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Eminent Domain: Eminently Powerful

Eminent Domain: Eminently Powerful

EMINENT DOMAIN: EMINENTLY POWERFUL

By Ilene Dorf Manahan, Contributing Writer

hey could easily provide plot lines for a novel series of reality shows. They pit Davids versus Goliaths – powerful entities against the every-man (and sometimes the every-woman). They match the haves versus the have-nots. They set developers against , and, in some show-downs, against individual - and business owners. The featured players don’t realize, until it’s too late, that their American dream of hearth and home or a successful commercial venture has become an incredible nightmare.T These are true stories involving eminent domain, the right granted by the Fifth Amendment of the U.S. Constitution that enables government entities to take private for public uses, providing the government pays the owner “just compensation” or “fair market value” for their property. The 14th Amendment applied these same powers to the states with the same requirement that if property is taken for a public use, just compensation must be paid. Historically, such public uses have included infrastructure and facilities like roads, schools, libraries, government , police and fire stations and . Many states, recognizing their rights of home rule, have further specified how eminent domain can be exercised within their borders. For example, Article VIII, Section III, paragraph one of the New Jersey Constitution authorizes the use of eminent domain for the taking of private land for for a “public purpose,” provided that the are “blighted.” Over the years, the Legislature has attempted to define the word “blight” and to ascertain exactly what constitutes a public use. The “blight” issue was summarily addressed in 1992, when the Legislature deleted the word from the beginning of the 1949 Blighted Area Act statute and instead declared that blight exists when an area is determined to be “in need of redevelopment,” a phrase that might apply to almost any neighborhood or business district, in a way that “blight” might not. In addition to the ruling reaffirmed the right of redevelopment in New Jersey must Constitution, two New Jersey governments to take be reformed to adequately protect statutes provide both the authority for a “public use” and further the rights of tenants and property and framework to condemn determined that the use of eminent owners,” Commissioner Chen said. properties under certain circum- domain for economic development “The use of eminent domain for stances. The Eminent Domain Act of constitutes a valid “public purpose.” redevelopment must be limited to 1971 provides the steps to be taken Since such redevelopment typically truly blighted areas. The process by a government entity to condemn means taking private property and that a local government follows a property, and the Local conveying it to a private developer when it wants to redevelop or use Redevelopment and Housing Law for redevelopment, the case raised a eminent domain must be reformed (LRHL) of 1992 establishes a red flag on the use of eminent domain to ensure that it is fair, ethical and framework to designate an area as for other than public uses. transparent.” “blighted” or “in need of Nevertheless, the court based its In his report, the Commissioner redevelopment.” decision on its conviction that local included reforms he believes are One of New Jersey Public officials, not federal judges, know needed to protect the rights of New Advocate Ronald Chen’s main best in deciding whether a particular Jersey families and businesses criticisms of the LRHL is the lack of project serves a legitimate public including: better defining the term objective, meaningful criteria for purpose and contributes to the public “blighted”; making it easier for designating property as being good. municipalities to declare an area “in “blighted” or “in need of While Commissioner Chen notes need of rehabilitation,” which redevelopment.” that the New Jersey State provides municipalities almost all Attention to the eminent domain Constitution allows eminent the powers and benefits that come issue was fueled last year, when the domain for private redevelop-ment from designating an area as U.S. Supreme Court issued its close only in blighted areas – so the state blighted, but does not allow the use (5-4) and controversial ruling in the is not directly impacted by Kelo – of eminent domain; requiring notice case of Kelo v. of New London, when he took in March 2006, to tenants and property owners well Connecticut. The case involved the Chen made eminent domain a in advance of the hearing on the city taking private property for a priority and in May issued a report, blight designation and explaining redevelopment plan designed to “Reforming the Use of Eminent in plain language that a revitalize the city’s economy. When Domain for Private Redevelopment consequence of this designation is many of the property owners in the in New Jersey.” that their property can be taken designated area refused to sell, the “Our research has left no doubt under eminent domain; offering city initiated condemnation that the laws governing the use of property owners a meaningful proceedings. The Supreme Court’s eminent domain for private opportunity to appeal the blight designation; and strengthening ethics rules for the redevelopment Towns Can Seize Developers’ process, including the enactment of pay-to-play reforms. Land for Open Space “The greater the power entrusted n a 6-2 decision, the New Jersey Supreme Court ruled that towns can use the practice of eminent to government officials, the more Idomain to seize property from developers in order to preserve open space. The move is in safeguards should exist to ensure contrast to the U.S. Supreme Court’s 2005 ruling in Kelo v. City of New London, Connecticut, which that (eminent domain) is used with reaffirmed the right of governments to take private property for a “public use,” including giving care and discretion,” Chen said in property to private developers for the overall goal of economic development. his report. “It is therefore crucial The New Jersey ruling involved the town of Mt. Laurel, Burlington County, which wanted to that the laws governing the use of stop development of High Pointe Estates, a 16-acre property where 23 single-family were eminent domain ensure (that) . . . approved to be built by MiPro Homes of Medford. the rights of tenants and property owners are fully protected and The town condemned the property using eminent domain, claiming that the preservation of eminent domain is used rarely and open space was a “public purpose.” It has received Green Acre funding to acquire the site, which only in very specific circumstances. was a former farm. This is particularly important in Mt. Laurel’s decision was based on its wish to limit development, traffic congestion, situations where eminent domain is overcrowded schools and pollution. The court ruled there was enough of a motive here to drive used for private redevelopment “public interest in open space acquisition.” because, in these cases, the For builders in the state, the ruling may result in planned developments, under existing opportunities for misuse, abuse and laws, to be halted if there is enough political feedback against projects. injustice are often even greater.” In favor of builders, however, the court did rule that towns must pay fair market prices for land, Chen believes that “redevelop- reflecting any existing development approvals and zoning possibilities. ment of truly blighted areas is a legitimate public purpose ... .”

2 J ANUARY, 2007 Moreover, with fewer acres of For the business community, the League of Municipalities (NJLM), developable land – partly resulting legislation would increase the which also provided significant from regulations like the Highlands maximum financial assistance for input on the proposed legislation. and Pinelands acts, skyrocketing business relocation and compensate “Certainly abuses occur, but they property values, “” business owners for a business’ are not common,” says Dressel. And programs designed to channel “goodwill,” which is the intrinsic a series of New Jersey court growth into and towns with value of a business beyond the decisions have reconfirmed the existing infrastructure, and the buildings and . eminent domain powers of local search for ratables, the use of NJBIA would also like the bill to governments and largely deferred eminent domain has been on the include protection for those to their decisions on circumstances increase. But especially in light of property owners performing affecting their communities. Kelo, New Jersey must clarify the remediation in accordance with the Dressel adds that the League was circumstances under which private New Jersey Department of “pleased with the (Kelo) decision property may be taken for Environmental Protection (DEP). because redevelopment (is) an redevelopment and refine the Specifically, NJBIA is requesting essential element in revitalizing our statutory process for doing so. wording that would create a older, primarily urban areas” and is “The Kelo decision did not distinction between negligent a part of the “smart growth” efforts materially impact the eminent property owners who purposely to concentrate development into domain laws in our state,” delay the remediation process and areas where infrastructure already emphasizes David Brogan, New those property owners who are exists. In order to accomplish such Jersey Business & Industry actively remediating property in redevelopment, it is often necessary Association (NJBIA) vice president. accordance with DEP directives, for government to acquire entire “New Jersey and its municipalities which can take a considerable blocks, sometimes through eminent already have the authority to use amount of time. domain. eminent domain for redevelop- A-3257 passed the Assembly on “Some have been critical of local ment purposes. What Kelo did was June 22, 2006 and was sent to the governments’ involvement with the spur an examination into the use Senate Community and Urban private sector in development of our and possible abuse of eminent Affairs Committee. Senator Stephen downtowns,” Dressel notes. “In the domain in our state. This is turning Sweeney has the identical bill in the late 1980s and 1990s, they called this out to be good news for the business Senate (S-2088) and Senator Ronald the public-private partnership ... .” community because it can focus on Rice, who chairs the Committee, And such partnerships have been correcting some of the flaws in the introduced a similar bill (S-1975) in successful in many New Jersey current system.” late June 2006. In October 2006, communities. “Eminent domain is a Like the Public Advocate, NJBIA Senator Rice began hearings tool of last resort,” he states, “but an also wants to see a clarification and throughout the state to get public important tool nonetheless.” strengthening of “area in need of input on the bills. At press-time, James Kinneally, a partner in redevelopment” or “blight” criteria there is no indication as to when the Hoagland, Longo, Moran, Dunst, and pay-to-play protections in committee will act on them. Doukas, in New Brunswick, reports terms of those named as private With increased awareness of his municipal clients “are extremely redevelopers who will reap the eminent domain powers affirmed reluctant to resort to eminent profits from a condemnation. by Kelo, many more private domain.” He says, “In most cases, The most comprehensive reform property owners are challenging municipalities are able to negotiate bill appeared in June 2006, a year governmental condemnations of land purchases without resorting to after Kelo. Sponsored by their homes and businesses. eminent domain. Only after all Assemblyman John Burzichelli, A- Unfortunately, many of those negotiations have failed would they 3257 incorporates many of the challenges are made after the take such action.” recommendations in the has been condemned. And In his practice, representing Advocate’s report and from NJBIA, with the long and detailed process municipalities and government among other groups. Significantly, required of municipalities before agencies in more rural Middlesex the bill eliminates some of the they can declare an area “in need of and Monmouth counties, most of ambiguous language that the Public redevelopment” and take it through the eminent domain cases have Advocate warned “could apply to eminent domain, the courts have effected the preservation of open any property.” For example, a been reluctant to overturn local space “for a public use.” municipality would not be able to decisions. “But in New Jersey, I do see a delineate a property as “in need of “This process does not happen conflict developing,” he adds. “Kelo redevelopment,” the equivalent of casually or behind a wall of secrecy, did not change the law, but I see “blighted” under the LRHL, merely as has been suggested,” states popular opinion swinging against because its current condition is “not William Dressel Jr., executive the use of eminent domain more fully productive.” director of the New Jersey State than before Kelo. It seems that

N EW J ERSEY B USINESS 3 mayors and councils are even more voters surveyed by Fairleigh reluctant to use it.” Dickinson University’s Public-Mind Christopher Stracco, a litigation poll said they have heard a “great and real estate partner at Day deal” about eminent domain, Pitney LLP, Florham , notes slightly more than knew about the there are avenues to challenging issue right after the Kelo decision, plans for redevelopment, but and most continue to disapprove of often don’t get its use in most circumstances. challenged until the condemnation The respondents said their begins. “Once an area is determined support of the use of eminent to be ‘blighted’ and plans are drawn domain is highly contingent on up that show how an area is slated what sort of property is being taken for redevelopment, then people get by the government. For example, 90 agitated,” Stracco laments. “The percent said they oppose the seizure redevelopment process is a lengthy of middle class housing in order to one, often taking several years, and build upscale shops. While those affected have ample constructing buildings for public Howard Geneslaw, a director in the and opportunity to challenge the use such as a new school is an environment law group at Gibbons, Del Deo, Dolan, proposal along the way. acceptable application of eminent Griffinger & Vecchione, P.C., in Newark Challenging a redevelopment domain, 64 percent said they feel declaration at the condemnation taking and shops for such level is after the fact, and the courts uses is unacceptable. Some 47 can be met in a way other than are reluctant to second guess a percent of voters said they would through eminent domain.” process that has taken years to most likely support the state’s use On the other hand, eminent accomplish.” of eminent domain to replace domain often is the answer. To protect themselves in eminent dilapidated properties with better “Eminent domain tends to be domain situations, Stracco urges housing and shops. Only 16 percent intertwined with and drive businesses that property to said it is acceptable to take active redevelopment,” Geneslaw adds. have a condemnation clause that farmland for a public use, such as a “When a redevelopment designation will entitle them to some new school or ballfield. is made for a major project, compensation for being displaced Howard Geneslaw, a director in properties need to be assembled, and having to relocate. the real property and environment which can be a complicated process. “The fundamental problem law group at Gibbons, Del Deo, Eminent domain enables people have with condemnations is Dolan, Griffinger & Vecchione, redevelopment that might not taking someone’s home or business P.C., in Newark, asserts that since otherwise take place. It’s its misuse property and giving it to another Kelo, the courts are looking more that becomes the issue.” private developer and then not skeptically at condemnation As a result of Kelo, nearly every fairly compensating them,” Stracco decisions. state in the nation has either passed or says. “It’s become harder for is considering some sort of eminent Anthony Delle Pella of McKirdy municipalities to exercise their domain reform. Consequently, and Riskin, P.A., Morristown, states, eminent domain and redevelopment members of governing bodies and “While Kelo only impacts powers, as there is a much greater planning boards, as well as home and redevelopment projects, not takings focus on how municipalities business owners and those who lease for traditional public uses, it undertake their ‘area in need of property, need to be vigilant when the focused more scrutiny on redevelopment’ studies,” Geneslaw word “redevelopment” is uttered. municipalities in all of their eminent says. “Today the courts are not just Whatever legislation ultimately is domain cases. It opened peoples’ rubber stamping projects. Since Kelo, passed, it is critical to understand a eyes, especially in redevelopment they are requiring that municipalities proposal from the outset and act areas. They want the abuse of prove that the statutory standards for swiftly and deliberately to protect an power to stop.” redevelopment determinations and individual’s Constitutionally-granted Indeed, Kelo apparently did open the exercise of condemnation have property rights. peoples’ eyes. A year after the been met, and are looking more decision, over half of New Jersey skeptically at whether their needs

For website posting only. Reproduction or bulk printing prohibited. Excerpted from New Jersey Business, January 2007 by The Reprint Dept., 800-259-0470 (10600-0407)

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