January 1, 1900

by Stephen M. Eisdorfer

The State of New Jersey has begun carrying out a 10-year program to prevent the development of one million acres of undeveloped land. In June 1999, the Legislature adopted the Garden State Preservation Trust Act (L. 1999 c.152 ). This act allocates $98 million per year in state tax revenues to a new state agency, the Garden State Open Space Preservation Trust. It also authorizes that agency to issue up to one billion dollars in bonds over the next 10 years.

The Garden State Open Space Preservation Trust is to use this tax and bond revenue to promote preservation of open space and farmland by funding the public acquisition of land and the purchase of conservation and farming easements. The agency has announced its first two rounds of approved preservation projects.

New Public Funds

In addition to this state money, counties and municipalities are authorized, on the approval of the voters, to add up to 1/2 cent per hundred dollars to the local property tax with the funds to be earmarked to preserve open space and farmland. Thus far, 16 counties and 92 municipalities have done so. The State projects that these new taxes will generate an additional $1 billion in local funds over the next ten years. Thus, a total of $3 billion in new public funds will become available for this purpose between now and 2009.

The establishment and liberal funding of these public acquisition programs will necessarily have large consequences for builders in New Jersey. They will place a cloud on the marketability and availability for development of some of the most desirable vacant developable land in the state. By taking scarce prime land off the market, they will push up prices for vacant developable land. They will add new levels of complexity to the process of developing vacant land in this state. They will also require a rethinking of the language for contracts of sale. On the other hand, they create opportunities for astute builders to make favorable deals with municipalities.

Under the new statute, a small amount of the funds ($6 million per year) will be set aside for acquisition of historical sites. Of the remainder, approximately 60 percent will be administered by the DEP preservation of open space and 40 percent by the Department of Agriculture for the preservation of farmland. The State's announced goal is the preservation of 1 million acres (half for conservation and recreation and half for farmland).

DEP Priorities

In seeking to price and acquire land for development purposes, builders need to be aware of state and local land acquisition priorities. The state has not mapped the land it seeks to acquire or even adopted specific criteria. The DEP has, however, identified general priorities for the funds that it will administer. The DEP intends to give its highest priority to preserving lands that are watershed-related properties, waterfront properties, "large and small" properties that link existing preserved lands to create connected "greenways," properties for specialized recreational purposes, and properties that lie within or adjacent to existing preserved land. Builders contemplating developing lands in these categories - which have historically been some of the most desirable lands for residential development - should be prepared to face acquisition attempts.

In practice, the development status of the land may be just as important as its environmental characteristics. In its statement of priorities, DEP has emphasized that a property's "important environmental features. . . may pale in comparison to a nearby parcel that is under immediate threat of development." Thus, the fact that a builder has taken steps to acquire a property or secure approvals for development may itself make the property a candidate for acquisition.

The fact that the programs will fund acquisition by different governmental entities subject to . different rules may also have an impact on builders. Municipalities have an incentive to induce the State to acquire a property rather than acquiring it themselves if possible. Forty percent of the monies allocated to the DEP are earmarked for assisting local acquisition of land for conservation or recreation purposes through grants to counties and municipalities accounting for between 25 and 75 percent of the acquisition costs.

No State Condemnation

If local government can induce DEP to acquire land in imminent "peril" of development, it avoids the necessity of paying the local share. Moreover, if the State acquires the land, it not only manages it, but is required by statute to make payments to local government in lieu of taxes. On the other hand, the state can only acquire privately owned land by agreement with the owner. It cannot condemn land for open space preservation or threaten condemnation to bargain down the price.

For the municipality, the next best choice is to have the Department of Agriculture subsidize local acquisition. The Department of Agriculture can make grants of up to 80 percent of the cost of acquisition of the property or of development easements, provided that the land is resold or leased for agricultural purposes. Neither the Department of Agriculture nor local government has the power to condemn land or development easements for farmland preservation.

Municipal and county governments may utilize funds that they have raised through their own tax set-asides or have received from the DEP to acquire property by condemnation even over the owner's objections. This greatly increases their bargaining power in dealing with property owners and developers. This is, however, mitigated to some degree by provisions of the statute that provide that land is to be valued for purposes of condemnation at its fair market value based upon the either the zoning in force when the land is acquired or the zoning in force as November 3, 1998, whichever gives the higher value.

These new programs will affect builders in developed areas of the state as well as those at the suburban fringe. The DEP is required to a set aside 20 percent of the money available to it for state acquisition for projects in "highly populated c"ounties, which include Bergen, Hudson, Essex, Union, Passaic, Union, Middlesex, Monmouth, Mercer and Camden. There are similar requirements for money for local acquisition projects and for farmland preservation.

Development Prevention

These programs give government new tools for development prevention. They also create opportunities for astute developers to strike favorable deals with public entities. Builders may, for example, have new opportunities to negotiate for compensation for lands the builder is required to leave undeveloped to meet open space requirements imposed by PUD or clustering ordinances.

Finally, these new programs create new perils for abuse. In the past, public acquisition of land in the name of open space preservation has sometimes been improperly used to thwart or discourage the construction of low income housing or housing for the handicapped. It has been abused to exclude minorities or families with children. Municipalities have also used their zoning powers to force down land prices to facilitate acquisition. All these practices are illegal. The vastly increased funds available for land acquisition may invite more abuses of this sort.

Only with the best legal advice will builders be able to navigate their way through the perils and opportunities created by these new programs.

Stephen M. Eisdorfer is also a partner within the Land Use Division of Hill Wallack. A Member of the Board of Directors of the New Jersey State Bar Association's Land Use Section, he concentrates his practice in land use litigation, including Mount Laurel litigation and litigation involving the civil rights statutes.