Court Says ‘Public Purpose’ Trumps Private Property Rights

Published August 1, 2005

Our home may be our castle, but our castle may come under siege as a result of a U.S. Supreme Court ruling that allows local governments to take property from one owner and give it to another owner who promises to generate more tax revenue.

The 5-4 decision, issued June 23, is being hailed by municipal officials and condemned by property rights advocates.

“This is a terrible ruling,” said Mark Moller of the Cato Institute, which filed an amicus brief in the case of Kelo v. New London, Connecticut. “It creates an enormous hole in the takings clause. It opens the possibility for blanket government evasions of the takings limits the founders established.”

The National League of Cities took the opposite view. “The National League of Cities is pleased that the Supreme Court upheld 50 years of precedent today, allowing local officials the continued use of eminent domain to bolster depressed economic neighborhoods,” said NLC President Anthony A. Williams, mayor of Washington, DC, in a statement.

“It’s important to note that the Court did not expand the power,” Williams continued, “but reaffirmed its current use, which has been indispensable for revitalizing local economies, creating much-needed jobs, and generating revenue that enables cities to provide essential services. With cities and towns facing ever-shrinking resources, we need all the help we can [get] to redevelop our neighborhoods and provide jobs for our citizens.”

All Property at Risk

Many who have reviewed the ruling take issue with Williams’ view, saying the ruling does indeed expand the power of government to take private property. Justice Sandra Day O’Connor said as much in a blistering dissenting opinion.

“The specter of condemnation hangs over all property,” she wrote. “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.”

There is no need for the property in question to be blighted or in an economically depressed area, according to the Court’s decision. Furthermore, private developers who obtain seized property may keep whatever profits they realize from their redevelopment projects.

“Perverse Result” Feared

O’Connor warned of powerful interests being able to cozy up to politicians to get what they want.

“The beneficiaries are likely to be those citizens with disproportionate influence and power in the political process, including large corporations and development firms,” O’Connor wrote. “As for the victims, the government now has license to transfer property from those with fewer resources to those with more. The founders cannot have intended this perverse result.”

Justice Clarence Thomas issued a separate dissenting opinion in which he wrote, “Something has gone seriously awry with this court’s interpretation of the Constitution. Though citizens are safe from the government in their homes, the homes themselves are not.”

Chief Justice William Rehnquist and Justice Antonin Scalia joined O’Connor and Thomas in dissenting.

“Public Purpose” = “Public Use”

Justice John Paul Stevens wrote the majority opinion, which states economic development projects are a “public use” as intended by the Fifth Amendment to the Constitution. That amendment says government may take private property for “public use” after paying the property owner “just compensation.”

For most of the nation’s history, public use was understood to mean something widely used by and for the public, such as public roads or utilities. In 1954 the U.S. Supreme Court gave local governments the right to condemn economically blighted areas for redevelopment.

The majority of justices in the Kelo case–Stevens, Stephen Breyer, Ruth Bader Ginsburg, Anthony Kennedy, and David Souter–found that “[p]romoting economic development is a traditional and long accepted function of government.” Local governments therefore may seize private property for another owner who will use the land in ways that stimulate economic activity, generating more tax revenue in the process, the justices ruled.

“As with other exercises in urban planning and development, the city is trying to coordinate a variety of commercial, residential and recreational land uses, with the hope that they will form a whole greater than the sum of its parts,” Stevens wrote. “Because that plan unquestionably serves a [public] purpose, the takings challenged here satisfy the 5th Amendment.”

Homeowners Refused to Sell

In the late 1990s New London officials decided to seize the home of Susette Kelo and other homes and businesses in the town’s 90-acre Fort Trumbull neighborhood, and turn the property over to a private developer whose plans include construction of high-end condominiums, a hotel, a marina, and office buildings.

Fort Trumbull had been a middle-income area with small businesses and Victorian-era homes, some of which had been owned by multiple generations of the same family. One owner, Wilhelmina Dery, has lived in her house since being born there in 1918.

Kelo, Dery, and other owners of 15 lots in the neighborhood refused to sell. A series of court actions worked their way to the U.S. Supreme Court last fall.

“Court Sided with Powerful”

“I was in this battle to save my home and, in the process, protect the rights of working class homeowners throughout the country,” Kelo said after the ruling. “I am very disappointed that the court sided with powerful government and business interests.”

Kelo and the other New London homeowners were represented by attorneys at the Institute for Justice, a libertarian public interest law firm in Washington, DC.

Dana Berliner, a senior attorney with the Institute for Justice, said in a statement afterward, “It’s a dark day for American homeowners. While most constitutional decisions affect a small number of people, this decision undermines the rights of every American, except the most politically connected. Every home, small business, or church would produce more taxes as a shopping center or office building. And according to the Court, that’s a good enough reason for eminent domain.”

Steve Stanek ([email protected]) is managing editor of Budget & Tax News.