February 4, 2008
BMIA, LLC, PLAINTIFF-APPELLANT,
PLANNING BOARD OF THE BOROUGH OF BELMAR; MAYOR KENNETH PRINGLE AND THE COUNCIL OF THE BOROUGH OF BELMAR; THE BOROUGH OF BELMAR; AND GALE BELMAR, LLC, DEFENDANTS-RESPONDENTS.
On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, L-1537-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 24, 2007
Before Judges A. A. Rodríguez and C. S. Fisher.
BMIA, L.L.C. (BMIA), the owner of the Belmar Mall, appeals from the dismissal of its action in lieu of prerogative writs. The action challenged the adoption by the Mayor and City Council of the Borough of Belmar (collectively "the Governing Body" or "Belmar") of a resolution accepting the recommendation of the Borough of Belmar Planning Board (Board) to designate an area of the Borough as an "Area in Need of Redevelopment" pursuant to the Local Redevelopment and Housing Law, N.J.S.A. 40A:12A-1 to -49 (LRHL). We reverse the dismissal of BMIA's action.
These are the relevant facts. The Governing Body directed the Board to investigate whether a certain area, identified as the Transit Village Study Area (TVSA), met the statutory criteria set by the LRHL, to qualify as a Redevelopment Area.
The Borough retained a consultant, Schoor DePalma, Inc., to aid in this investigation. David Roberts of Schoor DePalma performed the investigation and offered the following opinion with respect to TVSA: (1) the lack of proper utilization of the property causes a "not fully productive condition of land;" (2) the lack of investment in TVSA "prevents outside developers, investors, or current property owners from making significant improvements" to the land; and (3) "create[s] an unattractive environment for private investment of any significant commercial or residential development." Roberts opined that the criteria that "are pertinent to this redevelopment investigation are [the] statutory criteria [found in N.J.S.A. 40A:12A-5a, -5d and -5e]."
With respect to the Belmar Mall, the Schoor DePalma investigation report concluded that: (1) "the former ACME supermarket retail space is undersized for modern supermarket standards and so the space is not being properly utilized for maximum economic benefits[;]" (2) any replacement supermarket retailer would have to rely on the Borough's public parking spaces rather than providing a private lot for its customers to the expense of the Borough; (3) the Belmar Mall has an obsolete layout for a strip mall adjacent to a train station platform; (4) the one-story rentable floor area causes the property to be underutilized in comparison to the potential of a two or more story structure; (5) the location of the parking lot opposite from pedestrian traffic on Main Street causes customers to have to walk across a parking lot to access the stores, creating a dangerous condition and requiring more effort than necessary to reach the stores; and (6) the store fronts are only clearly visible from the parking lot and not the street and the rear of the Belmar Mall faces out to the railroad tracks showing trash dumpsters, utility meters, utility poles and boarded windows to the passengers in the railroad cars. Hence, the Schoor DePalma report concluded that BMIA's property's faulty and obsolete layout satisfies the criteria set forth in N.J.S.A. 40A:12A-5d and -5e of a blighted area.
The Board held one public hearing and recommended that the Governing Body declare the area "in need of redevelopment." BMIA participated at the hearings and objected to such designation. BMIA sought an order to show cause, alleging that the Board made a decision before BMIA had presented all relevant information. On the return date, the parties negotiated a consent order reopening the hearing. At the additional hearings, BMIA presented expert testimony from Kenneth Ochab, a professional planner, and from Donald M. Moliver, Ph.D., a New Jersey certified real estate appraiser and a real property valuation expert. Both experts opined that: 1) the majority of the real property within the TVSA did not meet any of the criteria outlined in N.J.S.A. 40A:12A-5; 2) real estate property values have increased significantly across the Borough, specifically within the TVSA; and 3) private investments of hundreds of thousands of dollars have been spent improving the Belmar Mall and other commercial properties in the TVSA. At the conclusion of the hearings, the Board voted to recommend that the Governing Body adopt the Board's finding that the TVSA was in a state of blight and was, therefore, an area in need of redevelopment as defined by the LRHL.
BMIA then brought an action in lieu of prerogative writs, alleging that the Board's construction and application of the LRHL were constitutionally deficient. BMIA added a claim that the Governing Body and Gale Belmar, L.L.C. (Gale) had violated the LRHL by entering into a redevelopment agreement before the Governing Body had adopted a redevelopment plan by ordinance. Subsequently, the Governing Body adopted a resolution accepting the Board's recommendation and ordering the preparation of a redevelopment plan.
Following a bench trial, the judge issued a written opinion that, among other things, sustained the validity of the designation of the TVSA as an area in need of redevelopment and the redevelopment agreement between the Governing Body and Gale. BMIA appealed from the July 10, 2006 order dismissing its action in lieu of prerogative writs. We granted the application by the National Federation of Independent Business Legal Foundation (Foundation) to appear as amicus curiae.
BMIA contends that the "judge misapplied the standard of review." We agree and conclude that the proper standard here involved a narrow legal construction of the LRHL and compelled the setting aside of the "in need of redevelopment" designation.
A rebuttable presumption exists that a municipal body has properly exercised its discretion. Pheasant Bridge Corp. v. Twp. of Warren, 169 N.J. 282, 289-90 (2001); Harvard Enter., Inc. v. Bd. of Adjustment, 56 N.J. 362, 368 (1970). However, the municipal body's decision may be revoked when it is proven that the findings on which the decision is based are not supported by the evidence before the municipal body. Infinity Outdoor, Inc. v. Delaware and Raritan Canal Comm'n, 388 N.J. Super. 278, 288-89 (App. Div. 2006) (citing Campbell v. Dep't of Civil Serv., 39 N.J. 556, 562 (1963)).
A crucial element in determining the sufficiency of the evidence is whether the court below correctly interpreted the statutory criteria. In the landmark case of Gallenthin Realty Dev., Inc. v. Borough of Paulsboro, 191 N.J. 344 (2007), which was decided almost a year after the decision of the judgment under review here, the Supreme Court noted:
Because [the Borough's] redevelopment designation was based on an improper interpretation of the LRHL, we need not address whether there was sufficient evidence on the record to support the Borough's action. . . .
Although issues of law are subject to de novo review,  municipal redevelopment designations are entitled to deference provided that they are supported by substantial evidence on the record.
[Id at 372-73 (internal citations omitted).]
Thus, the substantial evidence standard is inappropriate when the municipality's decision is based on evidence that is not tailored to the correct statutory criteria. That is what occurred here. Because this case was decided before the opinion in Gallenthin was issued, the judge focused on the sufficiency of the evidence rather than the narrow construction of the LRHL criteria.
BMIA contends that the LRHL "is a takings statute that must be construed narrowly in accordance with the constitutional constraints on the Government's power to take." Thus, the definition of "blight" and "Area In Need of Redevelopment" must be construed narrowly and in harmony with the New Jersey Constitution and governing case law. BMIA also contends that the judge did not construe N.J.S.A. 40A:12A-3, -5a, -5d, -5e and -5h in accordance with this narrow standard. BMIA and the Foundation argues that, "the trial court . . . erred in sustaining Belmar's determination that the [TVSA] was in need of redevelopment." We agree with BMIA and the Foundation.
Designation of an area in need of redevelopment subjects the properties within the area to being taken by eminent domain. N.J.S.A. 40A:12A-8c; Gallenthin Realty Dev., supra, 191 N.J. at 357. Therefore, the statutory criteria must be construed within the constitutional standards for a taking by eminent domain.
The Blighted Areas Clause of our Constitution permits the taking of private property to improve or eliminate blighted areas. The Clause states in pertinent part:
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. [N.J. Const. art. VIII, § 3, ¶ 1.]
Although "blight" is not defined in our Constitution, generally, the term "blight" is defined as "[s]omething that impairs growth, withers hopes and ambitions, or impedes progress and prosperity." Gallenthin Realty Dev., Inc., supra, 191 N.J. at 360 (quoting American Heritage Dictionary 196 (4th ed. 2000)).
In 1992, pursuant to the authority found in the Blighted Areas Clause, the Legislature enacted the LRHL, N.J.S.A. 40A:12A-1 to -49, and repealed the Blighted Area Act, N.J.S.A. 40:55-21.1 to -21.14.*fn1 The LRHL empowers municipalities to designate property as "in need of redevelopment" and thus, subject the property to the State's eminent domain power. Gallenthin Realty Dev., Inc., supra, 191 N.J. at 357. See also N.J.S.A. 40A:12A-3 (declaring that the power to define "redevelopment area" or "in need of redevelopment" is exercised pursuant to the constitutional authority in the Blight Areas Clause). Thus, the terms "blighted area," as used in N.J. Const. art. VIII, § 3, ¶ 1, and "an area in need of redevelopment," as used in the LRHL, are synonymous. Concerned Citizens of Princeton, supra, 370 N.J. Super. at 436. See also N.J.S.A. 40A:12A-6c ("An area determined to be in need of redevelopment pursuant to this section shall be deemed to be a 'blighted area' for the purposes of Article VIII, Section III, paragraph 1 of the Constitution."). The LRHL is an eminent domain statute regulating a government's power to take, and it is, therefore, to be construed narrowly, State v. Trap Rock Indus., Inc., 338 N.J. Super. 92, 95 (App. Div. 2001).
In construing the sections of the LHRL implicated in this appeal, we must be guided by the Gallenthin decision. The Court re-affirmed the principle that the Constitution restricts government redevelopment to "blighted areas." Gallenthin, supra, 191 N.J. at 373 (citing N.J. Const. art. VIII, § 3, ¶ 1). For that reason, "[t]he New Jersey Constitution does not permit government redevelopment of private property solely because the property is not used in an optimal manner." Ibid.
The Schoor DePalma investigation report opined that the TVSA qualifies for redevelopment pursuant to N.J.S.A. 40A:12A-5d and -5e. However, we conclude, based on a thorough review of the record, that no evidence has been presented to the Board or Governing Body that meets the criteria set by these sections.
The statutory language of N.J.S.A. 40A:12A-5d requires that the following condition must be proven by the municipality:
Areas with buildings or improvements which, by reason of dilapidation, obsolescence, overcrowding, faulty arrangement or design, lack of ventilation, light and sanitary facilities, excessive land coverage, deleterious land use or obsolete layout, or any combination of these or other factors, are detrimental to the safety, health, morals, or welfare of the community. [N.J.S.A. 40A:12A-5d.]
Thus, the conditions listed in the first part of the sentence must be "detrimental to the safety, health, morals, or welfare of the community."
Here, although there is evidence that the area could be better utilized and that redevelopment would be beneficial, there is no evidence, and Belmar does not assert, that any of the conditions of TVSA are detrimental to the safety, health, morals, or welfare of the community.
We are mindful that an area may be deemed "in need of redevelopment" if the governing body of the municipality concludes that "[t]he generality of buildings are substandard, unsafe, unsanitary, dilapidated, or obsolescent, or possess any of such characteristics, or are so lacking in light, air, or space, as to be conducive to unwholesome living or working conditions." N.J.S.A. 40A:12A-5a. There is no requirement that all of the structures in the designated area meet this criteria. Ibid.
Here the Schoor DePalma Report identifies two buildings within the TVSA that meet this criteria. These two buildings comprise .34 acres in the TVSA, which encompasses fifteen acres. Such a small portion (.226 percent) cannot be considered the "generality of buildings" within the designated area.
Therefore, we conclude that the evidence presented to the Board does not meet the criteria set by N.J.S.A. 40A:12A-5a. We also conclude that although "[t]he designation of the delineated area is consistent with smart growth planning principles adopted pursuant to law or regulation[,]" N.J.S.A. 40A:12A-5h, the proofs presented do not meet the overall criteria set by N.J.S.A. 40A:12A-5d.
With respect to N.J.S.A. 40A:12A-5e, the LRHL provides that a condition for redevelopment can be:
A growing lack or total lack of proper utilization of areas caused by the condition of the title, diverse ownership of the real property therein or other conditions, resulting in a stagnant or not fully productive condition of land potentially useful and valuable for contributing to and serving the public health, safety and welfare. [N.J.S.A. 40A:12A-5e.]
The Legislature intended N.J.S.A. 40A:12A-5e to apply in areas "that, as a whole, are stagnant and unproductive because of issues of title, diversity of ownership, or other conditions of the same kind." Gallenthin, supra, 191 N.J. at 373. "The phrase 'other conditions' is not a universal catch-all that refers to any eventuality." Id. at 367.
Here, although the Schoor DePalma investigation report, on which the Borough relies, may have established the desirability of redeveloping the TVSA, there is no evidence that the existing conditions are due to "issue of title" or "diversity of ownership" as required in N.J.S.A. 40A:12A-5e.
Given this conclusion, we do not reach BMIA's other contention that the judge failed to account for Belmar's conflict of interest and failed to recognize that Belmar is not yet empowered by the LRHL to award redevelopment contracts.
Accordingly, the decision of the Law Division is reversed and the designation by the Board and Governing Body is vacated. We do not retain jurisdiction.