NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-2281-16T4
MEPT JOURNAL SQUARE URBAN RENEWAL, LLC, MEPT JOURNAL SQUARE TOWER NORTH URBAN APPROVED FOR PUBLICATION RENEWAL, LLC, and MEPT JOURNAL SQUARE TOWER SOUTH URBAN August 9, 2018 RENEWAL, LLC, APPELLATE DIVISION Plaintiffs-Respondents,
v.
THE CITY OF JERSEY CITY,
Defendant-Appellant. _______________________________________
Argued January 17, 2018 – Decided August 9, 2018
Before Judges Fuentes, Manahan and Suter.
On appeal from Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-3177-15.
Vijayant Pawar argued the cause for appellant (Pawar Gilgallon & Rudy, LLC, attorneys; Vijayant Pawar, on the brief).
Lawrence Bluestone argued the cause for respondents (Genova Burns, LLC, attorneys; Jennifer Borek, of counsel and on the brief; Michael C. McQueeny, on the brief).
Adam M. Gordon argued the cause for amicus curiae Fair Share Housing Center (Fair Share Housing Center, attorneys; Kevin D. Walsh and Adam M. Gordon, on the brief). The opinion of the court was delivered by
FUENTES, P.J.A.D.
In this appeal, this court must determine whether a
municipality may condition the grant of tax abatements pursuant
to the Long Term Tax Exemption Law (LTTEL), N.J.S.A. 40A:20-1 to
-22, upon three urban renewal entities1 making a prepayment of two
million dollars, characterized as "a portion" of the Annual Service
Charge the entities would pay in lieu of property taxes after the
project was completed. The three urban renewal entities and the
municipality agreed to this arrangement in Prepayment Agreements
that were subsequently approved by the municipality's governing
body in a resolution and expressly made part of the ordinance
approving the tax abatements. These Prepayment Agreements
predated the Financial Agreements that otherwise memorialized the
terms of the tax abatements granted by the municipality.
We are also asked to determine the validity of a provision
in the Financial Agreements that required the three urban renewal
entities to pay a combined $710,769 initial contribution to the
municipality's Affordable Housing Trust Fund (AHTF). However,
unlike the two-million dollar prepayment required under the
1 See N.J.S.A. 40A:20-3(g) and N.J.S.A. 40A:20-5, which limit the operations of urban renewal entities and requires them to mitigate the harm caused to people displaced or affected by the project.
2 A-2281-16T4 combined three Prepayment Agreements, the AHTF was part of the
Financial Agreements and was based on a $1500 per unit basis for
the two residential redevelopment projects that would construct a
total of 1615 residential units, and a $1.50 per square foot basis
for the commercial project, based on a gross, not leasable, square
footage of 280,385. Furthermore, the total AHTF contribution made
by each entity was subject to "contingencies" that were clearly
described in the Financial Agreements and included a percentage
payment schedule based on the completion of each individual
project.
These issues arise in the context of a verified complaint
filed in the Law Division by MEPT Journal Square Urban Renewal,
LLC, MEPT Journal Square Tower North Urban Renewal, LLC, and MEPT
Journal Square Tower South Urban Renewal, LLC (collectively
"plaintiffs"), against the City of Jersey City (City), after these
urban renewal entities decided not go forward with these
redevelopment projects. Plaintiffs sought declaratory relief in
the form of a judicial determination that the prepayment
arrangement crafted by the parties in the Prepayment Agreements
were ultra vires and void ab initio because they lacked statutory
support under the LTTEL. Plaintiffs also sought injunctive relief
in the form of a judgment from the Law Division compelling the
City to refund the initial contributions made to the AHTF and a
3 A-2281-16T4 refund of the two million dollar prepayment. The project was
never built.
After joinder of issue, the Law Division granted plaintiffs'
unopposed motion to proceed summarily, established an expedited
briefing schedule, and set the matter down for oral argument and,
if necessary, "limited testimony." On February 5, 2016, the trial
court heard oral argument from counsel and reserved decision. In
a letter-opinion dated August 16, 2016, the trial judge found the
Prepayment Agreements to be "a run-around that essentially
nullifies the requirement of the LTTEL, and . . . the financial
agreement, that annual service charges shall not be due until
substantial completion of the urban renewal project." The court
declared the "prepayment agreements were void from their
inception."
With respect to the contributions plaintiffs made to the
City's AHTF, the trial court concluded the Fair Housing Act (FHA),
N.J.S.A. 52:27D-301 to -329, did not provide the City with the
legal authority to condition the grant of tax abatements upon a
redeveloper contributing to its AHTF. Relying on the Supreme
Court's analysis in Holmdel Builders Ass'n v. Holmdel, 121 N.J.
550 (1990), the court concluded that the "fairness and
reasonableness of imposing an AHTF contribution fund payment on
[p]laintiffs evaporated when the [p]laintiffs no longer possessed,
4 A-2281-16T4 enjoyed, or consumed the land." The trial judge thus ordered the
City to refund the AHTF contributions plaintiffs made in 2009 as
a condition of obtaining the tax abatements pursuant to the LTTEL.
In a Final Order of Judgment dated October 4, 2016, the court
granted judgment to plaintiffs and against the City in the amount
of $2,710,769, based on the $2,000,000 prepayment and the $710,769
AHTF contribution. On November 9, 2016, the City filed a motion
for reconsideration pursuant to Rule 4:49-2. Among the arguments
raised therein, the City, for the first time, claimed the trial
court erred in proceeding in a summary fashion and requested "the
opportunity to exchange discovery." In an order dated January 12,
2017, the trial court denied the City's motion for reconsideration
as both untimely and substantively without merit.
The City now appeals arguing the trial court erred when it
interpreted the LTTEL to prohibit the prepayment plaintiffs made
as a condition of obtaining the tax abatement. The City claims
the Prepayment Agreements and the Financial Agreements requiring
plaintiffs to contribute to the AHTF were valid, enforceable
provisions negotiated by the parties under traditional principles
of contract law. The City also argues the court erred when it
failed to consider the arguments in its motion for reconsideration
and in denying the City's request for discovery. For the first
time on appeal, the City argues that plaintiffs' complaint should
5 A-2281-16T4 have been dismissed as untimely under Rule 4:69-6(a). Finally,
the City argues the court misconstrued the 2008 amendments to the
FHA when it granted plaintiffs' application to refund the AHTF
contribution.
As a threshold issue, plaintiffs argue the trial court
correctly proceeded in a summary fashion because the issues raised
in this case strictly involve matters of law. Plaintiffs further
argue the trial court correctly concluded that the City did not
have any authority under the LTTEL to condition the grant of a tax
abatement upon the prepayment of Annual Service Charges. Thus,
the court correctly declared the Prepayment Agreements were void
ab initio. Plaintiffs also argue the court properly exercised its
discretionary authority when it denied the City's motion for
reconsideration. Plaintiffs also claim the City is procedurally
barred from arguing, for the first time in its motion for
reconsideration, that this cause of action is untimely under Rule
4:69-6(a). Plaintiffs argue that the rules that govern actions
in lieu of prerogative writs do not apply to a complaint brought
pursuant to the Declaratory Judgment Act, N.J.S.A. 2A:16-50 to -
62, to determine the validity of a contract.
On August 29, 2017, after both sides had submitted their
briefs in this appeal, this court entered a sua sponte order
inviting the Fair Share Housing Center (Fair Share) to participate
6 A-2281-16T4 in this appeal in an amicus curiae capacity, limited to the
question of whether the City has an obligation to return to
plaintiffs the $710,769 AHTF contribution.2 Fair Share accepted
this court's request, submitted a brief limited to this issue, and
participated at oral argument. Fair Share urges this court to
reverse the trial court's decision ordering the City to return the
AHTF contributions received by plaintiffs as a condition of a tax
abatement pursuant to the LTTEL. Fair Share argues the trial
court erred in relying on the FHA and the Court's decision in
Holmdel to evaluate the lawfulness of the AHTF contributions.
According to Fair Share, the Legislature decisively
distinguished LTTEL trust fund contributions under N.J.S.A.
40A:12A-4.1, from a municipality's right to impose and collect
development fees under N.J.S.A. 52:27D-329.2 of the FHA. Although
both the parties and the trial court acknowledged the City's
authority under LTTEL to impose AHTF contributions by ordinance
and as a provision in the Financial Agreements, they incorrectly
2 Fair Share has served the judiciary in this capacity on numerous occasions. See Toll Bros. v. Twp. of W. Windsor, 173 N.J. 502 (2002); In re Declaratory Judgment Actions Filed by Various Municipalities, Cty. of Ocean, 446 N.J. Super. 259 (App. Div. 2016); Homes of Hope, Inc. v. Eastampton Twp. Land Use Planning Bd., 409 N.J. Super. 330 (App. Div. 2009); Oceanport Holding, L.L.C. v. Borough of Oceanport, 396 N.J. Super. 622 (App. Div. 2007).
7 A-2281-16T4 conflated the inapplicable FHA requirements to invalidate the AHTF
contributions under LTTEL. Stated differently, plaintiffs'
$710,769 contribution to the City's AHTF as a condition of the tax
abatement is expressly sanctioned by the Legislature under the
LTTEL, N.J.S.A. 40A:12A-4.2.
After considering the arguments of the parties, we affirm the
trial court's decision finding no statutory support under the
LTTEL for the City to condition the grant of tax abatements to
plaintiffs upon the prepayment of two million dollars,
characterized as a credit against the Annual Service Charge the
entities would pay after the project was completed. These
Prepayment Agreements are ultra vires under the LTTEL, and
unenforceable as a matter of public policy.
We reach a different conclusion with respect to the City's
decision to condition the grant of these tax abatements upon
plaintiffs contributing to the municipality's AHTF. We agree with
the legal arguments advanced by amicus Fair Share that these
contributions are expressly authorized by the Legislature under
the LTTEL in N.J.S.A. 40A:12A—4.2, and are independent from and
unrelated to the FHA. We thus reverse the order of the trial
court requiring the City to refund the $710,769 contribution
plaintiffs made to the City's AHTF as a condition for receiving
the tax abatements. The provisions in the Financial Agreements
8 A-2281-16T4 requiring the payment of these AHTF contributions and the municipal
ordinance subsequently adopted by the City Council confirming
these AHTF contributions as a material condition of the tax
abatements are statutorily supported in the LTTEL.
We recite the following facts from the record presented to
the Law Division.
I
A
Financial Agreements
On May 15, 2009, plaintiffs and the City entered into three
separate Financial Agreements that contained the terms and
conditions of the long term tax abatements granted to plaintiffs
pursuant to the LTTEL. The City granted a tax abatement for three
separate projects, which were authorized by the City Council
through three separate ordinances. Each ordinance was
supplemented by the Financial Agreements.
Ordinance 08-165, recognized MEPT Journal Square Tower North
Urban Renewal, LLC (Tower North), as the urban renewal entity
"formed and qualified to do business" under the provisions of the
LTTEL, and "the owner of Unit 2," one of three units described as
the Tower North of Residential Rental Building, a property located
within the boundaries of the Journal Square Redevelopment Plan.
One of the Recitals of the Financial Agreement corresponding to
9 A-2281-16T4 Ordinance 08-165 disclosed that Tower North planned to construct
approximately 922 residential rental units in a tower
approximately sixty-eight stories tall.
Ordinance 08-166 recognized MEPT Journal Square Tower South
Urban Renewal, LLC (Tower South) as an urban renewal entity and
"owner of Unit three," a property located within the boundaries
of the Journal Square Redevelopment Plan. The Recitals of the
Financial Agreement disclosed that Tower South planned to
construct approximately 693 residential rental units in a tower
approximately fifty stories tall.
Ordinance 08-164 recognized MEPT Journal Square Urban
Renewal, LLC (MEPT Journal Square) as an urban renewal entity and
owner of the Commercial Unit, a property located within the
boundaries of the Journal Square Redevelopment Plan. The Recitals
of the Financial Agreement disclosed that the Commercial Unit
would have an approximately 210,000 square-foot area, consisting
of 700 parking spaces, and 70,585 square feet of retail space, for
a total of 280,385 gross square feet in a seven story building.
The Financial Agreements provided that these three projects
"shall be construed and enforced in accordance with the laws of
the State of New Jersey . . . [and] in the event of a conflict
between [the financial agreements] and the [LTTEL], the [LTTEL]
shall govern . . . ." They were to "remain in effect for the
10 A-2281-16T4 earlier of 35 years from the date of the adoption of [their
instituting ordinances] . . . or 30 years from the date of
Substantial Completion of the Project."
Article IV of the Financial Agreement for Tower North, titled
"ANNUAL SERVICE CHARGE" described the payments plaintiffs agreed
to pay "in consideration of the tax exemption."3 Plaintiffs agreed
to pay an annual service charge in "an amount equal to the greater
of: the Minimum Annual Service Charge or an Annual Service Charge
equal to ten percent [] of the Annual Gross Revenue." The "greater
of the Annual Service Charge or Minimum Annual Service Charge . .
. shall be due on the first day of the month following the
The Financial Agreements defined "Annual Service Charge" as
"the amount the Entity has agreed to pay the City for municipal
services supplied to the Project, which sum is in lieu of any
taxes . . . ." "Minimum Annual Service Charges" are "the taxes
levied against the real property in the area covered by the Project
in the last full tax year in which the area was subject to taxation,
which [for Tower North] the parties agree is $173,223." The
minimum annual service charge for Tower South was $121,256, and
3 The other two Financial Agreements for Tower South and the Commercial Unit contained identical language, differing only in the amount the particular urban renewal entity agreed to pay.
11 A-2281-16T4 $51,967 for the Commercial Unit. The minimum annual service
charges plaintiffs agreed to pay totaled $346,446.00. The minimum
annual service charges served as the floor for the amount of the
Annual Service Charge to be paid. Plaintiffs were also required
to pay a County Annual Service Charge and an Administrative Fee.
B
AHTF Contributions
All three Financial Agreements also contained the following
provision in Article IV, Section 4.6, titled "Affordable Housing
Contribution and Remedies":
A. Contribution. The Entity shall pay the City . . . as a contribution subject to the contingencies set forth below. The sum shall be due and payable as follows:
i. 25% on or before the execution of the exemption Financial Agreement, but not later than 60 days after the adoption of the Ordinance approving this tax exemption;
ii. 25% on or before the Substantial Completion of the project approved for [the urban renewal entity];
iii. 25% on or before the Substantial Completion of this Project; and
12 A-2281-16T4 iv. 25% on or before the Substantial Completion of the project approved for [the urban renewal entity].[4]
The Entity acknowledges that the City relies on these payments and will enter into agreements in anticipation of receiving such funds in a timely manner.
B. Remedies. In the event that the Entity fails to timely pay the contributions, the amount unpaid shall be added to the service charge and shall bear the highest rate of interest permitted in the case of unpaid taxes or tax liens on the land until paid.
Section 4.7, titled Material Conditions, characterized a
series of payments and service charges the entity agreed to pay
as "Material Conditions of this Agreement." AHTF contributions
were included in this list of "Material Conditions." The AHTF
contribution assessed to Tower North was based on $1500 x 922
units, totaling $1,383,000; Tower South was based on $1500 x 693
units, totaling $1,039,500; and the Commercial Unit was based on
$1.50 per square foot "based upon gross, not leaseable, [sic]
square footage of 280,385," totaling $420,578. The three
ordinances adopted by the City Council approving the tax abatements
4 The event that triggered plaintiffs' obligation to pay the third 25% installment of its total AFTF contribution varied. In the Tower North and the Commercial Unit Financial Agreements, the third 25% of the total AHTF contribution was due on or before the Substantial Completion of Tower South. In the Tower South Financial Agreement, the third 25% of the total AHTF contribution was due on or before the Substantial Completion of Tower North.
13 A-2281-16T4 also included, as a condition, the AHTF contributions based on the
calculation methodology reflected in Article IV, Section 4.6 of
the Financial Agreements.
On June 5, 2009, plaintiffs' counsel wrote a letter to the
City Administrator memorializing the release of $2,710,769,
"representing the Two Million ($2,000,000) Dollar prepayment
amount in the aggregate for all the [F]inancial Agreements relating
to the tax abatement and the twenty-five percent (25%) first-
installment of the Affordable Housing Contribution Payment in the
amount of Seven Hundred Ten Thousand Seven Hundred Sixty-Nine
($710,769) Dollars, which amounts were paid under the Tax Abatement
Documents . . . ." Plaintiffs' counsel had held these funds in
escrow "until such time as that certain ordinance of the County
of Hudson is passed and deemed final . . . ." Counsel acknowledged
that "[a]s of June 3, 2009, the County Ordinance was passed and
adopted without challenge."
C
Prepayment Agreements
On May 11, 2009, plaintiffs and defendant entered into three
separate Prepayment Agreements, one for each of the three urban
renewal entities. The three ordinances adopted by the City Council
approving the tax abatements contained the following clause
acknowledging the material nature of these Prepayment Agreements:
14 A-2281-16T4 "This Ordinance shall be contingent upon the execution by the
Entity of the Prepayment and Contribution Agreements for each of
the three (3) condominiums forming the Journal Square
Development." (Emphasis added).
The Prepayment Agreements began with the following recitals:
WHEREAS, Entity has been authorized by the City to construct a project . . . under the Law with attendant tax exemption benefits as provided in the Law and pursuant to a certain Financial Agreement . . .; and
WHEREAS, Entity recognizes that the Annual Services Charges payable under the Law with respect to its Project will not begin to accrue to the City until the Project is completed; and
WHEREAS, the City is in immediate need of additional funds for use during this fiscal year; and
WHEREAS, Entity is willing to prepay the Annual Service Charges in the amounts as set forth herein that will accrue from the Project in exchange for the City's agreement to credit such payments through credits against future Annual Service Charges that will become due; and
WHEREAS, by the adoption of Resolution . . . on November 25, 2008, in order to allow the City to anticipate and rely on the funds and properly account for the funds, the City of Jersey City approve[d ]the prepayment of Annual Service Charge and authorize[d] the execution of an agreement . . . .
Under these agreements, the urban renewal entities were
required to prepay Annual Service Charges that would not accrue
15 A-2281-16T4 until the completion of their particular project. The prepayment
would only be credited against future annual service charges to
be collected over the first four years following the substantial
completion of the project. The entities acknowledged that the
City was relying on this prepayment and "will enter into agreements
in anticipation of receiving such funds in a timely manner." Thus,
"[a]ny late payment of the Prepayment . . . shall bear interest
at the rate of 6% until paid." Conversely, because the entities
were not obligated under the LTTEL to enter into these Prepayment
Agreements, the prepayments were in essence an interest-free loan
to the City.
However, as the following provisions in the Prepayment
Agreements show, the City viewed this arrangement differently:
B. Credit. [The] City agrees to give Entity a credit, without interest, against the Annual Service Charges otherwise due under the Financial Agreement in the following manner:
(i) For each of the first four (4) years that the Entity is obligated under the Financial Agreement to pay Annual Service Charges, the Entity shall be entitled to a credit against such charges estimated as follows [for Tower South]: $175,000 in 2010; $175,000 in 2011; $175,000 in 2012; and $175,000 in 2013, with the credit prorated for the first
16 A-2281-16T4 year and last year if such years are less than full calendar years;[5]
(ii) The Annual Service Charges are to be paid quarterly under the Financial Agreement. The credits hereunder are to be taken against the earliest quarterly payments in each year until the annual amount of the credit, or appropriate pro rata portion for less than a full year, has been recouped in full by the Entity;
. . . .
(iv) Notwithstanding, under no circumstances shall the Entity be entitled to a credit in excess of the amount of the actual Annual Service Charges (that is, excluding any credit for the land taxes) actually paid by the Entity.
C. No Additional Credit. In the event the Entity is unable to recover its Prepayment as a credit against the Annual Service Charge, in whole or in part, for any reason, then any Prepayment balance otherwise due, shall be forfeited.
D. Coordination of Credit. The Office of Tax Abatement of the City shall notify the appropriate taxing authorities of this credit arrangement so that the bills for Annual Service Charges when issued will reflect the credit.
Section 3. Payments. All payments due hereunder shall be sent to the Director of the
5 North Tower was entitled to the following credits against the annual service charge: $250,000 in 2010; $250,000 in 2011; $250,000 in 2012; and $250,000 in 2013. The Commercial Unit was entitled to the following credits against the annual service charge: $75,000 in 2010; $75,000 in 2011; $75,000 in 2012; and $75,000 in 2013.
17 A-2281-16T4 Office of Tax Abatement, with a copy to the Business Administrator.
The three urban renewal entities involved here made three
prepayments totaling $2,000,000; Tower North paid $1,000,000;
Tower South paid $700,000; and Commercial Unit paid $300,000.
D
Termination of the Project and Sale of the Property
In the brief filed in this appeal, plaintiffs claim they
originally intended to go forward with the three projects described
in the Financial Agreements. However, they "refrained from
building the Project for more than five years." No further
information is included in the appellate record that explains or
provides any reasons for plaintiffs' decision in this respect.
On December 29, 2014, plaintiffs conveyed all of the
undeveloped properties to One Journal Square Partners Urban
Renewal Company, LLC, One Journal Square Tower South Urban Renewal
Company, LLC, and One Journal Square Tower North Urban Renewal
Company, LLC (collectively "One Journal Square"), a redeveloper
unrelated to the original project. In plaintiffs' verified
complaint, Robert B. Edwards, the President of MEPT Journal Square
avers:
One Journal Square did not take assignment of and did not become a successor entity under the terms of the Financial Agreements and/or the Prepayment Agreements.
18 A-2281-16T4 Thus, the Financial Agreements and the Prepayment Agreements are no longer in effect and [p]laintiffs will never receive any of the benefits contemplated under those Agreements.
. . . [O]n or about April 2, 2015, [p]laintiffs sought a repayment of the Prepayment from the City, by virtue of the fact that no Annual Service Charges had accrued, and the City's only purported claim to the Prepayment was an upfront loan required of [p]laintiffs in order to receive the tax abatement.
[(Emphasis added).]
The appellate record includes a copy of an email from
plaintiffs' counsel to an unidentified person that appears to have
some connection with the City. This individual invoked a provision
in the Prepayment Agreements that stated: "In the event the Entity
is unable to recover its Prepayment as a credit against the Annual
Service Charge, in whole or in part, for any reason, then any
Prepayment balance otherwise due, shall be forfeited."
II
Prepayment Agreements with the City
The Law Division decided this matter strictly on its
interpretation of the LTTEL and the FHA. We review questions
related to statutory interpretation de novo, without affording any
deference to the trial court. State v. Revie, 220 N.J. 126, 132
(2014). In construing a statute, our role "'is to determine and
effectuate the Legislature's intent.'" State v. Friedman, 209 N.J.
19 A-2281-16T4 102, 117 (2012) (quoting Bosland v. Warnock Dodge, Inc., 197 N.J.
543, 553 (2009)). "'[T]he starting point of all statutory
interpretation must be the language used in the enactment.' We
construe the words of a statute 'in context with related provisions
so as to give sense to the legislation as a whole.'" Spade v.
Select Comfort Corp., 232 N.J. 504, 515 (2018) (first quoting DCPP
v. Y.N., 220 N.J. 165, 178 (2014); then quoting N. Jersey Media
Grp., Inc. v. Twp. of Lyndhurst, 229 N.J. 541, 570 (2017)).
Guided by these well-settled principles, we start our
analysis by recognizing that in enacting the LTTEL, the Legislature
intended to eliminate unnecessary, redundant laws that impeded the
elimination of blighted areas and at the same time promote laws
that "encourage[d] private capital and participation by private
enterprise" to contribute in the restoration of deteriorated or
neglected properties. N.J.S.A. 40A:20-2. In furtherance of this
public policy, the Legislature authorized municipalities "to
contribute toward this purpose through the use of special financial
arrangements, including the granting of property tax exemptions
with respect to land and the buildings . . . ." Ibid. The
Legislature declared "that the provisions of [LTTEL] are one means
of accomplishing the redevelopment and rehabilitation purposes of
the 'Local Redevelopment and Housing Law,' [N.J.S.A. 40A:12A-1 to
20 A-2281-16T4 -49] . . . and that this act should be construed in conjunction
with that act." Ibid.
In enacting the LTTEL, the Legislature carefully crafted a
statutory scheme that provides municipalities with the means to
carry out the public policy underpinning the act. One of the key
issues concern the parameters of the financial agreements that set
the terms between the City and the urban renewal entities.
Pursuant to N.J.S.A. 40A:20-4, "[t]he governing body of a
municipality which has adopted a redevelopment plan pursuant to
the 'Local Redevelopment and Housing Law,' . . . may enter into a
financial agreement with an urban renewal entity . . . ." However,
the form and content of the "financial agreement shall include,
but not be limited to, those provisions set forth in [other
sections of the LTTEL]. Ibid. For example, N.J.S.A. 40A:20-8
delineates the contents of application forms, the process for
review by the "mayor or other chief executive officer," and the
final approval by the municipal governing body.
N.J.S.A. 40A:20-9 sets forth the statutory requirements of
the "financial agreement," an issue of particular relevance here.
The statute requires:
Every approved project shall be evidenced by a financial agreement between the municipality and the urban renewal entity. The agreement shall be prepared by the entity and submitted as a separate part of its application for
21 A-2281-16T4 project approval. The agreement shall not take effect until approved by ordinance of the municipality. Any amendments or modifications of the agreement made thereafter shall be by mutual consent of the municipality and the urban renewal entity, and shall be subject to approval by ordinance of the municipal governing body upon recommendation of the mayor or other chief executive officer of the municipality prior to taking effect.
N.J.S.A. 40A:20-9 further requires that the financial agreement
be fully performed "within 30 years from the date of completion
of the project . . . ."
"Where the statute sets forth the procedure to be followed,
no governing body, or subdivision thereof, has the power to adopt
any other method of procedure." Midtown Props., Inc. v. Twp. of
Madison, 68 N.J. Super. 197, 207 (Law Div. 1961), aff'd o.b., 78
N.J. Super. 471 (App. Div. 1963)). Here, N.J.S.A. 40A:20-9
requires that financial agreements include the following specific
provisions:
a. That the profits of or dividends payable by the urban renewal entity shall be limited according to terms appropriate for the type of entity in conformance with the provisions of [the LTTEL].
b. That all improvements and land, to the extent authorized pursuant to [N.J.S.A. 40A:20-12], in the project to be constructed or acquired by the urban renewal entity shall be exempt from taxation as provided in [the LTTEL].
22 A-2281-16T4 c. That the urban renewal entity shall make payments for municipal services as provided in [the LTTEL].
d. That the urban renewal entity shall submit annually, within 90 days after the close of its fiscal year, its auditor's reports to the mayor and governing body of the municipality.
e. That the urban renewal entity shall, upon request, permit inspection of property, equipment, buildings and other facilities of the entity, and also permit examination and audit of its books, contracts, records, documents and papers by authorized representatives of the municipality or the State.
f. That in the event of any dispute between the parties matters in controversy shall be resolved by arbitration in the manner provided in the financial agreement.
g. That operation under the financial agreement shall be terminable by the urban renewal entity in the manner provided by [the LTTEL].
h. That the urban renewal entity shall at all times prior to the expiration or other termination of the financial agreement remain bound by the provisions of [the LTTEL].
Conspicuously missing from this detailed recitation is any
direct reference or even oblique allusion to any authority that
would permit a municipality to enter into a separate agreement in
which a municipality may condition the grant of a tax abatement
upon the urban renewal entity agreeing to prepay "a portion" of
its Annual Service Charge. Stated differently, where specific
23 A-2281-16T4 procedures are provided by the Legislature, a municipality may not
rely upon or resort to its claimed police powers. See Dome Realty,
Inc. v. City of Paterson, 83 N.J. 212, 232-33 (1980).
The City argues we should review the enforceability of the
Prepayment Agreements under traditional principles of contract
law. This argument is irreconcilable with one of our State's
governing principles that "a municipality is a creature of the
Legislature, and as such is a government of enumerated powers
which can act only by delegated authority." Inganamort v. Ft.
Lee, 72 N.J. 412, 417 (1977). Thus, "while a public body may make
contracts as an individual, it can only do so within its express
or implied powers . . . ." Kress v. La Villa, 335 N.J. Super.
400, 410 (App. Div. 2000) (quoting Midtown Props., Inc., 68 N.J.
Super. at 208). The City's authority to grant tax abatements is
exclusively derived from the LTTEL. The Legislature delegated
this authority to the City as a means of revitalizing blighted
areas by encouraging the participation of private enterprise to
restore deteriorated or neglected properties. N.J.S.A. 40A:20-2.
Moreover, in our view, the Prepayment Agreements the City and
plaintiffs entered into have all the trappings of an iniquitous,
mutually beneficial gratuity. It allowed the redevelopers to
secure the tax abatement they sought, and granted the City
immediate access to two million dollars to balm the revenue
24 A-2281-16T4 shortfall it was experiencing at the time, without raising property
taxes or reducing municipal services. The recitals of the
Prepayment Agreements unequivocally reveal the meretricious quid
pro quo of the Prepayment Agreements:
WHEREAS, Entity recognizes that the Annual Services Charges payable under the Law with respect to its Project will not begin to accrue to the City until the Project is completed; and
WHEREAS, the City is in immediate need of additional funds for use during this fiscal year; and
WHEREAS, Entity is willing to prepay the Annual Service Charges in the amounts as set forth herein that will accrue from the Project in exchange for the City's agreement to credit such payments through credits against future Annual Service Charges that will become due; and
WHEREAS, by the adoption of Resolution . . . on November 25, 2008, in order to allow the City to anticipate and rely on the funds and properly account for the funds, the City of Jersey City approved the prepayment of Annual Service Charge and authorize the execution of an agreement . . . .
We confidently conclude that this arrangement concocted by
the City to alleviate an immediate revenue shortfall was not
envisioned, or even remotely contemplated, by the Legislature when
it adopted the LTTEL.
25 A-2281-16T4 III
Contributions to the Affordable Housing Trust Fund
When it adopted the LTTEL, the Legislature declared "that the
provisions of [LTTEL] are one means of accomplishing the
redevelopment and rehabilitation purposes of the 'Local
Redevelopment and Housing Law', . . . and that this act should be
construed in conjunction with that act." N.J.S.A. 40A:20-2
(emphasis added). The Legislature amended the Local Redevelopment
and Housing Law in 2003 as follows:
Any municipality that has designated a redevelopment area, provides for a tax abatement within that redevelopment area and has adopted a housing element . . . may, by ordinance, require, as a condition for granting a tax abatement, that the developer set aside affordable residential units or contribute to an affordable housing trust fund established by the municipality. The requirement may be imposed upon developers of market rate residential or non-residential construction or both, at the discretion of the municipality.
[N.J.S.A. 40A:12A-4.1 (emphasis added).]
Thus, in sharp contrast to the Prepayment Agreements we have
invalidated here, the Legislature expressly authorized
municipalities to adopt an ordinance to require an urban renewal
entity to contribute to a municipal affordable housing trust fund
as a condition of receiving a tax exemption under the LTTEL.
Furthermore, as N.J.S.A. 40A:12A-4.1 makes clear, the municipality
26 A-2281-16T4 may impose this requirement "upon developers of market rate
residential or non-residential construction or both, at the
discretion of the municipality."
The Legislature also codified the methods for calculating
AHTF contributions:
Any municipality that makes the receipt of a tax abatement conditional upon the contribution to an affordable housing trust fund shall include within the ordinance detailed guidelines establishing the parameters of this requirement including, but not limited to, the following:
a. standards governing the extent of the contribution based on the value of construction for market rate residential or non-residential construction, as the case may be; provided, however, that this contribution shall not exceed $1,500 per unit for market rate residential construction, $1.50 per square foot for commercial construction, and 10 cents per square foot for industrial construction;
b. a schedule of payments based upon phase of construction; and
c. parameters governing the expenditure of those funds, legitimate purposes for which those funds may be used, and the extent to which funds may be used by the municipality for administration.
[N.J.S.A. 40A:12A-4.2.]
27 A-2281-16T4 Here, the City adopted three separate ordinances that
incorporated the "Affordable Housing Contribution" provisions
described in Article IV, Section 4.6 of all three Financial
Agreements. As we explained in detail in Subsection I-B, the City
ordinances imposed AHTF contributions upon Towers North and South,
the two urban renewal entities that were constructing residential
projects, based on $1500 per unit. The AHTF contribution that the
City imposed on the urban renewal entity that was constructing the
Commercial Unit was based on a $1.50 per square foot of "gross,
not leaseable" space. The ordinances further established a twenty-
five percent installment plan for the payment of the AHTF
contributions. The $710,769 at issue in this case represents the
first twenty-five percent installment payment due under this plan.
We hold the methods the City employed were consistent with the
statutory guidelines established in N.J.S.A. 40A:12A-4.2.
The trial court's decision invalidating these AHTF
contributions erroneously applied the provisions in the FHA and
the Supreme Court's analysis in Holmdel. We hold the City was
entitled to condition the grant of tax abatements upon a
redeveloper's contributions to the municipal AHTF pursuant to
N.J.S.A. 40A:12A-4.1. Finally, we affirm the Law Division's order
denying the City's motion for reconsideration as untimely under
Rule 4:49-2, for the reasons expressed by this court in Hayes v.
28 A-2281-16T4 Turnersville Chrysler Jeep, 453 N.J. Super. 309, 312-313 (App.
Div. 2018).
IV
Summary
We affirm the Law Division's judgment invalidating the
Prepayment Agreements entered into by the parties on May 15, 2009,
as ultra vires and unenforceable, and requiring the City to refund
plaintiffs the two million dollars plaintiffs paid thereunder.
We reverse the court's decision invalidating the $710,769
contribution plaintiffs made to the City's AHTF pursuant to
N.J.S.A. 40A:12A-4.1 of the Local Redevelopment and Housing Law,
as applied in this case through the LTTEL. The remaining
arguments raised by the City in this appeal lack sufficient merit
to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
Affirmed in part and reversed in part.
29 A-2281-16T4