Sunday, December 18, 2005

A Grain of Salt

On October 9, I commented on a story that was making the rounds of the blogosphere concerning a development project in Union Township, New Jersey. The meme of the various postings was that evil wealthy developers had, in essence, paid off a political boss in order to steal a valuable development opportunity from the proverbial little guy, one Carol Segal, and that this exposed the basic of the Supreme Court's opinion in Kelo. This particular story line was reflected by bloggers on both the left (Kevin Drum) and the right (The Queen of All Evil). I expressed my doubts that the actual facts were that simple ("As related by the anti-Kelo commentators, there is something of an air of a "just-so story" about this matter.")

At the time I posted my comments, I had missed the comments of Nathan Newman posted three days earlier. He had picked up some facts that I had missed, specifically that:
  • Segal, a local retired electrical engineer, [had bought] up a bunch of abandoned industrial property in Union Township for $1.5 million. He [lobbied] the local government to rezone the land for residential development, which will instantly make him rich, since what was low-value land becomes instantly more valuable with the zoning change.

  • The city [demanded] that as a condition of making Segal rich that he agree to various conditions, including working with developers picked by the Township, possibly for public interested reasons, more probably to share the economic booty from the zoning change with their political supporters.
Newman concluded that:
Let's be clear-- giving it to the original owner is not rewarding anything but dumb luck or shrewd political manipulation and lobbying prowess. And if we are rewarding the latter, then why complain if someone else with better political manipulation powers grabs the land?

Of course-- and this is the key point -- we should want no one gaining financially from manipulation of the political process. Which is why people need to FOCUS on the economic payoff from zoning changes and the public should demand that WHOEVER develops land after a zoning change has to pay the public for the windfall from the zoning change.
I'm not certain that I fully agree with Newman's political theory here, but the facts seem to support his view that this matter involves a sharp developer (Segal) who attempted to benefit from the same sort of exercise of police power that underlies the Kelo decision. The Township, for its part, simply wanted to exercise that police power differently.

I am in no position to determine whether that difference was totally benign (the development that the Township's preferred developers promised was more in line with the overall planning goals of the Township), partially benign (the Township's preferred developers simply offered the Township a a better economic return from the development), or outrageously malignant (the preferred developers got the deal due to a political payoff to a local political boss). But then neither are any of the other weblogs who commented on the story.

Last week, the Township canceled its plans to condemn the Schaefer Salt Site, as the Segal property is known. It gave as its reasons the costs of having to litigate the matter with Segal and the fact that it had too many other development irons in the fire. In another deal, for the development of a hotel, the Township had sold the land at a significantly reduced price and had given the developers large tax abatements. In response, Segal said "If the town gives us the same deal for the hotel, we'll give them $2 million -- five times what the town is selling it for -- and we'll take half of the tax abatement."

Of course, we now know the principle that Segal is attempting to vindicate. As the saying goes, now we're only dickering over the price.

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