The U.S. Supreme Court has given a major victory to urban planners, large property owners, and government in the Kelo decision announced June 23. The major losers are those who treasure private property rights and the respect for those rights set forth in the U.S. Constitution and those with the least political power to protect themselves.
The decision says, in essence, that where a government has a “carefully considered development plan” which is intended to lead to economic development, enhancing the tax base and creating jobs, it has the right to use the condemnation power contained in the U.S. Constitution to seize the private land and transfer title of it to private developers as long as the government pays “just compensation” to those whose land is seized.
The 5-4 decision was written by Justice Stephens and joined by Justices Breyer, Ginsburg, Souter and Kennedy. Dissenting in strongly written dissenting opinions were Justices O’Connor and Thomas, whose opinions were joined by Justice Scalia and Chief Justice Rehnquist.
The case grew out of a plan by New London, Connecticut to develop its downtown with a Pfizer facility, a marina, a hotel and residential units and shops. In its way were working class middle class homes and homeowners, including some whose families had owned their individual properties for well over 100 years. Many of the property owners agreed to sell their homes “voluntarily” (with the threat of condemnation not so subtly being raised). Others said they liked their homes thank you, we aren’t interested in selling them.
The town fathers of New London proceeded with condemnation against the hold-outs, based on the argument that in was in the “public interest” to develop the waterfront area. It would enhance the economic revitalization of New London by raising the tax base, creating jobs and making the area more aesthetically pleasing. These were not homes or a neighborhood that was blighted or dangerous. The City and its urban planners simply decided which owners and economic activities they preferred on the waterfront of New London.
At the core of the case was the proper scope of the condemnation power in the US Constitution, which explicitly limits the taking of private property for “public use.” The simple term “public use” would, to most of us and to those who wrote the US Constitution, mean a use that is generally open to the public. Examples are the building of roads and highways, the creation of a public park or municipal swimming pool or the building of common carrier lines (like a cross-country railroad or airport).
However, in Kelo, the term has been replaced with “public purpose” following a line of cases that was developed in the 1950's and 1960's dealing with urban renewal and slum clearance by large U.S. cities. In those cases it was allowed that it was permissible if the government condemning properties didn’t hold title and become a developer but rather transferred ownership to private parties to help achieve the elimination of blight and dangerous health conditions. The key though was that there was a public policy involved consistent with the traditional power of government, protecting the health of the public.
In Kelo, the Court has stretched the term to encompass whatever has economic development benefits in the view of local government as long as it is “carefully considered.” It said it was necessary in a modern society to read the term that way because government should be interested in economic development. The Court said it will give “great deference” to the local government in determining what constitutes economic development and how big the redevelopment area should be.
The Court further said where a condemnation is simply the taking of one person’s property to give to another without general economic development being enhanced and not as part of a broader plan of redevelopment, it would not be allowed. To say that this is a qualification of no significance or comfort to those who value private property rights would be a major understatement. Justice Kennedy tried to soften that by saying in a concurring opinion that the economic development finding has to be more than pretext or incidental.
What this means for city planners is that they now have a green light from the federal courts to plan what they want and where they want it, without feeling hindered by the private property rights of people who might own land they wish to redevelop. It may be a Wal-mart or an office building or a shopping center which will enhance the tax base and create jobs.
The “carefully considered” test can probably be passed by creating the right record of hearings and a nice pamphlet or book with color photos. There is no need to say that the affected properties are blighted or dangerous. Virtually all of the economic development tools now being used will work and new tools will certainly be developed. Current state statues which require a finding of “blight” as a condition for condemnation may well be amended to do away with that inconvenient requirement.
Who wins and who loses? Consultants who produce reports claiming to show big employment and tax base growth from redevelopment schemes will likely prosper. Property owners will need to have a friendly alderman or mayor to protect themselves from a taking, so the former will lose whatever bribes and “campaign contributions” they are compelled to give to the latter. The biggest losers are people who have the least political power, since they are the most at risk of being Keloed.
Those who still support private property rights should note that state limits on the power of condemnation will not automatically fall if amendment to state statutes can be prevented. In some ways the battle now moves to the states. Even at the national level, 5-4 votes tend to leave everyone poised for the next round. However, the attempt to rein in the power of government to condemn land for private redevelopment has suffered a significant setback.
Attorney Paul Fisher is a member of the board of directors of The Heartland Institute and head of the real estate department at McGuire Woods LLC in Chicago.