New Jersey Future’s 2011 Redevelopment Forum Set for March 4 in New Brunswick

New Jersey Future’s 2011 Redevelopment Forum will be held on Friday, March 4 at the Hyatt Hotel and Conference Center in New Brunswick, New Jersey. To register at the early-bird rate of $85 for New Jersey Future members and $125 for non-members click here (NJF also accepts purchase orders).  After Feb. 18, admission is $100 for New Jersey Future members and $140 for non-members. NJF has also applied for 5.5 AICP Certification Maintenance (CM) credits and will be applying for CLE Credits. If you have any questions, please contact Marianne Jann at 609/393-0008, ext. 101.

Florio Perrucci partners Governor James J. Florio, and Philip J. Morin III will each be serving as panelists at the Forum and the firm will be a co-sponsor of the cocktail reception following the Forum.  Details of the panels are below:

Renewables and Redevelopment? Balancing Redevelopment with Green Energy Production  –  Should spaces like brownfields and landfills be used as solar panel “fields”? Or should they be redeveloped with offices, housing, and transit? Is there a way to make both possible? This panel will highlight recent case studies in Trenton and Jersey City, and look at the types of ordinances communities are putting in place to allow these projects.

Panelists:

• Michele N. Siekerka, Esq., Assistant Commissioner for Economic Growth and Green Energy, New Jersey Department of Environmental Protection (Moderator)
• Governor James J. Florio, Founding Partner, Florio, Perrucci, Steinhardt & Fader
• Alfred Matos, Vice President – Renewables and Energy Solutions, PSE&G
• George Vallone, President, Hoboken Brownstone Company

Areas in Need of Rehabilitation: Exploring the Potential and Limitations  – The successful redevelopment of an area does not always have to involve the acquisition, clearance and assemblage of multiple properties for new buildings and uses. In many cases, the designation of an “area in need of rehabilitation” may be the a better option. In this session, speakers will explore the tools available to towns with this designation, its limitations as well as strategies for using the area- in-need-of rehabilitation designation as part of a broader revitalization strategy.

Panelists:

• Philip J. Morin III, Esq., Partner, Florio Perrucci Steinhardt & Fader (Moderator)
• Anne Babineau, Esq., Partner, Wilentz, Goldman & Spitzer, P.A
• Marta Lefsky, Director of Planning & Development, Woodbridge Township
• Raymond McCarthy, Mayor, Town of Bloomfield
• David G. Roberts, AICP, PP, LLA, RLA, LEED-AP, Department Manager, Maser Consulting PA

Report Shows Increase In Property Values in Communities With “Transit Village” Designation

Highlands At Morristown Station

A recent report issued by the Voorhees Transportation Center at the Rutgers’ Bloustein School that was commissioned by the New Jersey Association of Realtors Government Research Foundation found that while property values in municipalities with “Transit Village” designations increased, it appeared that those communities with aggressive planning and local government support were thriving regardless of the formal designation.

According to an article by John Celock in AOL’s online community newspaper, The Cranford Patch:

A report released Friday [February 4, 2011] shows that property values in towns designated as Transit Villages have risen the most in communities with an infrastructure behind the designation.

The report, commissioned by the New Jersey Association of Realtors Government Research Foundation and conducted by the Voorhees Transportation Center at Rutgers’ Bloustein School, showed an increase in property values for the towns with the designation, but did not directly connect the rise to the status. The study showed that the communities with strong planning and government programs in place have helped the residential property values rise the most in Transit Village communities. 

“The Transit Village designation is helpful but it is not needed,” said Robert Noland, the director of the Voorhees Center, in a Friday conference call with reporters. “It is the better planning and the stronger leadership.”

The Transit Village designations were implemented by the state in 1999 to promote mixed-use residential and commercial development around train stations and in downtowns. Twenty communities have received the designation from the state Department of Transportation, along with funds to assist with the planning of mixed-use development near the train stations. 

Noland said his research did not see the direct correlation between the designation and the property value increase. He said factors such as special improvement districts, commitment from the business community, government support and work from municipal land use officials helped the property values rise. 

. . . .

Cranford’s Transit Village status, granted in 2003, has led to the construction of the Cranford Crossing mixed-used project on South Avenue, along with consideration of a mixed-use development along the Rahway River across from the south side of Cranford’s train station.

In Morristown, one of the original Transit Village communities, Michael Fabrizio, the executive director of the Morristown Partnership, which runs the town’s special improvement district, said he agrees that the Transit Village designation was not the only thing responsible for property value growth in the town. He places the bulk of the credit with New Jersey Transit’s decision in the 1990s to upgrade the Morris and Essex rail line to have direct access to midtown Manhattan. 

Fabrizio said the Midtown Direct access led to the town seeking the Transit Village status and putting into place a series of mixed-use developments in the downtown area. In the last decade, Morristown has seen a growth in businesses, bars and restaurants in the downtown, along with new apartment and condominium projects. This includes the teardown of the former Epstein’s Department Store across from the Morristown Green and construction of a mixed-use condominium, parking and retail project, along with the development of new condos on the grounds of the Vail Mansion.

“At the end of the day, the significance of the transit hub is important,” Fabrizio said.

For a link to the NJDOT’s Transit Village Initiative, click here.

New Brownfields Development Areas Designated by NJDEP

On Tuesday, October 6, NJDEP announced the designation of six new Brownfield Development Areas (“BDA”).  BDA designation provides substantial benefits to redevelopment of contaminated sites, including the assignment of a dedicated case manager to facilitate a coordinated effort on remediation of contaminated sites within the BDA and access to $5 million in grant funding from the Hazardous Discharge Site Remediation Fund (“HDSRF”) to be used in investigating (and, in some cases, remediating) brownfield sites to spur redevelopment.  According to the October 6 NJDEP press release:

Department of Environmental Protection Acting Commissioner Mark N. Mauriello today announced that portions of Lodi, Kearny, Plainfield, Rahway, Somerville and Woodbridge have been designated as state Brownfield Development Areas. The new designations will help these municipalities work toward their redevelopment goals.

. . . .

Brownfields are properties that have been abandoned or underutilized because of known or suspected contamination. The DEP’s Brownfield Development Area program allows communities to designate clusters of brownfield sites for coordinated remediation and redevelopment.

Municipalities that have been designated are eligible for grants of up to $5 million each year from the DEP’s Hazardous Discharge Site Remediation Fund for investigation and remediation. A case manager assists the communities in overseeing remediation, obtaining financial assistance and coordinating revitalization efforts with other state agencies.

Communities bring together various stakeholders to develop applications for designation. These stakeholders include owners of contaminated properties, potentially responsible parties, developers, community groups, technical experts, and residents. Municipal adoption of a formal redevelopment plan is required.

Plans for the six newly designated areas include:

• Lodi is looking to re-create a downtown district between the borough hall and Route 46 with retail and office space that will serve as a focal point for the community.  Properties include a vacant rail spur, an abandoned commercial building and the sites of former chemical and dye manufacturers.
• Kearny plans to develop mixed senior-citizen housing, commercial facilities and a riverfront walk on properties along the Passaic River that were the site of steel and metals factories, a linen mill and chemical processors.
• Plainfield plans to revitalize its central business district by redeveloping a number of vacant and underutilized properties with a mix of small-scale commercial establishments such as banks, health spas, pharmacies and restaurants. The city wants to enhance the district’s proximity to the Plainfield rail station.
• Rahway is looking to improve its business district with a 1,100-seat amphitheater and black-box theater within walking distance of the Rahway train station. Rahway also wants to acquire an apartment complex with the intention of attracting artists.
• Somerville plans to strengthen its economic vitality by redeveloping an old landfill and parking lots near the Raritan River with mixed-used developments that will have access to NJ Transit’s Raritan Valley rail line.
• Woodbridge wants to clean up past industrial contamination at properties along the Raritan River and develop the area as an eco-park that allows companies to use each others’ wastes as resources. The township is also developing a resource-recovery park for recycling, compost processing and other resource reuse.

. . . .

Municipalities interested in being considered in the next round of Brownfield Development Area designations are urged to meet with the DEP to discuss their redevelopment plans.

. . . .

Applications may be submitted from Jan. 1 through March 31, 2010.

For more information on brownfields and the Brownfield Development Area initiative, go to: http://www.nj.gov/dep/srp/brownfields/

Florio Perrucci Steinhardt & Fader serves as environmental counsel to the Borough of Lodi.  If you have questions about the BDA application process or the benefits of BDA designation, please contact your relationship attorney at FPS&F or Phil Morin by e-mail at pmorin@florioperrucci.com or telephone at 201-843-5858.

NJ Economic Stimulus Bill Provides New Incentives for Development

The New Jersey Economic Stimulus Act of 2009 recently passed both houses of the Legislature and was signed into law by Governor Jon Corzine on Monday, July 27th.  The Act is an amalgamation of initiatives designed to reinvigorate New Jersey’s economy and includes several incentives to jump start commercial real estate development. 

According to the Assembly Budget Committee statement in support of the Act, the Act includes the following: (1) an Economic Redevelopment and Growth Grant Program; (2) authorization for certain municipalities to impose special taxes and surcharges to fund redevelopment activities and certain programs; (3) expansion of transferability of tax credits under the New Jersey Emerging Technology and Biotechnology Financial Assistance Program and changes to the “Urban Transit Hub Tax Credit Act”; (4) relief to certain developers otherwise subject to the “Statewide Non-Residential Fee Act”; (5) grants to municipalities for affordable housing; (6) changes to improve the financing of higher education facilities in New Jersey; and (7) relief to certain manufacturing companies taxes and surcharges on energy and utility services.

Below, I have highlighted the portions of the Act with the most impact on the commercial development community: the Economic Redevelopment and Growth Grant progam; the amendments to the Urban Transit Hub Tax Credit Act; and the relief to developers from the Statewide Non-Residential Fee Act which requires a 2.5 percent contribution of the equalized assessed value of new non-residential construction to a state or municipal affordable housing trust fund.

Economic Redevelopment and Growth Grant program

The Act authorizes State and local incentive grants to developers in “qualifying economic redevelopment and growth grant incentive areas,” which includes the Metropolitan and Suburban planning areas (Planning Areas 1 and 2), centers designated under the State Development and Redevelopment Plan and federal land approved for military base closure.  Projects in transit villages are not eligible for State incentive grants but are eligible for municipal incentive grants.  This program replaces the revenue allocation district (“RAD”) financing program which was seen as too complicated and was sparingly considered as an option by developers and local governments.

Incentive grants are intended to help fill project financing gaps in a difficult financial climate.  To qualify, a developer must contribute its own capital for at least 20 percent of the total project cost and must certify that additional capital is not available from other sources.

Project revenues will fund the grants.  For State grants, the Economic Development Authority and the developer will enter into a redevelopment agreement, which would also require local approval by municipal ordinance.  Such agreements would provide that up to 75 percent of State revenues realized from a project would be pledged toward a grant.  For municipal grants, municipalities may pledge their revenues from payments in lieu of taxes, lease payments to the municipality, property taxes and any additional taxes authorized by law (motor vehicle rental taxes, payroll taxes, parking taxes).

An incentive grant can extend up to 20 years and cannot exceed 20 percent of the total cost of the project.  A determination must be made that the revenues will exceed the grant funds.

Urban Transit Hub Tax Credit Act Amendments

Current law allows a business with a certain level of capital investment in a qualified business facility within an urban transit hub and that employs at least 250 people at the facility to qualify for a tax credit equal to the qualified capital investment, which must be taken over a 10-year period against the corporate business tax or insurance premiums tax liability.  Certain tenants were also able to take advantage of a tax credit, provided they met certain thresholds.

The Act makes numerous changes to the Urban Transit Hub Tax Credit program, including the following: 

• The “urban transit hub” definition is expanded to include in “eligible municipalities”: (1) property located within a half-mile radius surrounding the mid point of one of up-to-two underground light rail stations’ platform areas that are most proximate to an interstate rail station; (2) property adjacent to, or connected by rail spur to, a freight rail line if the business utilizes that freight line for loading and unloading freight cars on trains; and (3) within a half-mile of all light rail stations (and within a mile of the Camden rail station).  “Eligible municipalities” are defined pursuant to the criteria set forth in N.J.S.A. 34:1B-209 as Camden, East Orange, Elizabeth, Hoboken, Jersey City, Newark, New Brunswick, Paterson and Trenton.
• Adds a mixed use component to definition of “qualified residential project” for purpose of receiving a credit.
• Lowers the capital investment threshold from $75,000,000 to $50,000,000 for an owner of a “qualified business facility”, and from $50,000,000 to $17,500,000 for a tenant that occupies a leased area of the qualified business.
• Provides that for a business applying before January 1, 2010, its credit shall not be reduced if it relocates to an urban transit hub from another location or locations in the same municipality.
• Allows the full-time employee requirement to be met by certain types of contract workers who perform work at the qualified business facility for at least 35 hours a week and allows out-of-State residents working in New Jersey to be counted as “full time employees.”
• Allows a business to use an affiliate to satisfy the employment or capital investment requirements of the program.
• Clarifies how tenant investment will be included in the capital investment calculation for the qualified business facility, by providing that the capital investment made by a tenant will be included in the owner’s capital investment to the extent necessary to meet the minimum capital investment threshold. Any capital investment made by a tenant above this amount will be added to the amount of tax credit the tenant is otherwise entitled to receive based on its portion of the net leasable area in the qualified business facility.
• Allows up to three tenants to meet the 250 employee requirement in the aggregate.
• Relaxes the 10 percent Statewide full-time workforce reduction trigger before the business suffers a mandatory forfeiture of an annual tax credit by setting the trigger at 20 percent.
• Expands the urban transit hub credit zones to include business headquarters property that can become a qualified investment facility within a one-mile-wide zone in a qualified municipality.
• Clarifies that S-corporations and limited liability corporations are included as businesses that may be eligible to participate in the program and clarifies that a tax credit is not to be applied against individual New Jersey gross income tax liability.  An individual who is a holder of a credit may sell their credit, covering one or more years, under the tax credit transfer certificate program for consideration received by the business of not less than 75 percent of the transferred credit amount.
• Removes the provision that casino licensees cannot qualify for the program.
• Allows reduction of the credit by 20 percent if less than 200 employees are employed, even if a business relocates to an urban transit hub from another location in the same municipality.
• Changes the timing of the trigger for forfeiture of the credit so that a business cannot reduce its workforce by more than 20 percent in the last tax accounting or privilege period prior to approval, rather than the greater of the two following periods: in the period prior to approval or in the period prior to the enactment of the original 2007 legislation.

Note that the Act also eliminates any “as of right” qualification and adds subjective criteria for the eligibility for a tax credit, namely that a business shall demonstrate to the EDA at the time of application, that the State’s financial support will yield a “net positive benefit” to the State and the eligible municipality.  Also, a business will not qualify for a credit if the capital investment was the basis for a grant under the InvestNJ Business Grant Program Act.

Additionally, the Act provides for a new credit for “qualified residential projects” under the Urban Transit Hub legislation.  “Qualified residential projects” are defined as a building or buildings, including a mixed use project, consisting predominately of residential units, located in an urban transit hub.  The definition of “residential units” includes rental units, hotel rooms or dormatory rooms.

A developer may receive a credit up to 20 percent of its capital investment for a “qualified residential project.”  To be eligible, a developer shall demonstrate, through a project pro forma analysis, that the project “is likely to be realized with the provision of tax credits . . . but not likely to be accomplished by private enterprise without the tax credits.”

A developer must make or acquire capital investments totalling at least $50,000,000 in a qualified residential project to be eligible for a credit.

Non Residential Development Fee and Affordable Housing

The Act will exempt certain property from the 2.5 percent development fee imposed by the “Statewide Non-Residential Fee Act,” N.J.S.A. 40:55D-8.1 to -8.7 (“SNRF” or “A-500”). 

Development Fee Moratorium: Property which received preliminary or final site plan approval from a municipality or from the New Jersey Meadowlands Commission before July 1, 2010 will be exempt from the fee imposed by the SNRF/A-500, provided that a local building permit is issued prior to January 1, 2013.

Ban on Local Non-Residential Fee Ordinances Remains: The Act does not abolish the section of the SNRF/A-500 which prohibits municipalities through local action from imposing their own obligations on non-residential development.

Refunds: The Act requires that, in most cases, any funds deposited under the SNRF/A-500 with the State or a municipality be refunded to the developer.  The exception is where a developer received preliminary or final site plan approval prior to the effective date of SNRF/A-500 (July 17, 2008) and agreed to pay a fee based upon a local development fee ordinance.  In that instance, only the difference between the local fee and the 2.5 percent statewide fee will be eligible for a refund.

Municipal Obligation: Furthermore, the Act provides that the portion of a municipal fair share affordable housing obligation created as a result of the non-residential development will be reduced or eliminated if the collection of fees are suspended and if there are insufficient funds in the State affordable housing trust fund or other State or federal sources of funding within the next two years following enactment.

For an example of the practical implications of the Act on actual “in the pipeline” development projects, read the text of Senator Raymond Lesniak’s (D-Union) speech to the New Jersey Business and Industry’s Economic Development Forum at NJ Voices here.

NJBIZ Article Highlights Praise and Concerns With “Builder-Friendly” Legislative Enactments

An NJBIZ.com article written by Evelyn Lee contains an excellent synopsis of “developer-friendlier” legislation authored by the New Jersey Legislature and (mostly) signed into law by Governor Corzine over the last year.  The legislation was intended to extend permit approvals, expedite site cleanups and spur development in down economic times. 

However, the article notes that many industry leaders still have concerns about the practical application and limitations of several of these new laws:

[T]he Permit Extension Act has some limitations, said Tim Touhey, chief executive of the New Jersey Builders Association in Hamilton. The Highlands region has determined that it won’t allow any permits to be extended, although some of the more developed municipalities in the region — such as Dover and Rockaway — have been designated as growth areas by the state, he said.

The Site Remediation Reform Act also has many unknowns, particularly with regard to presumptive remedies that the Department of Environmental Protection will develop for sensitive sites, said David Fisher, vice president of governmental affairs at Matzel & Mumford Organization, an Edison-based homebuilder. Presumptive remedies are expected to be finalized within a year of the law’s enactment, according to DEP.

“If we don’t know how to clean up a site, then we don’t know how costly it’s going to be,” he said. “What value do you place on land when you don’t know how much it’s going to cost to clean it up?”

Others said that legislative changes fell short in terms of addressing flaws in the state’s affordable housing funding methodology and directing new projects to redevelopment areas.

For the full article, click here.

Eminent Domain Compromise Bill Getting Traction in Senate

According to a report at NJBIZ.com and Trenton sources, a compromise bill on eminent domain reform is making its way through the State Senate and may clear the upper house this week:

From NJBIZ:

State Senate majority leader Steve Sweeney (D-West Deptford) and state Sen. Ronald Rice (D-Newark) last week unveiled amendments to their merged eminent domain legislation, SCS-559/757. The proposed amendments would establish tougher eminent domain standards by limiting the use of eminent domain and tightening the definition of a property in need of redevelopment — such as adding a 20 percent cap on nonblighted areas within designated redevelopment areas.

The changes would improve notice provisions for property owners and tenants affected by eminent domain, and significantly increase the financial compensation to parties displaced during the process. Businesses, for example, would receive payment for the loss of a location with heavy foot traffic and for capital improvements that were done at the site.

The revised bill also would demand more transparency during the redevelopment process, and require that a municipality or redevelopment agency exercise the power of eminent domain within five years of adopting a redevelopment plan.

For the full article, click here.

Treasurer Defines A “State Redevelopment Entity” Under Executive Order No. 118

Executive Order No. 118 requires the State Treasurer to identify entities considered “State redevelopment entities” for purposes of E.O. No. 118.  The Treasurer has identified the New Jersey Meadowlands Commission, the New Jersey Redevelopment Authority and the Capital City Redevelopment Corporation as “State redevelopment entities.” 

As a result, any “redevelopment agreements” with these entities will be subject to the terms and restrictions set forth in the Executive Order.

For the full statement from the State Treasurer, click here.

For the full text of Executive Order No. 118, click here.

Appellate Division Declines to Require Redevelopment Area Notice Be Served Upon Commercial Tenants

Municipalities withstood another attack on their broad powers under the Local Redevelopment and Housing Law, N.J.S.A. 40A:12A-1 to -49 et seq. (“LRHL”), last week while the rights of commercial tenants remained status quo. In Iron Mountain Information Management Inc. v. City of Newark, the Appellate Division held that a commercial tenant is not generally entitled to advance notice of a municipality’s consideration of a building as part of an area in need of redevelopment – unless its unit is noted in the tax assessor’s records pursuant to N.J.S.A. 40A:12A-6(b)(3).

The court specifically noted that the increased constitutional protections and explicit notice of potential use of eminent domain by a government agency mandated in Harrison Redevelopment Agency v. DeRose, 398 N.J. Super. 361 (App. Div. 2008), does not apply to commercial tenants and remains limited to property owners or others specifically entited to statutory notice under the LRHL. The court also found that the forty-five day period for bringing a timely appeal applies to commercial tenants of properties in designated redevelopment areas notwithstanding that the tenant did not receive individualized written notice of the redevelopment designation or the hearings leading up to the designation.

Appellate Division: Long Branch Did Not Provide Substantial Evidence to Support Redevelopment Designation

In one of the battlegrounds over redevelopment and the use of eminent domain in the state, the Appellate Division has ruled that the City of Long Branch failed to establish sufficient evidence that certain residential properties in the Beachfront North redevelopment zone met the criteria for an area in need of redevelopment. The court also dismissed other contentions of the homeowners, including claims of conflict of interest of the City Attorney and upheld the City’s delegation of authority to commence condemnation proceedings to the designated redeveloper. Long Branch v. Anzalone, A-0067-06T2 et als. (N.J. App. Div. August 7, 2008).

According to the Asbury Park Press:

The Appellate Division of Superior Court, relying on the 2007 decision in the Gallenthin Realty Development Inc. v. the Borough of Paulsboro case, found that Long Branch’s 1996 report did not meet the heightened standard for blight and so it reversed Lawson’s decision appointing condemnation commissioners for the affected parcels.

“We agree with appellants that material facts are in dispute regarding not only whether substantial evidence supports a finding of a need for redevelopment,” but also regarding other issues such as whether taking that neighborhood is integral to the overall redevelopment plan and whether its inclusion is necessary in the redevelopment plan.

Also, Lawson will determine whether taking the properties represented a change to the redevelopment plan that would have required it to be readopted, and thus require a new series of public notices and hearings.

MTOTSA maintains it was always told that its neighborhood was safe and would be redeveloped as “infill,” which it took to mean as development on existing or available properties. Absent a definition, however, Lawson will have to define that term as well, the appellate panel said.

“We agree with appellants that . . . the city did not find actual blight‚ under any part of the law, ‚that the record lacked substantial evidence that could have supported the New Jersey Constitution’s standard for finding blight and that the absence of substantial evidence of blight compels reversal,” the appellate panel found.

For the full Asbury Park Press article, click here.

For the Star Ledger article, click here.

Somerville To Seek New Responses to RFP for Landfill

Somerville has decided to reissue a request for proposals for redevelopment of the former Somerville landfill bordered by Route 206 and the Raritan Valley rail line. The RFP was sent out to dozens of builders but only one response was received by the March 2008 deadline.

The redevelopment area includes the 112-acre abandoned landfill which is proposed to be transformed into a transit-oriented retail and residential development.

For a copy of the Star Ledger article, click here.

For a link to an overview of Somerville’s redevelopment areas, click here.