Redevelopment in New Jersey After Kelo v. City of New London

Redevelopment in New Jersey After Kelo v. City of New London

The recent United States Supreme Court ruling of Kelo v. City of New London, 125 S.Ct. 2655 (2005) has been given wide attention in the media on its potential impact to greatly increase municipal authority to take property to increase tax ratables, to spur economic development and in general to improve the appearance of a municipality.  This article will show why Kelo is not applicable to support economic redevelopment and takings in New Jersey.

Kelo–U.S. Supreme Court Decision

The factual scenario in Kelo is relatively straightforward.  The city of New London, Connecticut has been in economic decline for decades.  A state agency declared New London a “distressed municipality.”  See Kelo, supra, 125 S.Ct. at 2658. The citizens of the Fort Trumbull area lost 1,500 jobs when the Federal Government closed the Naval Undersea Warfare Center in 1996.  See id. The unemployment rate of New London approximately doubled that of the state of Connecticut.  To combat these issues facing New London, state and municipal officials worked together to start revitalizing New London.  The nine plaintiffs own 15 homes in the neighborhood of Fort Trumbull which is part of the subject development/redevelopment.  See id., at 2660.

The important factor given very little notice in this decision is the part of the Court’s decision that finds that “the City has invoked a state statute that specifically authorizes the use of eminent domain to promote economic development.”  See id., at 2665.  (Emphasis supplied.)  The strongly worded dissent of Justice Sandra Day O’Connor focused on the broad implications of the majority’s ruling.  Justice O’Connor wrote that “[u]nder the banner of economic development, all private property is now vulnerable to being taken and transferred to another private owner, so long as it might be upgraded–i.e., given to an owner who will use it in a way that the legislature deems more beneficial to the public–in the process.”  Id., at 2671.  Further, that Kelo:

presents an issue of first impression:  Are economic development takings constitutional?  I would hold that they are not.

Id., at 2673.  Justice O’Connor further argues that this decision creates the looming “specter of condemnation hangs over all property.  Nothing is to prevent the State from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory.”  Id., at 2676.

The majority of the Court seems to limit the scope of the decision by holding that “[t]his Court’s authority… extends only to determining whether [New London]’s proposed condemnations are for a ‘public use’ within the meaning of the Fifth Amendment to the Federal Constitution.”  Id., at 2668.  The Court’s attempt to limit its holding is not strong enough to quell the anticipation described by Justice O’Connor, of a wide-spread cataclysmic reaction to this decision by states and municipalities seeking to take property to further economic development and redevelopment plans.  See, id., at2671, 2676-2677.  What the Court’s holding fails to do is limit the ramifications of the decision based on the very statute at issue that permits economic redevelopment and taking.  This statute, C.G.S.A. § 8-186, et seq. is not mentioned in the dissent or in the recent commentary of this decision.  By the statute’s own terms the holding of Kelo would be limited to only the facts and circumstances of Kelo.  It would prohibit municipalities and other states, such as New Jersey, from adopting redevelopment plans seeking only to economically benefit the state or municipality unless a statute permitted such actions.  New Jersey does not have such a statute.

Connecticut Statute

The statute at issue in Kelo, C.G.S.A. § 8-186, states:

It is found and declared that the economic welfare of the state depends upon the continued growth of industry and business within the state; that the acquisition and improvement of unified land and water areas and vacated commercial plants to meet the needs of industry and business should be in accordance with local, regional and state planning objectives; that such acquisition and improvement often cannot be accomplished through the ordinary operations of private enterprise at competitive rates of progress and economies of cost; that permitting and assisting municipalities to acquire and improve unified land and water areas and to acquire and improve or demolish vacant commercial plants for industrial and business purposes and, in distressed municipalities, to lend funds to businesses and industries within a project area in accordance with such planning objectives are public uses and purposes for which public moneys may be expended; and that the necessity in the public interest for the provisions of this chapter is hereby declared as a matter of legislative determination. (Emphasis supplied.)

Other sections of the Connecticut statute support this position.  Section 8-187 defines “development project” as “a project conducted by a municipality for the assembly, improvement and disposition of land or buildings or both to be used principally for industrial or business purposes …”  (Emphasis supplied.)  The section defines “business purpose” as “includ[ing], but is not limited to, any commercial, financial or retail enterprise and includes any enterprise which promotes tourism and any property that produces income.”  Section 8-189 requires “that the project will contribute to the economic welfare of the municipality and the state.”

Under the terms of the Connecticut statute, the Supreme Court correctly affirmed the Connecticut Supreme Court which upheld the actions of New London in taking plaintiffs’ property.  The United States Supreme Court, unfortunately, failed to limit the decision appropriately to the statute upon which New London’s actions were based.  It is only because the Connecticut statutes permit economic redevelopment and declare such redevelopment as a public purpose is this decision able to be tolerated.  New Jersey does not specifically have such a statute.

New Jersey Redevelopment and Takings Law

The New Jersey Constitution provides for taking of private property to clear blighted property.  N.J. CONST. art. 8, § 3, par. 1 states in pertinent part:

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.  Municipal, public or private corporations may be authorized by law to undertake such clearance, replanning, development or redevelopment…

The right to take private property is mentioned in two other sections of the New Jersey Constitution.  N.J. CONST. art. 4, § 6, par. 3 permits “[a]ny agency or political subdivision of the State or any agency of a political subdivision thereof, which may be empowered to take or otherwise acquire private property for any public highway, parkway, airport, place, improvement or use, may be authorized by law to take or otherwise acquire a fee simple absolute or any less interest…”  Art.1, par. 20 permits the taking of private property for public use, but requires the payment of just compensation.

The relevant statutory scheme is the Local Redevelopment and Housing Law (LRHL), N.J.S.A.40A:12A-1, et seq.  N.J.S.A. 40A:12A-15 provides that “the municipality shall not have the power to take or acquire private property by condemnation in furtherance of a redevelopment plan, unless:  a. the area is within an area determined to be in need of redevelopment pursuant to this act; or b. exercise of that power is authorized under any other law of the State.”  For the municipality to declare an area in need of redevelopment pursuant to the LRHL, the municipal council and planning board must follow the statutory scheme and must find within a proposed area designated for redevelopment one of eight criteria found in N.J.S.A. 40A:12A-5 [ 1].   Each of the individual criteria is a complex, long and multi-part sentence that requires the entirety of one of the sections to be satisfied by substantial evidence.  See N.J.S.A. 40A:12A-6(b)(5); Spruce Manor Enterprises v. Borough of Bellmawr, 315 N.J.Super. 286, 293-294, 296-297 (Law Div. 1998); Winters v. Township of Voorhees, 320 N.J.Super. 150, 155-157 (Law Div. 1998).  None of the sections of the LRHL permit takings for purely economic purposes.  Subsection (g) regarding Urban Enterprise Zones would be the closest, but that section still requires the satisfaction of the Urban Enterprises Zones Act.

Unlike the Connecticut statute, there is no identical economic redevelopment statute in New Jersey that permits the type of takings upheld by the United States Supreme Court in Kelo.  Two bills currently before the state legislature seek to limit the potential of the Kelo decision by limiting the power of condemnation of private residences and proposing a constitutional amendment to preclude economic redevelopment takings. [ 2]

This will be a hot-button issue in New Jersey because municipalities may attempt to exercise the power of eminent domain purely for economic purposes in reliance on Kelo, without giving effect to the New Jersey statute which requires the municipality to prove the property is an area in need of redevelopment.  Based on the current status of the law, Kelo and the proposition of purely economic redevelopment is a nullity in New Jersey.

[1] The statutory section of N.J.S.A. 40A:12A-5 provides as follows:
a. The generality of buildings are substandard, unsafe, unsanitary, dilapidated, or obsolescent, or possess any of such characteristics, or are so lacking in light, air, or space, as to be conducive to unwholesome living or working conditions.

b. The discontinuance of the use of buildings previously used for commercial, manufacturing, or industrial purposes; the abandonment of such buildings; or the same being allowed to fall into so great a state of disrepair as to be untenantable.

c. Land that is owned by the municipality, the county, a local housing authority, redevelopment agency or redevelopment entity, or unimproved vacant land that has remained so for a period of ten years prior to adoption of the resolution, and that by reason of its location, remoteness, lack of means of access to developed sections or portions of the municipality, or topography, or nature of the soil, is not likely to be developed through the instrumentality of private capital.

d. Areas with buildings or improvements which, by reason of dilapidation, obsolescence, overcrowding, faulty arrangement or design, lack of ventilation, light and sanitary facilities, excessive land coverage, deleterious land use or obsolete layout, or any combination of these or other factors, are detrimental to the safety, health, morals, or welfare of the community.

e. A growing lack or total lack of proper utilization of areas caused by the condition of the title, diverse ownership of the property therein, or other conditions, resulting in a stagnant or not fully productive condition of land potentially useful and valuable for contributing to and serving the public health, safety and welfare.

f. Areas, in excess of five contiguous acres, whereon buildings or improvements have been destroyed, consumed by fire, demolished or altered by the action of storm, fire, cyclone, tornado, earthquake or other casualty in such a way that the aggregate assessed value of the area has been materially depreciated.

g. In any municipality in which an enterprise zone has been designated pursuant to the “New Jersey Urban Enterprises Zones Act,” P.L.1983, c. 303 (C.52:27H-60 et seq.) the execution of the actions prescribed in that act for adoption by the municipality and approval by the New Jersey Enterprise Zone Authority of the zone development plan for the area of the enterprise zone shall be considered sufficient for the determination that the area is in need of redevelopment pursuant to sections 5 and 6 of P.L.1992, c. 79 (C.40A:12A-5 and 40A:12A-6) for the purpose of granting tax exemptions within the enterprise zone district pursuant to the provisions of P.L.1991, c. 431 (C.40A:20-1 et seq.) or the adoption of a tax abatement and exemption ordinance pursuant to the provisions of P.L.1991, c. 441 (C.40A:21-1 et seq.).  The municipality shall not utilize any other redevelopment powers within the urban enterprise zone unless the municipal governing body and planning board have also taken the actions and fulfilled the requirements prescribed in P.L.1992, c. 79 (C.40A:12A-1 et al.) for determining that the area is in need of redevelopment or an area in need of rehabilitation and the municipal governing body has adopted a redevelopment plan ordinance including the area of the enterprise zone.

h. The designation of the delineated area is consistent with smart growth planning principles adopted pursuant to law or regulation.

[2]Senate Bill S-2739 by Nia Gill, D-Essex and Diane Allen, R-Burlington seeks to amend the LRHL to prohibit the use of condemnation to take residential properties for redevelopment. There is an identical bill in the Assembly, A-4392, sponsored by Michael Painter and Robert Morgan, both D-Monmouth.

The other bill, ACR-256, seeks a constitutional amendment to limit use of condemnation to traditional public purposes, thereby precluding economic redevelopment. The bill also seeks to repeal constitutional provisions allowing condemnation and long-term tax exemptions for redevelopment projects. See also 181 N.J.L.J 175 (“Passaic Case Measures Fairness of Compensation in Kelo-type Taking,” 7/18/05 New Jersey Law Journal, p. 11.)

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