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Vineland Construction Company, Inc. v. Township of Pennsauken

July 27, 2007


On appeal from the Superior Court of New Jersey, Law Division, Camden County, L-2223-04.

The opinion of the court was delivered by: Lisa, J.A.D.



Argued March 6, 2007

Before Judges Lisa, Holston, Jr. and Grall.

Plaintiff, Vineland Construction Company, Inc., a property owner in Pennsauken Township, challenges the Township's designation of Cherokee Pennsauken, LLC (Cherokee), as master redeveloper for the Township's redevelopment plan for approximately 600 acres of waterfront property along the Delaware River, including plaintiff's 137 acres. Plaintiff does not challenge the Township's determination that the property within the redevelopment area (including plaintiff's property) is in need of redevelopment, nor does it challenge the Township's redevelopment plan.*fn1

Prior to the designation of Cherokee, plaintiff had engaged in contract negotiations with the Township for the right to redevelop its own property and an adjoining property consistent with the redevelopment plan. Plaintiff contended the Township's designation of Cherokee was a result of political favoritism and that it should be permitted to redevelop its own property. Plaintiff therefore sought to enjoin Cherokee's anticipated condemnation*fn2 and redevelopment of plaintiff's property, contending this would amount to an unconstitutional taking.*fn3

Following a ten-day bench trial, Judge Orlando issued a comprehensive written decision finding no violation of statutory or constitutional law in connection with the Township's designation of Cherokee as master redeveloper and the potential condemnation of plaintiff's property. He therefore entered an order dismissing plaintiff's unconstitutional taking claim and its claim premised upon alleged political impropriety.

On appeal, plaintiff argues that the trial court erred by rejecting plaintiff's constitutional challenges to the designation of Cherokee as master redeveloper and by finding that the designation of Cherokee was neither arbitrary, capricious nor unreasonable, and therefore, entitled to deference. Plaintiff also argues that critical factual findings by the trial court were clearly erroneous. We reject these arguments. From our review of the record we are satisfied that the trial court's factual findings are supported by substantial credible evidence in the record as a whole. See Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974). We are further satisfied that the trial court correctly applied the controlling legal principles in reaching its conclusion. Therefore, we affirm.


We set forth a detailed recitation of the facts, as established at trial, to provide context to the appeal issues. The Township's waterfront includes most of the Delaware River frontage between the Benjamin Franklin and Betsy Ross bridges connecting Camden and Pennsauken, respectively, to Philadelphia. Camden lies to the south of this area. Revitalization of the Township's waterfront was one of the objectives set forth in its 1998 master plan.

Plaintiff, a closely-held real estate development and construction firm, purchased 137 acres of land along the Pennsauken waterfront in 1972. It converted an existing manufacturing facility into a 300,000 square foot warehouse distribution center and leased space to various businesses. As of 2003, plaintiff's warehouse facility was occupied by two tenants; a three-story office building on the property was vacant; and another small building was being used as "a kind of shop." The property contains wetlands.

In 1990, plaintiff learned that the prior owners' manufacturing operation, which involved the application of porcelain enamel to cast iron bathtubs, had contaminated the soil. In 1996, plaintiff reached a settlement with the prior owners regarding remediation of the property, which was ongoing at the time of trial.

On June 5, 2001, following an investigation and a public hearing, the Planning Board adopted a resolution finding over 600 acres of waterfront property along the Delaware River, including plaintiff's property, in need of redevelopment pursuant to the Local Redevelopment and Housing Law, N.J.S.A. 40A:12A-1 to -73 (LRHL). In particular, the Board found the existence of conditions set forth in N.J.S.A. 40A:12A-5b, c, d and e, in support of its determination.

The redevelopment area was largely comprised of four properties commonly referred to as Petty's Island, owned by CITGO; Vineland Construction, owned by plaintiff; the Acme Site, owned by the Township; and the Hess/Texaco site, which was comprised of two parcels owned by the Hess and Texaco oil companies. The redevelopment area also encompassed a number of smaller properties, including a small junkyard located adjacent to plaintiff's property, known as the Parisi site.

Petty's Island is an island in the Delaware River. It is elongated and stretches southward from the Pennsauken mainland such that its location in the river runs parallel to and is directly across from the Cramer Hill section of Camden, which fronts the river. A bridge connects the northern tip of Petty's Island with plaintiff's property on the mainland, which borders the Cramer Hill section of Camden. The Acme site is across the street from plaintiff's and Parisi's property. The Hess/Texaco site is north of the other sites. It is separated from plaintiff's property by a cove etched out in the river, such that the two sites face each other across the cove in a generally North-South direction. The two sites are not contiguous, but are connected by a road on the mainland running along the cove.

On June 6, 2001, the Township approved the resolution of the Planning Board. On June 27, 2001, the Township adopted an ordinance adopting a redevelopment plan prepared by its planning consultant, Marc R. Shuster. The objectives of the redevelopment plan included the "environmental rehabilitation of existing compromised sites" and the development of "a unique mix of land uses designed for the particular characteristics of the area." The potential uses contemplated by the plan included "marine oriented uses, general athletic fields, lodging, institutional/governmental uses, retail, educational facilities, dining, and active and passive recreational uses."

In addition, the redevelopment plan authorized the Township to enter into a contract with a redeveloper if "necessary" for the implementation of the plan. The Township was also given "the option of negotiating with private-sector developers for a payment-in-lieu-of-taxes . . . for appropriate developments under this plan."

In 2002, the Township learned that an active bald-eagle nest had been discovered on Petty's Island. As a result, the State Department of Environmental Protection (DEP) urged the Township to adopt a coordinated approach in implementing its redevelopment plan in order to manage the eagle habitat consistent with various regulations governing endangered species.

The Township retained Louis Bezich, a planning consultant, to manage the redevelopment project and to meet with potential redevelopers. Over the next few years, the Township engaged in discussions with at least four potential redevelopers and reviewed several redevelopment proposals for various sites within the redevelopment area, including proposals submitted by plaintiff. There is no dispute that plaintiff dedicated considerable resources and effort to the development of a redevelopment proposal for its property.

John Krauser, plaintiff's President and Chief Operating Officer, testified that after reviewing the Township's redevelopment plan in December 2001, he initiated discussions with the Township regarding the Township's intentions with respect to plaintiff's property. Plaintiff initially offered to sell its property to the Township. However, by January 2002, Krauser had assembled a "team" to evaluate whether plaintiff should instead undertake the redevelopment of its property. In addition to Krauser, the team included an outside attorney, Catherine Ward, of the Cooper Levenson firm; a redevelopment planner, Angelo Alberto; engineers, Sadat Associates, Inc.; and a wetlands expert, Princeton Hydro.

According to Krauser, by August 2002, plaintiff had decided to undertake the redevelopment of its property. Plaintiff contemplated a mixed-use redevelopment for its property including residential, commercial and retail uses. According to Alberto, plaintiff was primarily an industrial developer and did not have expertise in redevelopment projects involving smart growth principles. Alberto was retained because of his expertise in mixed use redevelopment. Therefore, Alberto arranged for plaintiff's redevelopment team to visit various other redevelopment projects throughout the State having characteristics similar to its proposal.

Over the next two years, there were numerous meetings between plaintiff's representatives and the Township, and many written and oral communications. Until Cherokee expressed an interest in undertaking the redevelopment project, the Township continued to encourage plaintiff to refine its plan.

In March 2003, plaintiff presented to the Township concept plans for the redevelopment of its property. The Township's response was favorable and Bezich asked plaintiff to consider the possibility of developing some portion of the Acme site, which had already been acquired by the Township. This favorable response prompted plaintiff to further refine its plan and to explore the process for securing the appropriate permits from regulatory agencies. During a July 2003 meeting, plaintiff presented a revised concept plan to the Township. Again, the Township's response was favorable. There was also some discussion regarding the possible inclusion of the Parisi site in plaintiff's plan. According to Ward, the Township was eager to eliminate the Parisi "junkyard operation." However, plaintiff could not acquire the Parisi site through condemnation for inclusion in its project unless it entered into a redevelopment agreement with the Township.

Accordingly, on August 8, 2003, the Township's redevelopment counsel sent Ward a draft of a redevelopment agreement between the Township and plaintiff. The draft redevelopment agreement was not complete. The provisions pertaining to the improvements to be constructed and the acquisition costs for the Parisi property were left blank. Also, the three exhibits referred to in the draft agreement did not exist and remained to be negotiated. The exhibits were to include a "purchase and sale agreement" to be prepared by the Township and the redevelopment project plan to be prepared by plaintiff.

In September 2003, Bezich advised Ward that another redeveloper had proposed a "co-generation" facility for the Texaco-Hess site. According to Ward, plaintiff was strongly opposed to any industrial development of the other sites. Accordingly, on September 19, 2003, Ward drafted, but did not deliver, a letter to the Township withdrawing plaintiff's proposal to redevelop its property as a "mixed use development" on the basis that the proposal was "highly dependent on the entire waterfront redevelopment area being redeveloped in a similar manner," and that the Township's master plan demonstrated "no synergy and no consistency, just haphazard uses." In Ward's view, the Township did not share plaintiff's "vision" for the entire waterfront and plaintiff's parcel could not "stand alone."

According to Krauser, the letter was not sent to the Township because he did not want to end negotiations and "the language was too harsh." Nonetheless, in September 2003, Krauser informed Alberto that the redevelopment project was "on hold" and that Alberto would not be paid for any additional work. Although Krauser maintained that plaintiff was always "prepared to go forward" with the project, he acknowledged that plaintiff's commitment was not unequivocal, in that it depended upon market conditions.

While there continued to be some communication between plaintiff and the Township during 2003, the frequency of their meetings slowed, plaintiff did not submit additional concept plans, and there were no further negotiations regarding the unresolved terms of the draft redevelopment agreement. Also, plaintiff and the Township had reached an impasse regarding plaintiff's plan to use dredge in carrying out the proposed redevelopment. In light of these developments, Township officials were not convinced that plaintiff was capable of, or committed to, carrying out the proposed redevelopment of its property.

Meanwhile, during 2003, Cherokee, an experienced redeveloper of brownfield sites in major urban areas, was involved in negotiations with Camden officials regarding its potential designation as master redeveloper for the "Cramer Hill Redevelopment Project." Cherokee was ultimately named master redeveloper for the Cramer Hill project. While evaluating the development potential of the Cramer Hill site, Cherokee became interested in the potential for the complementary development of Petty's Island.

In early December 2003, David Luthman, the Township attorney, was contacted by Joseph Salema, a Cherokee consultant, regarding Cherokee's interest in the Petty's Island site. Luthman acknowledged that he had known Salema for years and greatly respected him. Therefore, Luthman immediately scheduled a meeting between representatives of the Township and Cherokee for December 18, 2003. At this meeting, Cherokee expressed its interest in the complementary redevelopment of Petty's Island in conjunction with the Camden project. Cherokee described its experience in redeveloping brownfields, as well as its financial strength. The Township's representatives were impressed with Cherokee's credentials and financial capability, and asked Cherokee to consider submitting a redevelopment proposal for the entire waterfront redevelopment project. Anselm Fusco, a Cherokee senior vice president, agreed to present the Township's request to Cherokee. He indicated that the Township could anticipate a prompt response because Cherokee had already conducted related research regarding the development potential of the Delaware waterfront in conjunction with its work on the Camden project.

On December 29, 2003, Luthman reported on his discussions with Cherokee during a Township meeting. Given the difficulties posed by the discovery of the bald eagle nest on Petty's Island, as well as the lack of any other private proposals for the development of the Petty's Island site, Luthman urged the Township to negotiate a redevelopment agreement with Cherokee.

In January 2004, Cherokee advised the Township that it was interested in undertaking the entire waterfront development project on condition that it be named sole redeveloper. Cherokee stressed that it would be to the Township's advantage to have a single redeveloper. Fusco conveyed to Township officials the many benefits of working with a single redeveloper such as Cherokee, including efficiencies in terms of scheduling and costs, which would make it more likely that the project would succeed and have a positive financial impact on the Township. From a fiscal perspective, the success of the project depended upon the Township being able to garner sufficient revenues from tax ratables to offset the financial impact of development, such as additional roads to maintain and more children to educate. Accordingly, Cherokee conducted a fiscal analysis projecting these variables over the ten-year period it would take to complete the project. This analysis ensured that the Township would not find itself in the position of having "10,000 kids in their school system and . . . marginal tax ratables."

Fusco also informed Township officials of the many advantages of having Cherokee coordinate different aspects of the project, such as engineering and remediation contracts, impact litigation, and infrastructure improvement. Fusco emphasized that a coordinated and coherent approach was crucial in dealing with environmental and ecological issues. Because of Cherokee's supervision of the Camden project, Fusco believed it was in an ideal position to facilitate "habitat management" or "the treatment of the ecosystem, the waterfront area and all of the areas that eagles roost and forage." Having control over two large projects enhanced Cherokee's ability to mitigate the effects of development by preserving large swaths of wetlands.

Multiple developers would be less likely to allow large portions of their respective properties to be preserved for wetlands. A single developer would be in a better position to identify and commit a portion of the development area for wetlands to balance out development in another portion.

In addition, Fusco explained that Cherokee would assign case managers to deal with each regulatory agency, facilitating the permitting process. Because these case managers would be operating "under an umbrella of a single effort," there would be benefits "in terms of continuity of regulatory approach," "consistency of remedial strategy," and "the efficiency with which the regulators can operate."

According to Fusco, there were also significant advantages to having a single developer deal with infrastructure issues. For example, each site would need adequate sewage. The municipality would be responsible for maintaining the existing sewer infrastructure, while a State agency would be processing all new sewage applications. Having a single developer to coordinate sewage activity would be much more effective because "there is a single hand driving the design, driving the implementation, coordinating and controlling the schedule, being able to speak to how the project is phased in over time, so that demand is anticipated and the right improvements are made in a logical sequence."

Although Cherokee requested that it be named conditional redeveloper by January 28, 2004, the Township demurred, asking that Cherokee first submit a statement of qualifications and formal ...

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