Be Alert for Off-Tract Recreational Assessments

June 2007 In The Zone

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It may have just become more expensive to develop residential neighborhoods in New Jersey. In a recent decision which is pending approval for publication, an Atlantic County Judge has upheld the validity of two ordinances enacted in Egg Harbor Township, New Jersey, which not only increased the required acreage for recreational open space in a major residential development, but also provided for increased in lieu payments which may be used by the Township for park and recreation purposes anywhere within the Township.1 While developers historically have made business decisions to make similar payments, they now are faced with decisional law supporting the validity of those payments, and at increased levels.2

The case, Builders League of South Jersey v. Egg Harbor Township, et al., remains pending in the Law Division in Atlantic County, New Jersey. The issues left to be determined concern only the validity of the amount of the in lieu contributions, which currently stand at $5,600.00 per lot.

The decision, rendered on May 11, 2007, came in response to a Motion for Summary Judgment filed by the Builders League, and a Cross-Motion for Summary Judgment filed by the Township. The Builders League sought to invalidate the Ordinances on the basis that they are ultra vires and unconstitutional. The Township sought to dismiss all Counts of the Builders League Complaint, except those challenging the validity of amount of the in lieu contributions; as noted, those issues have been preserved for further consideration.

In brief, the Ordinances allow the Township, as a condition of a development approval, to require a developer to either provide the required recreational open space within its development or, in the Township's discretion, to require payment of the in lieu fees, calculated on a per lot basis, to be allocated to the Township's general parks and recreation budget if the recreation needs of the proposed development and the Township would be better served. The Ordinances provide an exception to the above for developments in the Township's Regional Growth Areas. In those areas, the developer, rather than the Township, has the option to pay the off-tract assessment.3

The Builders League presented three essential arguments:

  1. that these off-tract assessments are nothing more than impact fees intended to address the general recreation needs of the Township at large, thereby rendering them ultra vires and unlawful; it contended that those costs should be the responsibility of the Township, rather than of individual developers;
  2. that even if the Court were to conclude that the Township had the general authority to impose the recreational requirements established by these Ordinances, the Township had failed to establish an essential nexus or perform an individualized assessment necessary to establish that a rough proportionality existed between the requirements of the Ordinances and the realistic recreational needs of the residential developments impacted by the terms of the Ordinances; and
  3. that there is no statutory authority under the Municipal Law Use Law (“MLUL”) for the imposition of the assessments; while there is statutory authority in the MLUL for municipalities to require pro rata contributions from developers, that authority is limited to street, water, sewer and/or drainage improvements necessitated by the developer's specific project.

The Court rejected each of those arguments. After an exhaustive statutory analysis, the Court found ample authority in numerous provisions of the MLUL authorizing a municipality to impose reasonable recreation and open space requirements in conjunction with major residential developments. The Court reasoned that the Builders League arguments, which equated the in lieu contributions to an imposition upon developers of the Township's responsibility to fund recreational facilities for all Township residents, ignored the fact that the thrust of the Ordinances was to address the increased recreational and open space needs necessitated by new residential development in the Township. It was not impressed by the fact that those contributions may be used by Township residents other than those individuals whose residential development generated the contributions in the first place. The Court believed that simply because an in lieu contribution may be used for off tract recreation facilities does not lessen the impact upon recreational and open space needs generated by new residential development.

The Court also reviewed pertinent elements of the Pinelands Protection Act and the New Jersey Administrative Law regulations implementing the Act's Comprehensive Management Plan, finding the Ordinances to be consistent with them. It also found that the Pinelands Commission's review and certification of the Ordinances (after the exception was carved out in Ordinance No. 60) did not conflict with any provisions of the MLUL, which itself provides ample authority for municipal zoning ordinances to impose recreational and open space requirements on major residential developments in non-Pinelands areas. As the Court stated:

As to a developer's option to make an in lieu contribution for recreational needs when developing property in the Pinelands Regional Growth Area, such option does not offend any provision of the MLUL. A developer in the Township's RGA zones cannot be required by the Township to make an in lieu contribution. Rather, whether to do so is at the option of the developer. That the in lieu contribution will be utilized for off-tract recreational development is of no moment. The Pinelands Commission has certified Ordinance 60 in full recognition of the fact that a developer has the option to either provide on-site recreational amenities or make an in lieu contribution. In fact, Ordinance 60 which amended Ordinance 41, to provide the developer with the option of determining to make an in lieu contribution in the RGA districts apparently resulted after various discussions between the Township and the Pinelands Commission staff. The Commission staff expressed concern that Ordinance 41 could negatively impact a developer's ability to achieve the maximum densities permitted by the Township's Zoning Ordinance.

The Court also rejected the Builders League arguments on nexus and found the requirements to be proportional. Noting that the in lieu contributions are fixed and predictable, rather than being established by a negotiated, bargained for amount tantamount to a quid pro quo for development approvals, the Court distinguished them from assessments found to be offensive in other cases.

The Court has not yet been presented with notification one way or another as to whether the Builders League will appeal this decision. If the decision is neither appealed nor reversed, it bodes ominously for major residential developments, not only in the Township of Egg Harbor, but also in other areas where recreational and open space needs are at issue.

For more information, please contact John Grossman at 609.572.2322 or at [email protected].

1 - The first ordinance, No. 41 of 2004, was amended by the second ordinance, No. 60 of 2004, after review by and negotiation with the Pinelands Commission. For purposes of this Article, they will be collectively referred to as the “Ordinances.”
2 - A contrary decision was recently rendered recently in a Law Division case in Ocean County, New Jersey, entitled New Jersey Shore Builders Association v.Township of Jackson.
3 - This exception came as the result of review by and input from the New Jersey Pinelands Commission, which was concerned that developers might not be able to maximize permitted densities; as a result, Ordinance 60 was enacted to provide this exception.