ITIA SPRING, 2005 Condemnation for Economic DevelopmentWhere to Draw the Line Between Public and Pri

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ITIA (SPRING, 2005)Condemnation for Economic
DevelopmentWhere to Draw the Line Between Public
and Private Purpose?
PREPARED BY richard f. klawiter DLA PIPER
RUDNICK GRAY CARY US LLP 203 NORTH
LASALLE STREET CHICAGO, ILLINOIS
60601 312.368.7243
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U.S. CONSTITUTIONAL PROVISIONS

• FIFTH AMENDMENT
• NO PERSON SHALL...BE DEPRIVED OF LIFE,
  LIBERTY OR PROPERTY WITHOUT DUE PROCESS OF LAW
  NOR SHALL PRIVATE PROPERTY BE TAKEN FOR PUBLIC
  USE WITHOUT JUST COMPENSATION.

FOURTEENTH AMENDMENT (EXTENDS FIFTH AMENDMENT
PROTECTIONS TO STATES) SECTION 1 ...NO STATE
SHALL...DEPRIVE ANY PERSON OF LIFE, LIBERTY,
OR PROPERTY, WITHOUT DUE PROCESS OF LAW NOR
DENY TO ANY PERSON WITHIN ITS JURISDICTION THE
EQUAL PROTECTION OF THE LAWS.
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The Public Use ClauseThe Traditional View

• The Burnham Plan (1908)
• . . . the state may take private property, but
  only for a public use and only upon payment of
  just compensation.
• No judge grounded in the principles of American
  jurisprudence would countenance the argument that
  mere pecuniary advantage to a municipality could,
  without other pretext, justify the taking of
  private property against the will of the owner.

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The Public Use ClauseThe Broad View

• Berman v. Parker, 348 U.S. 26 (1954).

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The Broad View

• Berman v. Parker, 348 U.S. 26 (1954).

Can a government condemn private commercial
property under an urban renewal program intended
to clear slums and then transfer the property to
another private interest?
Yes!

• Examine the purpose of the action, not the
  identity of the future user.
• Eliminating slums and blight is a legitimate
  public purpose.
• Equate public purpose with Public Use The
  power of eminent domain is within the police
  power. If the purpose of the condemnation is
  within the police power, then the condemnation is
  for a public use.

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The Broad View

• Hawaii Housing Auth. v. Midkiff, 467 U.S. 229
  (1984).

Photo of Kapalama Campus, Honolulu, Oahu, Hawaii,
courtesy of Kamehameha Schools.
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The Broad View . . .

• Hawaii Housing Auth. v. Midkiff, 467 U.S. 229
  (1984).

Can the state condemn land and then resell it to
private interests in order to decentralize
ownership of land in an oligopolistic land
system?
Yes!

• Public Use Requirement is coterminous with
  scope of sovereigns police power.
• Defined by the purpose of the governmental
  action, not the identity of the end-user.
• Broad discretion in defining public use --
  courts step in only where palpably without
  reasonable foundation.

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The Broad View Recently Embraced By . . .
KansasNew YorkCaliforniaTexasPennsylvaniaNort
h CarolinaMassachusettsLouisianaNew
JerseyMinnesotaMaineTennesseeIowa
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The Narrow View

• Casino Reinvestment Development authority v.
  Banin, 727 A.2d 102 (N.J. Super. 1998).

Can the property be conveyed post-taking to a
private user for public parking and open space
without guarantees that it will continue to be
devoted to these public uses?
No!

• Economic development is not a sufficient
  justification to use the power of eminent domain
  to assist the expansion of Donald Trumps Casino.
  
• Can convey taken land to a private party, but
  only so long as the public use prevails and
  endures.

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The Narrow View

• Illinois Racetrack

Gateway International Raceway, Madison, Illinois.
Developed with 21.5 million in sports facility
revenue bonds.
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The Narrow View

• Southwestern Illinois Development Authority v.
  National City Environmental, 199 Ill.2d 225
  (2002).

Can the development agency condemn non-blighted,
vacant industrial land to convey to racetrack to
increase parking?
No!

• Property may generally be taken to clear slums
  and eliminate blight, regardless of subsequent
  use.
• Where no blight, public must be entitled to use
  or enjoy property after the take, not as a mere
  favor, but as a matter of right.
• Taking bestows a purely private benefit here
  public is not the primary intended beneficiary
  condemnation dismissed.

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The Narrow View

• Bailey Brake Shop, Mesa, Arizona

• Brake shop in the Bailey family for over 30
  years.
• Handed down from father to son.
• City tries to acquire for economic redevelopment

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The Narrow View

• Bailey v. City of Mesa, 76 P.3d 898 (Ariz. Ct.
  App. 2003).

Can the city condemn non-blighted, commercial
property to give to a national chain for a new
hardware store?
No!

• Arizona state constitution requires that takings
  be for a public use.
• Even though the public purpose was
  redevelopment, the anticipated public benefits
  did not outweigh the private character of the end
  use.
• Only case of over 3,200 filed in Arizona over 5
  years in which right to condemn is withheld.

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The Narrow View

• Jasper County, South Carolina Marine Terminal

South Carolina rural county, Pop. 20,678, seeking
economic development, condemns land to develop
marine terminal on Intra-Coastal Waterway.
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The Narrow View

• Georgia Department of Trans. v. Jasper County,
  355 S.C. 631, 586 S.E.2d 853 (2003).

Can the county condemn non-blighted, shore land
then lease the land long-term to a private
stevedoring company?
No!

• While there is a public benefit from the
  economic development, there is no public use, and
  eminent domain taking is therefore enjoined.

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Public Use v. Public Purpose
Poletown Neighborhood Council v. City of Detroit
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Public Use v. Public Purpose1981
General Motors
1,000 homes
v. 600 businesses
Acquired for 200 million sold to GM for 6.5
million
Poletown Neighborhood Council v. City of Detroit
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Public Use v. Public Purpose

• As a general proposition, then, in the realm of
  aid to private corporations, public purpose
  (taxation) has been construed less restrictively
  than public use (eminent domain). The
  distinction is fully justified. The character of
  governmental interference in the case of taxation
  is wholly different from the case of eminent
  domain. The degree of compelled deprivation of
  property is manifestly less intrusive in the
  former case it is one thing to disagree with the
  purposes for which ones tax money is spent it
  is quite another to be compelled to give up ones
  land and be required, as in this case, to leave
  what may well be a lifelong home and community.
• Poletown Neighborhood Council v. City of Detroit,
  410 Mich. 616, 666, 304 N.W.2d 455 (1981) (Ryan,
  J., dissenting).

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Wayne County v. Hackworth (2004)
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Pinnacle Aeropark, Detroit, Michigan
Wayne County v. Hackworth (2004)
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-- 1,300 acre Pinnacle Aeropark.-- Business
and technology park.-- 30,000 jobs 350
million tax revenue.-- 1,000 acres acquired in
voluntary sales.-- County moved to acquire 46
parcels totaling 300 acres by eminent domain 27
owners accepted offer.-- Eminent domain suits
filed on remaining 19 parcels.-- Appealed to
Michigan Supreme Court.
Wayne County v. Hackworth (2004)
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Public PurposeA transition from a declining
rustbelt economy to a growing, technology-driven
economy would, no doubt, promote prosperity and
general welfare. Consequently, the countys goal
of drawing commerce to metropolitan Detroit and
its environs by converting the subject properties
to a state-of-the-art technology and business
park is within this definition of public
purpose.
Wayne County v. Hackworth (2004)
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Public UseState constitutions public use
requirement works to prohibit the state from
transferring condemned property to private
entities for private use.
Wayne County v. Hackworth (2004)
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Permissible Exceptions(1) where public
necessity of the extreme sort requires
collective action(2) where the property
remains subject to public oversight after
transfer to a private entity(3) where the
property is selected because of facts of
independent public significance, rather than the
interests of the private entity to which the
property is eventually transferred.
Wayne County v. Hackworth (2004)
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Permissible Exceptions Examples(1) taking for
a linear strip, like a railroad right-of-way or a
fiber-optic telecommunications line(2) taking
for a privately-owned public utility (3)
taking to eliminate slums or prevent blight.
Wayne County v. Hackworth (2004)
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Poletown rejectedradical and unabashed
departure from fundamental constitutional
principles.reliance on Berman v. Parker
improper neither controlling nor
persuasive.Poletown expressly overruled to
vindicate state constitution, protect the
peoples property rights, and preserve the
legitimacy of the judicial branch as the
expositor not creator of fundamental law.

• eliminates the leading state court authority for
  broad view of public use.

Wayne County v. Hackworth (2004)
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The Next Big Case

• Kelo v. City of New London, 268 Conn. 1, 843 A.2d
  500 (2004).
• Certiorari granted September 28, 2004, by United
  States Supreme Court, Docket No. 04-108.

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Kelo v. City of New London
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Redevelopment of 90 acres needed between historic
Fort Trumbull State Park on Thames River . . .
. . . and 22-acre, 300 million, 2,000 jobs
Pfizer global research facility recently
constructed on former New London Mills
brownfield site.
Kelo v. City of New London
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-- State agency finding that New London is a
distressed municipality recent loss of 1,900
government jobs with closing of U.S. Naval
Undersea Warfare Center.-- Pfizer the 10,000
pound gorilla and driving point behind
redevelopment plan to provide ancillary
facilities for its clients, business associates,
employees and contractors, and to upgrade local
infrastructure. -- Development plan proposes
waterfront hotel and conference center, 80 new
residences, 230,000 square feet of office,
parking, marina, water-dependent commercial and
U.S. Coast Guard Museum, but retaining the
existing Italian Dramatic Club (a private social
organization).-- Three parcels to be ground
leased for 99 years for 1/year to private
developer, development agreement still being
negotiated remaining parcels to be developed by
New London Development Corporation.-- 518 to
867 construction jobs 718 to 1,362 direct jobs
500 to 940 indirect jobs 680,544 to 1,249,843
in property tax revenue.-- 115 parcels, mixture
of single family homes and small businesses.
Distressed Municipality
Kelo v. City of New London
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Susette Kelo, a registered nurse from New
London, Connecticut, purchased and lovingly
restored a home that was so run-down, she needed
to cut her way through the front yard with a
hatchet to get to the front door. The sheriff
posted a note on Kelos door the day before
Thanksgiving in 2000 telling her that her
picturesque home was being condemned to make way
for an unspecified private development. (The
developer hadnt gotten around to deciding what
to do with her land.) She was then told she had
90 days to be out of her home or she would be
removed.
Whats more, from that moment on, she was told
to pay rent to the very corporation that was
trying to take her property because, under
Connecticut law, once an authority moves to
condemn a persons home, the authority
automatically owns the home until the homeowner
can win the property back in court.

Institute for Justice

April 22, 2003
Kelo v. City of New London
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Kelo v. City of New London
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Conn. Supreme Court Decision (4-3)

• State public use requirements identical to
  Federal public use requirements.
• Public use synonymous with public purpose,
  relying on Berman v. Parker, Hawaii v. Midkiff
  and Poletown.
• Broad, purposive view of the concept of public
  use, synonymous with public benefit or advantage.
• Economic development plan rationally crafted by a
  legislative authority satisfies public use
  requirement.
• Broad deference to legislative findings, no
  heightened scrutiny (property owners burden is
  beyond a reasonable doubt).
• Trial courts consideration of social costs of
  takings was error, but harmless.
• Development agreement provides adequate
  assurances of future use.

Kelo v. City of New London
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Conn. Supreme Court Decision (4-3)

• Parcel 3 Four existing homes and the Italian
  Dramatic Club, adjoining Pfizer site slated for
  90,000 sq.ft. of high-tech office research and
  development.
• Dispute between planners over need to take homes.
• Reasonable necessity for taking upheld
  deference to legislative determination of
  necessity.
• Equal protection? Not beyond realm of rational
  consideration to want to have a social club of
  admittedly some political clout . . . Remain in
  the area.
• Parcel 4A Designated for Park Support,
  possibly Coast Guard museum, no development
  commitment or site plan.
• Reasonable necessity for taking upheld no
  showing of bad faith, abuse of power or
  unreasonableness.

Kelo v. City of New London
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U.S. Supreme Court Cant Tell the Players
without a Scorecard!

• OConnor
• Stevens

• Kennedy
• Souter
• Ginsburg
• Breyer

• Rehnquist
• Scalia
• Thomas

Kelo v. City of New London