Greenbaum Rowe Smith & Davis Newsletter

New Jersey's Highlands

by Meryl A. G. Gonchar and Lloyd H. Tubman

 

Property owners and developers of land in the northwest portion of New Jersey must familiarize themselves with a 100 plus page piece of legislation that dramatically changes the rules governing property development. The legislation is touted as a means to protect critical drinking water resources; however, questions have been raised regarding the means chosen to achieve the purported ends.

 

The Highlands Water Protection and Planning Act, S-1/A-2635, was passed by both houses of the New Jersey State Legislature on June 10, 2004. The Act would encompass 88 municipalities located in the northwest portion of the State within an area designated as the “Highlands Region,” over which the Highlands Water Protection and Planning Council, an entity to be established pursuant to the Act, will have jurisdiction.

 

Within the Highlands Region, the nearly 800,000 acres of affected land would be divided between the preservation and planning areas, with the former comprising more than one-half of the total regulated lands. Traditional “home rule” exercised by municipalities relative to zoning and planning determinations within their boundaries will yield to the mandatory regulations to be enacted by the Council. Municipalities must conform local ordinances to a Highlands master plan. Within the planning area, municipalities may elect to follow the dictates of a regional master plan. However, it appears that the “voluntary” conformance with that master plan may be somewhat illusory. Those municipalities failing to follow the recommendations of the plan will lose various financial incentives and benefits available to those opting to do so.

 

Immediately upon enactment of the Act and for the nine months next following, certain interim restrictions and requirements will be in effect that will either prohibit or severely limit the development of land within the preservation area. For any “major” Highlands development, defined as entailing one acre of site disturbance or one-quarter acre of impervious surface in the preservation area, an applicant will be required to obtain a Highlands Preservation Area approval from NJDEP. Included among the requirements, which will be immediately effective and implemented without compliance with the Administrative Procedures Act for enactment of rules or regulations, is a prohibition of any development within 300 ft. of any “Highlands open water”, defined under the Act to include every stream, wetlands or other surface water except, specifically, swimming pools. In addition, an impervious coverage limitation of 3% per lot will be mandatory. Included within the calculation of this limitation are porous paving, crushed stone, decks and elevated structures.

 

Of greatest interest to property owners within the preservation area may be the grandfather provisions for projects that have already received some but not all development approvals. It is anticipated that the restrictions and regulations will apply unless specifically exempted under Section 30 of the Act. Exempted developments include certain single family homes and lots, major Highlands developments that received, on or before March 29, 2004, (the date of introduction of the legislation) preliminary or final site plan approval, a final municipal building or construction permit, preliminary or final subdivision approval (where no subsequent site plan is required) and at least one of enumerated NJDEP permits, if required. Those permits include a water extension permit, a certification, approval or authorization for a septic system, a treatment works approval or a wetlands permit. Even if an exemption is created by the Act, it will expire if construction beyond site preparation does not begin within three years after the date of enactment of the Act.

 

Under the Act, the Highlands Council will become the preeminent planning entity in the Highlands Region with the power to review municipal ordinances and master plans for conformance with the regional master plan and to review development applications for conformance with the regional master plan.

 

While the Act raises numerous legal issues, including those of regulatory takings and the impact on vested rights, perhaps the most pressing concern for property owners and developers whose properties are located within a Highlands municipality is to determine whether their properties are located within the preservation area as defined in the Act. Each municipality identified in the Act is wholly within the Highlands Region; however, the critical issue is whether a particular parcel is within the preservation area. This will, in broad terms, determine whether the property can be developed at all. This determination can be made only upon a careful review of the metes and bounds description included in the Act and review of the map published along with it. It is recommended that property owners obtain the services of an engineer or other professional to plot the boundaries of the preservation area within a given municipality and determine whether a parcel is within the planning or preservation area. Those who find their properties within the preservation area but have not obtained the local and NJDEP approvals which qualify a development for exemption from the Act must await further DEP and Highlands Council rules to determine with any certainty if they have any hope of developing their land. Even exempted projects may be delayed until municipalities within the Highlands Region seek clarification and explanation of the Act.

 

The Act provides for a transfer of development rights (TDR) program which requires the Council’s identification of appropriate sending zones within the preservation area and designation of “voluntary” receiving areas within the planning area. Theoretically, those development rights eliminated in the preservation area could be “recouped” within the planning area. The Council has 18 months from enactment of the Act to put a TDR program in place. In addition, the Act allows “impact fees” to be assessed by any municipality which has implemented a master plan and development regulations found by the Council to be in conformance with the regional mater plan. The fee is $15,000 per dwelling unit against applicants in these receiving zones. In some circumstances municipalities may assess impact fees of up to 200% of the otherwise calculated impact fees.

 

Finally, New Jersey residents should not think that the Act will not affect them because they live or own property outside of the Highlands Region. The entire State will likely bear the burden of the Act. Enormous sums of State money will be expended to implement the Act, to compensate municipalities for loss of tax funds as a result of the elimination of development, to incentive and fund enhanced planning grants and to establish a Pinelands Property Tax Assistance Fund, a Highlands Protection Fund and a Highlands Municipal Property Tax Stabilization Fund.