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Gallenthin Realty Development, Inc. v. Borough of Paulsboro

June 13, 2007

GALLENTHIN REALTY DEVELOPMENT, INC., A NEW JERSEY CORPORATION AND/OR GEORGE A. AND CYNTHIA L. GALLENTHIN III, H/W, BOTH JOINTLY AND SEVERALLY, PLAINTIFFS-APPELLANTS,
v.
BOROUGH OF PAULSBORO, A NEW JERSEY MUNICIPALITY AND/OR PLANNING BOARD OF BOROUGH OF PAULSBORO AND/OR PAULSBORO REDEVELOPMENT AGENCY, JOINTLY AND SEVERALLY, DEFENDANTS-RESPONDENTS.



On certification to the Superior Court, Appellate Division.

SYLLABUS BY THE COURT

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

In this appeal, the Court ascertains the meaning of the term "blighted" as used in the New Jersey Constitution and determines whether the Borough of Paulsboro's interpretation of N.J.S.A. 40A:12A-5(e) (subsection 5(e)) is within the scope of that term.

The Gallenthin family has owned the Gallenthin property since 1951, although it has enjoyed the parcel as early as 1902, when it used the land to moor barges transporting produce from Mantua to Philadelphia. As it currently exists, the property is bounded on its western edge by Mantua Avenue, on its eastern edge by Mantua Creek, which flows into the Delaware River, and on its southern tip by an industrial facility, across from which is a residential section of Paulsboro. The property's northern edge abuts a packaging facility and an inactive British Petroleum (BP) storage site, which fronts the Delaware River across from Philadelphia International Airport. Gallenthin Realty Development, Inc., George Gallenthin, III, and Cindy Gallenthin (collectively, Gallenthin) own the property with clear, quieted title.

The land consists mostly of undeveloped open space and has been identified as protected wetlands by the DEP. There is also an unused railroad spur tracing the property's western edge, an active gas pipeline bisecting the property, and several mooring pylons designed to receive boats navigating Mantua Creek. At Gallenthin's request, the Paulsboro Planning Board (Board) rezoned the property in 1998 from manufacturing to marine industrial business park, thereby permitting various commercial, light industrial, and mixed non-residential uses.

The property has periodically been used as a deposit site for dredging materials over the years. Gallenthin also leased portions of the property to an environmental clean-up organization in 1977 and 1978 for river access, employee parking and storage. Additionally, since 1977, a wild growing reed, phragmites australis (phragmites) has been harvested from the Gallenthin property three times a year. The phragmites reed is used as cattle feed and is recognized by the EPA as a valuable plant species that actively neutralizes soil pollutants.

In 1998, the town of Paulsboro adopted a new master plan that referenced seven broadly defined areas of Paulsboro that should be redeveloped to stimulate economic rehabilitation. The Gallenthin property was not included in the initial master plan. In 1999, the Board was authorized to investigate whether several parcels, primarily the BP facility and an adjacent Dow/Essex Chemical (Dow) property, could be designated as "in need of development" pursuant "to the criteria set forth in N.J.S.A. 40A:12A-5(e)." That resolution did not encompass the Gallenthin property. The investigative reports, prepared by Remington & Vernick Engineers, Inc. (R&V) and presented to Paulsboro, concluded that the parcels comprising the study meet the statutory definition for "an area in need of development." Paulsboro adopted R&V's recommendations in December 2002 and designated the implicated property as the "BP/Dow Redevelopment Area."

Also in 2000, BP and Dow retained URS Corporation (URS) to conduct a two-phase "Site Development Study" of their combined facilities. In Phase II of that report presented in 2002, it was first suggested that the Gallenthin property be included in the BP/Dow redevelopment project in respect of discussions of access routes to the property. Paulsboro asked R&V to look into the URS report, leading to R&V ultimately recommending the inclusion of the Gallenthin property in the redevelopment project based on the conclusion that the property was "in need of redevelopment," a designation that would subject the Gallenthin property to taking by eminent domain. After a hearing, the Planning Board recommended that the Gallenthin property be included in the BP/Dow Redevelopment Area. That recommendation was adopted by the governing body in May 2003, which designated the Gallenthin property as a redevelopment area.

In June 2003, Gallenthin filed a complaint in lieu of prerogative writs, challenging Paulsboro's designation of the property as "in need of redevelopment." Gallenthin claimed that the property did not meet any of the statutory criteria necessary for that designation. The complaint further alleged procedural flaws in the Borough's enactment of the redevelopment ordinance and other improprieties. The Law Division dismissed Gallenthin's complaint, finding that Paulsboro "meticulously adhered" to the Local Redevelopment and Housing Law's (LRHL) procedural requirements and that the Borough's inclusion of the Gallenthin property in the redevelopment plan was supported by substantial evidence. The Appellate Division affirmed that decision.

The Supreme Court granted certification.

HELD: Because the New Jersey Constitution authorizes government redevelopment of only "blighted" areas, the

Legislature did not intend N.J.S.A. 40A:12A-5(e) to apply in circumstances where the sole basis for redevelopment is that the property is "not fully productive." Rather, subsection 5(e) applies only to areas that, as a whole, are stagnant and unproductive because of issues of title, diversity of ownership, or other similar conditions. Therefore, the Borough of Paulsboro's redevelopment classification in respect of the Gallenthin property is invalidated.

1. The Constitution expressly authorizes municipalities to engage in redevelopment of "blighted areas." The State may take private property only for a "public use." Under the Blighted Areas Clause of the New Jersey Constitution, the clearance, replanning, development, or redevelopment of blighted areas shall be a public purpose and public use for which private property may be taken or acquired. The LRHL empowers municipalities to designate property as "in need of redevelopment" and thus subject to the State's eminent domain power. (Pp. 15-20)

2. It is the Court's duty to construe a statute so as to render it constitutional if it is reasonably susceptible to such an interpretation. When the Blighted Areas Clause was adopted in 1947, the framers were concerned with addressing the deterioration of certain sections of older cities that were causing an economic domino effect devastating surrounding properties. The Blighted Areas Clause enabled municipalities to intervene, stop further economic degradation, and provide incentives for economic investment. Although the meaning of "blight" has evolved, the term retains its essential characteristic: deterioration or stagnation that negatively affects surrounding properties. That articulation of the term's essential meaning is consistent with other states' statutory definitions of "blight." (Pp. 20-28)

3. Paulsboro interprets subsection 5(e) to permit redevelopment of any property that is "stagnant or not fully productive" yet potentially valuable for "contributing to and serving" the general welfare. Under that approach, any property that is operated in less than optimal manner is arguably "blighted." If such an all-encompassing definition were adopted, most property in the State would be eligible for redevelopment. Such an approach is not reconcilable with the New Jersey Constitution. (P. 29)

4. Because it must be presumed that the Legislature intended subsection 5(e) to function in a constitutional manner, and because subsection 5(e) is reasonably susceptible to an alternative interpretation, the Court concludes that the Legislature intended N.J.S.A. 40A:12A-5(e) to apply only to property that has become stagnant because of issues of title, diversity of ownership, or other similar conditions. By adopting that construction, the Court avoids rendering subsection 5(e) unconstitutional and gives effect to the Legislature's original purpose in adopting the language that would become subsection 5(e). (Pp. 30-38)

5. Paulsboro's only reason for designating the Gallenthin property as "in need of redevelopment" was that it was not being utilized in a fully productive manner. Those considerations, standing alone, are insufficient to engage the municipality's power to designate property as "in need of development" and, therefore, subject to eminent domain. Further, there is no evidence in the record that the broader redevelopment area suffered from a lack of proper utilization caused by conditions of title of the real property therein. The record is also silent as to whether the Borough considered the benefits of the protected wetlands in finding that the property was in need of redevelopment. Lastly, the record contains no evidence suggesting that the Gallenthin property is integral to the larger BP/Dow Redevelopment Area or that the Planning Board based its determination on anything other than the property not being fully productive. As such, Paulsboro's redevelopment determination in respect of the Gallenthin property was beyond the scope of subsection 5(e) and must be invalidated. This holding does not prejudice any future inquiry by the Borough regarding whether the property is "in need of redevelopment" based on any other legitimate grounds. (Pp. 38-40)

6. The Court further notes that municipal redevelopment designations are entitled to deference provided that they are supported by substantial evidence on the record. However, the substantial evidence standard is not met if a municipality's decision is supported by only the net opinion of an expert. A municipality must establish a record that contains more than a bland recitation of applicable statutory criteria and that those criteria are met. (Pp 40-41)

Judgment of the Appellate Division is REVERSED and Paulsboro's redevelopment designation in respect of the Gallenthin property is INVALIDATED.

JUSTICES LONG, LaVECCHIA, ALBIN, WALLACE, RIVERA-SOTO and HOENS join in CHIEF JUSTICE ZAZZALI'S opinion.

The opinion of the court was delivered by: Chief Justice Zazzali

Argued April 26, 2007

Gallenthin Realty Development, Inc. owns a sixty-three-acre parcel of largely vacant wetlands in the Borough of Paulsboro. In 2003, Paulsboro classified the Gallenthin property as "in need of redevelopment" under N.J.S.A. 40A:12A-5(e) because the property's unimproved condition rendered it "not fully productive." Such a classification subjects property to taking by eminent domain. N.J.S.A. 40A:12A-8(c). The trial court and Appellate Division upheld Paulsboro's redevelopment designation.

Because the New Jersey Constitution authorizes government redevelopment of only "blighted areas," we conclude that the Legislature did not intend N.J.S.A. 40A:12A-5(e) to apply in circumstances where the sole basis for redevelopment is that the property is "not fully productive." We therefore invalidate Paulsboro's redevelopment classification concerning the Gallenthin property and hold that N.J.S.A. 40A:12A-5(e) applies only to areas that, as a whole, are stagnant and unproductive because of issues of title, diversity of ownership, or other similar conditions.

I.

A.

Although the Gallenthin family has owned the parcel at issue since 1951, the family had enjoyed the property as early as 1902, when it used the land to moor barges transporting produce from Mantua to Philadelphia. As it currently exists, the property is bounded on its western edge by Mantua Avenue, on its eastern edge by Mantua Creek, which flows into the Delaware River, and on its southern tip by an industrial facility, across from which is a residential section of Paulsboro. The property's northern edge abuts a packaging facility and an inactive British Petroleum (BP) storage site, which fronts the Delaware River across from the Philadelphia International Airport. Plaintiffs Gallenthin Realty Development, Inc. (Gallenthin), George A. Gallenthin, III, and Cindy Gallenthin own the property with clear, quieted title.

The land consists mostly of undeveloped open space and is identified as protected wetlands on the New Jersey Department of Environmental Protection's (DEP) Geographic Information System. There is also an unused railroad spur that traces the property's western edge, an active gas pipeline that bisects the property, and several mooring pylons designed to receive boats navigating Mantua Creek. At Gallenthin's request, the Paulsboro Planning Board rezoned the property in 1998 from manufacturing to marine industrial business park, thereby permitting various commercial, light industrial, and mixed non-residential uses.

The property historically has been used as a deposit site for dredging materials. In 1902, the property was authorized to receive dredge deposits from the United States Army Corps of Engineers, which was responsible for widening and straightening Mantua Creek. The Army Corps of Engineers made deposits on the Gallenthin property in 1902, 1934, 1937, and 1963. Although nearby waterways are not currently being dredged, plaintiffs contend that the property may still receive dredging deposits and that dredging is a "periodic" activity that occurs "every 35 years or so as the need arises."*fn1

Other than the property's sporadic use as a dredging depot, Gallenthin leased portions of the property to an environmental clean-up organization, Clean Ventures, in 1997 and 1998. Clean Ventures used the property for river access, employee parking, and storage. Additionally, since 1997, a wild-growing reed, phragmites australis (phragmites), has been harvested from the Gallenthin property three times a year. The reed can be used as cattle feed and, according to plaintiffs, is recognized by the federal Environmental Protection Agency as a valuable plant species that actively neutralizes soil pollutants. Although the record does not reveal how much profit Gallenthin generates from harvesting the phragmites, Paulsboro characterizes any revenue as negligible and primarily for tax abatement purposes.

In 1998, Paulsboro -- a town of about 6,500 residents and covering approximately two square miles -- adopted a new master plan. The plan referenced seven broadly defined areas of Paulsboro that should be redeveloped to stimulate the Borough's economic rehabilitation. Although the Gallenthin property was not included in the master plan's redevelopment recommendations, the plan mentioned the Gallenthin property, stating:

The 63 acre Gallenthin property is idle and may be largely undeveloped due to tidal wetlands regulations. This Mantua Creek site may, however, be available for development as a boat launch or marina . . . . The Borough should explore acquiring the property and working with redevelopers and with the Nature Conservancy or other nature agency to assist in the development of a creek front marina with the bulk of the property used as a nature center for tidal river appreciation or passive recreation use.

In 1999, the Paulsboro governing body authorized the Planning Board to investigate whether several parcels, primarily the BP facility and an adjacent Dow/Essex Chemical (Dow) property, could be designated as "in need of redevelopment" pursuant "to the criteria set forth in N.J.S.A. 40A:12A-5." The governing body's resolution did not encompass the Gallenthin property. In June 2000, the governing body authorized the Planning Board to investigate additional, contiguous parcels, but the Gallenthin property was again not included.

The investigation reports, prepared by Remington & Vernick Engineers, Inc. (Remington & Vernick) and presented to Paulsboro in 2000, described the properties under review as land upon which are located a now closed liquid storage facility for petroleum products and an unimproved three (3) acre parcel, all of which being owned by BP Oil Company; contiguous unimproved parcels utilized for miscellaneous storage, owned by Norman B. Swindell; and now a closed chemical plant, owned by Dow Chemical Company.

Remington & Vernick concluded that "given primarily the closure of the facilities and the stagnant and not fully productive condition of the land, . . . the parcels comprising the study meet the statutory definition for an 'area in need of redevelopment.'" In December 2002, Paulsboro adopted Remington & Vernick's recommendations and designated the implicated property as the "BP/Dow Redevelopment Area."

Also, in 2000, BP and Dow retained URS Corporation (URS) to conduct a two-phase "Site Redevelopment Study" of their combined facilities. The first phase of the URS study did not reference the Gallenthin property. However, the phase-two report, presented to BP and Dow in 2002, contained the first suggestion that the Gallenthin property be included in the BP/Dow redevelopment project. URS observed that "transportation to the [BP/Dow redevelopment] site is an issue" and proposed three alternative access routes. One proposed route involved a bridge over Mantua Creek connecting to an access road that would traverse a small portion of the Gallenthin property. URS expressly discouraged that option, however, because of "wetlands and ownership challenges." Rather, URS concluded that the most "natural alignment to the site" and the "preferred" access route involved a bridge to the north of the Gallenthin property that would directly enter the BP/Dow site.

Paulsboro then requested that its own engineers, Remington & Vernick, compile a "Redevelopment Plan Summarization" regarding the URS report. Presented in October 2002, the summarization noted that "[t]he URS Phase II Study indicates the possibility of ultimately including [in the redevelopment project] the [Gallenthin] parcel immediately to the south of the BP site . . . . In the event of said eventuality, a further preliminary investigation would be necessary as [that] parcel[] w[as] not previously examined."*fn2 Consequently, in December 2002, Paulsboro authorized Remington & Vernick to prepare a "Redevelopment Area Study and Plan" that, for the first time, included the Gallenthin property.

That plan described the Gallenthin property as an "expanse of vacant unimproved land, other than for a rail line." Regarding the statutory criteria for classifying the property as "in need of redevelopment," the report stated:

Conditions rising to the level of the requisite criteria for a redevelopment declaration noted from field observation conducted in January 2003 include: a not fully productive condition of land as evidenced by the expanse of vacant unimproved parcels which otherwise could be beneficial in contributing to the public health, safety and welfare of the community resultant from aggregation of the positive features of development such as the introduction of new business, job creation, and enhanced tax base; and as further evidenced by the underutilization of the existing rail line (Criteria [N.J.S.A. 40A:12A-5(e)]).

Owing principally to the instances of stagnant and not fully productive condition of land and circumstance of rail line underutilization, this report concludes that existing conditions, as described herein, satisfy the statutory criteria necessary to deem the study area an area in need of redevelopment. [(Internal heading omitted).]

The report made no reference to the URS proposal that the Gallenthin property be included because of access problems associated with the larger BP/Dow Redevelopment Area.

In April 2003, the Planning Board held a public hearing regarding the classification of the Gallenthin property as "in need of redevelopment." The Planning Board's professional planner, George Stevenson, presented the redevelopment plan and testified that the Gallenthin property should be included in the plan. Stevenson had previously conducted a physical inspection of the property and ...


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