Saturday, July 21, 2007

In Newark, an eminent domain decision with some echoes for Brooklyn

A 14-acre plot of land one block from an urban sports arena, with modest lots, homes, and businesses, some of them empty. A redevelopment proposal with mostly luxury housing. A politically connected developer. A plan to use eminent domain. A questionable finding of blight. And a lawsuit.

Sounds like Brooklyn and Atlantic Yards? Nope, it's the Mulberry Street Redevelopment Project in Newark, where, on Thursday, a state judge shot down the plan by calling the government's finding of blight and underutilization not credible. (See Mulberry Street Area Property Owner's Group v. City of Newark, 3.8 MB PDF.)

There's little if any applicability to Brooklyn, given that the decision was based on state rather than federal law. The plaintiffs in Goldstein v. Pataki, the Brooklyn eminent domain case, draw on the U.S. Supreme Court's 2005 Kelo v. New London decision, but have so far been stymied in trial court.

Still, the case has some significant echoes for Atlantic Yards watchers because, in New York, the Empire State Development Corporation, the condemning agency, almost certainly would not get away with its questionable blight finding had the case proceeded in New Jersey.

Law revised

(The New York Times summarized the case as Judge Stops Newark Redevelopment Project, noting that it "would have been the largest development initiative here in decades." It would have been a $550 million project, not a $4 billion one, as in Brooklyn.)

Superior Court Judge Marie Simonelli, in her decision, relied heavily on a case decided just a month earlier, Gallenthin Realty Development v. Paulsboro. In it, the state Supreme Court held that the Legislature did not intend redevelopment law to apply in circumstances where the sole argument is that the property is “not fully productive.”

In Newark, the case involved the city's effort to speed redevelopment of a newly-valuable area in the southeast portion of the Central Business District. The homeowners, tenants, and business owners who made up the plaintiff organization occupy "single and multi-family homes, restaurants, offices, retail stores, commercial businesses and private and for-pay parking lots," according to the decision.

"To the immediate west is the Federal Post Office and Courthouse and City Hall Complex, several blocks north are the New Jersey Performing Arts Center, the Gateway Complex and Newark Penn Station, and one block north is the new [Prudential Center] sports arena, which is presently under construction," the judge wrote.

Under state law, "there must be substantial evidence that the area has reached a stage of deterioration or stagnation that negatively affects surrounding areas," the judge wrote, noting that most of the buildings are structurally sound and in good to fair condition. In Brooklyn, five properties were declared by the developer's expert last year to be in need of demolition, and that was upheld by the courts with no independent review; other properties have already been demolished.

Have there been spillover effects? In Brooklyn, plaintiffs have pointed out that land has grown valuable just outside the Atlantic Yards footprint and Chuck Ratner of the parent Forest City Enterprises has called the AY site "a great piece of real estate."

Political connections

The developer, Newark Redevelopment Corp. (NRC), has strong political ties, even more obvious than those of Forest City Ratner in Brooklyn. Principal Emile Rania is a former aide to one City Council member and chaired a fund-raiser for another; he and fellow principal Bruce Wishnia, along with family members, made numerous political contributions to five Council members and former Mayor Sharpe James.

Private rezoning

The proposal, involving 2000 market-rate condos (less than half the density of Atlantic Yards), commercial establishments, off-street parking, and open space, proceeded not via bidding but via discussion with the city, which agreed to "fast track" it as a redevelopment plan as opposed to a "master plan/zone change or use variance."

The implication, along with a memo proposing that the city adopt a plan endorsing "use of the Area for housing in the densities... discussed," suggests a private rezoning, not unlike the state's role in the Atlantic Yards case. NRC, not the city, proposed expansion of the map; similarly, with plaintiffs in two lawsuits challenging Atlantic Yards allege that developer Forest City Ratner drew the map for condemnation.

Unlike in Brooklyn, where the developer has negotiated sales with a majority of landowners in the Atlantic Yards footprint, albeit with the threat of eminent domain in the future, in Newark, NRC apparently negotiated only with one large landowner, not any others in the Mulberry Street Area.

City complicity

Discussing city officials stated support for the Mulberry Street project from the start and the administration's desire to designate the area in need of redevelopment--not unlike with Atlantic Yards--the judge was emphatic.

"In other words," she wrote, "it was no secret that the City wanted to blight the Mulberry Street Area so that the Mulberry Street Redevelopment Project could be accomplished and NRC and Metro Homes would accomplish it."

Dueling planners

One significant difference between Newark and Brooklyn is the weight granted in the former case to the professional planner engaged by the plaintiffs, who successfully challenged the city's designation of blight. In Brooklyn, while Develop Don't Destroy Brooklyn filed an extensive critique of the state's blight findings, there has been no independent arbiter to evaluate it yet.

In the pending case challenging the state's environmental review, plaintiffs told Justice Joan A. Madden that the state's criteria for productive land use was arbitrary, but any expert testimony was in affidavits rather than public testimony.

In Newark, that planner, Peter Steck, either challenged the city's planner, David Roberts, at public hearings or (at the least) in legal papers. (The judicial opinion isn't quite clear.) Lot by lot, Steck and Roberts disagreed significantly. The latter concluded that Mulberry Street needs development because it suffers from "a growing lack of proper utilization resulting in a stagnant and not fully productive condition of land" and "consumes land that could otherwise be available for much more productive uses."

Roberts, however, did not investigate building permits, building code violations, occupancy rates, or the number of people employed in the area--most of which was done in Brooklyn.

Steck pointed out that Roberts' designation of parking lots as "not fully productive" could mean every parking lot in the city was eligible for designation for redevelopment; that echoes Brooklyn planner Ron Shiffman's comment, when the environmental lawsuit was filed, "Under this standard, large sections of Brooklyn would be considered blighted, as they are also not built out to their full capacity under existing zoning."

Roberts also declared, for example, that two small lots could be incorporated to create a "gateway" corner; Steck countered that the conclusion was biased by the release of a specific plan for the area developed by NRC and already promoted by the city. That again echoes the Atlantic Yards case.

How's the market?

In the case, the city of Newark acknowledged that it didn't analyze code violations, the parking needs for adjacent buildings, nor interview property owners. Also, the city "did not investigate the scope or extent of private market real estate transactions occurring within the Mulberry Street area," the judge wrote. Regarding Atlantic Yards, plaintiffs' attorney Jeff Baker sardonic ally commented in court “OK, let’s compare our analysis to the market analysis they did. Sorry, I can’t. They never did.”

Similarly, Newark's expert testified that current uses in the area led to greater crime but did not investigate the scope or extent of criminal complaints; in Brooklyn, the state's blight report used larger districts as surrogates for allegations that crime is higher in the Atlantic Yards footprint.

Done deal

In the closing pages of her 72-page opinion, Simonelli addressed "the alleged 'sordid, pre-arranged land-grab in [sic] behalf of a politically favored redeveloper' and 'abuse of the redevelopment power, with coordinate corruption.'"

“There is evidence in the present case that the Mulberry Street Redevelopment Project and NRC's role as its developer was a done deal, a fait accompli, before the required statutory redevelopment process began,” she wrote, citing the city's fast track agreement with the developer's requests.

"Thus, it appears that, one way or another, NRC was going to acquire the Mulberry Street Area to redevelop it," Simonelli wrote, going on to cite political contributions and below-market sales of city-owned land to NRC. (An inside track to gain city development rights is part of the Memorandum of Understanding to develop Site 5, now part of the Atlantic Yards project. Also, Forest City would get city streets underlying the arena for... $1.)

"This evidence certainly provides cause to question the results and validity of the redevelopment investigation," the judge wrote. "However, the court mentions it for historical purposes only and makes no determination of the merits of plaintiff's corruption claim. It appears that such a determination may be made in the recently initiated criminal proceedings involving former Mayor [Sharpe] James."

An indictment in Brooklyn is far less likely, though there are some parallels regarding a developer's inside track. In the federal eminent domain case involving Atlantic Yards, however, the plaintiffs must argue under Kelo, which suggests judges should look skeptically at apparent sweetheart deals, rather than the clearer path set out by the New Jersey Supreme Court.

New Jersey v. New York

New York State has been slow to tighten eminent domain laws in the wake of Kelo and has not even enacted modest reforms supported by organizations that generally support condemnation.

New Jersey even has a statewide official Public Advocate Ronald Chen, who's crusaded against eminent domain abuse. He told the Times: “If they want to declare land blighted, municipalities are just going to have to work a little bit harder to make their case.”

Then again, defenders of the governmental power warn that courts have gone too far. Wishnia told the Times, “If it is not reversed, it will effectively shut the door on urban redevelopment in New Jersey.” Though Newark officials under new Mayor Cory Booker weren't ready to say they'd appeal the case, Wishnia probably was not the best person to make the case for eminent domain, since he wouldn't answer the Times's questions about political connections and contributions.

Addendum

See comments below from Lupe Todd, spokeswoman for Booker. (When she worked for Dan Klores Communications, she used to represent Forest City Ratner, so I got to know her a bit.) I thought that the reference above to political contributions to James, and the criminal proceedings involving him, indicated that this project started on his watch, rather than on Booker's, but I could have spelled it out.

Todd notes that Booker "feels that eminent domain, when used correctly and with the best intentions, is one tool in the tool box.... " Indeed, it is. The question is whether it was used correctly in this case.

The Times reported:
Although they blame Mr. James for condemning their neighborhood in the first place, residents and merchants said they were disappointed that Mayor Cory A. Booker upheld the city’s use of eminent domain, despite having promised during his campaign that he would not.

1 comment:

  1. Hey Norman-

    Hope Brooklyn is treating you well. I read your post about the recent ruling in Newark regarding the Mulberry Street project. What you did not mention is that this project, while standing to possibly be the largest of its kind in New Jersey, was neither conceived nor crafted under the administration of Mayor Cory Booker; it was crafted under the previous mayor, Sharpe James.

    The New York Times article mentions this, but you do not. I make this distinction because you mention the judge's comments about political connections with respect to this project.

    Mayor Booker has made a point of ensuring that his mayoralty is as open and transparent as possible, even going so far as to pass the boldest, most reformed executive orders to curb the "pay to play" methods used under the previous administration.

    While we haven't yet decided whether to appeal the decision, Mayor Booker feels that eminent domain, when used correctly and with the best intentions, is one tool in the tool box to help city's like Newark bring jobs and redevelopment to its downtown core.

    If you haven't already, take a drive to the other side of the Hudson and see what Mulberry Street, our arena (opening in October) and Downtown Initiative are all about.

    I hope you are well.

    Lupe

    ReplyDelete