New Jersey Lawyer & Attorney : Stark & Stark Law Firm : New Jersey Law Blog

Redevelopment plans are governed by the Local Redevelopment and Housing Law at N.J.S.A. 40A:12A-7a and consist of six basic categories. First, subsection (1) of the aforesaid statutory section requires redevelopment plans to discuss the relationship of the redevelopment plan to local objectives, including land uses, density of population, traffic and public transportation, public utilities and recreational and community facilities. Second, under subsection (2), a redevelopment plan must include actual land uses and building requirements for property within the redevelopment area to which the plan applies. Subsections (3) and (4) - if applicable - require municipalities to treat temporary and permanent relocation of persons to be displaced by redevelopment and an identification of the actual proposed takings. This portion of a redevelopment plan should also contain an evaluation of why the taking of such properties are necessary for a particular redevelopment project. Subsection (5) mandates that a redevelopment plan treat the relationship between it and other planning documents, such as the master plans of contiguous municipalities, the county master plan and the State Development and Redevelopment Plan. Finally, under Subsection (6) of N.J.S.A. 40A:12A-7a, a redevelopment plan must contain a description that relates the plan to local law, such as its relationship to local regulations and its consistency with the municipal master plan or its design to effectuate the municipal master plan. However, it should be noted that a municipality may actually adopt a redevelopment plan that is inconsistent with or is not designed to effectuate the municipal master plan, provided that the municipal governing body does so by an affirmative vote of a majority of its full authorized membership and sets forth the reasons for so acting in the redevelopment plan.

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Those of you in Trenton during the legislative hearings on the Permit Extension Act undoubtedly witnessed an amazing process and historic battle leading to the passage of the Permit Extension Act, and therefore know first hand just how much credit NJBA Master Sponsors deserve for industry defense and the effort put into the Permit Extension Act. To the surprise of many, one environmental lobbyist plainly declared that the proposed legislation was an all out "declaration of war" against the environment and not worthy of discussion or compromise. That mindset seemingly pervaded attempts to kill or gut the bill despite the broad understanding that the industry and the economy need immediate stimulus.

 

The contributions by Master Sponsors critically supported NJBA’s drive to promote the Permit Extension Act. Prospective Master Sponsors often ask, "why should we become Master Sponsors?" Despite the ultimate discussion about "return on investment," the direct and indirect marketing opportunities afforded to program participants and the exclusive access to industry insiders afforded to the Master Sponsors, the first reason Associate Members of the Builders Association are encouraged to join this elite program, is precisely this -- industry defense. What that means to builders, associate members of NJBA and Master Sponsors was fully on display in recent weeks.

 

First of all, any discussion of the Permit Extension Act would be remiss if we did not laud the officers and professional staff of NJBA for their masterful job in standing up for the industry, going toe to toe with powerful forces not that are not only used to getting their way, but also were intent on gutting the Permit Extension Act. While other organizations participated in the Smart Growth Economic Development Coalition, NJBA clearly took the lead in advancing the Act, providing much of the resources, informational tools and political savvy resulting in the overwhelming bipartisan passage of the Act now sitting on the Governor's desk and expected to be signed into law shortly. Despite the tremendous adversity, NJBA would not back down in their insistence on a strong industry-supported Act.

 

Master Sponsors were critical to these efforts. It easily can be said that the Act would not have been adopted, thousands of jobs not saved, and hundreds of millions of dollars invested not protected without the Master Sponsors. The biblical story of David and Goliath is notable simply because notwithstanding good intentions and a righteous cause, Davids rarely beat Goliaths without the strength and weapons necessary to do so. Master Sponsors provided those resources on various levels. Hundreds appeared at legislative hearings in Trenton when called upon to support the advancement of the Act. Not only did builders, officers and professional staff all appear in large numbers, but significantly the Master Sponsors made up much of the crowd standing behind the efforts of NJBA leadership and pressuring our State Legislators to support the Act without gutting it. The environmental lobby and their supporters, while out in numbers, did not begin to compare to the strength and numbers of NJBA supporters.

 

That Master Sponsors were out in numbers is not surprising because this elite group of industry supporters recognizes the importance of industry defense. As it has been said by many, notably Michael Kurpiel on numerous occasions, if the builders stop building today, we will be out of work tomorrow. Despite monumental opposition, we saved those jobs and opportunities! Master Sponsor's all know of the financial commitment to NJBA required to become part of this exclusive group. Revenue from the Master Sponsor program provides critical financial resources to the Builders Association necessary to allow NJBA to retain top professionals, recruit talented and resourceful officers, provide member mobilization resources (leading to those hundreds of people traveling to Trenton), and engage legal and technical expertise advancing passage of the Act, as well as many other resources. 

 

None of us need be told that these are tough times in the building industry. A few Master Sponsors who have regularly supported the program have struggled to find the resources necessary to justify remaining as Master Sponsors while other first time Master Sponsors recognize this as a critical time to defend and support the industry.

 

NJBA regularly advances opportunities for Master Sponsors because these are the elite organizations providing the resources for NJBA to protect the industry on various levels. Simply speaking, Master Sponsors deserve support not only for all they do to support the industry, but because Master Sponsors are key players providing product and services to the industry. Builders and Associate Members support and should support Master Sponsors not only for their efforts to protect the industry and save your job and mine, but because of their professionalism and extensive involvement in the industry. The next time someone asks "what do you do for me as a Master Sponsor," I encourage you to look them in the eye and proudly declare, my efforts led to the adoption of the Permit Extension Act, protections of our collective investments and literally our jobs. 

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Recently, the Appellate Division of the Superior Court of New Jersey affirmed a Tax Court decision finding that a day care center a with before- and after-care program was exempt from paying real property taxes under New Jersey law.  Wee Love, Inc. v. Township of Maple Shade, Docket No. A-0290-07T2 (July 7, 2008). This case not only reaffirms a series of prior rulings decided when such facilities were referred to as nursery schools, but also discusses how before - and after - care programs impact the exemption analysis.

   
Wee Love is a New Jersey non-profit corporation licensed by the New Jersey Department of Human Services, Division of Youth and Family Services, as a child care center.  The facility is opened between 6:30 a.m. and 6:30 p.m., and includes a before- and after-care program.  Wee Love provides structured educational services suitable to the age of the children enrolled in the center, including singing, crafts and story time.  However, the before- and after-school program “lacked any indicia of being educational and was purely child care” raising a question over the entitlement to an educational exemption.

   
Under New Jersey, if a portion of property is not used for exempt purposes, that portion of the property can be assessed.  In this case, since there was such an overlap in the use of the property, the court decided to use the “predominant use” test to determine if an apportionment of the tax assessment was feasible.  Under this test, if the predominant use of the property is for the exempt purpose (ie., school use), the entire property will be exempt.  The court ultimately found that virtually all of the building was being used by the pre- school children, and although at times some portion was occupied by the before- and after-school participants, the predominate use of the building was as a school.  As a result, the entire property was exempt from real property taxes.

   
Day care centers which conduct educational programs should be exempt from paying property taxes, providing the predominate use of the property is for educational programs.  The fact that the day care also provides some services that may be considered “mere baby sitting” should not jeopardize the exemption.  This assumes that all other requirements for exemption are in place (ie., certificate of incorporation properly identifies the purpose).   In order to maintain the exempt status, it is advisable for day care centers to prepare formal lesson plans (albeit basic) in order to document what educational activities are being conducted at the center.

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Property within an area being studied for redevelopment in the context of a preliminary investigation under the Local Redevelopment and Housing Law (“LRHL”) may be declared blighted even if it does not satisfy any one of the statutory redevelopment criteria provided that the municipal governing body finds that such property is necessary for the effective redevelopment of the study area. Although not essential to its ruling, the New Jersey Supreme Court addressed the matter of designating non-blighted properties for redevelopment in the case of Gallenthin Realty v. Bor. of Paulsboro decided last year and officially reported at 191 N.J. 344 (2007).

According to the Court, “non-blighted parcels may be included in a redevelopment plan if . . . [they are] integral to the larger [blighted area].” As such, the placement of non-blighted property into a redevelopment zone must be based upon more than mere convenience. A circumstance that might warrant such action is the lack of accessibility. Specifically, if non-blighted property within a study area may be used as a roadway for other properties within the study area that are landlocked or have insufficient access to the existing public ways, the inclusion of such non-blighted property in the proposed redevelopment zone might be appropriate. However, the inquiry does not necessarily end here. The Court suggested in Gallenthin Realty that before a municipal governing body may delineate non-blighted property deemed to be necessary for redevelopment it must look at the current state of the parcel and conduct a balancing test weighing “the benefits” of utilizing the parcel for redevelopment purposes against whatever productive use it may have.

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The State Assembly and the State Senate have each overwhelmingly passed bills that amend Section 19 of the Municipal Land Use Law (P.L. 1975, c.291) codified at N.J.S.A. 40:55D-28, which authorizes a local planning board to include in its master plan a “green buildings and environmental sustainability plan element.”  According to the Assembly bill (A1559), the purpose of this new master plan element is to encourage and promote, among other things, “the efficient use of natural resources [and] . . . the impact of buildings on the local, regional and global environment . . . through site orientation and design.”  The amendment now awaits approval by Governor Jon Corzine.

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When a property owner and municipality each have their own expert appraiser, the New Jersey Tax Court has the daunting task of determining (1) whether the property owner has overcome the presumption of correctness, and (2) assuming the presumption is overcome, which appraiser is the more credible expert.  Recently, in a decision involving property located in Franklin Lakes, New Jersey, the New Jersey Tax Court performed a thorough analysis of two appraisers’ selection and adjustments to comparable sales in a residential tax appeal.  See Elrabi v. Borough of Franklin Lakes, New Jersey Tax Court, July 11, 2008. The property owner’s appraiser believed the property was worth $1.8 million, and the municipality’s appraiser believed the property was worth $2.6 million.  In the end, the court determined a value of $2.6 million. The case provides an overview of the law governing the presumption of correctness and provides a good analysis of how to analyze an appraisal of residential property.

   
In terms of the comparable sales selected by the two appraisers, the two appraisers used different approaches.  The property owner’s expert focused primarily on finding homes of a similar age to the subject with standard finishes, regardless of the size of the homes.  The property owners’ appraiser justified this approach because of the condition of the property under appeal was allegedly out dated and not comparable to other high end homes in the area.  The appraiser then adjusted the properties for size. The municipality’s appraiser focused on homes of similar size, even if they were newer and had higher quality amenities.  The appraiser then adjusted the values for the quality of the amenities  (ie, quality of the kitchen, landscaping, finishes in the bathroom, etc.).  The adjustments are described in detail in the court’s opinion and beyond the scope of this blog, but essential reading for those seeking to litigate a tax appeal.

   
The Franklin Lakes case provides a good road map for a property owner deciding whether or not to file a tax appeal.  After overcoming the initial hurdle of the presumption of correctness, the property owner must still have solid proof to demonstrate the true value of the property. When it comes to the battle of the experts, it is very important to retain an appraiser with experience in the New Jersey Tax Courts.  The Tax Court Judges are experts in this area and often times will ask their own questions of the competing experts.

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A bill that would amend Section 3.1 of the Municipal Land Use Law (P.L. 1975, c.291) codified at N.J.S.A. 40:55D-4, to add to the statute a definition of “inherently beneficial use” was introduced in the Assembly as A3062 on June 23, 2008.  The proposed definition, if enacted, would specifically designate certain uses as being inherently beneficial, such as “a wind, solar or photovoltaic energy facility.”

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Under the Local Redevelopment and Housing Law a municipality may declare private property to be blighted if it meets one of the enumerated criteria set forth it the statute at N.J.S.A. 40A:12A-5. For example, under the so-called “e” criteria - referred to as such because it is codified at N.J.S.A. 40A:12A-5e - property may be deemed blighted or in need of redevelopment if the property lacks “proper utilization” caused by such things as conditions of title, diverse ownership or “other conditions,” which result in a “stagnant or not fully productive condition of land potentially useful and valuable for contributing to and serving the public health, safety and welfare.”


In Gallenthin Realty v. Bor. of Paulsboro, decided last year, the New Jersey Supreme Court held that in order to satisfy the “e” criteria there must be substantial, credible evidence that the “particular configuration” of properties or their “fractionalization” due to conditions of title, diverse ownership or other conditions would frustrate the orderly redevelopment of the study area. A mere showing that property is not being used in an optimal manner is not enough. As such, it is essential to review deeds and other title records and conduct surveys of property and public rights-of-way in evaluating the applicability of the “e” criteria. If these studies show that the proposed redevelopment area (a) is characterized by landlocked parcels, (b) contains properties having questionable or invalid title, (c) is marked by numerous physical encumbrances into the public rights-of-way and/or (d) displays other similar deleterious circumstances directly linked to stagnation and underutilization, then all or some of the study area may qualify for redevelopment under the “e” criteria.

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Gary S. Forshner, Shareholder in Stark & Stark's Real Estate Zoning & Land Use group will present at this year's Lorman Education Services seminar, Real Estate Development From Beginning to End in New Jersey. Mr. Forshner's presentation on Ethics in Land Use will be part of a full day seminar covering topics related to development in New Jersey including government approvals, redevelopment, construction financing and the purchase and sale agreement.


The seminar will take place Friday, September 26, 2008 from 8:00 AM - 4:30 PM at the Parsippany Holiday Inn Hotel & Suite in Parsippany, New Jersey. You can access the full seminar brochure with additional information and registration form here.

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The New Jersey Department of Transportation and New Jersey Transit have developed a program known as the Transit Village Initiative, which recognizes municipalities that are committed to redeveloping the area around a transit facility into a compact, mixed-use community.  Once designated, a municipality may obtain technical assistance and financial benefits.  New Jersey’s Transit Village Initiative is an offshoot of the so-called “smart growth” policies first advanced by former Governor Christine Todd Whitman and included in the New Jersey State Development and Redevelopment Plan.  It is not supported by specific legislation.  However, this could soon change if the State Legislature enacts and Governor Jon Corzine signs into law the proposed New Jersey Transit Villages Act introduced earlier this year in the Senate as bill number S1223.


Under the proposed New Jersey Transit Villages Act, at Section 11, “[a] municipality or a county in which a transit village has been designated by the [C]ommissioner [of Transportation], shall receive priority on all applications for funding from programs that are administered by State agencies and departments that support the use of transit through transit oriented developments.”  This legislation would also, among other things, authorize the New Jersey Department of Environmental Protection to develop an expedited and coordinated permit review and approval process for transit villages and make available to developers of property within a designated transit village tax credits “equal to four percent of allowable costs plus such other incentives deemed appropriate[.]” The term “allowable costs” is defined under Section 12 of the Senate bill and includes such expenses as “legal, engineering, architectural, and other professional fees allocable to construction or rehabilitation . . . not to exceed $200 per square foot of finished interior space.”


The New Jersey Transit Villages Act is also being considered in the State Assembly under a companion bill (No. A1633).  However, the future of this proposed legislation is uncertain.  In light of the current economic downturn and the concomitant budgetary concerns, it appears unlikely that the Legislature or the Governor will be receptive to any new funding or tax credit programs. On the other hand, because the proposed New Jersey Transit Villages Act encourages redevelopment planning and construction which, in turn, promotes economic activity it might have a chance during the 2008-2009 legislative session.  It certainly is a bill that is worth watching.

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