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WILL THE NJ RULE AFFECT EMINENT DOMAIN NATIONALLY?

Jim Ettelson is a partner in the corporate and real estate practice of Thorp, Reed & Armstrong. He is based in Philadelphia.

The bulk (57%) of respondents to last week’s Feedback Poll don’t like the scent in the wind since New Jersey’s recent ruling limiting eminent domain. As Eric Peterson reported, the Court drew the line at takings because a parcel was “underutilized.” While the majority is convinced that, as the question was posed, the industry will pay in the long run, 43% believe it’s an isolated incident. Commentator Ettelson doesn’t buy into that theory. He says there’s going to be dialog on a national basis–and the ruling could help both sides of the issue. Here’s why:

“I don’t know what impact the ruling will have nationally, but it’s another piece of the discussion that will go on–on both sides of the issue.

“Blight is like obscenity. No one’s really sure what it is but they know it when they see it. And everyone has a different view of it. So nobody has fully rejected the blight argument yet. We know it’s obvious that a local municipality or government cannot take property just because they want to turn it over to a private entity to develop it. There are a number of things that have to happen and different states treat it different.

“In terms of affect, what happened in New Jersey might inspire others who are opponents to say, ‘If they could do it, we can challenge it on the same basis.’ And it might inspire people on the other side to say, ‘Let’s avoid what happened in Jersey and let’s not use these nebulous terms.’

“Politically, some strange bedfellows have been created since Kelo, with both sides of the aisle coming together in their mutual opposition to it, which transcended their mutual opposition to each other. But they came together for different reasons, and everyone was seeing what they wanted to see in it. The question is what do the cities really see in it and what are the areas that truly need revitalization. What are they going to do? This most recent wrinkle to me is just another way of saying we’re still trying to figure out how to define blight. In New Jersey, the court made a point of saying you can’t take property just because it’s not fully productive. That you need to make sure it negatively affects surrounding property.

“This becomes a major problem for legislatures because frankly, we have all of this public tax money. If we stop such projects all together how do we benefit these cities with all this money we just took out of people’s pockets? Right now, maybe it’s OK to put these projects on hold, but after a while, if deterioration continues, if revitalization slows down or a port doesn’t get developed or an inner city doesn’t get improved, people will start to ask what we need [these legislators] for.

“If you look at the New Jersey decision from 50,000 sf, you’d see a port area being developed; you’d see one thing. Down on the ground, you’d see a piece of property–the last piece in this assemblage–and if the only reason you needed that piece was for access, it would look like an overtaking. It could be said that, had they done it differently and they referred to it as something more definitive than not fully productive, or had they emphasized the importance of the access an reduced their taking to whatever the necessary access was, the issue would never have come up.

“The real question here is if there is public process and if people have the right to object in a legislative process and can you somehow definitively clarify, at least in your own municipality, what it is that people can expect from this statute. If you can’t, we’re talking about fodder for newspapers for years.”

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