State Takes Control Over Development Decisions for Hundreds of Thousands of Acres as Highlands Act Becomes Law of the Land in Much of Northern New Jersey

On August 10, 2004, Governor McGreevey signed into law the Highlands Water Protection and Planning Act (“Highlands Act”), P.L. 2004, c.120 (codified at N.J.S.A. 13:20-1 et seq. and various amended chapters). The new statute, passed by overwhelming margins in the Legislature less than three months after its initial introduction, largely implements the recommendations contained in the March 2004 Action Plan prepared by the nineteen-member Highlands Task Force appointed by Governor McGreevey in 2003.

The Highlands Act borrows and refines many approaches taken by the 1979 Pinelands Protection Act and transplants them from the sparsely populated Pinelands to one of the state’s fastest-growing regions. This article summarizes the major provisions of the Highlands Act and how it will affect development in the Highlands region.

The statute creates a fifteen-member Highlands Water Protection and Planning Council (“Council”), to be appointed by the Governor, with land use regulation and/or planning responsibilities over a statutorily defined Highlands Region encompassing eighty-eight municipalities and all or part of seven counties (Sections 2, 4, 5, 6, 7a). The Council’s main responsibility is the preparation of a regional master plan for the entire 800,000-acre Highlands Region (Sections 2, 6j, 8). The statute specifies the goals and contents of the regional master plan (Sections 10, 11, 12). The Council can also adopt rules and regulations in order to exercise its statutory powers (Section 6y), and go to court to enforce the requirements of statute (Section 27).

The Highlands Act does not cover all development in the Highlands region, instead providing for seventeen separate categories of exemptions from the statute’s coverage (Section 30). These include exemptions for the construction of certain single family homes, projects that received any one of a number of local or state approvals before March 29, 2004, and certain reconstruction and improvement projects (Sections 30a(4) through 30a(6)).

The statute draws a critical distinction between two portions of the Highlands Region. In the preservation area (Section 7b), covering about half of the Highlands Region, the statute requires conformance of municipal and county master plans and development regulations with the regional master plan. The covered municipalities and counties must submit to the Council any necessary revisions of their master plans and regulations, and make any necessary changes identified by the Council (Sections 14a, 14b). Failure to do so results in a loss of substantial power: in covered portions of non-conforming municipalities and counties within the preservation area, the Council has all local land use enforcement authority under the Municipal Land Use Law and the Highlands Act, as well as its own rules and regulations and regional master plan (Section 14d).

The statute also gives the Council the power to review and supersede local development decisions within the preservation area (Section 17a). In conforming municipalities and counties, this power extends only to projects that disturb at least two acres or cause a cumulative increase in impervious area of at least one acre. No such thresholds apply in non-conforming areas, where the Council is even free to provide that all local decisions will be subject to its review (Section 17c). Council review may be requested by any member of the public (Section 17d). Projects that the Council decides to review may not proceed without Council approval, and the Council can reject or conditionally approve a project if it determines that the project does not conform to the regional master plan or that it “could result in substantial impairment of the resources of the Highlands Region” (Section 17a). Within the preservation area, most State and local capital projects that meet the two-acre threshold for development also require Council approval (Section 16b). Within the planning area, described below, such projects must be submitted to the Council for its nonbinding review and comment (Section 16c).

In the planning area, defined in Section 7c as including all portions of the Highlands Region not within the preservation area (but excluding designated regional centers or town centers (Section 7d)), conformance with the regional master plan is encouraged but not required (Sections 14f, 15, 18, 24). Also, the Council’s authority to review and supersede local decisions does not apply to projects in the planning area.

The statute also sets forth a strict set of controls applicable to all so-called “major Highlands development” in the preservation area (Sections 21 through 35). “Major Highlands development” includes any non-residential development and any substantial residential development (Section 3). To obtain the DEP “Highlands Preservation Area approval” required by this provision, a covered project must comply with a variety of requirements that often may, in practice, be virtually impossible to satisfy, including a 300-foot buffer adjacent to open waters, a limitation on impervious area to three percent of a pre-existing lot, a prohibition on most development on steep slopes, and tight limits on disturbance of upland forested areas. These limitations, which are to be included in rules and regulations that the DEP must promulgate within 270 days, will also apply prior to the effective date of the DEP regulations. The DEP regulations will establish the environmental standards upon which the Council’s regional master plan and a separate DEP permitting review program will be based.

To cushion the effect of the statute on municipalities, the statute establishes a “Highlands Municipal Property Tax Stabilization Fund,” to be funded by a specially created “Highlands Protection Fund” in the Department of Treasury (Section 21), for the purpose of compensating “qualified municipalities,” i.e., those municipalities that are wholly or partly within the preservation area and (after its adoption) have master plans and development regulations that conform to the regional master plan, for the decline in the aggregate true value of vacant land “directly attributable” to the implementation of the Highlands Act. The aid is designed (but not guaranteed) to fully compensate for tax losses caused by the statute for the first five years after its implementation, and then gradually declines in years six through ten, after which the program will expire. A three-member “Highlands Municipal Property Tax Stabilization Board,” consisting of tax experts who will be appointed by the Governor (and who may be Council members) is to work with the Council to establish procedures for determining a municipality’s valuation base, whether “fiscal stress” has been caused by the implementation of the statute, and the amount due the municipality (Section 19).

Similarly, to redirect development away from more sensitive areas and ease the effect of the statute on developers and landowners, the statute also directs the Council to establish an ambitious transfer of development rights (“TDR”) program for the Highlands Region. Among other provisions, it directs the Council to consult with municipal, county and State entities and identify “sending zones” in the preservation zone, and “voluntary receiving zones” in the planning area (Sections 13 and 46).

The Highlands Act represents the most sweeping change in land use regulation in New Jersey since the enactment of the State Planning Act in 1985. It promises to change, in fundamental ways, the way land use planning and regulation is done in a region facing substantial development pressure. Once the Council has been formed, you can expect the debate to be contentious as the details of the regional master plan are worked out over the following eighteen months.