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[April 19, 2007] - The Warren County Board of Chosen Freeholders, joined by nine property owners, filed suit today asking the courts to declare the Highlands Water Protection and Planning Act invalid.

The lawsuit, filed in Superior Court in Mercer County, states that the Highlands Act violates the constitutional equal protection and due process rights of property owners in the Highlands “Preservation Area” and confiscates much of the value of undeveloped land there.

Politics, not science, determined the boundaries of the 410,000-acre preservation area, the freeholder board and the property owners assert. Furthermore, the Highlands Council established by the Act has failed to implement promised measures to compensate landowners for their loss of equity in their property.

A County study last year found that land values have plummeted due to the Highlands Act, according to appraisers who are certified by the State Agriculture Development Committee. This loss of land value destroys the equity farmers have built in their property and reduces their ability to borrow capital for farm operations.

Many of the affected property owners in the Highlands are farmers, and land value is a crucial component of a successful agricultural operation, allowing farmers to use their equity as collateral when borrowing to purchase seeds, fertilizer, equipment and other needed supplies. The freeholders, who unanimously support taking legal action, say the Act’s onerous restrictions against development eviscerate land values, and instead of protecting farmland will sound the death knell for the viable agriculture that has been an important characteristic of Warren County.

“Warren County has worked for improvements in the Highlands Act since it first became law in 2004, but the affected farmers and other property owners can wait no longer. This is a terrible piece of legislation that must be overturned,” said Freeholder Director Everett A. Chamberlain.

“There are a lot of things wrong with the Highlands Act. We are challenging the validity of the entire process,” said attorney Stephen H. Shaw of the firm Hueston McNulty, P.C., who along with attorney John M. Zaiter of Broscious, Fischer and Zaiter, filed the suit on behalf of Warren County and the nine property owners from Warren, Morris and Hunterdon counties.

The four-count complaint seeks a declaratory judgment determining that because the Highlands Council failed to adopt a Regional Master Plan, implement a Transfer of Development Rights (TDR) program and otherwise fulfill its statutory obligations, it now lacks the authority to do so without curative legislation.

It also seeks to have the Highlands Act declared unconstitutional because it violates the equal protection guaranty of the state constitution, as some properties in the Highlands region were exempted from the restrictions through legislative bargains while others must bear the entire burden of restricted development.

The third count maintains the Highlands Act is unreasonable since the TDR program established by the Act is not a viable funding source to compensate property owners for the restrictions placed on their land.

Finally, the Act is unconstitutional because the preservation area boundaries were not justified or rationally related to any legitimate government interest or determined on a scientifically valid basis.

The Highlands Act passed the New Jersey Legislature on June 11, 2004 and was signed into law by then-Gov. James McGreevey on August 10, 2004. However, the effective date was made retroactive to March 29, 2004.

“Three years after the Act’s retroactive effective date, those flaws and the inability of the Highlands Council to implement the Act in accordance with the Legislature’s intentions are manifest,” according to Shaw. “The Act re-delegated the State’s zoning powers from municipalities to a new regional entity and mandated adoption of a Regional Master Plan and creation of a Transfer of Development Rights program by June 2006. Some 10 months later, we’re still waiting for the Master Plan and the TDR program, which are clearly violations of the Act. The Council’s self-extension of these statutory deadlines is legally ultra vires, or acting beyond its powers, and ratification by the Legislature is required to cure these fundamental flaws,” Shaw said.

"The Highlands Act is implicitly inconsistent,” Zaiter remarked. “On the one hand it recognizes the losses that the landowners will suffer as a result of its enactment, and on the other hand it has created a compensation plan that everyone agrees cannot work."

The County is taking the uncommon step of filing a civil action due to its major role in the acquisition and preservation of open space and agriculture. The Highlands Council’s failure to implement a TDR program – and the impossibility of that program becoming a viable funding source for at least a decade, if ever – frustrates the intent of the Highlands Act and places the burden of funding land preservation on county and local governments.

By joining with individual property owners in a declaratory action, the Freeholders are implementing their oaths of office to uphold the constitution, and standing beside ordinary citizens whose rights have been violated.

“It is imperative that Warren County provide the necessary leadership in filing this lawsuit to halt the harm the Highlands Act is causing residents and businesses throughout the region,” said Freeholder Richard D. Gardner. “It really is a means of trying to open the eyes of the Legislature on how unfair and egregious this Act is to the people who live in the Highlands area, and particularly in the preservation zone,” Gardner added.

Gardner noted that one top-notch international company located in Warren County, Borealis Compounds in Mansfield Township, is blocked from expanding at its current location due to the Highlands Act. The company is forced to contemplate moving, Gardner said, which would mean a loss of jobs and tax revenue.

The Highlands Water Protection and Planning Act doesn’t live up to its premise, Freeholder John DiMaio said, pointing out, “Not one thing in the law calls for conservation of water resources.” DiMaio said the legislature should have implemented a fee so that water users would help pay for protecting the land, but “There’s nothing in the law that creates a stable, permanent funding source to pay the property owners for their land.”

A water fee would help promote conservation, DiMaio said, adding, “They could take some of the water fee and rebuild broken water infrastructure systems that probably waste 30 to 40 percent of the water.”

Joining Warren County as plaintiffs are:
Robert and Ruth Best, whose 47-acre orchard in Independence Twp., Warren County, has been in his family for 62 years. Their son and daughter are the third generation of the Best family to run Best’s Fruit Farm.

Robert Best, 72, said he had a sizable loan with First Pioneer Farm Credit and was working with a financial backer to refinance before the Highlands Act was introduced. The process took several months, and a meeting on the refinancing was planned for Aug. 12, 2004. The Highlands Act was signed Aug. 10, and on Aug. 11, the backer pulled out of the deal, Best said. “He walked because in his opinion, the equity that was going to back the loan had been taken away.”

Best said he no longer has the equity to borrow money to buy equipment or supplies for the farm. “All a farmer has is his land, his equity,” he said.

Best said he had previously been offered $1.5 million to sell his farm, but doubts he could get $200,000 for it now. And because the property already has a house, he cannot subdivide his home and sell the rest of the property for someone else to build a home there.

Although 10 acres of the farm are zoned commercial with water and sewer service available within 1,000 feet, the entire property is in the Highlands preservation area. The big loss is for his two grown children, who have worked all their lives there, knowing the farm, house and farm store would be equity on which they could rely. “That would be their 401(k), that would be their retirement fund. It’s gone,” Best said.

On being a litigant in the suit, Best said, “There’s a time to take action. I’m willing to be out there and take my stand.”

Hank Klumpp, 70, who owns about 150 acres in Tewksbury Twp., Hunterdon County. Klumpp’s family has been farming there since 1952, and most of the land is in hay production. In the original draft of the Highlands bill, Tewksbury was not in the preservation area, but was added at the request of the township’s mayor. The fact that his land is in the preservation zone but land across the road is not shows there was no scientific basis for how the preservation zone borders were determined, Klumpp said.

“We lost our equity in the land,” Klumpp said. “Once land is preserved with ridiculous restrictions, it is basically just worthless. It has no equity.”

Without that land value, he cannot get loans needed to continue farming operations. “When they took the equity away, that was devastating,” Klumpp said.

Moreover, there has been no compensation for the lost value, and Klumpp doubts that the promised Transfer of Development Rights program will ever be implemented. “This TDR program is a farce,” Klumpp said.

David Shope, 70, bought 57 acres in Lebanon Twp., Hunterdon County, in 1971, and raises beef cattle there. Shope said he purchased the property from an older couple who sold their farm so they could live happily in Florida. He hoped to do the same. He has no pension, and “This was my 401(k). Now it’s essentially gone, and I’m not happy,” Shope said.

Shope said he is paying the price so others to the east and south can have water at a cheap rate. Water company profits are guaranteed by state Board of Public Utilities, Shope said, but added, “Nobody guarantees my profits running a farm here.”

“The Highlands Act has removed any viable alternatives for us to dispose of our property at anything near its pre-Highlands Act value. We can’t sell it to the state, because the state’s broke.”

Shope noted the average age of a farmer in 2002 was 58 and that average is rising. “The cynical creeps who wrote this bill know that, and quite frankly they’re waiting for us to die,” Shope said.

The Highlands Act includes a first exemption that allows building one house for a family member on a parcel but that exemption applies only to the owner of record at the time the law was enacted, and doesn’t pass along to family members. People don’t know they may be prohibited from building that one house, Shope said.

Andy and Lois Drysdale are residents of Chester Twp., Morris County. Their 18.5-acre property was part of his grandfather’s farm. Other family members who received pieces of that farm sold off their shares, but he kept his and was planning on using it for his retirement.

In 2002, they began to think about subdividing and selling portions of it. Andy Drysdale, 71, said his October 2003 application for a subdivision with four lots never received final approval from the township before the Highlands law went into effect. He later tried for a two-lot minor subdivision, which also did not get approved. Drysdale said he spent $60,000 on the application for attorneys and other fees, and now is prohibited from subdividing and recouping any of what he spent.

A self-employed land surveyor, Drysdale said of the property, “This is really our retirement plan.” It was estimated to be worth $2.3 to $2.4 million for the four lots, but he doubts the remaining value is even a quarter of that now.

The state Department of Environmental Protection set strict rules for the Highlands preservation area, with 25 acres required for septic systems and only 3 percent of the land can have impervious coverage, making it impossible to put in a road, houses and driveways.

The situation would be different if the state paid him what the land is worth, but Drysdale objects to having his land’s value taken away without compensation.

Charles W. “Bill” Shoop, 75, owns 100 acres in Washington Twp., Morris County, where he moved in 1959. He has raised beef cattle there but now is retired and has someone else farming the land.

About 10 years ago, Shoop was offered nearly $3 million for the place – about 60 acres of which is zoned for light industrial development – but the deal never was completed. Shoop said he believes the land’s value has now decreased by 80 percent. “When somebody comes in and takes all the value away from it, that doesn’t make you feel too good,” Shoop said.

Shoop noted he is fortunate that he doesn’t have to sell the farm right now, but that doesn’t give anyone the right to say he can’t sell it, just because he didn’t sell a few years ago when he had the chance.

Shoop said he is joining with Warren County in the litigation because he feels this has taken away the value of his property. If he got paid even a reasonable amount for that value, he wouldn’t be in the lawsuit, Shoop said.

Jerry Kern is unlike the other property owners who are plaintiffs. At 47, he is not retired or on the verge of it. However, the value of the 62 acres he and his wife, Sandra, own in Pohatcong Twp., Warren County, is just as important to the Kerns as it would be to a farmer looking to secure his retirement.

Kern has lived in Pohatcong more than 20 years, but purchased the farm in mid-2003. His plan was to find land and stay in the township, retiring there someday. After a long search he found property that was perfect, but a bit of a financial stretch, so he thought he could perhaps subdivide and sell a few lots on the road frontage if necessary to make the purchase affordable. His intention was to keep as much of the land as possible to run a small farm.

The Highlands Act has hampered everything he’s done. Kern said he has spent more than $20,000 in engineering and related costs for his minor subdivision, but after all his hard work and research to ensure for his family’s future “they pretty much take away everything with the swipe of a pen.”

“It was our family’s American dream all this time to do this,” Kern said. “All it’s been is a horror story ever since. It’s un-American.”

Kern is involved in construction and he anticipated zoning changes, with larger lots being required, but he never expected his ability to build on land to disappear entirely.

“I hate large developments as much as anyone. I’m for preservation as much as anyone, but it should be done fairly,” Kern said, adding, “How would you feel if your house was devalued? There’s no one that would be happy with that.”

If the Highlands Act were really about preserving water resources, there are many other solutions to address that issue, he said, including water conservation. However, those other options are not addressed, Kern said.

Moreover, the Transfer of Development Rights program, and other provisions for compensating landowners such as the farmland preservation program should have been in place and funded before a bill of the Highlands Act’s magnitude was passed, Kern said.

The irony is, Kern said, “I’m the young guy who they would want to own this land. I’m the kind of guy who they want to have these properties, who’s willing to keep 50 acres for themselves and do something with it in agriculture.” A large developer could have come in and developed the entire tract had he not purchased it, but Kern added, “If I had known this act was coming, I never would have bought this land.”

Regarding the lawsuit, Kern said, “I’m glad that the freeholders are sticking up for my rights and for democracy, because I’d lost all respect for democracy in this state.”

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