United States: Off Tract Contributions: Be Careful!

Last Updated: November 2 2013
Article by Henry L. Kent-Smith

On October 8, 2013, the Appellate Division released an unpublished opinion in 520 Victor Street Condominium Association v. Raymond Plaza and The Township of Saddle Brook Zoning Board.  Docket No. A5655-10T3.  In Victor Street, the Appellate Division invalidated all approvals granted to Raymond Plaza for the construction of multi-story residential buildings, on the basis that the applicant agreed to a $400,000.00 contribution for off tract improvements related to sewer and storm water  improvements in violation of N.J.S.A. 40:55D-42. 

This opinion follows the long standing principles first annunciated in Nunziato v. Planning Board of Edgewater, 225 N.J. Super. 124 (App. Div. 1988), that deviation from the strict application of N.J.S.A. 40:55D-42 would lead to "the intolerable spectacle of a Planning Board haggling with an applicant over money to strongly suggesting that variances are up for sale." Id, at 134.  Victor Streetis a reminder that "courts must be extremely sensitive to the threat presented by unlawful exactions imposed by municipality on developers where the developers are reluctant or enthusiastic participants in the transaction."   Swanson v. Planning Board of Hopewell, 149 N.J. 59, 66 (1997) Stein, J. concurring). 

This case falls within similar factual patterns found in Nuziato and Swanson.  Here, the applicant met all requirements for sewer and water utility service for its proposed project.  However, there were pre-existing problems with both sanitary sewer and storm water flooding in the vicinity of the applicants proposed project.  During the hearing process, it was determined that the proposed development would not adversely impact either storm water or sanitary sewer flow in the area.  Therefore, the Board never made a determination that any sewer or drainage improvements were "necessitated" by the proposed development, as required under N.J.S.A. 40:55D-42.  Instead, the Applicant and the Board had a series of discussions relative to these pre-existing off tract conditions.  Based on these discussions, the applicant agreed to contribute $400,000.00 to the Township to fund improvements related to existing conditions found in the area and not directly necessitated by the proposed project.  Therefore, 520 Victor failed to establish the first requirement for an off tract improvement under N.J.S.A. 40:55D-42, that the improvements are necessitated by impacts associated with the proposed development. 

The trial court uphelp the contribution as within the discretionary authority of the zoning board, even if it failed to conduct the type of analysis required under N.J.S.A. 40:55D-42.  In contrast, the Appellate Division found that the process that was followed was more akin to a "negotiation" between the developer and the municipality, which was found to be abhorrent to the statutory requirements under the Municipal Land Use Law in Nunziato v. Edgewater.  225 N.J. Super. 124 (App. Div. 1988). 

520 Victor Streetstands for the proposition that adherence to the MLUL requirements related to off tract improvements remains a concern of courts.  Principles first annunciated in Nunziato have been upheld again in 520 Victor Street.  Simple negotiation as to a blanket contribution for off tract improvements is improper, and may result in the voiding of all approvals associated with the project.  However, the requirements to compel off tract improvements under N.J.S.A. 40:55D-42 require the governing body adopting an ordinance to permit exaction of contributions as a condition of subdivision or site plan approval, and that such ordinance must be based upon circulation and competence of utility service plans of the municipal master plan.  The ordinance must also establish the capital improvements for which off tract contribution is required.  Finally, the ordinance must provide for reasonable standards to determine the proportionate share of each developer impacting those improvements. 

Municipalities are once again on notice that undertaking capital improvement plans, and embarking on a conscious planning process, is a prerequisite to the requirement to compel developers to make contributions for off tract improvements.  Developers are once again warned not to undertake negotiations with planning boards or governing bodies as to off tract improvement contributions, unless those contributions are specifically linked to improvements, the necessity of which are required to be made in order to address the direct impacts of the proposed development.  The cost of failure to adhere to N.J.S.A. 40:55D-42 is severe:  invalidation of approvals.  Therefore, both the municipal and development community have been warned once again of the need to follow the Municipal Land Use Law in the exaction of off tract improvements. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Henry L. Kent-Smith
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