How, and why, local governments make decisions to approve or deny development projects may not be a major concern to corporate counsel, but when your CEO calls you up and asks you to coordinate a relocation or expansion of the company facilities, you will soon find out that local land use decision making is not for the faint-hearted or the unprepared. This article will familiarize the reader with the basics of the process, but the first piece of advice is to hire knowledgeable local counsel immediately following that conversation with the CEO.
The discussion below is based on New Jersey's land use regulatory process, since each state has developed its own laws and traditions. In New Jersey, the first fact that your outside counsel will tell you about is the multiplicity of review that land use decisions typically have.
New Jersey has 566 local units of government, 21 counties, and a host of regional and state entities, many of which may well have something to say about a company's plan to expand, or to move to a location.
The smart person begins by looking at the State Development and Redevelopment Plan (SDRP), which, while not regulating land uses directly, does show the impact of much of the state's functional regulation. The SDRP shows five major categories - Planning Area One (Metropolitan) and Planning Areas Two (Suburban) - are the two areas, along with designated Centers, in which future growth is expected to take place. The balance of the state - fringe areas, rural and environmentally sensitive areas - are more highly regulated and typically do not have infrastructure to support growth (and are not expected to get any such infrastructure). If your CEO suggests that he thinks the company ought to relocate into an area which is not in a state-designated Growth Area, you can anticipate that state funds designated to support corporate expansion will not be available; that the local permits will be harder to obtain, and your company, not the regular purveyors of sewer and water, will be footing the bill for any sewer and water connection. Conversely, if the company is willing to go into a state-favored growth area, funding, infrastructure and permitting all become somewhat easier.
The state directly regulates wetlands, floodplains and coastal areas. The Department of Environmental Protection is the regulatory entity for those issues, and is also the overall regulator of sewer systems and water supply agencies. In counseling your CEO about what the relocation or expansion will entail, plan on spending some time with the NJ Department of Environmental Protection.
The state has set up special planning regions where growth is especially highly regulated. These Special Planning regions have specific, and in most cases, quite intense land use regulations. In the Southern portion of the state, the Pinelands region covers approximately one million acres (approximately one fifth of the state); and in the Pinelands Protection region, about half of the total area, no development is permitted. In the Pinelands Planning Region, very tight controls over development are in place, and anyone seeking to develop in that area must become aware of the Pinelands Commission regulations. In the northwestern portion of the state, approximately 800,000 acres are protected by a very similar body, the Highlands Council. Along the New Jersey Coast, the New Jersey Department of Environmental Protection regulates land uses via the Coastal Areas Facilities Review Act. Finally, in a multi-county jurisdiction covering more than 14,000 acres of prime real estate, the New Jersey Meadowlands Commission has jurisdiction.
Once you have figured out that about one fifth of the state lends itself to future development, and you've convinced your CEO to look exclusively at those areas where the state would prefer your company to grow, you will have directed your broker to find an appropriate site with appropriate zoning. Every municipality in New Jersey has established different zones for different uses; if a proposed use does not conform to the zoning, then either re-zoning (a political process) or variances (done through the local board) will be required.
For purposes of this discussion, let us assume that your CEO wants to build a 300,000 square-foot office campus for advanced research and development in a suburban location, near transit facilities and your broker has found a suitably zoned site. Here is how the process should work:
A. Secure the site with a suitable option, giving you at least two years to secure all required permits before you have to close on the site. Finding the right site is only the first step; the permitting process is quite time consuming and the results are not guaranteed; and you do not want to have the company's money tied up or worse, forced to close on a property which, at the end of the process, cannot be used for your proposed project.
B. Schedule a meeting with the mayor and the administrator of the municipality in which the project is to be located. Local government controls the majority of required permits, and no mayor likes to learn about a project which will affect his/her municipality through the newspapers. Most projects of the sort contemplated here are welcomed by local governments, since they create positive tax benefits, but there are frequent concerns raised by local residents dealing with traffic, or, in the case of research and development facilities, concerns with chemicals and security. So a meeting with the local governmental leaders before the announcement of the project is an excellent idea.
C. Schedule a meeting with the New Jersey Commerce, Economic Growth and Tourism Commission. This state agency can help with required state permits, can ascertain if there are state funds to assist with the development, and can open doors throughout the entire spectrum of government.
D. Put together a team composed of the building's architect, the site planner, civil engineer, landscape architect, local attorney and liaison with the company's internal development team.
E. Put together the development application with the municipality. Typically, the applicant will be seeking approval for a major site plan; in New Jersey, there is the opportunity to seek preliminary approval followed by final approval, or, if everything is in order early on, one can seek preliminary and final approval together.
F. When the application is ready for submission to the local government, create a checklist for all other required permits. In addition to the local approval, no doubt there will be required county approval (the county has jurisdiction over regional drainage and access to county highways); and approvals for such things as sewer and water. (New Jersey has regional sewer purveyors, private and municipal sewer purveyors, regional water suppliers, and so forth. In addition, there are often regional entities, such as the Delaware and Raritan Canal Commission which has approval rights for a specified geographic area in Central New Jersey.)
G.The application will have to be supported with a variety of studies, including traffic and environment. The municipality will require the application to post sufficient funds to hire its own experts to review the application materials; so the budget for the application process has to be substantially increased from the bids you've received from your project professionals.
H. Once the application and all of the supporting materials have been received by the municipality, expect to have some working meetings with the board's professionals while the issues raised by the board's professionals are discussed. Do not be surprised if there are difficulties with the application which your professionals did not foresee: many municipal ordinances are written in language only understood by the government, and variances from obscure requirements are often required. If the municipality likes the project, the difficulties are easily overcome; if there is opposition to the project, the difficulties multiply.
I. Once the application is deemed ready for action, a public hearing is scheduled. Public notice is required. Oftimes, the hearings take place over multiple meetings, if there is complexity to the application and public interest. The applicant makes the case for approval though the testimony of witnesses, based on architecture and engineering, and conformance with the municipal ordinances and approval requirements. The public, the board members and the board's professionals are allowed free rein in terms of questioning the various aspects of the project; and at the end, there is a substantial opportunity for public comment.
J. Once public comment is over, the board will vote, hopefully to approve the application. Numerous conditions will be attached to the approval, and the board will adopt a comprehensive resolution. The notice of adoption of the resolution is published (which triggers the appeal process, if anyone wishes to challenge the approval).
With the local approval in hand, the development team can go through the difficult and time consuming process of obtaining all other required permits, including sewer, water, road access and other utilities. Once all permits are in hand, an application for a building permit can be submitted.
There are a number of other issues which need to be addressed in this process. One significant item is a contribution for affordable housing, which is a minimum of 2% of the assessed valuation of the project as well as contributions for or improvements to the local infrastructure to make the project possible.
Every state has its own variation of these issues, and the wise corporate counselor will advise the CEO to work carefully with state and local officials, take the time to do political and public relations, and do the required homework. Corporate relocation, expansion, or selection of sites for new projects is not for the faint-hearted or the unprepared, and diligence and follow-through are required.
Thomas J. Hall is a member of the Firm's Real Estate Practice Group and Co-Chair of its Land Use and Development Law Section. The views and opinions expressed in this article are those of the author and do not necessarily reflect those of Sills Cummis Epstein & Gross P.C.