Ruling Bans Impact Fees, For The Moment

Posted: April 05, 1989

Municipalities in New Jersey ran into yet another detour sign last week on their road toward producing affordable homes for families with lower incomes. But some pending state legislation could put them back on track.

The newest snag for municipalities came last Wednesday when a state appeals court ruled that it is unconstitutional for towns to charge developers a fee that would be pooled to finance affordable housing programs. That decision could be reversed, however, by the adoption of pending legislation introduced in December by Assemblyman John O. Bennett (R., Monmouth), which states that those fees are constitutional and legal. If approved, the legislation could give municipalities the option of charging such fees to developers to finance their affordable housing programs.

But if the legislation does not go through and last week's court decision is upheld, it could have large implications for the towns that now charge those fees, known as impact fees and linkage fees, to developers.

Since 1986, Cherry Hill has collected more than $300,000 by charging developers a fee of 3 percent of their total construction costs on major subdivisions.

David Benedetti, assistant director of community development, said the money would be used to subsidize the township's requirement to provide 1,000 units of affordable housing.

"The intent is to utilize that money for the future demand for housing," he said. But he said the township does not yet know how the court ruling will affect Cherry Hill's ordinance.

In Burlington County towns, linkage fees are a seldom-used option, according to county planning engineer Thomas Jaggard.

"I don't think many (Burlington County municipalities) do it as a regular thing. They tend to work an arrangement with the developer on an individual basis to come up with a way to supply low and moderate (income) housing," Jaggard said. "Some developers pay a fee, but it's not set up for all developers to do so."

In Hainesport, an ordinance calls for builders to pay the township $1,500 per home if they do not provide affordable homes in their development. The fee was imposed for the first time, earlier this year, on a 157-unit housing development, the largest development so far in the township, according to Planning Board chairman Lawrence Corn.

Corn said the fees would be used to build affordable homes in Hainesport. He said the board was scheduled to discuss the court decision at its meeting tonight.

"We received a copy of the decision," he said. "But I'm not familiar with how it will affect our ordinance."

In Moorestown and Mount Laurel, developers have contributed to a fund for affordable housing to avoid having to build such housing themselves. But those contributions are the result of the 1983 Mount Laurel II Supreme Court ruling and are not considered impact fees.

Mark McDonald, of the Gloucester County planner's office, said he was unaware of any Gloucester County towns that charge impact fees.

The Council on Affordable Housing estimates that only about 20 percent of New Jersey's 567 municipalities now charge impact fees to finance affordable housing programs. But the proposed legislation could make it possible for all municipalities to charge them.

Bennett's bill is now in the assembly's Community Development and Urban Affairs Commitee, according to a spokeswoman for Bennett. But some officials interviewed yesterday said the court's decision might make it difficult for that bill to pass.

The decision was made by a three-judge panel of the Appellate Division of the state Superior Court. The panel ruled that three central New Jersey municipalities had no basis in either statutory law or the state constitution to make developers pay a nominal impact fee to help fund programs to provide affordable housing.

Patrick O'Keefe, executive director of the Trenton-based New Jersey Builders Association, said his group had been opposed to the impact fees and had been litigating against the use of those fees in Chester Township, one of the three towns named in the decision.

O'Keefe said it is unfair to expect developers to foot the entire bill for affordable housing and he said he was pleased with the outcome of the decision. "You can't expect a narrow sector of developers to finance giant welfare responsibilities," he said.

But some disagree.

"The state has made it more difficult to create affordable housing, there's no question about that," said Arthur Maurice, deputy director of the Department of Community Affairs. "We need every available resource and these linkage fees we view as one available resource."

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