In Re Failure of the Council on Affordable Housing to Adopt trust Fund Commitment Regulations

112 A.3d 595, 440 N.J. Super. 220, 2015 N.J. Super. LEXIS 51

• Court: New Jersey Superior Court Appellate Division
• Decided: April 9, 2015
• Docket: A-5257-11 A-0122-13
• Status: Published

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-5257-11T4 DOCKET NO. A-0122-13T3

IN RE FAILURE OF THE COUNCIL APPROVED FOR PUBLICATION ON AFFORDABLE HOUSING TO April 9, 2015 ADOPT TRUST FUND COMMITMENT REGULATIONS. APPELLATE DIVISION

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Argued March 24, 2015 – Decided April 9, 2015

Before Judges Fisher, Nugent and Accurso.

On appeal from the inaction of the Council on Affordable Housing.

Kevin D. Walsh argued the cause for appellant Fair Share Housing Center (Fair Share Housing Center, attorney; Mr. Walsh, Adam M. Gordon and Laura Smith-Denker, on the briefs).

Geraldine Callahan, Deputy Attorney General, argued the cause for respondent Council on Affordable Housing (John J. Hoffman, Acting Attorney General, attorney; Robert T. Lougy, Assistant Attorney General, of counsel; Ms. Callahan, on the briefs).

Jeffrey R. Surenian argued the cause for intervenor New Jersey State League of Municipalities (Jeffrey R. Surenian & Associates and NJ State League of Municipalities, attorneys; Mr. Surenian, of counsel and on the brief; Donna A. McBarron, on the briefs).

Donald J. Sears argued the cause for intervenor Township of South Brunswick. Gerald J. Muller argued the cause for amicus curiae Affordable Housing Professionals of New Jersey (Miller, Porter & Muller, P.C., attorneys; Mr. Muller, on the brief).

The opinion of the court was delivered by

FISHER, P.J.A.D.

Despite the Legislature's clear and unambiguous direction

that the Council on Affordable Housing (COAH) promulgate

regulations defining when affordable housing trust funds are

committed, and despite previously expressing its intention to

comply with that command, COAH has failed and refused to adopt

regulations, leaving municipalities in a morass of uncertainty

while facing the prospect of an arbitrary seizure of affordable

housing trust funds. In light of COAH's inaction, Fair Share

Housing Center (appellant)1 filed this appeal asking that we

order COAH to adopt regulations and that we bar transfer of

trust funds to the State pursuant to N.J.S.A. 52:27D-329.1 to -

329.3 (the 2008 amendments) to the Fair Housing Act, N.J.S.A.

52:27D-301 to -329.19 (FHA), in the interim.2 During the

1 The New Jersey State League of Municipalities and the Township of South Brunswick intervened; Affordable Housing Professionals of New Jersey was permitted to participate as amicus curiae. 2 A second appeal (A-0122-13) – regarding COAH's failure to adopt an annual meeting schedule – was filed and consolidated with this appeal. Shortly before oral argument, we were advised the parties had settled their disputes in that appeal, which we now dismiss.

2 A-5257-11T4 pendency of this appeal, we issued orders to fill gaps caused by

COAH's inaction. More recently, despite recognizing the

preference for an "administrative forum, and its special

processes, for addressing constitutional affordable housing

obligations," In re Adoption of N.J.A.C. 5:96 and 5:97, __ N.J.

__ (2015) (slip op. at 2-3), our Supreme Court determined that

because of COAH's chronic failure to adopt Third Round Rules,

"there no longer exists a legitimate basis to block access to

the courts," id. at __ (slip op. at 4). In light of the Court's

determination and COAH's abject failure to adopt the regulations

required by the 2008 amendments, we now enjoin the seizure of

any trust funds by COAH or the executive branch; the future

disposition of the trust funds will be directed by our courts on

a case-by-case basis.

We need not canvass the earlier proceedings in this appeal

except to mention that circumstances required entry of orders on

July 13, 2012, and June 6, 2013,3 dealing with the problems

caused by the absence of regulations and the threat of seizure.4

3 In the earlier stages of this appeal, the Supreme Court provided COAH with partial relief from our stay so as to allow it to "gather[] and evaluat[e] municipalities' submissions" regarding fund expenditures while leaving in place our injunction against the transfer of funds. 4 Since the filing of the appeal, the Governor's effort to unilaterally abolish COAH was invalidated. In re Plan for (continued)

3 A-5257-11T4 Instead, we focus on what lies at the heart of this appeal: the

2008 amendments to the FHA. These amendments include N.J.S.A.

52:27D-329.2(a), which: first, declares that COAH "may authorize

a municipality that has petitioned for substantive certification

. . . to impose and collect development fees from developers of

residential property"; second, provides that "[a] municipality

may not spend or commit to spend any affordable housing

development fees . . . without first obtaining [COAH's] approval

of the expenditure"; and, third, mandated that COAH "shall

promulgate regulations regarding the establishment,

administration and enforcement of the expenditure of affordable

housing development fees by municipalities."5

Of critical importance, the Legislature provided that "all

fees shall be committed for expenditure within four years from

the date of collection," and that "[a] municipality that fails

(continued) Abolition of Council on Affordable Hous., 424 N.J. Super. 410, 438 (App. Div. 2012), aff’d as modified, 214 N.J. 444, 479 (2013). 5 N.J.S.A. 52:27D-329.2(c)(1) emphasizes that "[a] municipality may only spend development fees for an activity approved by the council to address the municipal fair share obligation." COAH rules were also to provide guidance for the requirement that a portion of the municipality's development fee trust fund must be set aside to provide "affordability assistance" to low and moderate income households including such items as down payment assistance, security deposit and rental assistance, low interest loans, and common maintenance expenses for condominium units. N.J.S.A. 52:27D-329.2(c)(3).

4 A-5257-11T4 to commit to expend the balance required in the development fee

trust fund by the time set forth in this section shall be

required by the council to transfer the remaining unspent

balance at the end of the four-year period to the 'New Jersey

Affordable Housing Trust Fund,' . . . to be used in the housing

region of the transferring municipality for the authorized

purposes of that fund." N.J.S.A. 52:27D-329.2(d). These and

other funds6 would be deposited into a trust fund and accounted

for separately and would also be subject to transfer to the

State if not used within a four-year period, as follows:

A municipality shall commit to expend collections from payments-in-lieu imposed pursuant to subsection a. of this section within four years of the date of collection. The council may extend this deadline if the municipality submits sufficient proof of building or other permits, or other efforts concerning land acquisition or project development. The council shall provide such administrative assistance as may be required to aid in the construction of affordable housing units. A municipality that fails to commit to expend the amounts collected pursuant to this section within the timeframes established shall be required to transfer any unexpended revenue collected pursuant to subsection a. of this section to the "New Jersey Affordable Housing Trust Fund," . . . to be used within the same

6 Another provision allowed municipalities "to impose and collect payments-in-lieu of constructing affordable units on site upon the construction of residential development, which payments may be imposed and collected as provided pursuant to the rules of the council." N.J.S.A. 52:27D-329.3(a).

5 A-5257-11T4 housing region for the authorized purposes of that fund, in accordance with regulations promulgated by the council.

[N.J.S.A. 52:27D-329.3(b) (emphasis added).]

In 2008, COAH's then-Executive Director Lucy Vandenberg

wrote to all New Jersey mayors explaining these provisions and

noting that COAH was authorized to promulgate regulations

regarding the expenditure of development fees in the municipal

trust funds. In 2012, Department of Community Affairs (DCA)

Commissioner Richard E. Constable prepared amendments purporting

to define when funds were considered to be expended or committed

for expenditure.7 But regulations were never adopted and, in

their absence, municipalities were left to try other less formal

methods, without success, including an entreaty by one group of

municipalities to the Governor regarding the uncertainty

presented by the status quo. Those municipalities argued that,

without a clear and present understanding about the meaning and

scope of "commit to expend," they would be placed in the unhappy

position of committing funds while remaining liable to reimburse

from their own funds or by raising taxes if COAH later devised

7 This action took place during the approximately six-month period when COAH's authority had been transferred to DCA pursuant to a gubernatorial reorganization plan. We invalidated that action on March 8, 2012, Abolition of Council on Affordable Hous., supra, 424 N.J. Super. at 438; the Supreme Court affirmed that determination on July 10, 2013, Abolition of Council on Affordable Housing, supra, 214 N.J. at 479.

6 A-5257-11T4 more stringent guidelines.8

As the four-year deadline approached, legislation was

proposed and passed to extend the four-year deadline for two

years. On June 29, 2012, the Governor vetoed that legislation

and, also, line-item-vetoed language in the 2012-2013 budget,

adopted as L. 2012, c. 18, which would have defined what funds

were "committed" and therefore ineligible for transfer to the

State. With that proposed definitional language excised, the

2012 budget bill as signed into law provided that an "amount not

to exceed $200,000,000" from the municipal affordable housing

trust funds and transferred to the New Jersey Affordable Housing

Trust Fund as funds that have not been committed "shall be

deposited in the General Fund as State revenue."

No administration action regarding the needed regulations

has occurred. It also does not appear that proceedings

anticipated by a 2012 resolution adopted by COAH, or proceedings

in the manner tailored by our interim orders in this appeal,

have commenced or proceeded to completion. And COAH has not met

since October 2014. In re Adoption of N.J.A.C. 5:96 & 5:97,

8 According to appellant, since July 2012, "COAH staff has only approved two municipal spending plans despite hundreds of such spending plans before it[, and] [i]n both cases, . . . these plans were only approved after litigation was filed." And, even at that, COAH still refused "to make a determination of whether such approval constituted a commitment of funds."

7 A-5257-11T4 supra, __ N.J. at __ (slip at 13-14). Appellant seeks our

intervention to relieve the uncertainty.

In explanation for its failure to adopt regulations, COAH

claims no regulations are needed – that the 2008 amendments

provide sufficient clarity. This is not a serious response to

the problem at hand. The 2008 amendments required COAH to

promulgate regulations to define when trust funds are

"committed." The statute did not say that COAH "may" adopt

regulations or that prior regulations were sufficient; the

Legislature declared in N.J.S.A. 52:27D-329.2(a) that COAH

"shall" promulgate regulations. COAH's own contemporaneous

interpretation of the amendments, as noted earlier, revealed its

understanding that new regulations were required. Its current

contention – that by enacting the 2008 amendments the

Legislature was not using a specialized term that needed

regulatory definition and the new law set the "generous but

inflexible limitation" requiring relinquishment of funds unspent

or uncommitted within four years of collection – is unworthy of

further discussion in a written opinion. R. 2:11-3(e)(1)(E).

The simple fact is that COAH has ignored the considered wisdom

of our Legislature by failing to promulgate rules. The only

legitimate debate concerns the road to now be taken.

Although our authority to intervene has not been disputed,

8 A-5257-11T4 we nevertheless iterate what is well-established: we are

empowered to review not just agency action but agency inaction,

Pascucci v. Vagott, 71 N.J. 40, 52 (1976); Hosp. Ctr. at Orange

v. Guhl, 331 N.J. Super. 322, 329 (App. Div. 2000), and, if

necessary, prevent any resulting "denial of 'fundamental

procedural fairness,'" id. at 333 (quoting In re Arndt, 67 N.J.

432, 436 (1975)). COAH has not acted as required by the

Legislature, and the parties have been placed in a most

uncertain position with respect to these funds.

The question then is whether we should fill this vacuum by

interpreting the critical provisions of the 2008 amendments and

imposing our own procedures for ascertaining when funds have

been committed. Despite the need for our courts to step into

the fray – because COAH stepped out – we remain mindful that

"[t]he judicial role here is not to become a replacement agency

for COAH." In re Adoption of N.J.A.C. 5:96 & 5:9-7, supra, __

N.J. at __ (slip op. at 40). Instead, in resolving the problems

caused by COAH's failures, our courts are required to resolve

disputes and settle uncertainties in their usual manner and not

in the manner in which administrative agencies may act.

Accordingly, because of the lack of a factual record or a

contested case, we reject the invitation to interpret the

legislative intent embodied by the 2008 amendments or establish

9 A-5257-11T4 procedures for suits yet to be filed.

In adhering to the Supreme Court's recent determination, we

conclude that interpretation and construction of the 2008

amendments and the application or disposition of the funds in

question must also now be adjudicated in our courts. To be

sure, this is not the most ideal circumstance; the parties'

concern that inconsistent determinations may be made by

different Mount-Laurel-designated judges in different locales is

by no means illusory. Ultimately, however, erroneous or

inconsistent rulings can be addressed by this court or the

Supreme Court through the parties' resort to the appellate

process; this method may be slower and less efficient than the

administrative process, see In re Adoption of N.J.A.C. 5:96 &

5:97, supra, __ N.J. at __ (slip op. at 2-3), but now, in light

of the recent action taken by the Supreme Court – and barring a

change in the status quo – the courts are the only available

forum for addressing these matters. The issues raised in this

appeal can no longer be left in COAH's moribund hands.

Absent some change in circumstances,9 we enjoin COAH or any

9 The Supreme Court observed that the action it took "does not prevent either COAH or the Legislature from taking steps to restore a viable administrative remedy that towns can use in satisfaction of their constitutional obligation." In re Adoption of N.J.A.C. 5:96 & 5:9-7, supra, __ N.J. at __ (slip op. at 47). The same holds true here.

10 A-5257-11T4 other part of the executive branch from engaging in any further

attempt to seize affordable housing trust funds. The use and

disposition of those funds will hereafter be decided, in the

first instance, by Mount Laurel-designated trial judges.10

This remedy – compelled by COAH inaction and the logical

application and import of the Supreme Court's recent decision –

takes effect immediately; resort to the courts on the issues

stemming from COAH's inaction in this regard is subject to the

same timelines and parameters contained in the Supreme Court's

March 10, 2015 order. Our prior orders in this appeal, which

set forth an interim procedure for COAH's disposition of

affordable housing trust funds, are vacated.

So ordered. We do not retain jurisdiction.

10 Our injunction by no means forbids an appropriate body of the State from applying to the courts for forfeiture of trust funds with regard to municipalities which have, under any rational interpretation of the relevant statutory terms, failed to commit funds.

11 A-5257-11T4