388 Route 22 Readington Realty Holdings, LLC v. Township of Readington

SYLLABUS
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the
convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the
interest of brevity, portions of any opinion may not have been summarized).
388 Route 22 Readington Realty Holdings, LLC v. Township of Readington (A-63-13) (073322)
Argued December 2, 2014 – May 5, 2015
ALBIN, J., writing for a unanimous Court.
In this appeal, the Court considers the circumstances under which a municipality may exercise its discretion
to repurchase unused sewer capacity.
In December 2007, plaintiff purchased property in Readington Township (Township). The property is
serviced by a septic tank with a capacity of up to 2000 gallons per day (gpd). The Township rezoned plaintiff’s
property from the Mixed-Use District to the Business District. Thereafter, plaintiff made plans to redevelop the
property for use as a restaurant and other retail purposes. However, plaintiff’s septic tank does not have sufficient
capacity to process the wastewater generated by the uses plaintiff proposes.
In 1999, the Readington-Lebanon Sewerage Authority (Authority) began to expand its plant capacity to
allow the treatment of an additional 320,000 gpd of the Township’s wastewater. As a result of the expansion, the
Township was allocated a total of 939,000 gpd of sewer capacity. The Township agreed to pay the Authority
$6,024,704 for the increased capacity and relied on private investment to finance the project. Each landowner
purchasing future sewer capacity entered into a sewer allocation agreement with the Township. The sample
allocation agreement places a time limit on the right of a landowner to hold on to unused capacity and provides that
the landowner pay a certain sum for unused sewer capacity annually. By ordinance, the Township provides the
methodology for allocation of sewer capacity to landowners and for the recapturing of unused capacity. According
to the ordinance, in the case of those development projects which have not received approval by the appropriate
Township board having jurisdiction at the time a request for gallonage is made, allocation agreements shall provide
that if the applicant does not make formal application to the appropriate Township board within two years of
approval of the allocation, then the Township Committee may, in its discretion, terminate the agreement. The
ordinance also provides that if within two years after preliminary approval, construction has not commenced, the
Township Committee may, at its discretion, terminate the agreement.
Plaintiff requested that the Township recapture sufficient sewer capacity to allow its construction project to
proceed. In response, the Township notified plaintiff that there was no sewer capacity available. Plaintiff filed a
complaint against the Township and multiple private entities to compel the transfer of allocated, but unused, sewer
capacity, claiming that the municipal ordinance addressing the allocation of sewer capacity was invalid either on its
face or as applied by the Township. Plaintiff and defendants subsequently moved for summary judgment. The trial
court remanded the matter to the Township Committee to review the reasoning set forth in its prior rejection of
plaintiff’s request for sewer capacity and to provide a statement of reasons as a supplement to its decision. In
response to the remand order, the Township Committee held a public hearing and issued a resolution denying
plaintiff’s request for sewer capacity.
The trial court affirmed the validity of the ordinance, but determined that the Township’s blanket policy of
not recalling unused sewer capacity violated the dictates of this Court’s decision in First Peoples Bank v. Township
of Medford, 126 N.J. 413, 420-21 (1991). According to the trial court, the Township’s obligation is not dependent
on whether plaintiff can beg, borrow or cadge capacity from others, but rather to terminate agreements where it is
appropriate to do so. As a remedy, the court ordered that the Township undertake, within ninety days, a review of
the unused sewer capacity listed by plaintiff and provide a reasoned basis for not recapturing that capacity. Plaintiff
and several defendants appealed, and in an unpublished opinion, the Appellate Division reversed. The Appellate
Division agreed with the trial court that the Township relied on a policy of not re-taking sewer rights granted by
contract, but also found that plaintiff could not overcome the presumption of validity that attaches to municipal
decision-making. This Court granted plaintiff’s petition for certification. 217 N.J. 287 (2014).
HELD: A blanket policy of not recapturing unused sewer capacity is the functional equivalent of a moratorium on
development. The Court approves of the trial court’s approach, requiring the Township both to undertake a detailed
analysis of the unused capacity in the hands of private parties and to explain whether any of that capacity can be
recalled.
1. The Court’s primary task here is to resolve whether the Township’s sewer allocation ordinance is facially valid and
whether the ordinance as applied by the Township Committee constitutes an improper delegation of land-use authority
to private parties in violation of First Peoples. The Legislature has the constitutional authority to delegate to
municipalities the police power to enact ordinances governing the nature and extent of the uses of land and has done so
through the passage of the Municipal Land Use Law (MLUL). This power, however, is not unlimited. Like all
ordinances, the Township’s sewer allocation ordinance is entitled to a presumption of validity, and the party
challenging the ordinance bears the burden of overcoming that presumption. (pp. 29-31)
2. A sewer ordinance should withstand a challenge unless it is inequitable, unfair, or lacks adequate standards to insure
the fair and reasonable exercise of municipal authority. In First Peoples, which addressed several of the issues
presented here, Medford Township financed the expansion of its sewage plant through the sale of sewer permits that
were available on an equal basis to all developers. There, the question was whether the ordinance articulated adequate
standards to guide the exercise of municipal discretion when considering the repurchase of permits. This Court
concluded that the ordinance, although not exquisitely drafted, contained sufficient standards to withstand the plaintiff’s
challenge and rejected the plaintiff’s as-applied challenge to the ordinance, finding nothing to suggest that Medford had
acted arbitrarily in deciding whether to exercise its repurchase option. (pp. 32-34)
3. With those principles in mind, the Court rejects plaintiff’s challenge to the ordinance itself and finds that the
Township’s sewer allocation ordinance provides adequate standards to guide the exercise of municipal discretion when
considering the repurchase of permits. The Court presumes that the ordinance’s drafters intended certain practical
considerations to be taken into account by the Township Committee in exercising its discretion whether to terminate an
allocation agreement or extend one based on good cause. Such considerations would include (1) the length of time a
landowner has possessed unused sewer capacity, (2) the development plans of the landowner to tap some or all of the
unused capacity and the imminence of that happening, (3) the complexity of the development project and the
importance of the project to the community, (4) whether the economy has retarded economic development, (5)
proposed development projects by others that cannot proceed because of unavailability of sewer capacity and the
importance of those projects to the community, and (6) any other relevant factors. As was true in First Peoples, the
ordinance here was not exquisitely drafted. Nevertheless, it must be liberally construed in favor of its validity. This
ordinance in no way suggests that the Township as a matter of law has delegated its authority to control land use, or
access to sewer capacity, to private parties. The Court concludes that the sewer allocation ordinance provides adequate
guidelines for the Township to exercise its discretion whether and when to repurchase sewer capacity. (pp. 35-37)
4. In contravention of its own ordinance, the Township maintains a blanket policy of not repurchasing unused sewer
capacity allocated to developers. The fact that sewer capacity was allocated by contracts to private entities that
financed the plant expansion project and was paid for at considerable expense cannot be the end of the analysis.
Otherwise, the ordinance requiring the Township to exercise its discretion in recapturing sewer capacity would be
meaningless. That other landowners did not participate in purchasing capacity to help finance the plant expansion
may indicate nothing more than that they did not have a need for sewer capacity at the time. (pp. 37-39)
5. The Appellate Division placed on plaintiff the burden of showing that defendant developers were acting without
good cause for delay by not voluntarily surrendering their sewer rights for the fair value offered by plaintiff. That
defeats the purpose of the ordinance and of the policy of the MLUL, which is to have the Township exercise its
decision-making authority in land-use matters. The resolution also failed to analyze which developments, if any, fall
under the dictates of the Permit Extension Act, N.J.S.A. 40:55D-136.1 to -136.6. Last, and most significantly, the
resolution did not give a reasoned explanation for the Township’s failure to exercise discretion, as required by its
own ordinance. As a best practice, the Court suggests that the Township maintain updated records of the unused
capacity held by private parties so that it can exercise its discretion, when necessary, with current information. (pp.
39-42)
6. The Court orders the Township Committee, within ninety days, to undertake a critical review of the unused capacity
identified by plaintiff and to determine whether any such capacity can be recaptured from defendants to satisfy
plaintiff’s development needs. (p. 42)
The judgment of the Appellate Division is AFFIRMED IN PART and REVERSED IN PART. The
matter is REMANDED to the trial court for proceedings consistent with this opinion.
CHIEF JUSTICE RABNER and JUSTICES PATTERSON, FERNANDEZ-VINA, and SOLOMON
join in JUSTICE ALBIN’S opinion. JUSTICE LaVECCHIA and JUDGE CUFF (temporarily assigned) did
not participate.
2
SUPREME COURT OF NEW JERSEY
A-63 September Term 2013
073322
388 ROUTE 22 READINGTON
REALTY HOLDINGS, LLC,
Plaintiff-Appellant,
v.
TOWNSHIP OF READINGTON,
TOWNSHIP COMMITTEE OF THE
TOWNSHIP OF READINGTON, SEWER
ADVISORY COMMITTEE OF THE
TOWNSHIP OF READINGTON,
BELLEMEAD DEVELOPMENT
CORPORATION, READINGTON
COMMONS, LLC, C. DELVECCHIO,
S. CARBONE, A. CARBONE, ROLF
ACKERMAN, VALLEY NATIONAL
BANK, RYLAND DEVELOPERS, LLC,
LOT 3 DEVELOPMENT, LLC,
FALLONE PROPERTIES, LLC,
URB-FI DEVELOPMENT CORP.,
FALLONE AT SPRING MEADOW, LLC
COUNTRY CLASSICS LEGACY
READINGTON, and WINFIELD
MANAGEMENT,
Defendants-Respondents,
and
MERCK SHARP & DOHME CORP.,
f/k/a MERCK & CO., INC.,
Defendant-Respondent,
and
RAMYZ TADROS, SHADIA SAMAAN,
WHITEHOUSE ATHLETIC
ASSOCIATION, WLADYSLAW
1
ZACIOS, JOANN ZACIOS, BETTY
ANN COEBLER, CODDINGTON HOMES
CO., INC., TOM JR. PROPERTY,
INC., and WPS REALTY, LLC,
Defendants.
388 ROUTE 22 READINGTON
REALTY HOLDINGS, LLC,
Plaintiff-Appellant,
v.
TOWNSHIP OF READINGTON,
TOWNSHIP COMMITTEE OF THE
TOWNSHIP OF READINGTON, SEWER
ADVISORY COMMITTEE OF THE
TOWNSHIP OF READINGTON, MERCK
SHARP & DOHME CORP., f/k/a
MERCK & CO., INC., READINGTON
COMMONS, LLC, C. DELVECCHIO,
SCOTT CARBONE, A. CARBONE,
ROLF ACKERMAN, VALLEY
NATIONAL BANK, RYLAND
DEVELOPERS, LLC, LOT 3
DEVELOPMENT, LLC, FALLONE
PROPERTIES, LLC, URB-FI
DEVELOPMENT CORP., FALLONE AT
SPRING MEADOW, LLC, COUNTRY
CLASSICS LEGACY READINGTON,
and WINFIELD MANAGEMENT,
Defendants-Respondents,
and
BELLEMEAD DEVELOPMENT
CORPORATION,
Defendant-Respondent,
and
2
RAMYZ TADROS, SHADIA SAMAAN,
WHITEHOUSE ATHLETIC
ASSOCIATION, WLADYSLAW
ZACIOS, JOANN ZACIOS, BETTY
ANN COEBLER, CODDINGTON HOMES
CO., INC., TOM JR. PROPERTY,
INC., and WPS REALTY, LLC,
Defendants.
388 ROUTE 22 READINGTON
REALTY HOLDINGS, LLC,
Plaintiff-Appellant,
v.
TOWNSHIP OF READINGTON,
TOWNSHIP COMMITTEE OF THE
TOWNSHIP OF READINGTON, and
SEWER ADVISORY COMMITTEE OF
THE TOWNSHIP OF READINGTON,
Defendants-Respondents,
and
BELLEMEAD DEVELOPMENT
CORPORATION, MERCK SHARP &
DOHME CORP., f/k/a MERCK &
CO., INC., READINGTON
COMMONS, LLC, C. DELVECCHIO,
SCOTT CARBONE, A. CARBONE,
ROLF ACKERMAN, VALLEY
NATIONAL BANK,RYLAND
DEVELOPERS, LLC, LOT 3
DEVELOPMENT, LLC, FALLONE
PROPERTIES, LLC, URB-FI
DEVELOPMENT CORP., FALLONE AT
SPRING MEADOW, LLC COUNTRY
CLASSICS LEGACY READINGTON,
and WINFIELD MANAGEMENT,
Defendants-Respondents,
3
and
RAMYZ TADROS, SHADIA SAMAAN,
WHITEHOUSE ATHLETIC
ASSOCIATION, WLADYSLAW
ZACIOS, JOANN ZACIOS, BETTY
ANN COEBLER, CODDINGTON HOMES
CO., INC., TOM JR. PROPERTY,
INC., and WPS REALTY, LLC,
Defendants.
388 ROUTE 22 READINGTON
REALTY HOLDINGS, LLC,
Plaintiff-Appellant,
v.
TOWNSHIP OF READINGTON,
TOWNSHIP COMMITTEE OF THE
TOWNSHIP OF READINGTON, SEWER
ADVISORY COMMITTEE OF THE
TOWNSHIP OF READINGTON,
BELLEMEAD DEVELOPMENT
CORPORATION, MERCK SHARP &
DOHME CORP., f/k/a MERCK &
CO., INC., C. DELVECCHIO,
SCOTT CARBONE, A. CARBONE,
ROLF ACKERMAN, VALLEY
NATIONAL BANK, RYLAND
DEVELOPERS, LLC, LOT 3
DEVELOPMENT, LLC, FALLONE
PROPERTIES, LLC, URB-FI
DEVELOPMENT CORP., TOLL NJ I,
LLC, and WINFIELD MANAGEMENT,
Defendants-Respondents,
and
COUNTRY CLASSICS LEGACY AT
READINGTON, READINGTON
COMMONS, LLC, and RYLAND
DEVELOPERS, LLC,
4
Defendants-Respondents,
and
RAMYZ TADROS, SHADIA SAMAAN,
WHITEHOUSE ATHLETIC
ASSOCIATION, WLADYSLAW
ZACIOS, JOANN ZACIOS, BETTY
ANN COEBLER, CODDINGTON HOMES
CO., INC., TOM JR. PROPERTY,
INC., and WPS REALTY, LLC,
Defendants.
388 ROUTE 22 READINGTON
REALTY HOLDINGS, LLC,
Plaintiff-Appellant,
v.
TOWNSHIP OF READINGTON,
TOWNSHIP COMMITTEE OF THE
TOWNSHIP OF READINGTON, SEWER
ADVISORY COMMITTEE OF THE
TOWNSHIP OF READINGTON,
BELLEMEAD DEVELOPMENT
CORPORATION, MERCK SHARP &
DOHME CORP., f/k/a MERCK &
CO., INC., READINGTON
COMMONS, LLC, C. DELVECCHIO,
SCOTT CARBONE, A. CARBONE,
ROLF ACKERMAN, VALLEY
NATIONAL BANK, RYLAND
DEVELOPERS, LLC, FALLONE
PROPERTIES, LLC, URB-FI
DEVELOPMENT CORP., FALLONE AT
SPRING MEADOW, LLC, and
COUNTRY CLASSICS LEGACY
READINGTON,
Defendants-Respondents,
and
5
LOT 3 DEVELOPMENT, LLC and
WINFIELD MANAGEMENT,
Defendants-Respondents,
and
RAMYZ TADROS, SHADIA SAMAAN,
WHITEHOUSE ATHLETIC
ASSOCIATION, WLADYSLAW
ZACIOS, JOANN ZACIOS, BETTY
ANN COEBLER, CODDINGTON HOMES
CO., INC., TOM JR. PROPERTY,
INC., and WPS REALTY, LLC,
Defendants.
388 ROUTE 22 READINGTON
REALTY HOLDINGS, LLC,
Plaintiff-Appellant,
v.
TOWNSHIP OF READINGTON,
TOWNSHIP COMMITTEE OF THE
TOWNSHIP OF READINGTON, SEWER
ADVISORY COMMITTEE OF THE
TOWNSHIP OF READINGTON,
BELLEMEAD DEVELOPMENT
CORPORATION, MERCK SHARP &
DOHME CORP., f/k/a MERCK &
CO., INC., READINGTON
COMMONS, LLC, C. DELVECCHIO,
SCOTT CARBONE, A. CARBONE,
ROLF ACKERMAN, VALLEY
NATIONAL BANK, LOT 3
DEVELOPMENT, LLC, FALLONE
PROPERTIES, LLC, URB-FI
DEVELOPMENT CORP., FALLONE AT
SPRING MEADOW, LLC, COUNTRY
CLASSICS LEGACY READINGTON,
and WINFIELD MANAGEMENT,
Defendants-Respondents,
6
and
RYLAND DEVELOPERS, LLC,
Defendant-Respondent,
and
RAMYZ TADROS, SHADIA SAMAAN,
WHITEHOUSE ATHLETIC
ASSOCIATION, WLADYSLAW
ZACIOS, JOANN ZACIOS, BETTY
ANN COEBLER, CODDINGTON HOMES
CO., INC., TOM JR. PROPERTY,
INC., and WPS REALTY, LLC,
Defendants.
388 ROUTE 22 READINGTON
REALTY HOLDINGS, LLC,
Plaintiff-Appellant,
v.
TOWNSHIP OF READINGTON,
TOWNSHIP COMMITTEE OF THE
TOWNSHIP OF READINGTON, SEWER
ADVISORY COMMITTEE OF THE
TOWNSHIP OF READINGTON,
BELLEMEAD DEVELOPMENT
CORPORATION, MERCK SHARP &
DOHME CORP., f/k/a MERCK &
CO., INC., READINGTON
COMMONS, LLC, C. DELVECCHIO,
SCOTT CARBONE, A. CARBONE,
ROLF ACKERMAN, VALLEY
NATIONAL BANK, RYLAND
DEVELOPERS, LLC, LOT 3
DEVELOPMENT, LLC, URB-FI
DEVELOPMENT CORP., COUNTRY
CLASSICS LEGACY READINGTON,
and WINFIELD MANAGEMENT,
Defendants-Respondents,
7
and
FALLONE PROPERTIES, LLC, and
TOLL NJ I, LLC,
Defendants-Respondents,
and
RAMYZ TADROS, SHADIA SAMAAN,
WHITEHOUSE ATHLETIC
ASSOCIATION, WLADYSLAW
ZACIOS, JOANN ZACIOS, BETTY
ANN COEBLER, CODDINGTON HOMES
CO., INC., TOM JR. PROPERTY,
INC., and WPS REALTY, LLC,
Defendants.
388 ROUTE 22 READINGTON
REALTY HOLDINGS, LLC,
Plaintiff-Appellant,
v.
TOWNSHIP OF READINGTON,
TOWNSHIP COMMITTEE OF THE
TOWNSHIP OF READINGTON, SEWER
ADVISORY COMMITTEE OF THE
TOWNSHIP OF READINGTON,
BELLEMEAD DEVELOPMENT
CORPORATION, MERCK SHARP &
DOHME CORP., f/k/a MERCK &
CO., INC., READINGTON
COMMONS, LLC, C. DELVECCHIO,
SCOTT CARBONE, A. CARBONE,
ROLF ACKERMAN, VALLEY
NATIONAL BANK, RYLAND
DEVELOPERS, LLC, FALLONE
PROPERTIES, LLC, URB-FI
DEVELOPMENT CORP., FALLONE AT
SPRING MEADOW, LLC, and
COUNTRY CLASSICS LEGACY
READINGTON,
8
Defendants-Respondents,
and
LOT 3 DEVELOPMENT, LLC, and
WINFIELD MANAGEMENT,
Defendants-Respondents,
and
RAMYZ TADROS, SHADIA SAMAAN,
WHITEHOUSE ATHLETIC
ASSOCIATION, WLADYSLAW
ZACIOS, JOANN ZACIOS, BETTY
ANN COEBLER, CODDINGTON HOMES
CO., INC., TOM JR. PROPERTY,
INC., and WPS REALTY, LLC,
Defendants.
Argued December 2, 2014 – Decided May 5, 2015
On certification to the Superior Court,
Appellate Division.
Lawrence S. Berger argued the cause for
appellant (Berger & Bornstein, attorneys).
Christopher John Stracco argued the cause
for respondent Merck Sharp & Dohme Corp.
(Day Pitney, attorneys; Mr. Stracco and
Jennifer Gorga Capone, on the brief).
Robert A. Ballard argued the cause for
respondents Township of Readington, Township
Committee of the Township of Readington, and
Sewer Advisory Committee of the Township of
Readington, (Ballard & Dragan, attorneys).
Glenn S. Pantel argued the cause for
respondent Bellemead Development Corporation
9
(Drinker Biddle & Reath, attorneys; Mr.
Pantel and Karen A. Denys, on the brief).
Deborah B. Rosenthal argued the cause for
respondents Winfield Management Corp. and
Lot 3 Development, LLC (Gebhardt & Kiefer,
attorneys; Robert C. Ward, on the brief).
Alexander G. Fisher argued the cause for
respondents Ryland Developers, LLC,
Readington Commons, LLC and Country Classics
Legacy at Readington, LLC (Mauro, Savo,
Camerino, Grant & Schalk, attorneys).
Thomas W. Sweet argued the cause for
respondents Fallone Properties, LLC and
Fallone at Spring Meadow, LLC.
Salvatore Alfieri submitted a letter in lieu
of brief on behalf of respondents Scott
Carbone, A. Carbone, and C. DelVecchio
(Cleary Giacobbe Alfieri Jacobs, attorneys).
JUSTICE ALBIN delivered the opinion of the Court.
Access to sewer service is vital to any major development
of property. In First Peoples Bank v. Township of Medford, we
held that a municipality cannot delegate the exercise of its
land-use authority to private parties by allowing them to
purchase and hoard unused sewer rights, thereby stifling
development by those who are prepared to build. 126 N.J. 413,
420-21 (1991). Instead, a “[t]ownship must retain sufficient
control to assure that sewer permits are either used or
repurchased so that others may use them.” Id. at 420.
Plaintiff 388 Route 22 Readington Realty Holdings, LLC is
seeking to construct a retail outlet and a restaurant but cannot
10
do so unless it secures access to 11,260 gallons per day (gpd)
of sewer capacity. At the time that plaintiff requested access
to that amount of sewer capacity from Readington Township,
approximately twenty private entities possessed 322,009 gpd of
unused capacity. The Township sold most of that unused capacity
on the private market as a means of financing the expansion of
sewer service from the Readington-Lebanon Sewerage Authority
(Sewerage Authority or Authority).
Plaintiff demanded that the Township -- in accordance with
a municipal ordinance governing allocation of sewer rights --
recapture sufficient sewer capacity to allow its construction
project to proceed. Consistent with its policy of not
repurchasing capacity, the Township declined to do so.
Plaintiff then filed a complaint in lieu of prerogative writs
against the Township and multiple private entities to compel the
transfer of allocated but unused sewer capacity. Plaintiff
claimed that the municipal ordinance addressing the allocation
of sewer capacity was invalid either on its face or as applied
by the Township.
On cross-motions for summary judgment by the parties, the
trial court affirmed the validity of the ordinance. The court,
however, determined that the Township’s blanket policy of not
recalling unused sewer capacity violated the dictates of First
Peoples. The court issued a writ of mandamus ordering the
11
Township to exercise its discretion under its ordinance and to
provide “a reasoned basis for refusing to recapture” the unused
capacity held by multiple private entities.
The Appellate Division reversed. Although the Appellate
Division agreed with the trial court that the Township “simply
relied on a policy of not re-taking sewer rights granted by
contract,” it concluded that plaintiff could not overcome the
presumption of validity that attaches to municipal decision-
making.
We now conclude that the Appellate Division erred. As the
trial court held, the Township cannot meaningfully exercise its
discretion whether to repurchase sewer capacity unless it
examines the reasons given by each entity for not using capacity
assigned to it. A policy of not recapturing unused sewer
capacity is the functional equivalent of a moratorium on
development. We approve of the sound approach taken by the
trial court, requiring the Township both to undertake a detailed
analysis of the unused capacity in the hands of private parties
and to explain whether any of that capacity can be recalled.
I.
We now review the relevant parts of the record on the
summary-judgment motions.
In December 2007, plaintiff purchased property and a
warehouse located at 388 Route 22 West in Readington Township.
12
The wastewater at that site is serviced by a septic tank that
allows for a maximum of 2000 gpd of capacity.1 The Township
rezoned plaintiff’s property from the Mixed-Use District to the
Business District, where retail and restaurant uses are
permitted. Plaintiff’s septic tank does not have sufficient
capability to process the wastewater generated for the uses
plaintiff proposes.
Plaintiff’s property is in an area serviced by the Sewerage
Authority, which manages wastewater for Readington and Lebanon
Townships. A sewer line is located directly in front of
plaintiff’s property. After the zoning change, plaintiff made
plans to redevelop the property for use as a restaurant and for
other retail purposes. Plaintiff’s proposed project requires
11,260 gpd of sewer capacity, which can only be accomplished by
connecting to the Authority’s sewer system. However, the
Township advised plaintiff that there was no available sewer
capacity to allocate to the project.
Around 1999, the Sewerage Authority began the expansion of
its plant capacity to allow the treatment of an additional
320,000 gpd of Readington’s wastewater. As a result of the
plant expansion, Readington Township was allocated, in all,
1 N.J.A.C. 7:9A-1.8 prohibits the use of a septic system to
manage a wastewater capacity of over 2000 gpd without permission
from the New Jersey Department of Environmental Protection.
13
approximately 939,000 gpd of sewer capacity. The Township
agreed to pay the Authority $6,024,704 for the increased
capacity. To finance the project, the Township relied on
private investment. The Township offered landowners the
opportunity to purchase portions of the 320,000 gpd of increased
capacity. In response to the offering, to name a few, Merck
Sharpe & Dohme Corporation purchased 141,900 gpd of capacity for
$2,196,764, Bellemead Development Corporation purchased 58,746
gpd of capacity for $1,106,187, and Readington Commons, LLC
purchased 7628 gpd of capacity for $143,635. The prior owner of
plaintiff’s property declined to invest in future sewer
capacity.
Each landowner purchasing future sewer capacity entered
into a sewer allocation agreement with the Township. The
Township’s “Sample Sewer Allocation Agreement,” in part,
provides:
Should Developer not begin construction on the
aforementioned properties within two (2) years
of the date of this agreement, then the
Township shall have the option to terminate
this agreement and all capacity assigned
herein under shall be returned to the Township
for reallocation at the discretion of the
Township.
The sample allocation agreement -- in compliance with the sewer
allocation ordinance -- places a temporal limit on the right of
a landowner to hold on to unused capacity.
14
The allocation agreements with Merck, however, do not
follow the protocols in the ordinance or sample allocation
agreement. Merck’s 2003 and amended 2008 sewer allocation
agreements allow Merck to maintain unused sewer capacity for the
periods the Township extended Merck’s site plan approvals for
proposed construction in Readington. A past approval ran from
1988 to 2008, and the current approval runs from 2008 to 2018.
Merck’s agreements have barred the Township from recapturing
unused capacity for a period lasting at least fifteen years.2
The typical allocation agreement provides that the
landowner pay a certain sum for unused sewer capacity annually.
The full annual amount was due the third year after acquisition.
The first and second year payments were set at one-third and
then two-thirds of the full amount annually due. For example,
Merck agreed to pay $48,720 the first year, $97,440 the second
year, and then $146,160 annually for as long as the allocated
gallonage remained unused.
2 In 1988, Merck obtained preliminary site plan approvals for
projects to be constructed on its Readington property. The
approvals were set to expire in twenty years. In 2008,
Readington granted Merck a ten-year extension of its preliminary
site plan approvals, and the Township agreed that it would not
seek to recapture any unused sewer capacity until 2018.
15
As of December 2010, of the 322,009 gpd of unused capacity,
141,900 was held by Merck, 66,060 by Bellemead,3 32,000 or 38,860
by Fallone Properties, LLC, and 30,125 by Ryland Developers,
LLC. Each remaining defendant held less than 10,000 gpd of
unused capacity. Merck’s unused capacity represents forty-four
percent of the entire capacity yielded from Readington’s portion
of the Authority’s plant expansion.
Defendants have not proceeded with construction projects
for a variety of reasons. One reason given by some defendants
has been the downturn in the economy.
By ordinance, the Township provides the methodology for
allocation of sewer capacity to landowners and for the
recapturing of unused capacity. Readington Township Code § 187-
26 states:
A. Order of priority; reserves.
(1) By existing joint agreement with the
Readington Lebanon Sewerage Authority,
the Township of Readington has a total
sewer allocation of 935,000 gpd. Upon
study by the Township, there is a limited
amount of sewer capacity in Readington
3 In 1988, Bellemead was granted preliminary and final site plan
approval for its “Halls Mills Farm” development project. The
approval was set to expire in eight years. Bellemead was
granted multiple extensions with the final extension set to
expire in July 2010. As a result of the Authority’s plant
expansion, Bellemead was allocated 58,746 gpd of capacity,
making its total capacity 110,746 gpd. Bellemead is using
44,686 of that gallonage, while 66,060 gpd -- the amount
required to operate its Halls Mills project -- remains unused.
16
Township at the present time. Any
remaining capacity from Readington’s
portion of its allotted capacity in the
Readington Lebanon Sewerage Authority
sewer service area shall be allocated in
the following order of priority, subject
to availability:
(a) First, to those projects which
will enable the Township to meet its
future Mount Laurel affordable
housing obligations; and
(b) Secondly, to remedy those
properties within the sewer service
area which constitute an
“emergency” due to failing septic
systems.
(2) The Township reserves the right to
keep that portion of sewerage capacity
needed for “reserve” to meet NJDEP
requirements.
B. Allocations for sewer capacity from
Readington’s allotted portion of sewer
capacity shall be made by the Readington
Township Committee upon written agreement to
be entered into with the applicant, after the
allocation request has been reviewed and a
favorable recommendation has been made by the
Readington Township Sewer Advisory Committee.
C. In the case of those development projects
which have not received an approval by the
appropriate township board having
jurisdiction at the time a request for
gallonage is made, allocation agreements shall
provide that if the applicant does not make
formal application to the appropriate township
board within two years of approval of the
allocation, then the Township Committee may,
in its discretion, terminate the agreement.
If within two years after preliminary
approval, construction has not commenced, the
Township Committee may, at its discretion,
terminate the agreement. The agreement may be
17
extended upon application to the Township if
there is a showing of good cause, at the option
of the Township Committee.
D. Applicants who received capacity
allocations under this section shall enter
into a sewer plant expansion developer
contribution agreement which is intended to
cover the Township’s share of the portion of
the costs of expanding the [Sewerage
Authority] treatment plant until such time as
those costs have been satisfied. . . .
E. Allocation of sewer capacity may not be
transferred from the owner without prior
approval of the Readington Township Committee,
upon review and recommendation of the
Readington Township Sewer Advisory Committee.
In March 2010, plaintiff wrote to the Readington Township
Committee and the Readington Sewer Advisory Committee requesting
that 388 Route 22 be permitted to hook up to the Authority’s
sewer system and gain access to approximately 10,000 gpd
capacity. Plaintiff expressed its belief that the Township
possessed sufficient sewer capacity to accommodate plaintiff’s
request. Alternatively, in the event that all sewer capacity
had been allocated, plaintiff stated that Readington should buy
back unused capacity from property owners who had “not made
formal application for development of [their] properties” or who
had “failed to commence construction of improvements within two
years after receipt of preliminary approval from the appropriate
Township Board.” In making this demand for the buyback of
unused capacity, plaintiff relied on paragraph C of the
18
Readington Township sewer allocation ordinance. The Readington
Township Committee replied that it did “not wish to terminate
any of its existing sewer agreements.”
On August 4, 2010, plaintiff’s attorney and professional
planner appeared before the Readington Sewer Advisory Committee,
describing plaintiff’s plan to develop the property at 388 Route
22 into retail space and a restaurant. They requested a hookup
to the sewer system and 11,260 gpd of wastewater capacity. The
Committee’s chairman replied that all capacity was either used
or reserved by property owners who financed the sewer plant’s
expansion. He stated that the Township was bound by contracts
with those property owners, although the ordinance allowed for
an owner to “voluntarily” give up capacity. The chairman made
clear that “the policy of this board and the policy of the
Township Committee has been not to take any capacity back.” The
chairman finally noted that his committee’s recommendation was
advisory and that the Township Committee would make the final
decision.
On September 20, 2010, plaintiff’s attorney appeared before
the Township Committee and requested 11,260 gpd of sewer
capacity for plaintiff’s project. He indicated that plaintiff
had contacted fifteen property owners, and none were interested
in selling their unused capacity. The attorney noted that
plaintiff would pay the holder its costs in acquiring and
19
retaining the unused capacity. Nevertheless, Committee members
expressed concern about breaching contracts with landowners
holding unused capacity.
By letter dated October 14, 2010, the Township Committee
advised plaintiff that there was no sewer capacity available.
The Committee invited plaintiff to present “a conceptual plan,
either through the Planning Board or Board of Adjustment,
whichever is applicable, . . . and that the application would be
conditioned on obtaining a suitable solution to wastewater.”
II.
A.
In November 2010, plaintiff filed its lawsuit seeking an
order compelling the Township to recapture 11,260 gpd of unused
sewer capacity for its project. Plaintiff’s complaint in lieu
of prerogative writs named as defendants Readington Township,
Bellemead, Merck, Readington Commons, and various other parties
listed in the caption. Among plaintiff’s claims are the
following: (1) as a result of Readington Township’s sewer
allocation ordinance, the Township has failed to retain control
over the allocation of sewer capacity and, in effect, has
delegated to certain private landowners the authority to prevent
other property owners from developing their land; (2) the
Township’s policy of not recapturing sewer capacity in the hands
of private entities is arbitrary, capricious, and unreasonable
20
under the ordinance; (3) the “Township has sufficient unused
capacity to allocate to [p]laintiff’s [p]roperty”; and (4) the
Township’s failure to allocate to plaintiff sewer capacity
amounts to an unconstitutional taking of its property.
Plaintiff’s claims, in essence, constitute a facial and as-
applied challenge to the validity of the municipal ordinance.
Plaintiff and defendants moved for summary judgment. The
trial court -- the Honorable Peter A. Buchsbaum, J.S.C. --
remanded the matter to the Township Committee to “review the
reasoning set forth in its prior rejection” of plaintiff’s
request for sewer capacity and to “provide a statement of
reasons as a supplement to its decision.”
In response to the remand order, the Township Committee
held a public hearing on July 5, 2011 and issued a resolution
denying plaintiff’s request for sewer capacity. The resolution
referenced letters received from defendants Merck, Readington
Commons, Bellemead, Fallone, and Urb-Fi Development Corp., which
recited their allocation agreements with the Township and
described the development status of their projects. Those and
other defendants objected to the transfer of any of their unused
capacity to plaintiff.
In justifying its refusal to recapture unused sewer
capacity, the Township Committee adopted in the resolution “the
full contents and arguments of the listed correspondence
21
submitted by various defendants.” The Township Committee gave
further reasons for the denial of plaintiff’s request: (1) all
excess capacity held by the Township is reserved for affordable
housing and emergencies; (2) the sewer ordinance allowed the
Township to extend its sewer allocation agreements with
defendants for “good cause” and, having done so, the Township
did not act unreasonably or arbitrarily; (3) several defendants
“have development approvals which fall under the protections
afforded by the Permit Extension act,” a separate reason
constituting “good cause” for continuing the allocation
agreements; (4) the previous owner of plaintiff’s property
expressed no “interest in acquiring sewer capacity at the time
the Township announced that it was available for purchase”; (5)
Township Committee members did not believe that it was “in the
public interest to force the termination of . . . existing sewer
agreements”; and (6) plaintiff had not determined whether the
holder of any unused capacity had an “interest in voluntarily
selling their capacity back to the Township.”
B.
The trial court held that Readington’s sewer ordinance
passed muster under First Peoples, supra, 126 N.J. 413. In a
written opinion, the court determined that the ordinance, on its
face, ensures “municipal control of sewer rights” and “provides
mechanisms” for the Township “to recapture sewer capacity.” In
22
reaching this decision, the court recognized “the tradition of
judicial deference” in upholding “broad standards for local
action in the land use area.”
On the other hand, the court found that the ordinance as
applied by the Township raised serious doubts about the
legitimacy of the Township’s sewer policy. Based on the
summary-judgment record, it accepted that plaintiff was
unsuccessful in its efforts to purchase sewer capacity from
defendant developers and that the policy of the Township, as
expressed by the Chairman of the Sewer Advisory Committee, “is
not to take capacity back.” The court described the Township’s
resolution as “pro forma” and a “brushoff” that “simply recites
what was received from [defendants’] counsel.” The resolution
failed to “contain a development by development analysis” or to
provide “a reasoned explanation” for the Township’s decision not
“to exercise discretion” to recapture any of the unused
capacity, which constituted one third of the entire flow
allocated to Readington. Further, the resolution failed to
analyze whether the Permit Extension Act, N.J.S.A. 40:55D-136.1
to -136.6, applied “to each and every development.” The court
held that “the ordinance requires the exercise of discretion,”
yet the Township followed a “flat policy” of refusing to assert
its right to recapture unused capacity. It construed First
Peoples as standing for the proposition that sewer rights
23
“cannot be held in perpetuity” and that at some point the
Township has a duty to recapture unused capacity.
According to the trial court, the Township’s obligation is
not dependent on whether plaintiff can “beg, borrow or cadge
capacity from others” but rather “to terminate agreements where
it is appropriate to do so.” It found that the Township’s no-
buy-back policy “functioned as a de facto moratorium on any
development which requires sewerage.”
As a remedy, the court ordered that the Township undertake,
within ninety days, a review of the unused sewer capacity listed
by plaintiff and provide “a reasoned basis” for not recapturing
that capacity.”4 It cautioned that agreements between the
Township and defendants granting extended sewer rights may not
control when a present holder of capacity has seemingly reserved
the right indefinitely and a “party seeking sewer allocation is
ready to imminently make use of those rights.” The court
acknowledged, however, that the application of the Permit
Extension Act might limit the Township’s discretion.
Plaintiff and several defendants appealed.
C.
4 The court excepted from the order defendants Country Classics
of Readington and Readington Commons because they evidently are
using their capacity.
24
In an unpublished opinion, the Appellate Division affirmed
the Law Division’s rejection of plaintiff’s facial challenge to
the ordinance but reversed the Law Division’s finding that the
Township Committee did not give a reasoned basis for not
recapturing sewer capacity for plaintiff’s project.
Like the trial court, the appellate panel was satisfied
that the ordinance provided “standards sufficient to insure
‘fair and reasonable exercise’ of the discretion granted,”
quoting First Peoples, supra, 126 N.J. at 419. Nevertheless,
the panel suggested that the Township follow the guidance
offered in First Peoples and consider whether the Township and
property owners would be better served if the ordinance gave
“‘more specific standards defining the conditions under which’
good cause for extension will and will not be found, and
procedural requirements applicants interested in repurchase
should follow,” quoting id. at 423.
The panel, however, determined that the Township Committee
did not abuse its discretion in not recapturing unused sewer
capacity for plaintiff. The panel described plaintiff’s
development plan as “at best speculative” and “vague.” Although
the panel acknowledged that the Township “Committee simply
relied on a policy of not re-taking sewer rights granted by
contract,” it concluded that plaintiff did not “establish that
the denial of its request was arbitrary because it failed to
25
overcome the presumption of validity to which the decision is
entitled.” The panel based its conclusion on the fact that
defendants paid a “great expense” for their sewer rights and
that plaintiff failed to identify those who were holding unused
sewer capacity “without good cause for delay.” The panel also
faulted plaintiff for its “preference for litigation or
settlement over development and presentation of a more
definitive request.” Last, the panel declined to rule on
whether the sewer allocation agreements are protected under the
Permit Extension Act.
We granted plaintiff’s petition for certification. 388
Route 22 Readington Realty Holdings, LLC v. Twp. of Readington,
217 N.J. 287 (2014).
III.
A.
Plaintiff advances several arguments: (1) the sewer
allocation ordinance is invalid because it does not set forth
adequate standards to guide the Township in determining when
unused sewer capacity should be recaptured; (2) the Township’s
blanket refusal to recall unused sewer capacity violates
principles set forth in First Peoples, amounts to an
unconstitutional delegation of governmental authority over land
use into the hands of private parties, and constitutes an
unlawful moratorium on development; and (3) the Appellate
26
Division mistakenly ratified the Township’s policy on the
erroneous grounds that plaintiff “should have presented a more
definitive plan for its proposed development,” the holders of
sewer rights expended considerable money to acquire the
allocated capacity, and the Permit Extension Act expresses the
Legislature’s view that sewer agreements should be extended in
periods of economic downturn. With regard to the last of those
points, plaintiff emphasizes that developers who paid for
allocations of sewer capacity did so “with full knowledge of the
recapture rights of the Township under the Ordinance which, in
many, if not all, instances, were embodied in the allocation
agreements themselves.” Plaintiff also maintains that neither
the Township nor any court has determined whether any particular
sewer allocation attached to a development project is protected
by the Permit Extension Act. Last, plaintiff contends that the
Appellate Division erred by dismissing its claim that the
Township has understated its available capacity -- a claim that
has never been adjudicated.
B.
Defendants individually and collectively urge this Court to
affirm the Appellate Division. First, they submit that the
sewer allocation ordinance is valid on its face for the reasons
given by the Appellate Division: the ordinance allows the
Township to terminate or extend allocation agreements for good
27
cause, grants the Township authority over the transfer of sewer
rights, sets benchmarks for the recapture of capacity, and
establishes an order of priority for allocating available
capacity.
Defendants also maintain that the Township Committee did
not act unreasonably or arbitrarily in declining to recall sewer
capacity allocated to property owners who funded the sewer plant
expansion, who have approved site plans, and who paid and
continue to pay for reserved capacity. Defendants emphasize
that plaintiff had purchased 388 Route 22 with notice that sewer
capacity was unavailable, had no definitive plan to develop the
property, and made no application for land-use approvals.
Defendants contend that the Township rightly relied on the
policy objective of “the Permit Extension Act as well as the
explicit protections afforded by the Act in finding good cause
to extend and not recapture the sewer allocations,” particularly
given the downturn in the economy that stalled development
projects. Defendant Merck, in particular, claims that the
Township is bound to honor its contractual obligations and that
an impairment of those obligations would violate its rights.
Merck points out that its agreement bars the Township from
recalling sewer capacity before Merck’s site plan approvals
expire in 2018. Merck maintains that any recapture of its
“unused sewer capacity prior to that time would unlawfully
28
vitiate Merck’s site plan approvals, resulting not only in a
breach of its contracts with the Township, but also an
unconstitutional taking.”
Finally, various defendants represent that they are
currently using or in the process of using their allocated sewer
capacity because their projects are either completed or
underway.
IV.
A.
Our primary task here is to resolve issues of law: whether
the Readington sewer allocation ordinance is facially valid, and
whether the ordinance as applied by the Township Committee
constitutes an improper delegation of land-use authority to
private parties in violation of First Peoples. In construing
the meaning of a statute, an ordinance, or our case law, our
review is de novo. Farmers Mut. Fire Ins. Co. of Salem v. N.J.
Prop.-Liab. Ins. Guar. Ass’n, 215 N.J. 522, 535 (2013). “We
need not defer to the trial court or Appellate Division’s
interpretative conclusions” unless they are correct. Murray v.
Plainfield Rescue Squad, 210 N.J. 581, 584 (2012).
This appeal comes to us from a grant of summary judgment in
favor of defendants, resulting in a dismissal of plaintiff’s
action in lieu of prerogative writs. In this procedural
posture, plaintiff, as the non-moving party, is entitled to “the
29
benefit of all favorable evidence and inferences presented in
the record before us.” Murray, supra, 210 N.J. at 584-85; see
also Gormley v. Wood-El, 218 N.J. 72, 86 (2014) (“A court should
grant summary judgment only when the record reveals ‘no genuine
issue as to any material fact’ and ‘the moving party is entitled
to a judgment or order as a matter of law.’” (quoting R. 4:46-
2(c))). Accordingly, the summary-judgment record must be viewed
“through the prism of [plaintiff’s] best case.” Gormley, supra,
218 N.J. at 86.
With those principles in mind, we begin with a review of
the law that controls the distribution of sewer rights.
B.
The Legislature has the constitutional authority to
delegate to municipalities the “police power” to enact
ordinances governing “the nature and extent of the uses of
land,” N.J. Const. art. IV, § 6, ¶ 2, and the Legislature has
done so through the passage of the Municipal Land Use Law
(MLUL), N.J.S.A. 40:55D-1 to -163. The constitutional power
delegated to municipalities to enact land-use regulations,
however, is not unlimited. That power “must be exercised for
the general welfare,” and “regulations that conflict with the
general welfare . . . are unconstitutional.” S. Burlington
Cnty. N.A.A.C.P. v. Twp. of Mt. Laurel, 92 N.J. 158, 208 (1983)
(Mt. Laurel II); see also S. Burlington Cnty. N.A.A.C.P. v. Twp.
30
of Mt. Laurel, 67 N.J. 151, 175 (1975) (Mt. Laurel I) (noting
that police power exercised by municipality must promote “the
general welfare”). Consistent with this fundamental tenet, one
of the express purposes of the MLUL -- indeed the first
enumerated purpose -- is “[t]o encourage municipal action to
guide the appropriate use or development of all lands in this
State, in a manner which will promote the public health, safety,
morals, and general welfare.” N.J.S.A. 40:55D-2(a).
Like all ordinances, Readington’s sewer allocation
ordinance is entitled to a presumption of validity, and the
“party challenging the ordinance bears the burden of overcoming
that presumption.” See Rumson Estates, Inc. v. Mayor & Council
of Fair Haven, 177 N.J. 338, 350 (2003). An ordinance must be
“‘liberally construed’” in favor of its validity. Id. at 351
(quoting N.J. Const. art. IV, § 7, ¶ 11). Our charge is to pass
not on the wisdom of a municipal ordinance, but only on whether
it complies with the Constitution and the MLUL. See ibid.
Courts must also pay deference to the decision-making of
municipal bodies, recognizing that they possess “peculiar
knowledge of local conditions [and] must be allowed wide
latitude in the exercise of delegated discretion.” Kramer v.
Bd. of Adjustment, 45 N.J. 268, 296 (1965). A municipal land-
use determination should not be set aside unless the public body
has engaged in “a clear abuse of discretion.” Id. at 296-97.
31
If there is “substantial evidence to support” the municipal
decision, a court should not interfere by substituting its
judgment. Id. at 296.
Specific to this case, “a sewer ordinance should withstand
a challenge unless it is inequitable, unfair, or lacks adequate
standards to insure the fair and reasonable exercise of
municipal authority.” First Peoples, supra, 126 N.J. at 419
(citing 5 McQuillin, The Law of Municipal Corporations § 18.12
at 453 (3d ed. 1989)). Nevertheless, “[t]he municipal
obligation is to provide a level playing field so that
applicants are treated equally.” Ibid.
In assessing the validity of Readington’s sewer ordinance
and the Township’s application of that ordinance, we are not
addressing novel issues. We are returning to issues that we
reviewed in First Peoples, and therefore a discussion of that
case will help guide us here.
In First Peoples, Medford Township financed the expansion
of its sewage plant through the sale of sewer permits that were
available on an equal basis to all developers. Id. at 415-17.
Medford’s sewer ordinance gave property owners “the option to
purchase connection permits before obtaining municipal land use
approvals.” Id. at 416. The plaintiff bank declined the
opportunity to do so. Id. at 417. Later, when the plaintiff
wanted to develop its property, its request for several sewer
32
permits was denied because all permits had been allocated. Id.
at 418. The plaintiff then instituted a lawsuit, challenging
the validity of the ordinance and seeking an order directing
Medford to repurchase unused permits.5 Ibid.
Our focus in First Peoples was whether the ordinance
articulated “adequate standards to guide the exercise of
municipal discretion when considering the repurchase of
permits.” Id. at 421. Ultimately, we concluded that the
“ordinance, although not exquisitely drafted, contain[ed]
sufficient standards to withstand the [plaintiff’s] challenge.”
Id. at 422. We gleaned from various clauses of the ordinance,
including one that provided that “reservation of capacity is not
irrevocably committed to a proposed user,” that Medford “when
exercising its right of repurchase, must consider the public
health, safety, and welfare, a reasonable and equitable
allocation of costs, and the allowance of moderate growth.” Id.
at 422-23. Importantly, we considered Medford’s sewer ordinance
to be far from a model ordinance. Id. at 423. We stated that
it would better serve both the Township and
property owners if it contained more specific
standards defining the conditions under which
permits would be subject to repurchase. Such
standards could appropriately include the
criteria the municipality will apply when
exercising its rights to repurchase permits
5 The plaintiff also unsuccessfully sought an order requiring
Medford to expand the capacity of the sewage plant. Id. at 418,
423-24.
33
and a formula for more closely correlating the
issuance of building permits and sewer
permits. In the absence of such standards,
the municipality runs the risk that in another
case the ordinance might be found vulnerable
as applied.
[Ibid.]
Significantly, in First Peoples, no one disputed that “the
Township must retain sufficient control to assure that sewer
permits are either used or repurchased so that others may use
them.” Id. at 420. We declared that “[w]ithout an adequate
repurchase provision, the ordinance could result in the improper
delegation of access to the sewer system to private landowners
who, by purchasing permits, could prevent other owners from
developing their land.” Id. at 420-21.
We nevertheless rejected the plaintiff’s as-applied
challenge to the ordinance, finding nothing to suggest that
Medford had “acted arbitrarily in deciding whether to exercise
its repurchase option.” Id. at 423. We specifically noted that
Medford “had repurchased approximately fifteen permits and that
it was considering the repurchase of others,” and that the
record did not indicate that the plaintiff “had made demand on
Medford to repurchase specific permits.” Ibid. For those
reasons, we viewed the plaintiff’s “attack on the repurchase
provision as essentially facial.” Ibid.
34
With those principles in mind, we now turn first to the facial
challenge to Readington’s sewer allocation ordinance and then its
application of the ordinance to this case.
V.
A.
We reject plaintiff’s challenge to the ordinance itself.
We find that Readington’s sewer allocation ordinance provides
“adequate standards to guide the exercise of municipal
discretion when considering the repurchase of permits.” First
Peoples, supra, 126 N.J. at 421.
First, the ordinance sets temporal limits on the right of a
property owner to keep unused sewer capacity. The Township has
the discretion to terminate an allocation agreement and
repurchase capacity if a developer (1) does not make application
for development approvals within two years of having received
sewer capacity or (2) has not begun construction within two
years after having received preliminary approval. Readington
Code, supra, § 187-26C. Second, the ordinance provides that an
allocation agreement “may be extended upon application to the
Township if there is a showing of good cause, at the option of
the Township Committee.” Ibid.
As was true in First Peoples, supra, the ordinance here was
not “exquisitely drafted.” See 126 N.J. at 422. Nevertheless,
we must “‘liberally construe[]’” the ordinance in favor of its
35
validity. Rumson Estates, supra, 177 N.J. at 351 (quoting N.J.
Const. art. IV, § 7, ¶ 11). We presume that the ordinance’s
drafters intended certain practical considerations to be taken
into account by the Township Committee in exercising its
discretion whether to terminate an allocation agreement or
extend one based on good cause. Such considerations would
include (1) the length of time a landowner has possessed unused
sewer capacity, (2) the development plans of the landowner to
tap some or all of the unused capacity and the imminence of that
happening, (3) the complexity of the development project and the
importance of the project to the community, (4) whether the
economy has retarded economic development, (5) proposed
development projects by others that cannot proceed because of
unavailability of sewer capacity and the importance of those
projects to the community, and (6) any other relevant factors.
Plans for the treatment of wastewater is a critical
component of any development project, for without sewer approval
no development project can go forward. Field v. Franklin Twp.,
190 N.J. Super. 326, 328-35 (App. Div.), certif. denied., 95
N.J. 183 (1983). This ordinance, as written, in no way suggests
that the Township as a matter of law has delegated its authority
to control land use -- and more specifically to control access
to sewer capacity -- to private parties. The ordinance suggests
36
that access to sewer capacity is to be managed by the Township
Committee for the general welfare of the community.
We conclude that the sewer allocation ordinance -- when
read with the commonsense considerations implied within the
enactment -- provides adequate guidelines for the Township to
exercise its discretion whether and when to repurchase sewer
capacity.
We next turn to plaintiff’s argument that the ordinance, as
applied, violates the dictates of First Peoples.
B.
In First Peoples, supra, we did not find evidence that
Medford had acted arbitrarily in deciding whether to exercise
its option to repurchase sewer capacity. 126 N.J. at 423. That
was so because the “Township had repurchased approximately
fifteen permits” and “was considering the repurchase of others”
and because the plaintiff had not demanded that Medford
“repurchase specific permits.” Ibid. We noted that had Medford
acted arbitrarily, “a court might direct it to exercise its
option to repurchase.” Ibid. That scenario, envisioned by our
Court, presents itself here.
Based on the summary-judgment record before us, it is
apparent that, despite its ordinance, Readington maintains a
blanket policy of not repurchasing unused sewer capacity
allocated to developers. The Chairman of the Sewer Advisory
37
Committee told plaintiff’s attorney that “the policy of this
board and the policy of the Township Committee has been not to
take any capacity back.” The Chairman’s statement reinforced
the Township attorney’s earlier communication to plaintiff that
the Township Committee did “not wish to terminate any of its
existing agreements.”
Approximately one-third of Readington’s entire sewer
capacity -- 322,009 gpd -- is not in use. That unused capacity
is largely in the hands of a relatively small number of private
entities. Currently, Merck has 141,900 gpd and Bellemead has
66,060 gpd of unused sewer capacity -- capacity allocated for
more than a decade but still not in use. Both companies
received approvals for their development projects in the late
1980s. That sewer capacity was allocated by contracts to
private entities that financed the plant expansion project and
was paid for at considerable expense cannot be the end of the
analysis. Otherwise, the ordinance requiring Readington to
exercise its discretion in recapturing sewer capacity would be
meaningless. Those entities that purchased unused capacity did
so knowing that the ordinance placed potential temporal limits
on how long that capacity could be held in reserve and gave the
Township the authority to recapture unused capacity for
distribution to developers with projects ready to go. The
ordinance made clear that sewer rights were not to be held in
38
perpetuity. That other landowners did not participate in
purchasing capacity to help finance the plant expansion may
indicate nothing more than that they did not have a need for
sewer capacity at the time.
The Township Committee invited plaintiff to present “a
conceptual plan” of its development project to the appropriate
land-use board, adding “that the application would be
conditioned on obtaining a suitable solution to wastewater.”
But given the Township’s stated policy not to recapture sewer
capacity, the presentation of that plan would have constituted
an exercise in futility. A developer may be hesitant to expend
great sums of money to secure preliminary approvals for a
development project that has no prospect of securing necessary
sewer capacity. Plaintiff can hardly be faulted for deciding
that judicial relief was the only viable option.
Plaintiff identified the entities that were holding unused
capacity and contacted approximately fifteen of those entities,
inquiring whether they would relinquish some of their unused
capacity. The opposition to this lawsuit is the ultimate
testament to defendants’ unwillingness to freely give back any
of their unused capacity.
The Appellate Division placed on plaintiff the burden of
showing that defendant developers were acting “without good
cause for delay” by not voluntarily surrendering their sewer
39
rights for the fair value offered by plaintiff. But that
defeats the purpose of the ordinance and of the policy of the
MLUL, which is to have the Township exercise its decision-making
authority in land-use matters. One of the objectives of the
sewer allocation ordinance was to ensure that the Township
exercised discretion, when appropriate, to recapture unused
capacity and to avoid “the improper delegation of access to the
sewer system to private landowners who, by purchasing permits,
could prevent other owners from developing their land.” See
First Peoples, supra, 126 N.J. at 420-21. The MLUL requires
that townships exercise their authority to develop lands “in a
manner which will promote the . . . general welfare,” N.J.S.A.
40:55D-2(a), and the repurchase provision of the sewer
allocation ordinance was a means to that end. We concur with
the trial court that the Township’s obligation to terminate
agreements, when appropriate, was not dependent on whether
plaintiff could “beg, borrow or cadge capacity from others.”
The Township’s no-buy-back policy has rendered the ordinance
toothless, and, as the trial court determined, “functioned as a
de facto moratorium on any development which requires sewerage.”
We substantially agree with the conclusions that Judge
Buchsbaum reached from the summary-judgment record. In
declining to recapture unused sewer capacity for plaintiff’s
project, the Township in its resolution incorporated by
40
reference, wholesale and uncritically, the arguments of the
developer defendants. That approach suggests that the Township
had effectively delegated its land-use authority to private
entities. The resolution failed to analyze development by
development why none of the unused capacity -- after years of
lying idle -- could be recaptured.
The resolution also failed to analyze which developments,
if any, fall under the dictates of the Permit Extension Act,
N.J.S.A. 40:55D-136.1 to -136.6. The Permit Extension Act tolls
the expiration date of certain land-use approvals for a period
of time “due to the present unfavorable economic conditions.”
N.J.S.A. 40:55D-136.2(m). The Act covers “an agreement” between
a developer and municipality “for the use or reservation of
sewerage capacity.” N.J.S.A. 40:55D-136.3. Admittedly, the
Permit Extension Act would take precedence over an ordinance and
therefore might limit the Township’s discretion.
Last, and most significantly, the resolution did not give a
“reasoned explanation” for the Township’s failure to exercise
discretion, as required by its own ordinance. The Township and
defendant developers cannot contract away their obligation to
comply with the law -- whether it is First Peoples, the MLUL, or
the Readington sewer ordinance. Private parties do not have a
right to hoard unused sewer capacity indefinitely and therefore
effectively impose a moratorium on development. As a best
41
practice, we suggest that the Township maintain updated records
of the unused capacity held by private parties so that it can
exercise its discretion, when necessary, with current
information. In addition, a property owner seeking capacity
should have access to data that is necessary to making an
informed decision whether to proceed with a development plan.
We adopt the thoughtful approach taken by Judge Buchsbaum.
We order the Township Committee, within ninety days, to
undertake a critical review of the unused capacity identified by
plaintiff and to determine whether any such capacity can be
recaptured from defendants to satisfy plaintiff’s development
needs. The Committee should consider the factors outlined
earlier to guide the exercise of its discretion. We add that if
a property owner, presently holding a substantial amount of
unused capacity, has moved its business operations to another
municipality and there is no realistic prospect that approvals
previously acquired will result in a project coming to fruition,
that factor must be given significant weight in deciding whether
to recall capacity.
Last, we address when a party has a sufficient stake to
purchase unused capacity. Needless to say, the Township should
not recapture unused sewer capacity from one party and allow its
sale to another party that is unlikely to put that capacity to
use in the near future. A party that has received preliminary
42
site plan approval obviously will have a stake in requesting
capacity, but we are loath to impose that as the necessary test
because of the significant costs involved in securing such an
approval. Here, the Township offered plaintiff the opportunity
to present a concept plan to the appropriate board.6 If such a
plan is satisfactory, and assuming that sufficient unused
capacity is available, then the Township could commence the
process of recapturing capacity at plaintiff’s expense and hold
that capacity in escrow, contingent on plaintiff securing all
necessary approvals. If plaintiff does not secure the necessary
approvals, then the Township can sell that capacity to another
developer that needs it for an imminent project, or resell it to
the original owner.
VI.
For the reasons given, we affirm the Appellate Division’s
judgment upholding the trial court’s dismissal of plaintiff’s
6 The concept plan suggested by the Township resembles the
informal review available under N.J.S.A. 40:55D-10.1. A
planning board is permitted to conduct “an informal review of a
concept plan for a development for which the developer intends
to prepare and submit an application for development.” N.J.S.A.
40:55D-10.1. An applicant can “benefit from the exchange of
ideas and expression of the board’s preferences” without having
to “expend[] the significant amounts of money required in the
preparation of development plans and applications.” 36 New
Jersey Practice, Land Use Law § 13.10 (David J. Frizell & Ronald
D. Cucchiaro) (3d ed. 2014). However, importantly, neither the
board nor the applicant are bound by the discussions. N.J.S.A.
40:55D-10.1. An applicant must still proceed through the
ordinary approval process.
43
facial challenge to the Readington Township sewer allocation
ordinance. We reverse, however, the Appellate Division’s
judgment rejecting the trial court’s determination that the
ordinance, as applied, violates principles espoused in First
Peoples. The Township Committee shall undertake a critical
review of the unused capacity identified by plaintiff and
determine within ninety days whether any capacity can be
recaptured to satisfy plaintiff’s development needs. We remand
to the trial court for proceedings consistent with this opinion.
CHIEF JUSTICE RABNER and JUSTICES PATTERSON, FERNANDEZ-
VINA, and SOLOMON join in JUSTICE ALBIN’s opinion. JUSTICE
LaVECCHIA and JUDGE CUFF (temporarily assigned) did not
participate.
44
SUPREME COURT OF NEW JERSEY
NO. A-63 SEPTEMBER TERM 2013
ON CERTIFICATION TO Appellate Division, Superior Court
388 ROUTE 22 READINGTON
REALTY HOLDINGS, LLC,
Plaintiff-Appellant,
v.
TOWNSHIP OF READINGTON, ET AL.,
Defendants-Respondents,
and
MERCK SHARP & DOHME CORP.,
f/k/a MERCK & CO., INC.,
Defendant-Respondent,
and
RAMYZ TADROS, ET AL.,
Defendants.
DECIDED May 5, 2015
Chief Justice Rabner PRESIDING
OPINION BY Justice Albin
CONCURRING/DISSENTING OPINIONS BY
DISSENTING OPINION BY
AFFIRM IN PART/
REVERSE IN
CHECKLIST
PART/
REMAND
CHIEF JUSTICE RABNER X
JUSTICE LaVECCHIA -------------------- --------------------
JUSTICE ALBIN X
JUSTICE PATTERSON X
JUSTICE FERNANDEZ-VINA X
JUSTICE SOLOMON X
JUDGE CUFF (t/a) -------------------- --------------------
TOTALS 5