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Monday, February 21, 2005

What If We Give It Away?

Interesting discussion at Crooked Timber regarding the heavily anticipated Supreme Court case of Kelo v. New London, which puts the small Connecticut city and its redevelopment authority against a group of residents hoping to stop the taking of their property by eminent domain for a private development project. The project is slated to include a hotel, a conference center, and office space and is located along the Thames River near Fort Trumbull State Park, and, more importantly, a recently built Pfizer research facility.

The Connecticut Supreme Court found for the City of New London, accepting their arguments that the "public benefits of creating new jobs, increasing tax and other revenues and contributing to urban revitalization," constituted a public use sufficient to satisfy the requirement for taking by eminent domain found in the Connecticut and U.S. Constitutions. The Connecticut homeowners appealed to the Supreme Court, who accepted certiorari.

In their decision, the 4-3 majority on the Connecticut Supreme Court relied on a landmark 1981 ruling from the Michigan Supreme Court, Poletown Neighborhood Council v. City of Detroit. Many first-year Property classes in law school covered the Poletown case as part of their discussion of the issue of public benefits.

Though I was somewhat groggy the morning that case was discussed in class, I recall there being a vigorous disagreement regarding the case's reasoning. I believed then, and still believe now, that that case was wrongly decided. The current Michigan Supreme Court apparently agrees with me, since they've reversed their Poletown holding.

If you were asleep that day, or never went to law school, the city fathers of Detroit were going to seize the properties of the residents of a neighborhood known as Poletown for the construction of a auto factory, to be owned by General Motors. The city argued that the factory constituted a sufficient public use, as it would bring much-needed jobs to the area, and the Michigan Supreme Court agreed. And there went Poletown.

What is a public use of land of the sort contemplated by eminent domain law? Public roads, utility lines, public educational facilities, public water supply protection - those are good examples of legitimate public benefit. A city taking land from landowners and giving to a corporation for the purposes of building a facility owned by the corporation is an abuse of the power of eminent domain. This Connecticut case isn't quite that extreme - the redevelopment authority will retain ownership of the land but will be charging only nominal rents for use of the property - but it's still largely the same principle at work.

But can economic revitalization ever be a sufficient justification for eminent domain? The Supreme Court has acknowledged an exception for "blighted" property, which generally has almost no economic value, which certainly seems more than reasonable. Establishing chains of ownership can be an issue in some cases; in other cases, the use (or lack thereof) of one's property may detrimentally affect the values of adjacent property generally.

If the developers here want the land - presumably valuable due to its proximity to a waterway and to other corporate facilities - why is it that they need the city to force the owners to sell it to them? Would the price at which the property owners - rather than the city - were willing to sell the developers the land not be a fairer price? The unfortunate fact is that far too often local governments are captured by developer interests to use the power of government to do their bidding.

Our current President is only one such major beneficiary, back in his days as owner of the Texas Rangers baseball team. Much of the land used to build the Ballpark at Arlington was taken by eminent domain. Among the results was a lawsuit by one prominent landowner, TV tycoon Curtis Mathes, in which it was held that he was underpaid by millions of dollars.

Like a lot of well-connected businessmen, Bush and his contributors love to talk about "market solutions" and the "invisible hand" of Adam Smith when it comes to people with modest means, but they're all about the "public good" when they can use their clout to manipulate governments to funnel some cash into their pockets.

Not only is this sort of "socialism for the rich" immoral, it also tends not to work very well for anyone - other than the immediate beneficiaries of the largesse in question, of course.

The tax revenues anticipated by many of these large projects often fail to materialize, either because the owners are given a sweetheart tax deal on top of the underlying land deal, the typcially rosy projections regarding the economic impact of the project prove overly optimistic, or both. I am reminded of the many public financing deals for sports stadia and arenas, which usually bring a short-term construction boom, a number of low-wage service jobs, and not much of anything else. Or my old hometown of Worcester, which destroyed much of its downtown with a monstrosity of an enclosed mall that has stubbornly resisted no fewer than three wholescale "revitalization" efforts, and hurt its tax base with subsequent efforts that replaced taxpaying small businesses with larger megaprojects that took advantage of the generous tax deals that the city offered. Or, indeed, of what happened to Poletown itself in the years following the decision:
GM fell 3,500 short of its promise to create 6,500 new jobs. In the end, more people were displaced [approx. 4,200] than employed and the sweetheart deal cost taxpayers more than $300 million in federal, state, and local subsidies for GM.

Most cities are much better off cultivating their own neighborhoods and making them livable as best they can; of course, that's not nearly as "exciting" as attempting to create a tourist trap, or a shopping mecca. It also won't get you crucial campaign contributions from deep-pocketed developers or as much positive press from media outlets, both of which are probably more important reasons why cities and other localities are always pushing macro-development initiatives.

Here one can find a differing opinion regarding the issues in this case. Newman's words can give a progressive pause. He points out - correctly - that the judiciary is not well-equipped to evaluate the merits of economic development programs.

And even he fails to mention the possbility that the eminent domain baby may end up being heaved out the window along with the eminent domain bathwater. Many of the supporters of the homeowners here harbor the hope that a judiciary stacked with Federalist Society alumni would use a reversal here to justify a wholesale sea change in community rights. They would love to see a ruling that would give birth to a massive expansion of "property rights" theory that would call into question a host of zoning ordinances, environmental protection measures, and regulation of hazardous externality-generating activities.

In that context, it's tempting to root for the City of New London. But I'm not going to; I reject the notion that our only alternatives are the rules of law laid down in the Poletown decision and a return to the Wild West.

I believe that there's a clear enough line that can be drawn here as to what is enough of a public benefit. If whatever public benefit the government anticipates is only ancillary to the private one, eminent domain isn't an appropriate tool. It's by no means a bright-line of rule of the sort that law students crave to put in their blue books, but it's better than handing municipalities the (and the developers who often lean heavily on them) absolute power to condemn land.


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