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CD Development, LLC v. City of Newark

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


August 26, 2010

CD DEVELOPMENT, LLC, PLAINTIFF-RESPONDENT,
v.
CITY OF NEWARK, MUNICIPAL COUNCIL OF THE CITY OF NEWARK, DEFENDANTS, AND CENTRAL PLANNING BOARD OF THE CITY OF NEWARK, DEFENDANT-RESPONDENT.
MORRIS FAIRMONT ASSOCIATES, LLC, INTERVENOR-APPELLANT.

On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket No. L-5716-05.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued September 16, 2009

Before Judges Graves, Sabatino and Harris.

Intervenor Morris Fairmont Associates, LLC, a designated redeveloper for the City of Newark, appeals from a final judgment of the Law Division entered in favor of plaintiff, CD Development, LLC, on May 30, 2008. The judgment determined that plaintiff's property was incorrectly designated as an "area in need of redevelopment" under the Local Redevelopment and Housing Law (LRHL), N.J.S.A. 40A:12A-1 to -73, and vacated the portions of a resolution adopted by the Municipal Council of the City of Newark (the City Council) that classified plaintiff's property as in need of redevelopment. The judgment was entered, however, without prejudice to any future determination by the City Council "that satisfies the statutory criteria of the LRHL and the controlling case law." For the reasons that follow, we affirm.

Plaintiff is the owner of five acres of land in the City of Newark. The land is designated as Lot 82 and Lot 84 in Block 2438 on the City's tax map. The land is used as an active trucking facility. In 2004, the City Council authorized the Central Planning Board of Newark (the Planning Board) to investigate whether eight parcels of land totaling 22.34 acres, qualified as an area "in need of redevelopment" under the LRHL. The eight properties are designated as Lots 74, 76, 78, 80, 82, 84, 85, and 92 in Tax Block 2438 (the study area).

On March 11, 2005, Mark G. Barksdale (Barksdale), a licensed professional planner and Acting Director of the Newark Department of Economics and Housing Development, presented a report to the Planning Board. Barksdale noted that the properties in the study area were "located within the City's East Ward" and described the area as follows:

This Ward contains parts of the Central Business District, Newark Liberty International Airport, Port Newark, North Ironbound and South Ironbound neighborhoods, as well as a small portion of the South Broad Street neighborhood. While the Land Use Element notes that the area adjacent to the Newark Liberty International Airport is one of the City's most rapidly redeveloping areas, there are many isolated, vacant parcels and underutilized industrial tracts scattered throughout this area. Aside from the Airport, stable industrial areas in Newark are located close to highway and seaport access, which are the other two dominant modes of cargo transportation in Newark, including the New Jersey Turnpike, US Routes 1 & 9, Interstate 78 and the Passaic River and Port Newark.

The Barksdale report applied the criteria of N.J.S.A. 40A:12A-5 to plaintiff's property and found that it was an "area in need of redevelopment" based on subsection (e), which describes land with the following characteristics:

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-5(e).]

Barksdale's specific findings with regard to plaintiff's property were as follows:

This site consists of Lots 82 and 84. The improvements are located, for the most part, on Lot 82, and the company is still in operation. The remaining portions of the site hold old, broken down trucks and trailers. Extensive portions of the site are paved. The improvement-to-land ratio exhibits the economic productivity of the property, and ratios of less than 2:1 offer evidence of underutilization. For example, the site improvements of the property are valued at $990,300, versus a total assessed value of $2,316,200, which accounts for an improvement ratio of 43%. Ideally, the value of improvements should [be] at least equal to the value of the land itself . . . . The property is also actively listed on the NJDEP's Known Contaminated Sites list since April 1999.

These conditions indicate a lack of proper utilization of land causing a stagnant and not fully productive condition of otherwise valuable property that could potentially be useful and valuable for contributing to and serving the public health, safety and welfare, such as by providing jobs.

Pursuant to N.J.S.A. 40A:12A-6(b)(4), the Planning Board conducted a public hearing on April 11, 2005. Barksdale testified at the hearing regarding his findings and recommendations. In addition, Mr. Danilo Joa, plaintiff's representative, testified that plaintiff's property is actively used as a trucking facility and the business "provides opportunities for many drivers and operators in the area." During the hearing, another property owner in the study area submitted a report prepared by Peter G. Steck, a licensed professional planner, into evidence. That report specifically addressed Lots 76 and 78, owned by Delisa Realty Co., Inc., but also concluded that Barksdale's analysis was flawed and his findings were "unsupportable":

The March 11, 2005 Redevelopment Report is founded on incorrect facts, over-generalized findings and misinterpretation of the statutory criteria in the Local Redevelopment and Housing Law. The report fails entirely to relate the alleged conditions within the study area to the causal factors required by the state statute. The absence of cited code violations, interior inspections, and tax delinquency data yield the conclusion that no significant, much less substantial, credible evidence exists which would support a finding that the Delisa properties or for that matter the other properties in the study area are in need of redevelopment. Furthermore, the use of tax assessment ratios is a deceptive and unreliable basis for judging satisfaction of the statutory criteria for an area in need of redevelopment.

Contrary to the conclusions offered by the Redevelopment Report, an accurate examination of Lots 76 and 78 in Block 2438 owned by Delisa Realty Co., Inc. shows a very active, occupied, tax-paying business generating significant employment.

Based on these findings, it is concluded that the findings of the March 11, 2005 Redevelopment Report are misaligned with the Local Redevelopment and Housing Law and unsupportable.

Based on the evidence presented at the hearing, the Planning Board concluded that each of the properties in the study area "qualifies as an area in need of redevelopment primarily and specifically under N.J.S.A. 40A:12A-5(e)." Accordingly, in a resolution dated May 2, 2005, the Planning Board recommended to the City Council that "the study area be determined to be a redevelopment area pursuant to the statutory criteria set forth in [the LRHL]."

On June 1, 2005, the City Council voted to accept the Planning Board's recommendation. However, the City Council made no specific findings of fact. Instead, it adopted the findings of fact, conclusions, and determinations set forth in the Planning Board's resolution. The City Council's resolution also incorporated the Barksdale report, which specifies that plaintiff's property qualifies as an area in need of redevelopment pursuant to N.J.S.A. 40A:12A-5(e).

Plaintiff brought this action in lieu of prerogative writs challenging the inclusion of its two lots in the redevelopment area. During the pendency of this action, the Supreme Court decided Gallenthin Realty Dev., Inc. v. Borough of Paulsboro, 191 N.J. 344 (2007), which held that N.J.S.A. 40A:12A-5(e) applies "only to property that has become stagnant because of issues of title, diversity of ownership, or other similar conditions." Id. at 370. In a comprehensive oral decision on May 23, 2008, the trial court found that the designation of plaintiff's property as an area in need of redevelopment was "arbitrary, capricious and invalid" because N.J.S.A. 40A:12A- 5(e) was the sole authority for that classification and there was no "evidence of diversity of title or ownership, as required by Gallenthin."

On appeal, defendant presents the following arguments for our consideration:

POINT I THE TRIAL COURT FAILED TO AFFORD APPROPRIATE DEFERENCE TO THE COUNCIL'S DECISION, AND FURTHER FAILED TO PROPERLY DETERMINE WHETHER THERE IS SUBSTANTIAL EVIDENCE IN THE RECORD TO SUPPORT THE COUNCIL'S DECISION.

POINT II THE TRIAL COURT ERRED IN INVALIDATING THE COUNCIL'S DESIGNATION OF CD DEVELOPMENT'S PROPERTY AS PART OF A VALIDLY DESIGNATED AREA IN NEED OF REDEVELOPMENT BECAUSE THERE IS SUBSTANTIAL EVIDENCE IN THE RECORD TO SUPPORT ITS DETERMINATION.

A. THE TRIAL COURT FAILED TO CONSIDER THE STUDY AREA AS A WHOLE AND TO CONSIDER CD DEVELOPMENT'S PROPERTY WITHIN THE CONTEXT OF THE STUDY AREA.

B. THERE IS SUBSTANTIAL EVIDENCE IN THE RECORD TO SUPPORT THE COUNCIL'S DETERMINATION THAT THE STUDY AREA EXHIBITS CONDITIONS THAT SATISFY THE "b", "c", "d", AND "e" CRITERIA OF N.J.S.A. 40A:12A-5.

POINT III THE TRIAL COURT ERRED IN NARROWLY LIMITING ITS REVIEW TO THE RESOLUTIONS AND CRITERION "e" WITHOUT LOOKING AT THE SUBSTANTIAL EVIDENCE IN THE RECORD THAT SUPPORTS THE COUNCIL'S DETERMINATION THAT THE STUDY AREA IS IN NEED OF REDEVELOPMENT UNDER CRITERIA "b" THROUGH "e" OF N.J.S.A. 40A:12A-5.

POINT IV THE TRIAL COURT IMPROPERLY SUBSTITUTED ITS PERSONAL OBSERVATIONS OBTAINED DURING A SITE VISIT TO THE STUDY AREA FOR THE DETERMINATION OF THE COUNCIL.

POINT V THE TRIAL COURT ERRED IN FAILING TO FIND THAT THE PRIOR INCLUSION OF THE CD DEVELOPMENT PROPERTY, AND THE STUDY AREA AS A WHOLE, IN THE URBAN RENEWAL PLAN REMAINS VALID AND IN EFFECT.

After considering these contentions in light of the record, the briefs, oral argument, and the applicable law, we are satisfied they are without sufficient merit to warrant extended discussion in a written opinion. R. 2:11-3(e)(1)(E). We affirm substantially for the reasons stated by Judge F. Michael Giles in his comprehensive oral decision on May 23, 2008, with only the following comments.

In Gallenthin, the Court concluded that an "interpretation of N.J.S.A. 40A:12A-5(e), which would equate 'blighted areas' to areas that are not operated in an optimal manner, cannot be reconciled with [Article VIII, Section 3, Paragraph 1] of the New Jersey Constitution." 191 N.J. at 365. Therefore, to give effect to the Legislature's apparent intent and to preserve the constitutionality of N.J.S.A. 40A:12A-5(e), the Court interpreted this subsection to apply "only to areas that, as a whole, are stagnant and unproductive because of issues of title, diversity of ownership, or similar conditions." Id. at 348. In this case, neither the Barksdale report, the Planning Board, nor the City Council identified any "issues of title, diversity of ownership, or other similar conditions" that would justify the inclusion of plaintiff's property in the redevelopment area. As noted in the Barksdale report, which the Planning Board and City Council both relied on, plaintiff's property was "stagnant and not fully productive." However, as interpreted in Gallenthin, N.J.S.A. 40A:12A-5(e) does not authorize the classification of property as in need of redevelopment simply because the property is not utilized "in an optimal manner." Id. at 365. Therefore, Judge Giles correctly concluded that the inclusion of plaintiff's property in the redevelopment area was not authorized by the LRHL.

Affirmed.

20100826

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