On appeal from Superior Court of New Jersey, Law Division, Atlantic County.
Before Judges Shebell, D'Annunzio and A.a. Rodr¡guez.
The opinion of the court was delivered by: Shebell, P.j.a.d.
On May 10, 1996, plaintiffs, who are residents, taxpayers and interested associations of Atlantic City, filed an action in lieu of prerogative writs in the Law Division, alleging that improper actions were taken by the City of Atlantic City's Planning Board and Mayor and Council in connection with the Huron North site. On May 20, 1996, plaintiffs filed an amended complaint. On June 10, 1996, Mirage Resorts, Incorporated (MRI) was permitted to intervene. MRI and Atlantic City filed answers to the amended complaint dated May 23 and June 24, 1996, respectively. On July 12, 1996, both Atlantic City and MRI filed motions for summary judgment. Oral arguments were conducted on October 1 and November 20, 1996. On December 23, 1996, Judge Anthony Gibson gave his oral opinion from the bench, in which he granted the summary motion judgments and dismissed plaintiffs' complaint. An order memorializing that decision was entered on January 16, 1997. Plaintiffs appeal.
Two State statutes are implicated in this appeal. The first, the New Jersey Urban Enterprise Zones Act, N.J.S.A. 52:27H-60 to -88, provides that any area shall be eligible for designation as an "urban enterprise zone" if the area has been qualified as an "area in need of rehabilitation," and if it meets certain other criteria established by the New Jersey Urban Enterprise Zones Authority. N.J.S.A. 52:27H-69. Qualified businesses within such zones shall be eligible for certain "awards," tax exemptions, and tax credits. N.J.S.A. 52:27H-74 to -79. The purpose of this act is to assist in the economic revitalization of urban areas suffering from economic distress. N.J.S.A. 52:27H-61.
The second act, the Local Redevelopment and Housing Law, N.J.S.A. 40A:12A-1 to -49 ("Act"), was adopted to "codify, simplify and concentrate" various state laws regarding local redevelopment and housing, in an effort to assist in promoting redevelopment and new housing in areas of the State in need of rehabilitation. N.J.S.A. 40A:12A-2(d). Pursuant to this Act, a municipal governing body has the authority to determine whether areas within its jurisdiction are "areas in need of redevelopment." N.J.S.A. 40A:12A-4, -5, and -14. The governing body must, by resolution, determine which areas are in need of rehabilitation; however, that area may include the entire municipality. Prior to adopting such a resolution, the governing body must send the proposal to the planning board for its consideration. N.J.S.A. 40A:12A-14(a). Once an area of redevelopment has been identified, public hearings conducted by the local planning board follow, and a Redevelopment Plan can then be adopted by local ordinance. N.J.S.A. 40A:12A-6, -7. After a plan for rehabilitation of an area has been adopted, the municipality, or its designated redevelopment authority, can carry out the plan through the use of several enumerated powers described in N.J.S.A. 40A:12A-8. Any agreement reached between the municipality and the redeveloper chosen to develop the area must contain a provision prohibiting the redeveloper from selling, leasing or transferring the area in need of rehabilitation without the written consent of the municipality. N.J.S.A. 40A:12A-9.
The Act empowers a municipality to contract with any redeveloper for the planning, construction or undertaking of any project within an area in need of rehabilitation, and the municipality can lease or convey property to such a redeveloper, without public bidding and at prices and upon such terms as it deems reasonable. N.J.S.A. 40A:12A-8(f),(g). The municipality can also arrange for the relocation of residences or businesses displaced from an area in need of rehabilitation. N.J.S.A. 40A:12A-8(i).
The Huron North site of approximately 178 acres located in the marina section of the City, was determined to be in need of rehabilitation. It is bounded by Huron Avenue to the south, Atlantic-Brigantine Boulevard and Massachusetts Avenue on the east, Clam Thorofare and the Penrose Canal on the north, and Absecon Boulevard to the west. One hundred and fifty acres of this parcel is owned by the City. Despite prior efforts to revitalize the area, it remained largely vacant. At the time the summary judgment motions were heard, it was used only for (1) a municipal landfill; (2) the City's public works building and maintenance yards; (3) the police department's firing range and K-9 kennel; and (4) casino employee parking. This area was zoned commercial from 1929 through 1979. In subsequent years, it consisted of three zones; resort commercial (casinos), resort service (uses in support of casinos, such as hotels and parking garages), and area commercial (commercial facilities for diverse retail uses). In 1987, the City attempted to auction forty-eight acres of the site for a minimum of $16 million, and no bids were received. It appears that development of Huron North has been hampered by a lack of direct access to it from the Atlantic City Expressway.
In May 1994, the City's Planning Director, Stuart Wiser, was asked to determine whether any or all of the City qualified as an area in need of rehabilitation pursuant to the Urban Enterprise Zones Act. Wiser concluded that the entire City qualified. On May 25, 1994, the City Council passed Resolution No. 364, which adopted a map Wiser had prepared showing the entire City as an area in need of rehabilitation. On November 2, 1994, and pursuant to N.J.S.A. 40A:12A-14(a), City Council passed Resolution No. 791, proposing to the Planning Board that all of the City was an "area in need of rehabilitation" pursuant to the Act. Following a hearing that same day, the Planning Board issued Resolution No. 24-94, determining that the entire City was an area in need of rehabilitation. On November 23, 1994, City Council passed Resolution No. 889, concluding that the entire City was in need of rehabilitation pursuant to the Act.
On March 1, 1995, City Council adopted Resolution No. 131, which noted that Huron North was an area in particular need of rehabilitation. It stated that the City was committed to developing family attractions to enhance "the destination resort aspects" of the City. Therefore, Council directed the Planning Board, pursuant to N.J.S.A. 40A:12A-7, to prepare a Redevelopment Plan for Huron North. The resolution stated that the City intended to designate itself as the redevelopment entity for the Huron North site.
On March 9, 1995, a subcommittee of the Planning Board, together with the Board's division of planning, prepared the "Huron North Redevelopment Plan" (Plan). The plan provided that the project area was intended to cover the Huron North site as previously described. The purpose of the plan was to provide a "mechanism for a public/private partnership leading to the development of `world class' entertainment/recreation facility within the Project Area."
The plan proposed the conveyance of the City-owned land within Huron North to a redeveloper, who would create the facilities. The City's public works and police functions would be relocated. The plan created a number of "building limit controls," designed to "provide guidelines to the physical development of the Project Area." However, the redeveloper was to be encouraged to exercise maximum creativity in designing a facility consistent with the plan's objectives. The plan further noted that the City contemplated no public acquisition of private parcels within Huron North and, therefore, there would be no displacement of families or businesses and, consequently, no need for a relocation plan. The redeveloper would be required to begin and complete the proposed development within "a reasonable time period" under the plan, with more specific time schedules to be provided in any Redevelopment Agreement ultimately entered into.
On March 15, 1995, the Planning Board passed Resolution No. 8-95, reciting that it had been directed by the City Council, via Resolution No. 131, to prepare a Redevelopment Plan for Huron North. The Planning Board noted that the Board's Division of Planning and a subcommittee of that Board had prepared such a plan, and the Planning Board recommended the adoption of the Huron North Redevelopment Plan to the City Council. On April 12, 1995, the City Council passed Ordinance No. 28, thereby adopting the Redevelopment Plan approved by the Planning Board pursuant to Resolution No. 8-95.
In September 1995, Governor Whitman formed the Task Force on Atlantic City Access and Circulation to provide additional highway capacity in Atlantic City. The "major mobility goals" of the Task Force included improving access to Brigantine and expanding access to the marina area, where the Huron North site lies. In March 1996, the Task Force issued its final report, relying on a Transportation Alternatives Report prepared by Schoor-DePalma, an engineering firm retained by MRI. Schoor had analyzed eleven alternative proposals for linking Atlantic City and the Atlantic City Expressway to the marina area and concluded that the "Penrose Canal" and "Westside Bypass" alternatives were reasonable, but that the Westside Bypass would best enhance the community.
The Westside Bypass has been described as follows:
This scenario proposes a grade separated connector, with tunnel and overpass components, between the Atlantic City Expressway and Huron Avenue. This `inner-City connector' [also called the Westside Bypass], as presently proposed, would form an interchange with the eastbound Expressway, looping under the Expressway bridge and paralleling the waterline through the Atlantic Electric property to Horace Bryant Drive[ *fn1 ] where it would descend into a tunnel paralleling the length of Horace Bryant Drive, passing under Route 30 and emerging on the east side of Route 30. The roadway would then parallel the northern curbline of Route 30, crossing over Huron Avenue, looping into a connection with Brigantine Boulevard and providing access to the [Huron North site], the existing Marina casino-hotels and Brigantine. Although the design is not finalized, it is expected that a four-lane cross-section would be constructed in approximately an 85 foot right-of-way.
In August 1995, before the Task Force's final report was issued, the City passed Resolution No. 553, hiring Pennoni Associates, a traffic consultant, to perform a traffic study. On November 29, 1995, however, before any final report was issued by Pennoni, City Council voted, via Resolution No. 866, against the Westside Bypass. Therefore, Pennoni was asked to consider alternatives to the Westside Bypass pursuant to Resolution No. 935.
Pennoni ultimately issued a report, in which it considered several alternatives, including the Westside Bypass, but ultimately recommended another option, the "Direct Connector," because it felt it, together with other city-wide improvements, would best accomplish the City's long-term goals. The Direct Connector, however, would cross substantial wetlands, thereby raising environmental concerns. The report deemed the Westside Bypass unacceptable due to its high cost, its impact on the Horace Bryant Drive neighborhood, and because it did not provide for a connection with Route 30.
On February 20, 1996, the Governor's Task Force conducted a public hearing regarding these issues. At the meeting, the advantages and disadvantages of all proposals were considered, including the Direct Connector proposed by Pennoni. On March 13, 1996, the Task Force issued its final report, concluding that the Westside Bypass was the best alternative. In July 1996, Governor Whitman adopted the recommendation and decided that the Westside Bypass should be built.
Meanwhile, in April 1995 the City issued a "request for qualifications" (RFQ) seeking responses from qualified redevelopers with the appropriate credentials to construct the facilities proposed for the Huron North site. The RFQ was widely disseminated in prominent newspapers in New York, Hong Kong, Las Vegas and Atlantic City. Two proposals were received. One was from MRI, and the other was from Marina Landing Associates (MLA), a joint venture of Harrah's Atlantic City and Trump's Castle Casino Resort.
To evaluate the proposals, the City formed the Huron North Redevelopment Committee (Redevelopment Committee) comprised of elected officials, the City's Planning Board chairperson, the chairperson of the City Council Planning and Development Committee and other City employees. The City also engaged an accounting firm and a financial analysis firm to evaluate the proposals. Both produced reports, in which the applications were compared using criteria established by the City. The financial analysts ranked MRI equal to, or higher than, MLA with respect to each of these criteria. The Redevelopment Committee held a public meeting on September 1, 1995, to discuss the proposals. It issued a resolution recommending the selection of MRI as redeveloper, because that entity best met the criteria established by the City.
On September 6, 1995, City Council adopted Resolution No. 594, naming MRI as the redeveloper. The resolution also authorized negotiations with MRI for the purpose of entering into a memorandum of understanding (MOU) and ultimately a Redeveloper's Agreement with MRI to effectuate the proposed development.
On February 21, 1996, MRI and the City agreed on an MOU, and by Resolution No. 130, the City Council authorized the Mayor to execute the MOU. At the public hearing on Resolution No. 130, several persons expressed concerns about MRI's proposals, particularly because of the proposed Westside Bypass, which would require a tunnel under portions of Horace Bryant Drive, thereby requiring residents of that street to relocate. A council member noted that the Council had originally voted against the Westside Bypass because it believed the public was against the tunnel. However, after having learned that was not the case, many council members had changed their vote.
The MOU was executed in March and April 1996. It described a "list of current issues" which would need to be addressed and mutually resolved before a Redeveloper's Agreement could be executed. Those issues involved environmental matters, the relocation of the City's Public Works Department, job and business opportunities the proposal would create, development of the project, neighborhood concerns, and various others. After additional negotiations, all outstanding issues were resolved and the parties agreed upon a Redeveloper's Agreement. On March 28, 1996, City Council passed Ordinance No. 14, authorizing the City to execute the Redeveloper's Agreement. The Agreement was then executed by both parties.
MRI's obligation to proceed was conditioned on approval and construction of the Westside Bypass. MRI committed to employing 2000 persons upon completion of the project. Pursuant to Section 4.3, remediation costs related to environmental problems at the Huron North site, including the prior landfill, were to be borne solely by MRI; however, if MRI determined "in its sole discretion that costs of remediation [were] unreasonable," it could elect to not proceed. If other sources of funding for such remediation became available, they would inure totally to MRI's benefit.
Further, if funds were obtained under a then-pending State Senate Bill, S-294, the first $8 million of such funds would go to the City and MRI would retain the balance. The proposed S-294, as written when the Redeveloper's Agreement was executed, would have permitted a redeveloper to receive reimbursement against future sales tax obligations for the total cost of remediating a municipal landfill such as that which existed at Huron North. However, as passed, the maximum amount of reimbursement was reduced to seventy-five percent (L. 1996, c.124, § 4).
On April 17, 1996, certain residents filed a petition seeking a referendum on Ordinance No. 14. The City filed a complaint seeking a declaratory judgment precluding the referendum. On May 15, 1996, summary judgment was granted, holding that it was impermissible to submit Ordinance No. 14 to a public referendum. We affirmed on January 2, 1997.
Meanwhile, on May 10, 1996, plaintiffs filed the complaint which is the subject of this appeal. Judge Gibson ultimately granted summary judgment to Atlantic City and MRI, and the complaint was dismissed. This appeal follows.
Plaintiffs contend that Atlantic City acted arbitrarily and capriciously in taking the steps that ultimately led to the Redeveloper's Agreement with MRI. We reject this contention. Municipal action will be overturned by a court if it is arbitrary, capricious or unreasonable. Charlie Brown of Chatham v. Board of Adjustment of Chatham, 202 N.J. Super. 312, 321 (App. Div. 1985); Drake v. Human Servs. Dept., 186 N.J. Super. 532, 536 (App. Div. 1982); In re Application of Holy Name Hosp., 301 N.J. Super. 282, 295 (App. Div. 1997). However, municipal actions enjoy a presumption of validity. Fanelli v. City of Trenton, 135 N.J. 582, 589 (1994); Ballantyne House Assocs. v. City of Newark, 269 N.J. Super. 322, 337 (App. Div. 1993). Thus, a challenge to the validity of a municipal ordinance or action must overcome the presumption of validity -- a heavy burden. 515 Assocs. v. City of Newark, 132 N.J. 180, 185 (1993); First Peoples Bank v. Medford Township, 126 N.J. 413, 418 (1991).
When two actions are open to a municipal body, municipal action is not arbitrary and capricious if exercised honestly and upon due consideration, even if an erroneous Conclusion is reached. Worthington v. Fauver, 88 N.J. 183, 204-05 (1982); Bayshore Sewerage Co. v. Department of Envtl. Protection, 122 N.J. Super. 184, 199 (Ch. Div. 1973), aff'd, 131 N.J. Super. 37 (App. Div. 1974). A determination predicated on unsupported findings is the essence of arbitrary and capricious action. In re Boardwalk Regency Casino Licensing Application, 180 N.J. Super. 324, 334 (App. Div. 1981), modified on other grounds, 90 N.J. 361 (1982).
Legislative bodies are presumed to act on the basis of adequate factual support and, absent a sufficient showing to the contrary, it will be assumed that their enactments rest upon some rational basis within their knowledge and experience. This presumption can be overcome only by proofs that preclude the possibility that there could have been any set of facts known to the legislative body . . . [that] would rationally support a Conclusion that the enactment is in the public interest.
[Hutton Park Garden v. West Orange Tp. Council, 68 N.J. 543, 564-65 (1975) (citations omitted)].
In addition, to determine whether a municipal ordinance is authorized by a state statute, we need decide only whether that ordinance represents a reasonable exercise of the Legislature's delegation of authority to the municipality in enacting the statute. Fanelli v. City of Trenton, supra, 135 N.J. at 591.
It is clear from the record presented to us that the motion Judge utilized the proper standard of review in considering Atlantic City's actions. Plaintiffs' assertions to the contrary are without foundation. R. 2:11-3(e)(1)(E).
Plaintiffs also assert that the Judge erred in concluding that the City unconstitutionally donated public land to MRI for the construction of MRI's planned resort development. We disagree.
The New Jersey Constitution provides that, "no county, city, borough, town, township or village shall hereinafter give any money or property, or loan its money or credit to or in aid of any individual, association or corporation . . . . " N.J. Const. art. VIII, § 3, ¶ 2. It further provides that, "no donation of land or appropriation of money shall be made by the State or any county or municipal corporation to or ...