New Jersey Eminent Domain Law Blog

In a unanimous decision which invalidated Paulsboro’s redevelopment classification of the Gallenthin property, the New Jersey Supreme Court analyzes the meaning of blight as it pertains to the New Jersey Constitution and the Local Redevelopment Housing Law (LRHL) in Gallenthin Realty Development, Inc. v. Borough of Paulsboro (A-51-2006):

The Constitution expressly authorizes municipalities to engage in redevelopment of “blighted areas.” The State may take private property only for a “public use.” Under the Blighted Areas Clause of the New Jersey Constitution, the clearance, replanning, development, or redevelopment of blighted areas shall be a public purpose and public use for which private property may be taken or acquired. The LRHL empowers municipalities to designate property as “in need of redevelopment” and thus subject to the State’s eminent domain power.

In the Court’s final analysis, Paulsboro’s view of blight was incongruent with both the statutes and the Constitution. Paulsboro interpreted subsection 5(e) of the LRHL to permit redevelopment of any and all properties that were stagnant, or not fully productive. Any property which is underutilized could be deemed blighted under this flawed approach and, had the Court's interpretation adopted such an expanded definition of blight, most properties would be eligible for redevelopment. Instead, the Court held:

Because the New Jersey Constitution authorizes government redevelopment of only “blighted” areas, the Legislature did not intend N.J.S.A. 40A:12A-5(e) to apply in circumstances where the sole basis for redevelopment is that the property is “not fully productive.” Rather, subsection 5(e) applies only to areas that, as a whole, are stagnant and unproductive because of issues of title, diversity of ownership, or other similar conditions. Therefore, the Borough of Paulsboro’s redevelopment classification in respect of the Gallenthin property is invalidated.

However, the Court also said that its holding does not prejudice any future inquiry by the Borough regarding whether the property is “in need of redevelopment” based on any other legitimate grounds.

Paulsboro’s approach in blighting the property was flawed because of the absence of substantial evidence under the statutory criteria in the LRHL. In this case, the Court clearly states that a record must contain more than a bland, recitation of applicable statutory criteria. Paulsboro’s failure to provide such a record led to the invalidation of the blight designation:

Paulsboro’s only reason for designating the Gallenthin property as “in need of redevelopment” was that it was not being utilized in a fully productive manner. Those considerations, standing alone, are insufficient to engage the municipality’s power to designate property as “in need of development” and, therefore, subject to eminent domain. Further, there is no evidence in the record that the broader redevelopment area suffered from a lack of proper utilization caused by conditions of title of the real property therein.

Paulsboro retained expert Remington and Vernick to perform a study of the “BP/Dow Redevelopment Area.” There was no reference that the Gallenthin property should be included because of access problems associated with the larger redevelopment area, nor did the borough’s professional planner, George Stevenson, testify about access problems. Had such evidence been provided, the Court might have reached a different conclusion. In any case, the access issue could have been ameliorated with a partial taking as referenced in the oral arguments.

Instead, the expert report merely included a recitation of the subsection 5(e) of the LRHL and concluded that the Gallenthin property should be designated solely because it was stagnant and underutilized. The Court also noted that the record was silent about the borough’s designation of protected wetlands as a redevelopment area. Nor did the record contain evidence that the Gallenthin’s property was integral to the BP/Dow Redevelopment Area. To merely say that the Gallenthin property was not being utilized in a fully productive manner was not enough to declare the property blighted or to engage the municipality’s power of eminent domain The Court had no choice but to invalidate the designation.

The Court stopped short of declaring section 5(e) unconstitutional by focusing only on the fact that Paulsboro didn’t meet the substantial evidence test in this particular case:

Because it must be presumed that the Legislature intended subsection 5(e) to function in a constitutional manner, and because subsection 5(e) is reasonably susceptible to an alternative interpretation, the Court concludes that the Legislature intended N.J.S.A. 40A:12A-5(e) to apply only to property that has become stagnant because of issues of title, diversity of ownership, or other similar conditions. By adopting that construction, the Court avoids rendering subsection 5(e) unconstitutional and gives effect to the Legislature’s original purpose in adopting the language that would become subsection 5(e).

Because the Court's holding does not prejudice any future inquiry by the Borough, there is practical significance to the 42-page opinion written by Chief Justice Zazzali. The borough could redo the blight study in conformity with the Court’s opinion and the requirements of the statute. In all likelihood, those corrections would be upheld. This decision is a temporary bump in the road for Paulsboro, and gives municipalities further instruction on how to blight a property.

It appears the good news for the Long Branch cases is the dictum in the Court's opinion at Part VI, where it imposes the standard of review to be followed, i.e., that there can be no rebuttable presumption of blight, rather that blight must be proven by substantial evidence. This ruling alone should warrant a "slam dunk" on the current appeal and get the Long Branch cases back to the trial court.

What impact will this have on areas previously declared blighted under a standard identical or similar to the one used in Paulsboro? Will property owners be able to resist eminent domain under Gallenthin even if they didn't object when the declaration of blight was made? And will towns have to re-investigate those areas to meet the Gallenthin test?