In Search of a Balance between Property Rights and Redevelopment

July 27th, 2007 by Chris Sturm

Gallenthin v. Paulsboro: In Search of a Balance between Property Rights and Redevelopment

Although the recent New Jersey Supreme Court decision in Gallenthin v. Paulsboro was hailed in some quarters as a victory for property rights over the power of eminent domain, the reality is more complicated. The decision did grant a reprieve to the property owners in the case, but at the same time it reaffirmed the existing redevelopment law, leaving the door open for towns to use eminent domain as a tool in redevelopment.

The Case: The Gallenthins have owned a piece of waterfront land in Paulsboro since 1951. In 2003, the Borough designated the property as a redevelopment area, paving the way for the town to acquire the property through eminent domain. The Gallenthins filed a complaint in court seeking to overturn that designation, arguing that their property did not fall under the 1992 Local Redevelopment and Housing Law (LRHL) as a blighted area in need of redevelopment. This was the first case heard by the New Jersey Supreme Court concerning the 1992 law. Watch the argument.
The Decision: The Supreme Court held that Paulsboro was not justified in including the property as part of the redevelopment area solely on the basis that it was “not fully productive.” This clarifies the requirements for designating an area as “blighted.” The court also reaffirmed that the LRHL empowers municipalities to designate areas in need of redevelopment and thus subject them to the state’s eminent domain power. Read the decision.
What Does This Mean For Redevelopment?: This ruling makes it clear that cities and towns can not invoke the power of eminent domain because the property in question is simply “underutilized.” In order to claim a property is not being properly utilized, a town must also show that the property is stagnant or not fully productive as a result of a variety of reasons such as diversity of ownership and conditions of title affecting land within the redevelopment area. The court does not explicitly define stagnant, but the decision implies it will be a more rigorous standard than simply “underutilized.”

Eminent Domain Going Forward

In effect, this ruling requires towns to show that a particular property or area is truly blighted. This means it is unlikely a town will be able to, for example, forcibly take a corner store because it will generate more tax revenue as a Wawa. Still, the ruling upholds the power of municipalities to take land that they legally deem as blighted for the purposes of redevelopment.

If New Jersey is to continue to grow and prosper, it will require room to accommodate new businesses and residents. As the state’s supply of open land continues to dwindle, redevelopment will be an increasingly essential vehicle for growth. For towns, eminent domain is an essential part of urban revitalization. Absent the power of condemnation, it would be possible for a single landowner to block redevelopment plans that could benefit a whole region.

Recognizing the importance of eminent domain is not to say that its use should go unchecked. The Supreme Court’s decision clarifies the law and reminds municipalities of the need to ensure that redevelopment is used appropriately. This is an important clarification —but there is more that can be done:

Increase Transparency
- Subject redevelopment plans to more public discussion by increasing the notice and hearing requirements for adoption.
- Assure that development plans will benefit the public, and are not undertaken for the purpose of benefiting a private developer.
- Lengthen the period for good faith negations and increase the notice for hearing from 14 to 30 days.
Offer Better Compensation
- The statute should be clarified with regard to “date of taking” to ensure that property owners receive the full market value for their property in cases of eminent domain.
Improve Relocation Assistance
- Compensation should be increased to reflect current costs of relocating a home or business in the area. Cities and towns must be sure to assist businesses and homeowners in finding comparable property to the one being taken through eminent domain.

By making the redevelopment process more open and fair, New Jersey can increase the legitimacy of eminent domain while preserving its effectiveness as a necessary tool in redevelopment efforts. Striking the proper balance between property rights and redevelopment is achievable. It is also essential to the future prosperity of our state.

If you have any questions about this issue of Future Facts, please contact Chris Sturm, Senior Director of State Policy.