Redevelopment Teeters on the Cliff

by Edward J. McManimon, III on January 19, 2011

You would think that the last thing the various branches of the State government, already severely challenged by high taxes and shrinking revenues, would want to do to local governments, particularly urban areas, is diminish their powers that provide the best means long term to revitalize their communities on their own while they are adjusting to their curtailed State aid. Yet that is exactly what is happening across the board to the Local Redevelopment and Housing Law.

The Governor imposed a large dose of financial reality on local governments telling them directly to become self-reliant by drastically cutting State aid in spite of their dependence on such State aid in many instances for over 25 years. The financial fallout was immediate and extreme. For communities thinking creatively and long term, this accelerated the hunt for tax ratables and development to shore up their local tax base. The use of the broad powers in the redevelopment laws to forge public/private business partnerships to provide incentives to the developers to locate in their communities was at least some hope. Then the State Comptroller out of nowhere released a superficial report on payments in lieu of taxation with little practical or rational substance concluding that such arrangements are giveaways to projects that in his view would have located in such communities anyway in spite of decades of such property in many cases laying follow and financially unproductive. He apparently presumes that the incredible revitalization of New Brunswick over the past 20 years and similar revitalizations elsewhere throughout the State have happened naturally.

Then to add insult to injury, the Local Finance Board in doling out the diminished local governments “transition aid”, which replaced steady and reliable much larger amounts of State aid, required that any local governments receiving such transition aid must sign a memorandum of understanding that any PILOT revenue derived from such redevelopment projects must be shared with their school districts. Instead of providing much needed municipal revenues, it shares revenues with a school district even if the redevelopment project has no impact on adding school children and in spite of the fact that school districts receive 100% of their budget request anyway regardless of whether any development occurs or not.

On top of that, the New Jersey Legislature decided to weigh in by resurrecting the Rice/Burzichelli Redevelopment Eminent Domain legislation significantly changing much of the flexibility to local governments in the Redevelopment Law in spite of the many judicial decisions which already changed the landscape of municipal options in dealing with their longstanding and unproductive properties.

The Courts, of course, continue to address these issues in a vacuum, one even recently allowing a property owner in one municipality who bought property in a redevelopment area after the redevelopment designation and with full knowledge of the designation and who participated for two years in trying to get the municipality to adopt a redevelopment plan to provide higher densities for his proposed housing than the proposed redevelopment to challenge the redevelopment designation years later, based on the De Rose Case, even though the adopted redevelopment plan actually provided that there will be no eminent domain.

So where does it all go for local governments? No more money from the State, demands to help yourself, continued restrictions on those who try to do just that and lawsuits going on for years with a freewheeling court while the public demands progress. Good Luck.

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