What You Need to Know

• ICCTA Preemption: The Court ruled that the Interstate Commerce Commission Termination Act (ICCTA) preempted the City Council's decision to designate certain property in Jersey City as an area in need of redevelopment (AINR). This includes parcels with active rail lines and those used for accessing the rail line, even if some of the parcels do not directly contain a rail line.
• Railroad Operations Protection: The Court emphasized that ICCTA protects railroads from local zoning and land-use regulations that could interfere with railroad operations. Designating property as an AINR could create regulatory complexity and uncertainty, which may deter investments in freight rail operations on the property.
• Contiguous Land Considerations: The Court rejected the idea that an AINR designation could apply to properties without active rail lines, as the designated property in question is a contiguous plot with an active rail line running through its center. ICCTA provides exclusive jurisdiction over such railroad-related properties.
• Implications for Redevelopment Plans: Even if redevelopment was not currently planned, the Court stated that any AINR designation could potentially hinder future railroad use and violate ICCTA's broad preemption of local zoning laws. The ruling suggests that municipalities must consider ICCTA’s authority before pursuing redevelopment designations for properties tied to active rail use.

Introduction

In a recent ruling from the Superior Court of New Jersey, Appellate Division, the Court held that the City Council of the City of Jersey City’s (the “Council”) decision to designate certain property as an area in need of redevelopment (“AINR”) was preempted by the Interstate Commerce Commission Termination Act (“ICCTA”) even when certain parcels of the Property did not contain a rail line. CONRAIL v. City Council, No. A-1246-22, 2025 N.J. Super. Unpub. LEXIS 475, *3 (App. Div. Mar. 27, 2025).

Background and Procedural History

Consolidated Rail Corporation (“Conrail”) is a rail carrier that owns twenty-eight parcels in Jersey City (the “Property”). Conrail’s parcels are next to the National Docks freight rail line, which remains active and runs through the center of the Property. The rail line is situated on some of  the Property’s parcels and many of the remaining parcels are used to access the active rail line.

On February 10, 2021, the Council passed a resolution (the “Preliminary Resolution”) requiring the Jersey City Planning Board (the “Board”) to commission a study to determine whether a certain area, “which included the Property, satisfied the statutory criteria of the Local Redevelopment and Housing Law, N.J.S.A. 40A:12A-1 to -89, for designations as an AINR.” The Preliminary Resolution divided the study into two sections: “(1) eight lots not owned by Conrail (Condemnation Study Area); and (2) the remaining thirty-five lots, including the Property (Non-Condemnation Study Area).” In connection with the review of the Non-Condemnation Study Area, Jersey City’s City Planner prepared a report that determined “an active freight line runs across seven of the lots” and the other lots are either “adjacent to active rail lines” or littered with “inactive rail infrastructure.” The City Planner recommended that the Non-Condemnation Study Area, which included the Property, be declared an AINR.

Conrail submitted the following objections to the Board: (1) ICCTA preempts “local zoning and land-use regulation of the Property, including designation as an AINR, because the Property is the site of an active rail line”; (2) “the Property does not meet the statutory criteria for designation as an AINR”; and (3) there is no reason to declare the Property an AINR “because Conrail has no desire to use the Property for any purpose other than railroad use.”

Notwithstanding Conrail’s objection, the Board recommended that the Council designate the Property as an AINR. Conrail again submitted its objections to the Council. However, “the Council, without discussion, adopted the Resolution designating the Non-Condemnation Study Area, including the Property, as an AINR.” As a result, Conrail filed a complaint in lieu of prerogative writs in the New Jersey Superior Court Law Division directly challenging the determination of the Board and Council. The trial court held that the Council’s decision to designate the Property as an AINR was arbitrary, capricious, and unreasonable because “ICCTA preempts the Council’s authority to designate the Property as an AINR.” The trial court further reasoned that even if ICCTA did not preempt the Council’s decision, “the Council lacked sufficient evidentiary support to meet the statutory criteria for the designation[]” as “the Property has supported an active rail line since around 1871 and continues to be used for that purpose.” Indeed, the trial court found that the Council neglected to “identify the [necessary] smart growth planning principles” nor did it “establish inclusion of the Property in the AINR was necessary for effective redevelopment of other parcels” in the area. The Council appealed.

Decision

On appeal, the Council argued that ICCTA did not preempt the Property’s designation as an AINR, that a distinction can be made between the Conrail parcels on which an active rail line operates and those parcels not “used for railroad purposes,” and reiterated that the City Planner’s report supports “the statutory criteria for an AINR designation of the Property.”

The Court began by emphasizing that “the threshold issue in this case is whether the trial court erred when it determined the ICCTA preempts the Council’s inclusion of the Property in an AINR.”

ICCTA provides that “the federal Surface Transportation Board (STB) has ‘exclusive’ jurisdiction over the following:

(1) transportation by rail carriers, and the remedies

provided in [the ICCTA] with respect to rates,

classifications, rules (including car service,

interchange, and other operating rules), practices,

routes, services, and facilities of such carriers; and

(2) the construction, acquisition, operation,

abandonment, or discontinuance of spur, industrial,

team, switching, or side tracks, or facilities, even if the

tracks are located, or intended to be located, entirely in

one State . . . .

[49 U.S.C.A. § 10501(b).]” Indeed, “[t]he ‘remedies provided under [the ICCTA] with respect to regulation of rail transportation are exclusive and preempt the remedies provided under . . . State law.” (quoting [49 U.S.C.A. § 10501(b).]).

The Court determined that “[t]he Property, which contains railroad tracks, facilities, equipment, yards, and grounds used or necessary for Conrail's operation of an active railroad, falls within” the applicable definitions of ICCTA. Further, the Court reasoned that the areas of the Property that are “undeveloped” provide a way for Conrail to access the railway and keeps a “buffer” between the public and the active railway. After a comprehensive review of the New Jersey Supreme Court’s interpretation of ICCTA, the Court rejected the Council’s assertion that its designation of the Property as an AINR “has no impact on Conrail’s use of the Property for railroad purposes and will be legally significant only if Conrail abandons such use.” Instead, the Court agreed with Conrail and found that the broad authority granted to a municipality as a result of an AINR designation is preempted by ICCTA.

The Court reasoned that an “AIRN designation is the first step in imposing a redevelopment plan on the parcels in the designated area[]” and such designation “is a means of imposing zoning and land-use regulations on the parcels in the AINR.” Thus, the Court held that “the broad preemption in the ICCTA of zoning and land-use regulation of railroad properties encompasses an AINR designation.” Specifically, “the potential of a zoning or land-use regulation to interfere with railroad operations . . . triggers ICCTA preemption.”

The Court rejected the Council’s assertion that simply designating the Property as an AIRN does not violate ICCTA as the Court reasoned that “the AINR designation, even if the Council does not undertake redevelopment, creates regulatory complexity and uncertainty with respect to the Property that could deter Conrail from investing in freight rail transportation activities on the Property.”  The Court also rejected the Council’s argument that an AINR designation is appropriate for the parcels that do not have an active rail line running through them. The Court found that the record below demonstrated that “the Property is a contiguous plot of land with an active railroad running through its center[]” and ICCTA provides that the STB has “exclusion jurisdiction” over rail lines and “any ‘yard, property, facility, instrumentality, or equipment of any kind related to the movement of passengers or property.’” (quoting 49 U.S.C.A. § 10102(9)). The Court determined that the Council failed to meet its burden under ICCTA to show that the Property “is not and will not be needed for rail purposes”.

Because the Court determined that the Council’s designation of the Property as an AINR was preempted by ICCTA it did not opine as to whether the Council “satisfied the statutory criteria for the AINR designation.” Finally, the Court called into question the Council’s decision to designate the Property as an AINR in the first place as the Council conceded that any redevelopment of the Property “while it is in railroad use” would be preempted by ICCTA and its fear that Conrail would sell the property to a developer only cut against the Council’s assertion that an AINR designation was necessary.

Takeaways

This case reinforces the preemption authority of ICCTA over State law. It offers a reminder to local planning boards and councils that designation of property as an AINR, even if redevelopment is not currently contemplated, must consider and comply with federal statutes, such as the ICCTA, when they are applicable. As local communities look to redevelop land once used and/or currently used for railway transportation, they should be mindful of the extensive reach of ICCTA.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Matthews Florez at mflorez@riker.com, Kori Pruett at kpruett@riker.com or Shelley Wu at swu@riker.com.