                                NOT FOR PUBLICATION WITHOUT THE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-3314-17T2

ESTATE OF WINIFRED SKORSKI,

          Appellant,

v.

NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY,

     Respondent.
_______________________________

                    Argued March 4, 2019 – Decided March 20, 2019

                    Before Judges Sumners and Mitterhoff.

                    On appeal from the                         New        Jersey        Economic
                    Development Authority.

                    Michael G.         Sinkevich argued the cause for appellant
                    (Lieberman          & Blecher PC, attorneys; Stuart J.
                    Lieberman          and Michael C. Kondrla, of counsel;
                    Michael C.          Kondrla and Michael D. Sinai, on the
                    briefs).

                    Laura Drahushak, Deputy Attorney General, argued the
                    cause for respondent (Gurbir S. Grewal, Attorney
                    General, attorney; Laura Drahushak, on the brief).
PER CURIAM

      Appellant, Estate of Winifred Skorski ("Estate"), appeals the New Jersey

Economic Development Authority's ("EDA") final agency decision denying its

application for a conditional hardship grant pursuant to the Underground Storage

Finance Act, N.J.S.A. 58:10A-37.1 to -37.23 ("UST Act" or "the Act"). Under

the Act, owners or operators of leaking underground petroleum storage tanks

may receive grants or loans for the upgrade or closure of tanks and the

remediation of contaminated properties. See N.J.S.A. 58:10A-37.49(a).1 To

receive a conditional hardship grant, an applicant, among other requirements,

"cannot reasonably be expected to repay all or a portion of the eligible project

costs if the financial assistance were to be awarded as a loan." N.J.S.A. 58:10A-

37.5(c)(1).

      The Act and its implementing regulations do not discuss applications by

estates, but the EDA applies informal guidance contained in application

materials to evaluate applications by estates. The Estate challenges this informal

guidance, particularly a requirement that an estate's assets exceed its liabilities

in order to qualify for a conditional hardship grant, as improper de facto


1
   The upgrade or closure of such tanks may be required by federal or state
statutes. See N.J.S.A. 58:10A-37.4(a) (citing 42 U.S.C. 6991 to 6991(m) and
N.J.S.A. 58:10A-21 to -35).
                                                                           A-3314-17T2
                                        2
rulemaking that should have been subject to the formal rulemaking procedures

of the Administrative Procedure Act ("APA"), N.J.S.A. 52:14B-1 to -31.

      For the reasons that follow, we agree with the Estate that certain

provisions of the EDA's informal guidance constitute improper de facto

rulemaking and reverse the EDA's denial of the Estate's application.

                                        I.

      The UST Act and Implementing Regulations

      The UST Act established the Petroleum Underground Storage Tank

Remediation, Upgrade, and Closure Fund ("UST Fund") as a "special, revolving

fund" administered by the EDA. N.J.S.A. 58:10A-37.3(a). The UST Fund is

administered jointly by the New Jersey Department of Environmental Protection

("DEP") and the EDA.        See N.J.S.A. 58:10A-37.12.       Applicants seeking

assistance from the UST Fund must first apply to the DEP for consideration of

technical compliance with the cost guidelines developed by the DEP. N.J.A.C.

19:31-11.8(a). If the DEP deems the costs of the projects eligible, the EDA then

evaluates the applicant's financial condition to determine eligibility for a grant

or a loan. See N.J.A.C. 19:31-11.8 to -11.10.

      The EDA "may award financial assistance from the fund to an eligible

owner or operator in the form of a loan or a conditional hardship grant[.]"


                                                                          A-3314-17T2
                                        3
N.J.S.A. 58:10A-37.5(a)(1). "A conditional hardship grant for eligible project

costs of an upgrade, closure or remediation shall be awarded by the [EDA] based

upon a finding of eligibility and financial hardship and upon a finding that the

applicant meets the criteria set forth in this act." N.J.S.A. 58:10A-37.5(c)(1).

By contrast, "[a] loan to an eligible owner or operator for the eligible project

costs of an upgrade, closure, or remediation shall be awarded by the authority

only upon a finding that the applicant other than a public entity is able to repay

the amount of the loan." N.J.S.A. 58:10A-37.59(c)(2).

      The Act provides two initial eligibility criteria for a conditional grant for

remediation: (1) ownership of a qualifying tank; and (2) income and net worth

limits:

            In order to be eligible for a conditional hardship grant
            for remediation, in the case of a regulated tank, the
            applicant shall have owned or operated the subject
            regulated tank at the time of tank closure. No applicant
            shall be eligible for a conditional hardship grant if the
            applicant has a taxable income of more than $250,000
            or a net worth, exclusive of the applicant's primary
            residence and pension, of over $500,000.             Any
            applicant with a taxable income of more than $200,000
            who qualifies for a grant shall be required to pay no
            more than $1,000 of the eligible project costs.

            [Ibid.]

      The Act provides additional criteria for evaluating financial hardship:


                                                                           A-3314-17T2
                                        4
                  A finding of financial hardship by the authority
            shall be based upon a determination that an applicant
            cannot reasonably be expected to repay all or a portion
            of the eligible project costs if the financial assistance
            were to be awarded as a loan. The amount of an award
            of a conditional hardship grant shall be the amount of
            that portion of the eligible project costs the authority
            determines the applicant cannot reasonably be expected
            to repay.

                   [. . .] In making a finding of financial hardship
            for an application for the upgrade or remediation of a
            petroleum underground storage tank, where the
            petroleum underground storage tank is not a part of the
            business property of the owner, the authority shall base
            its finding upon the applicant's taxable income in the
            year prior to the date of the application being submitted.

            [Ibid.]

      Accordingly, for an application not pertaining to a business property, a

finding of financial hardship is based on: (1) "a determination that an applicant

cannot reasonably be expected to repay all or a portion of the eligible project

costs if the financial assistance were to be awarded as a loan" and (2) "the

applicant's taxable income in the year prior to the date of the application being

submitted." N.J.S.A. 58:10A-37.5(c)(1).

      All recipients of loans, as well as recipients of a conditional hardship grant

for a property other than the recipient's residence, are subject to a lien on the

property in the amount of financial assistance awarded to the applicant. N.J.S.A.


                                                                            A-3314-17T2
                                         5
58:10A-37.16(a). Recipients of a conditional hardship grant for a tank at the

recipient's primary residence, however, are not subject to a lien on the property.

Ibid.

        For conditional hardship grants, the lien is "removed upon repayment of

the amount of the grant that is unsatisfied or upon the end of a five-year period

in which the site . . . continued to be operated in substantially the same manner

as it was operated at the time of the award of financial assistance." N.J.S.A.

58:10A-37.16(c). In contrast, a recipient of a loan is required to repay the loan.

N.J.S.A. 58:10A-37.16(b) ("A lien that is filed on real property pursuant to a

loan shall be removed upon repayment of the loan.").

        The EDA promulgated regulations to implement the UST Act. N.J.A.C.

19.31-11.1 to -11.14. The EDA's regulations provide that an applicant may

receive a conditional hardship grant when the applicant meets: (1) eligibility

requirements; (2) financial hardship requirement; and (3) statutory requirements

of N.J.S.A. 58:10A-37.5(c).     N.J.A.C. 19:31-11.6(b).     With respect to the

eligibility requirements, the regulations track the language of N.J.S.A. 58:10A -

37.5(c)(1) regarding ownership of a qualifying tank and the income and net

worth of the applicant. N.J.A.C. 19:31-11.6(b)(1).




                                                                          A-3314-17T2
                                        6
      Regarding financial hardship, similar to N.J.S.A. 58:10A-37.5(c)(1), the

regulations provide:

            i. A finding of financial hardship by the Authority shall
            be based on a review of the applicant's financial
            condition and a determination that an applicant cannot
            reasonably be expected to repay all or a portion of the
            eligible project costs if the financial assistance were to
            be awarded as a loan.

            ii. The amount of an award of a conditional hardship
            grant shall be the amount of that portion of the eligible
            project costs the Authority determines the applicant
            cannot reasonably be expected to repay; however, any
            applicant with a taxable income of more than $200,000
            who qualifies for a grant shall be required to pay no
            more than $1,000 of the eligible project costs[.]

            [N.J.A.C. 19:31-11.6(b)(2)(i) to (ii).]

      The regulations, however, do not contain the UST Act's requirement that

"where the petroleum underground storage tank is not a part of the business

property of the owner, the authority shall base its finding [of financial hardship]

upon the applicant's taxable income in the year prior to the date of the

application being submitted." N.J.S.A. 58:10A-37.5(c)(1).

      The EDA's Informal Guidance Regarding Applications by Estates

      The parties agree that neither the UST Act nor the EDA's implementing

regulations specifically address applications by estates.       The Act defines

"Owner" as "any person who owns a facility" and "Operator" as "any person in

                                                                           A-3314-17T2
                                        7
control of, or having responsibility for, the daily operation of a facility."

N.J.S.A. 58:10A-37.2 (emphasis added). The Act defines "Person" as "any

individual, partnership, corporation, society, association, consortium, joint

venture, commercial entity, or public entity, but does not include the State or

any of its departments, agencies or authorities." Ibid. In its brief, the EDA notes

it "has long interpreted the UST Act to include estates as eligible recipients of

loans or hardship grants similar to other legally created entities that own

property in need of remediation."

      Accordingly, the EDA provides informal guidance regarding applications

by estates in two documents provided to applicants who have received technical

approval from the DEP. The first document, titled "Frequently Asked Questions

Leaking Underground Storage Tanks" ("FAQ Sheet"), describes the following

evaluation of financial hardship for an estate: "A determination of financial

hardship with an Estate applicant . . . liabilities must exceed its assets inclusive

of primary residence and pension plans (IRS recognized retirement plans, IRA,

401K) and the estate must not be settled." (ellipsis and emphasis in original).

      The second document, titled "Estates" ("Estates Sheet"), provides more

detailed guidance regarding the evaluation of applications by estates:

            I.     In order to qualify for a grant from the Petroleum
                   and Underground Storage Tank Program, an

                                                                            A-3314-17T2
                                         8
       applicant (Executor/Administrator applying on
       behalf of the Estate) must satisfy the following
       requirements:

       1)    Taxable Income – no more than $250,000
       2)    Net Worth – no more than $500,000
             (excluding    primary       residence and
             pensions)
       3)    Must be a financial hardship
       4)    Meets statutory eligibility

II.    The project site will be characterized based on its
       use at the time of the decedent's death (i.e.
       primary residence, a residence, or an investment
       property). Therefore . . .

       1)    if it was the decedent's primary residence,
             it will be excluded from the net worth test
             and no lien will be placed on the property.
       2)    if it was the decedent's residence at any
             time during the 12 months prior to the
             decedent's death, it will be included in the
             net worth test, but no lien will be placed on
             the property.
       3)    if it was an investment property (decedent
             did not reside there), it will be included in
             the net worth test and a lien will be placed
             on the property for 5 years and repaid on a
             pro-rate basis if the property is sold within
             the 5 years.

III.   In order to satisfy the financial hardship test
       (mentioned above), the administration of the
       Estate must not yet be settled and Estate
       liabilities must exceed Estate assets.




                                                             A-3314-17T2
                            9
            IV.   If the Executor/Administrator has the authority to
                  incur debt on behalf of the Estate, the Estate may
                  be eligible to receive a loan.

            If the decedent passes away on or after the date of the
            current application to the NJDEP or NJEDA, criteria III
            does not have to be satisfied. The financial hardship
            test will be utilized based on an expense to income
            ratio.

      The Estate's Application

      On April 28, 2016, the Estate applied to the DEP for the costs incurred in

the removal and remediation of a leaking underground storage tank located at a

property in Bergen County (the "Property"). While the Estate’s application was

awaiting the DEP's technical compliance review, the Estate sold the property on

July 20, 2016 and received $285,257.52 in proceeds from the sale.

      On August 17, 2017, the DEP sent the Estate a letter informing its

administrator that the DEP had determined that the Estate had satisfied the

technical eligibility requirements to receive remediation costs in the amount of

$70,524.07. The letter advised it did not "constitute any approval or release of

funding" and that the EDA would contact the administrator in the coming weeks

with a request for financial information. Accordingly, on August 21, 2017 , the

EDA sent the Estate application materials, including the FAQ Sheet and the

Estates Sheet.


                                                                        A-3314-17T2
                                      10
      On October 10, 2017, the Estate submitted its application to the EDA. As

part of the application, the Estate submitted a "Personal Finance Sheet" which

listed the Estate's assets and liabilities. The Estate's assets, inclusive of the net

proceeds from the sale of the Property, totaled $290,257.52.           The Estate's

liabilities, inclusive of the cost to remediate the property, totaled $214,533.14.

      By letter dated November 9, 2017, the EDA advised the Estate that based

on the review of the financial information submitted, the Estate was ineligible

to receive grant funding.       The letter stated:     "The first two eligibility

requirements have been satisfied, but the financial hardship test has not been

satisfied because the Estate's assets exceed its liabilities." The letter informed

the Estate that staff could review the application for consideration for a loan if

the administrator had authority to incur debt on behalf of the Estate.

      On December 11, 2017, the Estate's counsel sent a letter to the EDA

requesting that the Estate's application be considered by the EDA Board. The

letter argued that the financial hardship test applied to estates was unsupported

by statute or regulation and was therefore "ultra vires and should be invalidated."

The letter also informed the EDA that the Estate did not intend to pursue a loan.

      The EDA Board considered the Estate's application on February 13, 2018.

The Board voted to deny the Estate's conditional hardship grant application and


                                                                             A-3314-17T2
                                        11
adopted a resolution incorporating its staff’s memorandum. The memorandum

reiterated that the financial hardship test was not satisfied because the Estate's

assets exceeded its liabilities. Responding to the Estate's argument that the

financial hardship test for estates was unsupported by regulation or statute, the

memorandum stated:

            As explained earlier, the regulations describe the
            eligibility requirements for a conditional hardship grant
            and the basis for EDA's determination of financial
            hardship. The regulations, however, do not speak to the
            specific hardship requirements of an estate. An
            explanation of the specific documentation required
            from estates and the method in which the third hardship
            requirement applies to estates is set forth in the EDA's
            application documents and FAQs for the [petroleum
            underground       storage     tank]    program.       This
            documentation was provided to the Applicant. This
            documentation is also provided to all prospective
            applicants. Accordingly, staff applies the hardship test
            in the regulations in all cases, including any estate
            applicant. In re-assessing this application, staff reached
            the same conclusion that the Estate's assets exceeded its
            liabilities, and therefore did not present a financial
            hardship that would make it eligible for [petroleum
            underground storage tank] grant funding.

This appeal followed.

                                       II.

                                       A.

      On appeal, the Estates raises the following arguments for our review:


                                                                          A-3314-17T2
                                       12
              I.      THE EDA GUIDANCE DOCUMENTS ARE
                      IMPROPER DE FACTO ADMINISTRATIVE
                      RULEMAKING AND MUST BE STRICKEN IN
                      THEIR ENTIRETY.

                   A. The UST Finance Act and its Implementing
                      Regulations Do Not Support the EDA Guidance
                      Documents' Financial Hardship Test.

                   B. According to Precedent, the EDA Guidance
                      Documents      Are    Improper De  Facto
                      Administrative Rules.

                   C. Respondent's Actions are Ultra Vires and Violate
                      All Estate Applicant's Constitutional Right to
                      Due Process.

      In general, our review of a final agency decision is limited to four

inquiries:

             (1) whether the agency's decision offends the State or
             Federal Constitution;

             (2) whether the agency's action violates express or
             implied legislative policies;

             (3) whether the record contains substantial evidence to
             support the findings on which the agency based its
             action; and

             (4) whether in applying the legislative policies to the
             facts, the agency clearly erred in reaching a conclusion
             that could not reasonably have been made on a showing
             of the relevant factors.

             [In Re Taylor, 158 N.J. 644, 656 (1999) (quoting Brady
             v. Bd. of Review, 152 N.J. 197, 210-11 (1997)).]

                                                                             A-3314-17T2
                                         13
      In this case, the Estate raises the second issue, arguing that the EDA's

informal guidance violates the formal rulemaking procedures of the APA and

exceeds the statutory authority provided to the EDA by the UST Act. Our

review of this legal issue and the agency's interpretation of the UST statute is de

novo. See id. at 658.

      "Nonetheless, we 'defer to an agency's interpretation of both a statute and

implementing regulation, within the sphere of the agency's authority, unless the

interpretation is plainly unreasonable'" Ardan v. Bd. of Review, 231 N.J. 589,

604 (2018) (quoting In re Election Law Enf't Commn Advisory Op. No. 01–

2008, 201 N.J. 254, 262 (2010)).             "That deference derives from our

'understanding that a state agency brings experience and specialized knowledge

to its task of administering and regulating a legislative enactment within its field

of expertise.'" Ibid. (quoting In re Election Law Enf't Commn, 201 N.J. at 262).

                                        B.

      The Estate contends that the informal guidance used by the EDA to

evaluate applications by estates constitutes improper de facto rulemaking and is

therefore invalid because the EDA did not engage in the formal procedures of

the APA. The Estate argues that the guidance documents are inconsistent with

the UST Act and its implementing regulations because: (1) the requirement that

                                                                            A-3314-17T2
                                        14
an estate's liabilities exceed its assets is not contained in the Act or regulations;

and (2) the proceeds from the Estate's sale of the Property were included as an

asset when evaluating financial hardship. Therefore, the Estate seeks that the

informal guidance be stricken in its entirety and that the denial of the Estate's

application be reversed.

      In response, the EDA contends that it did not engage in improper

rulemaking and that it reasonably applied the UST Act and its implementing

regulations to evaluate applications by estates.        The EDA argues that it

reasonably exercised its expertise to evaluate the financial hardship of estate

applicants according to the estate's assets and liabilities, because estates are

static entities comprised of an ascertainable amount of money determined by the

assets and liabilities of the decedent. The EDA further contends that in enacting

the UST, the Legislature did not intend that hardship grants function simply as

handouts, but rather to assist struggling business owners and homeowners in

their remediation efforts so that they are able to maintain their businesses or

homes. The EDA argues that granting conditional hardship grants to all estates

whose net worth does not exceed $500,000, without a separate finding of




                                                                             A-3314-17T2
                                        15
financial hardship based on assets and liabilities, would be inconsistent with this

legislative intent. 2

       The APA defines an administrative rule as "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." N.J.S.A. 52:14B-2. "The term . . . does not include: (1) statements

concerning the internal management or discipline of any agency; (2) intra-

agency and inter-agency statements; and (3) agency decisions and findings in

contested cases." Ibid.

       "If an agency determination or action constitutes an 'administrative rule,'

then its validity requires compliance with the specific procedures of the APA

that control the promulgation of rules." In re N.J.A.C. 7:1B-1.1 Et Seq., 431

N.J. Super. 100, 134 (App. Div. 2013) (quoting Airwork Serv. Div., a Div. of

Pac. Airmotive Corp. v. Dir., Div. of Taxation, 97 N.J. 290, 300 (1984)). These

procedures require the agency to, among other things, publish notice of the

proposed rule in the New Jersey Register, N.J.S.A. 52:14B-4(a)(1), "[a]fford all

interested persons a reasonable opportunity to submit data, views, comments, or


2
  In this regard, the EDA contends that the Estate was still able to distribute
nearly $76,000 to its beneficiaries after completing the remediation and would
therefore receive a windfall of $70,524.07 if it received a grant.
                                                                           A-3314-17T2
                                       16
arguments, orally or in writing," N.J.S.A. 52:14B-4(a)(3), and "[p]repare for

public distribution . . . a report listing all parties offering written or oral

submissions concerning the rule, summarizing the content of the submissions

and providing the agency's response to the data, views, comments, and

arguments contained in the submissions," N.J.S.A. 52:14B-4(a)(4).

      "As an alternative to acting formally through rulemaking or adjudication,

administrative agencies also may act informally." Nw. Covenant Med. Ctr. v.

Fishman, 167 N.J. 123, 136 (2001). "Although not easily defined, informal

agency action is any determination that is taken without a trial-type hearing,

including investigating, publicizing, negotiating, settling, advising, plann ing,

and supervising a regulated industry." Id. at 136-37.

      "An agency has discretion to choose between rulemaking, adjudication, or

an informal disposition in discharging its statutory duty, provided that it

complies with due process requirements and the [APA]." Id. at 137. In this

regard, "an exception has been created so that where the agency's action 'is

inferable from the enabling statute itself and does not reflect a new or changed

position, it will not be held invalid for failure to meet rule-making procedural

requirements.'"   St. Barnabas Med. Ctr. v. New Jersey Hosp. Rate Setting

Comm'n, 250 N.J. Super. 132, 144 (App. Div. 1991) (quoting In re 1982 Final


                                                                         A-3314-17T2
                                      17
Reconciliation Adjustment for Jersey Shore Medical Center, 209 N.J. Super. 79,

87 (App. Div. 1986)). Nonetheless, "[a]n agency may not use its power to

interpret its own regulations as a means of amending those regulations or

adopting new regulations." In re Hospitals' Petitions For Adjustment of Rates

For Reimbursement of Inpatient Servs. to Medicaid Beneficiaries, 383 N.J.

Super. 219, 247 (App. Div. 2006) (quoting Besler & Co. v. Bradley, 361 N.J.

Super. 168, 173 (App. Div. 2003)).

      The Supreme Court has enumerated six factors to consider in assessing

whether an agency action constitutes rulemaking subject to the APA's

procedures. See Metromedia, Inc. v. Director, Division of Taxation, 97 N.J.

313, 331-32 (1984). These factors consider whether the agency action:

            (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


                                                                        A-3314-17T2
                                      18
              regulatory policy in the nature of the interpretation of
              law or general policy.

              [Ibid.]

"Not all factors need be present for an agency action to qualify as an

administrative rule."    In re Provision of Basic Generation Serv. for Period

Beginning June 1 2008, 205 N.J. 339, 350 (2011). "The pertinent evaluation

focuses on the importance and weight of each factor, and is not based on a

quantitative compilation of the number of factors which weigh for or against

labeling the agency determination as a rule." Ibid.

      To most clearly assess these factors in this case, we separately apply the

factors to the two aspects of the informal guidance that the Estate challenges:

(1) the assets and liabilities test for financial hardship; and (2) the informal

guidance on the characterization of primary residences for estates.

      Liabilities and Assets Test

      In applying the Metromedia factors to the assets and liabilities test, we

conclude that this informal guidance constitutes an administrative rule that was

required to be promulgated pursuant to the APA's formal rulemaking

procedures.

      As to the first Metromedia factor, the record does not reveal whether

applications by Estates are best considered "a large segment" or a "narrow select

                                                                         A-3314-17T2
                                        19
group" of the applicants for conditional hardship grants under the UST Act. 97

N.J. at 331. The Estate argues that the informal guidance has wide coverage,

but the EDA contends that estate applicants are a small segment of the general

public. On balance, this factor may support adherence to the APA's rulemaking

procedures, see In re Provision of Basic Generation Serv., 205 N.J. at 350-51,

but we give little weight to this factor given the limited record.

      The second factor, however, clearly supports that the assets and liabilities

test constitutes an administrative rule. The standards expressed in the guidance

documents are "intended to be applied generally and uniformly to all"

applications for conditional hardship grants by estates. Metromedia, 97 N.J. at

331. Similarly, with respect to the third factor, the EDA provides the guidance

documents to all prospective applicants and applies the guidance to evaluate all

applications by estates. Thus, the third factor also is satisfied because the

guidance is designed to operate prospectively.

      The fourth factor is the most heavily contested by the parties. The EDA

contends that giving appropriate deference to its interpretation of the UST Act,

the assets and liabilities test is inferable from the Act and its implementing

regulations. Specifically, the EDA suggests that the assets and liabilities test is

inferable from the statutory language that "[a] finding of financial hardship . . .


                                                                           A-3314-17T2
                                       20
shall be based upon a determination that an applicant cannot reasonably be

expected to repay all or a portion of the eligible project costs if the financial

assistance were to be awarded as a loan," N.J.S.A. 58:10A-37.5(c)(1), and from

the regulatory language that "a finding of financial hardship by the Authority

shall be based on a review of the applicant's financial condition," N.J.A.C.

19:31-11.6(b)(1)(i) (emphasis added).

      We find, however, that the assets and liabilities test is far more specific

than either of these sections and adds additional criteria (assets and liabilities)

that are not otherwise mentioned in the UST Act or its implementing regulations.

Under the terms of the Act, for an application not pertaining to a business

property, an award of a financial hardship grant is based on (1) "a determination

that an applicant cannot reasonably be expected to repay all or a portion of the

eligible project costs if the financial assistance were to be awarded as a loan"

and (2) "the applicant's taxable income in the year prior to the date of the

application being submitted." N.J.S.A. 58:10A-37.5(c)(1). In this regard, the

record does not reflect that the EDA considers any additional criteria other than

the taxable income from the previous year in determining whether an individual

applicant can reasonably be expected to repay the loan and has a financial




                                                                           A-3314-17T2
                                        21
hardship.3 Likewise, although N.J.A.C. 19:31-11.6 provides that "a finding of

financial hardship . . . shall be based on a review of the applicant's financial

condition," the parameters of the assets and liabilities test are not clearly and

obviously inferable from this regulatory subsection. 4

      In this case, the Estate notes that its taxable income in the year prior to its

application was $0.00 and its net worth was below the $500,000 statutory limit.

Accordingly, had the EDA "based its finding upon the applicant's taxable

income in the year prior to the date of the application being submitted ," N.J.S.A.

58:10A-37.59(c)(1), the EDA would have determined that the Estate could not

reasonably have been expected to repay a loan and had a financial hardship.

Thus, as demonstrated by the Estate's application, the informal guidance

provides determinative standards for evaluating applications by estates.




3
   The Personal Finance Sheet does ask all applicants to provide information
regarding their personal annual expenditures, asset totals, liability totals, and
properties and businesses owned. However, there is no indication in the record
that this information is used to calculate anything other than net worth and
income for non-estate individual applicants.
4
   Moreover, the FAQ Sheet provides that an estate's assets include primary
residences and pensions, whereas the UST Act clearly provides that primary
residences and pensions are excluded from the calculation of net worth.
N.J.S.A. 58:10A-37.5(c)(1).
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      Although we agree with the EDA that the UST Act was not intended to

provide conditional hardship grants as handouts to applicants who could

otherwise reasonably be expected to repay a loan, the EDA may not establish

determinative standards for financial hardship that are not contained in or clearly

inferable from the Act or its regulations without engaging in the APA's formal

rulemaking procedures.      In these ways, despite the deference given to an

agency's interpretation of its enabling statute and implementing regulation, the

fourth Metromedia factor is established because the assets and liabilities test is

not clearly and obviously inferable from the UST Act or its implementing

regulations. See In re N.J.A.C. 7:1B-1.1 Et Seq., 431 N.J. Super. 100, 138 (App.

Div. 2013) (holding that factors four and five were met where the DEP's

informal guidance on waiver regulations "elaborate[ed] upon and clarif[ied] the

very standards by which applicants will be held and the outcomes of their

applications").

      Similarly, the fifth factor is satisfied because the assets and liabilities test

was not previously expressed in any official and explicit agency rule, as neither

the UST Act nor its implementing regulation refer to such a test for evaluating

financial hardship.    See Ardan, 231 N.J. at 606-07 (holding that agency's




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interpretation of its regulation was plainly unreasonable where fourth and fifth

factors were satisfied.).

      As to the sixth factor, the unofficial guidance documents distinctly reflect

"a decision on administrative regulatory policy in the nature of the interpretation

of law or general policy," Metromedia, 97 N.J. at 331, specifically the

application of the UST Act and its implementing regulations to applications by

estates. See In re Adoption of Reg'l Affordable Hous. Dev. Program Guidelines,

418 N.J. Super. 387, 393 (App. Div. 2011). Thus, the sixth factor supports that

the assets and liabilities test constitutes an administrative rule.

      In sum, we find that five of the six Metromedia factors support that the

assets and liabilities test contained in the informal guidance constitutes an

administrative rule. Although the EDA's interpretation of the UST Act and its

implementing regulations warrants deference, the requirement that an estate's

liabilities exceeds it assets to qualify for a conditional hardship grant is not

"clearly and obviously inferable" from the Act or its implementing regulations.

Metromedia, 97 N.J. at 331. For these reasons, we conclude that that the assets

and liabilities test is invalid because it was not promulgated pursuant to the

APA's formal rulemaking procedures.




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      Primary Residence Characterization

      In applying the Metromedia factors to the informal guidance on the

characterization of primary residences for estates, we conclude that the informal

guidance does not constitute an improper de facto rule.

      As to the first, second, third, and sixth factors, we find the above analysis

with respect to the assets and liabilities test is similarly applicable to the

informal guidance's characterization of primary residences for estates. Thus, we

give little weight to the first factor, and we find that the second, third, and sixth

factors support that the informal guidance is an administrative rule.

      As to the fourth factor and fifth factors, however, we find that the EDA's

characterization of primary residence for estates is clearly inferable from the

UST Act and does not materially change any eligibility requirements for estate

applicants. With respect to these factors, the EDA argues that its criteria for

characterizing the primary residences for estates are a "commonsensical"

interpretation of the UST Act.       The EDA contends that the Estate Sheet

reasonably characterizes the project site based on its use at the time of the

decedent's death or within twelve months of the decedent's death. The Estate

counters that the EDA strayed from the UST Act's mandates on primary




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                                        25
residences by counting the proceeds from the sale of the Property in its

calculation of the Estate's net worth and assets.

      We agree with the EDA that it is clearly inferable from the Act that an

estate's primary residence would be characterized based on its use at the time of

the decedent's death. Likewise, it is easily inferable from the Act that once an

estate sells a primary residence, the proceeds from the sale will be considered a

monetary asset and will be included in the calculation of net worth. Any other

interpretations would fail to give effect to the plain terms of N.J.S.A. 58:10A-

37.5(c)(1) that net worth is to be calculated only "exclusive of the applicant's

primary residence and pension." See Ardan, 231 N.J. at 604-05 ("To apply the

'plainly unreasonable' standard, we first consider the words of the statute,

affording to those words 'their ordinary and commonsense meaning.'" (quoting

In re Eastwick Coll. LPN-to-RN Bridge Program, 225 N.J. 533, 542 (2016))).

      Thus, we conclude that the fourth factor is not satisfied because the EDA's

interpretation is "clearly and obviously inferable" from the Act. Metromedia,

97 N.J. at 331. Similarly, the fifth factor is not satisfied because EDA's informal

guidance is consistent with the UST Act and does not constitute a "material and

significant change" from the policy expressed on primary residences in the UST

Act and its implementing regulations. Ibid.


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                                       26
      In sum, although some of the Metromedia factors support that the informal

guidance in the Estate Sheet concerning primary residences is a de facto rule,

we conclude that fourth and fifth Metromedia factors weigh more heavily in the

agency's favor. These factors support that the informal guidance on primary

residences is not an administrative rule because the EDA's interpretation is

clearly inferable from the UST ACT. See St. Barnabas, 250 N.J. Super. at 144.

According due deference to this interpretation, the EDA's criteria for the

characterization of the primary residences for estates are not plainly

unreasonable. See Ardan, 231 N.J. at 604-05. We therefore conclude that the

EDA's informal guidance on the characterization of primary residences for

estates is valid and does not constitute an improper de facto rule.

                                            C.

      For the above reasons, we conclude that the assets and liabilities test

contained in the EDA's informal guidance documents is an improper de facto

rule and must be invalidated because the EDA did not follow the formal

rulemaking procedures of the APA. However, we conclude that the EDA's

informal guidance on primary residences of estates is not an administrative rule

and that the EDA may continue to apply the informal guidance's criteria

regarding the primary residences of estates.


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                                       27
      In this case, when applying only the primary residences criteria and not

the assets and liabilities test, the Estate's application for a conditional hardship

grant should be approved. Even when factoring in the proceeds from the sale,

the Estate would not exceed the taxable income limit of $250,000 (because the

requirement is based on the income from the previous tax year) or the $500,000

net worth limit. Additionally, as discussed above, had the EDA based its

evaluation of financial hardship on the Estate's taxable income from the previous

year, it would have determined that the Estate could not reasonably be expected

to pay back a loan and that the Estate had a financial hardship.

      Accordingly, we reverse the EDA's denial of the Estate's application

because the Estate would have met all requirements for a conditional hardship

grant if the EDA had not applied the assets and liabilities test. If the EDA seeks

to apply the assets and liabilities test to evaluate future applications, we direct

the agency to post notice of its proposed rule in the New Jersey Register, in

accordance with N.J.S.A. 52:14B-4, within ninety days. 5




5
   Although we are constrained to reverse the EDA's denial of a conditional
hardship grant on the particular facts of this case, we do not address the issue of
how our decision would impact any potential future grant applications by
estates.
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                                        28
      To the extent we have not addressed any other arguments raised by the

parties, we conclude they lack sufficient merit to warrant discussion in a written

opinion. R. 2:11-3(e)(1)(E).

      Reversed. We do not retain jurisdiction.




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