Matter of Egg Harbor Associates (Bayshore Centre)

464 A.2d 1115, 94 N.J. 358, 1983 N.J. LEXIS 2740

• Court: Supreme Court of New Jersey
• Decided: August 1, 1983
• Status: Published

Opinions

The opinion of the Court was delivered by

POLLOCK, J.

The principal issue in this case is whether the Division of Coastal Resources (Division) of the Department of Environmental Protection (DEP) may condition its approval of a proposed development within the coastal zone on the construction of a certain number of low and moderate income housing units. Here, the Division required a developer, Egg Harbor Associates (Associates), to set aside 10% of the residential units for low income housing and 10% for moderate income housing.

The Appellate Division held that the Coastal Area Facility Review Act, N.J.S.A. 13:19-1 to -21 (CAFRA), empowers the Division to impose “fair share” housing conditions and that the Division’s exercise of this power was constitutional. 185 N.J.Super. 507 (1982). Associates perceives CAFRA as a purely environmental statute, and in its petition for certification contends that the Division exceeded its statutory authority by using CAFRA to achieve another social goal, providing needed low and moderate income housing. Associates argues further that the Division’s actions were based on an impermissibly vague delegation of legislative power and that forcing a developer to build low and moderate income housing is an unconstitutional taking of property without compensation.

We granted Associates’ petition for certification, 91 N.J. 552 (1982), and now affirm the judgment of the Appellate Division.

I

Associates is the owner of a 127.644-acre tract in Egg Harbor Township, Atlantic County, on which it proposes to build a residential community of 1,530 units, a 500-room hotel, a 300-slip marina, a 22-story office building, and 4,200 parking spaces. The tract is located in a “development region” (formerly designated as a “high growth” area) of the coastal area in the “Absecon-Somers Point Development Region,” N.J.A.C. 7:7E-5.-3, near Atlantic City.

On March 30, 1979, Associates first submitted a CAFRA application to DEP for construction of the development. Because the tract is located within the “coastal area,” N.J.S.A. 13:19-3, and because the development constitutes a “facility” under N.J.S.A. 13:19-3(c)(5), a DEP permit is required. N.J. S.A. 13:19-6.

On April 30,1979, DEP responded in a letter outlining various deficiencies in the application. Among the comments was the following:

Given the magnitude and variety of uses proposed for Bayshore Centre and the rental schedule and anticipated sales prices for the proposed apartments and townhouses, it seems appropriate that the developer address the question of fair share and least cost housing. Therefore, please present to this Division an analysis which justifies the contribution made by the project towards meeting the full range of housing needs in Egg Harbor Township and the region (Atlantic County) (emphasis in original).

This request was consistent with the then applicable “fair share housing” rule, N.J.A.C. 7:7E-8.6, which mandated that new developments “provide least cost housing where feasible,” and encouraged developments that contributed to a municipality’s meeting its fair share housing obligations under Southern Burlington Cty. NAACP v. Mt. Laurel Tp. (Mt. Laurel I), 67 N.J. 151 (1975), app. dism., 423 U.S. 808, 96 S.Ct. 18, 46 L.Ed.2d 28 (1975). In response to that request, Associates submitted comments concerning the feasibility of low and moderate income housing within the development and off-site commitments contemplated by Associates to provide least cost housing within the region. Following various revisions, the application was deemed complete on September 27, 1979, and a public hearing occurred on December 6 in the Township of Egg Harbor. Testifying in support of the project was, among others, the mayor of the township, which had already granted its approval of the development under its zoning ordinances.

On August 29, 1980, the Division issued to Associates a conditional permit for construction of the Bayshore Centre. The subject of this litigation concerns the requirement in the permit that of the 1,530 proposed housing units 10% shall be low income units and 10% shall be moderate income units. The procedural history following the issuance of the permit was summarized by the Appellate Division:

The conditional permit was thereupon issued to Associates under date of August 29, 1980. Associates was advised that it had two avenues of appeal: to the Coastal Area Review Board whose role is restricted ‘to the declaration of public policy concerning the development of the coastal area’ (N.J.A.C. 7:7D-1), or to the DEP Commissioner by ‘a plenary (quasi-judicial) hearing before a hearing officer’ who would ‘make findings of fact, conclusions of law and recommendations to the Commissioner on whether to affirm, modify, or reverse’ the decision of the Division of Coastal Resources. N.J.A.c. 7:7D-2.8.

Associates elected not to request a plenary hearing before a hearing officer and waived that right by seeking a review before the Coastal Area Review Board. N.J.A.C. 7:7D-2.8(a). However, because of apparent miscommunication between the Attorney General and Associates, no hearing before the Coastal Area Review Board was conducted and this appeal was filed. • During the pendency of the appeal the Attorney General moved to remand the matter to the Coastal Area Review Board to conduct the omitted hearing; the remand was objected to by Associates and denied by this court. [185 N.J.Super. at 514-15],

II

The primary purpose of CAFRA is to protect the unique and fragile coastal zones of the State. Through CAFRA, the Legislature intended to reverse “serious adverse environmental effects ... that would preclude or tend to preclude those multiple uses which support diversity and are in the best long-term, social, economic, aesthetic and recreational interests of all people of the State.” N.J.S.A. 13:19-2. To achieve this goal, the Legislature determined that

all of the coastal area should be dedicated to those kinds of land uses which promote the public health, safety and welfare, protect public and private property, and are reasonably consistent and compatible with the natural laws governing the physical, chemical and biological environment of the coastal area. [Id.].

Associates contends that neither these legislative findings nor any specific provisions of the act supports the conclusion that the Legislature empowered DEP to require low and moderate income housing for approval of a CAFRA permit. We disagree.

Although CAFRA is principally an environmental protection statute, the powers delegated to DEP extend well beyond protection of the natural environment. Succinctly stated, the delegated powers require DEP to regulate land use within the coastal zone for the general welfare.

Many of CAFRA’s provisions illustrate the nature of its regulatory functions. First, in determining whether to issue a permit, the commissioner of DEP is to consider many diverse factors, including trash disposal, interference with natural life processes, and degradation of unique or irreplaceable land types (including historical or archeological areas). N.J.S.A. 13:19-10. More to the point, the commissioner must determine whether the facility “[i]s located or constructed so as to neither endanger human life or property nor otherwise impair the public health, safety, and welfare.” N.J.S.A. 13:19-10(f).

Second, the statute requires the commissioner to develop strategies “which take into account the paramount need for preserving the environmental values and the legitimate need for economic and residential growth within the coastal area.” N.J.S.A. 13:19-16 (emphasis added). The same section expressly provides that “[t]he environmental design . .. shall include a delineation of various areas appropriate for the development of residential and industrial facilities of various types .... ” Id. (emphasis added). Pursuant to the statutory mandate, DEP has promulgated regulations implementing the legislative policy. N.J.A.C. 7:7E-1.1 to -8.26. The rule in effect at the time of the issuance of the permit “encouraged” the construction of low and moderate income housing and stated that “[hjousing developments shall provide least cost housing where feasible.” Since that time the rule has been modified, and in its present form, which is more detailed than the original version, it requires new residential developments to “provide an appropriate amount of affordable housing for low and moderate income households where needed and feasible.” An explanation of the rationale for the rule recites that in recent decisions DEP has determined that major developments must provide at least 10% of the units for low income households and at least 10% for moderate income households.

Third, the act expressly empowers the commissioner either to deny or grant conditionally a permit for construction of a facility that violates the purposes of the statute. N.J.S.A. 13:19-11. In its findings, the Legislature emphasized the unique environmental qualities of the coastal area and stated “it is in the interest of the people of the State that all of the coastal area shall be dedicated to those kinds of land uses which promote the public health, safety and welfare . ... ” N.J.S.A. 13:19-2.

Our determination whether the legislative mandate includes the authority to require the provision of low and moderate income housing begins with the fundamental principle that land use regulation, as one aspect of the State’s police power, should be used to promote the general welfare. See, e.g., Lusardi v. Curtis Point Prop. Owners Ass’n, 86 N.J. 217, 226 (1981); Taxpayers of Weymouth Tp. v. Weymouth Tp., 80 N.J. 6, 20-21 (1976), app. dism., 430 U.S. 977, 97 S.Ct. 1672, 52 L.Ed. 2d 373 (1977); Mt. Laurel I, supra, 67 N.J. at 174. In its discretion, the Legislature may delegate this power to municipalities or to state agencies. See Meadowlands Reg. Redevelopment Agency v. State, 63 N.J. 35, 46, app. dism., 414 U.S. 991, 94 S.Ct. 343, 38 L.Ed.2d 230 (1973). As Chief Justice Wilentz recently stated with respect to the power of municipalities to zone in furtherance of the general welfare,

[i]t would be useful to remind ourselves that the doctrine does not arise from some theoretical analysis of our Constitution, but rather from underlying concepts of fundamental fairness in the exercise of governmental power. The basis for the constitutional obligation is simple: the State controls the use of land, all of the land. [Southern Burlington Cty. N.A.A.C.P. v. Mt. Laurel Tp. (Mount Laurel II), 92 N.J. 158, 209 (1983)].

Here, the specific question is whether the Legislature has delegated to DEP, a state agency, the power to require a fixed percentage of low and moderate income housing as a prerequisite for granting a construction permit within the coastal zone.

Enabling statutes delegating to municipalities the power to enact ordinances to promote the health, safety, and general welfare in the context of land use regulation should be given “an expansive interpretation.” Taxpayers Ass’n of Weymouth Tp., supra, 80 N.J. at 21; cf. DeSimone v. Greater Englewood Housing Corp. No. 1, 56 N.J. 428, 442 (1970) (low and moderate income housing is a “special reason” justifying a use variance). With respect to the scope of municipal land use regulations, the general welfare includes zoning for a planned housing development for the elderly, Shepard v. Woodland Tp. Committee and Planning Bd., 71 N.J. 230 (1976), and a trailer park for the elderly. Taxpayers Ass’n of Weymouth Tp., supra. Similarly, the enactment of a rent control ordinance also is within a municipality’s power to act for the general welfare. Inganamort v. Fort Lee Bor., 62 N.J. 521 (1973).

The message is clear. State and municipal bodies that have the power to control land use for the health, safety, and general welfare of the public may use that power to create housing opportunities for the poor. It would make no sense at all to hold that the general welfare encompasses the provision of low and moderate income housing at the behest of municipalities, but not of state agencies.

We need not dwell on the question whether CAFRA’s mandate that the coastal zone be “dedicated to those kinds of land uses which promote the public health, safety and welfare,” N.J.S.A. 13:19-2, permits the use of inclusionary requirements for low and moderate income housing. Just this term, we acknowledged that, in fulfilling its obligation with respect to low and moderate income housing, “mandatory set-asides keyed to the construction of lower income housing, are constitutional and within the zoning power of a municipality.” Mt. Laurel II, supra, 92 N.J. at 271. The DEP requirement that 20% of the housing be for low and moderate income residents is just such a mandatory set-aside.

In its decision, the Division explained its reasons for requiring 20% low and moderate income housing: “[a]n unquestioned need exists in the Atlantic City region for housing for low and moderate income households, as a direct .result of casino development.” DEP, Division of Coastal Resources Opinion # 73 at 21 (August, 1980). Specifically, the Division found:

The Bayshore Centre application is the largest residential or mixed use development in Atlantic County to receive a CAFRA permit since CAFRA took effect in 1973. As a significant, region-shaping development, Bayshore Centre has an opportunity to make an equally significant contribution to meeting the full range of the region’s housing needs. The appropriate required percentage of low and moderate income housing for a project the scale of Bayshore Centre (1,530 units) is 10% low income (153 units) and 10% moderate income (153 units) based on the following reasons and precedents. First, 20% low and moderate income housing represents only a small share of the expected households in the county that will need housing assistance in the 1980’s. Second, several local governments mandate that planned unit developments provide a required percentage of low and moderate income housing, such as East Windsor (20%) and South Brunswick (15-25%). Third, the New Jersey Supreme Court, in Oakwoodat-Madison v. Township of Madison, 72 N.J. 481, 512 (1977), required a developer challenging a local exclusionary ordinance to ‘.. . guarantee the allocation of at least 20% of the units to low and moderate income families.’ [Id. at 22],

Furthermore, the Division found that approximately 50% of the region’s housing needs in the remainder of the 1980’s will be for households earning under $15,000. Given its findings, we conclude the conditions imposed by the Division are not arbitrary, capricious or unreasonable and that they are supported by substantial credible evidence. See Henry v. Rahway State Prison, 81 N.J. 571, 579-80 (1980).

CAFRA is but one of three statutes manifesting legislative concern for the development of areas of the state with special environmental characteristics. The other statutes are the Hackensack Meadowlands Reclamation and Development Act, N.J.S.A. 13:17-1 to -86, and the Pinelands Protection Act, N.J.S.A. 13:18A-1 to -29. In those statutes, which respectively regulate development in the coastal zone, N.J.S.A. 13:19-2, the Meadow-lands, N.J.S.A. 13:17-1, and the Pinelands, N.J.S.A. 13:18A-2, the Legislature found that municipal land use control was inadequate to assure orderly and environmentally-sound development. Formerly, the Legislature designated land use regulation as the special province of municipalities. More recently, the Legislature has recognized that everyone, not just a single municipality, has an interest in protecting certain unique, but fragile areas of the State. That change in the legislative scheme heralds a new era in land use control, the significance of which becomes apparent from recognizing that 37.1% of the land in New Jersey is within the coastal zone, the Meadowlands, and the Pinelands.¹

With respect to the Meadowlands, the Legislature expressly subordinated municipal zoning power to the master plan of the Hackensack Meadowlands Commission. N.J.S.A. 13:17-11(b). That commission has promulgated regulations demonstrating its commitment to “housing that will result in a community with a mix and balance of income levels.” N.J.A.C. 19:4r-5.2(d)(1)(ix).

Similarly, the Legislature established the Pinelands Commission to oversee development of the Pinelands through a management plan and, toward that end, subordinated municipal zoning power to that of the commission. N.J.S.A. 13:18A-10(c). In the management plan for the Pinelands, the Commission has required that municipal master plans, to be certified by the Commission, provide that of all available housing units, 10% be set aside for low income, 10% for moderate income, and 5% for middle income households. New Jersey Pinelands Comprehensive Management Plan § 6-1202 at 428 (1980). Generally speaking, in municipalities that have not received certification of their master plan, 25% of the dwelling units shall be affordable to low, moderate, and middle income households. Id. at § 6-1203. Thus, the legislative and executive branches have recognized that protection of the environment and the provision of low and moderate income housing are not only compatible, but essential. That approach is consistent with our suggestion that “[i]t is desirable that administrative agencies acting under legislative authorization assume the regulation of the housing distribution problem .... ” Oakwood at Madison, Inc. v. Township of Madison, 72 N.J. 481, 499 (1977).

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In enacting CAFRA, the Legislature harmonized statewide concerns over the coastal zone with concerns of municipalities within that zone. Primarily an environmental statute, CAFRA expressly supplements the municipal zoning authority, N.J.S.A. 13:19-19, and provides for residential growth. N.J.S.A. 13:19-10 and -16. In further recognition of the shared concerns of DEP and municipalities in the CAFRA zone, the Legislature included in the Municipal Land Use Law (MLUL), N.J.S.A. 40:55D-1 to -99, effective in 1976, provisions relating to environmental conditions and regional needs. N.J.S.A. 40:55D-2, -28, -38.

As a theoretical proposition, the legislative scheme leaves open the possibility for conflicting decisions from DEP and municipal land use agencies in the coastal zone. No such conflict, however, exists in the present ease. Here, the applicant received final approval on two of seven phases of the development from the Board of Adjustment of Egg Harbor. Neither that board nor the governing body was a party to or sought to intervene in the present proceeding.

Any problems arising in future applications may be alleviated if, as is the practice of DEP, staff members meet with the applicant and municipal officials to discuss the effect of development on the municipality’s obligation to meet its fair share of low and moderate income housing. In an appropriate case, DEP might even provide testimony in municipal proceedings on the provision of low and moderate income housing. Presumably, as here, municipal officials may also appear at public hearings conducted by DEP. If problems should develop because of the overlapping jurisdiction of the municipality and DEP, the Legislature can resolve the conflict through amendments to the statutory scheme.

Previously, we have recognized the need for coastal zone municipalities to take cognizance of CAFRA when zoning property within their boundaries. In Lusardi v. Curtis Point Prop. Owners Ass’n, supra, the municipalities zoned vacant land along the Atlantic Ocean for residential use. We construed MLUL, N.J.S.A. 40:55D-1 to -99, to require municipalities to refrain from exercising their zoning powers in a manner that conflicted with the CAFRA regulations. See N.J.A.C. 7:7E-1.1 to -9.23. The obligation “to encourage the most appropriate use of land,” N.J.S.A. 40:55D-62(a), required the municipality, consistent with CAFRA regulations, to protect public access to ocean beaches. Underlying that decision was the recognition that local planning decisions “must be consistent with statewide policies concerning land use and resource allocation.” 86 N.J. at 227.

To hold, as Associates contends, that CAFRA can consider only the environment, but not the needs of the people who live in it, is contrary to the legislative intent. Certainly nothing in CAFRA precludes DEP from considering the needs for low and moderate income housing in the coastal zone. We agree with the Appellate Division, which stated:

CAFRA, therefore, clearly vests in DEP the authority to oversee and plan land development, including residential development, in the coastal area. We find it equally clear that CAFRA mandates DEP to utilize, in performing that statutory role, all relevant considerations of an enlightened public policy. The statutory directives to ‘promote the public health, safety and welfare’ and to advance the ‘best long term, social, economic, aesthetic and recreational interest of all people of the State’ are not, in our view, reasonably subject to any narrower reading. We find nothing in Toms River Affiliates v. Environmental Protection Dep’t, 140 N.J.Super. 135 (App.Div.1976), certif. den. 71 N.J. 345 (1976), or Public Interest Research Group v. State, 152 N.J.Super. 191 (App.Div. 1977), certif. den. 75 N.J. 538 (1977), persuasive of a contrary view. Although Associates urges that those cases limit the authority of the DEP under CAPRA to mere ‘environmental concerns,’ we find no such holdings there; rather, we read those cases to confirm our own view that the DEP may and must include in its land use planning all relevant criteria, including, as here, the social and economic impact of development. [185 N.J.Super. at 517],

Environmental protection, like good zoning, is not an exercise in abstract analysis, but in the pragmatics of responsible and sensitive land use control.

To summarize, we hold that CAFRA delegates to DEP the shared power to regulate development in the coastal zone. Although primarily an environmental act, CAFRA requires that DEP use its power to promote the health, safety, and welfare of the public. In deciding whether to grant permits for large scale residential development, DEP may consider the housing needs of low and moderate income residents. Pursuant to the legislative mandate, DEP has adopted rules directing large scale developers to provide an appropriate amount of affordable housing for low and moderate income units. The requirement that Associates set aside 10% of the residential units for low income housing and 10% for moderate income housing is neither arbitrary nor unreasonable.

Ill

We next consider the constitutionality of the delegation by the Legislature to DEP. To be constitutional, the statute must contain adequate standards to guide DEP in exercising the delegated power. In the past, we have construed the requirement for adequate standards to allow “liberal delegation of legislative powers.” Mt. Laurel Tp. v. New Jersey Pub. Advocate, 83 N.J. 522, 532 (1980). Standards may be general, as long as they are sufficiently specific to guide the agency in the exercise of its discretion and to permit judicial review. Id.

In this case, we have no doubt that the statute is sufficiently specific to pass constitutional muster. First, the legislative findings as incorporated into the statute, N.J.S.A. 13:19-2, provide ample guidance to DEP. Permits are to be issued consistent with the protection of the environment and the promotion of the health, safety, and welfare of the people of this State. The failure of a proposed facility to further the intent of the act may lead to denial of an application. N.J.S.A. 13:19-11. Second, N.J.S.A. 13:19-10 lists specific findings that the agency must make in its determination to issue a permit. This combination of statutory language clearly defines the Legislature’s mandate while leaving DEP with the power to adopt rules and regulations “to effectuate the purposes of this act.” See N.J. S.A. 13:19-17; Toms River Affiliates v. DEP, supra, 140 N.J.Super. at 144 — 45. Similarly, we find the administrative regulations to be sufficiently specific to be valid.

IV

Finally, we consider whether the requirement that Associates provide low and moderate income housing is an unconstitutional taking contrary to New Jersey Constitution, N.J. Const. (1947), Art. 1, par. 20, and the United States Constitution, U.S. Const, Amend. XIV.

In deciding whether use restrictions are confiscatory, we consider whether the regulatory scheme as applied “permit[s] an economically efficient operator to obtain a ‘just and reasonable’ return on his investment.” Hutton Park Gardens v. West Orange Town Council, 68 N.J. 543, 568 (1975) (upholding rent control ordinance); see Helmsley v. Fort Lee Bor., 78 N.J. 200, 210 (1978), app. dism., 440 U.S. 978, 99 S.Ct. 1782, 60 L.Ed.2d 237 (1979) (striking down rent control ordinance that imposed 2.5% ceiling on rent increases); Property Owners Ass’n of North Bergen v. North Bergen Tp., 74 N.J. 327,336 (1977) (invalidating rent control ordinance that placed strict limits on rent increases for senior citizens without providing owner with opportunity otherwise to recoup lost rent); Troy Hills Village v. Tp. Council of Parsippany-Troy Hills Tp., 68 N.J. 604, 620 (1975) (finding insufficient owners’ proofs that they did not receive a just and reasonable rate of return, and therefore upholding rent control ordinance).

The burden of demonstrating that a taking has occurred lies upon the party alleging that the state action is unconstitutional. Proof must be by clear and convincing evidence. Helmsley v. Fort Lee Bor., supra, 78 N.J. at 218; see Troy Hills Village, supra, 68 N.J. at 630; Hutton Park Gardens, supra, 68 N.J. at 570. On the record before us, Associates has not demonstrated that building Bayshore Centre in accordance with the CAFRA conditions will not return a profit or will return a profit so low as to amount to a taking. In fact, Associates waived its opportunity for a plenary hearing under N.J.A.C. 7:7D-2.8, which would have provided an appropriate vehicle to develop a record to establish an unconstitutional taking. In the absence of evidence to the contrary, we cannot assume that the regulations will effectuate a deprivation of property without due process of law. At this point, we close with our recent statement: “As for confiscation, the builder who undertakes a project that includes a mandatory set-aside voluntarily assumes the financial burden, if there is any, of that condition.” Mt. Laurel II, 92 N.J. at 267 n. 30.

The judgment of the Appellate Division is affirmed.

1 Following oral argument, the Attorney General provided us, at our request, with the following information on the acreage of land within the regulatory jurisdiction of the Pinelands Commission, the Hackensack Meadowlands Commission, and DEP under CAFRA: