16 March 2011

Eminent Domain Abuse In The Garden State

One of my favorite computer pastimes is playing Sim City, an addictive city-building simulation game which has scenarios that can strive to react to nuclear plant meltdowns to spur economic development.  As a cyber dictator, a Sim City mayor need not fret about eminent domain or the circumstances of displacing the sim citizens.

Mount Holly, New Jersey is a modest bedroom community of 11,700 residents on the outskirts of Philadelphia.  There has been an eight year effort by the Township to facilitate the replacement of 350 1950s row-homes on 25 acres in Mount Holly Gardens in favor of a plan for the “Villages of Parker’s Mill” development by the Keating Urban Partners with 292 new town homes, 228 apartments and 54,000 sf of commercial space.

There are only 84 row-home owners left in Mount Holly Gardens, who are mostly long time Black and Latino residents who are retired and on fixed incomes.  The Township has tried to strong arm the remaining residents of the closely knit Mount Holly Gardens community by threatening Eminent Domain on their properties, offering them settlements of between $35,000 to $49,000, which is about half of the cost of similar housing nearby.

Americans used to revel in the notion that a man’s home was his castle, until 2005, when the U.S. Supreme Court redefined the employment of Eminent Domain.  In Kelo v. City of New London (CT), the High Court held in 5 to 4 ruling that the government can use economic growth as a permissible public use rationale for invoking the 5th Amendment Takings clause.  Previously, public use involved takings that benefited the whole public like bridges, roads and maybe sports stadia, not crony capitalists or governmental coffers. Susette Kelo was a homeowner who was evicted from her property by eminent domain as part of a comprehensive redevelopment plan spearheaded by Pfizer which promised  3,169 new jobs and $1.2 million a year in tax revenues. Ironically, after Kelo was ousted from beloved property, the redeveloper was unable to secure financing and the “blighted” area became vacant.

In the wake of the public backlash against the Supreme Court’s holding, many states amended their eminent domain laws. Apparently not the case under the blue blooded regime under ex-Gov. John Corzine (D-NJ), but maybe there were not sufficient union interests to cover.

It is sad to see poor elderly minority property owners get taken advantage of by the strong hand of the government in favor of crony capitalism.  But the economic cost benefit basis of this redevelopment is questionable.

  • Mt. Holly Township has already spent $8.1 million in debt service since 2000 for the proposed “Villages at Parker’s Mill” project 
  • The Township has spent $17 Million for purchasing, demolishing, redeveloping and associated legal costs. 
  • The redevelopment project may increase schoolchildren by three fold, thereby increasing education costs by $1.4 million per annum.
  • The Reading Associates estimates that the development will cost Mt. Holly over $341,000 a year.

Those are hair curling sunken costs and anticipated ancillary expenses for a modest community to carry in support of a long stalled redevelopment project.

The national economic downturn also have impacted the Mt. Holly redevelopment project.  Townhomes are estimated to be worth 30% less than originally predicted (during the housing bubble) and rentals are thought to bring in 50% less an expected.  Instead of being a windfall, the redevelopment project may cost Mt. Holly $1 Million a year.  But at least it brings some shiny new buildings and scatters a pocket of vulnerable long time property owners.

As Mt. Holly soon will be filing eminent domain proceedings against hold out home owners.  But the US 3rd Circuit Court of Appeals is still considering the case.  While the Kelo holding bristles against a homeowner’s proprieties, it allows local governments to pick winners and losers when issuing eminent domain.  But those decisions must be based on economic growth.  May justice consider the real economic facts and not just based on developers’ dreams of hope and change.

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