An Anniversary in Redevelopment Law

Ten years ago today, the Supreme Court decided Gallenthin Realty Development, Inc. v. Borough of Paulsboro, 191 N.J. 344 (2007). It was the first time that the Court focused on the meaning of the term “blighted areas” in Article VII, section 3, paragraph 1 of the New Jersey Constitution,a provision that allows such areas to be taken by eminent domain for redevelopment purposes.

The case arose from the Borough’s designation of plaintiff’s 63-acre parcel of largely vacant wetlands as property “in need of redevelopment”under the Local Redevelopment and Housing Law, N.J.S.A. 40A:12A-5(e) (“LHRL”). A property that is designated as “in need of redevelopment” can be taken by eminent domain. Plaintiff contested the designation, which was based on the finding that its property was “not fully productive.” The Law Division and the Appellate Division both affirmed the designation. The Supreme Court, however, reversed in a unanimous opinion by Chief Justice Zazzali.

Plaintiff had argued that the Borough’s action in designating plaintiff”s property as “in need of redevelopment” violated Article VII, section 3, paragraph 1 of the New Jersey Constitution. That constitutional provision was the basis for the enactment of the LHRL. Section 5(e) of that statute did indeed permit a municipality to designate property as “in need of redevelopment” if the municipality determines that there is “growing lack or total lack of proper utilization of areas caused by the condition of the title, diverse ownership of the real 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.”

Relying on that statutory language, the Borough argued that it could designate property as “in need of redevelopment” whenever that land is “not fully productive,” and that the general “other conditions” language meant that any cause of less than full productivity would justify such a designation. Chief Justice Zazzali, however, after laying out a detailed analysis of the structure, history, and meaning of the term “blight” as used in the Constitution, ruled that section 5(e) contravened the Constitution. Without oversimplifying the Chief Justice’s scholarly opinion, the bottom line was that “[a]though the meaning of ‘blight’ has evolved, the the term retains its essential characteristic: deterioration or stagnation that negatively affects surrounding properties.” There was no showing of that here.

The Court observed that “[u]nder [the Borough’s] approach, any property that is operated in a less than optimal manner is arguably ‘blighted.’ If such an all-encompassing definition of ‘blight’ were adopted, most property in the State would be eligible for redevelopment.” Accordingly, the Borough’s interpretation of section 5(e) “cannot be reconciled with the New Jersey Constitution.”

In 2015, in a 3-2 opinion, the Supreme Court clarified that Gallenthin addressed only section 5(e) and did not extend to the definition of “blight” in other subsections of the LHRL. 62-64 Main Street, LLC v. Mayor & Council of City of Hackensack, 221 N.J. 129 (2015). Whether a full Court would adhere to that result might be debated. Regardless, however, Gallenthin stands, at a minimum, as a leading authority regarding redevelopment of “blighted areas,” and as to the interplay of the Constitution and the LHRL.