Pennsylvania will receive $68.8 million and New Jersey will get $46.8 million in federal stimulus funds for housing redevelopment projects. These projects will include acquiring blighted properties. It is virtually certain that many will be acquired through the power of eminent domain.

Approximately $43.9 million will go to the City of Philadelphia. However, the City was seeking $58 million. The funding for Pennsylvania also includes $5 million for the City of Reading. New Jersey’s funding includes $11.9 million for the Camden Development Authority, $14.1 million for the Camden Housing Authority and $20.8 million for the City of Newark.

The funds are included in $2 billion in grants awarded nationally by the Department of Housing and Urban Development under its Neighborhood Stabilization Program.
Los Angeles received the most of any city – $100 million. Chicago received $98 million and Phoenix $60 million.

 

New York’s highest court ruled on Tuesday that private property could be condemned for the “Atlantic Yards” project. That project involves, among other things, an NBA arena and 16 office and residential towers in Brooklyn. The properties were purportedly condemned to eliminate “blight.”

In Goldstein et al. v. N.Y. State Urban Development Corporation, the New York Court of Appeals upheld the condemnations in a 6 to 1 decision. The project was challenged, in part, on the basis that that since the condemned properties would ultimately be owned by private entities, they were not being condemned for a “public use.” The New York Constitution – as well as the U.S. and most state constitutions – provide that properties can only be condemned for a “public use.”

The Court rejected that claim ruling that projects eliminating blight satisfy the public use requirement and that the fact that the properties would ultimately be owned by private entities did not make the condemnations unconstitutional. This is consistent with the eminent domain law of most states and has been federal law since the 1950s.

The condemnations were also challenged on the basis that the properties were not truly blighted. The Court also rejected this argument and expressed the common belief among the judiciary that, other than in the most egregious cases, courts should not second guess the legislature’s decisions regarding the need for projects.
 

A copy of the opinion can be found at www.nycourts.gov/ctapps/decisions/2009/nov09/178opn09.pdf

A Philadelphia City Controller audit found significant accounting and reporting problems with former Mayor John Street’s anti-blight effort, the Neighborhood Transformation Initiative. The 15-month audit determined that millions in bond funds were mismanaged because of a lack of accountability within NTI.

The audit found that NTI, as of June 30, 2008, had failed to make nearly $13 million in payments on nearly 1,500 condemned properties awaiting settlement in court.

Last year, current Mayor Nutter suspended NTI after discovering serious accounting lapses in its management. The stated purpose of the NTI program was to reduce blight by demolishing 14,000 buildings and constructing 16,000 new homes with $296 million in bond proceeds. However, the program fell far short of those goals. The city controller’s report said that the Nutter administration, upon taking office, discovered that it "lacked information about the funding sources used to acquire the properties, where the properties were located, and the extent of dollars required to fund committed projects."

The Nutter administration contained in the audit report said the city intended "to fully implement the recommendations in this report to ensure any future use of these funds meets requirements of state and federal laws."

 

 

The report recommended that the city improve oversight and accountability over land-assembly activity, develop accurate and timely accounting reports, and investigate discrepancies in NTI transactions. Terry Gillen, executive director of the Philadelphia Redevelopment Authority, which oversees much of NTI, said that the administration would follow the recommendations in the audit.

There can be no question that eminent domain remains a hot button issue. Regardless of your role in an eminent domain project, it is critical to always be mindful of this fact which was made evident by two recent articles.

In one, George Will wrote an op-ed article regarding a Texas case in which an author was sued for defamation regarding her description of the use of eminent domain for a project for a Dallas developer. The author, Carla Main discussed that condemnation project in her book “Bulldozed: ‘Kelo,’ Eminent Domain and the American Lust for Land.” Her book is very critical of the use of eminent domain for economic development. The Dallas developer sued Main and her publisher. Will, citing the Institute for Justice — an Arlington-based public-interest group that represented the Kelo condemnees and other condemnees nationally – claims this is an example of “a national trend of attempted intimidation by litigation.” Will’s article, which was published by numerous papers locally and nationally, can be found at www.washingtonpost.com/wp-dyn/content/article/2009/08/19/AR2009081902262.html.

The other was written by Dana Berliner, a leader of the Institute for Justice. She has taken up the cause of the property owners challenging the taking of their property for redevelopment in Brooklyn including a new New Jersey Nets arena. That case, addressed in one of my posts below, is pending before the New York Supreme Court. The New York Daily News printed a lengthy editorial written by Ms. Berliner. That article can be found at www.nydailynews.com/opinions/2009/08/24/2009-08-24_end_eminent_domain_abuse.html.
 

The Battle over the taking of property for, among other things, an NBA arena and 16 office and residential towers in Brooklyn has moved to New York’s highest Court. The New York Court of Appeals decided to hear the challenge by property owners and tenants to the taking of their property. The parties are submitting briefs and the case – Goldstein et al. v. N.Y. State Urban Development Corporation – will be argued in Albany on October 14.

The properties are needed to construct the “Atlantic Yards Project” consisting of the Barclays Center Arena and 16 skyscrapers. The condemnees challenging the taking claim the use of eminent domain for Atlantic Yards violates the New York State Constitution.
 

The Pennsylvania Supreme Court declined hearing a case that could have directly addressed “Kelo” issues. In In Re: Condemnation by the Redevelopment Authority of Lawrence County, properties were condemned pursuant to Pennsylvania’s Urban Redevelopment Law (“URL”). A precondition to condemning the properties under the URL was a determination that the properties or the area in which the properties were located were “blighted.” The URL has a very broad definition of “blight” and, in this case, the Lawrence County Planning Commission determined that the condemned properties were in a blighted area under the URL because they were “maintained in economically undesirable uses.”

An en banc panel of Pennsylvania’s Commonwealth Court – the Pennsylvania intermediary appellate court that hears eminent domain cases – sustained the property owners’ challenges to the takings. It stated that “[t]he critical issue before us is whether the URL, in specifying
‘economically undesirable use’ among the criteria listed in Section 2 that render an area blighted, opens the door to a condemnation for purely ‘economic development.’” The Commonwealth Court noted that the US Supreme Court in “Kelo v. City of New London . . . upheld a condemnation of residential buildings that were clearly not blighted in the sense of dilapidated but were located in a certified redevelopment area targeted for revitalization pursuant to a carefully considered plan, which included razing the residences to build a pharmaceutical research facility.” However, the Commonwealth Court continued, the relevant state in Kelo – Connecticut – had a statute that permitted condemnations for purely economic development regardless of blight issues.

Pennsylvania, however, does not have a statute that permits condemnation for purely economic development. However, the URL does use the phrase “economically undesirable land uses” in its blight definition. The Commonwealth Court held that this phrase “does not mean property that is merely put to a use other than the most economically profitable. Such an understanding of the term fails to focus the inquiry on the actual condition of the properties labeled as ‘blighted’ and instead improperly focuses the inquiry on a comparison of the present use with the proposed redevelopment use.”

Therefore, the Commonwealth Court held that the taking was improper and sustained the property owners’ challenges. The property owners attempted to appeal to the PA Supreme Court which is not an automatic right and is at the discretion of the Court. The PA Supreme Court declined to hear the appeal and, therefore, declined an opportunity to address Kelo type issues.

We should be careful, however, not to read too much into this. The case was specific to the URL. In addition, the Eminent Domain Code was amended in September, 2006 – after the takings in this case. The amended Code added additional restrictions to condemnations under the URL which would have made it highly unlikely that the condemnor would have even attempted to take the properties let alone survive a challenge.
 

The Department of Housing and Urban Development has established a program to provide grants to state and local governments to purchase abandoned and foreclosed properties. According to HUD, the $3.92 billion Neighborhood Stabilization Program will provide emergency assistance to state and local governments to acquire and redevelop foreclosed properties that might otherwise become sources of abandonment and blight within their communities. The Neighborhood Stabilization Program (NSP) provides grants to every state and certain local communities to purchase foreclosed or abandoned homes and to rehabilitate, resell, or redevelop these homes. The purpose it to “stabilize neighborhoods and stem the decline of house values of neighboring homes.” Although the wording is unclear, it appears that these funds may be used to acquire property through eminent domain.
 

The City Commissioners of Ventnor, New Jersey, have passed a law limiting that City’s ability to condemn properties. On July, 17, 2008, the City Commissioners voted to prohibit Ventnor’s use of eminent domain for redevelopment projects that involve private developers. According to press accounts of the meeting, there was overwhelming support for the law and no contrary opinions.

A New Jersey Senate Committee has passed a statute that is designed to deal with alleged eminent domain abuses. This statute has been discussed for two years and is purportedly designed to protect homeowners from developers seeking the land for private development. Senator Ronald Rice, the sponsor, said that the bill would limit the use of eminent domain for redevelopment. It also adds new requirements regarding pre-condemnation negotiations between the condemning authority and the property owner. The bill was passed by the Senate Committee and Urban Affairs Committee and can be found at  www.njleg.state.nj.us/2008/Bills/S1000/757_I1.HTM.  The bill now moves to consideration by the full Senate.

The Commonwealth Court of Pennsylvania recently upheld the condemnation of a strip club for the use of a Charter School. The property, located in the City of Chester, Delaware County, Pennsylvania, was located in an area certified as blighted. The property owner challenged the condemnation primarily on the basis that the project would allegedly benefit the private developer retained for the project. Therefore, the property owner argued, the taking violated the Fifth Amendment’s requirement that condemnations must be for a “public use.”

The Commonwealth Court rejected the property owner’s argument and restated the principal that “a taking is proper if the benefit to the public is primary and any benefit to a private individual is only incidental.” In this case, the Court found the Charter School and the elimination of blight were “public uses” and the fact that the developer may profit from the project does not negate those public uses.