Today–this June 23–marks the fifth anniversary of the U.S. Supreme Court’s wrongheaded ruling in Kelo v. New London. Here’s my piece on Kelo+5 in The Daily Caller. The reasoning behind the opinion relied primarily on three past (although modern) Supreme Court decisions involving definitions of “public use”:
- Berman v. Parker (1954) — This case upheld the right of municipalities to declare entire areas blighted, even if the property in question isn’t blighted. It also accepted Washington, D.C.’s argument that the area condemnation was necessary to prevent future blight. An all around terrible decision.
- Hawaii Housing Authority v. Midkiff (1984) — This case involved redistribution of land titles in Hawaii. When the state moved to seize the properties, 49 percent of land in Hawaii was controlled by government and 47 percent was controlled by 72 owners. The Court failed to recognize the central problem with land distribution in Hawaii at the time: almost half of the property was controlled by government, which created massive real estate market distortions–in addition to Hawaii’s odd economic history. While Justice Sandra Day O’Connor wrote the majority opinion in Midkiff, she also wrote a scathing dissent in Kelo, where she regretted her broad language in the Midkiff ruling that opened the door for a terrible opinion like Kelo.
- Ruckelshaus v. Monsanto Co. (1984) — This case involved chemical industry trade secrets. While it was solely about intellectual property, the Court argued that this case was relevant because it dealt with public use in a purely economic context. The enormous distinctions between intellectual property and real property were lost on the majority in Kelo.
While the ruling itself was terrible, the events of New London demonstrate the fallibility of the municipal planner world view–that they somehow possess more market information than actual market players, and can in essence predict the future. In 2009 of last year, Pfizer announced it was closing the research facility that spawned New London’s redevelopment pipe dream, which in turn led the city to seize and demolish the petitioners’ homes. The land where their homes once stood is now largely vacant, with waist-high weeds supporting a thriving community of feral cats. Just another sad example of how economic development by fiat is bound to fail.
Since the Supreme Court’s poorly-reasoned majority opinion in 2005′s Kelo case, Americans have been aware of the grave threats facing their homes, businesses, and property. This awareness–while driving some meaningful reform–has unfortunately not translated into iron-clad property rights protections for most Americans. Municipal planners and rent-seeking private developers still engage in the back room wheeling-and-dealing that undermines our basic rights to own and use property as we see fit.
Today, I wrote about Detroit Mayor Dave Bing’s plan to “downsize” the city in the Detroit News, and warn city officials that redevelopment takings are far more harmful than most planners realize and to avoid using eminent domain–an issue I go into at greater length in my recently released CEI OnPoint. Put simply: government has an incentive to abuse redevelopment processes and is incapable of knowing key economic variables necessary to promote long-term growth. In addition to the actual land grab, cities often bungle the public financing mechanisms to such a great degree that they often end up far worse than they started from a fiscal perspective.
So what potential relief can property owners and taxpayers reasonably expect to get? Following the Kelo decision, a federal court redefining the public use doctrine seems like a long shot. The more promising avenues appear to be state courts and particularly state legislatures (or ballot initiatives, if your state permits them). As I’ve discussed before, implementing the following reforms would be a great first step forward:
- 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.
- 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.
- Enacting state legislation mandating that blight be determined on a parcel-by-parcel basis.
- 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.
As we approach the five year anniversary of the Supreme Court’s notoriously poorly-reasoned Kelo v. New London decision, the lack of meaningful legislative progress on curbing eminent domain abuse has been disheartening. While legislation was previously introduced in the House of Representatives by Rep. John Sullivan (R-Okla.), it was nixed by an unfriendly committee referral, and proponents of property rights and economic liberty have little to show for their efforts on this front.
The good news is that Congress is making another go at eminent domain reform. The Strengthening the Ownership of Private Property Act of 2009 (STOPP Act, H.R. 4288), introduced by Rep. Stephanie Herseth Sandlin (D-S.D.), would prevent any federal economic development funding–regardless of the federal agency or program–from being disbursed to state or local governments that seize private property in order to transfer it to another private party or for another private party’s benefit. While the legislation exempts takings for utilities, roads, pipelines, and right-of-way companies, it would–if passed–cut off significant funding to governments found to have engaged in Kelo-style eminent domain abuse.
The bill is by no means perfect. For example, funds would only be withheld from abusers for two years, instead of the 10 proposed by Rep. Sullivan in the previous legislative session. There are also no strings attached to federal highway funding, which is particularly obnoxious because Congress has no problem with tying highway funds to state behavior when, say, booze is involved. But it is worth remembering that eminent domain abuse is almost exclusively a municipal issue, and Congress ultimately has little control over how state’s police their local governments. Because of this, state legislative reform should take center stage.
Previously, I described a few of the most politically feasible state-level eminent domain reforms. They are:
- 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.
- 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.
- Enacting state legislation mandating that blight be determined on a parcel-by-parcel basis.
- 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.
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.
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:
- 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.
- 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.
- Enacting state legislation mandating that blight be determined on a parcel-by-parcel basis.
- 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.
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