Eminent Domain Ruling Draws Industry Fire

"At first blush, it appears to me that this is a move in the wrong direction," Michael McGuinness, executive director of the NJ Chapter of Naiop, tells GlobeSt.com. "Our objective has been to support efforts to revitalize New Jersey's older communities. We strongly prefer that the process promotes assemblage of redevelopment parcels in a cooperative and non-contentious manner that results in a more careful and discriminating use of condemnation as a tool of last resort.

"It would indeed be unfortunate if the Gallenthin decision creates yet another roadblock for struggling communities such as our older suburbs and second- and third-tier cities that are hoping for a better quality of life," McGuinness says.

"The tail is wagging the dog," says Ralph Zucker, president of the Lakewood-based Somerset Development. "A popular, politically driven backlash to the US Supreme Court [Kelo] decision is causing the anti-development pendulum to swing too far the other way. The fact remains that this decision will have a significant negative effect on much-needed redevelopment in our state. Many areas that are truly blighted will remain a fiscal and environmental drag on their communities.

"Redevelopment statutes may have been pushed too far in some instances," Zucker says. "But to decimate a much-needed tool in New Jersey's growth, even in areas that it's clearly indicated, is going too far in the wrong direction. The potential victims aren't only developers, but the communities that need their help."

"The Court's decision puts developers in a brave new world," says Kevin Moore, Princeton-based co-chair of the land use and development law practice group at Sills Cummis Epstein & Gross. "Developers would be well-advised to do enhanced due diligence on procedural and substantive actions that a municipality took to declare an area 'in need of redevelopment' before they enter into redeveloper agreements.

"Where appropriate, municipalities and redevelopers should utilize conventional rezoning techniques or rehabilitation provisions of the redevelopment statute to achieve their goals," Moore advises. "That's especially true in the absence of a need for eminent domain, tax incentives or redevelopment area bond financing.

"The potentially most far-reaching and disturbing aspect of the decision is the Court's narrowing of the constitutional definition of blight," Moore tells GlobeSt.com. "If the Court or lower courts apply this interpretation to the other redevelopment criteria in the future, there may be a substantial contraction in areas in which eminent domain, long-term tax exemptions and redevelopment area bond financing are available. If that's the case, the state Department of Community Affairs should reverse its restrictive policies with respect to revenue allocation district financing."

"Developers must make sure it's not window-dressed to be a blighted property if it's not really blighted, even if an anxious town says it's blighted," says Richard I. Clark, a partner in the Sparta law firm of Laddey, Clark & Ryan, who is also a trustee of the state Bar Association's Land Use Section and vice-chair of the New Jersey League of Municipalities' Land-Use Drafting Committee. "Be a real, valid partner in the fact-finding process," he advises, "because, from the looks of this opinion, all litigation will turn heavily on the precise facts in each development. Make sure the process is authenticated and verified and was done without cutting corners. Gone are the days when you can accept at face value what the town is telling you.

"Even then, be on the lookout for long-time property owners who might tie you up in the appellate division for years, which will reduce the value of your project," Clark says. "Developers should really look with a critical eye at any redevelopment project in the suburbs or no-growth zones. There will be a strong presumption against using eminent domain in those areas."

Clark urges municipalities to "analyze redevelopment possibilities and the possible taking of property through eminent domain even more closely than they do for their master plans, because the Court's decision indicates that towns will need factual data to support their redevelopment decisions."