                                NOT FOR PUBLICATION WITHOUT THE
                               APPROVAL OF THE APPELLATE DIVISION
        This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the
     internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.




                                                         SUPERIOR COURT OF NEW JERSEY
                                                         APPELLATE DIVISION
                                                         DOCKET NO. A-1883-18T3

JASONTOWN II ASSOCIATES
LP,

          Appellant,

v.

NEW JERSEY HOUSING AND
MORTGAGE FINANCE AGENCY,

     Respondent.
______________________________

                    Argued January 8, 2020 – Decided January 30, 2020

                    Before Judges Fuentes, Haas and Enright.

                    On appeal from the New Jersey Housing and Mortgage
                    Finance Agency.

                    Michael D. DeLoreto argued the cause for appellant
                    (Gibbons PC, attorneys; Michael D. DeLoreto and
                    Jennifer Phillips Smith, on the briefs).

                    George Edward Loeser, Deputy Attorney General,
                    argued the cause for respondent (Gurbir S. Grewal,
                    Attorney General, attorney; Melissa H. Raksa,
                    Assistant Attorney General, of counsel; Jeet M. Gulati,
                    Deputy Attorney General, on the brief).
PER CURIAM

      Appellant Jasontown II Associates, LP (Jasontown), appeals from the

November 21, 2018 Final Decision of the New Jersey Housing and Mortgage

Finance Agency (Agency).         This decision rejected the findings of an

Administrative Law Judge (ALJ) and adopted a 2 percent rent increase for

Jasontown instead of Jasontown's proposed 158 percent rent increase.          We

affirm, substantially for the reasons set forth in the Agency's comprehensive and

well-reasoned written decision, which is "supported by sufficient credible

evidence on the record as a whole." R. 2:11-3(e)(1)(D). We add the following

comments to give context to the Agency's decision.

      Jasontown operated under the Agency's authority for nearly five decades.

In 1970, Jasontown’s predecessor, the Monday Corporation, and the Agency’s

predecessor, the New Jersey Housing Finance Agency, entered into a Mortgage

and Regulatory Agreement (First Agreement) for the construction of an

apartment complex (the project). The project was developed with the specific

intent of generating housing for "moderate income" families. The Agency

financed the project with a first mortgage loan of over seven million dollars at

a below-market interest rate. Jasontown received no other governmental subsidy

or benefit and agreed to comply with the Agency's rules and regulations,


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                                       2
including the Agency's determination of appropriate rents and rent increases, in

exchange for the below-market interest rate loan. The First Agreement provided

for a cumulative annual return on Jasontown's investment, also known as a

return on equity (ROE), of eight percent of the equity base per year.

      In October 2009, Jasontown requested the Agency's approval for an

increase to Jasontown's equity base and a resulting ROE amount of $861,147.87.

The Agency approved this request, subject to Jasontown funding an additional

$1,575,350 operating reserve. An operating reserve's primary purpose is to

ensure a project has adequate funding in case operating revenues are lower than

expected or operating expenses are higher than anticipated. Jasontown did not

comply with this Agency condition; therefore, the ROE amount remained

unchanged from 2009 through 2013.

      In 2014, Jasontown again asked for an increase to its equity base and

sought an annual ROE amount of $1,064,000. It also requested permission from

the Agency to prepay the outstanding mortgage loan and obtain a new $12

million-dollar mortgage loan. The Agency approved both requests, subject to

Jasontown signing a new regulatory agreement (Second Agreement), consenting

to be bound by the Agency's rules and regulations until October 2019 , and

subject to Jasontown funding an additional $1,748,250 operating reserve.


                                                                        A-1883-18T3
                                       3
Jasontown satisfied these conditions and the 2014 ROE increase took effect.

After prepaying the initial mortgage, Jasontown cashed out $11,620,436.52 from

the project and distributed these proceeds to Jasontown’s owners.

      In 2016, Jasontown requested the Agency's approval to release $1,064,000

from its operating account as ROE for its owners. The Agency approved this

release. Shortly after cashing out this significant ROE, Jasontown submitted its

2016 application for a 158 percent rent increase, along with its proposed budget

for calendar year 2017. In November 2016, the Agency approved a two percent

rent increase.

      Jasontown objected to the two percent rent increase and filed a Notice of

Petition and Appeal to challenge the Agency's decision.        The matter was

transferred to the Office of Administrative Law (OAL) for a hearing as a

contested case. In May 2018, the ALJ issued an Initial Decision wherein she

recommended a nineteen percent rental increase. Both parties filed exceptions

to this decision, and the Agency remanded the Initial Decision to the ALJ due

to "incomplete and confusing language" in the Initial Decision and the need to

correct "apparent typographical errors." The ALJ reconsidered her decision and

in August 2018, issued an Initial Decision on Remand, concluding Jasontown

was entitled to a rent increase of 25.4 percent. Both parties filed exceptions,


                                                                        A-1883-18T3
                                       4
and the Agency issued its Final Decision on November 21, 2018 rejecting the

ALJ's conclusions. The Agency again approved a two percent rent increase for

Jasontown, effective January 1, 2017.

      On appeal, Jasontown argues "years of arbitrary and capricious actions by

the Agency to suppress the rent and eligible income limits" bars today's families

of moderate income from living at the project. It also claims the Agency failed

to properly account for maintenance and ROE when granting a two percent rent

increase on Jasontown's 2016 application. Further, Jasontown contends "[t]he

magnitude of the rent increase requested by Jasontown [in its 2016 application]

is directly attributable to the decades of the Agency's refusal to approve adequate

rent increases."

      The Agency counters that it rejected the ALJ's Initial Decision on

Remand, in part, because it determined the ALJ incorrectly found Jasontown

"entitled" to the maximum permitted ROE in 2017. The Agency explains that

N.J.A.C. 5:80-3.1 to -3.5 prescribes the annual ROE calculation, and does not

require the maximum amount calculated to be paid out annually. Instead, the

statute expressly acknowledges the Agency may defer annual ROE payments to

a future time, including when the project is sold.




                                                                           A-1883-18T3
                                        5
      Our review of final decisions by state administrative agencies is limited

in scope. See Clowes v. Terminix Int'l, Inc., 109 N.J. 575, 587 (1988). An

appellate court will not alter the ultimate determination of an agency unless the

decision was arbitrary, capricious, or unreasonable, or it violated legislative

policies expressed or implied in the act governing the agency. Campbell v. Dep't

of Civil Serv., 39 N.J. 556, 562 (1963). There is a "strong presumption of

reasonableness attach[ed] to the actions of the administrative agencies." In re

Carroll, 339 N.J. Super. 429, 437 (App. Div. 2001) (quoting In re Vey, 272 N.J.

Super. 199, 205 (App. Div. 1993)). "The burden of demonstrating that the

agency's action was arbitrary, capricious or unreasonable rests upon the [party]

challenging the administrative action." In re Adoption of Amendments to Ne.,

Upper Raritan, Sussex Cty., 435 N.J. Super. 571, 582 (App. Div. 2014)

(alteration in original) (quoting In re Arenas, 385 N.J. Super. 440, 443-44 (App.

Div. 2006)).

      We must also "'defer to an agency's technical expertise, its superior

knowledge of its subject matter area, and its fact-finding role,'" and therefore

are "obliged to accept all factual findings that are supported by sufficient

credible evidence." Futterman v. Bd. of Review, Dept. of Labor, 421 N.J. Super.

281, 287 (App. Div. 2011) (quoting Messick v. Bd. of Review, 420 N.J. Super.


                                                                         A-1883-18T3
                                       6
321, 325 (App. Div. 2011)). However, this court is "in no way bound by the

agency's interpretation of a statute or its determination of a strictly legal issue."

Mayflower Sec. Co. v. Bureau of Sec., 64 N.J. 85, 93 (1973).

      Mindful of our limited standard of review and the Agency's regulatory

expertise, we are satisfied the Agency's Final Decision is supported by

substantial evidence in the record and consistent with the applicable law. We,

therefore, affirm the determination, substantially for the reasons cogently

expressed in the Agency's Final Decision dated November 21, 2018.

      To the extent not otherwise addressed, Jasontown's remaining arguments

lack sufficient merit to warrant discussion in a written opinion. R. 2:11-

3(e)(1)(E).

      Affirmed.




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