Before commencing the redevelopment process, it is essential to evaluate and screen out all potential conflicts of interest as to members of the governing body, the planning board, and the redevelopment agency under the Local Redevelopment and Housing Law, N.J.S.A. 40A:12A-1 et seq. and the Local Government Ethics Law, N.J.S.A. 40A:9-22.1 et seq. Failure to do so will likely lead to the waste of public funds, years of delay, and perhaps even the death of the redevelopment project. Yet, such a costly downward spiral of what would otherwise be a promising and successful redevelopment project can be avoided by taking the time at the beginning of the redevelopment process to answer and evaluate the results of a conflict of interest questionnaire.
The potential for conflicts of interest arise “when the public official has an interest not shared in common with the other members of the public.” Wyzkowski v. Rizas, 132 N.J. 509, 524 (1993). The Legislature has codified certain conflicts of interest under the Local Redevelopment and Housing Law, by providing that “no commissioner or employee of an agency shall acquire any interest, direct or indirect, in a redevelopment project or in any property included or planned to be included in a project, nor shall he have any interest, direct or indirect, in any contract or proposed contract for materials and services to be furnished or used in connection with a project. . . .” N.J.S.A. 40A:12A-11. Additionally, numerous conflicts of interest provisions are codified under the Local Government Ethics Law, N.J.S.A. 40A:9-22.1 et seq. One of the more prominent provisions, often cited in lawsuits filed by concerned citizens, disgruntled property owners, or developers that were not designated by the municipality to be the redeveloper for the redevelopment project, states: “No local government officer or employee shall act in his official capacity in any matter where he, a member of his immediately family, or a business organization in which he has an interest, has a direct or indirect financial or personal involvement that might reasonably be expected to impair his objectivity of independence of judgment.” N.J.S.A. 40A:9-22.5(d). A number of questions arise as a result of this provision, the answers to which are extraordinarily fact sensitive:
Does the member of local government own property in or adjacent to the proposed redevelopment study area? How about a relative? Does the member or a family member have a financial interest in a business in or adjacent to the proposed redevelopment study area? Are there charities in which the government official is a member that has also received charitable donations from the proposed redeveloper? Are there charities near or in the proposed study area that have received donations from a member of local government? While the foregoing is not intended to be an exhaustive list for a conflict of interest evaluation, plaintiffs challenging the redevelopment area designation or the redevelopment plan will exhaustively search to find an alleged conflict of interest for at least the following two reasons:
First, a plaintiff that is successful in proving that a potential for a conflict of interest existed during the redevelopment process can result in the Court invalidating every redevelopment action that was taken by local government during the period of time in which the potential for a conflict of interest existed. Second, if there was the potential for a vitiating conflict of interest during the redevelopment process, the mere existence of such potential will provide the plaintiff with the opportunity to argue for the expansion of the traditional forty-five (45) day period in which to challenge the redevelopment area designation and/or redevelopment plan. If successful, this may permit a challenge to a redevelopment area designation and redevelopment plan that occurred years ago.
The answer as to whether there is a potential for a conflict of interest is very dependent on the particular facts. For example, there are several decisions that have found there was no potential for a conflict of interest. These decisions include, but are not limited to Wilson v. City of Long Branch, 27 N.J. 360, cert. denied, 358 U.S. 873 (1958) where the Supreme Court upheld a determination of blight even when the Mayor, who voted for the blight designation “was a director and stockholder of a bank and savings and loan association which held some mortgages in the area. This was not sufficient reason to bar him from performing his official duties.” Id. at 396. However, in Griggs v. Borough of Princeton, 33 N.J. 207 (1960), two professors of Princeton University who served on the borough council voted in favor of the blight determination were held by the Supreme Court to have a conflict of interest because Princeton University owned a majority of the stock of Princeton Management Improvement, Inc., one of the largest land owners inside and outside the redevelopment area. The Court, in that case, invalidated the blight determination even though the professors were not aware of the “interlocking interests” between Princeton University and Princeton Management Improvement, Inc.
In Tri-State Ship Repair & Dry Dock Co. v. City of Perth Amboy, 349 N.J. Super. 418 (App. Div.), certif. denied, 174 N.J. 189 (2002), the plaintiff-appellant alleged for the first time and as late as the appellate oral argument that the potential for a conflict of interest existed because the redevelopment area designation was within very close proximity to the primary residences of several city council members. While retaining jurisdiction, the matter was remanded to the Law Division for a hearing on whether there was a vitiating conflict of interest. No vitiating conflict of interest was found after a trial on that issue and the Appellate Division affirmed the dismissal of the complaint on untimeliness grounds. The Appellate Division noted that the forty-five day rule to file an action in lieu of prerogative writ may have been enlarged to permit the challenge to the redevelopment area designation and redevelopment plan two and one-half years after the adoption of the redevelopment if a vitiating conflict of interest had been established.
In Deegan v. Perth Amboy Redevelopment Agency, 374 N.J. Super. 80 (App. Div.), certif. denied, 183 N.J. 217 (2005), the Court held that a redevelopment agreement was valid when it was ratified without the vote of a parish priest of a church that had received charitable donations from the principal of the redeveloper years before the parish priest was appointed to the redevelopment agency. In this case, the parish priest had previously voted to approve the redevelopment agreement.
In the unpublished decision of City of Long Branch v. Brower, 2006 WL 1746120 (L. Div. June 22, 2006) no potential for a conflict of interest existed when two city councilmen that owned shares and worked for a bank voted to approve designation of a co-redeveloper to whom the bank had previously issued two lines of credit. It was noted that neither councilman served on the loan committee for the bank. Rather, one member was a messenger and the other was a senior vice president and chief financial officer for the bank.
In another unpublished decision of Albano v. City of Vineland, 2006 WL 3626766 (App. Div. 2006), certif. denied, 190 N.J. 256 (2007), the Appellate Division determined that even though a councilman’s son is a cashier at Walmart in Colorado, there was no disqualifying conflict of interest when the city councilman voted to approve a redevelopment agreement designating Walmart as the redeveloper for the City of Vineland.
Recently, the Law Division in an unpublished decision invalidated the City of Somers Point redevelopment area designation of approximately 380 parcels due to a holding that the potential for a conflict of interest existed because a councilman, the planning board chairman, and one of the many siblings the Mayor, owned residential property in the area determined to be in need of redevelopment. Bay Avenue Redevelopers, L.L.C., et al. v. City of Somers Point, et al., Docket No. ATL-L-2440-05.
Therefore, given the cost of litigation and the delay to the redevelopment project that can result from the same, evaluating whether the potential for a conflict of interest exists at the earliest stage of the redevelopment process will undoubtedly avoid costly headaches. If the facts reveal the potential for a conflict, it is advisable to have that person recuse themselves from the redevelopment proceedings and not participate in any way in order to avoid the conflict of interest pitfall.