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The redevelopment process is defined and governed by constitutional, statutory, and regulatory requirements. These requirements are in turn molded by court decisions that affect the way the laws are applied. An understanding of these statutory and legal imperatives is critical to effectively undertake redevelopment and to minimize the potential for legal challenges.
Constitutional Provisions
A community's authority to pursue redevelopment is based on the New Jersey State Constitution and laws that have been enacted by the state legislature in accordance with the state's constitution. As specified in Article VIII, Section III, paragraph 1 of New Jersey's 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. Municipal, public or private corporations may be authorized by law to undertake such clearance, replanning, development or redevelopment; and improvements made for these purposes and uses, or for any of them, may be exempted from taxation, in whole or in part, for a limited period of time during which the profits of and dividends payable by any private corporation enjoying such tax exemption shall be limited by law. The conditions of use, ownership, management and control of such improvements shall be regulated by law.This is the fundamental constitutional concept from which all redevelopment powers stem. The paragraph does three key things. It:
Establishes redevelopment as a public purpose;Some fundamental components of the redevelopment process would not be permitted without this constitutional declaration that redevelopment is a public purpose. Most significantly, public entities would not have the ability to acquire private property through eminent domain and convey that property to another private or public party to undertake redevelopment. Eminent domain may be invoked for other public purposes (e.g., acquisition of property for roads, infrastructure, schools, parks, and other public facilities). But what distinguishes its use in redevelopment scenarios is that allows a government to acquire private privately owned property and then to convey the property to another private entity for redevelopment.
Permits the acquisition of private property and conveyance of such property to a public or private redeveloper for redevelopment; and
Allows the granting of tax exemptions and abatements to private corporations or partnerships for the purpose of redevelopment, as long as the profits are limited by law.
History and Evolution of Redevelopment Laws
Over the last five decades, New Jersey has a adopted a series of laws and programs that were intended to address the problems of urban decay and disinvestment commonly known as "blight." Early state redevelopment and housing laws were based on the premise that the clearance and redevelopment of blight and slums were a critical public need. Spurred by large federal grant programs, New Jersey adopted a series of laws, including the former Redevelopment Agencies Law, Blighted Areas Act, and Housing Authorities Law, which formed the basis of the old federally funded and sponsored urban renewal projects in the 1950s and 1960s and established the basic framework under which redevelopment is undertaken today.
By the 1970s, however, the federal role in funding such activities began to change, along with a growing disenchantment concerning the effectiveness of the federal housing and urban renewal programs and increasing concerns about their the long-term impact on communities. This new thinking provided an impetus for the enactment of the Federal Housing and Community Development Act of 1974, which eliminated many of the older federal urban renewal grant programs, as well as subsequent federal legislation that reduced the role of the federal government local and moved public action away from large-scale urban renewal programs toward a greater reliance on a more strategic approach using public-private partnerships.
At the same time, New Jersey was saddled with a disparate collection of redevelopment and housing laws that were enacted piecemeal in response to each of the various federal grant programs that were put in place over the years. The result was a collection of laws that were often confusing and redundant-sometimes referencing federal programs that no longer existed.
Current Redevelopment Laws
Local Redevelopment and Housing LawKey Court Decisions
In 1992, a new statute was enacted that revised and consolidated New Jersey's local redevelopment and housing laws. The Local Redevelopment and Housing Law (LRHL) P.L. 1992, c. 79 (N.J.S.A. 40A:12A-1 et seq.) rescinded prior redevelopment statutes and replaced them with a single law governing local redevelopment activities in New Jersey. The LRHL was the culmination of a three-bill legislative package that also included the Long Term Tax Exemption Law, P.L. 1991, c. 431, (N.J.S.A. 40A:20-1 et seq.) and the FiveYear Exemption Law, P.L. 1991, c. 441, (N.J.S.A. 40A:21-1 et seq.). The latter two laws give municipalities the ability to provide tax abatements and exemptions for redevelopment and rehabilitation.The LRHL provides municipalities with the authority to designate "areas in need of redevelopment" (defined as "blighted" areas under the old statutes), formulate and adopt redevelopment plans for these areas, and undertake redevelopment projects. The LRHL defines the roles and responsibilities of the governing body, planning board, and redevelopment entity in the redevelopment process. It establishes the procedural steps and criteria by which an area is designated in need or redevelopment or in need of rehabilitation, and it outlines the authority and powers provided to municipalities that have designated an area in need of rehabilitation or redevelopment and have adopted a redevelopment plan.Tax Exemption and Abatement Laws
The law also governs the activities of redevelopment entities, the public bodies responsible for implementing redevelopment plans and administering redevelopment projects. Redevelopment entities may include redevelopment agencies, local housing authorities, county improvement authorities, and the New Jersey Redevelopment Authority. Other provisions define the content of a redeveloper agreement, the procedures for establishing a redevelopment agency and housing authority, and training requirements for officials and commissioners of such entities.
The Long Term Tax Exemption Law gives municipalities the power to grant tax exemptions to private entities undertaking redevelopment and housing projects. These exemptions may be for a term of up to 30 years from the completion of the project or 35 years from the execution of the tax exemption agreement. In turn, the redeveloper pays an annual service charge, commonly known as a payment in lieu of taxation (PILOT) to the municipality. The tax exemption law includes formulas for the calculation of the PILOT. The law also includes provisions for the phasing in of the PILOT to full taxation at the end of the exemption period. In addition, the law:Authorizes the granting of tax exemptions to private corporations whose purpose is the undertaking of local redevelopment or housing projects and whose dividends or profits are limited;The second tax exemption statute is the Five Year Exemption and Abatement Law, which provides municipalities with the authority to grant shortterm tax abatements and exemptions for home improvements, commercial and industrial development, and the improvement or conversion of multiple dwellings. Five-year abatements and exemptions may be granted in areas designated "in need of rehabilitation" pursuant to the provisions of the LRHL.
Requires that a project receiving a tax exemption be undertaken in accordance with an adopted redevelopment plan or that it be linked to the implementation of the redevelopment plan. (Exemptions may be granted for projects to relocate residents displaced by redevelopment.); Provides the municipality with the ability to negotiate a financial agreement on terms favorable to the municipality;
Allows municipalities flexibility when negotiating a tax-exemption agreement, based the findings of a cost/benefit analysis of the project, the importance of the project in advancing the goals of the redevelopment plan, and the weight the tax exemption carries in determining locational decisions by probable tenants or occupants of the project.
Other Statutes
In addition to the LRHL and tax-exemption statutes described above, there are a number of other laws that have a relationship to or govern some aspect of the redevelopment process. These include:Eminent Domain Act of 1971, P.L.1971, c.361 (N.J.S.A. 20:3-1 et seq.). This law describes the procedures by which property can be acquired by eminent domain.A New Approach
New Jersey Relocation Assistance Law, P.L. 1967, c.79, (N.J.S.A. 52:31B-1 et seq.) and Relocation Assistance Act, P.L. 1971, c.362, (N.J.S.A. 20:4-1 et seq.). These laws, and associated regulations adopted by the New Jersey Department of Community Affairs (DCA), govern the procedures by which municipalities and public agencies assist residents and businesses displaced by redevelopment plans and projects.
County Improvement Authorities Law, P.L. 1960, c183 (N.J.S.A. 40:37A-44 et seq.). This law permits the designation of a county improvement authority as a redevelopment entity. County improvement authorities also may help finance and otherwise support municipal redevelopment efforts.
Brownfield and Contaminated Site Remediation Act (BCSRA), P.L. 1997, c. 278 (N.J.S.A. 58:10B-1 et seq.), Industrial Site Recovery Act, P.L. 1993, c.139 (N.J.S.A. 13:1K-6 et seq.), and other related brownfield statutes form the basis of brownfield clean up and redevelopment laws.
New Jersey Redevelopment Authority Act, P.L. 1996, c. 62 (N.J.S.A. 55:19-20 et seq.). Under the provisions of this act, the New Jersey Redevelopment Authority (NJRA) may be the designated redevelopment entity for a redevelopment plan-implementation project. Also, the authority provides a wide range of technical and financial assistance to local redevelopment initiatives.
Fair Housing Act, P.L. 1985, c.222 (N.J.S.A. 52:27D-301). This act requires local governments to consider their affordable housing needs by including a housing element and fair share plan within their community's master plan. While not directly a redevelopment statute, the LRHL specifies that redevelopment plans may include provisions for affordable housing consistent with the housing element and fair share plan of a municipal master plan.
Municipal Land Use Law (MLUL), P.L. 1975, c.291 (N.J.S.A. 40:55D-1 et seq.) Governs the procedures under which municipalities regulate land use planning and development in their communities. The MLUL requires the municipal planning board to review the status.
The State Planning Act, P.L. 1985, c.398 (N.J.S.A. 52:18A-196 et seq.). Establishes statewide planning policies and principles for New Jersey. Includes recommendations for the use of redevelopment as a means to implement the smart growth objectives in the State Development and Redevelopment Plan (SDRP). Pursuant to the LRHL, a redevelopment plan must describe its relationship to the SDRP.
The new redevelopment and tax exemption laws were enacted to provide a clearer statutory framework within which the development and implementation of redevelopment and housing plans and programs could effectively take place. The LRHL has done much to end the confusion and uncertainty created by the previous statutes and has resulted in a more efficient and effective exercise of local redevelopment powers by municipalities. The LHRL's flexibility has encouraged many municipalities to use redevelopment to revitalize their communities.
The LRHL also was designed to ensure that the redevelopment planning process is effectively integrated into the local comprehensive planning process. The LHRL requires that adopted redevelopment plans clearly specify the plan's relationship to the municipality's zoning ordinance and master plan.
It is important to redevelopment is an effective way to implement the smart growth planning strategies identified in the New Jersey State Development and Redevelopment Plan (SDRP). Given the SDRP's focus on redevelopment and infill development in developed communities, many types of communities-not only the state's urban centers-are being encouraged to make use redevelopment. The LRHL provides these municipalities with clear and specific guidelines for undertaking redevelopment and a single reference source for identifying available redevelopment powers.
As is the case with any statute, the courts ultimately interpret the redevelopment laws. Consequently, a number of key court cases have further refined the way the redevelopment process is undertaken in New Jersey. Knowledge of these cases is essential for municipalities and professionals using redevelopment, particularly for those communities using redevelopment for the first time.
It is also important to remember that redevelopment law is constantly evolving as new statutes are enacted, existing statutes are amended, and new court opinions are issued. Therefore, it is recommended that municipalities consult attorneys and other professionals prior to engaging in any redevelopment activity.