In Kelo v. New London the United States Supreme Court upheld the taking of non-blighted property needed for economic development as a legitimate “public use” under the Fifth Amendment to the United States Constitution, but also recognized “the hardship that condemnations may entail, notwithstanding the payment of just compensation” and “emphasize[d] that nothing in our opinion precludes any State from placing further restrictions on its exercise of the takings power.” In the wake of the Kelo decision, the legislative and the executive branches of our state government have closely scrutinized a public entity’s authority under current law to acquire real property by eminent domain for redevelopment purposes (a type of economic development). Indeed, over the last several months the Assembly Commerce and Economic Development Committee has held hearings on this topic and, on May 18, 2006, the newly reestablished Department of the Public Advocate issued a detailed report offering numerous recommendations for reform.
One of the Public Advocate’s principal criticisms of the substantive law governing redevelopment acquisitions, the Local Redevelopment and Housing Law (“LRHL”), is the lack of objective, meaningful criteria for designating property as being in need of redevelopment – a prerequisite to condemnation – that is consistent with state constitutional limitations on redevelopment takings. Under Article VIII, Section 3, Paragraph 1 of the New Jersey Constitution, private lands may be taken for redevelopment only if they are “blighted areas.” Historically, according to the Public Advocate, blight has been understood to be a “current condition of . . . deterioration, decay and stagnation[,]” but current law far exceeds this understanding.
As a result of this self-searching process, it appears that New Jersey is now ready to take up the Supreme Court’s invitation to clarify the circumstances under which private property may be taken for redevelopment (and refine the statutory process for doing so).
On June 8, 2006, almost one year after the Supreme Court decided Kelo, a proposed reform bill (No. A3257) was introduced in the State Assembly, which incorporates many of the recommendations contained in the Public Advocate’s report. Significantly, the reform bill eliminates some of the overreaching and ambiguous language that the Public Advocate warned “could apply to virtually any property.” For example, under the reform bill a municipality would no longer be able to delineate property as being in need of redevelopment (the equivalent of “blighted” under the LRHL) merely because its current condition was “not fully productive.” Similarly, the reform bill deletes in its entirety the so-called “smart growth planning principles” criterion. The Public Advocate in its report strongly criticized the use of smart growth concepts as a basis for condemnation, because they have no bearing upon the present condition of the property being taken and this runs afoul of the “blighted areas” limitation under the New Jersey Constitution.
In addition to tightening up the criteria for the delineation of redevelopment areas, the reform bill treats many other aspects of redevelopment planning and the designation and acquisition of property for redevelopment purposes. Among these include the quality and quantity of pre-hearing and post-determination notices, the nature and extent of public participation in the redevelopment planning process, the content requirements for redevelopment plans, competitive bidding, the valuation guidelines for just compensation and relocation expenses. Of course, a complete evaluation of these (and other) proposed statutory changes is beyond the scope of this article. Suffice it to say that whether you own or lease property in an area being considered for redevelopment or are the designated redeveloper, a thorough understanding of redevelopment law as it continues to develop and change is crucial to protecting your interests – and, having competent legal counsel can make all the difference.