An ordinance that would have expanded the Special Improvement District (SID) beyond downtown to all commercial properties in the city was invalidated by a judge’s ruling.

Union County Assignment Judge Karen Cassidy issued the ruling late Monday, 11 days after a hearing on the lawsuit against the city by a group of local businesses organized as Friends of Rahway Business, LLC.

The 17-page decision (available here) described the two ordinances — O-42-14 to expand the SID city wide and O-12-15 setting the 2015 SID budget — as “an improper exercise of the authority delegated” by City Council.

In her ruling, Cassidy said the city’s arguments “mischaracterize” the state’s SID laws. “It is improbable that the legislature intended an entire city could be considered a SID. If this were the case, every municipality would have municipality-wide SID ordinance,” amounting to a special assessment for every non-residential property in the state. “The enabling statutes clearly imagined that the SID would be used to promote economic growth and commercial development in the downtown business districts, and that improving these businesses would translate to an increase in economic conditions and thus prosperity throughout the entire municipality,” she wrote.

“Obviously the city is disappointed with the ruling,” City Administrator Cherron Rountree said. “We are reviewing the ruling and considering next best steps for the city and will make a decision after consultation with our attorneys,” she said. The city has 45 days to appeal the decision. It remains to be seen whether the city would pursue some other form of additional SIDs, such as specific districts for St. Georges Avenue or Routes 1&9. Other towns have multiple SIDs that cover different commercial districts but none have citywide assessments.

William Michelson, an attorney representing Friends of Rahway Business, said the judge’s ruling doesn’t seem to present much opportunity for the city to purse another type of SID. “I don’t think they’ll get to the point where they [the city] save what they have,” he said. The primary issue behind the judge’s ruling was the non-contiguous nature of a citywide SID, said Michelson, who also is running for state Assembly against former Mayor James Kennedy.

A citywide SID would have impacted properties, particularly industrial ones, that wouldn’t have seen a benefit of the additional tax, he said, adding that it probably didn’t help that the city changed law firms between the time the ordinance was adopted and the lawsuit was filed.

Despite pleas to delay approval of SID expansion for more information, including the Chamber of Commerce, City Council adopted the ordinance last December. The original SID, created in 1993, covered 138 downtown commercial properties and raised about $130,000 annually. A citywide SID would have covered more than 500 properties, including industrial, commercial and some multi-family properties, generating $760,000 for improvements and programming.

The decision also cites a lack of information on the city’s part. “Proofs submitted to the Court, as well as confirmation by counsel at oral argument, demonstrates that no detailed explanation was made to the public regarding this ordinance, beyond its being read prior to the City Council’s vote,” according to the ruling. Twenty-five individuals who voiced their opinion on the ordinance “had an opportunity to speak prior to the vote, however, the meeting minutes do not document what was said.”

City attorneys said the findings and conclusions by the governing body “were based on the statutorily required investigation performed by the city. City Council asserts that the business administrator spoke with each councilmember to discuss the information and answer any questions. Based on the record before the court, there was not any group question and answer session or a separate workshop meeting to discuss specifics of this new SID.”

The SID expansion with new assessments took effect July 1 and per a court order on July 22, money collected from the additional assessments was put into a specially designated municipal account pending the final ruling. Michelson said he would expect some type of tax credit rather than a direct refund to property owners.

Additional briefs filed in the case can be found here: plaintiffs reply brief to the city; and the city’s reply brief.