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Court Buttresses Eminent Domain

Local Governments Cleared To Take Private Property
If Projects Promise Growth

JESS BRAVIN / Wall Street Journal 24jun2005

 

The Supreme Court gave local governments broad rein to take private property for economic development, ruling that transferring land to private investors for projects promising to bring jobs or commerce was a public use akin to building a park or paving a road.

The 5-4 decision lifts a cloud over redevelopment projects across the country that hinge on local authorities using eminent-domain powers to assemble parcels for private investors to develop commercially. Several projects could lead to the condemnation of property for conversion to shops or other uses that will feed off the primary development. The threat of condemnation, developers say, encourages holdouts to sell.

The court's ruling came in a case out of New London, Conn., a depressed manufacturing city whose economic hopes were buoyed in 1998 when New York drug maker Pfizer Inc. announced plans to open a research facility there. City authorities proposed to redevelop the adjacent residential Fort Trumbull neighborhood to capitalize on Pfizer's presence, including a hotel and a pedestrian "riverwalk." Most landowners sold willingly. Nine refused, and the city condemned their property.

The Fifth Amendment prohibits the government from taking private property "for public use without just compensation." The landowners sued, claiming that the redevelopment wasn't a "public use." The Connecticut Supreme Court rejected that theory, prompting an appeal to the U.S. Supreme Court.

Historically, the court has given government wide discretion to decide what constitutes public use. In 1954, it endorsed postwar urban-renewal efforts that paved over neighborhoods in a bid to eradicate blight.

No one argued, however, that working-class Fort Trumbull had fallen into blight, and the homeowners, backed by property-rights activists, asked the high court to draw a line between clearing slums and simply trying to boost the local economy.

The court's opinion, by Justice John Paul Stevens, refused to make such distinctions. "Promoting economic development is a traditional and long-accepted function of government," he wrote, an aim sometimes better achieved through promoting private enterprise than state ownership.

In dissent, Justice Sandra Day O'Connor warned that now "the specter of condemnation hangs over all property. Nothing is to prevent the state from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory."

Dana Berliner, an attorney with the Institute for Justice, an advocacy group that represented the homeowners, said the ruling "is an open invitation for the abuse of power of eminent domain by local government and private developers, and I'm sure they will be more than happy to accept that invitation."

Justice Stevens made clear that states were free to impose greater limits on condemnation, and Ms. Berliner said, "that is where we will be taking this battle." Several states have restricted takings for economic development, including Michigan, whose Supreme Court last year reversed an earlier decision that had allowed such condemnations.

Daniel Rodriguez, dean of the University of San Diego School of Law and an expert in local-government law, said the ruling was unlikely to lead to a rash of condemnations.

The opinion is "not a license to steal," he said. "The court makes clear that there are standards and that the public-use requirement is a real requirement," one that was met through the detailed process New London followed before settling on its plan.

Developers said the ruling was a relief. James G. Koman, president of Koman Properties Inc., of St. Louis, has five projects that hinged on the outcome. "There's no way a city can rebuild its urban core or rundown sections of town unless you have this type of law behind you," he said. (Kelo v. New London)

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A Closer Look at Eminent Domain

What the High Court's Decision May Mean for Homeowners

STEVEN SLOAN / Wall Street Journal 24jun2005

 

On Thursday, the Supreme Court ruled that local governments can use their authority to seize private property to encourage commercial and economic development. The case came out of New London, Conn., a depressed manufacturing city whose economic hopes were lifted in 1998 when Pfizer Inc. decided to open a research facility there. After the announcement, the city created a redevelopment plan that involved razing the Fort Trumbull neighborhood and replacing homes with new construction and a pedestrian "riverwalk." Most landowners in the area sold willingly. But some refused and the city condemned their property.

We asked Antonio Rossmann, an adjunct professor of law at the University of California Berkeley and an expert in land-use law, to discuss how the ruling is expected to affect homeowners in general.

 

Q: What is the most significant part of this decision? How does it change existing eminent-domain law?

A: I don't see this as changing the law. I think it reaffirms existing law, which has been quite deferential to states or local governments in the determination of public necessity. By that I mean that the presumption remains that when the government says they need land to produce a project providing a public benefit, the court will not second guess that as a matter of constitutional law.

I think [Justice Anthony] Kennedy's opinion is significant because he shows there would be a fifth vote to strike down something outrageous. But while the New London plan is unfortunate, it's not outrageous. It's not aimed at people whose land was taken exclusively for Pfizer. Pfizer was just a catalyst for the redevelopment.

If the government acts in accordance with a plan that is not targeting individuals as beneficiaries or victims, the governmental option will be sustained. In the end, the federalists [those who favor states' rights and a division between national and local authority] will have their way because the focus will shift to states. State rules will prevent abuse. An opposing decision would have been a stunner.

Q: Are there a lot of projects that will go forward now because of this ruling? Where are there other high profile battles between homeowners and developers?

A: I am not aware of a sudden rush on projects. In California, it's not going to change anything because the law here, in both the legislature and the courts, provides for careful scrutiny to make sure there is actual blight before the change goes through. I know that in other areas, people have been on hold waiting for the decision to come down. But they still have to deal with state law procedures.

The decision does create the risk of insensitive abuse [by local governments]. But if I were advising governments, I'd say "you escaped by the skin of your teeth with five votes." I'd say "be cautious."

Q: How should homeowners and home buyers react to this ruling?

A: The facts of this case are extraordinary. This was the perfect test case because it was so heart-wrenching. [Several of the residents who refused to vacate lived there for decades, including an 87-year-old woman who continued to live in the home in which she was born.]

It's a political decision by the city council and a political decision by local and state governments to set rules for condemnation. The answer [for homeowners and home buyers] is not panic but political involvement.

The court's decision is a benign communitarian decision. It's endorsing people acting through their representative government. So people should fight like hell in that political arena for one's individual values.

In this case, there's genuine people involved. But in many cases, these are opportunists waiting to hold out. The court said we aren't going to be the engine for that anti-communitarian process.

Q: Some experts are now saying activists will turn to state governments for protection against eminent domain. How realistic is it to expect states to impose these kinds of protections?

A: I don't think it's unrealistic. This is one part of the property rights movement that has substantial populist appeal. So much of this is "government, get out of my face. Don't tell me about public good." People are saying this isn't a public good.

This is something we can all relate to. The court's action will be a catalyst in states where there isn't sufficient protection.

There are many folks in the redevelopment business that are insensitive at best and manipulative at worst. Political pressure should bring that under control. Let me also say that this isn't a blue state-red state issue. You've got the environmental, good government and private property groups all working together on this.

The court's decision will raise political awareness of this issue. People will be asking these questions in their communities. An effect on political action could take place within a certain window. But how long is an American's attention span? We've got a few years for people to act. But there is an energized property rights movement out there.

Q: Does this benefit large corporations over homeowners, as Justice O'Connor said in her dissent?

A: I don't see Pfizer as a beneficiary as much as I see the community as a beneficiary. There is a risk of collusion between business interests and government to transfer wealth but that's the same consequence we face with government action in general. Democracy is still being answered. People can make rules.

Q: Can homeowners challenge condemnation orders?

A: Not on the question of the legality of the condemnation. Pretty much, that's considered a question of law put in the hands of a judge. You have to have sound legal representation and should work on building a record showing that the proposal is not part of a rational plan.

If you contest a government taking the property and get to a jury, you'll do very well. Talk to any state highway department. They have a strong motivation to make peace with folks whose homes they are taking. So it's normally people who don't want to sell at any price. Again, in New London, this is a unique community.

If you want to challenge, you'd file a complaint against the city or the redevelopment agency. But the initial recourse is political. Make sure that the rules in your state are favorable to individual protection. A room full of angry citizens will certainly have an impact on a city council.

Q: What other protections are available to homeowners?

A: …. [E]nvironmental assessment laws… are very powerful. I don't know the state of the law in Connecticut but if this were to happen in New York or California, before the local government could go forward, they would have to do an environmental impact analysis.

In New London, I wonder if there would have been the possibility to move the houses to still enjoy the river view but at the periphery of the [Pfizer] project. Environmental assessment laws force that type of thinking to take place.

In this case, there had to be clear winners and losers but that doesn't always have to be the way.

Q: What's the process of selling a home in a condemnation situation?

A: In redevelopment, it has to be sold to the community and the local government. They, in turn, take those parcels and assemble them into a larger parcel and then make arrangements with private interests.

Developers have no leverage politically or legally. For a developer to realize its ambitions, it must use government as a vessel.

Q: How do municipalities calculate the value of the property they want to take?

A: Like any appraisal, you have to find comparable properties. The government will offer a fair market value. But that's tricky in condemnation because there's the question of how much value is added by the proposed project itself.

The rules that are written by governments try to discount those advantages, but if you get in front of a jury and say "I'm indispensable to this project. My property is more valuable because without me, you can't do the rest of the project," they might be sympathetic.

But the system tries to prevent that opportunism. If a person is forced to give up an awful lot, as is the case here, the jury will be sympathetic. Objectivity is at least the starting point.

Q: Is there any way to avoid worrying about this? Is there a type of property or location that cities or states would not take?

A: That's like asking if there's anyplace you can go to make sure they won't build a freeway. We live in an uncertain world and nobody has security. My best advice if you wanted to make sure you wouldn't deal with this is to buy a home in an established, large community where there would just be immense political and economic opposition to any effort to redevelop.

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