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Bill gives lift to urban development projects

Builders applaud measure, but lack of clarity is cause for concern

Urban investment stands to get a boost from a bill that seeks to extend the approval period for projects in New Jersey’s more heavily developed areas, according to the state’s real estate players.

TN3While municipalities also support the legislation, towns and other stakeholders are concerned certain terminology in the bill could create unintended consequences for development in the state.

Historically, under the state’s Municipal Land Use Law, general development plan approvals — which allow zoning and other conditions to remain unchanged for up to 20 years from when a developer receives final approval of a project’s first phase — were limited to projects on parcels of land in excess of 100 acres.

But S-483 — which passed both legislative houses this month and awaits the governor’s signature — would expand general development plan approvals to projects on sites of less than 100 acres, but with at least 150,000 square feet of nonresidential space or 100 residential units. The legislation would apply to parcels in so-called smart-growth areas, which include “the urban core, the older suburban ring, developed suburbs and developed centers of the state,” according to the bill.

The legislation, also known as the Vertical GDP bill, “gives the same long-term vesting to a project that is ‘large’ not because of its acreage, but because of its equivalent square footage, vertically,” said state Sen. Raymond J. Lesniak (D-Union). It “promotes compact development over sprawl.”

Carl Goldberg, a principal at Roseland Property Co., a real estate development company in the Short Hills section of Millburn, called the bill “a very significant and dramatic step” that calls for modifying the Municipal Land Use Law to reflect current development patterns, which support urban investment. Urban developers typically are working on sites far smaller than 100 acres, he said.

The bill “is a way to promote economic development and jobs,” added Michael Cerra, senior legislative analyst at the New Jersey League of Municipalities, in Trenton. “It also brings some underutilized properties back online as a tax ratable.”

Without a general development plan, preliminary and final site approvals for a project on a site of fewer than 100 acres typically are protected for three years from any zoning or other changes, said Allen Magrini, senior vice president of land use and development at Hartz Mountain Industries Inc., a Secaucus-based real estate developer. If a project is not completed within that time frame, and the zoning on the property changes, a developer is required to seek a use variance from the municipality in order to retain the project’s original use. That costs time and money, he said.

Having a longer approval period “gives you more certainty to commence a big project, knowing you have the time frame to complete it,” he said.
“To have your approvals established for longer than three years is very important, especially when you get to an economy like this one,” he said. “There are fewer tenants in the market right now.” In trying to market and lease a project, “you can burn up a significant amount of your approval time.”

As an economic development tool, the legislation “is certainly on par” with the Urban Transit Hub tax credit and the Economic Redevelopment Growth grant programs, both of which have attracted significant interest from developers, according to Goldberg, who said the bill would influence Roseland’s future property acquisitions.
While expanding the availability of general development approvals was less important than other issues — affordable housing being chief among them — “it’s something we definitely now will put into play, Magrini said.
And the bill will bolster development in the state by increasing the availability of real estate financing, Goldberg said. “The bottleneck in development activity is from the lack of liquidity in the market,” he said. “Anything that creates more certainty gives financial providers more comfort, and will be a very effective catalyst for new urban development.”

While Cerra was pleased that the length of the approval period was left up to town planning boards, he found the use of “smart-growth area” in the bill problematic. Not all smart-growth areas, as defined by the legislation, are appropriate for development, he said, for reasons such as proximity to a local water supply; meanwhile, certain rural areas may have isolated centers appropriate for this kind of development. The bill “could be used or manipulated someday for inappropriate growth,” Cerra said.
Under the legislation, “smart-growth areas” could potentially include 80 percent of state’s land, including environmentally sensitive areas, according to the New Jersey chapter of the Sierra Club.

A better approach would have been to expand the availability of general development plan approvals to towns that meet specific criteria, such as having a certain amount of existing infrastructure or development, Cerra said.
“In retrospect, I regret limiting vertical GDPs to only smart-growth areas,” Lesniak said. “The fact is, we should encourage developers to choose compact, vertical development over horizontal sprawl anywhere in the state that’s not a preservation area.”

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