A Perspective on Redevelopment
Written by David G. Roberts for NJAPZA
The use of redevelopment in New Jersey has made a comeback in recent years, fueled by a combination of the gradually rebounding economy, the rise of the millennials and their love for the energy and convenience of the urban lifestyle, and the amendments to the Local Redevelopment and Housing Law in 2013 that provided a way to separate the designation of a redevelopment area from the threat of Eminent Domain. In some cases, developers have initiated the process to advance new mixed-use projects with the financial tools only available to designated redevelopment areas. In other cases, municipal governments have led the way, motivated by the opportunity to effect positive change with economic opportunity. However, the actual criteria for qualifying a redevelopment area have not changed except for some additional language that was added to Criterion “e” (NJSA 40A:12A-5(e)):
- A growing lack or total lack of proper utilization of areas caused by the condition of the title, diverse ownership of the real properties therein or other similar conditions which impede land assemblage or discourage the undertaking of improvements, resulting in a stagnant and unproductive condition of land potentially useful and valuable for contributing to and serving the public health, safety and welfare, which condition is presumed to be having a negative social or economic impact or otherwise being detrimental to the safety, health, morals, or welfare of the surrounding area or the community in general. (new language from P.L. 2013, Chapter 159 underlined)
The new language associates “other similar conditions” with the impediment of land assemblage sometimes necessary to enable the repurposing of neighborhoods, downtowns or industrial areas, as well as conditions that discourage the undertaking of improvements. Prior to this new statutory guidance, the use of “e” had been significantly narrowed or totally avoided by the reversal of redevelopment area designations in lower court actions immediately following the NJ Supreme Court’ Decision in Gallenthin vs. Paulsboro. Now, we look into conditions that may not be as much directly about multiplicity of ownership or condition of title as about the impediment of land assemblage or discouragement of development where the result is a negative social or economic impact or a detrimental impact on the public welfare.
In addition to the clarifying language for the “e” Criterion, the 2013 amendments to the Local Redevelopment and Housing Law including a mechanism for separating the use of Eminent Domain from the designation of a redevelopment area (designation of a redevelopment area “with condemnation” or “without condemnation”). That wrinkle in the process enables the use of financial tools such as Redevelopment Area Bonds (RAB) and long term (up to 30 year) property tax exemptions (commonly referred to as “PILOTS”, which is an acronym for payments-in-lieu-of-taxes). Taking condemnation “off the table” at the very beginning of the process (the governing body resolution directing the planning board to undertake the redevelopment area investigation must state whether it is with or without condemnation) usually neutralizes objections from property owners.
Often it is developers who own the property in question that initiate the process so that they can access the financial tools necessary to make the project economically feasible. It is important to stress, however, that the investigation and designation of a redevelopment area requires “substantial evidence” that one or more of the criteria in Section 5 of the statute are met. This investigation and finding by the planning board must be free of any influence from interested parties, although the property owners can provide access to and helpful information about the properties involved. Once the designation is made, however, the prospective redeveloper can be involved in the development of the redevelopment plan. It is also important to remember that the powers of redevelopment (Section 8 of the statute) require the adoption by ordinance of the redevelopment plan, which means that the redevelopment agreement between the municipality and the redeveloper can only be executed after the plan is adopted.
An interesting example of that is the separate designation by the City of Clifton in Passaic County and the Township of Nutley in Essex County of the Hoffman La Roche complex of about 200 acres that is divided right through the middle of a building between the two jurisdictions. The systematic demolition of numerous buildings in both towns as the corporate giant disengaged from the site caused an economic crisis, especially in Nutley, where the state had to intervene with financial aid. The end result of the redevelopment process (which included the choice of one town to use a redevelopment area “with condemnation” and the other to designate “without condemnation”), was the adoption by both towns on the same night of a “Phase 1 Redevelopment Plan” that will enable the reuse of two of the former Roche buildings (and their state of the art research laboratories and training facilities) for a joint Seton Hall and Hackensack University Medical Center medical school – the first private medical school in New Jersey.
Examples such as how Clifton and Nutley used the redevelopment process and collaborated to plan for the repurposing of a site that is critical to their tax base is likely to be the future of ways that redevelopment will be used in New Jersey.