njfuture redevelopment forum 2016 goldsmith

REDEVELOPMENT LAWUPDATE

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Robert S. Goldsmith, Esq.Greenbaum, Rowe, Smith & Davis LLPWoodbridge, New Jersey

REDEVELOPMENT MATTERS:Redevelopment Post-Hackensack, Post LRHL Amendments, and Post-Recession

March 11, 2016

2009 Rutgers Law Record Article• In 2009, my partner, Robert Beckelman, Esq., and I published

an article in the Rutgers Law Record titled What Will Happen to Redevelopment in New Jersey When the Economy Recovers?

• The article traced the history leading up to Gallenthin v. Paulsboro as well as its progeny cases which led to the creation of the so-called “heightened standard” upon municipalities in deeming an area in need of redevelopment. We argued that Gallenthin created no such standard.

• Since the article was published, the Hackensack case clarified Gallenthin, the Supreme Court affirmed there is no ‘heightened standard’, the LRHL was amended, and the economy has begun bouncing back.

• Consider this presentation, therefore, the article’s sequel: What Has Happened to Redevelopment?”

Half of New Jersey Is Developed andPolicies Restrict or Prohibit Development In:• Highlands• Pinelands• Wetlands• Farmlands• Coastal Areas

The Lead-Up to Hackensack• Berman v. Parker, 348 U.S. 26 (1954)

• First redevelopment case decided by U.S. Supreme Court• Established general parameters of the use of eminent domain for

redevelopment purposes• Wilson v. City of Long Branch, 142 A.2d 837 (N.J. 1958)

• New Jersey Supeme Court largely adopted Berman decision• Found condemnation of property for redevelopment constitutional• Enabled local governments to determine whether an area qualified

as blighted and what property was needed to implement effective redevelopment

• Principles reaffirmed ten years later in Lyons v. City of Camden, 243 A.2d 817 (N.J. 1968)

The Lead-Up to Hackensack• Kelo v. City of New London, 545 U.S. 469 (2005)

• Court held that implementation of an economic revitalization development program designed to improve the general welfare of the community was valid

• Kick-started wave of legislative activity in states across the country designed to limit or curb the use of eminent domain for what was deemed “private redevelopment” or “economic development”

• New Jersey Constitution already required a finding of “blight” and specifically provides that the redevelopment of blighted areas constitutes a valid public purpose justifying the use of eminent domain.

The Lead-Up to Hackensack• Gallenthin Realty Development, Inc. v. Borough of

Paulsboro, 191 N.J. 344 (2007)• Paulsboro included a 63-acre largely vacant parcel of property in a

redevelopment area based upon its stagnant and unproductive condition resulting in an underutilized and not fully productive use of the property. This was the subsection “e” standard from the LRHL.

• Court found that Paulsboro’s determination essentially led to the conclusion that a property may be deemed blighted based solely on its status as “not fully productive”. Based upon this reading, the Court reasoned virtually any property may be deemed blighted and that such an interpretation was unconstitutional.

The Lead-Up to Hackensack• Gallenthin Realty Development, Inc. v. Borough of

Paulsboro, 191 N.J. 344 (2007) (CONTINUED)• With respect to subsection “e”, Court held that municipalities must

demonstrate negative impact on the community or surrounding areas.

• Court further emphasized that a redevelopment designation must be supported by “substantial” evidence, which would require more than the net opinion of a planner.

The Lead-Up to Hackensack• The Gallenthin Progeny

• Following Gallenthin decision, there were more reversals of redevelopment designations than there had been in the nearly sixty years since the adoption of the first redevelopment laws in New Jersey:• Land Plus v. Borough of Hackensack• Mulberry St. Prop. Owners v. City of Newark• HJB Assoc’s, Inc. v. City of Borough of Belmar• BMIA, LLC v. Planning Bd. of Borough of Belmar• Evans v. Twp. of Maplewood• LBK Assoc’s, LLC v. Borough of Lodi

The Lead-Up to Hackensack• Many of these cases over-read Gallenthin to establish a “heightened

standard” on all subsections of the LRHL, not just subection “e”.• Long Branch v. Anzalone and Long Branch v. Brower

• Appellate Division determined that it must review the City’s actions under the “heightened standard” of review established by Gallenthin.

• Court held that because Gallenthin discussed blight as necessarily having a negative impact upon surrounding areas, Long Branch’s findings were flawed because there was no analysis of the negative impact of the blight upon the surrounding areas.

The Hackensack Case• 62-64 Main Street LLC and 59-61 Monroe Street LLC v.

City of Hackensack, 221 N.J. 129 (2015)• Facts• City of Hackensack included two (2) vacant dilapidated

buildings and a parking lot with deteriorated pavement within an area in need of redevelopment.

• Hackensack justified inclusion of the properties under three subsections of the Redevelopment Law:• Subsection (a) as the buildings were substandard and unsafe for

occupancy;• Subsection (b) as the deteriorated condition of the buildings

rendered them vacant and untenantable; and• Subsection (d) because of faulty arrangement or design.

The Hackensack Case• Facts (Continued)• Trial Court upheld City’s determination that the properties

were in need of redevelopment• Appellate Court, however, reversed the Trial Court and

cited to the “heightened standard” of Gallenthin. It held that the City must demonstrate, under every subsection of the statute that the properties suffered from “deterioration or stagnation that negatively affects surrounding properties.”

• City of Hackensack was granted Certification by the Supreme Court

The Hackensack Case• Holding & Take-Away• Supreme Court, by 3-2 decision, held that Gallenthin

specifically addressed only subsection (e) of the Redevelopment Law and its holding should not be extended to other subsections.

• The Court reaffirmed the ability of municipalities to exercise their redevelopment powers and condemn properties that satisfy the requirements of a blighted area without requiring a further finding that the sites negatively affect surrounding properties.

The Hackensack Case• Holding & Take-Away (Continued)• The holding makes clear that Gallenthin did not create a

heightened standard for finding blight.• The decision should facilitate further redevelopment and

provide a greater level of assurance to municipalities in their efforts to effectuate redevelopment plans.

Lead-Up to 2013 LRHL Amendments• Harrison v. DeRose, 398 N.J. Super. 361 (App. Div. 2008)

• Appellate Division held that if a property owner did not receive personal notice at the time of the redevelopment designation that (1) a potential consequence of the designation could be exercise of eminent domain, and (2) that designation must be challenged within 45 days, then that property owner would not be precluded from challenging the redevelopment designation beyond the 45 day limit imposed by the Court Rules.

2013 LRHL Amendments• Amendment to 40A:12A-5(e) to address Gallenthin

• Subsection (e) now requires a showing that the property 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.

• Harrison v. DeRose Notice Requirement Codified• Now required to be served to all record owners of properties within

the delineated area and those whose names are listed on the tax assessor’s records.

• Notice in a Condemnation Redevelopment Area must follow the Harrison standards (i.e. notice that eminent domain may be used and legal action must be commenced within 45 days.

2013 LRHL Amendments• Amendments further clarified rehabilitation criteria and

adds provision for rehabilitation designation based upon environmental issues

• Municipalities now permitted to establish redevelopment areas with condemnation and redevelopment areas without the power of condemnation.• Since the passage of the Amendments, our unscientific analysis

(Google) has shown that an overwhelming percentage of redevelopment areas established by municipalities since the Amendments went into effect have been Non-Condemnation Areas

Success of Non-Condemnation Redevelopment• Since the 2013 LRHL amendments went into effect, more

than 40 municipalities have designated redevelopment areas without condemnation. Examples include:

Aberdeen Clinton Harrison (Glouc.) Middletown Raritan

Bayonne Dover Hoboken Mullica Hill Somerville

Belmar East Rutherford Keyport North Bergen South Orange

Berkeley Heights Flemington Leonia Nutley Summit

Bloomfield Freehold Lyndhurst Parisppany Union

Chester Galloway Maurice River Passaic Wethampton

Cinnaminson Hackensack Middlesex Pompton Lakes Woodbridge

Woolwich

In re Referendum to Repeal Ordinance 2354-12 of the Twp. of W. Orange v. Township of W. Orange• Citation: 2015 N.J. LEXIS 1255• Supreme Court held that a challenge to a redevelopment bond

ordinance must be filed within 20 days of the final publication of the ordinance pursuant to R. 4:69-6(b)(11) and N.J.S.A. 40A:2-49, barring the most extraordinary circumstances.

• While court rules permit an enlargement of filing period in the interest of justice, court found that the aforementioned statute counsels against exceptions as it states that a bond ordinance is conclusively presumed to be valid 20 days after publication.

• Compare: Concerned Citizens v. Princeton, finding sufficient basis for trial court’s ruling that the designation was of sufficient public interest to warrant relaxation of the 45-day filing limitation

The “Presumptive Redeveloper”• Borough adopted Belmar Seaport Village Redevelopment Plan in

2003 and in 2005 initiated an extensive outreach program with residents in order to allow residents to analyze opportunities and to evaluate outcomes.

• As a result of this process, Belmar implemented unique approach to dealing with eminent domain concerns by creating the “presumptive redeveloper” concept.

• Under this concept, existing businesses and property owners are given a first right to participate in redevelopment of their own properties.

• This created a win-win for both owners and the master redeveloper while mitigating eminent domain issues.

CASE STUDIES

MORRISTOWN

Underutilization of land

2 surface parking lots

Chancery Square and Dalton Garage

Before After

Vacant lot/building for more than 10 years.

149 apartments market rate14,000 square feet retailAsking price $50 per sq. ft. & tenants are talking to landlordCould not have been built without Dalton Garage

Washington Street

Century 21 Department Store(former Macy’s building)

Shared parking is a neat concept that recognizes two distinct elements of urban parking demand.

The first is overlapping trips also known as “Park Once”. That is, a person driving to a downtown area for work can then walk to restaurants, stores, theaters, and there is but one car trip and one car parked, yet many distinct business transactions are possible.

The second element is complementary parking needs.This is a key method of saving development costs only available in downtown development contexts.

Both concepts are gaining recognition by the Planning and Engineering communities.

SOUTH BOUND BROOK

South Bound Brook

LONG BRANCHBefore

LONG BRANCHAfter

PRINCETON

MORRISTOWNThe “Epstein’s Project”

Paul Philips, Michael Fabrizio and Robert Goldsmith, Esq. all played a role in this award-winning project.

Maple Avenue Elevation

“It Don’t Come Easy”Ringo Starr

“Too hard, too long, too slow.”Bob Goldsmith

RAHWAY

THOR LABSNewton

TRENTON

NEWARKMULBERRY STREETBEFORE – CHINA TOWN

NEWARKMulberry Street Now

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