January 1, 1900

by Kenneth E. Meiser

Driven by unyielding State policies against growth in suburbs with large amounts of undeveloped land, New Jersey developers have been increasing their focus on urban and inner-suburb redevelopment. Those redevelopment efforts involving condemnation now face major hurdles, caused in part by the backlash to the United States Supreme Court’s Kelo v. City of New London decision, but also in large measure because of the New Jersey Public Advocate’s challenge to what it labels condemnation “abuses.”

The New Jersey Supreme Court is now considering a case, Gallenthin Realty Development v. Borough of Paulsboro, in which the Public Advocate seeks to have the Court adopt its restrictive redevelopment condemnation theories. Hill Wallack LLP has submitted a “friend of the court” brief to the Supreme Court in the Gallenthin case on behalf of the New Jersey Builders Association. Although the facts in that case concern only one parcel in Gloucester County, the case represents the Court’s first review of the 1992 Local Redevelop­ment and Housing Law (“LRHL”). The clear goal of the Public Advocate is to encourage as comprehensive and restrictive a decision as possible, one which addresses a large number of the Public Advocate’s concerns, to the detriment of New Jersey builders and New Jersey redevelopment. Simultaneously, the Public Advocate is leading the charge for legislative change which would greatly restrict, and possibly derail, any redevelopment which involves condemnation.

The Public Advocate Redevelopment Report

The new Department of Public Advocate reopened on March 27, 2006, and the Public Advocate immediately announced that his first major initiative would be to eliminate the perceived abuses of eminent domain and redevelopment in New Jersey. Shortly thereafter, the Public Advocate submitted a 43-page report, entitled “Reforming the Use of Eminent Domain for Private Redevelopment in New Jersey” (“the Report”). While based in part on negative reaction to the Kelo decision, it was grounded on the New Jersey Constitution, law and policies. First, the Report examined the redevelopment laws in New Jersey in light of the New Jersey Constitution language concerning blighting. It concluded that the 1992 LRHL, which established the provisions for designating areas in need of redevelopment, contained several criteria that were unconstitutional, unless judicially rewritten and narrowed, because they went beyond the meaning of “blight” in the New Jersey Constitution.

The Report made numerous recommendations. For example, it recommended that certain redevelop­ment criteria be repealed or declared unconstitutional, such as Section (e) of the LRHL, which is at issue in Gallenthin (allowing for the designation of land as being “in need of redevelop­ment” if there is “a growing lack or total lack of proper utilization of areas caused by the condition of the title, diverse ownership of the real property therein or other conditions, resulting in a stagnant or not fully productive condition of land potentially useful and valuable for contributing to and serving the public health, safety and welfare”).

It also recommended that condem­nation in redevelopment projects should be a tool of last resort, to be used only when no other alternative could possibly succeed. It further recommended that the municipality have the burden of proof to establish by clear and convincing evidence that an area has been properly designated as blighted. This would replace the historic rule that the property owner challenging redevelopment or condem­nation has the burden of proof.

It also recommended severely limiting the right to condemn non-blighted areas within a larger area to be designated as blighted, even if the overall area qualified as blighted. It also suggested that the process by which a municipality declares an area in need of redevelopment is insufficient because it provides for inadequate notice. It further recom­mended that compensation for property condemned for redevelopment purposes should be established in a manner such that the property owner receives sufficient funds to afford a home of similar size and quality within the municipality under comparable condi­tions. Condemnation awards should, per the Report, be based upon fair market value or replacement value of the house, whichever is higher. It also called for strengthening ethics restrictions to prevent conflict of interest and to prohibit “pay-to-play.”

The Public Advocate’s Legislative Strategy

The Public Advocate first seeks to effectuate his proposed “reforms” through legislation. While the outcome of the legislative process is unclear as of the time this Quarterly went to press, numerous versions of bills have been introduced and made the subject of committee hearings. The legislative process must be carefully monitored to see which, if any, proposals are enacted into law.

The Public Advocate’s Judicial Strategy

The Public Advocate has also submitted amicus briefs in pending Appellate Division cases (involving Long Branch and Lodi), and has been granted leave to submit a brief and participate in oral argument in the pending Supreme Court case— Gallenthin. There are two appeals relating to Long Branch arising out of similar facts, the City of Long Branch v. Brower and the City of Long Branch v. Anzalone. The Public Advocate makes a number of arguments in those cases, consistent with the proposed reforms in the Report, as summarized above.

The Public Advocate’s amicus brief to the Appellate Division in LBK Associates v. Borough of Lodi seeks affirmation and expansion of the trial court decision invalidating Lodi’s attempts to condemn two mobile home parks. The destruction of the mobile home parks, which contain almost all low and moderate income housing, would lead to less affordable housing units in the municipality. The Public Advocate asserts that the New Jersey Constitution requires a heightened scrutiny for redevelopment proposals that eliminate lower income housing opportunities. It also argues that the LRHL is not being construed in a constitutional manner, and that, even if the grounds for redevelopment satisfy the criteria under the redevelopment statute, they do not satisfy the Constitution.

The Gallenthin Case The Gallenthin case being heard by the Supreme Court concerns the validity of Paulsboro’s redevelopment plan, which extends the redevelopment area beyond two environmentally contaminated sites to include the plaintiff’s 63 acres. The plaintiff petitioned the Supreme Court to hear the case, stressing that the Supreme Court has never reviewed any case involving the LRHL, the redevelopment statute enacted in 1992. It asserted that Paulsboro seeks to take land in total disregard of any reasonable standard of what constitutes a blighted area. The petition further states that, if a property could be taken on grounds that it was vacant and not fully productive, almost any property in the state would be vulnerable to be taken on the most minimal of evidence. The petition asks the Supreme Court to declare that the analysis and findings of Paulsboro, even if sufficient to satisfy the statutory criteria, were insufficient to constitute “genuine blight” within the meaning of the New Jersey Constitution. The plaintiff also asserts that a municipal designation of property in need of redevelopment must be reviewed on a standard based upon heightened scrutiny because of the “severe interference” with property rights secured by the New Jersey Constitution.

The Public Advocate’s amicus brief urges reversal of the local redevelopment decisions. The Public Advocate questions New Jersey cases dating back over fifty years, which hold that the blight warrant­ing condemnation is not confined to the “blight” of the “ghettoes” of the cities. It asks the Court to declare portions of the LRHL unconstitutional. It also requests that the Court place the burden of proof upon the municipality in redevelopment cases.

Hill Wallack LLP’s amicus brief on behalf of the NJBA urges rejection of the Public Advocate positions, and judicial ratification of the redevelopment efforts that are essential to carrying out the revitalization of New Jersey’s urban areas and inner suburban rings. Gallenthin is currently scheduled for oral argument on April 26, 2007.

Conclusion

By the time this legislative session ends and the Supreme Court renders its Gallenthin decision, New Jersey citizens will have a very good idea of whether the Public Advocate’s anti-redevelopment crusade has been successful. Some reforms not affecting the right to condemn may well be justified. Never­theless, if the Public Advocate succeeds in effectively removing condemnation from the redevelopment process for most projects, New Jersey will be in danger of losing much of the public benefits and revitalization that accrue from redevelopment, as potential redevelopment projects become embroiled in lengthy litigation with very uncertain outcomes. These events must be closely monitored by those considering redevelopment project