On August 18, 2011, DEP Commissioner Bob Martin and DOT Commissioner James Simpson released a set of guidelines to revamp and apply consistency to New Jersey’s land leasing process for State Lands. A panel of ten State Agencies was convened to analyze the current lease policies and compile a Lease Valuation Report that offers recommendations on leases for Tidelands; Linear Corridor Projects (other than Tidelands); Publicly Bid, Market-Based and Nominal Fee leases; Telecommunications Towers and Antennas, Aquaculture, and leases Related to Transportation Corridors. The guidelines will be adopted by all State agencies, with most of the guidelines implemented immediately.
The panel reported an honest and critical view of the current system for valuing certain types of leases labeling it simply as “broken.” The panel noted that some fee schedules are terribly outdated and that certain rules and statutes prevent the maximization of compensation to the State for the use of its land.
The new guidelines serve two public purposes: 1) to ensure that the State and its Citizens receive fair compensation for the use of State land and 2) to reduce the environmental impact of those that require use of State lands for private projects.
One of the changes is the elimination of perpetual term leases or easements for Tideland and Linear projects as well as a switch from a parcel-by-parcel negotiation and appraisal method to a flat square footage-based rate. As a point of perspective, the DEP alone owns 800,000 acres of fish and wildlife habitats and parks often traversed by utility lines. A switch to square footage-based rates both increases the revenue generated from a utility intent on developing on State property while at the same time compels them to use as little of the land as possible.
Leases will also have built-in annual adjustments of at least 2.5% thereby forcing lessees to accommodate for inflation. Another practical shift was to allocate more revenue generated from the leasing system back to the program or agency responsible for managing the leases.
Undoubtedly, the new guidelines will affect developers of offshore wind generation projects particularly in light of the Offshore Wind Economic Development Act, a bill that was recently passed to foster development of this type of green energy.
According to Bob Martin “The State’s process for valuing leases was long overdue for a major overhaul. This is our opportunity to bring this system up to date, to provide more predictability for business and to get the best deals and most fair compensation for the people of New Jersey.”
Sandro G. Ocasio is an Associate in the Gibbons Real Property & Environmental Department.