The State of Eminent Domain Reform in New Jersey

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 to acquire real property by eminent domain for redevelopment purposes (a type of economic development). This year, the Assembly Commerce and Economic Development Committee has held hearings on eminent domain, and the Department of the Public Advocate has made this topic one of its top priorities.

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 May 18, 2006, the Public Advocate issued a detailed report offering numerous recommendations for reform and, one month later, almost a year after the Supreme Court decided Kelo, State legislators introduced two proposed reform bills. One of the proposals, which has been referred to as the "Burzichelli bill" named after its primary sponsor John J. Burzichelli, was overwhelmingly passed by the full Assembly on June 22, 2006 (No. A3257), and referred to the State Senate on June 26, 2006 (No. S2088). The alternative reform bill, sponsored by Senator Ronald Rice (the "Rice bill"), was introduced in the Senate on June 12, 2006 (No. S1975). This article takes a brief look at some of the proposed legislative changes contained in each of the reform bills.

Definition of "Redevelopment Area"

One of the Public Advocate's principal criticisms of the substantive law governing redevelopment acquisitions, the Local Redevelopment and Housing Law ("LREL"), 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."

Significantly, the Burzichelli bill and the Rice bill attempt to correct this problem. For example, under both proposals, a municipality acting under the LRHL would no longer be able to designate property as a "redevelopment area" (the equivalent of "blighted" under the New Jersey Constitution) merely because its current condition was "stagnant or not fully productive." Similarly, both reform bills delete in its entirety the socalled "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.

The Burzichelli bill and the Rice bill also propose limitations on the inclusion of property within redevelopment areas that do not meet any of the statutory criteria, sometimes referred to as "nonblighted" properties. Although municipalities would retain the power to include nonblighted properties within redevelopment areas (provided they are found to be necessary for the effective redevelopment thereof), both proposals strictly limit the delineation of such nonblighted lands to 20% of the area "to be designated as available for private ownership." The meaning of this suggested statutory amendment is not completely clear but, presumably, the quoted language is intended to exclude from the 20% calculation all land within a designated redevelopment area that is intended for public use, such as parks or roadways.

In addition to eliminating some of vague and overreaching elements of the redevelopment area criteria under the LRHL, the Burzichelli bill and the Rice bill add one new criterion that may be used to designate property for redevelopment, although the proposed language for this new criterion differs between the two bills in a significant way. Under both proposals, commercial or industrial property "that has remained vacant or substantially underutilized for a period of 24 consecutive months" may be designated as being in need of redevelopment, provided that this circumstance is due to certain environmental conditions.

Under the Burzichelli bill, vacant or underutilized commercial and industrial properties do not qualify for redevelopment unless the vacancy or underutilized condition is "due to environmental contamination." This term is specifically defined in the said reform bill as "any discharged hazardous substance" defined under the Spill Compensation and Control Act, N.J.S.A. 58:10-23.11, et. seq., any "hazardous waste" defined under the Solid Waste Management Act, N.J.S.A. 13:1E-1, et. seq., or any "pollutant" defined in the Water Pollution Control Act, N.J.S.A. 58:10A-1, et. seq. On the other hand, the Rice bill permits vacant or underutilized commercial and industrial properties to be designated for redevelopment if the aforesaid 24-month vacancy or underutilized condition is "due to environmental issues associated with such parcels' historic use." The "environmental issues" language in the Rice bill is broader than the term "environmental contamination" as defined in the Burzichelli bill and could be interpreted to reach properties that are no longer actually contaminated.

Procedure for Designating Property as a Redevelopment Area

The Burzichelli bill and the Rice bill both propose a host of changes Ito the nature and scope of proceedings for delineating a redevelopment area. An example of a proposed legislative change that is consistent between the two bills is the one requiring local planning boards to evaluate alternatives to placing a particular geographic area in a redevelopment zone, such as "rehabilitation, preservation, or neighborhood improvement, [which] may represent a more appropriate means of addressing the conditions of the area[.]" The report of the planning board is to include this analysis of alternative strategies, along with "an inventory of the environmental, historical, and cultural assets in the delineated area." Clearly, if this provision were to become law, planning boards would have to be more thorough and holistic in their approach to the conduct of preliminary investigations under the LRHL, and have additional experts on hand to advise them.

Another procedural change that both reform bills share pertains to the method by which redevelopment area designations are approved. Under current law, a governing body may by resolution adopt a recommendation from its planning board that certain properties be designated as a redevelopment area. Although resolutions must be approved at a public meeting, a municipal governing body may introduce and approve a resolution at the same meeting and does not have to open the matter being considered to the public. The proposed amendments obligate a municipality to abide by the statutory procedure applicable to the enactment of ordinances when considering and voting upon delineation of a redevelopment area, which requires, among other things, introduction and passage at separate meetings and at least one public hearing. In addition, although the specifics differ between the Burziochelli bill and the Rice bill, both reform bills require municipalities to satisfy a myriad of other requirements pertaining to the posting, transmittal and publication of notice and the timing for final approval.

Additional Differences between the Burzichelli bill and the Rice bill

In addition to the several differences between the Burzichelli bill and the Rice bill highlighted above, these reform bill packages are even more divergent in other respects. One of the more noticeable distinctions relates to the approach that each bill takes toward the evidentiary standard by which local redevelopment determinations are measured and the burden of proof in court challenges. Under current law, the burden is on the person or entity challenging the validity of a delineated redevelopment area to demonstrate that the local determination is not supported by substantial credible evidence. The Burzichelli bill, if enacted, would eliminate this evidentiary standard, known as the substantial evidence test, and shift the burden of proof to the municipality. Additionally, the Burzichelli bill limits the duration of a designation to 10 years following the final adoption of an ordinance creating the delineated area or 10 years following the final adoption of the redevelopment plan, whichever occurs later. There is also a mechanism under this proposal for extending the life of a redevelopment area designation by an additional five years (for a total of 15 years). Contrarily, the Rice bill neither tampers with the burden of proof for sustaining redevelopment area delineation nor attempts to limit its duration.

Conclusion

The Burzichelli bill and the Rice bill both proffer weighty changes to the statutory bases and the procedures for designating and taking property for redevelopment purposes. Indeed, the items selected for discussion in this article represent only a small portion of all the statutory amendments contained in these legislative proposals. Among those not addressed herein include the establishment of competitive bidding, a complete overhaul of content requirements for redevelopment plans and significant changes to valuation guidelines for just compensation. Of course, a complete summary and comparison of the Burzichelli bill and the Rice bill is beyond the scope of this article. Suffice it to say that if either bill (or portions of both) ultimately become law it will substantially alter how property owners, tenants, redevelopers and municipal officials view redevelopement.