You have the right to remain: Part 5, Ornery

August 29, 2014 | Atlantic City, Cities, Development, Donald Trump, Economics, ED4ED, Eminent domain, Fair market value, Homeownership, Housing, Land use, Markets, Urban renewal, Urbanization, US News, Vera Coking | No comments 78 views

[Continued from yesterday's Part 4 and the preceding Part 1, Part 2, and Part 3.]

By: David A. Smith

James ‘Jimmy’ Darmody: You can’t be half a gangster, Nucky. Not anymore. 

Boardwalk Empire

Litigation, as we saw yesterday, can acquire its own momentum that outlasts its original instigator’s intention, and by 1998, Vera Coking had won an important interim victory – her opposition had dragged out the proceedings long enough to attract supporters like Carry Trudeau and Doonesbury, and had peeled away the state authority, CRDA, leaving only Trump Casinos and Atlantic City:

Sources used in this post

New York Times (October 4, 1994; blue font)

New York Times (August 11, 1996; violet font)

New York Times (March 22, 1998; green font)

New York Times (July 21, 1998; sky-blue font)

New York Times (July 26, 1998; red font)

Press of Atlantic City (August 28, 2011; brown font)

New York Times (July 21, 2014; black font)

Press of Atlantic City (July 31, 2014; orange font)

boardwalk_empire_threat_knife

Yes, I can see the point of your argument

Even without CRDA’s support, Atlantic City forged ahead:

Norman L. Zlotnick, the Banins’ attorney, is encouraged by a recent state Supreme Court decision that urges ”heightened scrutiny” of cases like these. But he said, ”When you’re trying to fight a condemnation on public-use grounds, New Jersey is a very hard state.”

The case was City of Atlantic City v. Cynwyd Investments decided March 10, 1997, which involved property formerly occupied by the by-then-demolished Traymore Hotel, held:

Generally, when the exercise of eminent domain results in a substantial benefit to specific and identifiable private parties, “a court must inspect with heightened scrutiny a claim that the public interest is the predominant interest being advanced.” Poletown Neighborhood Council v. City of Detroit, 410 Mich. 616, 304 N.W.2d 455, 459 (1981). In determining whether projects with substantial benefit to private parties are for a public purpose, this Court has held that the trial court must examine the “underlying purpose” of the condemning authority in proposing a project as well as the purpose of the project itself.

Though it would not bubble into the national consciousness until 2005, the backlash against over-reaching eminent domain for economic development was building steadily throughout the 1990s:

Mr. Buonocore, the Morristown lawyer, is handling an Atlantic City case where his client, Joseph Zoll, owns eight lots in an ”area in need of redevelopment” — in this instance, redevelopment by MGM Grand on a 38.5-acre site subject to condemnation by the city. The city argues that Mr. Zoll is a speculator who has held out for a price substantially higher than other owners in the area received.  

holdouts_decker

You better rustle up a higher price

Even assuming that Mr. Zoll was indeed a speculator – buying on the expectation of being latuer bought out by a behemoth neighbor – in general, that is their right (subject of course to condemnation or eminent domain).  Mr. Zoll’s foresight benefited him handsomely: properties that he bought between 1977 and 1983 for a total of $397,000, he sold to MGM Grand in 1999 for $2,228,000.  [Which, as we noted above, in fact never developed the Atlantic City site. – Ed.]

”It’s just scary to me,” Mr. Buonocore said, ”when they can yell, ‘Jobs! Progress! Development!’ and say anybody who gets in the way is a bad person.”

Eventually, and perhaps to the surprise of many, Ms. Coking and her neighbors won outright:

In an oral [sic] decision, the judge, Richard Williams, rejected the authority’s request, saying that there were no guarantees that the Trump Organization would use the land appropriately. If the properties were transferred, he said, Trump Plaza could just as easily choose to extend its casino floor instead of adding the new parking and trees that were the basis of the authority’s condemnation request.

While the judge’s ruling was on narrow factual grounds – and he chose not to write his opinion, instead ruling verbally from the bench – the point he touched was as broad as it could be:

Judge Williams also said in his decision that he would have granted the authority’s condemnation applications had there been a firm contract between the authority and Trump Plaza as a guarantee that the seized properties would be used solely for additional parking and new trees.

three_pillars_takings_clause

Unless the property were in fact deeded into public use, it could be easily converted into private use – and if government could simply take property from A and give it to B, under a theory of broad economic development, there would be nothing to prevent the government from wiping out a Polish neighborhood to build a Ford assembly plant, or declaring an entire city downtown blighted and work out who gets the property later.

poletown_gone

Not Japan, Detroit: Poletown, after demolition and before the plant was built

Among the tensions inherent in representative government is that the free and sovereign people (as expressed in the Constitution) voluntarily give us to a government certain powers and authority over them; and as a result, that government, as an organism or entity in itself, inevitably becomes more powerful than the individual citizens (or even companies) with which it transacts business.  So the government, being comprised of people, is as prone to using leverage as any other assemblage of people, and for that reason laws and constitutions operate as a balance.  As memorably phrased by Supreme Court Justice Hugo Black:

It is no less good morals and good law that the Government should turn square corners in dealing with the people than that the people should turn square corners in dealing with their government.

justice_hugo_black

The counterpoint to Oliver Wendell Holmes: Supreme Court Justice Hugo Black

In his decision, Judge Williams cited a case in Vicksburg, Miss (Vicksburg v. Thomas)., in which a condemnation that would have benefited a Harrah’s casino was rejected because a judge found no guarantee between the government and the casino that the condemned land would be expressly used for the reasons outlined in the condemnation request.

vicksburg_siege

Unlike the Confederacy in 1863, in 1993 the Vicksburg property owners held out and won

To be precise, the Mississippi court held:

The facts of this case support the trial court’s conclusion that Harrah’s is the primary beneficiary of the taking of Thomas’ land. Because the use of Thomas’ land will be at the whim of Harrah’s, the private use of Thomas’ property by Harrah’s will be paramount, not incidental, to the public use and any public benefit from the taking will be speculative at best.

As I would have guessed, behind Ms. Coking’s successful litigation was pro-bono assistance from the Institute for Justice, the same folks who seven years later would take Susette Kelo’s case all the way to the Supreme Court:

”We are really thrilled that we have been able to set a precedent that this condemnation was not for a public purpose,” said Dana Berliner, a staff lawyer with the Institute for Justice, a nonprofit public-interest law firm in Washington that concentrates on property rights cases. ”If this kind of analysis is adopted throughout the country, it will be a revolution in condemnation law and a very important restraint on the ability of government to take private property and hand it over to other private parties.”

dana_berliner_rally

Ms. Berliner explaining the thrills of eminent domain litigation

Ms. Coking’s house is wedged between the Trump Plaza Hotel and Casino and Caesar’s Palace, so close to Trump Plaza that visitors knocking on her front door can feel the spray from sprinklers used to water the hotel’s grass.

The three owners had prevailed, but then a funny thing happened: two of them sold.

Both eventually agreed to sell, the owners of Sabatini’s restaurant receiving $2.1 million and $1.6 million going to the pawnshop.

So the price for the Sabatinis’ restaurant tripled, from $700,000 to $2,100,000.

claire_sabatini_trump

We love our restaurant, but for 3x its value?

Claire Sabatini, who eventually, perhaps reluctantly, sold

Peter Banin, 42, a Russian immigrant and a goldsmith, runs the Golden Island, a jewelry business and pawnshop. The shop is tiny, but the price the Banins paid for the building five years ago — $500,000 — reflects what he says is the Golden Island’s strong point: ”location, location, location.”

”I never thought that in the U.S. because one party wants something it will be backed up by the government,” Mr. Banin said. ”Here, you buy it, you pay for it, you work to pay for it again, and then CRDA says, ‘I want this.”’

That is the conundrum of eminent domain, one inherent in urbanizing, verticalizing, and technologizing cities. 

The Banins and the Sabatinis can at least hope that the development authority prevails in its efforts to drop condemnation proceedings against them, in which case they could stay put or negotiate directly with the Trump organization, which recently paid $1.2 million for a small parcel down the block.

For his property and his emotional distress, Mr. Banin (who as a pawnshop owner would have been very familiar with the concept of economic necessity and putting a price on memories) was at least both vindicated and compensated:

Mr. Banin did even better, as his pawnshop’s sale price rose tenfold, from $169,500 to $1,600,000.

[Continued tomorrow in Part 6.]

convert this post to pdf.
PDF Creator    Send article as PDF   

You have the right to remain: Part 4, Unreasonable

August 28, 2014 | Atlantic City, Cities, Development, Donald Trump, Economics, ED4ED, Eminent domain, Fair market value, Homeownership, Housing, Land use, Markets, Urban renewal, Urbanization, US News, Vera Coking | No comments 136 views

By: David A. Smith

[Continued from yesterday's Part 3 and the preceding Part 1 and Part 2.]

 

Enoch ‘Nucky’ Thompson: The puppies have grown fangs.

Boardwalk Empire

In an attempt to help Atlantic City remake its downtown to attract a new generation of punters, by the mid-1990s the New Jersey Casino Reinvestment Development Authority was throwing its judicial weight behind casino developers, led by Donald Trump, and their supporters, who included many local homeowners:

caber_tossing

We have the weight of the law behind us

Atlantic City homeowner Lillian E. Bryant campaigned in the 1970′s to get casino gambling for Atlantic City. 

”We were so intent on making sure organized crime wasn’t going to come in,” said Lillian E. Bryant, a resident of one of [nine houses being condemned in a separate action to build a tunnel]. 

In terms of the urban environment, government always competes against the alternative power structure of organized crime (that is one way a slum dies, by outcompeting the gangs).

Sources used in this post

New York Times (October 4, 1994; blue font)

New York Times (August 11, 1996; violet font)

New York Times (March 22, 1998; green font)

New York Times (July 21, 1998; sky-blue font)

New York Times (July 26, 1998; red font)

Press of Atlantic City (August 28, 2011; brown font)

New York Times (July 21, 2014; black font)

Press of Atlantic City (July 31, 2014; orange font)

But beware the savior into whose arms one flees:

‘We forgot to ask if we shouldn’t have safeguards for our elected officials who might not be able to understand the sophisticated games people are going to play with them.”  

The plan would claim nine houses on Horace Bryant Drive, which runs along a canal on the city’s west side, as well as scores of vacant and industrial properties.

When organized crime goes out, organized government comes in – and citizens need to be careful that they limit their government’s ability to act arbitrarily, lest the government be captured by parochial economic interests.

Several homeowners and community groups have sued in Federal court to forestall condemnation by the state Department of Transportation on the ground that the decision to route the tunnel through an African-American neighborhood violates civil rights laws.  

That was an interesting tactic, reminiscent of the later New Jersey dispute over the Mount Holly redevelopment, a case I think wrongly told, wrongly ended, and wrongly understood.  In this case, decided April 8, 1998, the City’s authority to condemn was affirmed.

The case points up not just the power of casino money but the huge racial divide in Atlantic City. ”The folks on the west side clearly feel betrayed,” said Councilman Lorenzo Langford, who in the May 12 election is challenging Mayor Whelan’s re-election.

[He won, and served a total of ten years. – Ed.]

lorenzo_langford

The King of Marvin Gardens?

A mayor like Grover Cleveland, elected twice with a hiatus in between

Mr. Trump also appeared on ”20/ 20” last month [June, 1998 – Ed.] to discuss the case. ”In life you have a thing called condemnation,” he said on the show. ”And cities have the right to condemn for the good of a city — whether it’s New York, whether it’s Los Angeles, whether it’s any other place. Atlantic City is one of those cities, and it’s got the right to condemn.”  

He added that he thought Mrs. Coking’s house was ugly.

On behalf of Ms. Coking, may I say that Mr. Trump’s hair is ugly?

donald_marla

Mr. Trump and his second wife, Marla, in 1998

That didn’t stop the State of New Jersey:

And so when a Superior Court judge ruled last year [Article in 1996] that CRDA could not seize Ms. Coking’s house and the other properties to allow a casino to expand, an Atlantic County State Senator, William Gormley [Now the managing partner for DLA Piper’s Atlantic City office – Ed.], drafted a bill that would give CRDA the power to do just that. The bill has passed the Legislature and Gov. Christine Todd Whitman is expected to sign it any day.

gormley_at_stockton_commencement

Senator Gormley giving a commencement address at the Richard Stockton College of New Jersey, 2012

As we know, it was signed … but in the meantime, other things happened.

James Kennedy, CRDA’s executive director, said once the bill is signed he expects an appellate court to void the Superior Court ruling. Robert M. Pickus, a lawyer for Trump Plaza, sounded even more definite. Saying that the Governor had already signed the bill, he said, ”The condemnation of the properties will proceed.”

5. Homestead property rights versus urban-economic imperatives

All of the city’s efforts have to be seen against the background of what actually happened: despite probably the most aggressive use of eminent domain for economic development (ED4ED) since the Bob Moses 1950s, Atlantic City’s leaders failed to turn its economy around:

Like the boardinghouse, Trump Plaza, across the street, has seen brighter days. The wallpaper is peeling, the windows are covered in grime and, worst of all, most of the seats at the slots and the gambling tables are empty. Last week, 1,100 workers there received letters saying the casino could close by mid-September, joining three others expected to shutter this year.

This was absolutely not for lack of trying:

The case on Columbia Place is a test of how far Atlantic City will go in breaking eggs to make omelets or, in this case, bigger casinos. That has been the story for twenty years of gambling in this city, an odd and spectacular social experiment that necessarily involves a lot of money and real estate changing hands.

”New Jersey is so congested and urbanized, and because in Atlantic City casinos are almost a public use, Atlantic City is like a Petri dish for this stuff,” said John H. Buonocore Jr., a Morristown lawyer who has handled several eminent domain cases in Atlantic City.

Atlantic City’s eminent domain campaign was born of desperation and blight; casinos may not have been the way to correct the blight, but the blight was real.  So Atlantic City went after it wholesale:

In the last 13 years [1985 to 1998], the authority has rebuilt Atlantic City by condemning 300 to 400 properties, almost all to make way for expansions and improvements to casinos along the city’s Boardwalk.

Just as if the city fathers were playing Monopoly, they sought to assemble color groups on high-rent properties, and for Atlantic City the Boardwalk is the high-priced real estate there is.

monopoly_boardwalk_double

The more hotels, the faster someone goes bankrupt

At the moment [March, 1998], the city map is dotted with condemnation fights involving casinos.

Down the street from Trump Plaza, several properties around the Tropicana casino-hotel were condemned recently for its expansion. Up the street, at the site of the huge casino development planned by MGM Grand [MGM Grand later built inland, at Egg Harbor, and tried Atlantic City again in 2007, and also abandoned that one. – Ed.], one owner is contesting the designation of a tract including his property as an ”area in need of redevelopment.” And across town, several homeowners are suing in Federal court to stop a $330 million tunnel that would plow through a middle-class black neighborhood to deliver traffic to the planned Mirage casino development.

But the question of whether a government can condemn land on behalf of someone else has seldom been presented to the courts in a case as stark as that now before Judge Richard Williams of Superior Court [He retired in September, 2004 – Ed.], who heard arguments last month on whether the constitutional concept of ”public use” is large enough to encompass Donald Trump. A ruling is expected any day now.

(In the event, it came three months later.)

”Even with a broad interpretation of government power, this case falls beyond it,” said Dana Berliner, a lawyer for the Institute for Justice, a conservative legal organization in Washington that is challenging the condemnations. ”I’m hoping this causes the New Jersey courts to draw the line. It’s really hard to argue with a straight face that taking a woman’s home of nearly 40 years to give it to Donald Trump for a limousine waiting area is a public use.”

dana_berliner_georgetown

Much less a limousine waiting area is a public benefit …

In the meantime, the authority has taken a bath, public relations-wise. It did not look good when the British Broadcasting Corporation covered the fight, or when Garry Trudeau devoted six ”Doonesbury” cartoons to the spectacle of Mr. Trump lining up against a little family restaurant.

trump_uncle_duke

When in doubt, libel somebody with a fictional character

sabatinis_doonesbury

Fame is fleeting: the Sabatinis in Doonesbury (the cartoonist donated his original artwork)

Mr. Kennedy notes that the authority’s main job is collecting taxes from the casinos to rebuild the city, not helping the casinos acquire more property.

”When you’re taking property from an established business or homeowner on behalf of a casino,” James B. Kennedy said, ”even if you can make the legal, intelligent argument in terms of economic development and job creation, it’s much, much harder for people to accept.”

That is because, as we saw in Kelo v. New London and its aftermath, people have a profound distrust for local governments with dollar signs in their eyes making I’ll-take-his-property-for-you arrangements

duck_dollar

I just have to use my powers?

Three years ago, Peter Banin, a Russian immigrant, bought the Golden Island pawn shop, next to Sabatini’s.

Left unmentioned, but wholly logical, is that Mr. Banin’s business – a pawnshop – undoubtedly depended for its business on the casino adjacent, where thousands of people gambled away their cash, and then when broke crossed the boulevard to pawn their jewelry for more cash.

Two months after he opened, he received notice that the property he bought for $500,000 would be condemned. He was offered $174,000.

Mr. Banin, weary after an 18-hour day at the store, sounded betrayed by his adopted country. ”Laws rewritten to overrule a court,” he said, shaking his head. ”Not even in Russia would the government do something like this.”

For whatever reason, by 1998 CRDA had reversed itself and was no longer siding with Trump on its expansion:

Now, however, the authority wants out. It is fighting Trump in the case before Judge Williams, claiming that the company’s lawyers agreed last summer to drop plans to condemn the Sabatinis’ restaurant and the gold shop belonging to Peter Banin and his brother Josef.

never_mind_litella

[Continued tomorrow in Part 5.]

convert this post to pdf.
PDF24 Creator    Send article as PDF   

You have the right to remain: Part 3, Stubborn

August 27, 2014 | Atlantic City, Cities, Development, Donald Trump, Economics, ED4ED, Eminent domain, Fair market value, Homeownership, Housing, Land use, Markets, Urban renewal, Urbanization, US News, Vera Coking | No comments 138 views

[Continued from yesterday's Part 2 and the preceding Part 1.]

By: David A. Smith

Meyer Lansky: We do operate a game in what might be termed a grey area territorially. But as to any violence in the neighborhood…

Joe Masseria: They stab themself, eh?

Lucky Luciano: A coincidence then. It happens.

Boardwalk Empire

By the 1970s, when the collapse of Atlantic City’s former economic model (railroad resorts) had made the city’s leaders desperate to find another source of demand to fill those beachfront hotel rooms, the city (and behind it, the State of New Jersey) hit upon legalized gambling as potential salvation.

salvation_army_nun

I pray for good rolls

Sources used in this post

New York Times (October 4, 1994; blue font)

New York Times (August 11, 1996; violet font)

New York Times (March 22, 1998; green font)

New York Times (July 21, 1998; sky-blue font)

New York Times (July 26, 1998; red font)

Press of Atlantic City (August 28, 2011; brown font)

New York Times (July 21, 2014; black font)

Press of Atlantic City (July 31, 2014; orange font)

That act of faith triggered another round of vertical urbanization, including the necessity of remaking the city’s grid and assembling ever-larger land parcels to support ever-larger hotels, and a gold rush of money-sin purveyors trying to replicate Vegas on the Atlantic.  To do this, they had to push aside the small property owners, and to use eminent domain, they had to buy at fair market value, the determination of which is trickier than it may appear.

Nixon

Now let me say this about that

In this context, there are potentially four types of value:

1. Occupancy value.  What the homeowners or property users would otherwise have to pay to live there.  Not really applicable, except possibly to Ms. Coking, because the properties are not homesteads.

The Sabatinis can’t stop thinking about how much of their family is in that thriving little restaurant. “It’s our livelihood,” Mrs. Sabatini said. “Where are we going to find another location that’s comparable?”

2. Use value.  What is the property worth in its current use?  In other words, how much cash flow is each property making?  In all three cases, the businesses being operated on the site were owned by the property owner, so the question would be especially abstract.

The restaurant they opened when Atlantic City’s big attractions were salt water taffy and a lively boardwalk put four of their five children through college. It put one through medical school. “It put my wife through school, too,” Vincent Sabatini said proudly. “She got her master’s in education while we had the restaurant.”

Three sons still [1994 – Ed.] work here. Michael, 34, is the chef. Stephen, 27, who plans to go to law school, works the bar. Charles, 39, an engineering student, is night manager.

3. Sale value.  If the property were put up for sale, as is and assuming continuation of its current physical configuration, how much would a buyer pay?  Maybe someone else would put a video rental place (remember those?) in Mr. Banin’s gold-merchant building, or a different chef would remake the Sabatinis’ traditional Italian restaurant.

boardwalk_empire_dining

Yeah, we’ll bring back the old-time glamour

Once the casino restaurants opened, business tailed off, but there’s still a regular crowd at Sabatini’s bar, including a lot of Trump employees. They had a few talks with Donald Trump’s brother Robert (”Robert was a gem,” Mrs. Sabatini said) about leasing the property to the Trump organization, but nothing came of it.  Nor did anything come of vague talks with Donald Trump (”he’s charming, but he’s a businessman”) in later years.

4. Redevelopment value.  If the property were redeveloped, either on its own or when combined with other parcels to enable a much larger structure, how much value would the land have?

tmnt_four

You have four choices

“If we have to move, we want a fair price,” Mrs. Sabatini said. She said they received an initial offer of well over $1 million six years ago [i.e. 1988 – Ed.] from the Sands Hotel and Casino when it was planning a project on the block.

(The project fell apart before they could respond to the offer.)

Redevelopment value is evanescent: there is a tide in the affairs of developers, which taken at the flood, leads on to revitalization.  Omitted, all the voyage of their city is bound in shallows and in miseries.

The old Penthouse hulk was torn down by Trump in 1993 after he bought the Guccione property for Trump Plaza’s expansion.

For a government making an eminent domain purchase, the purchase price must be whichever is highest.  But what is the answer for a seller who might be forced to sell, or might not be?

The Sabatinis are not the only ones fighting condemnation plans. Vera Coking, a widow who lives in one of the two houses on the block slated for condemnation, is also fighting to stay until she gets what she believes the property is worth.

(The owner of a house one lot away from Sabatini’s Restaurant has agreed to go.)

Ms. Coking was offered $251,000 for her three-story rooming house, which would become a limousine staging area. Her lawyer says it’s worth $2 million.

My respect for lawyers fluctuates, if only because they are perfectly willing to make outlandish claims for which they may have no basis, all in the name of ‘representing’ their client.

“One of the reasons my grandmother never wanted to sell,” said her grandson, Ed Casey, in a telephone interview, “is she just never wanted to move.”

Emotional incumbency is immensely powerful, and it’s an absolute right of property owners.

… Or is it?

Robert M. Pickus, a lawyer for Trump Plaza [Who later moved on to casino development himself – Ed.], said the corporation was just doing what was permitted by law.

bob._pickus

Easy pickus?

4. When cities need to change use to reverse economic decline

In 1985, New Jersey created CRDA, with the specific mandate of sweeping redevelopment in Atlantic City:

If it weren’t for eminent domain, there would be no new Atlantic City. It owes its reconstructed self in part to the Casino Reinvestment Development Authority, known as CRDA (CREE-dah), which in 13 years of existence has condemned 300 to 400 properties. Others have fallen to the city and its housing authority and similar agencies.

At the moment, the city map is dotted with condemnation fights involving casinos. Down the street from Trump Plaza, several properties around the Tropicana casino-hotel were condemned recently for its expansion. Up the street, at the site of the huge casino development planned by MGM Grand, one owner is contesting the designation of a tract including his property as an ”area in need of redevelopment.” And across town, several homeowners are suing in Federal court to stop a $330 million tunnel that would plow through a middle-class black neighborhood to deliver traffic to the planned Mirage casino development.

Starting in 1994, the state’s Casino Redevelopment Authority upped the ante:

When she refused Mr. Trump’s initial offers, the city’s Casino Reinvestment Development Authority became involved in 1996 and a three-year eminent domain saga ensued, pitting Mr. Trump against a woman who proved as feisty as he was.

By 1998, the eminent-domain fight was reaching New Jersey’s highest court:

The plan is to turn them over to the Trump organization for parking and landscaping to enhance what one executive at the Trump Plaza Hotel and Casino called the visiting gambler’s ”sense of arrival.”

That’s not really a public use, the property owners say.

Interestingly, had the CRDA elected to take the property and keep it publicly owned, instead of flipping it to the Trump casino, then it would have been public use – and it’s manifestly clear that the Trump Plaza would benefit (or would have benefited) from more green space before its main entrance.

127_s_columbia_trump

Would you imagine the casino entrance is nearby?

However, it did not – and Ms. Coking resisted:

But theirs is not an easy argument in the law of eminent domain, by which a government agency can take property. More and more often, courts are finding that a public use is whatever the legislature says it is — not just building roads and schools but enticing bigger, better employers and taxpayers, whoever they may be. The old owner gets fair market value, the new owner moves in, and the government acts as real estate broker.

kelo_wrecking_ball

How many viewed the Kelo decision in 2005

The Trump organization and the development authority point to the 1993 state law that authorized public funds and condemnation powers for the purpose of constructing hotel rooms and ”appurtenant facilities” (later amended to include casinos) in Atlantic City.

State laws are not Federal ones, and they differ; here, New Jersey’s legislature and governor (Florio) evidently decided the law needed updating to expand their land-taking powers. 

Under that law, they argue, these ends constituted a public use that the authority was securing when it entered an agreement with Trump Plaza Associates in 1993 to acquire the properties across the street.

Update presented with retrospective clairvoyance: when defeated for re-election in 1994 and then again in 2000, Mr. Florio joined the Board of Directors of Trump Entertainment Resorts until the entity’s third bankruptcy.  Now he’s back in private practice.

florio_governor

An honest politician?” – Robert A. Heinlein.

”Our board acted appropriately four years ago,” said James B. Kennedy, executive director of the development authority, in that the three parcels were necessary to the Trump expansion project as it was presented to the agency.

New Jersey has always been known for the probity of its elected officials.

wayne_bryant

I always served my principal constituency

[Continued tomorrow in Part 4.]

convert this post to pdf.
Create PDF    Send article as PDF   

You have the right to remain: Part 2, Anachronistic

August 26, 2014 | Atlantic City, Cities, Development, Donald Trump, Economics, ED4ED, Eminent domain, Fair market value, Homeownership, Housing, Land use, Markets, Urban renewal, Urbanization, US News, Vera Coking | No comments 149 views

[Continued from yesterday's Part 1.]

By: David A. Smith

Arnold Rothstein: The very reason this game is so challenging. There’s a lot of money in that pot. How much do you think is in there?

Boardwalk Empire

As we saw in yesterday’s opening post, Atlantic City was one of the world’s earliest technological (or even ‘artificial’) cities – it was born out of entrepreneurial vision, as a destination worthy of riding a railroad out of the stench and soot of Philadelphia and New York City. 

altantic_city_beauties

Bathing beauties, Atlantic City

That meant increased density, to put more eyes within sight of the beachfront, and that triggered a late-nineteenth-century hotel boom that wiped out small-scale residential infrastructure in favor of income-producing real estate:

During the early part of the 20th century, Atlantic City went through a radical building boom. Many of the modest boarding houses that dotted the boardwalk were replaced with large hotels. Two of the city’s most distinctive hotels were the Marlborough-Blenheim Hotel and the Traymore Hotel.

Traymore_1930

The Traymore in 1930

Sources used in this post

New York Times (October 4, 1994; blue font)

New York Times (August 11, 1996; violet font)

New York Times (March 22, 1998; green font)

New York Times (July 21, 1998; sky-blue font)

New York Times (July 26, 1998; red font)

Press of Atlantic City (August 28, 2011; brown font)

New York Times (July 21, 2014; black font)

Press of Atlantic City (July 31, 2014; orange font)

Then Atlantic City caught its big break: the national delusion known as Prohibition, which suddenly gave the city a new boom – rum-running.

The 1920s, with tourism at its peak, are considered by many historians as Atlantic City’s golden age. During Prohibition, which was enacted nationally in 1919 and lasted until 1933, much liquor was consumed and gambling regularly took place in the back rooms of nightclubs and restaurants. It was during Prohibition that racketeer and political boss Enoch L. “Nucky” Johnson rose to power. Prohibition was largely unenforced in Atlantic City, and, because alcohol that had been smuggled into the city with the acquiescence of local officials could be readily obtained at restaurants and other establishments, the resort’s popularity grew further. The city then dubbed itself as “The World’s Playground”.

altantic_city_worlds_playground

Ready to play, boys?

Nevertheless, all bad things must come to an end, and Prohibition’s 1933 repeal started Atlantic City on a long slow decline across three decades:

marilyn_monroe_miss_america_1952

Marilyn Monroe, Grand Marshal, Miss America Pageant, Atlantic City, 1952

By the late 1960s, many of the resort’s once great hotels were suffering from embarrassing vacancy rates. Most of them were either shut down, converted to cheap apartments, or converted to nursing home facilities by the end of the decade.

ac_1971

Atlantic City, 1971

In the Sixties and Seventies, Atlantic City was a code word for urban failure.

Prior to and during the advent of legalized gaming, many of these hotels were demolished. The Breakers, the Chelsea, the Brighton, the Shelburne, the Mayflower, the Traymore, and the Marlborough-Blenheim were demolished in the 1970s and 1980s.

ac_malle_checkin_lancaster_sarandon

I want to show the lady a good time, if that’s all right with you

The city’s urban decay from its past glories was sensuously depicted by Louis Malle in his 1980 film Atlantic City, with Burt Lancaster as the last of the stylish booze gangsters.

traymore_implosion_1972

Coming down in 1972 to make way for even bigger progress

The film ends with the Traymore’s demolition as the visual symbol of Atlantic City’s decision to legalize gambling (or ‘gaming’ as the industry likes to call it). 

ac_malle_lancaster_reminiscing

Kid, nostalgia ain’t what it used to be

With all that new gaming came a new round of even bigger and splashier hotels, and a half a boom for the 80s and 90s – but then came the proliferation of suddenly-valuable Indian tribes, with their ‘sovereign nations’ as convenient loci for casinos in every nook and cranny of America, and Atlantic City lost its exclusivity, leaving it only with proximity to New York and Philadelphia, and during the boom times, that carried the city, up through the Great Crunch:

As of October 2013, the greater Atlantic City area has one of the highest unemployment rates in the country at 13.8%, out of labor force of around 141,000.

ac_bourke_2013

Atlantic City by Geffrard Bourke

If by some chance Atlantic City were destroyed tomorrow by a hurricane, it might never be rebuilt – for the reasons it was created (railway resort, prohibition rum-running, and casino gambling) all have had their day and gone. 

Against the backdrop of a decade and a half of slow inevitable decline played out the tussle between the municipality of Atlantic City and its casino champions on the one side, and on the other a few isolated property owners.

3. The conundrum of property value in a rapidly changing city

For the three property owners – Coking, Banin, and Sabatini – Atlantic City wasn’t economic an economic development machine, it was a city that they liked and could afford.

Vera Coking and her husband Raymond, an engineer who died in 1967, bought the house in the 1960s for $20,000. Before the arrival of casino gambling in 1978 dramatically changed the city’s landscape, the Coking house was part of a cluster of homes and small businesses in the Columbia Place neighborhood.

Actually, the Cokings operated a rooming house

A three-story building that she ran for decades as a boarding house.

– and without impugning them, I can speculate that it was part of the stock of aging-and-declining boarding houses that zoning and building codes largely put out of business during the Sixties and Seventies.  Certainly it was anachronistic. 

Penthouse publisher Bob Guccione.

I’ve seen the future, and it gambles

In the 1970s, Penthouse magazine publisher Bob Guccione offered Ms. Coking $1 million offer for her house, so he began building the steel superstructure of the proposed Penthouse casino around her.

Guccione ran out of money for his project and halted construction in 1980, but the rusting steel frame of the half-completed casino surrounded Coking’s home.

vera_coking_husband_1979

Ms. Coking and her husband in front of their rooming house, with scaffolding for what would have been the Penthouse casino

Nearby were the Sabatinis:

Sabatini’s Restaurant, short and plain, sits on a prime corner of Pacific Avenue, dwarfed by glittering casinos. Caesars stands across the street on one side of the two-story brick building. On the other, gleaming like the head cheerleader, there is Trump Plaza.

sabatinis

The Sabatinis in their restaurant, probably 1990s

Until a little over a year ago [i.e. 1993], this made business, and so life, easy for Clare and Vincent Sabatini. They’re the mom and pop of the family that has run the restaurant for 30 years. Most of their business is casino-related; casino employees make up the regulars and casino guests take up the slack. But the problem with a great spot is others want it.

Unsurprisingly, the jobs the casinos brought helped the Sabatinis achieve good times:

The Sabatinis, who opened their restaurant in 1965, had done well. Mrs. Sabatini, in a quiet hour before dinner one recent evening, recalled the neighborhood when it was full of roses and hydrangea and guest houses that sent summer tourists to line up outside the restaurant.

For better or worse, the same forces that grew their business – expansion desired by the casinos, Atlantic City’s government, and the State of New Jersey – threatened their location:

donald_pitching_atlantic_city_1980s

Back when Mr. Trump’s hair was dark, and relatively un-combed-over

When Trump Plaza was going up in the early 1980′s, the Sabatinis fed so many company employees and workmen that they billed Trump by the week.

vincent_sabatini_91_daugher_anna_2011

Mr. Sabatini, age 91, and his daughter Anna, in 2011

The third property is owned by Peter Banin, a gold merchant who tends his shop into the wee hours, just himself and a small gray cat named Junior.

In July 1994, the Casino Reinvestment Development Authority, a state agency, filed condemnation suits against the Sabatinis, Mr. Banin and Mrs. Coking. T

These tactics make me wonder how the previous clearances (to build the Marlborough-Blenheim and the Traymore) were accomplished: probably with tactics a whole lot less legalistic than those deployed by the CRDA.

boardwalk_empire_capone

Now, let me explain about our relocation program

More and more often [This in 1998, not 2005 – Ed.] , courts are finding that a public use is whatever the legislature says it is — not just building roads and schools but enticing bigger, better employers and taxpayers, whoever they may be.

The old owner gets fair market value, the new owner moves in, and the government acts as real estate broker.

Ah, but what is ‘fair market value’?

In its classical definition, ‘fair market value’ means ‘willing buyer, willing seller’ – but the holdouts – Coking, Banin, and Sabatini – were unwilling sellers, who wanted to stay, seemingly no matter the price.

The authority had made its first and last offer: $700,000 for Sabatini’s Restaurant, $169,500 for Mr. Banin’s shop, which is next door, and $251,250 for Mrs. Coking’s house, which stands alone down the street, across from the casino entrance.

Was that a fair price? 

127_south_columbia_close_up

A lonely outpost sandwiched between a parking lot and a main entrance road

[Continued tomorrow in Part 3.]

convert this post to pdf.
PDF Converter    Send article as PDF   

You have the right to remain: Part 1, Immovable

August 25, 2014 | Atlantic City, Cities, Development, Donald Trump, Economics, ED4ED, Eminent domain, Fair market value, Homeownership, Housing, Land use, Markets, Urban renewal, Urbanization, US News, Vera Coking | No comments 199 views

Arnold Rothstein: A sound elimination is the basis of good health.

Boardwalk Empire

By: David A. Smith

miranda_laminated

Maybe print one of these for every home owner?

Vera Coking could have been Susette Kelo; in fact, she was Susette Kelo … but in 1998, she won her eminent domain taking case.

02_vera_coking_in_1998

She won? Vera Coking in 1998, after winning

kelo_pink_house

She lost? Susette Kelo in 2005, before losing

At the time nobody beyond the antagonists – and we have Donald Trump as the Eeeevil Developer, in fact as an Eeeeevil Casino Developer in a city known mainly for its sins – quite appreciated that Ms. Coking’s victory for property rights would be a defeat for Atlantic City, and for Ms. Coking herself. 

boardwallk_empire_good_story

The first rule of politics

If journalists did not invent survivorship bias, they are its most dedicated proponents, if only because the living give better interviews than the departed, and a lucky winner (or unlucky loser) makes for good storytelling, and even if the storytelling has to invert logic, as reported in The New York Times (July 21, 2014):

A Homeowner’s Refusal to Cash Out in a Gambling Town Proves Costly

Cue up the Kenny Rogers lyrics: You’ve got to know when to fold ‘em.

boardwalk_empire_gambling

Now might be a good time to fold

By Matt A. V. Chaban

Atlantic City — A stand of blossoming lilac trees and a fresh coat of white paint hardly hide the decrepitude of the three-story boardinghouse half a block from the boardwalk. Ripped screens cover the windows that have not been smashed or boarded up. In the kitchen, refrigerators stand open and empty in a row; dirty plates fill the sink. Some guest rooms look untouched, beds made, while bags of trash and piles of suitcases litter others. What appears to be a crack pipe sits on a dresser.

Not so long ago, this was the most coveted home in this city.

Coveted, as we will see, not for itself but for its land.

Sources used in this post

New York Times (October 4, 1994; blue font)

New York Times (August 11, 1996; violet font)

New York Times (March 22, 1998; green font)

New York Times (July 21, 1998; sky-blue font)

New York Times (July 26, 1998; red font)

Press of Atlantic City (August 28, 2011; brown font)

New York Times (July 21, 2014; black font)

Press of Atlantic City (July 31, 2014; orange font)

1. Start at the end

On the chessboard lies and hypocrisy do not survive long; the merciless fact, culmination in checkmate, contradicts the hypocrites. – Emanuel Lasker

emanuel_lasker

In chess, if anybody claims he is better than I, I can checkmate him.

Law 7: Any damn fool can predict the past. – Larry Niven.

larry_niven

Law 1a: Never throw shit at an armed man

Though it is the future’s curse to be unknowable, it is the past’s curse to be unchangeable, and if we are to see the story of Vera Coking’s 127 South Columbia Place, we might as well start from the undeniable, with the property’s sale and likely demise.

On July 31, the property, at 127 South Columbia Place, will go up for auction. The reserve price, or the lowest the seller will accept, is $199,000, but brokers insist it will go for more.

[When this post ends – oh, so far in the future – readers will calibrate the veracity of the brokers’ claim. – Ed.]

distant_future_researchers

In the distant future, brokers’ claims will be verifiable.

As recently as eight years ago [i.e. 2006 – Ed.], Donald Trump was willing to pay at least 10 times that amount so he could expand Trump Plaza Hotel and Casino.

Shortly afterwards, seven years ago, Trump’s casino company went bankrupt for the third time.

bZtrumpd01    Sapone

I’m opening this hotel in 2008 …but not with my money

Now, as Atlantic City teeters under the weight of all of its opulence, Ms. Coking and her family may have lost their shot at a big payout.

trump_snickering

“Donald Trump, who now only owns a 10% stake in the casino, reacted to the news exactly how you’d expect. ‘I got out seven years ago; my timing was tremendous,’ the Donald told the AP over the weekend.”

The building still has some admirers, who make the short detour from the boardwalk to take their photo with the famous property.

Not admirers, gawkers.

gawking_ass

Oh, don’t be a gawking horse’s ass: Richard Lithgow etching

“All the years we’ve been coming here, we never stopped by, but when I heard about the auction, I wanted to see it before it was gone,” said Luanne Albertson, who was visiting from Egg Harbor, N.J., with her daughter and granddaughter. “I thought it would be bigger.”

coking_aerial

It’s all in the perspective, isn’t it?

2. The unsustainable city along the Atlantic

Some cities have no business being where they are, and by all natural laws of urbanization, Atlantic City has no business existing, and its history is that of economic infrastructure creating a city and service economy built on the most shifting of foundations – America’s appetites and varieties of sin.

Some cities exist because they were outposts or ports; some because they were forts; some because they bestride rivers; and a few because they were built solely as a lure to get people to use new technology – like the railroad.

The railroad, in fact, was the world’s second disruptive transportation technology (the ocean-going sailing ship was the first); and just as the Duke of Wellington feared, the railroad ‘encouraged common people to move about needlessly’ – but that created a problem: why would people spend money on ‘cheap day return’ tickets if they had nowhere to go?

duke_of_wellington_old

And they will ruin the role of cavalry

Thus the railroad birthed Brighton (George IV’s playground), Blackpool, Palm Beach, Fire Island … and the Harvey Girls. 

harvey_girls

Nineteenth century flight attendants: the Harvey Girls

fly_me

To the moon, or to Florida?

harvey_girls_row

Ride me to adventure?

Until the railroad arrived, Atlantic City was empty:

trost_richards_seascape_atlantic_city_1873

William Trost Richards, Seascape, Atlantic City, 1873

It was built purely as a seaside resort:

The city was incorporated in 1854, the same year in which the Camden and Atlantic Railroad train service began. Built on the edge of the bay, this served as the direct link of this remote parcel of land with Philadelphia, Pennsylvania. By 1874, almost 500,000 passengers a year were coming to Atlantic City by rail.

In conspicuous consumption reminiscent of Huxley’s Brave New World (centrifugal bumble-puppy, anyone?) once the destination was established as a railroad terminus, it needed hotels:

atlantic_city_map_1872

A railway straight to the hotel entrance, and then the Atlantic Ocean only two blocks away

After arriving in Atlantic City, a second train brought the visitors to the door of the resort’s first public lodging, the United States Hotel. The hotel was owned by the railroad. It was a sprawling, four-story structure built to house 2,000 guests. It opened while it was still under construction, with only one wing standing, and even that wasn’t completed. By year’s end, when it was fully constructed, the United States Hotel was not only the first hotel in Atlantic City but also the largest in the nation. Its rooms totaled more than 600, and its grounds covered some 14 acres.

united_states_hotel_ac

The United States Hotel, Atlantic City, 1875

So Atlantic City, unlike many American cities, had hotels before it had housing – and thereby set its character for the next century and a quarter.

[Continued tomorrow in Part 2.]

convert this post to pdf.
PDF Printer    Send article as PDF