Lowe's Home Centers, Inc. v. Township of Raritan
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NOT FOR PUBLICATION WITHOUT APPROVAL OF THE TAX COURT COMMITTEE ON OPINIONS TAX COURT OF NEW JERSEY Patrick DeAlmeida R.J. Hughes Justice Complex Presiding Judge P.O. Box 975 Trenton, New Jersey 08625-0975 (609) 292-8108 Fax: (609) 984-0805 November 3, 2011 Kevin J. Coakley, Esq. Connell Foley, LLP 85 Livingston Avenue Roseland, New Jersey 07068-3702 John Belardo, Esq. McElroy, Deutsch, Mulvaney & Carpenter, LLP 1300 Mount Kemble Avenue P.O. Box 2075 Morristown, New Jersey 07962-2075 Re: Lowe’s Home Centers, Inc. v. Township of Raritan Docket No. 008173-2009 Dear counsel: This letter constitutes the court’s opinion with respect to plaintiff’s motion for an Order declaring the scope of plaintiff’s liability for a non-residential development fee associated with the construction of a Lowe’s Home Center retail store in Raritan Township. For the reasons explained more fully below, the court will enter an Order declaring that plaintiff is liable for a non-residential development fee equal to 2% of the equalized assessed value of the Lowe’s Home Center retail store building and related improvements constructed by plaintiff on land subject to plaintiff’s ground lease. * I. Findings of Fact Plaintiff Lowe’s Home Centers, Inc. possesses a ground leasehold interest in real property located in defendant Raritan Township. The property, a portion of the plot designated by the township as block 16.01, lot 35, is commonly known as 150 State Highway 31. Plaintiff recently constructed a Lowe’s Home Center retail store and related site improvements on the property. The store is one of a number of retail establishments and restaurants known collectively as Raritan Town Square on land that formerly housed the Flemington Raceway and Fairgrounds and an adjacent parcel. At the time that the development was planned, a Raritan Township ordinance provided that “[a]ll non-residential development . . . shall pay a development fee equal to two (2%) of the equalized assessed value for the non-residential development . . . .” Section 16.10.080, Raritan Township Code, Ordinance No. 05-05. The purpose of the Ordinance was to fund, in part, the township’s obligation to provide low and moderate income housing as required by the Mount Laurel doctrine, see Burlington County N.A.A.C.P. v. Township of Mount Laurel, 67 N.J. 151, cert. denied, 423 U.S. 808, 96 S. Ct. 18, 46 L. Ed. 2d 28 (1975) and Burlington County N.A.A.C.P. v. Township of Mount Laurel, 92 N.J. 158 (1993), and the Fair Housing Act, N.J.S.A. 52:27D-301 to -329.19. The Ordinance was consistent with N.J.A.C. 5:94-6.7, a regulation of the Council on Affordable Housing (“COAH”), the agency with statutory authority to oversee the implementation of municipal affordable housing obligations. See Holmdel Builders Ass’n v. Township of Holmdel, 121 N.J. 550, 580 (1990). The regulation states that: non-residential development fees shall be a maximum of two percent of either the equalized assessed value for non-residential development or the appraised value on the document utilized for 2 construction financing. Municipalities may also utilize any recognized industry standard to establish values of non-residential development that is acceptable to both the municipality and the Council. [N.J.A.C. 5:94-6.7.] The agency defines a development fee as “money paid by a developer for the improvement of property as permitted in N.J.A.C. 5:94-6.” N.J.A.C. 5:94-1.4. COAH approved the Raritan Township Ordinance on April 12, 1995. According to Ordinance No. 05-05, the non-residential development fee is paid in two installments. “Developers shall pay fifty (50) percent of the calculated development fee to the township at issuance of building permits. For purposes of this payment, the development fee shall be estimated by the tax assessor prior to the issuance of building permits.” Section 16.10.040, Raritan Township Code, Ordinance No. 05-05. The remaining 50% of the fee is due upon issuance of a certificate of occupancy. At that time, the fee is recalculated, in light of the fact that the development is complete and an accurate assessment of its equalized assessed value can be made. “At the issuance of certificates of occupancy, the tax assessor shall calculate the equalized assessed value and the appropriate development fee. The developer shall be responsible for paying the difference between the fee calculated at certificate of occupancy and the amount paid at building permit.” Ibid. On May 10, 2005, the Raritan Township Planning Board granted preliminary site plan approval for the construction of various structures, including what would become the Lowe’s Home Center retail store, on the multiple lots that constitute the Raritan Town Square shopping center. The preliminary approval required the developer, Raritan Town Square, LLC, “to pay COAH approved non-residential development fees in accordance with Ordinance #05-05 and 3 N.J.A.C. 5:94-6.7 of two (2%) per cent or [sic] the equalized value of the buildings for which the applicant is seeking a construction permit.” On October 10, 2006, the Raritan Township Planning Board adopted a final site plan approval for the Raritan Town Square project. The final site plan approval incorporated all of the conditions of the preliminary site plan approval, including the requirement that the developer pay a non-residential development fee, as required by Ordinance No. 05-05. The final approval provides that “[p]rior to the construction of any of the proposed buildings, the following shall occur . . . [a]pplicant shall pay one-half (½) of the affordable housing fee for the specific building.” In addition, the final approval provides that “[p]rior to the issuance of a certificate of occupancy for a specific building, the applicant shall pay the remaining one-half (½) of the affordable housing fee for that building.” Plaintiff subsequently assumed the developer’s obligations with respect to the construction of the building that would house the Lowe’s Home Center retail store. Pursuant to the Ordinance, at the time that plaintiff applied for its building permit for the Lowe’s Home Center retail store, the Raritan Township tax assessor estimated the non-residential development fee for the project. The assessor calculated the fee based on an estimated value of $9,650,000, the amount plaintiff certified on its construction permit as the “Estimated Cost of Work” for the project. This resulted in an estimated non-residential development fee of $193,000 (.02 x $9,650,000 = $193,000). As required by the Ordinance, plaintiff paid one half of the fee, $96,500, on June 15, 2007 at issuance of the building permit. On July 17, 2008, while the construction of the store was underway, the Statewide Non- Residential Development Fee Act, L. 2008, c. 46, became law. N.J.S.A. 40:55D-8.1 to -8.7. The statute superseded municipal ordinances imposing non-residential development fees and imposed 4 a uniform, statewide, non-residential development fee of 2.5% of equalized value of “the land and improvements” of new non-residential construction. See N.J.S.A. 40:55D-8.4(a)(1). The new, uniform fee was to be paid to the municipality in which the non-residential development is located. The statute imposed the uniform fee on all non-residential developments that had not obtained a certificate of occupancy prior to July 17, 2008. Thus, plaintiff’s then on-going construction project was subject to the new fee. In addition, the statute created an avenue to challenge the uniform fee. “A developer may challenge non-residential development fees imposed pursuant to L. 2008, c. 46 . . . by filing a challenge with the Director of the Division of Taxation.” N.J.S.A. 40:55D-8.6(b). “Appeals from a determination of the director may be made to the tax court in accordance with the provisions of the State Uniform Tax Procedure Law, R.S. 54:48-1 et seq., within 90 days after the date of such determination.” Ibid. On August 4, 2008, plaintiff applied for a certificate of occupancy for its retail store. As required L. 2008, c. 46, the assessor recalculated the non-residential development fee for plaintiff’s development. Using a recognized cost calculation method, the assessor determined the value of the retail store, including the garden center, to be $11,905,352, the value of the site improvements to be $2,545,875 and the value of the land under the store to be $5,835,300 for a total value of $20,286,527. After applying a Chapter 123 ratio of 98.91%, N.J.S.A. 54:1-35a, the assessor reached an equalized assessed value of $20,065,403. The assessor also raised the fee from the 2.0% authorized by the municipal Ordinance to the 2.5% authorized by L. 2008, c. 46. As a result, the assessor determined plaintiff’s uniform non-residential development fee to be $501,634.78 (.025 x $20,065,403 = $501,635). 5 Plaintiff objected to the revised fee. The municipality, however, refused to issue a certificate of occupancy until the fee was paid. In order to facilitate the opening of its store, plaintiff paid under protest $405,134.78, the balance due on the recalculated fee after credit for the $96,500 payment plaintiff made at the time it applied for its building permit ($501,634.78 - $96,500 = $405,134.78). Pursuant to L. 2008, c. 46, on November 20, 2008, plaintiff filed a timely appeal with the Director, Division of Taxation protesting the uniform non-residential development fee imposed by the municipality. On December 30, 2008, the Director issued a final determination upholding the assessor’s calculation of the uniform fee. On March 30, 2009, pursuant to L. 2008, c. 46, plaintiff filed a timely Complaint in this court challenging the Director’s final determination. On July 27, 2009, during the pendency of plaintiff’s challenge to the uniform fee, L. 2009, c. 90, the New Jersey Economic Stimulus Act of 2009, became effective. N.J.S.A. 52:27D-489a to -489o. The statute amended L. 2008, c. 46 by placing a moratorium on the collection of the statewide 2.5% uniform non-residential development fee with respect to any project for which site plan approval was issued prior to July 1, 2010, provided a building permit is issued prior to January 1, 2013. N.J.S.A. 40:55D-8.6(a)(1). Plaintiff’s project fell within the moratorium on the uniform fee. The moratorium, however, does “not apply to a financial or other contribution that a developer made or committed itself to make prior to the effective date of” L. 2008, c. 46, or July 17, 2008. N.J.S.A. 40:55D-8.6(a). The parties agree that plaintiff’s project falls within this provision of L. 2009, c. 90 and that plaintiff is liable for any “financial or other contribution” it “made or committed itself to make” to Raritan Township with respect to its 6 development of the subject property. The extent of plaintiff’s liability to the township, however, is at issue between the parties. According to N.J.S.A. 40:55D-8.8(a), “[a] developer of a property that received preliminary site plan approval . . . or final approval . . . prior to July 17, 2008 and that was subject to the payment of a nonresidential development fee prior to the enactment of P.L. 2009, c. 90 . . . shall be entitled to a return of any moneys that represent the difference between moneys committed prior to July 17, 2008 and monies paid on or after that date.” In order to secure the return of monies paid under L. 2008, c. 46, a developer must file a claim in writing with the entity to which the money was paid within 120 days of the effective date of L. 2009, c. 90. Pursuant to N.J.S.A. 40:55D-8.8(a), on August 7, 2009, plaintiff sought a return from Raritan Township of $308,634.78 of the statewide, uniform non-residential development fee plaintiff paid under L. 2008, c. 46. If that amount is returned by Raritan, plaintiff will have paid of total fee of $193,000, the amount originally estimated by the tax assessor under the then- effective Ordinance No. 05-05 ($96,500 + 405,134.78 - $308,634.78 = $193,000). Plaintiff contends that it committed to pay only that amount prior to July 17, 2008. In addition, plaintiff argues that its liability is limited to a non-residential development fee calculated on the basis of the equalized assessed value of only the Lowe’s Home Center retail store building, without consideration of the equalized assessed value of related site improvements or the land on which the building and site improvements sit. The municipality returned to plaintiff only $100,326.78. This amount represents the difference between 2.5% of the revised equalized assessed value of $20,065,403 reached after enactment of L. 2008, c. 46, and 2% of the revised equalized assessed value of $20,065,403. According to the municipality, plaintiff is liable under Ordinance No. 05-05 for $401,308, or 2% 7 of the equalized assessed value of the Lowe’s Home Center retail store, associated improvements and the land on which the project sits, as calculated by the assessor prior to the issuance of a certificate of occupancy for the retail store. The municipality contends that prior to July 17, 2008, plaintiff committed to pay a non-residential development fee in accordance with the terms of Ordinance No. 05-05, which requires the fee to be calculated on the basis of the assessed value of the entire development, including all improvements and the value of the land on which the improvements are situated. The municipality argues that the original estimate of the fee was based on the plaintiff’s cost estimate of $9,650,000 for the retail store only and that the Ordinance requires that the amount be recalculated once all of the improvements were completed. On August 30, 2010, plaintiff filed an Amended Complaint in this court alleging that the municipality failed to return to plaintiff the full portion of the fee plaintiff paid pursuant to L. 2008, c. 46 to which it is entitled to a refund under L. 2009, c. 90. Plaintiff seeks a refund of $208,308 ($308,634.78 - $100,326.78 = $208,308). On September 22, 2010, plaintiff moved to transfer this matter to the Superior Court, alleging that the enactment of L. 2009, c. 90 divested this court of jurisdiction to address plaintiff’s claims. On February 22, 2011, the court denied plaintiff’s transfer motion. On March 17, 2011, plaintiff moved for a declaratory judgment that the non-residential development fee applicable to the Lowe’s Home Center retail store be calculated based on 2% of the equalized assessed value of the retail store building alone. In addition, plaintiff seeks an Order directing the return to it of any non-residential development fee it paid in excess of the non-residential development fee for which it is liable. 8 II. Conclusions of Law N.J.S.A. 40:55D-8.6a provides that the cancellation of the non-residential development fees does not apply “to a financial or other contribution that a developer made or committed itself to make prior to” July 17, 2008. The statute defines “committed” as that term in use in N.J.S.A. 40:55D-8.6a as follows: For purposes of this section, a developer is considered to have made or committed itself to make a financial or other contribution, if and only if: (1) the contribution has been transferred, including but not limited to when the funds have already been received by the municipality; (2) the developer has obligated itself to make a contribution as set forth in a written agreement with the municipality, such as a developer’s agreement; or (3) the developer’s obligation to make a contribution is set forth as a condition in a land use approval issued by a municipal land use agency pursuant to the 'Municipal Land Use Law.” [N.J.S.A. 40:55D-8.6c.] There is no dispute that plaintiff’s obligation to make a contribution to the municipality was set forth as a condition in the land use approval issued for the construction of the Lowe’s Home Center retail store within the meaning of subsection (3) of the statute. As noted above, the preliminary site plan approval for the Lowe’s Home Center retail store was conditioned on plaintiff’s obligation “to pay COAH approved non-residential development fees in accordance with Ordinance #5-05 and N.J.A.C. 5:94-6.7 . . .” The preliminary site plan approval defined that contribution as “two (2%) per cent or [sic] the equalized value of the buildings for which the applicant is seeking a construction permit.” This condition was later incorporated in the final site plan approval for the project. Ordinance #05- 05, which is expressly referenced in the planning board’s final approval, defines the non- 9 residential development fee as “equal to two (2%) of the equalized assessed value for the non- residential development” and not the equalized value of the buildings addressed in the permit. Although the planning board resolution refers to the equalized assessed value of the “building” which plaintiff would construct as the measurement for the non-residential development fee, that definition of the fee is out of sync with the controlling Ordinance. The Ordinance imposes a non-residential development fee based on the equalized assessed value of the development, not on the equalized assessed value of a building. Whether the planning board inartfully drafted the final site plan approval or intended to limit the non-residential development fee to the equalized assessed value of the retail store only, the language of the Ordinance must control, as the planning board does not have the statutory authority to waive or alter the non- residential development fee as defined by the governing body in the Ordinance. A planning board is not a legislative body and must apply duly enacted municipal ordinances as they are drafted. Thus, plaintiff’s planning board approval, which was expressly conditioned on Ordinance No. 05-05, included a commitment by plaintiff to pay a non-residential development fee calculated based on “the equalized assessed value for the non-residential development” undertaken by plaintiff on the subject property. The non-residential development constructed by plaintiff was comprised of the Lowe’s Home Center retail store and related improvements on the portion of the property covered by plaintiff’s ground lease. The municipality’s argument that the land upon which the retail store and improvements sit is part of the “non-residential development” within the meaning of Ordinance No. 05-05 is not convincing. “The established rules of statutory construction govern the interpretation of a municipal ordinance.” State v. Schad, 160 N.J. 156, 170 (1999)(citing AMN, Inc. v. Township of So. Brunswick Rent Leveling Bd., 93 N.J. 518, 524-25 (1983)). “The 10 first step of statutory construction requires an examination of the language of the ordinance.” Id. (citing Bergen Comm’s Bank v. Sisler, 157 N.J. 188, 202 (1999)). “The meaning derived from the language controls if it is clear and unambiguous.” Ibid. Such is the case here. Plaintiff “developed” the property by constructing a building and related site improvements. The “development” that resulted was a new retail store and site improvements. It is the equalized assessed value of that development that serves as the basis for calculating plaintiff’s non- residential development fee under Ordinance No. 05-05, the law under which plaintiff committed to pay a fee as a condition of its final site plan approval for the construction that gave rise to this appeal. The court’s conclusion is bolstered by the fact that on June 23, 2008, the Raritan Township governing body adopted a new affordable housing ordinance that calculated non- residential development fees based on the equalized assessed value of “land and improvements.” The revised Ordinance, which does not apply to plaintiff’s construction of the Lowe’s Home Center retail store and related site improvements, evidences the governing body’s ability expressly to include equalized assessed land value as a component of the measure of a non- residential development fee. Ordinance No. 05-05 contained no provision regarding land value at the time that plaintiff’s development project was approved. The court rejects plaintiff’s contention that its commitment was limited to the payment of a non-residential development fee based on the estimated value of $9,650,000 certified at the time that the municipality issued a building permit to plaintiff. The plain language of Ordinance No. 05-05 requires two payments, half at the time that a building permit is issued and half at the time of issuance of a certificate of occupancy. The Ordinance clearly provides that the equalized assessed value of the development is to be recalculated prior to issuance of the certificate of 11 occupancy. “At the issuance of certificates of occupancy, the tax assessor shall calculate the equalized assessed value and the appropriate development fee. The developer shall be responsible for paying the difference between the fee calculated at certificate of occupancy and the amount paid at building permit.” Plaintiff’s commitment included a commitment to comply with this provision of the Ordinance. Thus, the $9,650,000 value is not controlling. The equalized assessed value placed on the retail store and related improvements by the assessor for tax year 2008 will serve as the measure of plaintiff’s non-residential development fee. The court notes the representation by defendant’s counsel at oral argument that Ordinance No. 05-05 has consistently been interpreted as authorizing a non-residential development fee based on the equalized assessed value of improvements and land. Counsel’s representation is not support by evidence in the record regarding calculation of the fee on other projects in Raritan Township. In addition, plaintiff’s counsel represented to the court that in his experience as a land use attorney he has never seen a non-residential development fee that was calculated on the basis of land value. The record contains no evidence with respect to the projects to which plaintiff’s counsel apparently referred. The court reaches its decision based on what the court has concluded is the unambiguous language of Ordinance No. 05-05 at the time that plaintiff’s development of the property was approved. In addition, the court is not persuaded by defendant’s argument that other tenants at the subject property paid without protest non-residential development fees calculated on the basis of the equalized assessed values of both improvements and land. A complete record regarding the calculation and collection of non-residential development fees imposed on other tenants at the subject property is not before the court. Nor would such information necessarily be relevant, as 12 plaintiff would not be bound by the decisions of other tenants not to protest non-residential development fees assessed against other portions of the Raritan Town Square Project. An Order is enclosed declaring plaintiff to be liable for a non-residential development measured by the equalized assessed value for tax year 2008 of the building and related site improvement constructed by plaintiff on the property that is subject to plaintiff’s ground lease. The record suggests that the Lowe’s Home Center retail store is not the only building on block 16.01, lot 35. It appears that the assessment placed on block 16.01, lot 35, by the assessor for tax year 2008 includes the value of the Lowe’s Home Center retail store and related site improvements, as well as the value of other buildings, site improvements and land not subject to plaintiff’s ground lease. It is not entirely clear if a precise apportionment of the value attributed to the Lowe’s Home Center retail store and related improvements constructed by plaintiff on land that is subject to plaintiff’s ground lease appears in the record. In addition, the Chapter 123 ratio applicable to Raritan Township for tax year 2008 is relevant to a determination of the equalized assessed value of the property. Direct evidence of the applicable ratio for the municipality for that tax year is not before the court. The court will hold a telephone conference with counsel to set a schedule for the determination of the amount of the non-residential development fee for which plaintiff is responsible and the amount of a refund due to plaintiff in light of its prior payments to defendant. Very truly yours, Patrick DeAlmeida, P.J.T.C. cc: SDAG Julian F. Gorelli 13
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