CAPE MAY — New Jersey has made a settlement offer in a decades-old case that promises to block much of a proposed 366-unit development and preserve open space on the east side of town.

The offer, which allows for less than a quarter of the originally proposed units, is not the first the state Department of Environmental Protection has made throughout the years. A previous offer in 2009, which involved developing a wetlands portion of the tract, fell apart when it became clear it had little chance of approval from the U.S. Army Corps of Engineers, which regulates freshwater wetlands.

The new offer would allow development on about 20 acres of the 96-acre tract east of Pittsburgh Avenue. The DEP provided four different design options, with the number of building lots ranging from 65 to 74. In exchange, East Cape May Associates would sign a conservation restriction dedicating the reminder of the land, which represents almost 5 percent of the land mass in the city, as open space.

A group of residents who live on the east side of town have already started a petition against it. Trenton Avenue resident Charles Hendricks said more than 100 signatures have been obtained.

Residents opposing the new offer question the DEP’s contention that the new development site is mostly uplands. A letter the group submitted asks for field tests of the site to prove it is not located in a wetland and argues against allowing any development in light of new flood maps coming from the Federal Emergency Management Agency. They say the tract cushions flooding on the east side of town. The letter asks for a public hearing on the issue, which is currently in a 60-day public comment period that began Feb. 6.

The project has a long history.

Developers Phil Robinson and Thomas Brodesser bought the tract for $20,000 in the early 1950s. Their company, Cape May Greene Inc., now called East Cape May Associates, developed much of the east side of town, which is comprised mostly of tidal land filled in when Cape May Harbor was created early in the 20th century.

The city wanted development and signed agreements in 1965 and 1969 to provide utilities and other infrastructure to the project. The Planning Board approved 366 units.

The state offer would allow the city to get out of the infrastructure agreement, which could cost taxpayers as much as $15 million, as part of a separate proposal to build an additional 14 affordable housing units on another tract owned by both the city and East Cape May Associates. Cape May would retain two of the lots and avoid any infrastructure obligations.

In 1988, the state issued violation notices for filling wetlands on the site. Three years later, the DEP refused to issue permits for the project, citing endangered species, wetlands and other environmental issues. The DEP said the tract is about 90 percent wetlands.

The developers filed suit in 1992, claiming it was an unfair “taking” of their property.

Initial DEP offers of 40 units and later 64 units were rejected. A 2009 offer mediated by late state Supreme Court Justice Daniel O’Hern allowed development of 18 acres, including 71 market-rate units and the 14 affordable housing units. It relieved the city of providing infrastructure but included a controversial plan to create 22 new acres of wetlands at the former Ponderlodge Golf Club in Lower Township to mitigate any wetlands losses.

The developers and Cape May supported the offer. The Army Corps, however, said the three sites envisioned for the project had little chance of being approved because of wetlands.

Now, construction will be moved to land accessible via Pennsylvania Avenue, which the DEP considers to be higher ground. An Army Corps permit may be needed to cross a ditch along Pennsylvania Avenue that may be wetlands. There are four potential designs, including:

n 65 lots fronting Pennsylvania Avenue on a 19.2-acre tract with an average lot size at 9,735 square feet. The plan calls for the construction of 4,445 feet of new road.

n 68 lots fronting Pennsylvania Avenue with an average lot size of 9,375 square feet and 4,195 feet of new road.

n 66 lots on 19.7 acres accessible from a new roadway loop, extending some streets, including Illinois and Brooklyn avenues. Minimum lot size is 10,125 square feet.

n 74 lots on a similar looped road with an average lot size of 9,375 square feet. A city-owned lot adjacent to the land could be added to help eliminate the infrastructure obligation.

The DEP says the proposals would give East Cape May Associates the “minimum relief necessary” and the “minimum beneficial economically viable use” of the property while avoiding a “taking.”

Residents, however, question whether the land along Pennsylvania Avenue is uplands and whether the latest offer is an attempt to avoid Army Corps jurisdiction.

But the city wants the open space and put together a package more than a decade ago to purchase it using local, county and state funding. It also wants out of the costly infrastructure agreement.

“The city has no liability but is responsible for infrastructure based on an old agreement,” said City Solicitor Tony Monzo.

Contact Richard Degener:

609-463-6711