Lowball Watch – New Jersey. With a Moral.

The Jersey Journal (nj.com) reports that the New Jersey Appellate Division (that state’s intermediate level appellate court) has affirmed an award of $18.6 million for the taking of a 3.4-acre parcel of land by the Jersey City Redevelopment Agency. Terrence McDonald, Court Rejects Challenge to $18.6M Award in Jersey City Eminent Domain Case, June 25, 2011 – Click here.

The taking took place in 2004. The Redevelopment Agency offered $3.9 million. A jury awarded $18.6 million which, with interest, has grown by now to $22 million, a sum that, as it happens, comes close to the owners’ trial valuation testimony of $25.3 million.

What is most interesting about this case to us is the Agency’s reaction. Even though in this case it is the redeveloper who is supposed to pay the judgment,  evidently the Redevelopment Agency has learned a sobering lesson. Its Executive Director is quoted as saying the Agency “has retooled its position regarding eminent domain in recent years and [this] case is partially responsible.” The Agency “has been much more hesitant to seize properties via eminent domain.” Which is a nice illustration of our general belief that economic solutions are best because they are self-enforcing. When the redevelopment agency and its redevelopers are made to understand that there is no free lunch, that they won’t be able to pursue their grandiose plans on the backs of property owners whose land is targeted for acquisition, and that they will have to pay the true amount — or something approaching it — of the cost of doing business, they will be more likely to use the power of eminent domain with restraint, and invoke it only when necessary and economically sound. There is nothing like an economic disincentive to trying to redevelop on the cheap, at the expense of condemnees whose land fortuitously winds up in the path of the project.

Our observation has been that no matter how much the legislature fiddles with the statutory right to take, chances are that even on their face the legislative changes won’t amount to a hill of beans, because they always have an exception for “blight,” a term that is so amorphous as to cover a multitude of municipal sins. The recent New York cases (Goldstein and Kaur) provide excellent examples of how far judges can go in rubber-stamping condemnor plans. In other words, even when not as intellectually corrupt as New York law, when it comes to the right to take,  judges are likely to interpret laws in favor of the condemning agencies. At least that has been the sad history of American eminent domain law.

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