Fifty years after a landmark Supreme Court decision involving a District of Columbia urban renewal project untied the hands of redevelopment agencies by making expropriation of private property easier, an upcoming high court case has the potential to reverse the trend of the last few decades that has given those agencies progressively wider discretion to condemn land.
The case, Kelo et al. v. City of New London, Conn., is of interest to cash-strapped localities that want to condemn land in order to clear the way for redevelopment projects that promise jobs and increased tax revenues. It is also of interest to the municipal bond market because municipal debt is often used in redevelopment financing packages, so any narrowing of the criteria used in eminent domain cases could have an impact on that market.
In the case, the New London Development Corp. proposed seizing private land in order to hand the property over to a private developer for a proposed redevelopment that included new residential, office, and retail space, in the Fort Trumbull area, which the local government there considers to be economically distressed. Connecticuts high court ruled 4 to 3 six months ago that the promise of additional revenue justified the seizure.
The Supreme Court decided Sept. 28 to hear an appeal of the case, and oral arguments are expected to proceed in January or February. The court begins its new term today.
This is the first case on eminent domain for private development that the Supreme Court has taken in 50 years, Dana Berliner, a lawyer for the homeowners whose property the city of New London wants to condemn, said in a recent interview.
If the appeal is successful, cities couldnt condemn property just to hand it over to a private party for the excuse that the new use would basically make money and therefore generate more tax revenue, said Berliner, who works for the Institute for Justice, a Washington-based libertarian public interest law firm. Hartford-based law firm Horton Shields & Knox is expected to present arguments on behalf of the city in the high court.
Some municipal advocates are concerned about the courts decision to take the Kelo case and fear it could lead to stricter criteria for taking private property for redevelopment projects that involve private businesses.
District of Columbia Mayor Anthony Williams, who is also first vice president of the National League of Cities, described the case Sept. 29 as very important and ridiculed organizations on the other side of the question as right-wing, ideological groups that are promoting an assault on eminent domain.
The way the opponents of eminent domain always want to portray it is, Oh, Old Mother Hubbard is getting kicked out of her cupboard by an evil government, said Williams, a lawyer.
Much of the time, local governments try to expropriate the property of some wealthy vested interest [who] doesnt want to get off their land for the benefit of the public, Williams said. Eminent domain authority constitutes the exercise of the public realm for good productive purposes against selfish, private, parochial interests.
A reining-in of the condemnation criteria would lead to jacking up the cost of economic development in poor neighborhoods dramatically, because then people can just sit, and sit, and sit, and wait, [and] bring their costs up way beyond just compensation, he said.
A month and a half ago, Williams strongly denounced the Michigan Supreme Courts decision July 30 to overturn a trend-setting 1981 case, Poletown Neighborhood Council v. Detroit. He called the reversal troubling and said, I really fear what the repercussions of [overturning the decision] may be.
Williams acknowledged that the Michigan decision is binding only in that state, but said he was concerned that courts in other jurisdictions would follow Michigans lead, much as they incorporated the reasoning found in Poletown in their own rulings after that opinion was rendered 23 years ago.
This to me would be a veneration of property rights at the expense of community interest, a federation of private interests at the expense of the public commonweal, he said. The restrictions on when you can take property are becoming more and more severe.
The original Poletown ruling, which allowed a Michigan locality to condemn land and give it to General Motors Corp. for an automobile plant, was an influential judgment that the mayor said he remembered reading in a textbook while in law school. The notion was that there would be a higher degree of economic activity under the new scenario than under the old scenario, Williams said.
But in its decision overturning the ruling, the same Michigan court did a philosophical about-face and stated that the Poletown decision was an aberration that constituted a radical departure from fundamental constitutional principles.
Gideon Kanner, professor emeritus at the Loyola Law School in Los Angeles where he taught full-time from 1974 to 1990, is optimistic that the Supreme Court will articulate a new public use standard in municipal condemnation cases. He said the Poletown decision set in motion a process that created an unwholesome alliance between cities that want more money and what I call the new robber barons.
Cities get big bucks, there is a lot of B.S. about providing jobs, and typically there are low-level, low-paying jobs created, said Kanner, who is now in private practice. But things werent always that way, Kanner said, pointing out that a dispute that arose in the District of Columbia a half century ago opened the door to what some people today call predatory redevelopment.
Until the mid-twentieth century, eminent domain condemnations of private property were typically allowed for parks, public transportation, public utilities, and railroads, which were deemed to have a significant public purpose because the nations commerce was dependent on them, he said. The U.S. Constitutions protections for private property along with the Fifth Amendments Just Compensation Clause are very specific, he said.
But then the Supreme Court opened the door to broader interpretations of what constituted a justifiable taking for public use in a case where a property owner challenged an ambitious District of Columbia redevelopment plan. In the 1954 case, Berman v. Parker, neighborhood store owner Sam Berman challenged the plan to take his shop as part of a larger plan to eliminate substandard housing and combat blight in a large swath of Southwest Washington, D.C., Kanner explained.
Berman argued that the proposed taking was improper because his property was not a slum as such, Kanner said. Berman then argued that even if it was blighted, the expropriation was unconstitutional because the redevelopment agency wanted to hand the land over to private developers, he said.
But the high court shot down Bermans arguments: It is not for the courts to oversee the choice of the boundary line, nor to sit in review on the size of a particular project area. Once the question of the public purpose has been decided, the amount and character of land to be taken for the project and the need for a particular tract to complete the integrated plan rests in the discretion of the legislative branch, Justice William O. Douglas wrote for the court.
What you had now was an opinion that indicated that there were no limiting conditions in redevelopment cases. It essentially fired off a starting gun that started a race of bulldozers rumbling through American cities, Kanner said.
Another Supreme Court decision, Hawaii Housing Authority v. Midkiff in 1984, further expanded the definition of what constituted an acceptable taking. In that case, the court upheld a state law that gave private land to residential tenants who lived on it in order to reduce what the court called the perceived social and economic evils of a land oligopoly that dated back to the days when Hawaii had a monarchy.
After that ruling, and especially over the last 10 years, municipal raids on private property became widespread, Kanner said. What caused those raids is the spreading realization in the business community that land can be obtained this way on the cheap, with no interference by the courts. A developer tries to buy property, cant make a deal, applies for condemnation, and gets it.
Adding tax-exempt municipal bonds to the financing menu can make redevelopment projects extremely attractive to development firms, Kanner said. Developers discover there is free money here, and its even better if it can be financed with municipal bonds, which are much cheaper than corporate bonds, he said.
Bonnie France, a bond lawyer with McGuireWoods LLP in Richmond who has experience in eminent domain cases, said condemnation powers have traditionally been very valuable to redevelopment agencies.
The [upcoming] decision in Kelo could certainly have wide-ranging impact and could be very troublesome for localities, but some well-reasoned guidance from the court would not be a bad thing if it does not unduly restrict a localitys ability to provide for the common good, France said.
If the court rules against New London, the decision could also create enough uncertainty in the marketplace that the cost of borrowing for projects involving condemned property will increase, she said.
Meanwhile, how a business owners lawsuit filed against a proposed redevelopment project in a low-income Washington, D.C., neighborhood east of the Anacostia River that would level an existing shopping center fares in court may foreshadow how other courts will respond in what appears to be a shifting legal environment.
The project in southeast Washington, called Skyland, may include a discount department store and a supermarket and could use about $25 million in tax-exempt financing. The citys development arm, the National Capital Revitalization Corp., which has eminent domain powers, is overseeing the project. The new shopping mall would create 600 new construction and permanent retail jobs, according to the NCRC.
But a lawsuit filed in federal court against the NCRC and the district government over the summer aims to halt the possible expropriation of the land and might delay the project. In the action, filed in late July on behalf of 21 business and property owners, the plaintiffs claim that an expropriation of the fully leased shopping mall violates their constitutionally protected property rights.
Anthony C. Freeman, who became the NCRCs acting chief executive officer and president after Theodore N. Carter resigned from the post Aug. 10, said on Aug. 20 that despite the filing of the lawsuit, expropriation has technically been authorized NCRC has the right to move forward with the process, so NCRC is moving forward. If the parties do not reach agreement with the NCRC, it has the ability to condemn the land in question, Freeman said.
Lawyer Elaine J. Mittleman of Falls Church, Va., who is representing the plaintiffs, said her strategy was to file suit before the redevelopment process moved any farther along. I felt it was important to make a stand early rather than wait for each property owner to take a stand on his own, she said.
The NCRC takes the position that it must act soon in order to bring benefits to the neighborhood around Skyland and to discourage shopping outside the city. Every year district residents spend about $350 million to $400 million spent outside the city, which amounts to massive sales leakage from the district to Maryland and Virginia, according to the NCRC.
The redevelopment plan calls for a 250,000-square-foot state-of-the-art retail center, about 90,000 square feet of which would be made available to local retailers including tenants at the existing shopping center.
In August, Williams denounced the lawsuit Mittleman filed as really disgraceful.
The place looks like a mess, the mayor said. I go everywhere in the neighborhoods east of the [Anacostia] river and what do I hear? We want the same kind of quality shopping that everybody else in the countrys getting right here in the district. And here we are trying to bring the same kind of quality, economic viability and activity to our neighborhoods that everybody else has and all were getting is resistance, and I think its really sad.
The Skyland situation is nothing really unique, Williams said. In hundreds and hundreds and hundreds of these cases of eminent domain for economic development you already have a degree of economic activity, but the whole purpose and the whole strategy of the economic development is to bring that economic activity up to a higher level.
David Burka, a property manager with Delbe Real Estate Co. here, which manages about 40% of the land in the current Skyland shopping center, said the proposed redevelopment would destroy an economically viable shopping center for the people who use it. Among his tenants are money-making national chains such as Spin Cycle, a laundromat; Foot Locker, a shoe store; a regional chain store; and small retailers, he said.
