# MEPT JOURNAL SQUARE URBAN RENEWAL, LLC VS. THE CITY OF JERSEY CITY (L-3177-15, HUDSON COUNTY AND STATEWIDE)

> New Jersey Superior Court Appellate Division · August 9, 2018 · 455 N.J. Super. 608

URL: https://www.frixlaw.com/law-library/cases/4430686

## Case

- **Court:** New Jersey Superior Court Appellate Division
- **Decided:** August 9, 2018
- **Citations:** 455 N.J. Super. 608; 190 A.3d 1113
- **Precedential status:** Published
- **Opinion:** Opinion
- **Cited by:** 3 later opinions in the Frix Law Library

## Citator (automated)

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## Opinion text

NOT FOR PUBLICATION WITHOUT THE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

Substantial Completion of the Project."

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 . . . .

[(Emphasis added).]

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/4430686. Public record. Not legal advice.