Capitol Connection

In-Sites
(The Real Properties Group)
March 8, 2004

NEW LAWS

Long Term Tax Exemption Law and Local Redevelopment and Housing Law

As reported in the April 24, 2003, edition of In-Sites, S-2402, and prior companion bill A-3404, make a series of procedural and substantive amendments to the "Long Term Tax Exemption Law" and the "Local Redevelopment and Housing Law." These changes respond to technical problems which have arisen in the implementation of these laws and substantive issues raised in a series of recent court decisions. The law authorizes any municipality that has designated a redevelopment area, provides for a tax abatement within the redevelopment area and which adopts a housing element to require, by ordinance, that a redeveloper either set aside affordable residential units or contribute to a housing trust fund established by the municipality as a condition of granting a long term tax abatement. The law requires that the ordinance include detailed guidelines establishing the parameters of this housing contribution and establishes upper limits on the amount that can be assessed for construction of market rate residential, commercial, and industrial development. The law introduces a new criterion which should be considered by municipalities in designating redevelopment areas. Specifically, the law encourages the designation of redevelopment areas that are consistent with smart growth planning principles adopted pursuant to law or regulation. Those redevelopment areas which are situated in areas in which growth is to be encouraged shall require simple notification of the Commissioner of Community Affairs of the designation of the redevelopment area. Designation of a redevelopment area in an area in which the State seeks to discourage growth, however, shall require the approval of the commissioner. The law introduces a limited tax exemption for the value of land in the case of developments which are exclusively housing developments in order to promote the appropriate development of affordable housing in the State. The law requires that municipalities remit to their respective counties 10 percent of annual service charges received pursuant to any financial agreement entered into on or after the effective date of the law. The law clarifies the definition of "excess profits" which are allowable under the law and redefines "allowable profit rate" to mean the greater of 12 percent or 1¼ percent over and above the annual interest percentage rate payable on the entity's initial permanent mortgage financing. The law adds to the expenses which may be factored into the calculation of "net profit" all capital costs determined in accordance with generally accepted accounting principles of any other entity whose revenue is included in the computation of excess profits over the term of the abatement. The law extends those expenses to include all payments of rent and all debt service and removes from the calculation interest which is part of debt service. If the financial agreement so provides, the law authorizes an exclusion from the total project cost of any extraordinary costs incurred by the entity and certified to the chief financial officer of the municipality in order to alleviate blight conditions within the area in need of redevelopment including, but not limited to, demolition costs, costs associated with the relocation or removal of public utility facilities, relocations costs, and the clearing of title to properties within the area in need of redevelopment in order to facilitate redevelopment. The law explicitly provides that nothing shall prohibit the transfer of the ownership interest in the urban renewal entity itself, provided that the transfer, if greater than 10 percent, is approved in the same manner as the financial agreement was approved pursuant to N.J.S.A. 40A:20-9. The law provides that a financial agreement shall not take effect until it is approved by municipal ordinance. Currently such agreements are approved by resolution. The law newly requires that both the ordinance and financial agreement shall be transmitted to the Director of the Division of Local Government Services immediately upon adoption. The law authorizes municipalities to levy an annual administrative fee, not to exceed two percent of the annual service charge and a fee for the processing of a request for the continuation of a tax exemption. The law establishes that delivery by the municipal clerk to the municipal tax assessor of a certified copy of the ordinance of the governing body approving the tax exemption and financial agreement with the urban renewal entity shall constitute the required certification. The tax assessor shall implement an exemption or abatement as of, or retroactive to, the date that the certificate of occupancy is issued and continue to enforce it upon such certification. These tax exemptions are declared to represent long term financial agreements between the municipality and the urban renewal entity and thereby constitute a single continuing exemption from local property taxation for the duration of the financial agreement, under the law. The law provides that the validity of a financial agreement or any exemption granted pursuant thereto may be challenged only by filing an action in lieu of prerogative writ within 45 days from the publication of a notice of the adoption of an ordinance by the governing body granting the exemption and approving the financial agreement. The law ratifies and validates the terms and conditions of any tax exemption approved pursuant to N.J.S.A. 40A:20-1 et seq., including any financial agreement or separate agreement implementing that exemption. This ratification and validation shall also include the structure and methods used to calculate excess profits and annual service charges, including the limitation of revenue, expenses and total project costs, to those of the urban renewal entity, regardless of any other entity, whether affiliated or unaffiliated with the urban renewal entity. The law applies to those tax appeals filed beginning with the 2003 tax year. Finally, the law provides that rent schedules and leases by the urban renewal entity to another entity shall be certified through the annual audit to be at market value rents in order to eliminate "sweetheart" arrangements that might affect the calculation of excess profits. On July 9, 2003, S-2402 became law and was adopted as P.L. 2003, ch. 215.

Real Estate Transaction Funds

A-3176 has been passed as new law. This law allows the use of checks written on the trust account of a licensed New Jersey attorney or a trust or escrow account check from a New Jersey licensed title insurance producer to be considered "collected funds" for the purposes of the statute concerning the disbursement of funds by title insurance producers in real estate transactions. Currently, mortgage lenders are required to deliver a certified, cashiers, tellers or bank check, or arrange for payment in cash or by wire transfer for a mortgage closing. Pursuant to the statute amended by this law, licensed title insurance producers must deposit loan proceeds in a separate trust or escrow account, and may not disburse those funds unless they were received as "cash, electronic wire transfer, or certified cashier's, teller's or bank check, or other collected funds...." As a result of opinions of the Supreme Court Committee on Professional Ethics, disbursements from an attorney's trust account must also be written against collected funds. In a typical real estate closing, the seller at the first closing receives an attorney's trust account check or a title producer's escrow or settlement account check, which the seller then wishes to use at the second closing wherein he is buying. This law thus allows the title insurance company or agent at the second closing to accept the attorney's trust account checks and title producer's trust or escrow checks from the first closing as collected funds. On January 9, 2004, A-3176 became law as P.L.2003, c. 234.

Uniform Construction Code Penalties

A-2651 has been adopted as law. This law will increase the per violation penalty amount permitted under the provisions of the "State Uniform Construction Code Act," from $500 to $2,000, and limit the amount which may be charged in excess of $500 under certain circumstances. The penalty has remained unchanged since 1975. The increased penalties are intended to deter individuals from violating the construction code. The law will allow an enforcing agency to levy penalties in excess of $500 for each violation as follows:

• A penalty not to exceed $1,000 per violation could be levied for failure or refusal to comply with any lawful order, however, if the failure or refusal to comply can be shown to have been committed with the knowledge that it will endanger the life or safety of any person, the penalty could be increased to an amount not exceeding $2,000 per violation;
• A penalty not to exceed $2,000 per violation could be levied for failure to obtain a required permit prior to commencing construction or for allowing a building to be occupied without a certificate of occupancy;
• A penalty not to exceed $2,000 per violation could be levied for failure to comply with a stop construction order;
• A penalty not to exceed $2,000 per violation could be levied for willfully making a false or misleading written statement, or willfully omitting any required information or statement in any application or request for approval.

The law provides that a code violation in an occupied building would be deemed to endanger life or safety of a person if the violation involves fire safety, structural soundness or any malfunctioning of mechanical equipment that would pose a life safety hazard. A code violation in an unoccupied building will be deemed to endanger life or safety of a person only if the violation involves a violation of any code requirement intended to protect the safety of members of the public walking by the property. On January 9, 2004, A-2651 was adopted as P.L.2003, c. 228.

Site Remediation and Redevelopment

A-2585, as adopted into law, will make changes to the laws concerning site remediation. The law will require the Department of Environmental Protection to complete its investigation and mapping of the States large areas of historic fill within nine months of the law's effective date. The investigation and mapping of the areas in the State in which large areas of historic fill exist was required to be performed in the "Brownfield and Contaminated Site Remediation Act," N.J.S.A. 58:10B-1.1. et seq. At that time, $2 million was appropriated for the historic fill study from the "1996 Environmental Cleanup Fund" created by the "Port of New Jersey Revitalization, Dredging, Environmental Cleanup, Lake Restoration, and Delaware Bay Area Economic Development Bond Act of 1996," P.L.1996, c.70. The law also requires that the department enter data concerning the contamination of an aquifer in the geographical information system, that is submitted in digital form by a person performing a remediation and that it be made available to the public within 90 days of the department's receipt of the information. The law will decrease the time provided for the department to review and respond to a request to decrease a remediation funding source from 90 to 45 days and would authorize a self-guarantee for the remediation funding source for special purpose entities by allowing the consideration of a statement of assets and liabilities certified by a certified public accountant to constitute satisfactory documentation of a person's ability to self-guarantee. The law will make changes to the redevelopment agreement program. The law will authorize use of sales tax generated from the purchase of materials used for the remediation or redevelopment at the site in the reimbursement of remediation costs to the developer. The proposed amendments would also require that, if the redevelopment of the property is performed in phases, the redevelopment agreement provide for payments to reimburse the developer to commence prior to the completion of the redevelopment at the entire site. The redevelopment agreement must provide that payments to reimburse the developer be in the same percentages as the occupancy rate of that portion of the site for which the developer has received a No Further Action Letter, and on which new residential construction is completed or a place of business is located, that has generated new tax revenues. Further, the law will clarify the liability of a person who is not a responsible party pursuant to the "Spill Compensation and Control Act" and who voluntarily remediates a contaminated site or relies on a previously issued no further action letter issued by the department for a site, for contamination that emanates from the site covered by the no further action letter. The law clarifies that the person would not be liable for the subsequent discovery of a hazardous substance that has emanated from the property covered by the No Further Action Letter even if the hazardous substance is no longer on the site covered by the No Further Action Letter. Finally, the law provides that to be eligible for the existing protection from third party suits, a person who voluntarily acquires contaminated property may have 30 days after the expiration of the period or periods allowed for the right of redemption pursuant to tax foreclosure law, to agree in writing to provide access to the State for remediation and related activities. Current law requires the person to agree in writing within 10 days after acquisition of the property. On January 9, 2003, this bill became law as P.L.2003, c. 224.

Municipal Power Over Abandoned Properties

A499, designated as A-2543 in the prior session, extends the authority of municipalities to determine that abandoned properties are a nuisance and require that the nuisance conditions be abated through immediate demolition, stabilization or repair. The bill establishes a standard according to which certain properties may be determined to be abandoned. Specifically, a property which may be determined to be abandoned under the bill would be one which has not been legally occupied for a period of six months and which meets one of the following additional criteria: (1) the property is in need of rehabilitation and has not been rehabilitated during the period it has been unoccupied; (2) construction has been initiated on the property in the past, but not for that six month period; (3) the property has been in tax arrearage for at least one installment period; or (4) the property has been determined to be a nuisance by the public officer. A public officer who deems a property to be abandoned is obligated under the bill to follow those notification procedures which are currently required when a property is determined to be a nuisance under N.J.S.A. 40:48-2.3 et seq. The bill enumerates the various circumstances under which a property may be determined to be a nuisance, which include a finding that the property is unfit for human habitation under N.J.S.A. 40:48-2.3 and a series of deleterious conditions which render the property a fire hazard or potential health and safety hazard. The bill establishes two exceptions from this determination of abandonment which relate to the purchase or taking assignment of a tax sale certificate by an entity other than the municipality and the vacancy of a property used on a seasonal basis. The bill establishes a procedure which follows from a municipal finding that an abandoned property is in need of rehabilitation and, if the owner or any mortgage holder or lien holder has failed to take action to further the rehabilitation of the property, culminating in the acquisition of possession of the property by the municipality, mortgage holder or lien holder. This process is initiated with the filing by the municipality of a complaint in Superior Court seeking an order granting it possession of the property for the purpose of pursuing its rehabilitation and reuse. This complaint shall include documentation that the property is on the abandoned property list or a certification by the public officer that the property is abandoned. The complaint shall also include a statement by an individual holding appropriate professional qualifications attesting to the reasons that the building should be rehabilitated rather than demolished. The bill requires the municipality to provide at least 30 days' notice to the owner prior to filing the complaint. An owner may defend against the complaint by submitting a plan for the rehabilitation and reuse of the property which is the subject of the complaint and by posting a bond equal to 125 percent of the amount determined by the public officer to represent the projected cost of rehabilitation. The bill sets forth the required contents of such a plan, which includes a financial feasibility analysis, a budget and timetable for rehabilitating the property, and documentation of the qualifications of the individuals and firms that will effectuate the rehabilitation. The court shall approve any plan that is realistic and likely to result in the expeditious rehabilitation and reuse of the property and, correspondingly, disapprove any plan which is unrealistic. If the court approves the owner's plan, it may appoint the public officer to act as monitor of the owner's compliance. If the owner fails to carry out any step in the approved plan, the public officer shall notify the court, which may order the owner to forfeit the bond posted as part of the plan, grant the entity possession of the property, and authorize the municipality to use the proceeds of the bond for rehabilitation of the property. The owner shall provide quarterly reports to the municipality and the court on the owner's progress toward rehabilitation and reuse of the property. If an owner fails to successfully defend against a complaint, a mortgage holder or lien holder may seek to be designated in possession of the property by submitting a plan and posting a bond meeting the same conditions described above. If no mortgage holder or lienholder meets these conditions, the municipality shall submit a plan, which shall designate that entity which shall implement the plan. This entity may be the municipality or a qualified rehabilitation entity, defined in the bill as an entity organized or authorized to do business under New Jersey law, which shall have as one of its purposes the construction or rehabilitation or residential or non-residential buildings, the provision of affordable housing and the restoration of abandoned property, among others. If the municipality is granted possession of a property under this bill, the municipality shall be deemed to have an ownership interest in the property for the purpose of filing plans with public agencies and any State program of grants or loans. Where the municipality borrows funds for the express purpose of rehabilitating the property, the court may authorize the municipality to grant a lien or security interest with priority over all other liens or mortgages other than municipal liens. The bill clarifies that, notwithstanding the granting of possession by the court to a municipality of a property determined to be abandoned, the owner shall continue to be responsible for all taxes or other municipal liens and charges, or mortgages or liens to any party, incurred on the property, whether those taxes, charges or liens are incurred before or after the granting of possession. Nor shall the owner be relieved of any operating or maintenance expense associated with the property. Similarly, although the municipality is required to maintain, safeguard, and maintain insurance on the property, nothing in the bill shall be deemed to relieve the owner of the property of any civil or criminal liability or any duty imposed by reason of acts or omissions of the owner. The municipality is authorized to seek court approval to assign its rights to another entity, which may be granted under the circumstances enumerated in the bill. The bill sets forth a process whereby an owner may petition for reinstatement of the owner's control and possession of the property, what the petition shall include, and what requirements the court may impose as a condition for reinstating those rights. If the municipality sells the property, the bill sets forth the order of distribution of the proceeds of such a sale. The bill authorizes the public officer, with the approval of the court, to place a lien on the property to cover any costs of the municipality incurred prior to the granting by the court of an order of possession, which may include costs incurred to stabilize or secure the property. The bill authorizes municipalities to hold special tax sales with respect to those properties eligible for tax sale under N.J.S.A. 54:5-19 which are also on an abandoned property list and sets forth procedures governing those special tax sales. In the case of any eminent domain proceeding carried out under N.J.S.A 55:19-56, the bill establishes the parameters for establishing fair market value. The bill amends various provisions of N.J.S.A. 55:19-20 et seq. to bring the existing definition of abandoned property into conformance with the new definition of this term being sought by this bill. Various procedural changes are being proposed regarding how properties are added to the abandoned property list; in addition, interested parties are authorized to request that properties be included on the abandoned property list. Finally, the bill authorizes the voters of any municipality which has not adopted an ordinance to create an abandoned property list the power to initiate such an ordinance through a petition process. Such a petition would require the signature of a number of the legal voters of the municipality equal to five percent of the total votes cast in the last election at which municipal officials were elected, but in no event fewer than 100 legal voters in a municipality with a population of 1,000 persons or more. The prior bill had passed both houses in the previous Legislative session, but was not signed by the Governor. On January 13, 2004, the Assembly introduced A-499, and referred it to the Assembly's Housing and Local Government Committee.

Transfer of Development Rights

A new bill, A-788, referenced as A-2395 in the prior Legislative session, authorizes municipalities to provide for the transfer of development rights within a newly-authorized plan element of the municipal master plan. The bill also authorizes municipalities to provide for development transfer in any zoning ordinance adopted pursuant to a master plan which provides for development transfer. The bill requires a determination by the State Planning Commission that the development transfer element of the master plan is consistent with and serves to implement the State Development and Redevelopment Plan as a precondition for the exercise of municipal zoning power effectuating the development transfer program. Under article 10 of the Municipal Land Use Law, municipalities and counties are authorized to exercise planning functions jointly by establishing regional planning boards and zoning boards of adjustment. By amending the general law to allow for a development transfer plan element, the bill also allows for a regional planning or zoning board to establish such a plan element in the regional master plan. For those municipalities situated in the Pinelands area, the plan element and any implementing land use ordinances being newly allowed for by this bill would still have to be submitted to the Pinelands Commission for a determination of consistency with the programs and standards of the comprehensive management plan, as required by section 11 of the Pinelands Protection Act, N.J.S.A. 13:18A-12. In addition, the bill authorizes municipalities to provide for the purchase, sale, or exchange of the development potential that is available for transfer from a sending zone by the establishment of a development transfer bank. The bill authorizes those development transfer banks to apply for funds which are currently made available for the purchase of development potential under the provisions of P.L.1981, c.276 for the purpose of farmland preservation and agricultural development consistent with the provisions and conditions of that act and N.J.S.A. 4:1C-11 et al. This language is patterned on the provisions of the Burlington County pilot program pursuant to N.J.S.A. 40:55D-113 et al. The bill authorizes these development transfer banks to apply to the State Transfer of Development Rights Bank established pursuant to N.J.S.A. 4:1C-51 for program or planning funds, or both. In order to make clear that these State bank funds are to be made available to municipalities, the bill also amends section 2 of the State Transfer of Development Rights Bank Act, N.J.S.A. 4:1C-50. Although the bill authorizes the creation by municipalities of development transfer banks and the utilization of the State TDR bank to fund municipal TDR programs, the bill does not require municipalities to employ these funding mechanisms as a precondition for exercising the power to undertake a TDR program. On January 13, 2004, the Assembly introduced the bill, and referred it to the Assembly Agriculture and Natural Resources Committee.

Another bill, A-532, which was A-1354 in the prior Legislative session, grants municipalities the authority to provide for a method of transferring development rights, and would make all municipalities that have established a transfer of development rights program eligible to participate in the "State Transfer of Development Rights Bank Act," N.J.S.A. 4:1C-49 et seq. Under the bill, the governing body of any municipality, other than a municipality participating in a transfer program pursuant to N.J.S.A. 40:55D-113 et al., would be permitted to provide for the voluntary transfer of development rights within its jurisdiction by ordinance for the purposes of preserving agricultural areas, environmentally sensitive areas, natural resources, open space, or public recreational areas. The governing bodies of two or more municipalities would also be permitted, by substantially similar ordinances, to provide for a joint program for the voluntary transfer of development rights, including voluntary transfers of development rights between individual landowners. Specifically, an ordinance adopted pursuant to the bill would:

1. specify sending areas from which development potential may be purchased and receiving areas to which development potential may be applied, but development shall not be prohibited in sending areas under such an ordinance unless the development potential is voluntarily sold or transferred by the landowner or the development is otherwise prohibited or restricted pursuant to any other law or ordinance, such as, but not limited to, laws or ordinances protecting steep slopes, wetlands, or other environmental features and
2. provide that the purchase of two acres of development potential in the sending areas shall result in density bonuses in receiving areas of one market rate residential unit .

Also, an ordinance adopted pursuant to the bill may provide that the purchase of two acres of development potential in the sending areas may result in density bonuses in receiving areas of two residential units reserved for moderate income housing or of three residential units reserved for low income housing. In addition, the bill provides that transfers of density within a municipality pursuant to N.J.S.A. 40:55D-65, for the purposes of eligibility for participation under the "State Transfer of Development Rights Bank Act," N.J.S.A. 4:1C-49 et seq., are to be considered a transfer made pursuant to the bill. The bill also permits a municipality to repeal a voluntary transfer of development rights ordinance. Any development potential that has been sold or transferred prior to the date of repeal of the ordinance but not yet utilized as of that date would remain in effect and continue to be utilizable in the former receiving area for 12 years after the date of repeal or for such other period of time greater than 12 years as may be established by the municipality by ordinance. A-532 was introduced in the Assembly on January 13, 2004, and referred to the Assembly Agriculture and Natural Resources Committee.

Site Remediation Tax Credits

A-513, identified as A-2628, and companion bill S-1723 in the prior session, provides a corporation business tax credit for 100% of the costs of the remediation of a contaminated site in the State, for the three year period beginning on or after the January 1 following its enactment. Only persons who are not responsible parties under the Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 et seq. are eligible for the credit. An environmental remediation project shall be eligible for the tax credit if the Director of the Division of Taxation certifies that the project meets these criteria:

1. the remediated site is located within an area designated as a Planning Area 1 (Metropolitan) or Planning Area 2 (Suburban);
2. the subsequent business activity at the remediated site represents new corporation business tax, or sales and use tax or gross income tax receipts;
3. there is a high probability that the estimated new tax receipts deriving from the business activity at the remediated site, within a three year period from the inception of the business activity, will equal or exceed the value of qualified tax credits issued; and
4. if the subsequent business activity at the remediated site is as a result of a relocation of an existing business from within the State of New Jersey, then the tax credit shall be equal to the difference in aggregate value of tax receipts from the corporation business tax, the sales and use tax and the gross income tax generated by the business activity in the privilege period immediately following the business relocation less the aggregate value of tax receipts generated in the privilege period immediately prior to relocation. If the difference in aggregate value is zero or less, then no tax credit will be awarded.

The bill requires the Director of the Division of Taxation in the Department of Treasury to establish a corporation business tax benefit certificate transfer program for three fiscal years which will allow a person who performs a remediation in this State that earns remediation tax credits to surrender those tax benefits for use by other corporation business taxpayers in this State. The bill requires the State Treasurer to establish a performance evaluation review committee that will consider the fiscal and economic impact to the State of this tax credit; the total number of properties redeveloped and their local economic and fiscal impact; any recommendations for legislative or regulatory amendments that would enhance the effectiveness of the program; and a recommendation on whether the program should be continued. The committee shall prepare and submit a report to the Governor and the Legislature on or before November 30, 2007. The prior bill had passed both houses in the previous Legislative session, but was not signed by the Governor. On January 13, 2004, the Assembly introduced A-513, and referred it to the Assembly Environment and Solid Waste Committee.

Short-Term Tax Exemptions

A-461, last reported in the April 24, 2003, edition of In-Sites, referred to as S-2022 and companion bill A-2358 in the prior Legislative session, would permit short-term tax abatements or exemptions to commence immediately following the completion of a project. Under current law the exemption or abatement commences for the next full tax year following the year of completion of the project. The bill would permit exemptions and abatements to commence for the tax year following completion of the project when the municipality and taxpayer enter into a tax agreement. In other cases, however, the granting of the exemption or abatement would relate back to, and become effective as of, the date of completion of the project, or portion of the project which is the object of the exemption or abatement, and continue for five annual periods from that date. This legislation is a response to the case of Seventy Five P-B Corporation v. Town of Phillipsburg, 18 N.J. Tax 71 (Tax Ct. 1999), in which the court held that under the "Five-Year Exemption and Abatement Law," N.J.S.A. 40A:21-1 et seq., the five-year property tax exemption period commences on January 1 next following completion of an improvement. Under the amendments proposed by this bill the five-year exemption or abatement period would commence as of the date of completion of an improvement or project, even when the exemption or abatement is granted at a later time. This bill is consistent with tax abatements granted under subsection a. of N.J.S.A. 54:4-3.144 that take effect upon the issuance of a certificate of occupancy. The bill also provides that no project for which an exemption abatement is granted shall be subject to added or omitted assessments. The bill passed the Senate in the prior session, but only received and was given a Second Reading in the Assembly. On January 13, 2004, the Assembly introduced A-461, and referred it to the Assembly Housing and Local Government Committee.

Municipal Court Fines Converted to Tax Liens

A-962, which was S-2787 in the prior session, would amend N.J.S.A. 40:49-5 to permit the conversion of municipal court fines against an owner of real property for a zoning or property maintenance violation into municipal liens against the property cited in the offense, if not paid in full within 20 days of its imposition, upon the certification of the code enforcement officer who issued the citation. The code enforcement officer shall file a copy of the lien and certification with the municipal tax collector. This lien shall be added to and become and form part of the taxes next to be assessed and levied upon such dwelling or lands, the same to bear interest at the same rate as taxes, and shall be collected and enforced by the same officers and in the same manner as taxes. A-962 was introduced in the Assembly on January 13, 2004, and was referred to the Assembly Housing and Local Government Committee.

Municipal Land Use Law

S-441, known as S-155 in the prior Legislative session, and reported in the May 2, 2002, edition of In-Sites, amends the Municipal Land Use Law, N.J.S.A. 40:55D-1 et seq. ("MLUL"), to require that municipal master plans be consistent with the State Development and Redevelopment Plan adopted pursuant to the State Planning Act, N.J.S.A. 52:18A-196 et seq., and to require a showing that a variance or other relief granted pursuant to section 57 of the Municipal Land Use Law does not substantially impair the intent and the purpose of the State Development and Redevelopment Plan. The bill also amends section 19 of the Municipal Land Use Law to require that the land use plan element, the utility service plan element and the conservation plan element of the master plan show the manner in which the State Development and Redevelopment Plan has been complied with in the development of each of those elements. On January 13, 2004, the Senate introduced S-441, and referred it to the Senate Community and Urban Affairs Committee.

A-1595, reported in the last four editions of In-Sites as S-159 and related bill A-3915 from the prior Legislative session, makes a series of changes to the land use approval process set forth in the "Municipal Land Use Law," N.J.S.A. 40:55D-1 et seq. This bill would require that a copy of any decision on an application for development be filed by the municipal agency in the office of the administrative officer within 10 days of the date of decision. The bill would also require the administrative officer to maintain a record of every decision of the municipal agency and index those decisions according to block and lot number. Additionally, the bill would clarify the procedure for allowing Class IV planning board members to serve as temporary members of the board of adjustment in order to achieve a quorum because of the exclusion of certain members from acting on a matter due to a personal or financial interest therein. Specifically, the bill provides that in the case of an application for a variance or relief, other than a "d variance," Class IV members would be called upon to serve in order of seniority of continuous service to the planning board as under current law. In the case of a "d variance," however, Class IV members of the planning board would be called upon to serve in order of seniority of continuous service to the planning board until there are seven members to act upon the matter without any personal or financial interest therein, whether direct or indirect. This change is necessitated by the current situation in which a quorum required for a "d variance" is four out of seven members while, at the same time, five members are needed in order to approve such a variance. If the minimum number of members is present in order to allow for a quorum, under current law there would not be a sufficient number of votes in order to allow for an affirmative vote on such a variance. Finally, the bill would require any interested party appealing a decision of a municipal agency to the Superior Court or other body having jurisdiction to file a copy of the complaint or appeal with the municipal clerk. This bill, on January 13, 2004, was introduced in the Assembly and referred to that body's Housing and Local Government Committee.

Development Impact Fees

New bill S-352, known as the "Municipal Development Impact Fee Authorization Act," and as S-436 in the prior Legislative session, would allow municipalities to impose an impact fee on developers under certain circumstances. A municipality which imposes an impact fee must do so by an ordinance which sets forth detailed standards and guidelines regarding the definition of a service unit and the specific purposes for which the impact fee revenues may be expended. The impact fee ordinance shall also contain a delineation of service areas for each capital improvement and a fee schedule which clearly sets forth the amount of the fee to be charged for each service unit. Municipalities may impose an impact fee to cover a broad range of expenditure areas, including any transportation improvement necessitated by new development in a county not covered by a transportation development district created pursuant to the "New Jersey Transportation Development District Act of 1989," water treatment and distribution, wastewater treatment and sewerage, flood control and stormwater management, educational facilities, municipal parks and recreation facilities, public safety and related facilities. The bill exempts low and moderate income housing units as defined under N.J.S.A. 52:27D-301 et al. from the assessment of impact fees and prohibits the internal subsidy within inclusionary developments which would otherwise see purchasers of market-priced units absorb the impact fees forgiven on their affordable counterparts. Capital improvements and facility expansion for which an impact fee is imposed must bear a reasonable relationship to needs created by the new development. A municipality may adopt such an impact fee ordinance only if it has previously adopted a capital improvement program and has a valid master plan in place. The capital improvement program referred to here is more detailed than that which is currently authorized under section 20 of the "Municipal Land Use Law," N.J.S.A. 40:55D-29. An impact fee imposed to finance educational facilities shall be based upon a long-term facilities plan approved by the Commissioner of Education. Municipalities which choose not to implement an impact fee ordinance under this bill may continue to prepare the less comprehensive capital improvement program currently authorized under the "Municipal Land Use Law." Similarly, those municipalities may continue to levy a fee for off-tract improvements authorized under N.J.S.A. 40:55D-42. The bill sets forth terms and conditions under which municipalities may assess and hold onto impact fee revenues. Fifty percent of the amount assessed as an impact fee shall be paid prior to the issuance of a construction permit and the remainder, prior to the issuance of the certificate of occupancy. No impact fee imposed by a municipality shall exceed the development's proportional share of the current reasonable cost of constructing the capital improvement or facility expansion for which the fee is being assessed. In no case shall the municipality maintain unexpended impact fees for more than eight years after the date of collection of the final payment for any development, unless construction has already begun on the capital improvement of facility expansion for which the impact fees were collected. The bill provides for an appeal of an impact fee assessment to an administrative law judge under the "Administrative Procedure Act" as a contested case; unlike decisions of contested cases under the APA, however, decisions of an administrative law judge in these cases would be final and would be appealable directly to the Appellate Division of Superior Court. The bill establishes a permanent 15 member Development Impact Fee Review and Advisory Commission (DIFRAC) in the Department of Community Affairs to provide ongoing technical assistance to municipalities in adopting impact fee ordinances and to evaluate the implementation of those ordinances. The first responsibility of DIFRAC shall be the preparation and dissemination of model ordinance. All municipal development impact fee ordinances must be certified by DIFRAC as to their conformity with law and the standards adopted by the commission. On January 13, 2004, the Senate introduced S-352, and was referred to the Senate Community and Urban Affairs Committee.

Applications in Neighboring Municipalities

A-2081, and companion bill S-100 in the Senate, would establish a procedure through which neighboring municipalities could consider issues of inter-municipal impact relevant to applications for development of property near municipal boundary lines. Specifically, the bill provides that whenever an administrative officer receives an application for development of a lot or lots consisting of at least five acres, a portion of which is located within 1,000 feet of an adjoining municipality, the administrative officer must deliver by personal service or certified mail to the clerk of each such adjoining municipality a copy of the complete application for which approval is sought, including maps and documents. The bill would require the administrative officer to deliver a copy of the complete application as soon as practicable after the application for development is deemed complete, but in no event less than 30 days before any scheduled hearing date. The bill would except applications for development which do not require notice or are exempt from site plan review from this delivery requirement. The bill provides an adjoining municipality 20 days from receipt of a copy of a complete application within which to adopt a resolution setting forth areas of inter-municipal concern and to deliver a copy of the resolution to the administrative officer of the municipality where the application was filed. A copy of the resolution would also be mailed by the clerk of the adjoining municipality within 10 days of adoption of the resolution to the applicant and to the county planning board or boards of the county or counties within which the municipalities are located. Within three days after an administrative officer's receipt of a resolution setting forth areas of inter-municipal concern, the administrative officer would be required to deliver, by personal service or certified mail, to the county planning board or boards within which the municipalities are located a copy of the complete application for which approval is sought. The county planning board would be required to forward to the municipality where the application was filed, each adjoining municipality and the applicant a report addressing the areas of inter-municipal concern raised in the resolution of the adjoining municipality within ten days of receipt of the complete application. Areas of inter-municipal concern would be limited to:

1. the general welfare of the adjoining municipality as impacted by traffic, noise, lights, odor, or environmental issues; and
2. conflicts with the master plan or zoning ordinance of the adjoining municipality. The bill provides that once a resolution of an adjoining municipality is received, a municipal agency would be prohibited from approving the application for development without showing that such approval can be granted:

without substantial detriment to the general welfare of the adjoining municipality; and

without substantial impairment to the intent and purpose of the master plan or zoning ordinance of the adjoining municipality.

Additionally, the bill would amend two sections of the Municipal Land Use Law to modify existing notice requirements to adjoining municipalities so that: applicants would be required to provide notice of hearings on applications for development involving property located within 1,000 feet of an adjoining municipality to the clerk of the adjoining municipality; and planning boards would be required to provide notice to the clerk of an adjoining municipality of all hearings on adoption, revision or amendment of a master plan involving property situated within 1,000 feet of the adjoining municipality. Current law requires notification to adjoining municipalities under the above circumstances if involved property is located within 200 feet of the adjoining municipality. S-100 was introduced in the Senate on January 13, 2004, and referred to the Senate Community and Urban Affairs Committee. The Assembly bill has not yet been introduced.

County Planning and Approvals

S-707, designated as S-502 in the prior session, would require county master plans to include recommendations concerning water resource management issues and also would require counties to give consideration to the available supply and quality of water resources in reviewing subdivision and site plan applications. This bill was introduced in the Senate on January 26, 2004, and referred to the Senate Community and Urban Affairs Committee for consideration.

Traffic Performance Objectives

A new bill, A-2123, and companion bill S-729, would authorize municipalities to require as a condition of preliminary site plan or subdivision approval demonstration by the applicant of conformity with traffic performance objectives and measures adopted by the municipality. Only those municipalities which have adopted a circulation plan element of their master plan would be authorized to adopt such objectives and measures under this bill. The objectives shall include, but not be limited to: (1) traffic level of service for all municipal, county or State roads; (2) the number and proportion of conflicts and crashes for particular types of highway or intersections; (3) the modal split for the municipality or affected districts or sites; and (4) person-hours and vehicle-hours of delay on applicable roadway segments. The bill authorizes any municipality which adopts such an ordinance to deny the application for approval of an application for development if the applicant cannot demonstrate compliance with the performance objectives and measures set forth in the ordinance relating to traffic level of service, safety, modal split or delay, as the case may be, and if the municipality deems that this compliance cannot be realized without substantial detriment to the public good and will not substantially impair the intent and purpose of the master plan and its constituent plan elements, notwithstanding the payment of contributions as authorized pursuant to law. The bill also authorizes municipalities to require applicants for approval of an application for development to require future owners or lessees of the site to demonstrate compliance with the ordinance's objectives or with specified travel demand reduction measures to mitigate traffic congestion. A-2123 was introduced in the Assembly on February 9, 2004, and referred to its Housing and Local Government Committee. The Senate introduced S-729 on February 5, 2004, and referred it to its Community and Urban Affairs Committee.

Public Notice

A new bill, A-2041, would augment the existing notice requirements specified in the "Municipal Land Use Law" by requiring applicants to post a sign on the property being developed notifying the general public that an application has been filed with a municipal land use agency. The Township of Warren had adopted an ordinance requiring applicants to post a sign on property proposed to be developed, but that ordinance was found to be invalid by a court decision as exceeding the notice requirements set forth in current law. In response to this setback, the Warren Township Committee adopted a resolution urging the Legislature and the Governor to enact legislation requiring applicants to provide the general public with this additional notice. The Warren Township Committee has indicated its belief that existing development notice requirements, notice by personal service or certified mail to owners of property located within 200 feet of the property being developed and newspaper publication of the notice, are inadequate. Under this bill, an applicant, in addition to other notice requirements contained in the "Municipal Land Use Law," would be required to post a sign, at least three feet by three feet in size, on the property which is the subject matter of the application. The sign would state:

A Development Application has been filed with the___________ (Zoning Board of Adjustment or Planning Board, as appropriate) relative to this property. For more information, call ____________ (Telephone number of designated municipal official) and reference application # ______.

The sign would be posted at least two weeks before the first scheduled public hearing on the application and remain posted for 45 days following the memorialization of any board action. The sign would be posted on all streets upon which the application has property fronting and would have to be clearly visible from the street. The sign would be posted close to the center of the property fronting the street, approximately 30 feet back from the paved portion of the street, if practicable, and be facing the street. The bill would require the applicant, at or before the scheduled public hearing, to file with the board a certification verifying the date the sign was posted, its location on the property and a picture of the sign located on the property. A-2041 was introduced in the Assembly on February 5, 2004, and referred to the Assembly Housing and Local Government Committee.

Timed Growth Ordinances

A-2125 would authorize municipalities to adopt timed-growth ordinances as a land use planning tool enabling them to pace development in their locale in conjunction with whatever capital improvements are needed to infrastructure to support the development. New development places an undeniable burden on older, and often inadequate infrastructure, such as deteriorating water supply facilities and sewer systems, and inadequate road networks, and also creates a need for new capital expenditures such as schools. A timed-growth ordinance adopted by West Windsor Township in Mercer County was invalidated by the court as being in conflict with the MLUL. This bill would authorize a timed-growth ordinance under the MLUL provided that it meets the following criteria:

• A municipality must have adopted a master plan and a capital improvement plan. The capital improvement plan required under the bill includes a requirement to look at a broad range of infrastructure such as sewers, water facilities, roads and schools, and the plan must comport with the State Development and Redevelopment Plan adopted pursuant to N.J.S.A. 52:18A-199.
• A timed-growth ordinance adopted pursuant to the bill must include: (1) the number of timed-growth districts and their geographic location and legal boundaries; (2) the quantity of development which will be timed or paced in each district, and the schedule for that timing; (3) a delineation of service areas for each capital improvement whose upgrading or expansion is necessary to support the development in each district; (4) the ability for a developer to accelerate development rights for a project within a district by the payment of the costs associated with the proposed development based on its estimated effect on each service unit; and (5) a schedule which clearly sets forth the amount to be charged for each service unit in the event development rights are accelerated.
• A timed-growth ordinance may not impinge on any pending plan for development of affordable housing pursuant to the Mount Laurel decisions or the "Fair Housing Act."
• A timed-growth ordinance may not be applied to an individual wishing to develop a single or two-family residence on his own property.
• A timed-growth district created by ordinance shall conform as nearly as practicable with the State Development and Redevelopment Plan adopted pursuant to N.J.S.A. 52:18A-199.
• A timed-growth ordinance may not be applied retroactively to deny approval to any application for development which had received preliminary approval prior to the adoption of such an ordinance.

The delay or prohibition of development within a timed-growth ordinance must be limited in duration to the time remaining before a revision of the master plan is required under the MLUL. The bill also extends the revision cycle of the master plan from six to 10 years, as well as setting the length of time for the revision of a capital improvement plan to 10 years. Under the bill any payment received by a municipality for acceleration of development rights shall be transmitted by the municipality to the appropriate entity or entities in proportion to the service unit costs calculated. Monies received by a school district pursuant the bill must be deposited into the appropriate capital reserve or debt service accounts. The Assembly introduced this bill on February 9, 2004, and referred it to its Housing and Local Government Committee.

Zoning Board of Adjustment Alternates

A-354, and companion bill S-1289, identified as A-3477 in the prior Legislative session, would permit municipal zoning boards of adjustment to have up to four alternate members. The bill provides that in any municipality in which more than two alternates are appointed, the terms of not more than two alternates will expire in any one year. The bill further provides that when a choice is to be made as to which alternate member is to vote, alternate members will vote in the order of their numerical designations. This bill was pre-filed for introduction in the 2004 session pending technical review. As reported, the bill includes changes required by technical review, which has been performed. A-354 was introduced on January 13, 2004, and referred to the Housing and Local Government Committee. On January 22, 2004, the bill was reported out of committee and given its Second Reading. S-1289 was introduced on March 1, 2004, and referred to the Senate Community and Urban Affairs Committee.