � requested and were scheduled to receive extended substantive certification at COAH’s July 16, 2002, meeting. Between Nov. 5, 2002, and May 5, 2003, COAH granted 31 other municipalities extended substantive certification. According to COAH, as of Dec. 4, 2003, 82 municipalities had been granted extended second-round substantive certifications.
On July 15, 2002, the New Jersey Builders Association (the NJBA) filed motions with COAH seeking to intervene in the proceedings and to oppose COAH’s grant of extended substantive certifications to the nine municipalities with matters pending at the time. The NJBA also sought withdrawal of the extended substantive certifications that COAH had previously granted to the first 46 municipalities.
In August 2002, the Coalition on Affordable Housing and the Environment moved to intervene toward the same ends. The coalition is a statewide nonprofit corporation of planning, environmental and housing organizations. The coalition specifically requested that the petitioning municipalities be granted temporary extensions of their second-round certifications under the interim procedures that previously existed; and that COAH expedite rulemaking procedures to create a constitutionally permissible interim methodology.
Also in August 2002, the League of Municipalities moved to appear as amicus curiae. It supports COAH and the regulations at issue.
COAH rejected the NJBA’s argument that the interim regulations were ultra vires because they allowed for certification based only on historical numbers. Holding that grants of extended certifications are within its authority, COAH opined that the interim rules specifically allow a municipality to continue addressing its second-round obligation based on second-round numbers while merely providing a compliant municipality with interim protection pending the release and adoption of the third-round methodology. When the third-round numbers and rules are proposed and adopted, municipalities with extended second-round certifications will be required to address their third-round obligations, since they must commit to addressing their third-round obligations as a condition of receiving the extension. In that way, COAH stated, any delay in the determination of a municipality’s ongoing obligation will be accounted for and recaptured in the third-round methodology.
COAH also rejected the argument that its extensions of second-round substantive certifications have deprived or will deprive anyone of the opportunity to challenge a municipality’s housing element and fair-share plan, noting that extended substantive certification does not preclude future exclusionary zoning suits or “provide towns with a ‘bullet proof vest,’” but merely extends the presumption of validity to a municipality’s housing element and fair-share plan.
The argument that COAH should not grant extended substantive certifications without first engaging in scarce-resource analyses was also disallowed in the decision.
COAH granted the nine extended substantive certifications before it and affirmed its actions in previously granting 46 extensions.
III. The agency was manifestly correct to eschew disposing of the issues on standing and timeliness grounds and instead to elect to address the merits.
IV. In their facial challenge to N.J.A.C. 5:91-14.3, appellants specifically argue that the FHA does not authorize COAH to grant extended substantive certifications, or confer implied authority to adopt such a regulation. They contend also that COAH’s grant of extended substantive certifications violates the requirement of N.J.S.A. 52:27D-314 that municipal fair-share plans be based on present and prospective fair-share housing needs, as well as the constitutional mandate that obligations must be met on a year-by-year basis as those obligations accrue. The claim is that, by granting extended certifications and not finalizing third-round numbers or releasing interim obligations that would quantify the municipalities’ continuing realistic obligations during the gap period, COAH has effectively excused New Jersey’s municipalities from meeting the obligations to provide their fair share of affordable housing, which obligations continue to accrue in the intervening time period. Appellants argue that the Mount Laurel doctrine’s fair-share requirement cannot be phased in or satisfied after the fact; and they assert that COAH’s second-round regulations clearly envisioned the release and adoption of third-round numbers and regulations by the end of the second round, which has not happened.
COAH and the municipal respondents contend, conversely, that N.J.A.C. 5:91-14.3 realistically � and properly � recognizes and deals with the gap between the expiration of the second-round standards and COAH’s adoption of its third-round methodology and rules. They stress that, when the same type of gap occurred between the first and second rounds, COAH retroactively incorporated in succeeding methodology the statewide need for the period commencing with the end of the prior regime; thus achieving a cumulative result.
V. A. On balance, in the circumstances, as a matter of administrative prerogative to deal with current exigencies in realistic and principled ways, the grant of extended substantive certifications to municipalities with expiring second-round substantive certifications does not exceed the authority granted COAH under the FHA to implement the constitutional imperatives informing the Mount Laurel cases.
The standards to measure the validity of nonadjudicative administrative action are elucidated in George Harms Constr. Co. v. N.J. Turnpike Auth., 137 N.J. 8 (1994). In determining whether the agency action is arbitrary, capricious or unreasonable, four inquiries are customary:
(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. Id. at 27.
B. With a straightforward application of the George Harms standards, in the context of the FHA’s policies and requirements, there is no clear flaw, in principle, in the cumulative-requirement concept employed by COAH, resulting in extended certifications to municipalities with expiring substantive certifications pending COAH’s promulgation of new standards governing successive phases in effecting the state’s constitutional and statutory policies. COAH has broad powers to promulgate flexible measures to implement the FHA.
Although there is no express grant of authority to COAH to adopt a mechanism that permits years of litigation protection without specific housing obligations, the agency is obliged to assure that municipalities do not lose that protection while COAH, itself, is recrafting those obligations from time to time in accordance with changing needs and changing circumstances. Thus, as a basic matter, COAH must be seen to have constitutional and legislative authority to grant extended substantive certifications to municipalities with expiring second-round substantive certification.
C. Held: Nevertheless, the manner in which that authority has been exercised is flawed for several related reasons, including the altogether too-extended time gap between the expiration of second-round standards and the promulgation of third-round standards; the lack of any ongoing substantive review criteria and procedures for acquiring the updated protections that are designed to assure that the state’s constitutional and legislative policies are being faithfully pursued; and the absence of any requirement for public notice of the application for extension and the opportunity for those with an interest to comment or otherwise participate in the process.
Delay, itself, is not always fatal. Here, however, the delay has been dramatic and inexplicable. The second-round standards expired in 1999, and COAH has only lately proposed and reproposed its third-round methodology, almost at the end of another six-year cycle, which, but for the recent amendment in L. 2001, c. 345, would have concluded another round of Mount Laurel administration. The impact of the delay is global, not just bearing on one municipality, and those involved in it, as in Sod Farm Assocs. v. Township of Springfield, 366 N.J. Super. 116, 131 (App. Div. 2004).
The conclusion is obvious: even though N.J.A.C. 5:91-14.3 does not expressly implement a moratorium on compliance by municipalities with their Mount Laurel obligations, the actual facts are that no new obligations have been effected. For nearly the equivalent of one full round of Mount Laurel administration, no municipality has been held to updated standards reflecting its present and prospective fair share of the housing needs of its region. The public policies underlying the FHA and the Mount Laurel cases have, quite obviously, been frustrated by inaction.
Respondents, both COAH and the respective municipalities, urge that the delay is not indefinite and that the third-round methodology will be cumulative and capture any obligation.
The permissive approach to the passage of time connoted by South Burlington Cty. N.A.A.C.P. v. Twp. of Mount Laurel, 92 N.J. 158 (1983) (Mount Laurel II), and Hills Dev. Co. v. Bernards Twp., 103 N.J. 1 (1986), 21 and 18 years ago, respectively, was applied when the subject matter was new and COAH was only an idea or in its infancy. The passage of so much time since then places a different perspective on the principle. Nevertheless, although factual figures, when ultimately developed, might never provide an adequate basis for recapturing the gap-time obligations of particular municipalities, to conclude so now, on the records in these appeals, would be speculative. The court accepts COAH’s intentions and goals as stated, and leaves to future development and remediation on the basis of actual facts and figures particularized on a municipality-by-municipality basis, any idea that real opportunities for affordable housing have been irretreviably lost during the gap in ways that do not comport with the policies and principles underlying the process.
D. Appellants also contend that N.J.A.C. 5:91-14.3 is invalid and violates the FHA and the state constitution, because it establishes no ascertainable standards or review process to govern COAH’s determination whether to grant a request for extended substantive certification.
VI. In a substantive sense, the standards and principles articulated in N.J.A.C. 5:91-14.3 are insufficient to inform the public and guide the agency. Pursuant to that regulation, COAH is to grant extended substantive certification if a municipality with a substantive certification that is expiring adopts a resolution that requests the extension; if it commits to continuing the implementation of its second-round obligations; and, if it commits to addressing its third-round obligations with a new housing element and fair-share plan whenever the third-round standards become effective. Thus, N.J.A.C. 5:91-14.3, on its face, does not fall for a lack of standards. According to that regulation, COAH’s role at this stage is ministerial. And N.J.A.C. 5:91-10.1 does allow “any interested party” to apply to COAH at any time for a scarce resource restraint to preserve land or other resources for affordable housing. Nevertheless, both the ministerial nature of the process provided in N.J.A.C. 5:91-14.3, and its lack of a more extensive procedure for granting extended substantive certification violate the policies and specific requirements of the FHA.
The FHA expressly requires that COAH conduct an extensive review process when evaluating a request for substantive certification, N.J.S.A. 52:27D-314, or for engaging in mediation, 52:27D-315. Although the review process in those provisions is required literally for the grant of initial substantive certifications, the Legislature, in the relatively recent enactment in L. 2001, c. 435, has articulated a clear design requiring COAH to conduct an interim review that is more than merely ministerial in nature when substantive certification is to be significantly extended.
In that amendment to the FHA, the Legislature changed the grant of substantive certification from a six-year to a 10-year period, and expressly instructed COAH to “establish procedures for a realistic opportunity review at the midpoint of the certification period and [to] provide for notice to the public.” N.J.S.A. 52:27D-313, as amended by L. 2001, c. 435. COAH is now expressly required to conduct “a realistic opportunity review” in the interim, at the midpoint of the now longer period for substantive certification, an interval long since exceeded by COAH’s delay in promulgating its third-round methodology. The FHA as amended contains no definition of “a realistic opportunity review.”
As a matter of procedural regularity, i.e., fairness to the process and all who have an interest in it, COAH bears the responsibility to employ a mechanism measurably more evaluative than a ministerial effort when considering extensions of substantive certification. And, while the process required may not need to have all the earmarks of a full review pursuant to adopted and extant standards for the then-current phase, it must be conducted in a way that is more than perfunctory, with appropriate notice to “all interested parties” and an opportunity to be heard.
Thus, the review process in N.J.A.C. 5:91-14 lacks proper standards and procedures required under law and is, therefore, invalid as promulgated.
VII. Withdrawal of all the extended certifications involved in these appeals would, indeed, be chaotic and would disserve the constitutional and public-benefit policies of the FHA and the cases informed by Mount Laurel principles. COAH has the authority to grant extended certifications, but it has implemented that authority in a way that does not comport with the Legislature’s expectations as expressed in the FHA. Appellants are not entitled to a particular type of procedure as a matter of due process guarantee or the policies underlying the Administrative Procedure Act.
The flaw identified, i.e., the lack of notice, opportunity for comment and a proper review, must be remedied in a prompt and workable manner by procedural mechanisms selected by the agency as most suitable to achieving its regulatory aims.
It is best that COAH should determine, in the first instance, what particular showings will be expected from municipalities seeking extended certification; how a true notice requirement should be effected; and how the opportunity for involvement shall be accomplished, whether by comment or more plenary participation. The key is that the standards and procedures adopted must be framed in the context of COAH’s statutory obligation to engage in a principled review of each municipality’s compliance and conduct before it can qualify for an extended certification. This must be done by the adoption of an appropriate rule, effective no later than 60 days from the date of this opinion, to cover the grant of extended certifications until such time as the standards for third-round methodology are effective and applied.
The extended substantive certifications that COAH has already granted pursuant to N.J.A.C. 5:91-14.3 are temporarily suspended, and those that are pending should not be acted on. No exclusionary zoning civil actions against the municipalities involved, that are normally precluded by substantive certification, may be filed in the interim. The continued absence, for an unreasonable time, of a timely, valid and sufficiently comprehensive interim extension procedure, and COAH’s action thereon, will, of course, free interested parties from the constraints that substantive certification imposes.
Remanded to COAH.
� Digested by Steven P. Bann
[The slip opinion is 63 pages long.]
For appellants: New Jersey Builders Association � Stephen M. Eisdorfer (Hill Wallack; Eisdorfer and Henry T. Chou on the briefs); Coalition for Affordable Housing and the Environment � Kenneth H. Zimmerman (New Jersey Institute for Social Justice and Rutgers Environmental Law Clinic; Zimmerman, Susan J. Kraham and John M. Payne of counsel; Nancy L. Fishman and Craig R. Levine on the brief); Toll Brothers, Inc. � Carl S. Bisgaier (Flaster/Greenberg; Bisgaier and Tracy A. Siebold on the brief); Roxbury 80, L.L.C. � Thomas F. Carroll (Hill Wallack; Carroll and Stephen M. Eisdorfer on the brief); Anthony Bailes et al � David J. Frizell (Frizell & Samuels). For respondents: Council on Affordable Housing � George N. Cohen, Deputy Attorney General (Peter C. Harvey, Attorney General; Michael J. Haas, Assistant Attorney General, of counsel); State League of Municipalities � Stuart R. Koenig (Stickel, Koenig & Sullivan); Borough of Bloomingdale � Jeffrey R. Surenian (Lomell Law Firm); Township of Manalapan � Robert F. Munoz (Lomurro, Davison, Eastman & Munoz); Readington Township � Howard D. Cohen (Parker, McCay & Criscuolo; Cohen and Edward P. Abbott on the brief); Township of Roxbury � Gerald J. Muller (Miller, Porter & Muller, special counsel, and Jansen, Bucco, DeBona & Semrau, municipal attorneys; Muller and Anthony M. Bucco on the brief); Township of Allamuchy � Vogel, Chait, Collins & Schneider (Thomas F. Collins Jr. and Thomas J. Molica Jr. on the briefs); Township of Cranbury � Mason, Griffin & Pierson (Trishka Waterbury); Township of East Brunswick � Michael J. Baker (Hoagland, Longo, Moran, Dunst & Doukas; George W. Pressler Jr. and Anthony C. Iacocca on the brief); Township of Princeton � Mason, Griffin & Pierson (Edwin W. Schmierer of counsel; Trishka Waterbury on the brief); Borough of Ridgefield � Basile, Birchwale & Pellino (Stephen F. Pellino on the brief); Village of Ridgefield Park � Durkin & Boggia (Martin T. Durkin on the brief); Township of Wayne � Feldman & Fiorello (John Fiorello on the brief); Township of White � Brian D. Smith, White Township Attorney.
