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Jersey City Redevelopment Agency v. Kerrigan

A-3483-08T2 (N.J. Super. App. Div. 2011) (Unpublished)

REDEVELOPMENT; CONDEMNATION — In a condemnation, a court has the right to apply a standard of reasonable probability as to whether proffered evidence will go before a jury and whether the probative value of such evidence is outweighed by the significant danger of confusing the jury.

A redevelopment agency filed a condemnation complaint and a declaration of taking. The question of the value of the property was referred to condemnation commissioners, but both the agency and the lot owner rejected the commissioners’ valuation and demanded a trial de novo. The property was located near the inland end of a tidewater basin with frontage on the basin along the width of the property. When the complaint was filed, the basin was used as a marina. Access by land was through a twenty-foot-wide easement over the property to its west. In turn, the property was burdened by a license and easement agreement giving a neighbor access over the lot to a second property on the northern boundary. The neighbor and the lot owner had not yet agreed on the location of that access route. The lot was near a light-rail station stop, a hospital, a parking area for ferry users, and a marina. Views at ground level provided visuals of some prominent landmarks.

At the time, the lot was being used by a drilling company as a staging area and the neighboring lots were used for a scrap metal recycling business. As a consequence of the neighbor’s business, there was truck traffic to and from the neighbor’s properties and there were mounds of scrap on the properties, some as high as forty feet. Although the area was zoned for industrial use, the municipality’s master plan had contemplated residential use in the area and the industrial designation did not preclude residential use. Also, it had adopted a compliant zoning change.

Prior to trial, the lower court held that the property should be valued as if the zoning ordinance previously adopted had applied. A revised zoning ordinance designated this for a high-density residential use, allowing ninety residential units per acre. Under those terms, the lot could hold 307 residential units plus any additional units permitted for recreational space reserved in an otherwise compliant site plan. Prior to the zoning revision, the municipality had declared the area as blighted, but the municipality had not taken any action to address the blight, and the lower court found that the new zoning ordinance, which did not purport to provide or implement a redevelopment plan, had nothing to do with the blight declaration. In fact, the municipality waited until much later to address the blight by creating a redevelopment area that included the lot. Later, the master plan was revised to recommend mixed use development and the municipality adopted a new zoning ordinance recognizing the predominance of redevelopment plans in redevelopment zones. In other areas of the municipality, the new ordinance limited high-density residential zones to areas of existing high-density development. Where high-density residential zones were continued, the ordinance increased permissible density to 150 units per acre. If that zoning applied to the lot, 510 units would have been permitted.

The redevelopment agency, at trial, pointed out obstacles to residential development that diminished the value of the lot for that use, such as the absence of a link to the sewer line, the presence of a water supply not acceptable for residential use; the need to resolve a question of essential riparian rights; its location in a flood zone making it inappropriate for the underground parking needed for a high-density residential structure; the noise and visual impact of the continuing scrap metal recycling operation on the adjacent properties; the need to build and maintain a bulkhead; and a diminished demand for housing in the municipality. An agency expert valued the lot at a figure that included an adjustment for a ten-year period during which any developer would have to face the presence of an adjacent industrial scrap metal recycling operation until when it was discontinued, as well as obstacles related to permits for access and sewerage. The lot owner took the position that the highest and best use for its lot was a two-tower, 420-unit residential structure on top of an underground parking area, with recreation areas on the tower’s roofs. It pointed to the benefits that would make this site attractive to a developer: the views; marina access; proximity to a ferry, light rail line, other landmarks, and the amenities of the local historic district; and housing development that had not peaked.

The 420-unit structure, though attractive to a developer, did not yet meet the density and lot coverage restrictions for the zone. So, the lot owner presented expert testimony relevant to the risk of obtaining necessary zoning approvals. The questions dealt with approval for 420 units, where 318 units were permitted – 307 units plus eleven more units due to credits for recreational space; and fifty-percent lot coverage, where twenty percent was the maximum allowed. The experts pointed to, and relied on, projects completed and underway in other areas of the municipality at the time, with similar or greater density and lot coverage well in excess of fifty percent. In the opinion of those experts, the trend in development at that time would lead a developer to conclude that approval of this size development was probable. On the assumption that a developer would assume the risks of obtaining approvals and adjusting for the expense and delay of obtaining approvals and overcoming the obstacles, the two experts valued the property significantly higher than did the agency’s expert.

The jurors concluded that a developer would pay an amount between the values proposed by the two sides. On appeal, the redevelopment agency objected to the lower court’s pre-trial determination on applicable zoning, but the Appellate Division affirmed that determination substantially for the reasons stated by the lower court.

The Court then considered whether the lower court erred as to the admissibility of testimony about the likelihood of zoning approval. The lower court had conducted a hearing out of the jury’s presence to assess the adequacy of the evidence of probable approval. The expert planner testified that there was a reasonable probability of approval evident in the municipality’s land use policy, as reflected in the master plans and zoning designations and the high-rise residential developments with lot coverage greater than fifty percent. The planner cited ten instances where the municipality had approved building coverages of seventy percent. Based on this, the lower court reasoned that the standard of reasonable probability had been met, at least to the point where the evidence should go before the jury. The Court found no basis for disturbing that determination. In this case, the evidence was sufficient to permit the jurors to consider the lot owner’s valuations in light of a developer’s willingness to pay more for the property because approval of a development of this density and size was likely.

Further, according to the Court, the lower court did not abuse its discretion when it excluded the redevelopment agency’s evidence of environmental contamination on the properties adjacent to the lot. The lower court concluded that the probative value of the contamination was substantially outweighed by the significant danger of confusing the jury. The Court found the lower court’s conclusion not so wide off the mark as to amount to an abuse of discretion warranting intervention.

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