NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court ."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-1632-21
IN RE CLINTON TOWNSHIP COMPLIANCE WITH THIRD ROUND MOUNT LAUREL AFFORDABLE HOUSING OBLIGATION.
Argued November 15, 2023 – Decided February 16, 2024
Before Judges Currier, Firko and Vanek.
On appeal from the Superior Court of New Jersey, Law Division, Hunterdon County, Docket No. L-0315-15.
Patrick J. Mullaney argued the cause for appellant Kerwin-Savage Partnership.
Jonathan Edward Drill argued the cause for respondent Township of Clinton (Stickel, Koenig, Sullivan & Drill, LLC, attorneys; Jonathan Edward Drill, of counsel and on the brief).
Guliet D. Hirsch argued the cause for respondent CRC Communities at Headley Farm Estates, Inc. (Archer & Greiner, PC, attorneys, join in the brief of respondent Township of Clinton).
Joshua David Bauers argued the cause for respondent Fair Share Housing Center (Fair Share Housing Center, attorneys; Joshua David Bauers, of counsel and on the brief).
PER CURIAM
Kerwin-Savage Partnership (K&S) appeals from a December 2021 order
approving the Township of Clinton's (the Township) Revised Third Amendment
(Third Amendment) to its Mount Laurel 1 affordable housing plan. The order,
which followed a fairness hearing, found that the proposed Third Amendment
negotiated between the Township and the Fair Share Housing Center (FSHC)
was fair and protected the interest of low- and moderate-income households in
the region. We affirm.
K&S is the developer of property—108 Alton Place—that is part of the
Township's affordable housing plan. In 2015, the Township filed a verified
complaint seeking declaratory judgment that it had satisfied its Third Round
obligation to provide affordable housing pursuant to Mount Laurel and
consistent with In re Adoption of N.J.A.C. 5:96 & 5:97 by the New Jersey
Council on Affordable Housing (Mount Laurel IV), 221 N.J. 1 (2015). The court
appointed a Special Master to assist in making determinations regarding
affordable housing. K&S attempted to intervene in this suit twice—the first
1 S. Burlington Cnty. N.A.A.C.P. v. Twp. of Mount Laurel (Mount Laurel I), 67 N.J. 151, appeal dismissed and cert. denied, 423 U.S. 808 (1975). A-1632-21 2 motion was denied without prejudice because K&S was not represented by
counsel; the second motion was denied as untimely.
After the Township and FSHC entered into an initial settlement agreement
in 2017, the trial court conducted a fairness hearing and designated FSHC as an
intervenor-defendant. The agreement was amended in February 2018 and
approved by the court in April 2018. After a compliance hearing, the court
entered a final judgment of compliance and repose in favor of the Township in
January 2019, declaring the Township was in compliance with its Third Round
Mount Laurel obligations. K&S did not appeal from the final judgment. We
affirmed the court's orders. In re Clinton Twp. Compliance with Third Round
Mount Laurel Affordable Hous. Obligation, No. A-2633-18 (App. Div. Jan. 30,
2020) (slip op. at 15). The Township and FSHC agreed to a second amendment
to the agreement in June 2020.
The subject of this appeal is the May 2, 2021 Third Amendment to the
Township's Third Round affordable housing plan. The Third Amendment, as
approved, contains four sites which will produce affordable housing in the
Township under an inclusionary zoning model (as opposed to a 100% affordable
A-1632-21 3 development) and subjects three of those four sites to "durational adjustments."2
K&S's property is subject to a durational adjustment and is fourth on the priority
list. K&S objected to the proposed Third Amendment, asserting the Township
had surplus water and sewer capacity and, therefore, the durational adjustments
and priority rankings contravened the intent of the settlement—to serve the low-
and moderate-income households in the region through the development of
affordable housing.
Thereafter, the court held a combined fairness and compliance hearing
over three dates in September and November 2021. The Township submitted
the settlement agreement resulting in the Third Amendment, a later revision to
the Third Amendment 3 and two reports from the Special Master.
The Township also presented testimony from its municipal planner,
Thomas Behrens, who was qualified as an expert in "professional planning with
[a] specialty in the field of [a]ffordable [h]ousing." Behrens explained that the
Third Amendment was needed to replace a prior approved site to satisfy the
2 A "durational adjustment" allows the municipality "to postpone satisfaction of its affordable housing obligation until water and sewer service actually become available." In re Petition for Substantive Certification, Twp. of Southampton, 338 N.J. Super. 103, 106 (App. Div. 2001). 3 The revisions to the Third Amendment moved one site ahead of 108 Alton Place on the priority list, leaving 108 Alton Place fourth on the list. A-1632-21 4 Township's Third Round Mount Laurel obligation. The prior approved site,
which was no longer available, had been subject to a durational adjustment in
the initial agreement. One of the new replacement sites was placed at the top of
the Township's priority list for water and sewer allocation because it had both
the highest percentage set-aside for affordable housing and the most units of
affordable housing of any project.
Behrens opined that the Third Amendment and overall agreements
satisfied the five-part test under East/West Venture, a New York Partnership v.
Borough of Fort Lee, 286 N.J. Super. 311, 328 (App. Div. 1996), as it ensured
fairness to low- and moderate-income people. He also opined that the two larger
replacement sites substituted into the Third Amendment satisfied the standard
established in Allan-Deane Corp. v. Township of Bedminster, 205 N.J. Super.
87, 113 (App. Div. 1985), that "[a] municipality must provide a realistic
opportunity for the construction of its fair share."
K&S's counsel questioned Behrens about the propriety of the durational
adjustments. Behrens stated he had reviewed the documentation submitted by
K&S. However, he asserted that K&S did not "have all the pieces of the puzzle"
because it focused on "capacity and flow" and not "allocations." As an example,
Behrens described a "Foster Wheeler site located in Union Township" that
A-1632-21 5 contracted for water and sewer capacity through the Clinton Township Sewerage
Authority (CTSA) and the Town of Clinton's Water Department (Water
Department). According to Behrens, those allocations acted as contractual
holds. Therefore, the CTSA and Water Department must keep the flow amounts
associated with those allocations available even if they are not in use. When
K&S showed Behrens a document from the Water Department regarding public
water deficit/surplus, he confirmed that it stated the Water Department had a
"supply term capacity" of 2.902 million gallons per day but again reiterated the
document did not show the "full picture," because it did not address the
allocation of the water capacity. He further testified that the Township has
"assisted in securing sewage capacity and water capacity for 100 percent
Affordable Housing sites," in accordance with its housing plan and prioritization
of sites.
The court admitted the Special Master's reports into evidence. The
Special Master opined that
the modifications set forth in the . . . Third Amendment . . . approved by the [c]ourt are de minimis and continue to satisfy the standards prescribed in East/West Venture . . . and are, therefore, fair and reasonable, and protect the interest of low- and moderate-income households.
[(italicization omitted).]
A-1632-21 6 The Special Master further "opined that the modifications of the
Township's compliance plan . . . and the prioritization of the durational
adjustment per the . . . Third Amendment . . . continue[] to represent a realistic
opportunity for the development of affordable housing as proposed."
After considering the testimony and evidence presented during the
fairness hearing, the Special Master issued a second report. He stated:
The crux of the K&S objection appears to be a claim that there have been substantial changes in the underlying facts forming the basis of the [c]ourt's prior determination and grant of a durational adjustment pursuant to the COAH4 rules governing lack of sewer and water facilities found at N.J.A.C. 5:93-4.3. In my opinion no credible testimony or evidence has been presented by K&S that the . . . Third Amendment . . . or the Township's compliance plan implementing same, is inconsistent with N.J.A.C. 5:93-4.3 and thus not entitled to the continuance of the prior durational adjustment. Furthermore, . . . no credible definitive testimony or evidence has been presented that any of the designated affordable housing sites in question . . . cannot be practically connected to existing sewer and water collection/distribution facilities. Questions remain as to the availability at this time of adequate allocated capacity to accommodate all four sites and thus establishing the appropriateness of prioritizing the sites to maximize the production of affordable units given the limits on available allocation capacity.
4 Council on Affordable Housing A-1632-21 7 In addressing K&S's contention regarding the water and sewer capacity
order of priority, the Special Master stated:
Notwithstanding K&S's claims to the contrary, the 108 Alton Site is a "priority site" to receive water and sewer allocation capacity pursuant to the . . . Third Amendment . . . , just not the highest priority based upon reasonable ranking criteria . . . intended to protect the interest of low- and moderate-income households in the region.
The Special Master continued: "While the rationale and basis for the
objection to the fourth position ranking are not supported by testimony, evidence
or COAH rule, there may be some merit to the objection as to [the] fourth
position priority ranking of the 108 Alton Site." The Master found it was
"logical" to replace the previously approved site with the new site on "a one-for-
one basis." However, the Special Master stated the court could place the third
listed site and 108 Alton Site on "equal priority footing" behind the first two
sites.
The Master reiterated his opinion that the Third Amendment was fair and
reasonable, and "the Township ha[d] sufficiently documented its claim that the
compliance plan . . . in the . . . Third Amendment . . . continue[d] to represent a
realistic opportunity for the development of affordable housing as proposed."
The Special Master recommended the court approve the Third Amendment.
A-1632-21 8 Michael Savage and Walter Wilson—partners with K&S—testified as lay
witnesses with personal knowledge of the construction projects. Savage stated
he calculated the actual available sewer capacity using publicly available
documents and records received pursuant to OPRA5 requests. He also relied on
billing statements from "all five sewer service areas within the Township."
Savage concluded there was 207,340 gallons per day of available sewer
capacity at the CTSA facility, and the available capacity should be made
available for affordable housing projects. Savage then calculated that the five
projects encompassed in the Third-Round obligation required approximately
201,375 gallons per day of sewer capacity. Therefore, Savage asserted there
was sewer capacity available even after satisfying the affordable housing
projects' needs.
Savage contended the CTSA and Township "have an obligation to
recapture sewer capacity." However, Savage conceded that when the full
contractual allotments are taken into account, the available capacity would drop
below the threshold needed to supply sewer service to all of the affordable
housing projects under the Third Amendment.
5 Open Public Records Act, N.J.S.A. 47:1A-1 to -13. A-1632-21 9 Savage also testified regarding water capacity, asserting the Water
Department was only using seventy-two percent of its capacity. According to
his calculations, there would still be available water capacity even after the five
affordable housing sites received their full usage. According to Savage, unlike
with the sewer capacity issue, it was unnecessary for the Township to reclaim
water allocations, because there was enough capacity to accommodate all
allocations.
Wilson conducted a personal investigation of water resources available
from the Water Department, also utilizing records received from OPRA requests
and public documents. He testified that infrastructure was currently available
for water service at 108 Alton Place.
On December 10, 2021, the court approved the settlement in a sixty-one-
page comprehensive and well-reasoned written decision.6
The court found that the purpose of the Third Amendment was to replace
a previously approved site with two new sites and that the modification required
addressing "sewer and water capacity issues." The court noted that one of the
new sites replaced the prior site at number one in the priority list because it
6 The decision was amended on December 13, 2021 with minimal changes not relevant to the issues on appeal. A-1632-21 10 provided the greatest number of affordable units among the developments
subject to the Third Amendment.
The court also considered the Special Master's reports and agreed with the
Master's conclusion that the Third Amendment was fair and reasonable and
adequately protected "the interests of low[-] and moderate[-]income households
in the region." The court considered the Special Master's application of the five
part analysis in East/West Venture and also made its own findings and
evaluation. The court also gave weight to the FSHC's approval of the Third
Amendment. In addition, the court found Behrens's testimony was "detailed,
credible, and persuasive." The court further stated it was deferring to the
Township's determinations on priority rankings, leaving 108 Alton Place ranked
last.
In addressing K&S's objections and contentions regarding sewer and
water capacity, the court noted K&S and its counsel appeared at the 2018
fairness hearing on the initial settlement agreement and raised the same issues
regarding available capacity and durational adjustments. However, K&S did not
object to the initial Amended Settlement agreement "which designated the 108
Alton Place site as a durational adjustment site and gave the site last priority for
sewer and water capacity among the affordable housing sites that were
A-1632-21 11 approved." In addition, the court remarked that K&S's counsel was present at
the 2018 compliance hearing but did not raise any objections. The court stated:
"In other words, not only did K&S fail to object during the two prior hearing s
but it also failed to appeal from the entry of the Final Judgment." Nevertheless,
although the court found it "unfortunate and ill-advised" that K&S did not "raise
the issue[s] at the original [f]airness [h]earings," it should not be precluded from
presenting its "colorable arguments" here.
The court found that the Township established a prima facie case that the
Third Amendment as revised was fair and reasonable and it demonstrated
continued compliance with its affordable housing plan. Therefore, the burden
shifted to K&S to prove otherwise.
However, according to the court, K&S did not present any evidence to
support a finding that the Third Amendment was not fair to low- and moderate-
income households. Instead, it objected to the designation of 108 Alton Place
as a durational adjustment site. In addition, K&S sought an order granting it top
priority over all the other affordable housing projects and requiring the
Township to acquire available sewer and water capacity and "claw back" unused
capacity for K&S to use. The court noted this relief would affect the rights of
other users of sewer capacity—users who were not parties to the proceeding.
A-1632-21 12 Nor was the CTSA, and as the owner and distributor of the sewer capacity, it
had an obvious interest in the outcome of the issue.
The court stated:
In this [c]ourt's experience, the determination of the available sewer and water capacity is likely not as simple as the theory and mathematical analysis that K&S provided through its presentation of its case. It would not be surprising to the [c]ourt if there was another side, in fact perhaps many other sides, to the issue. . . . [I]n order to address the matter, if it is to be addressed at all, the issue is likely one that should be litigated fully with all interested parties involved before the [c]ourt is asked to adjudicate it.
The court concluded that because all necessary parties to consider and resolve
the issues were not present, it could not grant K&S's request for specific relief.
The court commented that K&S could litigate any relief it deemed suitable
against the CTSA and the Water Department in the appropriate proceeding.
The court reiterated the purpose of the fairness and compliance hearing
was to determine whether the Third Amendment was fair to low- and moderate-
income households and whether the plan continued to create a realistic
opportunity to create affordable housing. However, K&S did not ground its
objections on that premise but rather asserted the Third Amendment was unfair
to its site. The court found Savage's and Wilson's testimony "was influenced by
self-interest" and merited "little credence." The court explained that
A-1632-21 13 [b]oth witnesses have ownership interest in K&S meaning, of course, that these two witnesses were not independent individuals who researched the sewer and water capacity issues they raised during the hearing. Rather, both of these witnesses had a financial interest in the outcome of the proceeding. Moreover, there were inconsistencies or omissions from their testimony that causes the [c]ourt to question the accuracy of the information presented.
The court concluded that "the priority list was established in a reasonable way
and in a way that is fair to lower-income households." The court further found
that the priority list was logical, stating "[i]t prioritizes sites that will produce
the most affordable housing, those receiving public funds, and sites which are
further along in the development process." Referring to the top listed site, the
court stated: "It is self-evident that the site providing nearly three times as many
affordable housing units is more worthy of the necessary infrastructure and
would result in an agreement that better protects the interest of lower-income
households." The court determined K&S did not meet its burden to demonstrate
the agreement was not fair and reasonable. The court memorialized its decision
in a December 21, 2021 order.
On appeal, K&S contends the court erred in: (1) determining the Township
established a prima facie case that the Third Amendment satisfied its affordable
housing obligation; (2) not making specific findings on the use of durational
A-1632-21 14 adjustments; and (3) finding K&S's claim could not be adjudicated because the
necessary parties were not before it.
Our review of the results of a Mount Laurel fairness hearing is de novo.
In re Application of Twp. of Bordentown, 471 N.J. Super. 196, 217 (App. Div.
2022) (citing Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J.
366, 378 (1995)), certif. denied, 252 N.J. 533 (2023). We will "'not disturb the
factual findings and legal conclusions of the trial judge unless we are convinced
that they are so manifestly unsupported by or inconsistent with the competent,
relevant and reasonably credible evidence as to offend the interests of justice.'"
Rova Farms Resort, Inc. v. Invs. Ins. Co. of Am., 65 N.J. 474, 484 (1974)
(quoting Fagliarone v. Twp. of N. Bergen, 78 N.J. Super. 154, 155 (App. Div.
1963)).
We are unpersuaded by appellant's arguments and affirm substantially for
the reasons expressed in the court's cogent written opinion. We add the
following comments.
"Trial courts have broad discretion when reviewing a municipality's
Mount Laurel fair share plan for constitutional compliance." Bordentown, 471
N.J. Super at 217-18 (citing Mount Laurel IV, 221 N.J. at 30). "The trial court's
role is to approve or reject the proposed settlement in its entirety as written and
A-1632-21 15 the court may not revise or amend particular provisions." Id. at 217. This
framework allows trial courts to assess the "prompt voluntary compliance" of a
municipality's affordable housing obligations and avoid "lengthy delay in
achieving satisfaction of towns' Third Round obligations." Mount Laurel IV,
221 N.J. at 33.
A proposed settlement is "fair[]" when "the settlement adequately protects
the interests of lower-income persons on whose behalf the affordable units
proposed by the settlement are to be built." East/West Venture, 286 N.J. Super.
at 328.
That analysis involves a consideration of the number of affordable housing units being constructed, the methodology by which the number of affordable units has been derived, any other contribution being made by the developer to the municipality in lieu of affordable units, other components of the agreement which contribute to the municipality's satisfaction of its constitutional obligation, and any other factors which may be relevant to the "fairness" issue.
[Ibid.]
A municipality must provide a "realistic opportunity" for the development
of affordable housing. S. Burlington Cnty. N.A.A.C.P. v. Twp. of Mount Laurel
(Mount Laurel II), 92 N.J. 158, 220-21 (1983). "'Realistic' is defined by the
Court in terms of 'likelihood.'" Allan-Deane Corp., 205 N.J. Super. at 113
A-1632-21 16 (quoting Mount Laurel II, 92 N.J. at 221-22). In the context of a fairness
hearing, the court must determine "whether there is in fact a likelihood—to the
extent economic conditions allow—that the lower income housing will actually
be constructed." Mount Laurel II, 92 N.J. at 221-22.
It is a municipality's burden at a fairness hearing to make a prima facie
case that the settlement is compliant with the town's constitutional affordable
housing obligations. Bordentown, 471 N.J. Super. at 233. Once such a prima
facie case is made, the burden shifts to the objector to show that the municipality
is not compliant. Ibid.
As we recently stated, "[t]he purpose of a fairness hearing is not to
determine if there exists an alternative plan, which may more efficiently provide
low-income units, but rather is restricted to the question of whether" the
settlement agreement as a whole "provides 'a realistic opportunity for the
municipality to achieve its "fair share of the present and prospective regional
need for low[-] and moderate[-]income housing."'" Id. at 221 (second and third
alterations in original) (quoting Mount Laurel IV, 221 N.J. at 25) (quoting
Mount Laurel II, 92 N.J. at 205). We cautioned trial courts conducting fairness
hearings to "'stop short of the detailed and thorough investigation that it would
undertake if it were actually trying the case.'" Id. at 220-21 (quoting Sutter v.
A-1632-21 17 Horizon Blue Cross Blue Shield of N.J., 406 N.J. Super. 86, 102 (App. Div.
2009)).
Here, the trial court recognized the focus of the fairness hearing was the
fundamental fairness of the agreement. The court accepted the testimony of the
Township's planner, Behrens, as competent and credible. Behrens testified that:
the reason for the Third Amendment was to substitute available sites for an
unavailable site to ensure the Township could comply with its affordable
housing obligations; the application of the five-part test under East/West
Venture led to the conclusion that the agreement was fair; the two new sites
substituting for a previously approved site realistically resulted in the
construction of units that would count towards the Township's obligation; and
the Township's planning board and council were active in conforming town
ordinances and zoning regulations to accommodate the proposed Third
Amendment.
The court accorded Savage's and Wilson's testimony minimal credibility
because of their clear economic interest and evasive answers during the hearing.
Those credibility findings are well supported by the record and do not represent
an abuse of discretion. In addition, the court was within its discretion to view
K&S's exhibits on water and sewer capacity as flawed because they did not
A-1632-21 18 properly document or account for allocations within the CTSA's and the Water
Department's authority regardless of actual flow rates.
We are satisfied the court did not err in finding the Township made its
prima facie case that the agreement and Third Amendment as revised were fair
to low- and moderate-income persons in the region, and resulted in the
likelihood that affordable units would be constructed.
Thereafter, the court shifted the burden to K&S. After listening to K&S's
witnesses, the court determined the information presented did not undermine the
Township's prima facie case that the settlement was fair. The court provided
detailed reasons for its rejection of K&S's objections to the fairness of the
settlement.
We only need briefly address K&S's remaining contentions. As to the
durational adjustments, as stated, a court is not permitted to modify individual
elements of a proposed affordable housing settlement. Bordentown, 471 N.J.
Super. at 217. It restricts itself to determining if the entire agreement is fair.
Bordentown, Ibid. The trial court properly assessed the fairness of the Third
Amendment; the durational adjustments are a component piece of the global
A-1632-21 19 K&S also challenges the court's determination that CTSA and the Water
Department were necessary parties to resolve the issue of water and sewer
capacity. There were outstanding allocations that complicated the availability
of water and sewer resources. Therefore, the court could not grant K&S's
requested relief—to move it to the top of the priority list and compel the CTSA
and the Water Department to take immediate action to supply utility to K&S's
site—without the participation of those utilities.
Affirmed.
A-1632-21 20