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Lowe’s Home Centers, Inc. v. Township of Raritan

008173-2009 (N.J. Tax Ct. 2011) (Unpublished)

AFFORDABLE HOUSING; DEVELOPERS — Even though a moratorium was placed on the collection of a nonresidential project development fees, if the developer already had committed itself to make pay a fee prior to the moratorium, it must still meet that obligation, but only in accordance with the terms of its initial commitment.

A retailer had a ground leasehold interest in real property. It built a store and related site improvements on the property. When the development was planned, a municipal ordinance called for developers of a nonresidential projects to pay a development fee equal to two percent of its equalized assessed value. The ordinance was consistent with the Council on Affordable Housing (COAH) regulations. Its purpose was to partially fund a municipality’s obligation to provide low and moderate income housing as required by the New Jersey Fair Housing Act.

The governing ordinance required developers to pay the nonresidential development fee in two installments: (1) half at issuance of building permits, using the amount estimated by the tax assessor prior to issuance; and (2) the balance upon issuance of a certificate of occupancy, at which time the fee was to be recalculated based on a complete development and an accurate assessment of its equalized assessed value.

The retailer received preliminary site plan approval, a condition of which was to pay the nonresidential development fee. Subsequently, it received final site plan approval, incorporating all the conditions of the preliminary site plan approval, including the requirement for payment of the nonresidential development fee. However, the final approval required the applicant to pay one-half of the affordable housing fee for the specific “building” before any construction could start. That same approval also provided that, prior to the issuance of a certificate of occupancy for a specific building, the applicant had pay the remaining one-half of the fee for that “building.” Based on this language, the retailer fashioned an argument for limitation of the fee in the litigation that followed.

The retailer paid one-half of the estimated fee at issuance of the building permit. While the store was under construction, the Statewide Nonresidential Development Fee Act became law. This superseded municipal ordinances imposing nonresidential development fees and imposed a uniform, statewide nonresidential development fee of two and one-half percent of equalized value of the “land and improvements” for new nonresidential construction. Based upon the timing of the passage of this Act and of the retailer’s receipt of a certificate of occupancy, the retailer was subject to the new fee.

Later, the retailer applied for a certificate of occupancy for its store. The municipal assessor recalculated the nonresidential development fee for the development, and included the value of the retail store, the garden center, the site improvements, and the land under the store. The assessor also raised the fee from the two percent authorized by the municipal ordinance to the two and one-half percent authorized by state law. The retailer paid the revised fee under protest. The municipality refused to issue a certificate of occupancy until the fee was paid. The retailer appealed by filing a complaint in the Tax Court.

While the Tax Court action was pending, the New Jersey Economic Stimulus Act of 2009 went into effect. It placed a moratorium on the collection of the statewide two and one-half percent nonresidential development fee for any project with site plan approval issued prior to July 1, 2010, provided that a building permit was issued prior to January 1, 2013. The retailer’s project fell within the moratorium. However, by statute, the moratorium did not apply to any financial or other contribution that a developer made or committed itself to make prior to the statute’s effective date. The municipality and the retailer agreed that the project fell within this provision; and the retailer agreed it was liable for any financial or other contribution it made, or committed itself to make, to the municipality in connection with its development. The extent of the its liability, however, was at issue.

Thereafter, the retailer sought return of a portion of the fee that it had paid to the township. It further argued the fee was to be calculated on the equalized assessed value of only the retail store building, without considering the related site improvements or the land. The municipality returned a lesser amount, arguing the retailer was liable under the ordinance to pay approximately the remaining amount, or two percent of the equalized assessed value of the retail store, associated improvements, and the land, as calculated at the time of certificate of occupancy. The municipality, in returning the funds, adjusted for the difference between the statewide two and one-half percent and the municipally-enacted two percent fee. It claimed that prior to the enactment of the moratorium, the retailer committed to pay the fee in accordance with the terms of the ordinance. That meant on the basis of the value of the entire development, not just the building.

The Tax Court found no dispute that the retailer had to pay the fee as a condition under its land use approvals. Relying upon basic language and meaning of statutory construction, the Court found that the retailer had committed to pay the fee in connection with receipt of its approvals. Addressing the final site plan resolution, which referred to the equalized assessed value of the “building” as the measurement for the fee, the Court found that this definition was inconsistent with the controlling ordinance, which imposed fees upon the value of developments, not simply buildings. Since the planning board did not have statutory authority to waive or alter the fee as defined by the governing body in the ordinance, the Court dismissed any argument that the building was to be the limiting factor. The Court also rejected the municipality’s argument that the land on which the retail store sat and the related improvements were part of the development within the meaning of the ordinance.

Since the retailer committed to complying with the ordinance at the time of receipt of the approvals, the Court concluded that the equalized assessed value placed by the assessor on the retail store and its own related improvements would serve as the measure of the retailer’s nonresidential development fee. A refund was ordered.

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