File #: 14-0766    Version: 1 Name: Investigation of area in need of redevelopment
Type: Resolution Status: Filed
File created: 5/15/2014 In control: Municipal Council and City Clerk
On agenda: 5/20/2014 Final action: 5/20/2014
Title: Dept/ Agency: Offices of Municipal Council/City Clerk Action: ( ) Ratifying (X) Authorizing ( ) Amending Type of Service: Supporting Action Purpose: Supporting an investigation regarding whether certain properties in the City of Newark should be designated as an area in need of redevelopment Additional Information:
Sponsors: Council of the Whole
Title
Dept/ Agency: Offices of Municipal Council/City Clerk
Action:  (   ) Ratifying     (X) Authorizing     (   ) Amending
Type of Service: Supporting Action          
Purpose:  Supporting an investigation regarding whether certain properties in the City of Newark should be designated as an area in need of redevelopment                         
Additional Information:  
                    
body
 
      WHEREAS, due in large part to the economic downturn of 2007 and certain predatory lending practices, many City of Newark home owners have experienced a significant decline in home values yet remain subject to underwater mortgages which have principal balances that exceed the current value of their home; and
 
      WHEREAS, this situation often referred to as underwater mortgages are at significantly greater risk of going into foreclosure, with research showing that homeowners who are severely underwater on their mortgages are  more likely to default on their mortgages; and
 
      WHEREAS, resetting  these mortgages  to fair market value may reduce foreclosures and stabilize the real estate market to create revenue and jobs in our City; and
 
      WHEREAS, loans held in private-label securitization trusts (the "PLS Loans") tend to be subject to pooling and servicing agreements that would require collective action by many security holders before the PLS Loans can be modified or sold out of trusts; and
 
      WHEREAS, approximately one thousand, one hundred fifty-one 1,151) PLS Loans are located in the City of Newark (the "City"); and
 
      WHEREAS, conducting collective action across most holders of the PLS Loans has been historically difficult; and
 
      WHEREAS, 77% of the PLS Loans located in the City have some predatory feature in the terms of the original loan, including, but not limited to Adjustable Rate Mortgages, Balloon Mortgages, Interest Only Mortgages and Negative Amortizations; and
 
      WHEREAS, the City has an interest in reducing the number of foreclosures within the City to keep families in their homes and preserve the community and tax base and the City has a responsibility to promote policies that benefit the people who live and work in our City; and
 
      WHEREAS, it is in the public good and in the public interest for the City to keep families in their homes and preserve the community and tax base; and
 
      WHEREAS, none of the foreclosure prevention efforts that have been implemented thus far at the local, state, or federal levels have adequately addressed the crisis;
 
      WHEREAS, cities and towns elsewhere in the country have considered implementing local programs to reset underwater mortgages by acquiring certain underwater mortgages for fair market value for the purpose of restructuring and modifying those loans by reducing the loan principal; and
 
      WHEREAS, such programs may help prevent foreclosures and stabilize the housing market in communities where they are implemented; and
 
      WHEREAS, the City desires to determine if it may utilize its powers of eminent domain to acquire, restructure and/or modify the PLS Loans located in the City to help prevent foreclosures and stabilize the City's housing market; and
 
      WHEREAS, the Local Redevelopment and Housing Law, N.J.S.A. 40A:12A-1, et seq. (the "LRHL"), authorizes municipalities to determine whether certain parcels of land in the municipality constitute areas in need of redevelopment; and
 
      WHEREAS, the City may utilize its powers of eminent domain for the redevelopment of areas in need of redevelopment; and
 
      WHEREAS, pursuant to N.J.S.A. 40:12A-6 the City Council of the City of Newark (the "City Council") must authorize the Planning Board of the City of Newark (the "Planning Board") to conduct a preliminary investigation of the proposed area and make recommendations to the City Council; and
 
      WHEREAS, the City Council desires to support the City Administration's initiative to identify whether various individual or contiguous sites within the City may qualify as an "area in need of redevelopment" in accordance with N.J.S.A. 40A:12A-5 and N.J.S.A. 40A:12A-6 due to the status of certain PLS Loans which include underwater mortgages or mortgages subject to pre-foreclosure or foreclosure activities; and
 
      WHEREAS, the City Administration shall prepare a staff report (the "Staff Report") identifying the parcels located throughout the City to be studied to determine if they meet the criteria to be designated an area in need of redevelopment; and
 
      WHEREAS, the Staff Report shall further examine the extent to which underwater mortgages in the City have led to foreclosures, and the potential impact that such foreclosures have had on (i) increasing the municipal deficit, (ii) eroding the municipal tax base, (iii) placing an undue burden on City property owners, (iv) causing homes to become dilapidated, obsolete and/or blighted, (v) forcing cuts to essential local services and jobs that support communities and/or (vi) otherwise negatively impacting the general welfare of the City; and
 
      WHEREAS, in connection with completing the Staff Report, the City Administration shall conduct an investigation, prepare a map of the proposed area (the "Proposed Area"), and complete a public hearing at which comments to the designation shall be received and considered (collectively, the "Due Diligence Investigation"); and
 
      WHEREAS, subject to the results of the Due Diligence Investigation, the City Council shall consider directing the Planning Board to conduct an investigation in accordance with N.J.S.A. 40A:12A-6 to determine whether the Proposed Area as identified in the Staff Report meets the criteria set forth in N.J.S.A. 40A:12A-5 to be designated as an area in need of redevelopment.
      
      NOW THEREFORE, BE IT RESOLVED BY THE MUNICIPAL COUNCIL OF THE CITY OF NEWARK, NEW JERSEY THAT:
 
 
      1. The City Administration is hereby authorized to conduct an investigation and prepare the Staff Report identifying the parcels located throughout the City to be studied to determine if they meet the criteria to be designated an area in need of redevelopment.
 
      2.  As part of its investigation, the City Administration shall prepare a map showing the boundaries and location of the proposed area, and shall append thereto a statement setting forth the basis for the investigation.
 
      3.  The City Administration shall conduct a public hearing to hear from all persons who are interested in or would be affected by such determination.
      4.   After conducting its investigation, preparing a map of the boundaries and location of the proposed area, and completing a public hearing, the City Administration shall make a recommendation to the City Council as to whether the City Council should direct the Planning Board to conduct a formal investigation to designate all or some of the proposed area as an area in need of redevelopment.
 
STATEMENT
 
This resolution supports an investigation by the Administration of the City of Newark into the need to designate certain properties as in need of redevelopment as the first step in the possible use of eminent domain as a tool to assist homeowners whose mortgage balance exceeds the value of their home.