Cities And Towns – Tools For Redevelopment

Along with the unprecedented economic growth, development and prosperity New Jersey has experienced over the past decade, broad-based initiatives have been advanced at many levels to foster redevelopment in urban areas and suburban downtowns. In fact, it is these areas that will likely experience the next major round of building in New Jersey.

This Article highlights some of the factors that are encouraging such redevelopment. The discussion is followed by an examination of some of the tools available to local governments to assist and implement such redevelopment.

A new State Development and Redevelopment Plan is near adoption. The first was created in 1992. The purpose of the State Plan is to establish a vision and a plan for the future of New Jersey. The intent is to manage and shape new growth and encourage redevelopment in ways that would revive cities; preserve the environment, open spaces and natural resources; provide affordable housing; and deal with increasing traffic congestion.

The new Plan has included a process called "cross-acceptance," which provides municipalities and counties with direct input into the policies adopted by the Plan, thus, ensuring their participation. The Plan delineates five planning areas with growth to be directed to an urban and suburban planning area. By directing new growth and redevelopment into compact centers, the sprawl will be controlled and the Plan's policy goals achieved.

The first State Plan had merely been a "useful guide to officials" in establishing planning and investment decisions, but had no regulatory effect. With the implementation of the new State Plan, state agencies have proposed regulations that will require development to be consistent with the Plan. If such regulations withstand legal challenges testing their legislative authority, the Plan will become the main force directing growth in the State. In any form, however, the Plan will certainly have a significant impact on the location of future development. Municipalities designated as some form of center, be it urban, regional, town, village, or hamlet; or municipalities that have their plans endorsed by the State Planning Commission, will be entitled to greater priority to receive funding, permit review and technical assistance from state agencies.

The robust economy, a growing distaste for suburban sprawl, and increasing demands on people's time, presents a parallel force that is fueling a renewed focus on urban and suburban downtown. Retailers are showing a broad and growing interest in downtowns that has not been seen since before World War II. Attitudes toward new development and redevelopment in urban and traditional suburban areas are increasingly more positive. There is an air of nostalgia for the baby boom generation, the generation which currently leads the State and Nation, because only traditional urban and suburban downtowns can bring a true sense of the oft used term "communities of place." Many major first class builders are returning to the cities and towns of New Jersey at an unprecedented level. Retail, residential and office-space construction is booming in towns and cities such as Newark, Red Bank, Jersey City, Morristown, Long Branch, at a level not seen in the last fifty years.

In addition to the State Plan providing statewide planning objectives for use by municipal zoning authorities, there are other tools available to municipalities to facilitate development and redevelopment in urban areas. These include Redevelopment Agencies, Parking Authorities and Special Improvement Districts.

The purpose of the Local Redevelopment and Housing Law is to codify, simplify and concentrate various state laws regarding local redevelopment and housing in an effort to promote the redevelopment and construction of new housing in areas of the state in need of rehabilitation. The law allows a municipal governing body to designate areas within its boundaries as redevelopment or rehabilitation areas. The pejorative term "blighted" is no longer part of the Redevelopment Act. Once an area is designated, the municipality may then promulgate a redevelopment plan, select a redeveloper and enter into a redevelopment agreement. Activities undertaken pursuant to the Local Redevelopment and Housing Law have continuously received extraordinary deference and broad flexibility by the Courts. Additionally, redevelopment projects may also qualify for favorable tax treatments, such as a phase-in of taxes, as well as payments in lieu of taxes to municipalities, which are typically less than real property taxes.

Most significantly, projects undertaken pursuant to the Local Redevelopment and Housing Law are not subject to the public bidding statutes which generally require municipalities to solicit competitive bids before entering into contracts or selling or leasing municipal lands. Thus, redevelopment agencies may proceed with redevelopment projects upon negotiated terms and conditions. A request for qualifications may be used but is not required.

Parking is crucial to any downtown area and particularly crucial to redevelopment efforts. A key tool in the revitalization of urban areas is a Parking Authority. A Parking Authority relieves the governing body from a broad array of concerns, such as police protection, fire protection, taxes, recreation, business, roads, sewers, infrastructure, and capital improvements, and replaces it with a board focused exclusively on parking.

Parking authorities have been granted a special legislative status pursuant to the Parking Authorities Law. Parking Authorities may lease or sell publicly owned lands to private entities for the construction and operation of public off-street parking facilities which will serve business, commercial and other uses. Such projects may include business, commercial, residential, and office elements. Additionally, a Parking Authority is able to issue debt that does not count toward any constitutional or statutory debt limitation or restriction imposed on a municipality and relies on user fees rather than real property taxes for support.

Special Improvement Districts (SID)

SIDs are self-help programs formed by a partnership between municipalities and local businesses. Funding for the SID is derived from a special assessment imposed upon properties within a designated commercial area. Residential properties are usually excluded from the SID assessment. Given the effectiveness of SIDs throughout the State, funding is often augmented by State and Federal grants, loans, and corporate contributions. Projects often include capital improvements such as street lighting, sidewalks, increased or improved parking, landscaping and other streetscape projects. Other less tangible projects are also undertaken, such as programs to promote and enhance the perception, reality and reputation of downtown areas, as well as business recruitment and retention. Perhaps, most importantly, the establishment of a SID results in focused management of a downtown area with improvements and programs tailored to the area's specific needs. The presence of a SID often demonstrates a vision and commitment on the part of local merchants and the municipality to improve the business community and climate.

SIDs function in a manner comparable to the management of a shopping center, but typically on a more democratic basis. In a shopping center, the common area maintenance charge is imposed contractually upon all tenants to fund common programs and improvements. In a Special Improvement District, the special assessment is imposed on all commercial properties within the district to support programs formulated by the business community itself.

The New Jersey Urban Enterprise Program is another incentive for development in urban areas. The program was created to stimulate economic development and job creation in designated zones. Businesses located in the zones are eligible for benefits such as reduced sales tax, sales tax exemptions for building materials, equipment and supplies invested or used at certified sites, and subsidized unemployment insurance costs. In addition, consumers in such areas pay only three percent sales tax as compared to the regular six percent state sales tax. The cumulative effect of these benefits is they provide a major incentive for businesses to locate in the urban enterprise zones.

The next wave of development and redevelopment is already taking place in the cities, suburban centers and other downtown areas of New Jersey. This trend is strong and, absent a change in overall economic conditions, is likely to continue and expand well into the future.