(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 interests of brevity, portions of any opinion may not have been summarized).
Argued March 6, 2007 -- Decided May 30, 2007
LONG, J., writing for a unanimous Court.
In this appeal, the Court must determine whether the Commissioner of the Department of Environmental Protection may deny certification to University Cottage Club as a tax-exempt historic site based on standards adopted after its petition for tax-exempt status was perfected. Cottage, a not-for-profit corporation, is a private eating club that is not officially part of Princeton University but is affiliated with its students. It has operated at its current location in Princeton Borough since 1906. The Cottage building was designed by the renowned architect Charles Follen McKim and is considered architecturally significant. The DEP’s Office of Historic Preservation administers the tax-exempt historic-site certification process.
In 1998, Cottage applied for a property tax exemption as an historic site. In response, the DEP sent a letter to Cottage advising, among other things, that in order to qualify for tax-exempt status Cottage would have to provide public access to the property. The letter stated that in determining what it means to be open to the public, a “good guide for the minimum” was to be found in the National Park Service’s materials, which were enclosed with the letter, and which provided that the property must be open to the public at least twelve times per year. Cottage passed a resolution stating that the club would be open to the public for visitation on no less than twelve days, and submitted evidence to the DEP of its efforts in that regard. After multiple communications over the ensuing years regarding the extent of public access provided by Cottage, in October of 2003, the Commissioner denied the application, stating that he intended to promulgate regulations that would require more extensive public access in order to qualify for tax-exempt status as an historic site. Although no regulations were adopted, effective December 2004, the Legislature enacted a law establishing more rigorous requirements for those seeking tax-exempt status for an historic site, including public access for at least ninety days per year. The amendments require cancellation of historic site certification if a non-profit corporation that owns the building certified after the effective date fails to comply with the provisions. Cottage appealed the Commissioner’s denial, and the Appellate Division affirmed. The Court granted certification.
HELD: Public access is an essential component of historic-site tax exemption. However, because Cottage satisfied all of the relevant standards in effect when it perfected its petition for tax-exempt status, Cottage was entitled to certification as a tax-exempt historic site.
1. Generally, courts afford substantial deference to an agency’s interpretation of a statute that it is charged with enforcing, although such deference is not extended for the agency’s interpretation of a strictly legal issue. (pp. 13-14)
2. The amendment to N.J.S.A. 54:4 to require more substantial public access applies by its own terms only when tax-exempt certification occurs after the Act’s effective date of December 22, 2004. The new amendments therefore apply only to applications after the effective date. The Court must address whether the Commissioner’s October 2003 denial of Cottage’s application was valid. If not, Cottage is entitled to have its application evaluated under the standards in effect at the time of the administrative adjudication. (pp. 14-15)
3. The long-standing administrative interpretation of N.J.S.A. 54:4-3.53 recognized a public-access requirement as a prerequisite to tax-exempt status, an interpretation that is entitled to considerable weight. Moreover, public access is implicit in the historic designation for tax-exempt purposes, since the sole beneficiary of historic preservation is the public, and the reduction in tax revenues could not be justified without public access. (pp. 15-18)
4. The Court examines its decision in Town of Morristown v. Woman’s Club of Morristown and Attorney General of New Jersey, 124 N.J. 605 (1991), which held that a property did not have to be used in a particular way to qualify for the historic site tax exemption; it did not, however, eliminate the public access condition of the historic site tax exemption. Use and public access are distinct concepts. The Legislature intended public access to be a fundamental aspect of an historic site tax exemption. (pp. 19-20)
5. Cottage argues that the Commissioner’s decision to jettison the prior public access standards and apply new ones was invalid because it was administrative rulemaking that required notice and an opportunity to comment. In Metromedia, Inc. v. Director, Division of Taxation, 97 N.J. 313 (1984) the Court enumerated six factors to determine whether an agency determination constitutes rulemaking. (pp. 20-22)
6. Here, the Commissioner’s decision to reject what he had previously declared to be the applicable twelve-day public access standard pending promulgation of his new and more stringent access requirement and to deny all pending applications that did not meet undisclosed “objectively reasonable standards” has all the earmarks of rulemaking. The new scheme was intended to apply generally and uniformly to all similarly situated persons. Moreover, it was intended as a statement of a new administrative position that differed materially the agency’s prior, clear position. It was, in effect, a decision on a regulatory policy, and therefore constitutes administrative rulemaking. (pp. 22-23)
7. The Commissioner’s decision here does not satisfy the exceptions from formal rulemaking requirements announced in prior Court decisions. (pp. 23-28)
8. Cottage was entitled to adjudication based on the regulations and standards the DEP had imposed upon it and that Cottage had satisfied. The DEP’s denial of Cottage’s application was arbitrary, and cannot stand. (p. 28)
The judgment of the Appellate Division is REVERSED, and the matter is REMANDED.
CHIEF JUSTICE ZAZZALI and JUSTICES LaVECCHIA, ALBIN, WALLACE, RIVERA-SOTO and HOENS join in JUSTICE LONG’s opinion.
SUPREME COURT OF NEW JERSEY
A-
65 September Term 2006
UNIVERSITY COTTAGE CLUB OF PRINCETON NEW JERSEY CORP.,
Petitioner-Appellant,
v.
NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION,
Respondent-Respondent.
THE BOROUGH OF PRINCETON,
Intervenor-Respondent.
Argued March 6, 2007 – Decided May 30, 2007
On certification to the Superior Court, Appellate Division.
Thomas M. Olson argued the cause for appellant (McKirdy and Riskin, attorneys; Mr.
Olson and L. Jeffrey Lewis, on the briefs).
Jane F. Engel, Deputy Attorney General, argued the cause for respondent (Stuart Rabner,
Attorney General of New Jersey, attorney; Patrick DeAlmeida, Assistant Attorney General, of counsel).
Michael J. Herbert argued the cause for intervenor-respondent (Herbert, Van Ness, Cayci &
Goodell, attorneys).
JUSTICE LONG delivered the opinion of the Court.
The University Cottage Club of Princeton (Cottage) here challenges a final decision by
the Commissioner of the Department of Environmental Protection (Commissioner) denying its petition for
certification as a tax-exempt historic site. The Commissioner based his decision on an
intention to promulgate more stringent rules governing public access to such sites and,
in the interim, determined to deny all applications that did not meet “objectively
reasonable standards of public accessibility.” Cottage appealed, claiming among other things that public
access is not a requirement for historic-site tax exemption. The Appellate Division affirmed.
We hold that public access is an essential component of historic-site tax exemption
but that the Commissioner acted arbitrarily in the denial of Cottage’s application. Because
Cottage satisfied all of the relevant standards in effect when its petition was
perfected, it was entitled to tax-exempt certification. We therefore reverse.
Cottage, a not-for-profit corporation under I.R.C. § 501 (c)(3), is one of eleven private eating clubs. See footnote 1 Although not officially part of Princeton University, the eating clubs have traditionally been affiliated with Princeton’s students. Cottage has operated at its current location in Princeton Borough (the Borough) since 1906. According to its constitution, “this privately owned and operated club is entirely for the use of its members and their accompanied guests, and is not open to non-members or the public.”
The Cottage building, completed in 1906, is considered architecturally significant. Designed by the renowned, early twentieth century architect Charles Follen McKim, it is an example of the “club” style of architecture of the late-Victorian era.
In 1998, Cottage decided to apply for a property tax exemption as an historic site pursuant to N.J.S.A. 54:4-3.52. It initiated the process by letter to the Department of Environmental Protection (DEP), Office of Historic Preservation (OHP), which administers the tax-exempt historic-site certification process. In a return letter dated January 13, 1999, the OHP agreed that Cottage “is a key contributing building within the Princeton Historic District” and is “architecturally significant.” It also informed Cottage that additional information was needed regarding its status as a non-profit organization, its commitment to the preservation of the building, its policy of non-discrimination, and its accessibility by the public.
In terms of public access, the OHP letter stated:
2. Open to the public, The property is not currently open to the public. This needs to be addressed. I am attaching a copy of one of the more recent “open to public notices” and copies of National Park Service “guidance” on what it means to be open to the public[,] required when federal funds go into restoring a historic property, but serves as a good guide for the minimum.
The included guidance material was a portion of the National Park Service’s Historic Preservation Fund Grants Manual, which addressed the need for public access when federal funds are invested in an historic property: See footnote 2
d. Public Access. “Public Access” means that the general public can see the results of the HPF [Historic Preservation Fund] investment of public funds.
1) As long as all the HPF-assisted work is clearly visible from a public
right-of-way, public access to the property is not required. Public access is also
not required when interior development work (such as electrical or plumbing repairs) would
not be visible if general access to the property were to be provided.
(However, the interior of a property acquired with grant assistance must be open
to the public at least 12 days a year if the interior has
any architecturally or historically significant features.)
In closing, the OHP explained “[o]nce these items have been addressed, and the
municipality has been given an opportunity to comment on your petition, the Historic
Preservation Office will process your request for certified historic site (tax exempt) status
to the Commissioner of New Jersey Department of Environmental Protection for final deliberation.”
In April 1999, the Board of Governors of Cottage passed a resolution “to
confirm certain facts in order to facilitate said historic site designation.” The resolution
stated that “the club is committed to the preservation of the Clubhouse as
a historic site”; “strictly adheres to a policy that does not tolerate illegal
discrimination or harassment”; and “shall be open to the public for visitation on
no less than twelve days, to be specified during each calendar year. Those
days shall be published in a local newspaper each year.” Cottage also submitted
evidence of its non-profit status.
In September 1999, Cottage was listed in the New Jersey Register of Historic
Places, and, in November 1999, in the National Register of Historic Places.
See footnote 3
Over
two years after Cottage had supplied all of the information sought by the
OHP, the OHP wrote again to Cottage in June 2001:
Under provisions of the Laws of New Jersey (1962, Chapter 92, as amended
1964, Chapter 61), the Commissioner of the Department of Environmental Protection can make
historic properties tax exempt from local property taxes if the property meets the
following conditions:
1. Listed in the New Jersey Register of Historic Places.
2. Owned by a non-profit corporation; with a specific provision to preserve the building.
3. Open to the public on a regular basis.
4. Non-discriminatory in regard to race, creed, color or religion.
I am enclosing a list of items, which must be sent to this
office before tax-exempt status can be determined. (There is no application form). All
materials should be sent to the above address. Upon receipt of the requested
information, we will begin to process your application.
The list of items included a petition requesting tax-exempt status to be signed
by the officers of the corporation and returned to OHP along with evidence
that the site:
a. Will be preserved by the said corporation.
b. Will be freely available to all people, without discrimination as to race, creed,
color, or religion, under reasonable terms and conditions, such as a nominal fee,
which would insure the preservation, and maintenance of the site.
c. Will be available to the public on a regular basis.
In essence, only the petition needed to be supplied because Cottage had previously
satisfied the other requirements.
In July 2001, Cottage submitted “its petition to be declared a tax-exempt site,”
including a copy of the resolution approved by its Board in April 1999,
as well as copies of published notices confirming that the Club had been
“open for public visitation and appreciation” for six hours on twelve days in
1999-2000, for five hours on ten days and for two hours on two
days in 2000-2001, and that it intended to be open for five hours
on twelve days in 2001-2002.
The OHP then alerted the Borough of Cottage’s application, and requested written comments.
In August, 2001, the mayor responded:
Thank you for apprising me of the petition filed for Historic Site exempt
status by the University Cottage Club at 51 Prospect Ave. in Princeton Borough.
You have asked me to comment on whether I believe that conditions have
been met for granting Certified Historic Site status.
I do not believe that Cottage Club has.
First, you should recognize that being “non-profit” does not automatically qualify an organization
for property tax exemption. In Princeton Borough, our Assessor has always expected a
“non-profit” organization to have a distinct community, educational, and/or charitable purpose before granting
such exemption. The University eating clubs on Prospect Ave. have applied for such
exemption in the past and our Assessor has always turned them down. (They
are off-campus clubs and clearly not part of the University.)
Secondly, your criteria says that: “The property must be open to the public
on a regular basis.” This is clearly not the case. In a “Statement
of Princip[le]s” adopted on May 11, 1994 and recently reconfirmed, the InterClub Council
and the Graduate InterClub Council affirmed that: “The Upperclass Eating Clubs are private
organizations for the sole use of their members and their invited guests.”
While occasionally the Clubs are rented out for weddings or private parties, I
hardly think that this qualifies them as “open to the public on a
regular basis.”
During 2001 and early 2002, Cottage sent three letters to the OHP regarding
the status of its application. In April 2002, eight months after it had
been received, OHP forwarded the letter from the mayor to Cottage. In June
2002, Cottage responded:
The Borough of Princeton letter of August 13, 2001 comments on our “non-profit”
organization status having a distinct community, educational and/or charitable purpose. The Club does
in fact have an educational involvement with a number of University precepts and
meetings, as well as a number of charitable events. We have also hosted
numerous community projects such as “Food for the Poor,” etc. Our well maintained
McKim, Mead and White building (and grounds) is an ideal historic facility which
contributes to our community needs. We plan to continue these policies.
Secondly, as indicated in the enclosed resolution, the “property” is open to the
public on a regular basis. We not only publish special dates for visitations,
but also have groups on an “invitational” basis.
Very clearly, we could not have met your criteria unless we adhered to
the laws of New Jersey. We submit this response with the anticipation that
it clarifies the evident objections of the Borough of Princeton. We sincerely hope
that our meeting of these requirements of your office will permit the Commissioner
of the Department of Environmental Protection to provide “Certified Historic Site” status for
the University Cottage Club.
On November 4, 2002, the OHP advised the Commissioner that certification should be
granted because all the requisite conditions had been met.
Thereafter, in December 2002, the mayor provided the OHP with a legal memorandum
prepared by the Borough attorney and argued:
Cottage Club is one of several private eating clubs whose membership is made
up of undergraduates and alumni of Princeton University. Granting such an exemption to
this club would set a precedent by which a number of these eating
and drinking places serving a private membership would attempt to be removed from
our tax base. By no stretch of our imagination are these clubhouses “open
to the public” in the sense that the Legislature ever contemplated.
We ask your due consideration. We trust that you, too, will find that
Cottage Club does not meet the intent of the statute.
In March 2003, the Borough attorney wrote to the Commissioner requesting information on
the status of the application. The Commissioner responded that the DEP had not
yet made a determination because it was considering whether to recommend amendments to
the tax exemption law to clarify the qualifications for tax-exempt status, including a
requirement of public access of ninety-six days per year. Both Cottage and the
Borough continued to write to the Commissioner for resolution of the issue.
Finally, in October of 2003, the Commissioner denied the application:
The [DEP] has determined to deny the application of University Cottage Club for
historic property certification for the reasons set forth below. . . . Implicit
in N.J.S.A. 54:4-3.52 and -3.53 is a legislative intent that in order to
qualify for the exemption from property taxation, “any building, its pertinent contents” and
that real property which is necessary for enjoyment of the building must be
available to the public for its enjoyment. Further, in order for a building
to “have material relevancy to the history of the State and . .
. [warrant] . . . preservation as an historical site,” public access must
be provided in a meaningful way and not just by allowing public entry
for a minimal number of days. As a private club, the building and
property of the University Cottage Club are not and cannot be freely accessible
on a regular basis to the public.
While I recognize the past practice that applicants for tax exemption need only
satisfy the minimal public access requirements set forth in guidance borrowed from the
National Historic Preservation program (which was created for a different purpose), I have
determined that this guidance does not provide a sufficient degree of public accessibility
to merit special dispensation from property taxation for buildings deemed historically important. Thus,
I intend to promulgate regulations that would require that applicants for property tax
exemption under this statutory scheme must meet standards that enable the public to
freely access and enjoy any property that merits certification. Until such time as
the rules are operative, I intend to deny all applications for properties that
do not meet objectively reasonable standards of public accessibility.
The Commissioner never promulgated such rules. Instead, the Legislature enacted L. 2004, c.
183, §§ 1, 2, and 3 (eff. Dec. 22, 2004), which augmented the statutory
provisions applicable to property-tax exemptions for historic sites by adding subsections -3.54a, -3.54b,
and -3.54c to N.J.S.A. 54:4. The cumulative effect of those additional provisions was
to prescribe more rigorous requirements for property-tax exemption by an historic site. Among
other things, a non-profit corporation qualified for tax-exempt status under I.R.C. 501(c) seeking
property-tax exemption for its registered historic property must have a “primary mission as
an historical organization to research, preserve and interpret history and architectural history.” N.J.S.A.
54:4-3.54a. Further, the property must be accessible to the public for at least
ninety-six days per year. N.J.S.A. 54:4-3.54b(a)(4). Additionally, the amendments require cancellation of historic
site certification if a non-profit corporation that owns a building certified after the
effective date, December 22, 2004, fails at any time to comply with the
new provisions. N.J.S.A. 54:4-3.54c. By their terms, those amendments are prospective.
Cottage appealed, and the Appellate Division affirmed. Affording deference to the Commissioner’s interpretation
of public access, the panel reasoned that the new legislation provided assistance in
determining the original legislative intent to require such access. It further relied on
the legislative history of the statute to support its view. Because of the
narrow application of tax exemption, and the policy that construes exemptions against the
claiming party, the Appellate Division held that the Commissioner had not abused his
discretion in refusing to certify Cottage’s property.
We granted certification and granted intervenor status to the Borough.
188 N.J. 577
(2006).
Cottage argues that, on its face, the statutory scheme did not empower the DEP to mandate public access as a condition of the grant of a certification for tax exempt historic status, and, thus, the Commissioner’s decision was arbitrary and capricious; that it violates our ruling in Town of Morristown v. Woman’s Club of Morristown and Attorney General of New Jersey, 124 N.J. 605 (1991); that, in any event, Cottage had consented to the applicable public access requirement in 1999; and that the procedure engaged in by DEP was unfair.
DEP counters that public access is an essential element of an historic-site tax exemption, See footnote 4 and that its action was neither arbitrary nor capricious, but was a statutorily authorized exercise of its discretion. As might be expected, the Borough sides with DEP, adding that the decision does not violate Woman’s Club and that there were no procedural improprieties in the case.
Our role in reviewing an administrative agency’s final decision is limited. In re Taylor, 158 N.J. 644, 656 (1999). We will not reverse an agency's decision unless: (1) it was arbitrary, capricious, or unreasonable; (2) it violated express or implied legislative policies; (3) it offended the State or Federal Constitution; or (4) the findings on which it was based were not supported by substantial, credible evidence in the record. Ibid.
Generally, courts afford substantial deference to an agency's interpretation of a statute that it is charged with enforcing. R & R Mktg., L.L.C. v. Brown-Forman Corp., 158 N.J. 170, 175 (1999). An appellate court, however, is “in no way bound by the agency’s interpretation of a statute or its determination of a strictly legal issue.” In re Taylor, supra, 158 N.J. at 658 (quoting Mayflower Sec. Co. v. Bureau of Sec., 64 N.J. 85, 93 (1973)). That is the backdrop against which this dispute must be assessed.
We begin with the amendments to N.J.S.A. 54:4 enacted subsequent to the Commissioner’s denial of Cottage’s application. Those amendments require, among other things, that an applicant’s primary mission must be “historical,” N.J.S.A. 54:4-3.54a, and that ninety-six days of public access per year be made available, N.J.S.A. 54:4-3.54b. See footnote 5
Generally, an appellate court “will apply the statute in effect at the time of its decision, at least when the legislature intended that its modification be retroactive to pending cases.” Riggs v. Twp. of Long Beach, 101 N.J. 515, 521 (1986) (quoting Kruvant v. Mayor & Council of Cedar Grove, 82 N.J. 435, 440 (1980)), rev’d on other grounds, 109 N.J. 601 (1988). “The purpose of the principle is to effectuate the current policy declared by the legislative body -- a policy which presumably is in the public interest.” Kruvant, supra, 82 N.J. at 440. Here, however, the new public access requirement applies, by its own terms, only where certification occurs after the Act’s effective date of December 22, 2004. N.J.S.A. 54:4-3.54b(a). Moreover, there is no legislative history revealing an intent to the contrary. Thus, the new amendments operate only in connection with applications for certification after the effective date.
The question, therefore, is whether the Commissioner’s October 2003 denial of Cottage’s application was valid. If it was a valid denial, Cottage must reapply subject to the more restrictive 2004 amendments. If the denial was not valid, Cottage is entitled to have its tax-exempt status evaluated based on its satisfaction of the standards in effect at the time of the administrative adjudication.
We turn now to the statutes in question. N.J.S.A. 54:4-3.52 provides in relevant part:
Any building and its pertinent contents and the land whereon it is erected and which may be necessary for the fair enjoyment thereof owned by a nonprofit corporation and which has been certified to be an historic site to the Director of the Division of Taxation by the Commissioner of Conservation and Economic Development as hereinafter provided shall be exempt from taxation.
N.J.S.A. 54:4-3.53, in turn, governs the certification of historic sites:
The Commissioner of Conservation and Economic Development when requested for any such certification and after consultation with and the advice of the Resource Development Council of the Division of Resource Development within his department shall certify a building to be an historic site whenever he finds such building to have material relevancy to the history of the State and its government warranting its preservation as an historical site and in the event of restoration, heretofore or hereafter made, such building is or shall be of substantially the same kind, character and description as the original.
Cottage argues that, on its face, the Act does not require public access as a condition of historic site tax exemption.
However, the Act’s legislative history, although sparse, suggests otherwise. In May 1962, the then-Commissioner of the Department of Conservation and Economic Development See footnote 6 wrote to the Governor’s Counsel with respect to the Act, which had not yet passed, expressing concern over an
assurance that any historic site declared to be tax exempt under the bill be available on a regular basis to the general public . . . . This is not specifically spelled out in the bill. However, if it is the judgment of the Governor’s Counsel that this consideration could be a requirement of the Commissioner of Conservation and Economic Development before certifying the building as provided in Section 2, we would recommend it for the governor’s signature.
[Commissioner, Conservation & Economic Development, Memorandum to Office of the Governor’s Counsel at
1 (May 25, 1962).]
That letter echoed the point made by the New Jersey Historical Society recognizing
the preeminent importance of the public being able to view historic sites. See
Letter from New Jersey Historical Society to Governor Richard Hughes (June 10, 1962).
The Governor’s response to those concerns was contained in his signing statement:
Since [New Jersey’s fine historic] heritage is a possession of all the people,
I have directed the Commissioner of Conservation and Economic Development to approve for
exemption only those historic sites which will be freely available to all people
without discrimination as to race, creed, color or religion, subject to reasonable terms
and conditions, such as a modest entrance fee, which will insure the preservation
and maintenance of the site.
[Office of the Governor, Press Release at 3 (June 27, 1962).]
Such a communication from the executive branch is an aid to legislative interpretation.
2A Sutherland Stat. Const. § 48:5 (Singer ed., 6th ed. 2006) (action of governor
upon bill is part of legislative process); Fields v. Hoffman,
105 N.J. 262,
270 (1987) (citing Skeer v. EMK Motors, Inc.,
187 N.J. Super. 465, 472
(App. Div. 1982)). Substantively, the exchange suggests that the DEP is correct in
arguing that the long-standing administrative interpretation of the statute (over forty years) recognized
a public access requirement. That interpretation is entitled to considerable weight. Kasper v.
Bd. of Trs. of Teacher’s Pension and Annuity Fund,
164 N.J. 564, 580
(1999).
In addition to what appears from the Act’s legislative history, it seems to
us a matter of common sense that public access is implicit in historic
designation for tax-exemption purposes. As we noted of historic preservation in Woman’s Club,
supra, “[i]ts sole beneficiary is the public, the citizens of New Jersey, who
receive the benefits of viewing the architectural beauty of the historic buildings and
better understanding our heritage.” 124 N.J. at 620. Equally important is the fact
that tax exemptions drain the public coffers just as expenditures do, and could
not be justified in the absence of public access.
Finally, we note that Cottage itself consented to the imposition of a public
access requirement at every stage of the administrative process, inferentially recognizing the essential
nature of such access to the legislative scheme. In short, we are satisfied
that public access is a fundamental element of an historic site tax exemption.
We turn next to our decision in Woman’s Club, which, Cottage argues, requires a contrary conclusion. There, we determined that an historically certified property -- the Dr. Condit House -- owned by the defendant, Woman's Club of Morristown, did not have to be used in any particular way to qualify for tax exemption. Id. at 608-11, 615-20. To support our statutory interpretation, we relied on the legislative history previously detailed here. Id. at 610-11, 615-17.
The heart of the issue in Woman’s Club was whether a non-profit organization that rented portions of its exempt historic property to commercial entities to help defray its costs would lose its tax exemption because of that commercial use. Id. at 607. We answered no because there is no “use” limitation in the statute. Id. at 611. We continue to hold that view.
Cottage characterizes public access as a “use” and thus argues that Woman’s Club supports its contention that public access cannot be compelled. That is a misreading of our decision. Initially, we do not view the concepts of use and access as interchangeable. Use is the basic purpose to which the property is put, for example, the basic purpose of a restaurant or a music hall. Public access is a condition of use, like hours of operation or parking. Those are distinct concepts.
More importantly, public access was an underlying assumption of our holding in Woman’s Club. See, id. at 615-16. Indeed, the building was freely open to the public on a year-round basis for civic purposes and for pro bono activities such as fund-raisers for charities. Id. at 608. Local senior citizens used the auditorium for their lunches. Ibid. The combination of the commercial use of the building and its civic functions resulted in regular public access to the Dr. Condit House. Ibid. There is simply nothing in Woman’s Club to support the notion that there is no public access condition to historic site tax exemption.
In short, we conclude that the Legislature intended that a fundamental aspect of an historic site tax exemption to be public access, and that to the extent the DEP required such access, it was within its statutory grant.
That is not the end of the inquiry. Cottage argues that the Commissioner nevertheless acted arbitrarily when he denied its application based on new and undeclared standards for public access. According to Cottage, the Commissioner’s decision to jettison the prior public access standards and apply “objectively reasonable standards of public accessibility” constituted an “administrative rule” that had to be adopted in accordance with the Administrative Procedure Act (the APA), N.J.S.A. 53:14B-1 et seq. In the absence of such adoption, Cottage contends that the new standards were invalid.
Prior to adopting or amending any rule, an administrative agency must give notice of its intended action, N.J.S.A. 52:14B-4(a)(1), and afford interested parties a “reasonable opportunity to submit data, views or arguments, orally or in writing.” N.J.S.A. 52:14B-4(a)(3). N.J.S.A. 52:14B-2(e) defines an “administrative rule” as follows:
(e) “Administrative rule” or “rule,” when not otherwise modified, means each agency statement of general applicability and continuing effect that implements or interprets law or policy, or describes the organization, procedure or practice requirements of any agency. The term includes the amendment or repeal of any rule, but does not include: (1) statements concerning the internal management or discipline of any agency; (2) intraagency and interagency statements; and (3) agency decisions and findings in contested cases.
In Metromedia, Inc. v. Director, Division of Taxation, 97 N.J. 313 (1984), we considered the issue of whether an agency determination constituted rulemaking, thereby requiring compliance with the APA’s notice and comment procedures. Id. at 328-37. There, we enumerated six factors for courts to consider singly or in combination. Id. at 331-32. Under that framework, a rule
(1) is intended to have wide coverage encompassing a large segment of the regulated or general public, rather than an individual or a narrow select group; (2) is intended to be applied generally and uniformly to all similarly situated persons; (3) is designed to operate only in future cases, that is, prospectively; (4) prescribes a legal standard or directive that is not otherwise expressly provided by or clearly and obviously inferable from the enabling statutory authorization; (5) reflects an administrative policy that (i) was not previously expressed in any official and explicit agency determination, adjudication or rule, or (ii) constitutes a material and significant change from a clear, past agency position on the identical subject matter; and (6) reflects a decision on administrative regulatory policy in the nature of the interpretation of law or general policy.
[Ibid.]
Here, the Commissioner’s decision to reject what he had previously declared to be
the applicable twelve-day public-access standard pending promulgation of his new and more stringent
access requirement and to deny all pending applications that did not meet undisclosed
“objectively reasonable standards” has all of the earmarks of rule-making. Plainly, the new
scheme was intended to apply generally and uniformly to all similarly situated persons.
Further, it was intended as a statement of an administrative position that had
not been previously expressed, constituting a material change from a clear, past agency
position on the subject. It was also intended to prescribe a standard, not
clearly inferable from the enabling legislation, and was, in form and effect, a
decision on administrative regulatory policy. Accordingly, it met the Metromedia paradigm.
To be sure, some agency actions are not subject to the APA’s formal
notice and comment requirements even if they satisfy the Metromedia criteria. See, e.g.,
N.J. Builders Assoc. v. N.J. Dep’t of Envtl. Prot.,
306 N.J. Super. 93,
100-04 (App. Div. 1997) (holding administrative order was intra-agency statement when it directed
DEP’s assistant commissioners, not any member of public, to consider during anticipated rulemaking
process). DEP claims that the order at issue was an exempt intra-agency statement
because it was operating to improve its existing flawed procedures.
Our decision in Woodland Private Study Group v. New Jersey Department of Environmental
Protection,
109 N.J. 62 (1987), is instructive in that respect. There, we considered
whether an administrative order issued by the DEP was an “intra-agency statement” that
did not require formal rulemaking. Id. at 63. The order at issue forbade
responsible parties (those “alleged to have contributed to or caused contamination of a
site”) from conducting a remedial investigation/feasibility study (RI/FS), although it did “permit private
parties to ‘participate’ in the development of an RI/FS under certain conditions.” Id.
at 64-65. We stated:
Where a legally countenanced right of a party is threatened by an internal
communication of an agency, rulemaking procedure must be followed. What constitutes an interest
that cannot be abridged without rulemaking procedure is not easily defined. The interest
alleged must ultimately be legitimate [and] of justifiable concern. . . .
The inquiry is whether the agency’s interest in streamlined procedure is outweighed by
the importance of the interests that are affected. Generally where the interest implicated
is legitimate, the balance will tilt in favor of notice and hearing for
internal actions that have a substantial impact on that interest. In light of
the foregoing we can define an intra-agency statement as (1) a communication between
agency members that (2) does not have a substantial impact on (3) the
rights or legitimate interests of the regulated public.
[Id. at 74-75.]
Because the DEP order in Woodland had a substantial impact on a legitimate
interest of the regulated public by imposing severe restrictions and conditions on public
participation, we held that it could not be viewed as an intra-agency statement
immune from rulemaking procedures, and thus, was invalid under Metromedia. Id. at 76.
Despite Woodland’s rather clear articulation of the applicable standard, DEP relies upon the
Appellate Division opinion and this Court’s affirmance in Citizens for Equity v. New
Jersey Department of Environmental Protection,
252 N.J. Super. 62 (App. Div. 1990), aff’d,
126 N.J. 391 (1991), for the proposition that its actions were exempt from
the APA‘s rulemaking requirements because they were efforts to “improve its procedures.” In
Citizens for Equity, the DEP suspended the processing of claims from residents seeking
compensation for damages from the operation of and the closure of landfills without
notice to the claimants, pending its promulgation of a modified claims regulation. 126
N.J. at 393-94. According to DEP, the regulation needed correction because in its
prior form it failed to achieve the purposes underlying the Sanitary Landfill Facility
Closure and Contingency Act, N.J.S.A. 13:1E-100 et seq. Id. at 394. Individuals who
had filed claims against the fund appealed. Ibid. The Appellate Division addressed the
claim that the “secret” suspending of the processing of claims while DEP undertook
a rule revision was illegal. Id. at 396-97. The panel rejected that argument,
declaring that the suspension of claims pending a rule promulgation was an intra-agency
statement exempt from the notice and hearing requirements of the APA under Woodland.
Id. at 396.
We affirmed. Ibid. In so doing, we agreed that the suspension was an
intra-agency statement exempt from the APA and declared that “[g]overnment has a duty
to correct itself, and courts should not stand in the way when a
governmental agency, acting in the public interest, attempts to improve its procedures.” Id.
at 396. However, we did not find the process to be fair:
Although we agree with the Appellate Division that the law did not require
public notice or hearing before DEP could suspend the processing of claims for
compensation under the Act, neither did the law prohibit the agency from disclosing
to claimants what it was doing. The due-process standards incorporated in the New
Jersey Administrative Procedure Act provide a minimum standard for agency conduct, but do
not preclude an agency from acting fairly and candidly in respect of those
whose interests may be affected by agency action. In other contexts we have
noted that “government has an overriding obligation to deal forthrightly and fairly with
property owners,” F.M.C. Stores Co. v. Borough of Morris Plains,
100 N.J. 418,
426 (1985), and have insisted that “government must ‘turn square corners’ rather than
exploit litigational or bargaining advantages . . ..” W.V. Pangborne & Co. v.
New Jersey Dep’t of Transp.,
116 N.J. 543, 561 (1989) (quoting F.M.C. Stores
Co., supra, 100 N.J. at 426).
. . . .
We are persuaded that in these circumstances DEP, irrespective of its statutory exemption,
should have notified all claimants that the processing of claims was being temporarily
suspended while the agency considered the adoption of the new regulations. Affording claimants
such notice is a matter of fairness. Instead, the record suggests that some
DEP personnel did not respond forthrightly to inquiries about pending claims until DEP
was prepared to publish the revised regulations. The statutory exemption from the requirement
of public notice and hearing does not relieve DEP of its duty of
candor to the public.
[Id. at 397-98.]
Ultimately, in upholding the unannounced decision to stop processing claims, we determined that
the absence of notice caused no substantial prejudice to claimants other than to
“delay their awareness that their claims would be governed by new rules.” Id.
at 398. In reaching that conclusion, we took particular note of the fact
that DEP only intended to apply the rules to claims that were filed
but not yet processed. Ibid.
This case is wholly unlike Citizens for Equity. Here, Cottage’s petition was perfected
over a period of five years during which it satisfied every one of
DEP’s stated requirements. Indeed OHP sent the petition to the Commissioner with a
recommendation for approval. Both Cottage and the Borough acknowledged that the petition had
been perfected and sought a decision thereon during 2002 and 2003. Therefore, unlike
Citizens for Equity, Cottage’s petition was not simply filed but was, in fact,
processed.
Moreover, the Commissioner did not merely suspend the processing of petitions in anticipation
of the publication of a new rule. On the contrary, in one fell
swoop he upended the prior public access requirement of twelve days, substituted an
“objectively reasonable” standard without defining it, and used that undisclosed standard to deny
Cottage’s petition outright. If the conduct in Citizens for Equity troubled the Court
then this conduct was inexcusable.
Although the Commissioner likely acted with good intentions, he was neither forthright nor
fair when he denied Cottage’s perfected and fully-processed petition. Cottage was entitled to
an adjudication based on the regulations and standards the DEP had imposed upon
it and that it had satisfied, including the twelve days of public access.
Because the Commissioner’s denial of Cottage’s application was arbitrary, it cannot stand. Accordingly,
Cottage is not subject to the 2004 amendments.
We note the Borough’s concern that the grant of this tax exemption would
set a precedent for removal of other eating clubs from its tax base.
We view that concern as fanciful insofar as it is the unique history
of this case that compels our conclusion and that, in any event, petitions
for tax-exempt status filed after 2004 will be subject to the more stringent
statutory requirements.
The judgment of the Appellate Division is reversed. The matter is remanded to the Commissioner to take action consistent with the principles to which we have adverted.
CHIEF JUSTICE ZAZZALI and JUSTICES LaVECCHIA, ALBIN, WALLACE, RIVERA-SOTO, and HOENS join in JUSTICE LONG’s opinion.
SUPREME COURT OF NEW JERSEY
NO. A-65 SEPTEMBER TERM 2006
ON CERTIFICATION TO Appellate Division, Superior Court
UNIVERSITY COTTAGE CLUB OF
PRINCETON NEW JERSEY CORP.,
Petitioner-Appellant,
v.
NEW JERSEY DEPARTMENT OF
ENVIRONMENTAL PROTECTION,
Respondent-Respondent.
----------------------------------------------
THE BOROUGH OF PRINCETON,
Intervenor-Respondent.
DECIDED May 30, 2007
Chief Justice Zazzali PRESIDING
OPINION BY Justice Long
CONCURRING/DISSENTING OPINIONS BY
DISSENTING OPINION BY
CHECKLIST
Footnote: 1
For a discussion of the club system at Princeton University, see Frank v.
Ivy Club,
120 N.J. 73, 83-90 (1990), cert. denied,
498 U.S. 1073,
111 S. Ct. 799,
112 L. Ed.2d 860 (1991).
Footnote: 2
There is no indication in the record that Cottage ever requested or
received monetary assistance from the Historic Preservation Fund.
Footnote: 3
In accordance with N.J.S.A. 13:1B-15.131, the listing of an area, site, structure,
or object on the New Jersey Register of Historic Places prevents the State,
or any of its subdivisions, from undertaking any project that will encroach upon,
damage, or destroy the property listed without approval from the Commissioner.
Footnote: 4
No other contention regarding any deficiency in Cottage’s application has been advanced
by DEP.
Footnote: 5
Under the Act, a building can be open to the public for
fewer than ninety-six days per year if the following exceptions apply: (1) the
nonprofit corporation that owns the building applies to the Commissioner for approval of
fewer days; (2) the governing body of the municipality in which the building
is located passes a resolution in support of the nonporofit corporation’s application for
fewer days; and (3) the Commissioner determines, based on the nonprofit corporation’s financial
resources, that in that instance the ninety-six-day standard is not feasible. N.J.S.A. 54:43-3.54b(a)(4).
Footnote: 6
The functions, duties, and powers of the Commissioner of the Department of Conservation
and Economic Development, and the National Resource Council (formerly, the Resource Development Council),
were transferred to the Commissioner of DEP pursuant to N.J.S.A. 13:1D-2 and N.J.S.A.
13:1D-3(b), respectively.