In the Matter of the Petition of New Jersey American Water Company, Etc. ( 2024 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-3903-22
IN THE MATTER OF THE
PETITION OF NEW JERSEY
AMERICAN WATER
COMPANY FOR A
DETERMINATION
CONCERNING FENWICK
WATER TANK PURSUANT TO
N.J.S.A. 40:55D-19.
_______________________________
Submitted October 16, 2024 – Decided November 20, 2024
Before Judges Chase and Vanek.
On appeal from the New Jersey Board of Public
Utilities, Docket No. WO22010004.
Duane Morris, LLP, attorneys for appellant Paul Savas
(David B. Amerikaner, on the brief).
Archer & Greiner, PC, attorneys for respondent New
Jersey American Water Company (Niall J. O'Brien and
James A. Boyd, Jr., of counsel and on the brief).
Matthew J. Platkin, Attorney General, attorney for
respondent New Jersey Board of Public Utilities (Sara
M. Gregory, Assistant Attorney General, of counsel;
Daren Richard Eppley and Terel L. Klein, Deputy
Attorneys General, on the brief).
Brian O. Lipman, Director, attorney for respondent
New Jersey Division of Rate Counsel (Brian O. Lipman
and Susan E. McClure, Managing Attorney, of counsel;
Christine M. Juarez, Assistant Deputy Rate Counsel, on
the brief).
PER CURIAM
Intervenor Paul Savas appeals from the New Jersey Board of Public
Utilities (BPU) July 12, 2023 final decision granting the New Jersey-American
Water Company, Inc.'s (NJAWC) petition for relief from the Municipal Land
Use Law (MLUL), N.J.S.A. 40:55D-1 to -163, and any Bernardsville land use
ordinance, that may be applicable to its construction of a replacement water
storage tank. Based on a thorough review of the record and our jurisprudence,
we affirm.
I.
We glean the salient facts from the record. On March 10, 2020,
NJAWC—a regulated public utility company that provides water for
approximately 660,000 New Jersey residents—filed an application with the
Zoning Board of Adjustment for the Borough of Bernardsville (the Zoning
Board) requesting conditional use approval, variances from conditional use
standards, preliminary and final major site plan approval, and bulk variances
related to replacement of a water storage tank on Mendham Road in
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Bernardsville (the Property). After hearing NJAWC's application, the Zoning
Board adopted a resolution memorializing its denial.
The Property is in a historic area of Bernardsville where structures are
limited to a height of thirty-five feet. The existing water tank has a 240,000-
gallon capacity, occupies 3,310 square feet of the 17,667-square-foot Property,
and is fifty-six feet tall. The proposed water tank would have a 750,000-gallon
capacity, a 4,645-square-foot footprint, and a height of eighty-three feet.
Because the existing water tank has been in operation since at least 1954, it
predates any municipal zoning ordinance requirements and is a pre-existing,
non-conforming use.
On January 4, 2022, NJAWC filed a petition with the BPU pursuant to
N.J.S.A. 40:55D-191 seeking a determination that local municipal and MLUL
approvals are not required for the construction of the proposed replacement
water tank since it is necessary for the convenience, safety, and welfare of the
public and there are no reasonable alternatives which could provide an
equivalent public benefit. The NJAWC further explained in its petition that the
proposed larger capacity water tank was needed to maintain the water supply to
1
N.J.S.A. 40:55D-19 sets forth the requirements and process by which a public
utility can appeal a municipal decision under the MLUL.
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the Bernardsville community—as well as neighboring Somerset and Morris
counties—due to the impending expiration and termination of a contract with
the Morris County Municipal Utilities Authority (MCMUA). The MCMUA
contract had allowed NJAWC to purchase up to one million additional gallons
of water per day to cover any shortfall in the existing supply. The NJAWC
posited that without the additional MCMUA water, there was a significant
shortfall. Thus, the NJAWC contended the proposed replacement water tank is
necessary to maintain adequate capacity and sufficient water pressure during
peak demand for both consumer-usage and fire suppression.
On January 13, 2022, the BPU transferred the petition to the New Jersey
Office of Administrative Law, and the matter was assigned to an Administrative
Law Judge (ALJ). On March 22, 2022, the ALJ granted Savas intervenor status
as a resident of Bernardsville. 2
The ALJ held hearings on the petition on December 12, 13, and 14, 2022.
NJAWC proffered the testimony of Donald C. Shields, a water utility engineer
with twenty-six years of experience. Shields testified to the necessity of
replacing the existing tank to fully address both capacity and safety issues.
2
The ALJ also granted participant status to Bernardsville resident Karen Martin.
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Shields testified that on May 11, 2018, the MCMUA notified the NJAWC
of its unilateral decision to terminate the original water supply agreement. He
proffered that the loss of the MCMUA supply strains the present system
significantly, requiring the NJAWC to secure water volume from a different
location. Shields testified that to maintain the minimum required water pressure
necessary to meet customer demand and provide adequate fire protection in the
communities served by the existing water tank, the water must be stored at an
elevation of at least 818 feet above sea level, pursuant to N.J.A.C. 7:10-11(a)(2).
Although the existing water tank on the Property meets this elevation
requirement, during peak periods of water demand in the summer, the water
reserves in the tank fall below New Jersey Department of Environmental
Protection (NJDEP) mandated levels. Shields acknowledged he was not aware
of any fires which were not able to be adequately responded to through using
water in the existing tank.
Shields testified the NJAWC considered other options that would negate
the need to construct the proposed water storage tank and found no suitable
alternatives. Further, Shields testified that NJAWC considered forty-six other
sites upon which to construct a water tank, each meeting the NJDEP's elevation
and regulatory standards. All the alternative sites were ruled out, some for being
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encumbered with a structure that would need to be demolished, others were
protected wetlands or preserved land. The alternative sites would also require a
significant amount of infrastructure to connect pipelines at great cost, with every
1,500 feet of pipe costing over a million dollars. On cross-examination, Shields
testified NJAWC did not consider the Property's estimated resale value in
analyzing cost feasibility.
The testimony of expert Howard Woods, proffered by the New Jersey
Division of Rate Counsel (Rate Counsel), was consistent with Shields's as to the
inadequacy of the existing tank and the need for the proposed facilities. Woods
acknowledged through his testimony that he had not visited the site.
Savas proffered the testimony of Giselle Diaz, a licensed professional
engineer with twenty-five years of experience in asset management for water
utility systems. Diaz had assisted the Zoning Board in evaluating NJAWC's
initial application for conditional use approval and zoning variances. Diaz
conceded she had not been supplied with sufficient evidence to assess if NJAWC
correctly concluded the current water tank did not comply with NJDEP's fire
safety standards.
Diaz initially opined the proposed water tank is not reasonably necessary
because the costs and drawbacks of the new construction outweigh the potential
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benefits. When asked to clarify why she felt the proposed water tank was not
reasonably necessary, Diaz testified that in her opinion, "reasonably necessary"
meant there was no other alternative whatsoever. When questioned further, she
revisited her conclusion, acknowledging she did not have enough information to
conclude the replacement tank was not reasonably necessary.
The Zoning Board proffered the testimony of Kenneth Jones, a licensed
real estate broker, appraiser, photographer and drone pilot, who was hired to
determine if there would be any valuation impact on Savas's and Martin's
properties if the proposed water tank was constructed. Jones compared the
properties to those in coastal communities where ocean-view homes are valued
higher than those without comparable views. Jones testified that having the
proposed water tank visible would diminish the value of Savas's property by
fifty percent and reduce the value of Martin's property by forty percent.
Jones conceded that upon visiting the properties, he was unsure if the
proposed water tank would be visible from each of the locations. Nonetheless,
he concluded that "being next to an eyesore" would also negatively impact
valuation.
The Zoning Board also proffered the testimony of Daniel Lincoln, a
licensed architect and member of the Bernardsville Historic Preservation
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Advisory Commission. Lincoln opined that Savas's and Martin's homes are
historically significant to the community, in part because they are more than 100
years old.
The Zoning Board proffered the testimony of David Greenbaum, a
seventeen-year Zoning Board member and its current president. Greenbaum
articulated the Zoning Board's primary objection to the proposed water tank was
its incongruity with the aesthetics of the surrounding community since it would
be the largest structure in the town and substantially taller than the present water
tower. Greenbaum further explained the members of the Zoning Board were
concerned NJAWC had not been forthcoming with all the reasons the new water
tank was needed and failed to identify the alternate sites they considered.
The ALJ found all of the witnesses to be professional, reasonable, and
candid. However, she noted that Shields, Woods, and Diaz were the most
objective witnesses, while Jones, Lincoln, and Greenbaum did not "even try to
hide their dis[d]ain" for the proposed water tank. After considering the
testimony, the ALJ determined there was credible evidence in the record
establishing the costs and logistical barriers to pursuing an alternate site.
In the May 1, 2023 written decision, the ALJ made factual findings
derived from the evidence adduced at the hearings which included
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(1) [t]he [p]roposed [w]ater [t]ank has not been shown
to have any adverse impact on the ambient noise levels
or air quality in the neighborhood nor to result in an
increase in truck or foot traffic; (2) NJAWC considered
forty-six alternate sites for the new water tank aside
from the Property; (3) there was no evidence that the
proposed water tank would reduce property values in
the surrounding community; and (4) NJAWC
considered alternate methods to augment the water
supply in order to meet the needs of the community
before filing the petition pursuant to N.J.S.A.
40:55D-19.
Based on these factual findings, the ALJ concluded "that while alternative sites
were identified and may be just as functional . . . there has been no showing that
an alternative location is reasonably available . . . and will achieve the equivalent
public benefit with less adverse impact on the environment, community, and
local zoning plans." The ALJ also concluded
1. That the [p]roposed [w]ater [t]ank is reasonably
necessary to provide safe, adequate, and reliable water
services in New Jersey;
2. That the [p]roposed [w]ater [t]ank is reasonably
necessary for the service, convenience, and welfare of
the public;
3. That [NJAWC] considered alternative methods to
building the [p]roposed [w]ater [t]ank . . . ;
4. That [NJAWC] considered alternative sites for the
[p]roposed [w]ater [t]ank;
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5. That the [p]roposed [w]ater [t]ank located at the
[Property] is reasonable considering the alternatives;
and
6. That based upon the record, the [p]roposed [w]ater
[t]ank is not adverse to the environment, the public
health, and/or the public welfare.
Predicated on these conclusions, the ALJ granted the NJAWC's petition
pursuant to N.J.S.A. 40:55D-19 and ruled that any zoning or land use ordinance
provisions contrary to the water tank's construction were deemed inapplicable.
Rate Counsel, Savas, and the participants filed exceptions to the initial decision.
On July 12, 2023, the BPU adopted the initial decision in its entirety, with
an effective date of July 17, 2023. This appeal follows.
II.
Savas argues the NJAWC failed to meet the statutory threshold of
establishing it is reasonably necessary for the water tank to be constructed on
the Property. Savas asserts the BPU shifted the burden of proof, improperly
requiring him to prove to the contrary.
Our review of the final decision of an administrative agency is
circumscribed, requiring reversal only where a board's decision is "arbitrary,
capricious, or unreasonable, or . . . not supported by substantial credible
evidence in the record as a whole." In re Stallworth, 208 N.J. 182, 194 (2011)
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(citing Henry v. Rahway State Prison, 81 N.J. 571, 579-80 (1980)). When
making that determination, we are instructed to consider
(1) whether the agency's action violates express or
implied legislative policies, that is, did the agency
follow the law; (2) whether the record contains
substantial evidence 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 in reaching a conclusion that could not reasonably
have been made on a showing of the relevant factors.
[Ibid. (citing In re Carter, 191 N.J. 474, 482-83
(2007)).]
"In assessing those criteria, a court must be mindful of, and deferential to,
the agency's 'expertise and superior knowledge of a particular field.'" Circus
Liquors, Inc. v. Governing Body of Middletown Twp., 199 N.J. 1, 10 (2009)
(quoting Greenwood v. State Police Training Ctr., 127 N.J. 500, 513 (1992)).
Thus, "[a] reviewing court 'may not substitute its own judgment for the agency's,
even though the court might have reached a different result.'" Stallworth, 208
N.J. at 194 (quoting Carter, 191 N.J. at 483). We, however, are "in no way
bound by the agency's interpretation of a statute or its determination of a strictly
legal issue." Carter, 191 N.J. at 483 (quoting Mayflower Sec. Co. v. Bureau of
Sec., 64 N.J. 85, 93 (1973)).
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Courts accord agency actions a presumption of validity and
reasonableness, so the party challenging the ALJ's decision—and therefore the
BPU's final administrative decision—bears the burden of demonstrating the
action was unreasonable. See In re Vey, 272 N.J. Super. 199, 205 (App. Div.
1993); Bowden v. Bayside State Prison, 268 N.J. Super. 301, 304 (App. Div.
1993).
III.
As a public water utility company, NJAWC falls within the BPU's
regulatory control. N.J.S.A. 48:2-13(a). We have opined that the BPU's power
to regulate utilities is broad. In re Centex Homes, LLC, 411 N.J. Super. 244,
254 (App. Div. 2009); see Twp. of Deptford v. Woodbury Terrace Sewerage
Corp., 54 N.J. 418, 424 (1969).
The BPU is tasked with "requiring any public water utility to furnish safe,
adequate and proper service . . . ." N.J.S.A. 48:2-23; see In re Pub. Serv. Elec.
& Gas Co., 35 N.J. 358, 371 (1961). The Legislature vested the BPU with the
"general supervision and regulation of and jurisdiction and control over all
public utilities . . . and their property, property rights, equipment, facilities and
franchises so far as may be necessary . . . ." N.J.S.A. 48:2-13(a).
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We review the BPU's final decision approving the NJAWC's petition
under N.J.S.A. 40:55D-19, which states in part that municipal land use laws and
zoning ordinances:
shall not apply to a development proposed by a public
utility for installation in more than one municipality for
the furnishing of service, if upon a petition of the public
utility, the [BPU] shall after hearing, of which any
municipalities affected shall have notice, decide the
proposed installation of the development in question is
reasonably necessary for the service, convenience or
welfare of the public.
[N.J.S.A. 40:55D-19 (emphasis added).]
Construing the language in N.J.S.A. 40:55-50, the predecessor to N.J.S.A.
40:55D-19, the Court stated:
1. The statutory phrase, "for the service, convenience
and welfare of the public" refers to the whole "public"
served by the utility and not the limited local group
benefited by the zoning ordinance.
2. The utility must show that the proposed use is
reasonably, not absolutely or indispensably, necessary
for public service, convenience and welfare at some
location.
3. It is the "situation," i.e., the particular site or location
. . . which must be found "reasonably necessary," so the
[BPU] must consider the community zone plan and
zoning ordinance, as well as the physical characteristics
of the plot involved and the surrounding neighborhood,
and the effect of the proposed use thereon.
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4. Alternative sites or methods and their comparative
advantages and disadvantages to all interests involved,
including cost, must be considered in determining such
reasonable necessity.
5. The [BPU's] obligation is to weigh all interests and
factors in the light of the entire factual picture and
adjudicate the existence or non-existence of reasonable
necessity therefrom. If the balance is equal, the utility
is entitled to the preference, because the legislative
intent is clear that the broad public interest to be served
is greater than local considerations.
[PSE&G, 35 N.J. at 376-77.]
The burden rests with the applicant to establish no alternative route has
less impact on the environment or on the community. PSE&G, 35 N.J. at 368.
After the petitioner establishes that showing, objectors to the petition have the
burden of showing the existence of a feasible alternative site. In re Hackensack
Water Co., 41 N.J. Super. 408, 426-27 (App. Div. 1956).
"When determining reasonable necessity, the [BPU] must consider
alternative sites and their advantages and disadvantages, including their costs."
In re S. Jersey Gas Co., 447 N.J. Super. 459, 481 (App. Div. 2016). "The [BPU]
also must weigh all of the parties' interests, and where those interests are equally
balanced, it must give the utility preference in light of the Legislature's clear
intent that the broad public interest to be served is greater than local
considerations." Ibid.A-3903-22
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We are unpersuaded by Savas's argument that the NJAWC failed to satisfy
the standard required under N.J.S.A. 40:55D-19. We conclude based on our de
novo review that the NJAWC established the proposed water tank is "reasonably
necessary for the service, convenience or welfare of the public."
Although Savas asserts the water deficit resulting from the MCMUA
contract termination can be "easily replaced"—this argument is belied by the
proofs in the record. That NJAWC has found alternative sources to fill the gap
in the water supply left by the MCMUA contract termination does not resolve
the issue. The testimony at the hearing established that the additional water
secured under the MCMUA contract was sourced from a higher elevation, such
that the water pressure was generated through gravity alone. The ALJ found the
explanation as to why the proposed water tank is "reasonably necessary to
provide safe, adequate, and reliable water services" in light of the MCMUA
contract termination credible.
We "generally defer to credibility determinations made by the ALJ who
had the opportunity to hear the testimony and observe the demeanor of the
witnesses." D.L. v. Bd. of Educ. of Princeton Reg'l Sch. Dist., 366 N.J. Super.
269, 273 (App. Div. 2004). The ALJ's credibility determination coupled with
the required deference to factual conclusions of administrative agencies,
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Capodilupo v. Bd. of Ed. of W. Orange, 218 N.J. Super. 510, 515 (App. Div.
1987), underpins our conclusion that the ALJ's decision—and the subsequent
final administrative decision—were supported by adequate evidence in the
record. We discern no reason to disturb the determination that NJAWC met the
evidentiary standard required under N.J.S.A. 40:55D-19 to establish the
proposed water tank is "reasonably necessary for the service, convenience or
welfare of the public," as it is grounded in the record.
IV.
The BPU properly allocated the burden to the objectors to prove that there
were reasonable alternative locations. The burden shifting analysis under
N.J.S.A. 40:55D-19 controls the issue. PSE&G, 35 N.J. at 376-77. An applicant
seeking an exception to the zoning ordinance or land use requirements must
prove "the proposed use is reasonably, not absolutely or indispensably,
necessary for public service, convenience and welfare at some location." Id. at
377. If this standard is met, the burden shifts to the objectors to show the
existence of a feasible alternative. Hackensack Water Co., 41 N.J. Super. at
426-27. No suitable alternative locations were proffered.
After considering the credibility and weight of the evidence from all
parties, the ALJ concluded that "[NJAWC] has met the requirements of N.J.S.A.
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40:55D-19, proving that the [p]roposed [w]ater [t]ank is necessary for the
service, convenience, and/or welfare of the public and that no alternative site or
sites are reasonably available to achieve an equivalent public benefit." Once the
NJAWC met this standard, the burden then shifted to Savas, as an intervening
objector, to show a feasible alternative. Hackensack Water Co., 41 N.J. Super.
at 426-27. Savas did not meet that burden.
Neither Savas nor the Zoning Board proffered evidence of any viable
alternative proposal for meeting the water supply or evidence a suitable,
alternate location for the new water tank that satisfied the needs of the
community. Savas has not raised any specific details as to what factors the ALJ
improperly considered in finding NJAWC met its initial burden, and we find no
error in the ALJ's conclusion that
[Savas] presented alternative methods by which
NJAW[C] might have chosen to counter the loss of one
million gallons of water per day from the MCMUA,
none of which were deemed preferable to the decision
of [NJAWC] to use its own supplies and make
necessary modifications to existing infrastructure.
After NJAW[C] showed that its chosen alternative
would provide gravity storage, equalization volume
storage for peak demands . . . and adequate pressure for
fire flows, the burden was on [Savas] to show a
reasonable alternative at a reasonable expense. [Savas]
did not prove that any alternative method was available
to [NJAWC] at a reasonable cost to the ratepayers.
[Savas] did not recommend any alternative locations;
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[Savas] did not so much as offer evidence in support of
any of the forty-six locations identified by [NJAWC] as
qualified by elevation.
We also reject Savas's contention that the ALJ did not properly weigh
testimony regarding the impact of the proposed water tank on neighborhood
aesthetics and property values, as unsupported by the record. The ALJ found
as a practical matter, construction of an [eighty-three]-
foot water tank anywhere in [the community] will be
met with the same neighborhood opposition [NJAWC]
experienced in this case. It is noteworthy that no
opponent of the [p]roposed [w]ater [t]ank suggested an
alternate location . . . .
The ALJ did not accept Jones's comparison of the loss in value due to having a
view of the proposed replacement water tank analogous to that of a coastal home
with no view of the beach as credible. We discern no error in the ALJ's findings
that "[t]he [p]roposed [w]ater [t]ank has not been shown to have any adverse
impact on the ambient noise levels or air quality in the neighborhood nor to
result in an increase in truck or foot traffic" or "diminution of historic value of
historic structures in the neighborhood" predicated on the credible evidence in
the record.
V.
NJAWC presented evidence of the relative costs of alternate solutions to
establish the proposed water tank on the Property was the most suitable, lowest-
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cost option, contrary to the intervenor's assertion. The proofs established that,
pre-petition, the NJAWC considered forty-six alternative sites for the proposed
water tank, with the ALJ finding the following as to the cost of those sites
1. [NJAWC] does not own any of these parcels; land-
acquisition costs would be a substantial investment in
utility plant that would translate to higher bills for
NJAW[C] customers. All of the parcels are located in
the same general area as [Property], in which land costs
are very high.
2. The new [water pumping] has been built . . . to supply
water to the [community] in connection with the
[p]roposed [w]ater [t]ank; no additional infrastructure
will be needed to put the [p]roposed [w]ater [t]ank into
service.
3. None of the alternate sites are near existing water-
transmission mains, meaning that the costs of
constructing new mains must be added to the total
investment in utility plant. No evidence was presented
opposing Shields['s] testimony that the approximate
cost would be $1,000,000 for every 1,500 feet of [water
lines].
4. New rights-of-way may be required for construction
and maintenance of connections between the new tank
and new distribution system, potentially adding to the
total investment in utility plant and potentially resulting
in delays while such easements are negotiated.
5. Construction of new connections would require
disruption of public streets, with police and/or other
security and construction costs adding to the total
investment in utility plant.
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6. Some of the sites at adequate elevation are developed
with single-family homes and there is no guarantee that
the homeowners would be willing to sell. Several are
in [the neighboring borough], where zoning prohibits
public-utility facilities. Others are already preserved
through the [land preservation] programs and are
therefore unavailable.
Our governing statutes and case law do not support Savas's assertion that
NJAWC should have been required to set forth the specific costs for all forty-
six possible alternative sites and select only the lowest-cost option. N.J.S.A.
40:55D-19 does not mandate that the lowest-cost option must be selected.
Rather, the burden on the petitioner is to consider the reasonable alternatives
and make a determination based on overall feasibility and adverse impact on the
community. Hackensack Water Co., 41 N.J. Super. at 428. As incorporated by
the BPU's final administrative decision, the ALJ set forth set conclusion "[t]hat
based upon the record, the [p]roposed [w]ater [t]ank is not adverse to the
environment, the public health, and/or the public welfare."
Any other arguments raised in this appeal, to the extent we have not
addressed them, are without sufficient merit to be discussed in a written opinion.
R. 2:11-3(e)(1)(E).
Affirmed.
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