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City Defeats Resolution to Fund Legal Costs for Sewell Tract

By Vince Conti

CAPE MAY – At the Jan. 7 work session of Cape May City Council, a resolution calling for the city to financially contribute to the legal costs of Concerned Citizens of Cape May was narrowly defeated. 
Concerned Citizens, a non-profit entity, has engaged in litigation for the last five years to prevent any development of a contiguous 100-acre parcel of land east of Pittsburgh Avenue, known as the Sewell Tract.
The resolution called for an immediate contribution of $20,000, the potential expenditure of up to $65,000 and maintained the option for Concerned Citizens to request additional funds in the future.
Deputy Mayor Patricia Hendricks abstained from the vote because her husband, Charles Hendricks, is president of Concerned Citizens. The vote was 2-2, meaning the resolution failed to carry.
Mayor Clarence Lear and Council member Shaine Meier voted in favor of the resolution. Council members Stacy Sheehan and Zack Mullock voted against. 
Mullock expressed strong support for attempts to keep the tract free of development, but said too many questions remained, after a closed-door executive session of the council earlier in the day, for him to comfortably support the measure so quickly.
Brief History
City Solicitor Frank Corrado summarized the long litigation history concerning potential development of the Sewell Tract. The case has origins over half a century ago, even though the case itself was filed, in 1991, 29 years ago. 
The issue of development of the tract has been through multiple judges, including a new one appointed October 2019 after the previous judge was rotated off following five years on the case. Attorneys involved in the case have passed the baton down through generations. Several litigants have been part of the proceedings, including the city.
The case involves a Florida limited partnership, East Cape May Associates (ECM), and its request July 23, 1990, for a Coastal Area Facilities Review Act (CAFRA) permit to develop 366 single-family residential units on a 100-acre tract bordered by Pittsburgh Avenue, Pennsylvania Avenue, U.S. Coast Guard Base and Maryland Avenue. In January 1991, the state Department of Environmental Protection (DEP) denied the permit, and ECM filed suit.
ECM claimed that the state excessively interfered with its property rights and denied it any economically beneficial use of its land. The company sought just compensation for what it deemed a regulatory taking of its land.
The litigation over the development of the tract predates the 1991 lawsuit. In 1965, and again in the early 1970s, the city entered into a “working agreement” with the owners of the property. The city, anxious to promote the development of this section of the municipality, agreed to provide water and sewer mains for the area if development proceeded. At the time, tracts of land existed on both the east and west sides of Pittsburgh Avenue.
When the city attempted to renege on the agreement, litigation ensued, and the courts declared the working agreement valid and enforceable. While there are still legal arguments to be made, one concern is that the old working agreement may bind the city to significant capital expenditures if the development of the Sewell Tract moves forward.
The city’s other interest is that an open, undeveloped Sewell Tract is a prominent part of the town’s master plan flood mitigation efforts.
DEP is attempting to find a way out of potential liability for compensating ECM for a regulatory taking of the entire large tract of land in a city where land values and housing values are significantly higher than they were in 1991. 
Litigation over this tract has been part of more than one Appellate Court decision, including in 1997 and 2001. Thus far, the courts have upheld that the relevant “denominator” for purposes of the inverse taking analysis is the entire tract. That means that DEP could face needing to make compensation to ECM based on the potential value of the whole tract. 
Present Issue
Concerned Citizens entered the legal proceedings, in 2014, when the DEP made an “amelioration offer” to ECM. The thrust of the offer is that permits would be issued for the development of a portion of the tract, and DEP would minimize the effect of its earlier denial of permits to the value of the total property.
The position of Concerned Citizens is that the tract should remain entirely free of development.
In the world of litigation, that puts the non-profit on the same side of the suit as the developer, against the proposed state action. The developer wants compensation for an inability to develop the entire tract and Concerned Citizens wants to keep the tract free of development. 
DEP wants to avoid a big payday for the developer at state expense, and is willing to allow development on part of the wetlands in East Cape May, as the price.
According to Charles Hendricks, Concerned Citizens has expended about $400,000 in legal fees and does not have the resources to proceed without city help. Thus far, the funds have been raised through donations.
Corrado advised the council that it could authorize the use of public funds to support the litigation on behalf of a private entity, Concerned Citizens, as long as the action met two conditions – the funds must be spent to promote a public purpose the council wants to support and there must be a contract in place to control the use of the funds.
Resolution Terms
The Jan. 7 resolution called for an immediate contribution of $20,000. It also called for $35,000 in matching funds, which would go to Concerned Citizens when matched by private donations, and which would begin when those private donations aggregated to at least $20,000. 
It also calls for $10,000 of public funds for non-legal expenses incurred by Concerned Citizens, as the non-profit prepares for a trial date set in March. The cap in the resolution is $65,000.
Despite the cap, the resolution leaves open the possibility for Concerned Citizens to return to the city, asking for further financial support in a case that Corrado told council members would almost certainly be appealed, no matter what the outcome of the trial.
The resolution states that the better path for the city is to contribute to Concerned Citizens’ legal costs rather than independently intervening in the case.
To date, the city has occupied many positions concerning the Sewell Tract. As late as 2013, then-mayor Edward Mahaney spoke of a city purchase of the tract as part of a settlement agreement that later dissolved. His State of the City address, in 2013, predated by one year the present Concerned Citizens litigation.
In 2001, the city was amicus curiae (an impartial adviser, often voluntary, to a court of law in a particular case) to litigation involving the tract and shared an attorney with the American Littoral Society, a group involved and finding itself on the side of the DEP.
Next Steps
The resolution was defeated, but could resurface. Corrado explained that the defeat of the resolution did not mean it could not be brought back for consideration at the next meeting.
The deputy mayor would have to continue to withhold any vote. If Lear and Meier continue to support the move, that would leave the decision to Mullock and Sheehan. Unless one of them supports the use of public funds for this purpose, the resolution can’t pass.
One other issue that animated discussion at the meeting was the refusal of Concerned Citizens to make the list of donors, who have supported the litigation thus far, available to the city. Mullock was uncomfortable with the prospect of contributing public funds to an organization whose other donors the city was not able to know.
Whatever the decision, the litigation will continue. Moving into a sixth year since the amelioration offer was made, almost 30 years since the 1991 case was filed, and over 50 years since the city entered into its “working agreement,” the case faces trial in March, and almost certain subsequent appeal.
To contact Vince Conti, email vconti@cmcherald.com.

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