Municipalities, property owners and developers did not have to wait long to see the impact of the Supreme Court’s decision in Gallenthin Realty Dev., Inc. v. Borough of Paulsboro, 191 N.J. 344 (2007). In Evans v. Township of Maplewood (Law Div. Decided: July 27, 2007) and Mulberry Street Area Property Owner’s Group v. City of Newark (Law Div. Decided: July 19, 2007), two Essex County trial courts voided municipal designations of redevelopment areas based upon the failure of the municipality to provide substantial evidence supporting a finding that the properties in question constituted “an area in need of redevelopment” under N.J.S.A. 40A:12A-5(e) or other subsections of the statute.
In Evans, the plaintiffs’ lots were 2 of 18 lots which the Township requested be studied to recommend whether to include them in a redevelopment area. The municipal planner found that several of the lots in question, including plaintiffs’ lots, did not meet the criteria under the Local Redevelopment and Housing Law, N.J.S.A. 40A-12A-1 et seq. (“LRHL”) for redevelopment and that he, in “good faith” could not recommend them for inclusion, absent additional evidence. Nevertheless, the Board members, based apparently upon their own conclusions that the lots in question were underutilized or the uses did not “add” to the “quality of life” in the municipality, voted to recommend that the plaintiffs’ lots be included in the redevelopment area. The Township Committee passed a resolution creating the redevelopment area and the plaintiffs filed a timely appeal.
Judge Goldman specifically found that the Planning Board equated blight with underutilization of the properties and held that a determination merely based upon underutilization did not pass muster under Gallenthin. The court also found that the municipality’s argument that subsection (d) should apply, namely that the buildings were “detrimental to the safety, health, morals or welfare of the the community,” was not supported by the evidence, noting that although “observations and comments of the members of the Planning Board may suggest that [the lots] were obsolete, had faulty arrangements or designs, or had excessive lot coverage,” there was no substantial evidence in the record to draw such a conclusion.
Finally, the municipality attempted to rely upon N.J.S.A. 40A:12A-3, which allows the inclusion of non-blighted properties in a redevelopment area where it is “necessary . . . for the effective redevelopment of the area.” The court found no substantial evidence in the record that the two lots at issue were in any way necessary for redevelopment of the area and noted that this section is typically utilized to deal with the “hole in the donut” – where property may be within the boundaries of a redevelopment area but do not meet the criteria of section 5. Here, the court found that to include these lots would “supersize” the redevelopment area with no showing of how these lots were necessary for future redevelopment.
In Mulberry Street, Judge Simonelli found that a nine block area which included one hundred and sixty-six lots was based upon the City of Newark’s finding that the entire Mulberry Street Area was “an area in need of redevelopment solely under N.J.S.A. 40A:12A-5(e) because it is not properly utilized and fully productive.” The court found that, as a result of the Gallenthin decision, such a declaration “does not meet the constitutional requirement of blight and must be invalidated and set aside.”
The trial court exhaustively reviewed the record below and found that the declaration was not based upon any defects in title or defects relating to diversity of ownership. While the trial court recognized that non-blighted parcels may be included in a redevelopment area if necessary to the rehabilitation of a larger blighted area, the court found no evidence that the Mulberry Street Area was connected to a larger blighted area.
The court noted that there is no bright-line test for what type or amount of evidence rises to the level of “substantial” for purposes of subsection (e). The Judge stated that a court must make a case-by-case evaluation and identified such criteria as (1) applications for building permits to determine substandard, unsafe, unsanitary or dilapidated conditions, (2) occupancy rates and numbers of employees of existing buildings to determine under-utilization; (3) usage of public transportation to determine under-utilization of parking lots; (4) physical inspections of structures to determine whether they are substandard; (5) economic activity and productivity; (6) maps detailing land uses, the extent of blighting factors and tax delinquencies; and (7) block-by-block findings. The court concluded that there was no evidence that the City considered any of the above factors.
Finally, the court noted that there was evidence that the redevelopment project and the role of the developer was a fait accompli before the required statutory process began. The City and developer had met to discuss a “fast track” for the project and there was “evidence of thousands of dollars in political contributions” by the developers and their family members to former Mayor Sharpe James and other Council Members who voted in favor of the resolutions. The court stated that the “evidence certainly provides cause to question the results and validity of the redevelopment investigation” but made no determination as to the merits of any claim of corruption.
The Evans and Mulberry Street decisions are instructive to municipalities, property owners and developers. Both decisions demonstrate that a lack of factually-supported expert analysis will likely lead to a finding that the designation of a redevelopment area does not meet the substantial evidence standard required in the LRHL. It appears that courts will view such designations with skepticism, particularly where the municipality fails to acknowledge the findings of its own experts or fails to provide support for conclusory findings in favor of a redevelopment designation. Furthermore, developers should take care to confirm that the underpinning of the redevelopment area is based upon substantial evidence and should confer with legal counsel on such issues much as they would in undertaking a zoning analysis in advance of embarking on any development project.
