What Kelo Means in Illinois

Published June 29, 2005

On June 23, in Kelo v. New London, the United States Supreme Court said, in essence, that a municipal redevelopment authority may condemn private property for the purpose of private redevelopment that will create jobs and tax revenue as long as there is a “well considered plan” which is not intended primarily to confer a private benefit on a specific party.

The Court read the 5th Amendment to the U.S. Constitution, which limits the condemnation power to takings for a “public use,” to include takings which have a “public purpose.” A “public purpose” can be the increase in taxes and jobs which will come from a redevelopment and the general improvement of an area.

The Court also said that nothing in its decision will prevent states from limiting their own condemnation power and the condemnation power granted to local redevelopment authorities. The standard established in Kelo means only that federal courts will not hear cases alleging that increased tax revenues are insufficient justification for a taking.

This has given some a false comfort in Illinois because of certain protections in Illinois law. In Illinois, the most significant condemnation case in recent years was Southwest Illinois Development Authority v. National City Environmental, decided by the Illinois Supreme Court in 2002. In that case an auto race track wanted more parking and it had SWIDA condemn the land of an operating business next door to provide it.

The Illinois Supreme Court held that it was a violation of the U.S. and Illinois Constitutions to allow a condemnation of private property for private redevelopment without a showing of “blight” or a right of the public generally to use the property (i.e., without having to pay for the use). The Court said allowing such a condemnation would go beyond the intent of the Framers of the Constitution, that a showing of public purpose was not enough.

While distinctions will be attempted to try to find continued life in the SWIDA case, it has been effectively overruled on this most essential point of law. While changes to Illinois redevelopment statutes require legislative action, this weakening of private property protection requires no act of the legislature or local town councils.

In Illinois there are many redevelopment authorities in place and many more proposed to be created. There are many master development plans adopted by municipalities ranging from large suburbs of Chicago to small towns in rural parts of Illinois. These plans envision a wide variety of development ranging from the development of lakefront areas to the location of new big box retail stores to the building of mixed use “new towns” containing residential and retail uses.

One thing these various authorities and municipalities have in common is that they have the power to take private land from owners who are not willing to sell it to them. These tend to be people who have homes or established businesses and aren’t interested in moving for reasons that are only partly economic. For redevelopment agencies, they are in the way.

Illinois law has required that these condemnations for economic development can only be done in the case of “blighted” land or in “conservation areas.” The Tax Increment Allocation Redevelopment Act contains the standards for determining if an area is considered “blighted.” In accordance with this statute, there needs to be a study to determine if these standards for blight are met.

While the law has not always prevented aggressive redevelopment authorities from declaring areas (downtown Arlington Heights and the Pilsen area of Chicago are examples) as “blighted,” it still has given property owners some measure of protection against being moved out in the name of more tax revenue or the need for a big box retail store.

Kelo does not change the Illinois statute, but it does say that federal courts will not view “blight” as a necessary condition before economic development condemnation can be used. So Kelo gives a green light to the Illinois legislature to change or even eliminate the safeguards in the statute. It also gives a green light to municipalities and redevelopment authorities to be more aggressive in their plans because the fear of intervention by the courts is greatly reduced.

One of the immediate impacts is that every town hearing on a redevelopment plan will become a new battleground. The prospect of legions of citizens coming to town meetings and hearings to protest the threat of condemnation will soon be unsettling to all of the urban planners and their allies. Greater scrutiny will be done of the specific grounds in the statute for finding “blight.”

Inevitably the debate will turn to whether these safeguards are too strong and get in the way of planned development or too weak, exposing property owners to a taking because some other use produces more taxes or fits better in the master plan. The Court has cleared the way, though, for those who want to weaken protection of private property owners and shut up the protesters at the local meetings. But they may find out that they’ve energized a wellspring of people who happen to like private property rights.

Paul Fisher ([email protected]) is a member of the Board of Directors of The Heartland Institute and head of real estate law at the Chicago office of McGuireWoods.