388 Route 22 Readington Realty Holdings, LLC v. Township of Readington

SYLLABUS

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the
convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the
interest of brevity, portions of any opinion may not have been summarized).

388 Route 22 Readington Realty Holdings, LLC v. Township of Readington (A-63-13) (073322)

Argued December 2, 2014 – May 5, 2015

ALBIN, J., writing for a unanimous Court.

In this appeal, the Court considers the circumstances under which a municipality may exercise its discretion
to repurchase unused sewer capacity.

In December 2007, plaintiff purchased property in Readington Township (Township). The property is
serviced by a septic tank with a capacity of up to 2000 gallons per day (gpd). The Township rezoned plaintiff’s
property from the Mixed-Use District to the Business District. Thereafter, plaintiff made plans to redevelop the
property for use as a restaurant and other retail purposes. However, plaintiff’s septic tank does not have sufficient
capacity to process the wastewater generated by the uses plaintiff proposes.

In 1999, the Readington-Lebanon Sewerage Authority (Authority) began to expand its plant capacity to
allow the treatment of an additional 320,000 gpd of the Township’s wastewater. As a result of the expansion, the
Township was allocated a total of 939,000 gpd of sewer capacity. The Township agreed to pay the Authority
$6,024,704 for the increased capacity and relied on private investment to finance the project. Each landowner
purchasing future sewer capacity entered into a sewer allocation agreement with the Township. The sample
allocation agreement places a time limit on the right of a landowner to hold on to unused capacity and provides that
the landowner pay a certain sum for unused sewer capacity annually. By ordinance, the Township provides the
methodology for allocation of sewer capacity to landowners and for the recapturing of unused capacity. According
to the ordinance, in the case of those development projects which have not received approval by the appropriate
Township board having jurisdiction at the time a request for gallonage is made, allocation agreements shall provide
that if the applicant does not make formal application to the appropriate Township board within two years of
approval of the allocation, then the Township Committee may, in its discretion, terminate the agreement. The
ordinance also provides that if within two years after preliminary approval, construction has not commenced, the
Township Committee may, at its discretion, terminate the agreement.

Plaintiff requested that the Township recapture sufficient sewer capacity to allow its construction project to
proceed. In response, the Township notified plaintiff that there was no sewer capacity available. Plaintiff filed a
complaint against the Township and multiple private entities to compel the transfer of allocated, but unused, sewer
capacity, claiming that the municipal ordinance addressing the allocation of sewer capacity was invalid either on its
face or as applied by the Township. Plaintiff and defendants subsequently moved for summary judgment. The trial
court remanded the matter to the Township Committee to review the reasoning set forth in its prior rejection of
plaintiff’s request for sewer capacity and to provide a statement of reasons as a supplement to its decision. In
response to the remand order, the Township Committee held a public hearing and issued a resolution denying
plaintiff’s request for sewer capacity.

The trial court affirmed the validity of the ordinance, but determined that the Township’s blanket policy of
not recalling unused sewer capacity violated the dictates of this Court’s decision in First Peoples Bank v. Township
of Medford, 126 N.J. 413, 420-21 (1991). According to the trial court, the Township’s obligation is not dependent
on whether plaintiff can beg, borrow or cadge capacity from others, but rather to terminate agreements where it is
appropriate to do so. As a remedy, the court ordered that the Township undertake, within ninety days, a review of
the unused sewer capacity listed by plaintiff and provide a reasoned basis for not recapturing that capacity. Plaintiff
and several defendants appealed, and in an unpublished opinion, the Appellate Division reversed. The Appellate
Division agreed with the trial court that the Township relied on a policy of not re-taking sewer rights granted by
contract, but also found that plaintiff could not overcome the presumption of validity that attaches to municipal
decision-making. This Court granted plaintiff’s petition for certification. 217 N.J. 287 (2014).

HELD: A blanket policy of not recapturing unused sewer capacity is the functional equivalent of a moratorium on
development. The Court approves of the trial court’s approach, requiring the Township both to undertake a detailed
analysis of the unused capacity in the hands of private parties and to explain whether any of that capacity can be
recalled.
1. The Court’s primary task here is to resolve whether the Township’s sewer allocation ordinance is facially valid and
whether the ordinance as applied by the Township Committee constitutes an improper delegation of land-use authority
to private parties in violation of First Peoples. The Legislature has the constitutional authority to delegate to
municipalities the police power to enact ordinances governing the nature and extent of the uses of land and has done so
through the passage of the Municipal Land Use Law (MLUL). This power, however, is not unlimited. Like all
ordinances, the Township’s sewer allocation ordinance is entitled to a presumption of validity, and the party
challenging the ordinance bears the burden of overcoming that presumption. (pp. 29-31)

2. A sewer ordinance should withstand a challenge unless it is inequitable, unfair, or lacks adequate standards to insure
the fair and reasonable exercise of municipal authority. In First Peoples, which addressed several of the issues
presented here, Medford Township financed the expansion of its sewage plant through the sale of sewer permits that
were available on an equal basis to all developers. There, the question was whether the ordinance articulated adequate
standards to guide the exercise of municipal discretion when considering the repurchase of permits. This Court
concluded that the ordinance, although not exquisitely drafted, contained sufficient standards to withstand the plaintiff’s
challenge and rejected the plaintiff’s as-applied challenge to the ordinance, finding nothing to suggest that Medford had
acted arbitrarily in deciding whether to exercise its repurchase option. (pp. 32-34)

3. With those principles in mind, the Court rejects plaintiff’s challenge to the ordinance itself and finds that the
Township’s sewer allocation ordinance provides adequate standards to guide the exercise of municipal discretion when
considering the repurchase of permits. The Court presumes that the ordinance’s drafters intended certain practical
considerations to be taken into account by the Township Committee in exercising its discretion whether to terminate an
allocation agreement or extend one based on good cause. Such considerations would include (1) the length of time a
landowner has possessed unused sewer capacity, (2) the development plans of the landowner to tap some or all of the
unused capacity and the imminence of that happening, (3) the complexity of the development project and the
importance of the project to the community, (4) whether the economy has retarded economic development, (5)
proposed development projects by others that cannot proceed because of unavailability of sewer capacity and the
importance of those projects to the community, and (6) any other relevant factors. As was true in First Peoples, the
ordinance here was not exquisitely drafted. Nevertheless, it must be liberally construed in favor of its validity. This
ordinance in no way suggests that the Township as a matter of law has delegated its authority to control land use, or
access to sewer capacity, to private parties. The Court concludes that the sewer allocation ordinance provides adequate
guidelines for the Township to exercise its discretion whether and when to repurchase sewer capacity. (pp. 35-37)

4. In contravention of its own ordinance, the Township maintains a blanket policy of not repurchasing unused sewer
capacity allocated to developers. The fact that sewer capacity was allocated by contracts to private entities that
financed the plant expansion project and was paid for at considerable expense cannot be the end of the analysis.
Otherwise, the ordinance requiring the Township to exercise its discretion in recapturing sewer capacity would be
meaningless. That other landowners did not participate in purchasing capacity to help finance the plant expansion
may indicate nothing more than that they did not have a need for sewer capacity at the time. (pp. 37-39)

5. The Appellate Division placed on plaintiff the burden of showing that defendant developers were acting without
good cause for delay by not voluntarily surrendering their sewer rights for the fair value offered by plaintiff. That
defeats the purpose of the ordinance and of the policy of the MLUL, which is to have the Township exercise its
decision-making authority in land-use matters. The resolution also failed to analyze which developments, if any, fall
under the dictates of the Permit Extension Act, N.J.S.A. 40:55D-136.1 to -136.6. Last, and most significantly, the
resolution did not give a reasoned explanation for the Township’s failure to exercise discretion, as required by its
own ordinance. As a best practice, the Court suggests that the Township maintain updated records of the unused
capacity held by private parties so that it can exercise its discretion, when necessary, with current information. (pp.
39-42)

6. The Court orders the Township Committee, within ninety days, to undertake a critical review of the unused capacity
identified by plaintiff and to determine whether any such capacity can be recaptured from defendants to satisfy
plaintiff’s development needs. (p. 42)
The judgment of the Appellate Division is AFFIRMED IN PART and REVERSED IN PART. The
matter is REMANDED to the trial court for proceedings consistent with this opinion.

CHIEF JUSTICE RABNER and JUSTICES PATTERSON, FERNANDEZ-VINA, and SOLOMON
join in JUSTICE ALBIN’S opinion. JUSTICE LaVECCHIA and JUDGE CUFF (temporarily assigned) did
not participate.
2
 SUPREME COURT OF NEW JERSEY
A-63 September Term 2013
073322

388 ROUTE 22 READINGTON
REALTY HOLDINGS, LLC,

Plaintiff-Appellant,

v.

TOWNSHIP OF READINGTON,
TOWNSHIP COMMITTEE OF THE
TOWNSHIP OF READINGTON, SEWER
ADVISORY COMMITTEE OF THE
TOWNSHIP OF READINGTON,
BELLEMEAD DEVELOPMENT
CORPORATION, READINGTON
COMMONS, LLC, C. DELVECCHIO,
S. CARBONE, A. CARBONE, ROLF
ACKERMAN, VALLEY NATIONAL
BANK, RYLAND DEVELOPERS, LLC,
LOT 3 DEVELOPMENT, LLC,
FALLONE PROPERTIES, LLC,
URB-FI DEVELOPMENT CORP.,
FALLONE AT SPRING MEADOW, LLC
COUNTRY CLASSICS LEGACY
READINGTON, and WINFIELD
MANAGEMENT,

Defendants-Respondents,

and

MERCK SHARP & DOHME CORP.,
f/k/a MERCK & CO., INC.,

Defendant-Respondent,

and

RAMYZ TADROS, SHADIA SAMAAN,
WHITEHOUSE ATHLETIC
ASSOCIATION, WLADYSLAW

1
ZACIOS, JOANN ZACIOS, BETTY
ANN COEBLER, CODDINGTON HOMES
CO., INC., TOM JR. PROPERTY,
INC., and WPS REALTY, LLC,

Defendants.

388 ROUTE 22 READINGTON
REALTY HOLDINGS, LLC,

Plaintiff-Appellant,

v.

TOWNSHIP OF READINGTON,
TOWNSHIP COMMITTEE OF THE
TOWNSHIP OF READINGTON, SEWER
ADVISORY COMMITTEE OF THE
TOWNSHIP OF READINGTON, MERCK
SHARP & DOHME CORP., f/k/a
MERCK & CO., INC., READINGTON
COMMONS, LLC, C. DELVECCHIO,
SCOTT CARBONE, A. CARBONE,
ROLF ACKERMAN, VALLEY
NATIONAL BANK, RYLAND
DEVELOPERS, LLC, LOT 3
DEVELOPMENT, LLC, FALLONE
PROPERTIES, LLC, URB-FI
DEVELOPMENT CORP., FALLONE AT
SPRING MEADOW, LLC, COUNTRY
CLASSICS LEGACY READINGTON,
and WINFIELD MANAGEMENT,

Defendants-Respondents,

and

BELLEMEAD DEVELOPMENT
CORPORATION,

Defendant-Respondent,

and

2
RAMYZ TADROS, SHADIA SAMAAN,
WHITEHOUSE ATHLETIC
ASSOCIATION, WLADYSLAW
ZACIOS, JOANN ZACIOS, BETTY
ANN COEBLER, CODDINGTON HOMES
CO., INC., TOM JR. PROPERTY,
INC., and WPS REALTY, LLC,

Defendants.

388 ROUTE 22 READINGTON
REALTY HOLDINGS, LLC,

Plaintiff-Appellant,

v.

TOWNSHIP OF READINGTON,
TOWNSHIP COMMITTEE OF THE
TOWNSHIP OF READINGTON, and
SEWER ADVISORY COMMITTEE OF
THE TOWNSHIP OF READINGTON,

Defendants-Respondents,

and

BELLEMEAD DEVELOPMENT
CORPORATION, MERCK SHARP &
DOHME CORP., f/k/a MERCK &
CO., INC., READINGTON
COMMONS, LLC, C. DELVECCHIO,
SCOTT CARBONE, A. CARBONE,
ROLF ACKERMAN, VALLEY
NATIONAL BANK,RYLAND
DEVELOPERS, LLC, LOT 3
DEVELOPMENT, LLC, FALLONE
PROPERTIES, LLC, URB-FI
DEVELOPMENT CORP., FALLONE AT
SPRING MEADOW, LLC COUNTRY
CLASSICS LEGACY READINGTON,
and WINFIELD MANAGEMENT,

Defendants-Respondents,

3
 and

RAMYZ TADROS, SHADIA SAMAAN,
WHITEHOUSE ATHLETIC
ASSOCIATION, WLADYSLAW
ZACIOS, JOANN ZACIOS, BETTY
ANN COEBLER, CODDINGTON HOMES
CO., INC., TOM JR. PROPERTY,
INC., and WPS REALTY, LLC,

Defendants.

388 ROUTE 22 READINGTON
REALTY HOLDINGS, LLC,

Plaintiff-Appellant,

v.

TOWNSHIP OF READINGTON,
TOWNSHIP COMMITTEE OF THE
TOWNSHIP OF READINGTON, SEWER
ADVISORY COMMITTEE OF THE
TOWNSHIP OF READINGTON,
BELLEMEAD DEVELOPMENT
CORPORATION, MERCK SHARP &
DOHME CORP., f/k/a MERCK &
CO., INC., C. DELVECCHIO,
SCOTT CARBONE, A. CARBONE,
ROLF ACKERMAN, VALLEY
NATIONAL BANK, RYLAND
DEVELOPERS, LLC, LOT 3
DEVELOPMENT, LLC, FALLONE
PROPERTIES, LLC, URB-FI
DEVELOPMENT CORP., TOLL NJ I,
LLC, and WINFIELD MANAGEMENT,

Defendants-Respondents,

and

COUNTRY CLASSICS LEGACY AT
READINGTON, READINGTON
COMMONS, LLC, and RYLAND
DEVELOPERS, LLC,

4
 Defendants-Respondents,

and

RAMYZ TADROS, SHADIA SAMAAN,
WHITEHOUSE ATHLETIC
ASSOCIATION, WLADYSLAW
ZACIOS, JOANN ZACIOS, BETTY
ANN COEBLER, CODDINGTON HOMES
CO., INC., TOM JR. PROPERTY,
INC., and WPS REALTY, LLC,

Defendants.

388 ROUTE 22 READINGTON
REALTY HOLDINGS, LLC,

Plaintiff-Appellant,

v.

TOWNSHIP OF READINGTON,
TOWNSHIP COMMITTEE OF THE
TOWNSHIP OF READINGTON, SEWER
ADVISORY COMMITTEE OF THE
TOWNSHIP OF READINGTON,
BELLEMEAD DEVELOPMENT
CORPORATION, MERCK SHARP &
DOHME CORP., f/k/a MERCK &
CO., INC., READINGTON
COMMONS, LLC, C. DELVECCHIO,
SCOTT CARBONE, A. CARBONE,
ROLF ACKERMAN, VALLEY
NATIONAL BANK, RYLAND
DEVELOPERS, LLC, FALLONE
PROPERTIES, LLC, URB-FI
DEVELOPMENT CORP., FALLONE AT
SPRING MEADOW, LLC, and
COUNTRY CLASSICS LEGACY
READINGTON,

Defendants-Respondents,

and

5
LOT 3 DEVELOPMENT, LLC and
WINFIELD MANAGEMENT,

Defendants-Respondents,

and

RAMYZ TADROS, SHADIA SAMAAN,
WHITEHOUSE ATHLETIC
ASSOCIATION, WLADYSLAW
ZACIOS, JOANN ZACIOS, BETTY
ANN COEBLER, CODDINGTON HOMES
CO., INC., TOM JR. PROPERTY,
INC., and WPS REALTY, LLC,

Defendants.

388 ROUTE 22 READINGTON
REALTY HOLDINGS, LLC,

Plaintiff-Appellant,

v.

TOWNSHIP OF READINGTON,
TOWNSHIP COMMITTEE OF THE
TOWNSHIP OF READINGTON, SEWER
ADVISORY COMMITTEE OF THE
TOWNSHIP OF READINGTON,
BELLEMEAD DEVELOPMENT
CORPORATION, MERCK SHARP &
DOHME CORP., f/k/a MERCK &
CO., INC., READINGTON
COMMONS, LLC, C. DELVECCHIO,
SCOTT CARBONE, A. CARBONE,
ROLF ACKERMAN, VALLEY
NATIONAL BANK, LOT 3
DEVELOPMENT, LLC, FALLONE
PROPERTIES, LLC, URB-FI
DEVELOPMENT CORP., FALLONE AT
SPRING MEADOW, LLC, COUNTRY
CLASSICS LEGACY READINGTON,
and WINFIELD MANAGEMENT,

Defendants-Respondents,

6
 and

RYLAND DEVELOPERS, LLC,

Defendant-Respondent,

and

RAMYZ TADROS, SHADIA SAMAAN,
WHITEHOUSE ATHLETIC
ASSOCIATION, WLADYSLAW
ZACIOS, JOANN ZACIOS, BETTY
ANN COEBLER, CODDINGTON HOMES
CO., INC., TOM JR. PROPERTY,
INC., and WPS REALTY, LLC,

Defendants.

388 ROUTE 22 READINGTON
REALTY HOLDINGS, LLC,

Plaintiff-Appellant,

v.

TOWNSHIP OF READINGTON,
TOWNSHIP COMMITTEE OF THE
TOWNSHIP OF READINGTON, SEWER
ADVISORY COMMITTEE OF THE
TOWNSHIP OF READINGTON,
BELLEMEAD DEVELOPMENT
CORPORATION, MERCK SHARP &
DOHME CORP., f/k/a MERCK &
CO., INC., READINGTON
COMMONS, LLC, C. DELVECCHIO,
SCOTT CARBONE, A. CARBONE,
ROLF ACKERMAN, VALLEY
NATIONAL BANK, RYLAND
DEVELOPERS, LLC, LOT 3
DEVELOPMENT, LLC, URB-FI
DEVELOPMENT CORP., COUNTRY
CLASSICS LEGACY READINGTON,
and WINFIELD MANAGEMENT,

Defendants-Respondents,

7
 and

FALLONE PROPERTIES, LLC, and
TOLL NJ I, LLC,

Defendants-Respondents,

and

RAMYZ TADROS, SHADIA SAMAAN,
WHITEHOUSE ATHLETIC
ASSOCIATION, WLADYSLAW
ZACIOS, JOANN ZACIOS, BETTY
ANN COEBLER, CODDINGTON HOMES
CO., INC., TOM JR. PROPERTY,
INC., and WPS REALTY, LLC,

Defendants.

388 ROUTE 22 READINGTON
REALTY HOLDINGS, LLC,

Plaintiff-Appellant,

v.

TOWNSHIP OF READINGTON,
TOWNSHIP COMMITTEE OF THE
TOWNSHIP OF READINGTON, SEWER
ADVISORY COMMITTEE OF THE
TOWNSHIP OF READINGTON,
BELLEMEAD DEVELOPMENT
CORPORATION, MERCK SHARP &
DOHME CORP., f/k/a MERCK &
CO., INC., READINGTON
COMMONS, LLC, C. DELVECCHIO,
SCOTT CARBONE, A. CARBONE,
ROLF ACKERMAN, VALLEY
NATIONAL BANK, RYLAND
DEVELOPERS, LLC, FALLONE
PROPERTIES, LLC, URB-FI
DEVELOPMENT CORP., FALLONE AT
SPRING MEADOW, LLC, and
COUNTRY CLASSICS LEGACY
READINGTON,

8
 Defendants-Respondents,

and

LOT 3 DEVELOPMENT, LLC, and
WINFIELD MANAGEMENT,

Defendants-Respondents,

and

RAMYZ TADROS, SHADIA SAMAAN,
WHITEHOUSE ATHLETIC
ASSOCIATION, WLADYSLAW
ZACIOS, JOANN ZACIOS, BETTY
ANN COEBLER, CODDINGTON HOMES
CO., INC., TOM JR. PROPERTY,
INC., and WPS REALTY, LLC,

Defendants.

Argued December 2, 2014 – Decided May 5, 2015

On certification to the Superior Court,
Appellate Division.

Lawrence S. Berger argued the cause for
appellant (Berger & Bornstein, attorneys).

Christopher John Stracco argued the cause
for respondent Merck Sharp & Dohme Corp.
(Day Pitney, attorneys; Mr. Stracco and
Jennifer Gorga Capone, on the brief).

Robert A. Ballard argued the cause for
respondents Township of Readington, Township
Committee of the Township of Readington, and
Sewer Advisory Committee of the Township of
Readington, (Ballard & Dragan, attorneys).

Glenn S. Pantel argued the cause for
respondent Bellemead Development Corporation

9
 (Drinker Biddle & Reath, attorneys; Mr.
Pantel and Karen A. Denys, on the brief).

Deborah B. Rosenthal argued the cause for
respondents Winfield Management Corp. and
Lot 3 Development, LLC (Gebhardt & Kiefer,
attorneys; Robert C. Ward, on the brief).

Alexander G. Fisher argued the cause for
respondents Ryland Developers, LLC,
Readington Commons, LLC and Country Classics
Legacy at Readington, LLC (Mauro, Savo,
Camerino, Grant & Schalk, attorneys).

Thomas W. Sweet argued the cause for
respondents Fallone Properties, LLC and
Fallone at Spring Meadow, LLC.

Salvatore Alfieri submitted a letter in lieu
of brief on behalf of respondents Scott
Carbone, A. Carbone, and C. DelVecchio
(Cleary Giacobbe Alfieri Jacobs, attorneys).

JUSTICE ALBIN delivered the opinion of the Court.

Access to sewer service is vital to any major development

of property. In First Peoples Bank v. Township of Medford, we

held that a municipality cannot delegate the exercise of its

land-use authority to private parties by allowing them to

purchase and hoard unused sewer rights, thereby stifling

development by those who are prepared to build. 126 N.J. 413,

420-21 (1991). Instead, a “[t]ownship must retain sufficient

control to assure that sewer permits are either used or

repurchased so that others may use them.” Id. at 420.

Plaintiff 388 Route 22 Readington Realty Holdings, LLC is

seeking to construct a retail outlet and a restaurant but cannot

10
do so unless it secures access to 11,260 gallons per day (gpd)

of sewer capacity. At the time that plaintiff requested access

to that amount of sewer capacity from Readington Township,

approximately twenty private entities possessed 322,009 gpd of

unused capacity. The Township sold most of that unused capacity

on the private market as a means of financing the expansion of

sewer service from the Readington-Lebanon Sewerage Authority

(Sewerage Authority or Authority).

Plaintiff demanded that the Township -- in accordance with

a municipal ordinance governing allocation of sewer rights --

recapture sufficient sewer capacity to allow its construction

project to proceed. Consistent with its policy of not

repurchasing capacity, the Township declined to do so.

Plaintiff then filed a complaint in lieu of prerogative writs

against the Township and multiple private entities to compel the

transfer of allocated but unused sewer capacity. Plaintiff

claimed that the municipal ordinance addressing the allocation

of sewer capacity was invalid either on its face or as applied

by the Township.

On cross-motions for summary judgment by the parties, the

trial court affirmed the validity of the ordinance. The court,

however, determined that the Township’s blanket policy of not

recalling unused sewer capacity violated the dictates of First

Peoples. The court issued a writ of mandamus ordering the

11
Township to exercise its discretion under its ordinance and to

provide “a reasoned basis for refusing to recapture” the unused

capacity held by multiple private entities.

The Appellate Division reversed. Although the Appellate

Division agreed with the trial court that the Township “simply

relied on a policy of not re-taking sewer rights granted by

contract,” it concluded that plaintiff could not overcome the

presumption of validity that attaches to municipal decision-

making.

We now conclude that the Appellate Division erred. As the

trial court held, the Township cannot meaningfully exercise its

discretion whether to repurchase sewer capacity unless it

examines the reasons given by each entity for not using capacity

assigned to it. A policy of not recapturing unused sewer

capacity is the functional equivalent of a moratorium on

development. We approve of the sound approach taken by the

trial court, requiring the Township both to undertake a detailed

analysis of the unused capacity in the hands of private parties

and to explain whether any of that capacity can be recalled.

I.

We now review the relevant parts of the record on the

summary-judgment motions.

In December 2007, plaintiff purchased property and a

warehouse located at 388 Route 22 West in Readington Township.

12
The wastewater at that site is serviced by a septic tank that

allows for a maximum of 2000 gpd of capacity.1 The Township

rezoned plaintiff’s property from the Mixed-Use District to the

Business District, where retail and restaurant uses are

permitted. Plaintiff’s septic tank does not have sufficient

capability to process the wastewater generated for the uses

plaintiff proposes.

Plaintiff’s property is in an area serviced by the Sewerage

Authority, which manages wastewater for Readington and Lebanon

Townships. A sewer line is located directly in front of

plaintiff’s property. After the zoning change, plaintiff made

plans to redevelop the property for use as a restaurant and for

other retail purposes. Plaintiff’s proposed project requires

11,260 gpd of sewer capacity, which can only be accomplished by

connecting to the Authority’s sewer system. However, the

Township advised plaintiff that there was no available sewer

capacity to allocate to the project.

Around 1999, the Sewerage Authority began the expansion of

its plant capacity to allow the treatment of an additional

320,000 gpd of Readington’s wastewater. As a result of the

plant expansion, Readington Township was allocated, in all,

1 N.J.A.C. 7:9A-1.8 prohibits the use of a septic system to
manage a wastewater capacity of over 2000 gpd without permission
from the New Jersey Department of Environmental Protection.
13
approximately 939,000 gpd of sewer capacity. The Township

agreed to pay the Authority $6,024,704 for the increased

capacity. To finance the project, the Township relied on

private investment. The Township offered landowners the

opportunity to purchase portions of the 320,000 gpd of increased

capacity. In response to the offering, to name a few, Merck

Sharpe & Dohme Corporation purchased 141,900 gpd of capacity for

$2,196,764, Bellemead Development Corporation purchased 58,746

gpd of capacity for $1,106,187, and Readington Commons, LLC

purchased 7628 gpd of capacity for $143,635. The prior owner of

plaintiff’s property declined to invest in future sewer

capacity.

Each landowner purchasing future sewer capacity entered

into a sewer allocation agreement with the Township. The

Township’s “Sample Sewer Allocation Agreement,” in part,

provides:

Should Developer not begin construction on the
aforementioned properties within two (2) years
of the date of this agreement, then the
Township shall have the option to terminate
this agreement and all capacity assigned
herein under shall be returned to the Township
for reallocation at the discretion of the
Township.

The sample allocation agreement -- in compliance with the sewer

allocation ordinance -- places a temporal limit on the right of

a landowner to hold on to unused capacity.

14
 The allocation agreements with Merck, however, do not

follow the protocols in the ordinance or sample allocation

agreement. Merck’s 2003 and amended 2008 sewer allocation

agreements allow Merck to maintain unused sewer capacity for the

periods the Township extended Merck’s site plan approvals for

proposed construction in Readington. A past approval ran from

1988 to 2008, and the current approval runs from 2008 to 2018.

Merck’s agreements have barred the Township from recapturing

unused capacity for a period lasting at least fifteen years.2

The typical allocation agreement provides that the

landowner pay a certain sum for unused sewer capacity annually.

The full annual amount was due the third year after acquisition.

The first and second year payments were set at one-third and

then two-thirds of the full amount annually due. For example,

Merck agreed to pay $48,720 the first year, $97,440 the second

year, and then $146,160 annually for as long as the allocated

gallonage remained unused.

2 In 1988, Merck obtained preliminary site plan approvals for
projects to be constructed on its Readington property. The
approvals were set to expire in twenty years. In 2008,
Readington granted Merck a ten-year extension of its preliminary
site plan approvals, and the Township agreed that it would not
seek to recapture any unused sewer capacity until 2018.

15
 As of December 2010, of the 322,009 gpd of unused capacity,

141,900 was held by Merck, 66,060 by Bellemead,3 32,000 or 38,860

by Fallone Properties, LLC, and 30,125 by Ryland Developers,

LLC. Each remaining defendant held less than 10,000 gpd of

unused capacity. Merck’s unused capacity represents forty-four

percent of the entire capacity yielded from Readington’s portion

of the Authority’s plant expansion.

Defendants have not proceeded with construction projects

for a variety of reasons. One reason given by some defendants

has been the downturn in the economy.

By ordinance, the Township provides the methodology for

allocation of sewer capacity to landowners and for the

recapturing of unused capacity. Readington Township Code § 187-

26 states:

A. Order of priority; reserves.

(1) By existing joint agreement with the
Readington Lebanon Sewerage Authority,
the Township of Readington has a total
sewer allocation of 935,000 gpd. Upon
study by the Township, there is a limited
amount of sewer capacity in Readington

3 In 1988, Bellemead was granted preliminary and final site plan
approval for its “Halls Mills Farm” development project. The
approval was set to expire in eight years. Bellemead was
granted multiple extensions with the final extension set to
expire in July 2010. As a result of the Authority’s plant
expansion, Bellemead was allocated 58,746 gpd of capacity,
making its total capacity 110,746 gpd. Bellemead is using
44,686 of that gallonage, while 66,060 gpd -- the amount
required to operate its Halls Mills project -- remains unused.

16
 Township at the present time. Any
remaining capacity from Readington’s
portion of its allotted capacity in the
Readington Lebanon Sewerage Authority
sewer service area shall be allocated in
the following order of priority, subject
to availability:

(a) First, to those projects which
will enable the Township to meet its
future Mount Laurel affordable
housing obligations; and

(b) Secondly, to remedy those
properties within the sewer service
area which constitute an
“emergency” due to failing septic
systems.

(2) The Township reserves the right to
keep that portion of sewerage capacity
needed for “reserve” to meet NJDEP
requirements.

B. Allocations for sewer capacity from
Readington’s allotted portion of sewer
capacity shall be made by the Readington
Township Committee upon written agreement to
be entered into with the applicant, after the
allocation request has been reviewed and a
favorable recommendation has been made by the
Readington Township Sewer Advisory Committee.

C. In the case of those development projects
which have not received an approval by the
appropriate township board having
jurisdiction at the time a request for
gallonage is made, allocation agreements shall
provide that if the applicant does not make
formal application to the appropriate township
board within two years of approval of the
allocation, then the Township Committee may,
in its discretion, terminate the agreement.
If within two years after preliminary
approval, construction has not commenced, the
Township Committee may, at its discretion,
terminate the agreement. The agreement may be

17
 extended upon application to the Township if
there is a showing of good cause, at the option
of the Township Committee.

D. Applicants who received capacity
allocations under this section shall enter
into a sewer plant expansion developer
contribution agreement which is intended to
cover the Township’s share of the portion of
the costs of expanding the [Sewerage
Authority] treatment plant until such time as
those costs have been satisfied. . . .

E. Allocation of sewer capacity may not be
transferred from the owner without prior
approval of the Readington Township Committee,
upon review and recommendation of the
Readington Township Sewer Advisory Committee.

In March 2010, plaintiff wrote to the Readington Township

Committee and the Readington Sewer Advisory Committee requesting

that 388 Route 22 be permitted to hook up to the Authority’s

sewer system and gain access to approximately 10,000 gpd

capacity. Plaintiff expressed its belief that the Township

possessed sufficient sewer capacity to accommodate plaintiff’s

request. Alternatively, in the event that all sewer capacity

had been allocated, plaintiff stated that Readington should buy

back unused capacity from property owners who had “not made

formal application for development of [their] properties” or who

had “failed to commence construction of improvements within two

years after receipt of preliminary approval from the appropriate

Township Board.” In making this demand for the buyback of

unused capacity, plaintiff relied on paragraph C of the

18
Readington Township sewer allocation ordinance. The Readington

Township Committee replied that it did “not wish to terminate

any of its existing sewer agreements.”

On August 4, 2010, plaintiff’s attorney and professional

planner appeared before the Readington Sewer Advisory Committee,

describing plaintiff’s plan to develop the property at 388 Route

22 into retail space and a restaurant. They requested a hookup

to the sewer system and 11,260 gpd of wastewater capacity. The

Committee’s chairman replied that all capacity was either used

or reserved by property owners who financed the sewer plant’s

expansion. He stated that the Township was bound by contracts

with those property owners, although the ordinance allowed for

an owner to “voluntarily” give up capacity. The chairman made

clear that “the policy of this board and the policy of the

Township Committee has been not to take any capacity back.” The

chairman finally noted that his committee’s recommendation was

advisory and that the Township Committee would make the final

decision.

On September 20, 2010, plaintiff’s attorney appeared before

the Township Committee and requested 11,260 gpd of sewer

capacity for plaintiff’s project. He indicated that plaintiff

had contacted fifteen property owners, and none were interested

in selling their unused capacity. The attorney noted that

plaintiff would pay the holder its costs in acquiring and

19
retaining the unused capacity. Nevertheless, Committee members

expressed concern about breaching contracts with landowners

holding unused capacity.

By letter dated October 14, 2010, the Township Committee

advised plaintiff that there was no sewer capacity available.

The Committee invited plaintiff to present “a conceptual plan,

either through the Planning Board or Board of Adjustment,

whichever is applicable, . . . and that the application would be

conditioned on obtaining a suitable solution to wastewater.”

II.

A.

In November 2010, plaintiff filed its lawsuit seeking an

order compelling the Township to recapture 11,260 gpd of unused

sewer capacity for its project. Plaintiff’s complaint in lieu

of prerogative writs named as defendants Readington Township,

Bellemead, Merck, Readington Commons, and various other parties

listed in the caption. Among plaintiff’s claims are the

following: (1) as a result of Readington Township’s sewer

allocation ordinance, the Township has failed to retain control

over the allocation of sewer capacity and, in effect, has

delegated to certain private landowners the authority to prevent

other property owners from developing their land; (2) the

Township’s policy of not recapturing sewer capacity in the hands

of private entities is arbitrary, capricious, and unreasonable

20
under the ordinance; (3) the “Township has sufficient unused

capacity to allocate to [p]laintiff’s [p]roperty”; and (4) the

Township’s failure to allocate to plaintiff sewer capacity

amounts to an unconstitutional taking of its property.

Plaintiff’s claims, in essence, constitute a facial and as-

applied challenge to the validity of the municipal ordinance.

Plaintiff and defendants moved for summary judgment. The

trial court -- the Honorable Peter A. Buchsbaum, J.S.C. --

remanded the matter to the Township Committee to “review the

reasoning set forth in its prior rejection” of plaintiff’s

request for sewer capacity and to “provide a statement of

reasons as a supplement to its decision.”

In response to the remand order, the Township Committee

held a public hearing on July 5, 2011 and issued a resolution

denying plaintiff’s request for sewer capacity. The resolution

referenced letters received from defendants Merck, Readington

Commons, Bellemead, Fallone, and Urb-Fi Development Corp., which

recited their allocation agreements with the Township and

described the development status of their projects. Those and

other defendants objected to the transfer of any of their unused

capacity to plaintiff.

In justifying its refusal to recapture unused sewer

capacity, the Township Committee adopted in the resolution “the

full contents and arguments of the listed correspondence

21
submitted by various defendants.” The Township Committee gave

further reasons for the denial of plaintiff’s request: (1) all

excess capacity held by the Township is reserved for affordable

housing and emergencies; (2) the sewer ordinance allowed the

Township to extend its sewer allocation agreements with

defendants for “good cause” and, having done so, the Township

did not act unreasonably or arbitrarily; (3) several defendants

“have development approvals which fall under the protections

afforded by the Permit Extension act,” a separate reason

constituting “good cause” for continuing the allocation

agreements; (4) the previous owner of plaintiff’s property

expressed no “interest in acquiring sewer capacity at the time

the Township announced that it was available for purchase”; (5)

Township Committee members did not believe that it was “in the

public interest to force the termination of . . . existing sewer

agreements”; and (6) plaintiff had not determined whether the

holder of any unused capacity had an “interest in voluntarily

selling their capacity back to the Township.”

B.

The trial court held that Readington’s sewer ordinance

passed muster under First Peoples, supra, 126 N.J. 413. In a

written opinion, the court determined that the ordinance, on its

face, ensures “municipal control of sewer rights” and “provides

mechanisms” for the Township “to recapture sewer capacity.” In

22
reaching this decision, the court recognized “the tradition of

judicial deference” in upholding “broad standards for local

action in the land use area.”

On the other hand, the court found that the ordinance as

applied by the Township raised serious doubts about the

legitimacy of the Township’s sewer policy. Based on the

summary-judgment record, it accepted that plaintiff was

unsuccessful in its efforts to purchase sewer capacity from

defendant developers and that the policy of the Township, as

expressed by the Chairman of the Sewer Advisory Committee, “is

not to take capacity back.” The court described the Township’s

resolution as “pro forma” and a “brushoff” that “simply recites

what was received from [defendants’] counsel.” The resolution

failed to “contain a development by development analysis” or to

provide “a reasoned explanation” for the Township’s decision not

“to exercise discretion” to recapture any of the unused

capacity, which constituted one third of the entire flow

allocated to Readington. Further, the resolution failed to

analyze whether the Permit Extension Act, N.J.S.A. 40:55D-136.1

to -136.6, applied “to each and every development.” The court

held that “the ordinance requires the exercise of discretion,”

yet the Township followed a “flat policy” of refusing to assert

its right to recapture unused capacity. It construed First

Peoples as standing for the proposition that sewer rights

23
“cannot be held in perpetuity” and that at some point the

Township has a duty to recapture unused capacity.

According to the trial court, the Township’s obligation is

not dependent on whether plaintiff can “beg, borrow or cadge

capacity from others” but rather “to terminate agreements where

it is appropriate to do so.” It found that the Township’s no-

buy-back policy “functioned as a de facto moratorium on any

development which requires sewerage.”

As a remedy, the court ordered that the Township undertake,

within ninety days, a review of the unused sewer capacity listed

by plaintiff and provide “a reasoned basis” for not recapturing

that capacity.”4 It cautioned that agreements between the

Township and defendants granting extended sewer rights may not

control when a present holder of capacity has seemingly reserved

the right indefinitely and a “party seeking sewer allocation is

ready to imminently make use of those rights.” The court

acknowledged, however, that the application of the Permit

Extension Act might limit the Township’s discretion.

Plaintiff and several defendants appealed.

C.

4 The court excepted from the order defendants Country Classics
of Readington and Readington Commons because they evidently are
using their capacity.
24
 In an unpublished opinion, the Appellate Division affirmed

the Law Division’s rejection of plaintiff’s facial challenge to

the ordinance but reversed the Law Division’s finding that the

Township Committee did not give a reasoned basis for not

recapturing sewer capacity for plaintiff’s project.

Like the trial court, the appellate panel was satisfied

that the ordinance provided “standards sufficient to insure

‘fair and reasonable exercise’ of the discretion granted,”

quoting First Peoples, supra, 126 N.J. at 419. Nevertheless,

the panel suggested that the Township follow the guidance

offered in First Peoples and consider whether the Township and

property owners would be better served if the ordinance gave

“‘more specific standards defining the conditions under which’

good cause for extension will and will not be found, and

procedural requirements applicants interested in repurchase

should follow,” quoting id. at 423.

The panel, however, determined that the Township Committee

did not abuse its discretion in not recapturing unused sewer

capacity for plaintiff. The panel described plaintiff’s

development plan as “at best speculative” and “vague.” Although

the panel acknowledged that the Township “Committee simply

relied on a policy of not re-taking sewer rights granted by

contract,” it concluded that plaintiff did not “establish that

the denial of its request was arbitrary because it failed to

25
overcome the presumption of validity to which the decision is

entitled.” The panel based its conclusion on the fact that

defendants paid a “great expense” for their sewer rights and

that plaintiff failed to identify those who were holding unused

sewer capacity “without good cause for delay.” The panel also

faulted plaintiff for its “preference for litigation or

settlement over development and presentation of a more

definitive request.” Last, the panel declined to rule on

whether the sewer allocation agreements are protected under the

Permit Extension Act.

We granted plaintiff’s petition for certification. 388

Route 22 Readington Realty Holdings, LLC v. Twp. of Readington,

217 N.J. 287 (2014).

III.

A.

Plaintiff advances several arguments: (1) the sewer

allocation ordinance is invalid because it does not set forth

adequate standards to guide the Township in determining when

unused sewer capacity should be recaptured; (2) the Township’s

blanket refusal to recall unused sewer capacity violates

principles set forth in First Peoples, amounts to an

unconstitutional delegation of governmental authority over land

use into the hands of private parties, and constitutes an

unlawful moratorium on development; and (3) the Appellate

26
Division mistakenly ratified the Township’s policy on the

erroneous grounds that plaintiff “should have presented a more

definitive plan for its proposed development,” the holders of

sewer rights expended considerable money to acquire the

allocated capacity, and the Permit Extension Act expresses the

Legislature’s view that sewer agreements should be extended in

periods of economic downturn. With regard to the last of those

points, plaintiff emphasizes that developers who paid for

allocations of sewer capacity did so “with full knowledge of the

recapture rights of the Township under the Ordinance which, in

many, if not all, instances, were embodied in the allocation

agreements themselves.” Plaintiff also maintains that neither

the Township nor any court has determined whether any particular

sewer allocation attached to a development project is protected

by the Permit Extension Act. Last, plaintiff contends that the

Appellate Division erred by dismissing its claim that the

Township has understated its available capacity -- a claim that

has never been adjudicated.

B.

Defendants individually and collectively urge this Court to

affirm the Appellate Division. First, they submit that the

sewer allocation ordinance is valid on its face for the reasons

given by the Appellate Division: the ordinance allows the

Township to terminate or extend allocation agreements for good

27
cause, grants the Township authority over the transfer of sewer

rights, sets benchmarks for the recapture of capacity, and

establishes an order of priority for allocating available

capacity.

Defendants also maintain that the Township Committee did

not act unreasonably or arbitrarily in declining to recall sewer

capacity allocated to property owners who funded the sewer plant

expansion, who have approved site plans, and who paid and

continue to pay for reserved capacity. Defendants emphasize

that plaintiff had purchased 388 Route 22 with notice that sewer

capacity was unavailable, had no definitive plan to develop the

property, and made no application for land-use approvals.

Defendants contend that the Township rightly relied on the

policy objective of “the Permit Extension Act as well as the

explicit protections afforded by the Act in finding good cause

to extend and not recapture the sewer allocations,” particularly

given the downturn in the economy that stalled development

projects. Defendant Merck, in particular, claims that the

Township is bound to honor its contractual obligations and that

an impairment of those obligations would violate its rights.

Merck points out that its agreement bars the Township from

recalling sewer capacity before Merck’s site plan approvals

expire in 2018. Merck maintains that any recapture of its

“unused sewer capacity prior to that time would unlawfully

28
vitiate Merck’s site plan approvals, resulting not only in a

breach of its contracts with the Township, but also an

unconstitutional taking.”

Finally, various defendants represent that they are

currently using or in the process of using their allocated sewer

capacity because their projects are either completed or

underway.

IV.

A.

Our primary task here is to resolve issues of law: whether

the Readington sewer allocation ordinance is facially valid, and

whether the ordinance as applied by the Township Committee

constitutes an improper delegation of land-use authority to

private parties in violation of First Peoples. In construing

the meaning of a statute, an ordinance, or our case law, our

review is de novo. Farmers Mut. Fire Ins. Co. of Salem v. N.J.

Prop.-Liab. Ins. Guar. Ass’n, 215 N.J. 522, 535 (2013). “We

need not defer to the trial court or Appellate Division’s

interpretative conclusions” unless they are correct. Murray v.

Plainfield Rescue Squad, 210 N.J. 581, 584 (2012).

This appeal comes to us from a grant of summary judgment in

favor of defendants, resulting in a dismissal of plaintiff’s

action in lieu of prerogative writs. In this procedural

posture, plaintiff, as the non-moving party, is entitled to “the

29
benefit of all favorable evidence and inferences presented in

the record before us.” Murray, supra, 210 N.J. at 584-85; see

also Gormley v. Wood-El, 218 N.J. 72, 86 (2014) (“A court should

grant summary judgment only when the record reveals ‘no genuine

issue as to any material fact’ and ‘the moving party is entitled

to a judgment or order as a matter of law.’” (quoting R. 4:46-

2(c))). Accordingly, the summary-judgment record must be viewed

“through the prism of [plaintiff’s] best case.” Gormley, supra,

218 N.J. at 86.

With those principles in mind, we begin with a review of

the law that controls the distribution of sewer rights.

B.

The Legislature has the constitutional authority to

delegate to municipalities the “police power” to enact

ordinances governing “the nature and extent of the uses of

land,” N.J. Const. art. IV, § 6, ¶ 2, and the Legislature has

done so through the passage of the Municipal Land Use Law

(MLUL), N.J.S.A. 40:55D-1 to -163. The constitutional power

delegated to municipalities to enact land-use regulations,

however, is not unlimited. That power “must be exercised for

the general welfare,” and “regulations that conflict with the

general welfare . . . are unconstitutional.” S. Burlington

Cnty. N.A.A.C.P. v. Twp. of Mt. Laurel, 92 N.J. 158, 208 (1983)

(Mt. Laurel II); see also S. Burlington Cnty. N.A.A.C.P. v. Twp.

30
of Mt. Laurel, 67 N.J. 151, 175 (1975) (Mt. Laurel I) (noting

that police power exercised by municipality must promote “the

general welfare”). Consistent with this fundamental tenet, one

of the express purposes of the MLUL -- indeed the first

enumerated purpose -- is “[t]o encourage municipal action to

guide the appropriate use or development of all lands in this

State, in a manner which will promote the public health, safety,

morals, and general welfare.” N.J.S.A. 40:55D-2(a).

Like all ordinances, Readington’s sewer allocation

ordinance is entitled to a presumption of validity, and the

“party challenging the ordinance bears the burden of overcoming

that presumption.” See Rumson Estates, Inc. v. Mayor & Council

of Fair Haven, 177 N.J. 338, 350 (2003). An ordinance must be

“‘liberally construed’” in favor of its validity. Id. at 351

(quoting N.J. Const. art. IV, § 7, ¶ 11). Our charge is to pass

not on the wisdom of a municipal ordinance, but only on whether

it complies with the Constitution and the MLUL. See ibid.

Courts must also pay deference to the decision-making of

municipal bodies, recognizing that they possess “peculiar

knowledge of local conditions [and] must be allowed wide

latitude in the exercise of delegated discretion.” Kramer v.

Bd. of Adjustment, 45 N.J. 268, 296 (1965). A municipal land-

use determination should not be set aside unless the public body

has engaged in “a clear abuse of discretion.” Id. at 296-97.

31
If there is “substantial evidence to support” the municipal

decision, a court should not interfere by substituting its

judgment. Id. at 296.

Specific to this case, “a sewer ordinance should withstand

a challenge unless it is inequitable, unfair, or lacks adequate

standards to insure the fair and reasonable exercise of

municipal authority.” First Peoples, supra, 126 N.J. at 419

(citing 5 McQuillin, The Law of Municipal Corporations § 18.12

at 453 (3d ed. 1989)). Nevertheless, “[t]he municipal

obligation is to provide a level playing field so that

applicants are treated equally.” Ibid.

In assessing the validity of Readington’s sewer ordinance

and the Township’s application of that ordinance, we are not

addressing novel issues. We are returning to issues that we

reviewed in First Peoples, and therefore a discussion of that

case will help guide us here.

In First Peoples, Medford Township financed the expansion

of its sewage plant through the sale of sewer permits that were

available on an equal basis to all developers. Id. at 415-17.

Medford’s sewer ordinance gave property owners “the option to

purchase connection permits before obtaining municipal land use

approvals.” Id. at 416. The plaintiff bank declined the

opportunity to do so. Id. at 417. Later, when the plaintiff

wanted to develop its property, its request for several sewer

32
permits was denied because all permits had been allocated. Id.

at 418. The plaintiff then instituted a lawsuit, challenging

the validity of the ordinance and seeking an order directing

Medford to repurchase unused permits.5 Ibid.

Our focus in First Peoples was whether the ordinance

articulated “adequate standards to guide the exercise of

municipal discretion when considering the repurchase of

permits.” Id. at 421. Ultimately, we concluded that the

“ordinance, although not exquisitely drafted, contain[ed]

sufficient standards to withstand the [plaintiff’s] challenge.”

Id. at 422. We gleaned from various clauses of the ordinance,

including one that provided that “reservation of capacity is not

irrevocably committed to a proposed user,” that Medford “when

exercising its right of repurchase, must consider the public

health, safety, and welfare, a reasonable and equitable

allocation of costs, and the allowance of moderate growth.” Id.

at 422-23. Importantly, we considered Medford’s sewer ordinance

to be far from a model ordinance. Id. at 423. We stated that

it would better serve both the Township and
property owners if it contained more specific
standards defining the conditions under which
permits would be subject to repurchase. Such
standards could appropriately include the
criteria the municipality will apply when
exercising its rights to repurchase permits

5 The plaintiff also unsuccessfully sought an order requiring
Medford to expand the capacity of the sewage plant. Id. at 418,
423-24.
33
 and a formula for more closely correlating the
issuance of building permits and sewer
permits. In the absence of such standards,
the municipality runs the risk that in another
case the ordinance might be found vulnerable
as applied.

[Ibid.]

Significantly, in First Peoples, no one disputed that “the

Township must retain sufficient control to assure that sewer

permits are either used or repurchased so that others may use

them.” Id. at 420. We declared that “[w]ithout an adequate

repurchase provision, the ordinance could result in the improper

delegation of access to the sewer system to private landowners

who, by purchasing permits, could prevent other owners from

developing their land.” Id. at 420-21.

We nevertheless rejected the plaintiff’s as-applied

challenge to the ordinance, finding nothing to suggest that

Medford had “acted arbitrarily in deciding whether to exercise

its repurchase option.” Id. at 423. We specifically noted that

Medford “had repurchased approximately fifteen permits and that

it was considering the repurchase of others,” and that the

record did not indicate that the plaintiff “had made demand on

Medford to repurchase specific permits.” Ibid. For those

reasons, we viewed the plaintiff’s “attack on the repurchase

provision as essentially facial.” Ibid.

34
 With those principles in mind, we now turn first to the facial

challenge to Readington’s sewer allocation ordinance and then its

application of the ordinance to this case.

V.

A.

We reject plaintiff’s challenge to the ordinance itself.

We find that Readington’s sewer allocation ordinance provides

“adequate standards to guide the exercise of municipal

discretion when considering the repurchase of permits.” First

Peoples, supra, 126 N.J. at 421.

First, the ordinance sets temporal limits on the right of a

property owner to keep unused sewer capacity. The Township has

the discretion to terminate an allocation agreement and

repurchase capacity if a developer (1) does not make application

for development approvals within two years of having received

sewer capacity or (2) has not begun construction within two

years after having received preliminary approval. Readington

Code, supra, § 187-26C. Second, the ordinance provides that an

allocation agreement “may be extended upon application to the

Township if there is a showing of good cause, at the option of

the Township Committee.” Ibid.

As was true in First Peoples, supra, the ordinance here was

not “exquisitely drafted.” See 126 N.J. at 422. Nevertheless,

we must “‘liberally construe[]’” the ordinance in favor of its

35
validity. Rumson Estates, supra, 177 N.J. at 351 (quoting N.J.

Const. art. IV, § 7, ¶ 11). We presume that the ordinance’s

drafters intended certain practical considerations to be taken

into account by the Township Committee in exercising its

discretion whether to terminate an allocation agreement or

extend one based on good cause. Such considerations would

include (1) the length of time a landowner has possessed unused

sewer capacity, (2) the development plans of the landowner to

tap some or all of the unused capacity and the imminence of that

happening, (3) the complexity of the development project and the

importance of the project to the community, (4) whether the

economy has retarded economic development, (5) proposed

development projects by others that cannot proceed because of

unavailability of sewer capacity and the importance of those

projects to the community, and (6) any other relevant factors.

Plans for the treatment of wastewater is a critical

component of any development project, for without sewer approval

no development project can go forward. Field v. Franklin Twp.,

190 N.J. Super. 326, 328-35 (App. Div.), certif. denied., 95

N.J. 183 (1983). This ordinance, as written, in no way suggests

that the Township as a matter of law has delegated its authority

to control land use -- and more specifically to control access

to sewer capacity -- to private parties. The ordinance suggests

36
that access to sewer capacity is to be managed by the Township

Committee for the general welfare of the community.

We conclude that the sewer allocation ordinance -- when

read with the commonsense considerations implied within the

enactment -- provides adequate guidelines for the Township to

exercise its discretion whether and when to repurchase sewer

capacity.

We next turn to plaintiff’s argument that the ordinance, as

applied, violates the dictates of First Peoples.

B.

In First Peoples, supra, we did not find evidence that

Medford had acted arbitrarily in deciding whether to exercise

its option to repurchase sewer capacity. 126 N.J. at 423. That

was so because the “Township had repurchased approximately

fifteen permits” and “was considering the repurchase of others”

and because the plaintiff had not demanded that Medford

“repurchase specific permits.” Ibid. We noted that had Medford

acted arbitrarily, “a court might direct it to exercise its

option to repurchase.” Ibid. That scenario, envisioned by our

Court, presents itself here.

Based on the summary-judgment record before us, it is

apparent that, despite its ordinance, Readington maintains a

blanket policy of not repurchasing unused sewer capacity

allocated to developers. The Chairman of the Sewer Advisory

37
Committee told plaintiff’s attorney that “the policy of this

board and the policy of the Township Committee has been not to

take any capacity back.” The Chairman’s statement reinforced

the Township attorney’s earlier communication to plaintiff that

the Township Committee did “not wish to terminate any of its

existing agreements.”

Approximately one-third of Readington’s entire sewer

capacity -- 322,009 gpd -- is not in use. That unused capacity

is largely in the hands of a relatively small number of private

entities. Currently, Merck has 141,900 gpd and Bellemead has

66,060 gpd of unused sewer capacity -- capacity allocated for

more than a decade but still not in use. Both companies

received approvals for their development projects in the late

1980s. That sewer capacity was allocated by contracts to

private entities that financed the plant expansion project and

was paid for at considerable expense cannot be the end of the

analysis. Otherwise, the ordinance requiring Readington to

exercise its discretion in recapturing sewer capacity would be

meaningless. Those entities that purchased unused capacity did

so knowing that the ordinance placed potential temporal limits

on how long that capacity could be held in reserve and gave the

Township the authority to recapture unused capacity for

distribution to developers with projects ready to go. The

ordinance made clear that sewer rights were not to be held in

38
perpetuity. That other landowners did not participate in

purchasing capacity to help finance the plant expansion may

indicate nothing more than that they did not have a need for

sewer capacity at the time.

The Township Committee invited plaintiff to present “a

conceptual plan” of its development project to the appropriate

land-use board, adding “that the application would be

conditioned on obtaining a suitable solution to wastewater.”

But given the Township’s stated policy not to recapture sewer

capacity, the presentation of that plan would have constituted

an exercise in futility. A developer may be hesitant to expend

great sums of money to secure preliminary approvals for a

development project that has no prospect of securing necessary

sewer capacity. Plaintiff can hardly be faulted for deciding

that judicial relief was the only viable option.

Plaintiff identified the entities that were holding unused

capacity and contacted approximately fifteen of those entities,

inquiring whether they would relinquish some of their unused

capacity. The opposition to this lawsuit is the ultimate

testament to defendants’ unwillingness to freely give back any

of their unused capacity.

The Appellate Division placed on plaintiff the burden of

showing that defendant developers were acting “without good

cause for delay” by not voluntarily surrendering their sewer

39
rights for the fair value offered by plaintiff. But that

defeats the purpose of the ordinance and of the policy of the

MLUL, which is to have the Township exercise its decision-making

authority in land-use matters. One of the objectives of the

sewer allocation ordinance was to ensure that the Township

exercised discretion, when appropriate, to recapture unused

capacity and to avoid “the improper delegation of access to the

sewer system to private landowners who, by purchasing permits,

could prevent other owners from developing their land.” See

First Peoples, supra, 126 N.J. at 420-21. The MLUL requires

that townships exercise their authority to develop lands “in a

manner which will promote the . . . general welfare,” N.J.S.A.

40:55D-2(a), and the repurchase provision of the sewer

allocation ordinance was a means to that end. We concur with

the trial court that the Township’s obligation to terminate

agreements, when appropriate, was not dependent on whether

plaintiff could “beg, borrow or cadge capacity from others.”

The Township’s no-buy-back policy has rendered the ordinance

toothless, and, as the trial court determined, “functioned as a

de facto moratorium on any development which requires sewerage.”

We substantially agree with the conclusions that Judge

Buchsbaum reached from the summary-judgment record. In

declining to recapture unused sewer capacity for plaintiff’s

project, the Township in its resolution incorporated by

40
reference, wholesale and uncritically, the arguments of the

developer defendants. That approach suggests that the Township

had effectively delegated its land-use authority to private

entities. The resolution failed to analyze development by

development why none of the unused capacity -- after years of

lying idle -- could be recaptured.

The resolution also failed to analyze which developments,

if any, fall under the dictates of the Permit Extension Act,

N.J.S.A. 40:55D-136.1 to -136.6. The Permit Extension Act tolls

the expiration date of certain land-use approvals for a period

of time “due to the present unfavorable economic conditions.”

N.J.S.A. 40:55D-136.2(m). The Act covers “an agreement” between

a developer and municipality “for the use or reservation of

sewerage capacity.” N.J.S.A. 40:55D-136.3. Admittedly, the

Permit Extension Act would take precedence over an ordinance and

therefore might limit the Township’s discretion.

Last, and most significantly, the resolution did not give a

“reasoned explanation” for the Township’s failure to exercise

discretion, as required by its own ordinance. The Township and

defendant developers cannot contract away their obligation to

comply with the law -- whether it is First Peoples, the MLUL, or

the Readington sewer ordinance. Private parties do not have a

right to hoard unused sewer capacity indefinitely and therefore

effectively impose a moratorium on development. As a best

41
practice, we suggest that the Township maintain updated records

of the unused capacity held by private parties so that it can

exercise its discretion, when necessary, with current

information. In addition, a property owner seeking capacity

should have access to data that is necessary to making an

informed decision whether to proceed with a development plan.

We adopt the thoughtful approach taken by Judge Buchsbaum.

We order the Township Committee, within ninety days, to

undertake a critical review of the unused capacity identified by

plaintiff and to determine whether any such capacity can be

recaptured from defendants to satisfy plaintiff’s development

needs. The Committee should consider the factors outlined

earlier to guide the exercise of its discretion. We add that if

a property owner, presently holding a substantial amount of

unused capacity, has moved its business operations to another

municipality and there is no realistic prospect that approvals

previously acquired will result in a project coming to fruition,

that factor must be given significant weight in deciding whether

to recall capacity.

Last, we address when a party has a sufficient stake to

purchase unused capacity. Needless to say, the Township should

not recapture unused sewer capacity from one party and allow its

sale to another party that is unlikely to put that capacity to

use in the near future. A party that has received preliminary

42
site plan approval obviously will have a stake in requesting

capacity, but we are loath to impose that as the necessary test

because of the significant costs involved in securing such an

approval. Here, the Township offered plaintiff the opportunity

to present a concept plan to the appropriate board.6 If such a

plan is satisfactory, and assuming that sufficient unused

capacity is available, then the Township could commence the

process of recapturing capacity at plaintiff’s expense and hold

that capacity in escrow, contingent on plaintiff securing all

necessary approvals. If plaintiff does not secure the necessary

approvals, then the Township can sell that capacity to another

developer that needs it for an imminent project, or resell it to

the original owner.

VI.

For the reasons given, we affirm the Appellate Division’s

judgment upholding the trial court’s dismissal of plaintiff’s

6 The concept plan suggested by the Township resembles the
informal review available under N.J.S.A. 40:55D-10.1. A
planning board is permitted to conduct “an informal review of a
concept plan for a development for which the developer intends
to prepare and submit an application for development.” N.J.S.A.
40:55D-10.1. An applicant can “benefit from the exchange of
ideas and expression of the board’s preferences” without having
to “expend[] the significant amounts of money required in the
preparation of development plans and applications.” 36 New
Jersey Practice, Land Use Law § 13.10 (David J. Frizell & Ronald
D. Cucchiaro) (3d ed. 2014). However, importantly, neither the
board nor the applicant are bound by the discussions. N.J.S.A.
40:55D-10.1. An applicant must still proceed through the
ordinary approval process.
43
facial challenge to the Readington Township sewer allocation

ordinance. We reverse, however, the Appellate Division’s

judgment rejecting the trial court’s determination that the

ordinance, as applied, violates principles espoused in First

Peoples. The Township Committee shall undertake a critical

review of the unused capacity identified by plaintiff and

determine within ninety days whether any capacity can be

recaptured to satisfy plaintiff’s development needs. We remand

to the trial court for proceedings consistent with this opinion.

CHIEF JUSTICE RABNER and JUSTICES PATTERSON, FERNANDEZ-
VINA, and SOLOMON join in JUSTICE ALBIN’s opinion. JUSTICE
LaVECCHIA and JUDGE CUFF (temporarily assigned) did not
participate.

44
 SUPREME COURT OF NEW JERSEY

NO. A-63 SEPTEMBER TERM 2013

ON CERTIFICATION TO Appellate Division, Superior Court

388 ROUTE 22 READINGTON
REALTY HOLDINGS, LLC,

Plaintiff-Appellant,

v.

TOWNSHIP OF READINGTON, ET AL.,

Defendants-Respondents,

and

MERCK SHARP & DOHME CORP.,
f/k/a MERCK & CO., INC.,

Defendant-Respondent,

and

RAMYZ TADROS, ET AL.,

Defendants.

DECIDED May 5, 2015
Chief Justice Rabner PRESIDING
OPINION BY Justice Albin
CONCURRING/DISSENTING OPINIONS BY
DISSENTING OPINION BY
AFFIRM IN PART/
REVERSE IN
CHECKLIST
PART/
REMAND
CHIEF JUSTICE RABNER X
JUSTICE LaVECCHIA -------------------- --------------------
JUSTICE ALBIN X
JUSTICE PATTERSON X
JUSTICE FERNANDEZ-VINA X
JUSTICE SOLOMON X
JUDGE CUFF (t/a) -------------------- --------------------
TOTALS 5