eminent domain

Pfizer to Close Facility Behind Kelo Case

by Marc Scribner on November 10, 2009 · 1 comment

in Economy, Legal, Personal Liberty, Politics as Usual, Zeitgeist

Yesterday, Pfizer announced it was closing its research and development facility in New London, Connecticut. This is the same complex that was at the center of the redevelopment plan at issue in Kelo v. New London. From the Castle Coalition:

This was the same bogus development plan that five justices of the U.S. Supreme Court refused to question when the property owners of New London pleaded to have their homes spared from the wrecking ball.  Justices mentioned that there was a plan in place, and that so long as lawmakers who are looking to use eminent domain for someone’s private gain had a plan, the courts would wash their hands.  Now, more than four years after the redevelopment scheme passed constitutional muster—allowing government to take land from one private owner only to hand that land over to another private party who happens to have more political influence—the plant that had been the magnet for the development is closing its doors and the very land where Susette Kelo’s home once stood remains barren to all but feral cats, seagulls and weeds.

This turn of events underscores the argument, often employed by eminent domain opponents, that government-sponsored development corporations lack the economic foresight to efficiently make long-term development investment decisions. Those decisions are best made by economic actors in an open marketplace, not by bureaucrats hungry for additional tax revenue and rent-seeking private developers who have no problem promising the moon to said tax-dollar-sign-eyed officials.

The poorly-reasoned Kelo decision did do some good in galvanizing a nation-wide property rights movement, which resulted in the majority of states enacting additional property protections. While the movement has lost a little steam recently, Texas voters just approved a constitutional amendment (with 81 percent support) that will outlaw several more egregious development takings practices.

For more on moving forward on the eminent domain front, see my previous post which outlines four practical reforms for curtailing eminent domain abuse.

Fighting Eminent Domain Abuse

by Marc Scribner on October 13, 2009 · 1 comment

in Deregulate to Stimulate, Economy, Legal, Personal Liberty, Stimulus to Nowhere

Popular outrage over eminent domain abuse may have waned a bit since the Supreme Court’s poorly-reasoned Kelo ruling in 2005, but economic development takings remain incredibly unpopular throughout the country. Public opinion polls indicate that more than 80 percent of Americans oppose eminent domain for economic development, which is surprising when one considers the relative inaction on the part of state legislatures to meaningfully protect their citizens’ property rights.

However, there are reasons to be optimistic. Brooklynites fighting the proposed Atlantic Yards development filed a lawsuit today challenging the legality of the Metro Transit Authority’s land handout to the private developer. In Texas, citizens will soon vote on widely-supported Proposition 11, which would amend the Texas Constitution to prevent area blight designations and condemnations, and prohibit takings for purposes of economic development. If it passes, which seems likely, Texas property owners will have some of the strongest protections against eminent domain abuse in the nation.

But there is a lot of work to do. Many in this country are still largely defenseless against development takings, so the question arises: What can property owners do to take back their rights from revenue-hungry municipalities and rent-seeking developers? The law, as it stands, is against them in most respects, but there are legislative avenues worth pursuing.

A few of the most politically-feasible are:

  1. Enacting state legislation mandating the creation and maintenance of a public eminent domain database accessible via the Internet. Currently, data on development takings are difficult to obtain due to the fact that eminent domain condemnations are ordered at the local level. Right now, an empirical analysis of takings within a state would require contacting every county clerk and requesting specific filings. A central state database would allow social scientists, journalists, and the public to examine the economic effects of eminent domain use and abuse.
  2. Enacting state legislation defining “public use” as “use by a government body,” which would deny municipalities the opportunity to claim that their takings deals with private developers serve the “public purpose” because they will ostensibly increase tax revenue at some future date.
  3. Enacting state legislation mandating that blight be determined on a parcel-by-parcel basis.
  4. Enacting state legislation mandating that Tax Increment Financing (TIF) be limited to the length of time required to complete public infrastructure improvements within a given TIF district. This would reduce the ability of rent-seeking private developers to collude with local officials to subsidize development projects.

These proposals could also be enacted through ballot initiatives, if the state allows them. As eminent domain is primarily a local issue, Congress is a less likely venue for legislative relief. However, it is possible for Congress to tie federal development and highway funding to takings behavior (as they presently do for myriad other “carrot-and-stick” purposes). For example, a bill was introduced in the previous legislative session that would cut off federal development grant money for 10 years to any state that permitted an eminent domain condemnation for the benefit of a private developer.

With the five-year anniversary of Kelo coming up next summer, a renewed interest in the harm caused by eminent domain abuse will hopefully materialize.

Eminent Domain Abuse in New York (Upstate Edition)

by Marc Scribner on October 7, 2009 · 1 comment

in Economy, Features, Legal, Politics as Usual, Zeitgeist

Yesterday, U.S. District Court Judge Frederick Scullin dismissed the majority of a lawsuit filed by J.C. Penney against the owner of the mall where it leases retail space.  The Carousel Center, located in Syracuse, New York, is currently undergoing a [doomed] expansion project–the largest commercial development to break ground in Syracuse in 20 years. The project is in part bolstered by public support in the form of generous tax breaks and ridiculous green giveaways (the planned hotel will be “powered by rainwater, solar,” and construction vehicles by biofuel), which has become a contentious issue in local Syracuse politics. But the development is also supported by questionable eminent domain condemnations.

In its complaint, J.C. Penney alleged that the mall owner violated the terms of its lease agreement, including provisions that required the retailer’s consent before any significant alteration to the mall was allowed to take place.  The court found that the mall was not liable because–at the insistence of the mall’s owners–the Syracuse Industrial Development Agency had condemned the property through eminent domain, which stripped all rights J.C. Penney had to its retail space per the original lease agreement. However, there appears to be some evidence that the takings were pretextual and that the developer violated the terms of the lease prior to the condemnation. This means it is possible that J.C. Penney will get some relief, despite New York’s notoriously biased and antiquated eminent domain statute. (And where exactly is the blight in this case justifying the takings? It seems difficult to apply the over-broad definition that came out of Berman v. Parker, as the condemnee is not a lone department store surrounded by “slums [and] blighted areas that tend to produce slums” in an economically-depressed inner city neighborhood, but an anchor store in a large, secure, modern shopping center.)

Unfortunately, the same cannot be said for Syracuse taxpayers, as the expansion project has also run into serious financial problems and completion of the expansion is now in jeopardy. In June, Citigroup, the primary construction lender, halted funding for the expansion project after it came to light that no tenants have agreed to lease the new space and that massive cost overruns now require drastic changes to the financing plan (specifically, Citi now wants the developer to contribute more cash). The case is currently tied up in appeals court, and the construction jobs and other benefits touted by cheerleading politicians have yet to materialize.

Land Grabbers Attack Free Speech

by Marc Scribner on August 20, 2009

in Legal, Personal Liberty, Politics as Usual, Zeitgeist

In this morning’s Washington Post, columnist George Will brings to light a particularly egregious example of politically-connected developers abusing the legal system to silence their land-grab critics:

When Kelo was decided, H. Walker Royall, a Dallas developer, already had designs on some property that for more than a decade has belonged to the Gore family shrimping business in coastal Freeport. In 2003, Royall signed an agreement with that city’s government to build a yacht marina, hotel and condominiums using property the city would seize by eminent domain.

The day after the Supreme Court made its Kelo mistake, Freeport intensified its pressure against the Gores, whose stout resistance caught the gimlet eye of Carla Main. An experienced journalist (former associate editor of the National Law Journal, she has written for the Wall Street Journal, National Review and numerous other publications), Main has recounted the case in her book “Bulldozed: ‘Kelo,’ Eminent Domain and the American Lust for Land.” Her thesis is that many “takings” of property for economic development are taking a terrible toll on the rights of everyday Americans.

In October 2008, Royall sued Main and her publisher (Encounter Books), seeking monetary damages and a ban on further production and distribution of the book. He also sued the Galveston newspaper that reviewed the book and the reviewer. A judge dismissed, on jurisdictional grounds, Royall’s suit against Richard Epstein, professor of law at the University of Chicago and New York University, whose offense was a dust-jacket endorsement of the book as a report on an “unholy alliance” between government and a private interest.

Royall’s defamation suit against Main appears ridiculous on its face, and his support for redevelopment takings is countered by a growing body of research. Moreover, Royall’s development plan was finalized before the state had even acquired the affected property, which is generally a good indication that the “economic redevelopment” in question is really just a transfer of wealth from legitimate property owners to the politically-connected developer. As I have noted in the past, these pretextual takings are recipes for economic and fiscal disaster–benefiting a few government officials and rent-seeking developers, but harming taxpayers, entrepreneurs, and homeowners.

Unfortunately, the silence-through-litigation strategy being employed by Royall has become increasingly common in the years following Kelo. The Institute for Justice, in its backgrounder on Royall v. Main, mentions the following cases:

In Clarksville, Tenn., when the city council considered a redevelopment plan that allowed the use of eminent domain for private development, a group of home and business owners formed the Clarksville Property Rights Coalition (CPRC).  Because the group dared to speak out against the project in an advertisement in a local newspaper, a member of the Clarksville city council and a member of the city’s Downtown District Partnership filed a frivolous libel lawsuit against the CPRC and demanded the group pay them $500,000. The Institute for Justice is defending the CPRC in this suit.

In Renton, Wash., eminent domain activist Inez Peterson led a successful fight against a blight designation—which would have enabled the use of eminent domain—that the city sought to place on the Renton Highlands neighborhood.  Prominent Renton developers Denny and Bernadene Dochnahl sued Peterson for various statements she made about them, such as when Peterson in an email called Ms. Dochnahl “a haughty and proud Pharisee.”

In St. Louis, the city government itself is trying to shut down a protest of its abuse of eminent domain.  Jim Roos owns well-maintained property that, as a public service, houses the urban poor.  The government has slated the property to be taken by eminent domain because of its location in a redevelopment area.  Roos decided to fight back with free speech.  On the side of one of his buildings, he placed a five-story-high mural that called for the city to “End Eminent Domain Abuse.”  Employing the city’s restrictive sign code, St. Louis is now trying to force Jim to remove the mural. The Institute for Justice is fighting to save the mural in litigation in federal court.

(Photo by Asa Gauen for IJ)

Brooklyn Land Grab Opponents Allege Government Corruption

by Marc Scribner on August 5, 2009

in Economy, Legal, Personal Liberty

Develop Don’t Destroy Brooklyn (DDDB), a group opposed to the taxpayer-financed development project Atlantic Yards, filed a motion with the New York Court of Appeals alleging that the environmental impact statement authored by the Empire State Development Corporation was illegally biased and predetermined in a manner that favors the property developer.

Specifically, according to DDDB, the latest brief filed in the case that challenges the environmental review asks the Court of Appeals to hear its case and address the following:

“1. Whether ESDC’s purposeful denial and mischaracterization of the uncontroverted economic conditions and trends in the project area, and its knowing misrepresentations of crime data in the project area, to support its ‘blight’ determination, demonstrate a degree of bias and corruption on the part of ESDC which warrants invalidation of its determination that the area is ‘substandard and insanitary’ for purposes of designating the project a ‘land use improvement project’ under the Urban Development Corporation Act (UDCA).

2. Whether ESDC’s purposeful denial and mischaracterization of the uncontroverted economic conditions and development trends in the project area, in order to justify its rejection of project alternatives, demonstrate a degree of bias and corruption on the part of ESDC which warrants invalidation of its rejection of project alternatives under State Environmental Quality Review Act (SEQRA).

3. Whether ESDC was required to consider the economic conditions and development trends in the project area in order to exercise its authority to designate and undertake the project as a ‘land use improvement project’ under the UDCA.

4. Whether a sports arena leased for one dollar per year to a private, for-profit entity to be operated as a professional sports facility, with trivial civic benefits, may nevertheless be designated a ‘civic project’ under the UDCA.

5. Whether the standard of review of an agency action under CPLR Article 78 is the same as the standard of review in a taxpayer action under section 51 of the General Municipal Law.”

The proposed Atlantic Yards project is financed in part by $1.6 billion+ in government subsidies. Forest City Ratner, the developer, is attempting to seize many of the affected parcels through eminent domain in order to construct high rise commercial and residential towers, along with a 20,000-seat arena. As noted by Daniel B. Kelly in the forthcoming Supreme Court Economic Review 2009 (ungated working paper available at SSRN), illegal pretextual takings–use of eminent domain when a deal between government and preferred private developer has already been reached–are far more common when development agencies author environmental impact statements and undertake “blight” determination studies. These analyses typically ignore current local economic trends and attempt to paint the economic landscape in the bleakest terms possible in order to convince the appropriate bureaucrats that a state-run, public-private “economic rehabilitation” plan is neccessary.

But, largely due to the poorly-reasoned majority opinion in Kelo v. New London, property owners now often face a Sisyphean task when they are forced to confront an unholy alliance between government bureaucrats and rent-seeking private developers.

Documentary Highlights Jersey Shore Eminent Domain Abuse

by Marc Scribner on July 13, 2009

in Culture, Economy, Legal, Personal Liberty, Politics as Usual, Zeitgeist

While the public outrage over eminent domain abuse following the 2005 Kelo ruling has waned to some degree, the controversy surrounding private property takings for purposes of “economic redevelopment” still burns in many municipalities across the country. Now a new documentary, titled Greetings from Asbury Park (yes, like the Springsteen record–he is listed among the film’s supporters), seeks to bring national attention to the plight of one elderly woman fighting to keep the home she has lived in for two generations.

“Greetings from Asbury Park” tells the story through the eyes of 91-year-old Angie Hampilos, a Greek immigrant who has lived in her tidy seaside bungalow for more than 50 years. It’s in the path of development, they want to raze her place and build high-rise condos Hampilos could not afford.

Filmmaker Christina Eliopoulos, who is Hampilos’ great niece, combined old film of Asbury Park’s boardwalk, stills, home movies and old and original music to tell her story. I was surprised Asbury Park ever looked that good. Eliopoulos obviously has a personal interest, but she tells both sides.

Seeing the spry Hampilos try to get the attention of politicians, who won’t see her or are absent from meetings, makes one wonder how she keeps going. She’s a tough woman but can’t understand how something like this can happen in America.

After a brief run on the festival circuit last year, the film is currently being shown on public television stations in the New York, New Jersey, and Philadelphia markets. The trailer can be found here.

Unfortunately, the situation Ms. Hampilos’ finds herself in is sadly typical. Takings generally target lower-income areas, which is intuitive as property values are expected to be lower and more likely to be found “in need” of some sort of economic rehabilitation. According to new research, lower-income property owners tend to be undercompensated with respect to appraised market value more often than their high-income counterparts.  As the enforcement of private property rights is a crucial institutional factor for potential entrepreneurs’ deciding whether to enter or exit the market, profitable opportunities for poorer entrepreneurs decrease disproportionately relative to high- or middle-income entrepreneurs–hardly a good policy to promote wealth creation at the lower end of the income scale. Local officials would be wise to focus more on their areas of expertise—tax policy, infrastructure development, et cetera—rather than involving themselves in the enterprise arena, as they often wind up hurting the very people they claim they’re trying to help.

Public Utility Land Grab Hits a Snag

by Marc Scribner on June 4, 2009

in Legal, Personal Liberty, Politics as Usual, Zeitgeist

In Springfield, Missouri, the city-owned utility provider–City Utilities–recently attempted to seize a parcel of downtown property in order to build a bus terminal. The owner, Becky Spence, planned to build a luxury hotel that would have been the tallest building in Springfield if completed. KOLR/KSFX reports:

Spence says when CU made it known it wanted to take her land, she tried to compromise.  She says she met with CU managers, offering a portion of the land for the bus terminal.  The rest would be for her hotel.

Spence says City Utilities rejected the offer.  She says she was surprised when CU brought up eminent domain because a study commissioned by CU to find an ideal piece of land ranked her property pretty low on the list.  That’s because the land sits 22 feet below street level.  The bus station is required to be on street level.

Spence says she declared bankruptcy as a last resort, knowing that eminent domain cannot touch a land protected by bankruptcy.

“It provides one more legal step that they have to go through, one more hoop that they have to jump, before they take my land,” says Spence.

It is a sad state of affairs when property owners must declare bankruptcy in order to prevent government theft. Adding insult to injury, her property–being 22 feet below street level–is completely inadequate for the “public purpose” of the proposed project. However, things may be looking up for Ms. Spence. The Springfield City Council has taken an interest in her case, and City Utilities has announced it is now considering building on land already owned by the city.

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