Daily Development for Monday, September 27, 2004
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin Kansas City, Missouri dirt@umkc.edu

MUNICIPAL CORPORATIONS; REDEVELOPMENT; OPEN MEETINGS LAW: A special purpose, private, non-profit entity set up to redevelop government land is similar enough to a governmental agency as to require its meetings to be open to the public. The Times of Trenton Publishing Corporation v. Lafayette Yard Community Development Corporation, 368 N.J. Super. 425, 846 A.2d 659 (App. Div. 2004); April 30, 2004.

An entity was hired by the local municipality to redevelop a tract of land donated to the entity by the municipality. The entity was incorporated as a private, non-profit corporation, pursuant to the New Jersey Nonprofit Corporation Act, for the express purpose of redeveloping the donated land. Its board was appointed by the mayor and municipality's council. Possession of the land would revert back to the municipality after the project was completed.

A local newspaper reporter was barred from attending the corporation's board meeting. It then claimed that it had a right to attend the meeting under the Open Public Meetings Act (OPMA). The mayor took the position that the corporation was a private organization to which the OPMA did not apply. The parties then negotiated an agreement to permit the reporter to attend the monthly meetings, but in a limited way. After the reporter was repeatedly asked to leave during the course of the meetings, the newspaper sued, seeking to prevent the board from closing its meetings to the public in violation of the OPMA, and requiring the minutes of all past and future meetings to be available to the public, also as required by the Open Public Records Act (OPRA). The lower court held that the corporation was not a public body within the meaning of the OPMA, nor a public agency within the meaning of the OPRA, and dismissed the complaint.

The Appellate Division reversed. The first part of its discussion of the reversal - concluding that this particular type of entity is within the open meetings law, is not particularly surprising, but may be limited in scope to the peculiarities of New Jersey redevelopment practice. Nevertheless, suspecting that other states have similar practices, the editor has discussed this part of the holding. The second part of the holding, however, is of broader application - concluding that the nature of the redevelopment project - to transfer public land into private hands at a discount or giveaway price in order to achieve public goals - invokes the Public Trust Doctrine and thus requires open meetings. This part of the holding is discussed separately below:

1. Open Meetings Law:

The OPMA requires that the public and the press have advance notice of, and the opportunity to attend, most meetings, including executive sessions, of public bodies. A 'public body' is defined in the OPMA as two or more persons collectively empowered as a voting body to perform a public governmental function affecting the rights, duties or other legal relations of any person or collectively organized to spend public funds. The lower court had already found that the corporation consisted of "two or more persons collectively empowered as a voting body."

The Appellate Division, however, disagreed with the lower court's finding that the newspaper failed to demonstrate that the board either performed a public governmental function or was collectively authorized to spend public funds. The Court examined the corporation's governing documents, the municipality's resolutions, and the agreements between the municipality and the entity. The entity's certificate of incorporation stated that its purpose was to redevelop municipal property. Its bylaws stated that its board members were to be appointed and removed by the mayor and council. The disposition agreement provided for the municipality to transfer the public property to the corporation for $1.00, and for the corporation to issue tax-exempt, municipally guaranteed bonds to finance the project and reimburse the municipality for its costs to acquire the property. The property disposition agreement specifically stated that the redevelopment of the property was in the best interest o f the municipality and the health, safety, and welfare of its residents; and that the project was "undertaken in accordance with [those] public purposes." Therefore, the Court found that the project was explicitly created for public purposes.

The Appellate Division next looked to the Redevelopment Law which authorized the creation and funding of the corporation. In adopting the law, the Legislature stated that its purpose was to reverse deteriorating housing, commercial, industrial, and civic facilities, and to promote the advancement of community interests through those facilities. Under this law, a municipality may undertake a redevelopment project by redeveloping the area itself, or through a public entity, or through a created municipal redevelopment agency or by designated a private redevelopment entity. By dint of the Legislature's stated intent, the Court found that redevelopment is a governmental function for the benefit of the public, regardless of how it is undertaken.

2. Open Meetings Law:

The Court also looked at the project under the public trust doctrine, which is premised on the rights of all citizens to use and benefit from public property. It held that conveying the land to the corporation, at a nominal price, and the reversion of the land and project to the municipality after repayment of the debt, established a "public trust" with the corporation as the trustee. A trustee is a person or entity who is appointed to execute a trust. The corporation was charged with developing and operating, through its contractor, a revenue-generating asset for the benefit of the municipality. The project was built on land furnished by the municipality, funded by tax-exempt bonds unconditionally guaranteed by the municipality. It was intended to provide jobs and tax revenues, and was scheduled to revert back to the municipality after payment of the debt. Based on those facts, the Appellate Division found the corporation to be a public body empowered to perform a governme ntal function affecting rights, duties, or other legal relations of "any other person."

In addition, under Article VIII, Section III, paragraph 3 of the New Jersey Constitution, a governmental entity is prohibited from giving property, lending money, or extending credit to a private entity for private use. The provision also expresses the fundamental principle that public money should be raised and used only for public purposes. A "public purpose" is an activity which serves as a benefit to the community as a whole, and at the same time is directly related to the functions of the government. Therefore, where a funded activity serves a benefit to the community and is directly related to the functions of government, the donation of public land to a private redeveloper passes constitutional muster. Furthermore, in terms of public policy, the Appellate Division stated that the democratic process is enhanced when citizens have the right to attend all meetings of public bodies at which business affecting the public is discussed or acted upon in any way.

The Open Public Records Act was expressly intended by the Legislature to make records of a public agency readily accessible for inspection by the citizens. Courts have held that a newspaper has the same right of access. A "public agency" is defined in the OPRA as "any division, board, bureau, office, commission or other instrumentality within or created by a political subdivision of the state." Here, the Court decided that the corporation was an instrumentality created by the municipality and a public agency under the OPRA for the same reasons that it was a public body under the OPMA

Comment 1: The Editor found the Public Trust Doctrine discussion particularly interesting. Although this concept is more fully developed in New Jersey than in many other jurisdictions, it is by no means limited to New Jersey and the discussion ties into an issue that appears to have caught the attention of courts around the country - the notion of the propriety of transferring public property into private hands in order to achieve economic benefits. Often the “public property” that is involved is property that has just been obtained by eminent domain from other private parties specifically for the redevelopment project. This court, consistent with some recent opinions around the country, concludes that such an activity is acceptable if the public purpose is sufficiently safeguarded by the imposition of governmental controls over the redevelopment. In County of Wayne v. Hathcock, 684 N.W. 2d 765 (Mich. 7/30/04) the DD of 8/3/04, the Michigan Supreme Court overruled the famous Poletown decision and held that in order for a eminent domain action to be regarded as serving a public purpose where the condemning agency retransfers the property to a private party, one of three conditions must be met. Either (1) the land must uniquely satisfy a public need - such as a right of way for utilities; (2) the private party receiving the property must be accountable to the public agency in its use of the property (this appears to be the circumstance of the New Jersey procedure described in the instant case; or (3) there must be a “special public concern” about the property, based upon “facts of independent significance,” such as that the land itself has been determined blighted.”

Obviously, transfers in connection with the implementation of the second prong of the Michigan test would fit directly into the “open meetings law” analysis of the New Jersey court. But what about transfers under the other two sections? Perhaps, on balance, one might conclude that the public regulation of such things as railroads and public utilities adequately insures that those activities meet a public need, so there is no requirement for public meetings law requirements at every meeting of the railroad or utility board. But where the property is simply transferred to a private developer with no special public oversight, perhaps the notion that public trust compels imposition of a open meetings light on the deliberations that the private developer undertakes to comply with the public need is appropriate.

Comment 2: Unfortunately, private profit making entities often don’t conduct business through hearings and other formal proceedings, and it might be seen as cumbersome and impractical to sort through all the decision making activities of a private developer and identify which of those are of sufficient consequence to warrant imposition of a public meetings requirement. On the other hand, it would be less difficult to identify critical decision making stages and to require public hearings with respect to major decisions in the project - even if they wouldn’t otherwise be subject to public scrutiny.

The editor recognizes that there are many issues that a private entity deserves to keep confidential if it is going to survive in a competitive business environment. But at the same time the private developer has elected to seek the numerous special advantages that redevelopment projects offer and has agreed therefore that it will be carrying out a discrete public goal. Under these circumstances, is it unreasonable to expect that the public would have at least some notion of the rationale for critical decisions it makes in pursuing that goal? The editor believes that courts who find that the Public Trust Doctrine is implicated in these redevelopment projects may in fact conclude that this is the case. It might be a good idea for legislatures and public agencies in jurisdictions in which such findings are likely to occur to develop their own system of mandated public hearings through negotiation with the development community in order to avoid more difficult mandates issuing f
rom the courts.

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