Cigna Property Update Message From the Mayor and FAQs

Message from the Mayor
Development of the Cigna Property

For those of you that were able to attend the joint meeting of the Mayor and Council and Planning Board on Monday, January 23, I hope that the information provided, primarily by the Borough’s Affordable Housing Attorney and Borough Planner, was useful in providing context for the discussion of the proposed development of the Cigna property. I would encourage anyone interested in this issue to attend the presentation of the concept plan by the developer to be held on Wednesday, February 1, at 7:00 pm, in the FAMS Multipurpose Room. The public will be provided with an opportunity to provide its input and ask questions of the developer, the Mayor and Council, the Planning Board and Borough professionals.

The Borough has prepared responses to some Frequently Asked Questions (FAQs) – see below – which are intended to provide a further resource for understanding the issues in front of us. Also, below are certain key Definitions which are taken from the PowerPoint presentation at the January 23 meeting, and are critical to understanding the impacts of the Mt. Laurel doctrine on this proposed development. It should be noted and stressed that these statements, definitions and other public documents are for informational purposes only and are not provided as legal opinion.

The currently proposed development, consisting of 585 units to be constructed by the developer and 3.5 acres to be conveyed to the Borough for the construction of an additional approximately 55 affordable units, was not where the discussions with the developer started. The Mayor and Council, as well as a subcommittee of the Mayor and Council, the Affordable Housing Committee which includes members of the Mayor and Council and the Planning Board, and the Borough’s professionals, have been working hard for some time to negotiate a plan that minimizes the impacts on the community and the Borough’s resources. The Mayor and Council have not agreed to the proposed concept plan. The developer has represented that, if we do not reach an agreement on this proposal pursuant to the Memorandum of Understanding (MOU), it will pursue whatever legal recourse it believes it has. 

The Mayor and Council, therefore, have a choice. It can accept the proposal, subject to whatever negotiations remain in terms of form of agreement, or it can reject that proposal and agreement. While these choices may not be particularly desirable to the community, we have been entrusted by the residents of this Borough to make a decision which is in the best interests of our residents and, in this instance, we must choose the best (or the least worst) of these options.

To enter into an agreement based on the MOU would mean a development of 640 units, with all of its impacts on schools, police and other Borough services. To reject the concept plan would be to expose the Borough to extreme variability of outcome, which could include higher densities. The decision must be based on advice from our very qualified experts and, as reflected in our public meetings, it must include a careful consideration of concerns raised by residents. Our professionals have advised that the likelihood of somehow overturning the Mt. Laurel doctrine as it applies to Franklin Lakes and thereby eliminating the necessity to negotiate or consider the site, is miniscule at best. The choice, therefore, is really between the concept plan being proposed by the developer, as negotiated to reduce impacts as best we can, or entering the Court process with its risk of and potential for a much larger scale project. The analytical framework is the likelihood of a better result at trial vs. the likelihood of a substantially worse result at trial. 

Either path is very likely to have impacts on schools, police and other Borough services – the more operative question is one of degree. We, together with the schools, would have to address the impacts of this development. 

The Mayor and Council, the Planning Board and the Borough’s professionals listened carefully and are considering the input from residents who attended the January 23 public meeting, and we look forward to gaining more insights from the developer’s presentation and your input on February 1.

Please take the time necessary to understand the context for this most important and impactful decision. I and all members of the governing body share your concerns and our interests are your interests. Our motivation is simply to do what is best for the community as a whole. To do that we must seek your comments, understand and assess our options and the risks associated with each, get the benefit of advice from our professionals, and then make an informed decision. As fellow members of our community, we are all in this together.

Charles J. X. Kahwaty
Mayor

Frequently Asked Questions
Cigna Property

The High Mountain Golf Course was developed with 275 units on 130 acres. The proposed development on the Cigna property is for 640 units on 89 acres – a much greater density. Why?

The Borough’s Court-approved Housing Element and Fair Share Plan (the Plan) is predicated upon a Vacant Land Adjustment (see Definitions), which resulted in the calculation of a Realistic Development Potential (RDP) (see Definitions) of 340 affordable housing units for the Borough. A large portion of that RDP is attributable to the golf course site (now The Reserve) because the RDP was calculated based on a density of 8 units to the acre. Thus, there was a significant shortfall in the number of affordable units being provided on the golf course site. As a result, the Borough was compelled to include in the Borough’s Plan additional affordable housing sites which influenced the inclusion of Franklin Manor (52 units on 1.7 acres), Sunrise Assisted Living (88 units on 4.6 acres) and the McCoy Road site (55 affordable units on 9.8 acres – not yet developed). 

If the developer of the Cigna property were to file suit in the Superior Court, the developer would argue that its proposal should be included in the Borough’s Plan since the Borough lacks sufficient land to address what the developer would argue constitutes a “change in circumstances” (see also FAQ below on the Judgment of Repose). Based on Council On Affordable Housing regulations, the presumptive minimum density in determining an RDP for the Cigna site would be 6 units per acre. The calculated density on the golf course site was 8 units per acre and, in Bergen County, in some instances, densities have been calculated at substantially higher densities, depending on the particulars of the site, the size of the unmet need, surrounding land uses and related issues. 

Why doesn’t the Borough purchase the property?

When the property was being marketed, the Mayor and Council had expressed an interest to the broker in purchasing the property in two letters. Both letters indicated that the purchase would be leveraged with grants through the State Green Acres program and the County’s Open Space program – sources the Borough has used to acquire the Franklin Lakes Nature Preserve and, more recently, the 12 acres known as Alice and Bud’s Meadow. The broker relayed the Borough’s interest to Cigna but, ultimately, Cigna entered into a contract with Hekemian. The Borough cannot now negotiate with Cigna as they are under contract with Hekemian – this is the legal doctrine known as tortious interference with contract. 

Moreover, even if the Borough were able to negotiate for the purchase of the property, the cost, including the purchase price and the loss of revenue, would be prohibitive. The property is assessed at $84 million. If the Borough were to bond for $80 million, say at 4%, over 30 years, the debt service on the purchase would be approximately $4.6 million per year. The Borough’s municipal tax levy in 2022 was approximately $13 million, and therefore this purchase, at $80 million, would result in an increase in municipal taxes of approximately 35%. If you factor in the loss of tax revenue by taking this property off the books, the municipal tax increase would be approximately 37%. If the Borough were somehow able to acquire the property with only $40 million, the tax increase would be approximately 20%. There would also be an increase in school taxes because of lost revenue of approximately $1,000,000.

If the Borough is protected by a Judgment of Repose, why would the Borough even consider a change in zoning?

The Borough’s Judgment of Repose recognizes that it lacked sufficient developable land to meet its constitutional affordable housing obligation at the time the Judgment is entered. As a result, the Borough received a Vacant Land Adjustment (see Definitions). When new land becomes available that is vacant or primed for redevelopment, municipalities that have received a Vacant Land Adjustment may be required to address that change in circumstance by providing additional affordable housing units.

What plan does the Borough have to respond to the anticipated increase in population from the Cigna property development?

The Borough and the schools would need to address the impact of the increase in population, including possibly additional police and DPW. The Borough would also need to address impacts on volunteer emergency services. The objective is to limit such impacts as much as feasible so as to mitigate the potential impacts on schools, police, DPW, emergency services and other Borough services. Generally, the courts will not reduce density because of the impact it will have on schools and services.

Why would the Borough enter into a Payment In Lieu of Taxes (PILOT)?

When a property has been identified as in need of redevelopment, State law permits municipalities to provide a tax incentive to a developer to redevelop the site, so that the project is economically feasible. A PILOT is based on a percentage of revenue generated from the site and may result in payments that are lower than full taxation. Without a PILOT, the developer may look for additional density on the site as an incentive for development.

Wouldn’t a PILOT result in less tax revenue to the Borough?

A PILOT is based on a percentage of revenue generated from the site. The revenue generated is not required to go to the County in the same proportion as traditional taxes – indeed, 95% of the revenue goes to the Borough. Generally, a PILOT agreement results in less tax revenue overall to the Borough and its school board. The Borough has retained a financial expert to assist in negotiating the terms of the PILOT.

Definitions

Mount Laurel I and II (1975/1983)

The genesis of the Mount Laurel doctrine. Municipalities cannot use power to zone to exclude low and moderate income households. Each municipality must create zoning to address its quota (referred to as its "fair share").

Builder's Remedy

Created by Mount Laurel II.  When a landowner/developer can demonstrate, among other things, that a municipality has failed to address its quota, it can sue the town and seek, as its remedy, a court-mandated rezoning of its property for high-density multifamily uses with affordable housing.

The Fair Housing Act ("FHA"):

Adopted in 1985. Created the "Council on Affordable Housing,“ or COAH, as the primary alternative to builder's remedy litigation for Mount Laurel compliance.

Fair Share (quota)

The total number of affordable units/credits a municipality needs to be compliant. There are many components of the "fair share“. Most relevant is the Borough’s "new construction" quota of 1,067 stemming all the way back to 1987.

Vacant Land Adjustment

For municipalities that lack sufficient developable land to meet its full quota – including Franklin Lakes.

The quota is adjusted downwards into a "Realistic Development Potential" or RDP. The calculation is done at a specific point in time and says to the Court, "judge, I do not have sufficient land to create a realistic opportunity for the construction of X, but I do have sufficient land to create a realistic opportunity for Y". The Borough's RDP is 340.

Unmet Need

The difference between the assigned quota (1,067) and the RDP (340). The Borough’s unmet need is 727. “Unmet need" does not go away and COAH’s second round regulations impose certain obligations with respect to it.

Changes in circumstances

COAH's grants of substantive certification and relevant case law require a municipality to account for certain changes in circumstances that occur after the "point in time" calculation of RDP.

Inclusionary Development

Residential development with a mix of market-rate and affordable housing units. Typically, inclusionary developments include 15% or 20% of the total number of units as affordable units.

Inclusionary Development Densities

COAH minimum – 6 units per acre. High Mountain Golf Course – 8 units per acre, after substantial negotiation. In Bergen County, in some instances, courts have required substantially higher densities, depending on the particulars of the site, the size of the unmet need, surrounding land uses and related issues.

Fair Share Plan

The municipality's plan to meet its quota. If it is approved by a Court, a municipality receives a Judgment of Compliance and Repose, or JOR - which grants certain protections from builder’s remedy litigation.

Court Approval Process

Since 2015, the trial courts have processed all affordable housing actions. The Court appoints its own expert, known as a "Special Master". In addition, Fair Share Housing Center ("FSHC"), a nonprofit housing advocacy group, is an interested party in all such post-2015 actions.

Upcoming Meetings on Cigna Property

Wednesday, February 1 at 7:00 PM, Presentation by developer. Joint Meeting of the Mayor and Council and Planning Board at the Franklin Avenue Middle School, Multipurpose Room, 755 Franklin Avenue, Franklin Lakes.

This meeting, which was to have been held on January 31, has been rescheduled to Wednesday, February 1, at 7:00 pm, in the Multipurpose Room at FAMS. At this meeting, the developer will present its concept plan for review and consideration by the Mayor and Council and the Planning Board and for public comment. At this meeting the public will be given sufficient opportunity to ask questions and provide their input to the developer and the members of the Mayor and Council and Planning Board. 

The Latest Buzz - Cigna Property

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