Waiting for Eminent Domain Reform

Last Thursday’s meeting of the Senate Community and Urban Affairs Committee ended shortly after it began. With no quorum and two of the Democrats missing, Senator Rice withheld the eminent domain reform bills until the next meeting which, he said, the would be in a few days. “This legislation will continue to come up until we can determine what the real problem is with Democrats -- in terms of not appearing…or in terms of the vote. This bill has been compromised so much, and every issue that was raised by Senator Sweeney and Assemblyman Burzichelli in their communications to me, dated May 12, has been addressed one way and another, most of them ended up in compromises, so I know that everyone had every opportunity to read all the changes, the amendments, etc.”

The previous Thursday, June 8, the committee was supposed to discuss the most recent iteration of S-757. That hearing was postponed.  Here is the June 1, 2008 version of S-757. The bill proposes changes to the Local Redevelopment Housing Law, the Eminent Domain Act of 1971 and the Relocation Assistance Act.

One of the major changes proposed to the Local Redevelopment Housing Law (LRHL) is to make “blighted” areas two-tiered: “condemnation area for tax exempt purposes” and “non-condemnation redevelopment areas.” I do not think this proposal will pass constitutional review. Article VIII, Section 3 of the New Jersey Constitution says, “the clearance, replanning, development or redevelopment of blighted areas shall be a public purpose and public use for which property may be taken or acquired.” The new legislation proposes to divide blighted areas into condemnation and non-condemnation areas. This is confusing, and more importantly, is contrary to the Constitution which says that once a property is blighted it may be condemned.

How do municipalities propose to differentiate between condemnation and non-condemnation areas? This provision will create instant controversy. Why is parcel A to be condemned and parcel B, belonging to the councilman’s brother, left untouched? The potential for favoritism is great where there is not clear standard to be followed in determining what property is condemned or not.

What is to prevent a municipality from changing its mind, once everything is blighted, or declared in need of redevelopment, and deciding to condemn remaining parcels? When should a property owner contest blight? Should they contest it at all if they are designated in a “non-condemnation redevelopment area?” Will there be a new notice and hearing for this class of property owners?

The Legislature ignores the very negative impacts of blight designation: i.e. difficulty in selling, mortgaging or improving blighted properties, once they are determined to in need of redevelopment. Tenants will be reluctant to make long term investments in blighted properties. And tenants, in this iteration of the bill, are not being noticed and they should be; often, tenants have a greater interest in the property than the landlord.

Over time, blight often becomes a self-fulfilling prophecy. If it’s not blighted now, just wait for the next ten years to pass. Capping blight at 5 to 7 years is a real need in the reform effort, and if the project is not underway within that time frame, do away with the blight designation.

The bill improves upon the notice provisions to property owners citing Harrison v. DeRose. It also provides for 60 days to appeal a blight designation, instead of the present 45 days. In addition, the bill proposes to bar campaign contributions by redevelopers from the time of the onset of the redevelopment process to the completion of the redevelopment agreement.

The bill also excludes condemnation of parcels of one acre or more which are contaminated where the owner is actively cleaning the property and in compliance with DEP rules and time frames regarding remediation.

The bill also provides that the condemning authorities’ appraisal cannot be less than a valid first mortgage on the property. The mortgage must be made by an institutionalized lender at least 180 days prior to negotiations to acquire the property, and the amount of the mortgage has to be based on a loan-to-value ration not to exceed 90 percent of the property’s appraised value as determined by the lender at the time of the loan.

Senator Rice concluded the last week’s committee meeting saying, “Let me thank all of you who came to witness this day… this historical…There will be many more historical days, let me assure you, regarding this legislation.”

Tomorrow is another day.