On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, L-141-06 (A-0067-06T2), L-309-06 (A-0191-06T2), L-4996-05 (A-0192-06T2), L-5551-05 (A-0195-06T2), L-4987-05 (A-0196-06T2), L-871-06 (A-0197-06T2), L-317-06 (A-0198-06T2), L-307-06 (A-0654-06T2).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Lisa, Sapp-Peterson and Newman.
Appellants*fn4 are homeowners in a neighborhood in the City of Long Branch (the City) which is part of a larger area the City declared to be in need of redevelopment and for which it adopted a redevelopment plan in 1996. In late 2005 and early 2006, the City filed condemnation actions against appellants, who filed motions to dismiss. Without granting appellants' request for discovery and a plenary hearing, the judge, after hearing oral argument, based on the documentary record, denied the motions and granted judgment in favor of the City, appointing condemnation commissioners.
The City found, pursuant to N.J.S.A. 40A:12A-5(a), (c), (d) and (e), that the area including appellants' properties was in need of redevelopment. Appellants argue that the trial court erred by (1) finding substantial evidence to support the City's findings that the area was in need of redevelopment, (2) failing to find that the taking of appellants' properties represented a change in the plan that required readoption, (3) failing to conduct a plenary hearing on disputed material facts, (4) failing to find that conflicts of interest invalidated the City's findings, (5) failing to dismiss the condemnation complaints because the City failed to pursue bona fide negotiations, and (6) failing to find that the City improperly delegated eminent domain authority to the redeveloper.
The trial court decided these cases prior to the Supreme Court's decision in Gallenthin Realty Development, Inc. v. Borough of Paulsboro, 191 N.J. 344 (2007), which reaffirmed that the New Jersey Constitution requires a finding of actual blight before private property may be taken for the purpose of redevelopment. Gallenthin involved only a finding under N.J.S.A. 40A:12A-5(e), but in our view its analysis of the constitutional and legislative history applies equally to subsections (a), (c) and (d). We conclude that, under Gallenthin's heightened standard, the record does not contain substantial evidence to support the City's findings under any of the subsections upon which it relied. Accordingly, we reverse the judgments appointing commissioners.
However, as we will discuss in this opinion, substantial activity has occurred in implementing the redevelopment plan. Although we attribute to these cases pipeline retroactivity of the Gallenthin holding, fairness dictates that the matter be remanded to afford the City an opportunity to amplify the record in an effort to meet the Gallenthin standard. Harrison Redevelopment Agency v. DeRose, 398 N.J. Super. 361, 420 (App. Div. 2008).
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 as to the subsidiary issues (if the plan is otherwise valid) of (1) construction of the terms of the redevelopment plan as it applied to appellants' particular neighborhood, and thus whether the taking of appellants' properties represented a change in the plan that required readoption, and (2) whether appellants' neighborhood was integral to the overall redevelopment area and whether its inclusion was necessary to the redevelopment plan.
We find no reversible error in the trial court's findings regarding conflicts of interest, bona fide negotiations, or delegation of eminent domain authority.
The issues remanded can only be decided after a plenary hearing. See Lyons v. City of Camden, 48 N.J. 524, 533-35 (1967) (discussing scope and nature of evidence permitted at such a hearing). We leave to the trial court's sound discretion the management of discovery issues.
Appellants' neighborhood is known as MTOTSA, an acronym derived from the three streets it contains, Marine Terrace, Ocean Terrace and Seaview Avenue. MTOTSA consists of mainly single-family homes, occupied by long-term owners. On average, homes in MTOTSA have been owned by the same family for forty-six years. Fifty-six of the fifty-eight units in MTOTSA are occupied by year-round residents. About one-third are retirees. This is a well-established, stable neighborhood.
MTOTSA is located at the extreme northerly end of the redevelopment area. It is bounded on the north by Seven Presidents Park, on the east by the beach and ocean, and on the west by Ocean Boulevard, a major thoroughfare that marks the western boundary of the redevelopment area of which MTOTSA is a part. This area is about one mile long and several blocks wide, stretching from North Bath Avenue on the south to Seven Presidents Park on the north, bounded on the east and west by the ocean and Ocean Boulevard. The redevelopment plan divided it into four sectors. Going from south to north, these are:
(1) Beachfront South (about 17.5 acres); (2) Pier/Village Center (about 25.5 acres); (3) Hotel Campus (about 16.75 acres); and (4) Beachfront North (about 27.5 acres). MTOTSA lies in the northern tip of the Beachfront North sector.
The redevelopment plan also includes an area of about 48.5 acres to the west of the area we have described, across Ocean Boulevard, designated as Broadway-Gateway. It has about three-quarters of a mile of frontage on Ocean Boulevard, and contained industrial and commercial areas and some residential properties in the northern and southern edges.
A. Initial Consideration of Redevelopment
In July 1994, the Planning Board and then the City adopted a review of the City's master plan, which had last been reviewed in 1988. The 1994 review identified several concerns about deterioration and hindrances to development, most of which applied to the City as a whole, including "inadequate attention being paid to the City's physical appearance and aesthetic qualities." The concerns about residential land use included the "excessive number of through streets in neighborhoods," the "overcrowding of houses upon the land in some areas," and the "additional need for varied housing types not being served." The report also noted "a significant degree of residential and commercial deterioration in the City[,] neighborhoods plagued with numerous blighting influences resulting in a less-than-attractive living environment," and "difficulty on the part of the City in achieving a balanced urban renewal program to produce remedial treatment where it is needed most" in order to "effectively deal with the problems of blight in the City." And, the report noted the "functional obsolescence of housing in some areas especially the oceanfront."
Howard Woolley, the City's business administrator since 1994, certified that the City selected Greenbaum, Rowe, Smith, Davis & Himmel (Greenbaum Rowe) in or about June 1995 as redevelopment counsel based on its experience and reputation in redevelopment and land use.
B. The Oceanfront Master Plan
In July 1995, the planning firm Thompson and Wood and urban development consultants The Atlantic Group issued an Oceanfront Master Plan (the OMP). The OMP was commissioned by the civic group Long Branch Tomorrow, and it reflected consultation with the mayor and City Council, the Planning Board, and other municipal agencies. The OMP covered the areas we have described, as well as a stretch of beachfront to the south of North Bath Avenue that extended about one mile to Takanassee Lake and had begun to see multi-family condominium development. The OMP referred to the two beachfront sections divided by North Bath Avenue as Waterfront South and Waterfront North.
The OMP's premises were the need for an integrated mix of uses and for greater density, which the City could promote "by converting unbuilt lands . . . to constructive year-round uses" and "providing the supporting infrastructure." Encouraging such development would benefit the City as a whole:
Today's public sector strategy needs more entrepreneurial insight and aggressive goals than in the past: it needs to create more value in land within city borders, to increase density by converting unbuilt lands (including parking areas) to constructive year-round uses, and to provide the supporting infrastructure. . . .
The enhancement of value in the waterfront zone, through well-balanced mixed use development, is based on this one central goal-achieving appropriate built density. Appropriate density is a positive force. It increases the number and intensity of uses and sometimes of height or land coverage. Density lowers the cost of infrastructure for each unit or user, and helps finance new development. . . . . . . It is critical to consider more than familiar patterns and past traditions of waterfront use-to consider the scale and type of development that can rebuild the entire oceanfront zone, not as a series of disjointed neighborhoods but as a mixed-use environment of urban character made unique by its connections to the existing fabric and proximity to the sea. . . . Imaginative use of these lands can launch the renaissance of Long Branch as a viable, balanced, and appealing city as it approaches the millennium.
The OMP declared that "[t]he planning intent is to achieve a critical mass of year-round residents in areas of moderate urban density," in order to "serve a market segment of individuals, couples, and small families by offering convenience, recreational amenities, and easy access to the ocean." Waterfront North's density was 5.5 residential units per acre, with the potential for eight units per acre if every vacant lot had a single-family house; that neighborhood could retain "its low scale and neighborhood character" at a density of up to fifteen dwelling units per acre, although the OMP did not indicate the extent to which such density could accommodate single-family houses.
The OMP stated that the increase in density should occur gradually: "Not by sweeping reform but by an incremental process, new buildings and blocks will fit in among the old."
To avoid the clean-sweep practices of contemporary urban renewal yielding antiseptic uniform "projects," we recommend an incremental approach that is rather like repairing a valuable patchwork quilt, piece by piece. Change can be layered upon existing conditions, knit together by reciprocative scale and siting, to produce a harmonious, yet variegated fabric.
In that manner, Long Branch's "considerable housing stock of various types, both owner and renter occupied, predominantly suitable for single family occupancy," would "expand options to attract a market not currently served, citizens who will broaden the pool of labor and purchasing power within the city."
The OMP envisioned for Waterfront North "[s]afe, coherent, quiet beachside neighborhoods," and proposed "[s]mall-parcel infill with the option of upgrading and densifying existing dwellings to multi-family units," with "[l]ow-rise medium-density planned unit development as a further "possibility." It noted that "infill" could be placed "amid existing structures" by "the redevelopment of vacant sites" and the "conversion" of the occupied lots' "independent driveways and under-utilized setbacks" into sites for "multi-family units." Neither the OMP nor any other document in the record defined the term "infill." This explanatory narrative is somewhat elucidating. It suggests retention of at least some existing structures, but it cannot be said to associate the infill concept exclusively with any one purpose, such as the preservation of existing structures.
The OMP did not cite the quality of the existing houses in Waterfront North as a reason to replace them. It simply made the blanket observations that "[g]reat variation exists in the quality and maintenance of buildings in this area," and that "[w]hile some are well maintained, virtually all of the homes need to be upgraded or rebuilt."
On August 8, 1995, the City responded to the OMP by passing Resolution 271-95, which authorized the Planning Board to conduct a "preliminary investigation" of whether all or part of the area that the OMP addressed satisfied the statutory criteria for a redevelopment area "and should be designated as same."
On August 29, 1995, in response to a request by the City's Assistant Director of Planning, Carl Turner, Fire Official Edward Williams provided the notes from the fire department's "cursory inspection" of building conditions in Waterfront North. Williams's notes covered 209 properties, most of which were houses, rooming houses, and small apartment buildings, of which a few were vacant, plus twenty-five vacant lots. They described exterior conditions that ranged from "well maintained" to "very poor." Williams observed that no interiors had been inspected, and that Turner's instruction not to disclose the purpose of the inspection had been respected.
C. The Redevelopment Study
In January 1996, the Long Branch City Planning Department and The Atlantic Group issued a redevelopment study of substantially the same area that the OMP addressed. The redevelopment study concluded that Waterfront South (which it called Oceanfront South) did not meet the statutory criteria for an area in need of redevelopment, but that Waterfront North (which it called Oceanfront North) did, along with what it called the Broadway Corridor, west of Ocean Boulevard. It described Oceanfront North as being much further from fulfilling its development potential than Oceanfront South, with the sole exception of a successful hotel:
Oceanfront North is characterized by haphazard, piecemeal and inefficient development. Obsolete layout and faulty design deter private redevelopment and are detrimental to the welfare of the community.
In a community chronically facing fiscal problems, these blocks (outside the property in which the OceanPlace Hilton is located) produce only a small fraction of the revenue that they should, inasmuch as they offer unique opportunities for oceanfront living and commercial development. Indeed, Oceanfront North stands in sharp contrast to the residential area to the south where mid-rise residential projects yield comparatively high property taxes and house affluent consumers needed by nearby commercial areas. As an indication of Oceanfront North's potential, the OceanPlace Hilton (the result of previous use of redevelopment authority) is the largest property tax payer in the City.
The redevelopment study used the term "blight" only in connection with the Broadway Corridor commercial area, which suffered the "blighting effects" of the shift of street traffic and shopping to other areas, an abandoned railroad right of way, "and decades of public and private neglect and inadequate reinvestment." It noted that "the nearby industrial area, with obsolete buildings oriented to the abandoned rail right-of-way deters residential development and discourages maintenance in nearby blocks."
In addition, the redevelopment study analyzed the condition of 403 properties in Oceanfront North, on the basis of undated "on site inspections conducted by the City's Fire Marshal and Planning Department" that were performed no later than August 31, 1995, and that were corroborated by a photographic survey performed from October 26 to November 2, 1995. This survey, like the earlier one, was a "windshield survey," involving only exterior observation. The planning department used the city and state building codes to devise six assessment criteria: broken windows; "deteriorating" paint; exterior columns that were falling or rotten; masonry veneer that was cracked or chipped; structural parts like walls, roofs, stairs, porches, balconies, and siding that showed "evidence of deterioration"; and "evidence of apparent defects" in gutters, leaders, drains, window frames and doors. A building in "good" condition would have no such deficiencies, while a "fair" building would have one or two, and a "poor" building would have three or more.
The inspected properties in Oceanfront North, as in the Broadway Corridor but unlike in Oceanfront South, consisted mostly of vacant lots and properties in fair or poor condition:
Broadway CorridorOceanfront NorthOceanfront South
Vacant47 (20%)148 (37%)5 (9%)
Good48 (20%)70 (17%)36 (67%)
Fair74 (31%)110 (27%)11 (20%)
Poor68 (29%)75 (19%)2 (4%)
On that basis, the study concluded that Oceanfront North satisfied the N.J.S.A. 40A:12A-5(a) redevelopment criterion that "[t]he generality of buildings" were in sufficiently poor condition "as to be conducive to unwholesome living or working conditions."
The study further noted that fifteen acres, comprising sixteen percent of Oceanfront North's land area, had been vacant for ten years. It declared that circumstance to represent a large amount of long-term vacant land for a "moderate size city" and "a very clear and significant indicator" that private capital alone was unlikely to develop that land. An additional nine percent of Oceanfront North, or 9.3 acres, had been vacant for less than ten years, and the study regarded the increase in vacant land as evidence of growing "non-investment and dis- investment phenomena." The study found that the extensiveness of vacant land was consistent with the criterion in N.J.S.A. 40A:12A-5(c) that land be unamenable to private development, although it did not address the coordinate statutory criterion that the hindrance to private development arise from the property's remoteness, topography, or soil conditions.
For the N.J.S.A. 40A:12A-5(d) criterion of conditions that are "detrimental to the safety, health, morals or welfare of the community," the study noted the dilapidation and obsolescence of the Broadway Corridor and the downtown commercial areas. It did not suggest that those conditions extended into the nearby residential areas or were in any way caused by them.
The final statutory criterion was in N.J.S.A. 40A:12A-5(e), a growing or total lack of proper land utilization, such that land "potentially useful and valuable for contributing to and serving the public health, safety and welfare" is instead left "in a stagnant and unproductive condition."*fn5 The study declared Oceanfront North to be increasingly if not fully unproductive, due to property values that were less than one-fourth those in Oceanfront South as measured by average property tax per square foot, which it called "a strong indication that the proposed redevelopment area is very significantly under-productive and should be capable of improvement."
Another measure of unproductive land use was the lack of private investment, as no construction permits had been issued for Oceanfront North from 1990 through November 1995, and only two were issued in the Broadway commercial area, compared to 4745 permits issued for the rest of the City. The study concluded that the increased residential density Oceanfront North could support served as a reasonable measure of proper land utilization "for the greatest good to the community":
There are an estimated 200 dwelling units in this area. Applying design standards consistent with the markets seeking high amenity locations such as the oceanfront, the team developed a model which will enable construction of an estimated 476 additional dwelling units in this area. This plan represents a reasonable standard for productive use of the land. The currently stagnant and not fully productive condition of this land area discourages development which could create more tax paying residential units near the ocean.
On January 23, 1996, the City Council adopted Resolution 38-96, by which it accepted the Planning Board's recommendation to find Oceanfront North and the Broadway Corridor to be areas in need of redevelopment.
D. The Redevelopment Plan
In April 1996 the planning department, along with Thompson and Wood for "planning and design," The Atlantic Group as redevelopment consultants, and Greenbaum Rowe, issued the "Oceanfront-Broadway Redevelopment Plan" (the plan). The plan's "overall goal is to bring about a compact and integrated ensemble of public and private places that support year-round uses related to living, working, and recreation and visitation."
As we have stated, the plan divided Oceanfront North into four sub-parts or sectors (also described as "Zones of Character"). The northernmost sector was designated as Beachfront North. It consisted of 27.5 acres and MTOTSA was at its northern tip. Beachfront North would become a "single cohesive neighborhood" of low-rise, medium-density residential use, with greater "street life" due to redesigned circulation and parking:
Beachfront North is a sector composed of a Waterfront Recreation Zone . . . and a Beachside Residential Village. Building types that are "street based" and "street dependent" shall be required in the entire sector. A neighborhood character is to be established, emphasized by controlled street traffic, bike and walking paths, on-street resident parking and through-block alleys for garages and secondary parking.
The plan's general redevelopment objectives included the encouragement of greater density, "in order to create a walkable environment and an enlarged base population to sustain a lively, year-round retail and residential core on Long Branch's Oceanfront." The vehicle for doing so, and for increasing the value of "land and enterprise for public and private interests," would be "high-yield projects that exploit ocean views from residential and commercial development and public spaces." Other goals included "[i]mprov[ing] the City's image by replacing vacant lots and poorly maintained buildings with new, carefully designed buildings, both commercial and residential," "increasing year-round population by creating housing types that will attract a diversified market, primarily small households," and "[c]onserv[ing] sound, well-maintained single-family housing to the extent possible, and encourag[ing] residential development through infill."
The plan declared itself "consistent with the general plan for the municipality" because it would "carry out major proposals of the Master Plan for the City and will comply with local objectives of the City as to appropriate land uses, improved street systems, and overall improvement of the area." More generally, it was consistent because it "will improve the total living and working conditions of the City through improvement of a blighted area, removal of structures in poor condition and the provision of land for new commercial and residential development." The plan stated that both the Planning Board and the City Council found these objectives consistent with their prior findings that area addressed in the plan was in need of redevelopment.
The plan noted the City's intention of letting the private redevelopers acquire necessary properties through negotiation with their owners, and the expectation that the need for relocation would be "moderate at most, given the policy encouraging infill." However, the City would reserve the right to exercise eminent domain for properties that "are judged essential to achieve objectives intended by the Plan," upon the redeveloper's request and "as a last resort after other means have been exhausted." The plan did not indicate how the determination that a property was essential to the redevelopment project would be made.
E. The Redevelopment Ordinance
On April 16, 1996, the City Council, citing the procedural requirements of N.J.S.A. 40A:12A-6 and -7(f), adopted a resolution finding "substantial evidence in support of a determination that the areas delineated as Oceanfront North and Broadway Corridor individually qualify as redevelopment areas and collectively also qualify as a redevelopment area." The resolution adopted the plan and declared Beachfront North and the Broadway Corridor to be "in need of redevelopment pursuant to the statutory criteria set forth in" N.J.S.A. 40A:12A-5(a), (c), (d), and (e).
On May 14, 1996, the City Council codified the plan as Ordinance 15-96. The ordinance included the plan's objectives and provided that further details would be provided as design guidelines.
On October 4, 1996, the Thompson Design Group issued design guidelines for developers to follow in devising redevelopment projects to propose to the City. The guidelines for Beachfront North explained that the development of "an urban beach-side community, integrated with high amenity beachfront recreational activities," required "a critical concentration" of year-round residents. For that reason, "new development" had to contain from twelve to fifteen dwelling units per acre.
Design Guidelines Handbook 1 (General Design Guidelines), in its Generalized Land Use section, and Design Guidelines Handbook 4 (Beachfront North), in its Land Use section, designated MTOTSA as "Infill residential."
G. The Redeveloper and the Redevelopment Agreement
Woolley certified that the plan and design guidelines were completed with no input from potential developers. The City sent requests for proposals to more than 250 potential developers, while Woolley, Turner, the City's director of building and development, and the Thompson Design Group evaluated the responses for compliance with the plan and the design guidelines.
Their evaluations were transmitted to the mayor and council, which selected the proposal submitted by Applied Development Company (Applied). On June 1, 1999, the City entered into a memorandum of understanding with Beachfront North L.L.C., the subsidiary that Applied created to separate its redevelopment work in that neighborhood from its other redevelopment work in Long Branch.
Woolley explained that the memo of understanding was the stage at which the City's redevelopment counsel "first became involved in the process." Before that point, no attorney received materials and no attorney attended meetings with potential developers "when the issues of redevelopment were discussed." James Aaron, the City's outside counsel since July 1994 and a member of Ansell Zaro Grimm & Aaron (Ansell Zaro), certified that he and his firm had no role in selecting the redeveloper, or in negotiating or preparing the redevelopment agreement, and that the City adopted the plan before potential developers were identified.
On February 22, 2000, the City and Beachfront North, L.L.C., entered into a redevelopment agreement for the Beachfront North area, defined as the area of approximately 25 acres bordered by Ocean Avenue,*fn6 Ocean Boulevard, Seaview Avenue, and Madison Avenue (the redevelopment agreement). Exhibits listed appellants' properties among those subject to acquisition. The project would have two phases. Phase I encompassed all of Beachfront North except for MTOTSA. It involved the acquisition of forty-one private properties and the construction of approximately 190 townhouses, 130 rental residential units, and 10,000 square feet of retail space. Phase II, covering only MTOTSA, would comprise approximately 200 residential units and another ...