An appeals court struck down part of a trial judge’s decision rejecting the city’s expansion of the Special Improvement District (SID) while remanding other parts of the decision for more proceedings.

A three-judge appellate panel heard oral arguments in May and handed down a decision on July 5. The entire 17-page Appellate Division decision is available here. William Michelson, an attorney representing Friends of Rahway Business, LLC, said he expects a conference by next month with city attorneys and the trial judge.

Rahway challenged the original judge’s ruling that the state statute does not allow a municipal-wide SID; districts contain non-contiguous properties; SIDs are outside of a traditional “downtown” area, and districts contain industrial and apartment building properties.

The appellate panel agreed that the state statute does not specifically prohibit a citywide SID but “merely suggests a SID could be a small, designated area within a municipality. Consistent with the legislature’s intent, the SID statutes provide towns with broad discretion when creating SIDs, calling into question the trial court’s narrower reading of the statutes.”

Nothing in the regulations specifically prohibit a citywide SID, the appellate court said, provided that a town can make the case that a SID can benefit an area. While Rahway asserted that it met these requirements, the appeals court disagreed. “We are able and do find there is no prohibition against a municipality adopting a citywide SID, and we remand for the trial court to consider the merits of the ordinance itself.”

The appeals court did agree with the city that the trial court erroneously ruled that the law only permits SIDs in downtown business districts. “Having the discretion to exclude residential properties does not require a municipality to exclude residential properties from SIDs.  The judge’s determination these properties must always be excluded is unsupported.”

The appeals court declined to consider arguments relating to other municipalities, including the city’s argument that the trial court misconstrued SID statutes governing 67 SIDs in 19 counties, because it simply wasn’t included in the trial record. The only evidence before the trial court was a map of Carteret.

There were four friends of the court briefs filed (amicus curiae), by Robert Goldsmith of Greenbaum, Rowe, Smith & Davis for the Morristown Partnerhsip, Edward Purcell for the state League of Municipalities, Edward Trawinski for New Jersey Managed Districts Association and Ironbound Business Improvement District, and state Deputy Attorney General Melanie Walter for the Attorney General’s Office.

In a brief telephone interview last week, Michelson, the attorney for plaintiffs Friends of Rahway Business, LLC, didn’t rule out negotiating a settlement with the city. That might include recommending a reduction in the special assessment or narrowing  the scope of the SID boundaries.

Since the SID lawsuit was filed, property owners have paid the special assessment but the funds have continued to go into an escrow account. Michelson said he’d ask the judge to extend that indefinitely but also free up the funds sooner. The SID budget typically generates about $130,000 through an annual special assessment on downtown properties; an expanded SID would raise some $760,000 from properties throughout the city.

It’s been more than 2 1/2 years since City Council introduced and approved the ordinance to expand the SID. The next month, Friends of Rahway Business, LLC, a group of Rahway business owners, filed suit challenging the expanded SID. A Superior Court judge ruled nine months later against the expanded SID.