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How Eminent Domain Ran Amok

Saturday, October 1, 2005

For many years, the subject of eminent domain, or “takings,” was the purview chiefly of academics and a narrow subspecialty of lawyers. But after June 23, 2005, when the U.S. Supreme Court handed down its 5–4 decision in Kelo v. City of New London, Conn., the term immediately found its way into heated debates in legislative chambers and the flying mud of electoral campaigns nationwide.

In Kelo, the Supreme Court ruled that it was constitutionally permissible for the city government to take a group of working-class homes from their owners and turn the parcel of land over to private parties for the purpose of economic development. Kelo thereby tapped into deep-rooted questions of money and class, its result threatening to violate that most sacred of American domains: the home.

The Kelo decision is testament to the expanding use of police power by the state for the advancement of private interests that are often in cozy relationships with local municipal governments. To follow the path of the takings locomotive that has chugged across this country is to see how the meaning of private property has changed in the United States from its original promise as a place of sanctuary from outside interference to a contingent relationship in which property is private and unmolested only at the sufferance of local government.

Around the nation, there are thousands of ordinary citizens whose lives have been touched — and sometimes destroyed — by takings. For decades, the takings locomotive was fueled by urban renewal policies, now known by the more delicate term “urban revitalization” (and no longer practiced in 1960s-style blunderbuss fashion). But the Kelo case was fueled by a different type of fervor, and one with far greater potential for mischief in the twenty-first century: economic development. The homes of the petitioners in Kelo were marked for eminent domain not because they were blighted, but because they stood in the way of the city’s plan to increase its tax base and jazz up what officials saw as a depressed waterfront in their town.

Citizens who had been the targets of economic development takings projects long in the works before the Kelo decision suddenly found the vocabulary they had lacked to express their anger. The Kelo case, covered in depth by the media, crystallized the often Byzantine nature of condemnation proceedings for the homeowners caught up in them. Armed with a clearer understanding of what had befallen them and an outlet for their outrage, they have been hitting the streets in protest. Even Justice John Paul Stevens, who authored the majority opinion in Kelo, said in a speech before a bar association meeting in August that he personally regretted the Kelo decision but had felt compelled to rule against the homeowners, based on precedent.

What has emerged from the ashes of the Kelo ruling is the rarest of political birds, a Supreme Court Phoenix — a case that lives on in political consciousness. If the Phoenix rises high enough, it may result in state laws and a federal statute that could render the Supreme Court ruling moot.

 

High court blessing

In the Kelo case, the high court ruled against 15 homeowners from a working-class neighborhood in Connecticut, giving federal constitutional blessing to what has become standard practice in a number of states for many years (though expressly rejected in others). What it has come down to is this: You may rest easy by your hearth (or behind the cash register of your business establishment) so long as the municipality in which it sits has not gotten a notion in its collective head that your property would raise more tax revenue by being taken in condemnation and given to a private developer, who would then raze it to build what the local government deems necessary in the name of economic development.

And lest you imagine that the project for which your home or business could be torn down would be something of great public purpose, such as a hospital, a school, or a missile silo, think again. It is far more likely, given the current pattern of economic development takings in this country, that your home or business would be replaced by a spate of condominiums, with an office park, a marina, and a big-box retail store thrown in — all of them built, operated for profit, and owned by private parties.

When your business is taken, you will be compensated primarily for the value of the real estate on which it sits and the “fixtures” inside; you may kiss goodbye the value of assets such as licenses, goodwill, location, customers, and most other intangibles. If you are a homeowner, you will get the value of your home at the time the condemnation made it virtually impossible to sell (and, if you’re lucky, moving expenses). You will not be given a dime to compensate you for the subjective value of your home — that is, your emotional attachment to it. Nor will you reap the windfall that will come with the revitalization of the neighborhood; you’ll be long gone by then. That bounty will be enjoyed by the folks who buy the condominiums to be built on the land you once, so to speak, owned.

Since most eminent domain proceedings are brought in state courts, there are no official tallies of how many such cases there have been or how many properties have been involved. Perhaps because it is a round number — and a rather dramatic one — the figure of 10,000 has been cited many times in the press to describe the total number of homes actually taken in economic development takings. As far as we can know, this appears to be wrong; nevertheless, the figure has taken on a life of its own. According to numbers published by Washington’s Institute for Justice, the libertarian advocacy organization that represented the Kelo petitioners, eminent domain was threatened in connection with 10,000 properties and actually used in connection with 3,717 properties between 1998 and 2002; we don’t know how many of those were economic development takings. Pennsylvania tops the list at 2,517 proceedings filed. (That’s for all types of eminent domain cases — including cases based on “blight,” another popular way to take private property and engineer the development of cities. But definitions of blight are notoriously loose.)

Now that the economic development takings have been blessed by the high court, they may well increase in number despite all the huffing and puffing about putting a stop to them in the aftermath of Kelo.

Of course, if you are wealthy, or even upper middle class, there is little chance this sort of catastrophic taking will befall you. The logic of an economic development taking is that knocking down what exists now and building something fancier will increase the municipality’s tax base. Not surprisingly, economic development takings disproportionately affect the poor and the working class. That has been the observation of Jane Jacobs, the doyenne of urban planning who submitted an amicus brief in support of the Kelo petitioners.

Indeed, the Kelo case brought together an odd coalition of political bedfellows. The petitioners were represented by the Institute for Justice, which has been waging a vigorous anti-eminent domain and property-rights agenda for some years now. They were supported by two dozen amicus curiae briefs from groups as diverse as the naacp, the Goldwater Institute, aarp, the Cato Institute, and the Becket Fund for Religious Liberty. They argued, each in turn, that the practice of taking private property with the sole aim of turning it over to another private party who will put it to a higher revenue-producing use unfairly affects the poor, the elderly, racial and ethnic minorities, and religious organizations (because their properties don’t produce revenue). The outrage over the decision has been equally surprising in the way it has cut across political lines.

It is fair to ask how we got here. Like many other stories that end in tragedy, this one began with the best of intentions.

 

Cognitive dissonance

The fifth amendment includes at its tail end a passage known as the takings clause: “. . . nor may private property be taken for public use without just compensation.” The takings clause is not an express grant of power. It is a limitation on an implied right of the government to take private property. The Constitution doesn’t tell us much about how government is to be constrained in its exercise of this power. It tells us only that the taking must be for a “public use” and that “just compensation” must be paid. Like much in the Constitution, the term “public use” is maddeningly vague. Nonetheless, the term did not constitute fighting words until quite recently. But whether it is the province of tweedy academics — as it was for much of the twentieth century — or incitement to riot, as it may soon become, its definition is crucial, for it is the litmus test of what is and is not a constitutionally permissible taking.

Wading in the waters of the eminent domain debate is an exercise in cognitive dissonance, with opinions about the necessity for eminent domain (and, by extension, economic development takings) in real estate development at polar extremes. To those who favor its vigorous use — primarily urban planners, municipal government officials, and real estate developers — eminent domain is a matter of land assemblage, plain and simple. Land assemblage without it, they argue, is impossible. Improving outdated or even dangerous buildings and infrastructures is the goal, and private owners are the obstacle. Eminent domain is an efficient and orderly way to clear large, contiguous parcels of land. It is the only way to deal with the problem of holdouts. There is nothing to be ashamed of in using eminent domain to improve communities. The legislatures that vote for economic development takings see the improvement of the tax base as a natural extension of the public use clause. In the end, it all boils down to the price paid for the land. Moreover, the use of eminent domain often means, as a practical matter, that the local municipality underwrites a substantial portion of the acquisition costs, making it an attractive alternative to developers.1

At the other end of the spectrum is the libertarian position. In these circles one hears eminent domain described as the “despotic power,” overused and mired in greed and corruption. The public use clause of the Constitution was never meant to be taken this far, they argue. Public use means actual, perpetual ownership by the government for a clear and unequivocal public purpose. Examples would include a public road, where people have a permanent right of way, or a fort or post office permanently maintained and used exclusively by government actors (with exceptions for private entities that run public utilities).

Such a strict interpretation is a far cry from the definition of public use to be found in the case law, which gave way long ago in American jurisprudence — well before the Kelo decision — to a far mushier idea of public benefit or public purpose. The federal government has been taking private property and turning it over to other private parties for a variety of uses since the early days of the republic. As far back as the early part of the nineteenth century, the government recognized that, on occasion, private interests must give way where the greater good is concerned, even when this means compromising one party’s private property interests so that another’s may dominate. This doctrine first emerged in connection with the Mill Acts, statutes passed in many states to allow grist mills to operate. The mills were privately owned, but the government closely regulated their fees. Takings related to these early mills were deemed justified in much the same way that we view takings related to public utilities today.2 The involvement of the government, plus the widespread and immediate benefit to the public, softened the blow of a taking in which the ultimate owner was to be another private party. The United States was a rural economy, and the farmers, after all, had to get their corn ground up somewhere in order to take it to market or to consume it themselves.

Later on, some mills began to cause greater consternation for their neighbors. Private owners who happened to have land on a river set up dams to harness the power of water for use not only in grist mills, but also for saw and iron mills (whose advantage to the general public was less obvious), or even just to be ready should a local need for water power arise. In the process, though, they flooded their upstream neighbors.

Americans being Americans, lawsuits ensued. In those cases, we find nineteenth-century discussions of public use that by no means rely on a physical occupation of the land by the government or by the public in order to justify a taking. As early as 1832, the court in Boston and Roxbury Mill Corp. v. Newman ruled that a Mill Act that allowed a landowner to flood his upstream neighbors — so long as he compensated them — was constitutional. The court in the Newman case ruled that public use did not necessarily require direct use by the public so long as the use of the land conferred a benefit to the public.

Since Mill Acts were a matter of state law, the results when they were challenged differed from state to state. For example, in Ryerson v. Brown, the Michigan Supreme Court in 1877 hewed to a very narrow application of public use, requiring that the statute provide for a “use to be public in fact . . . contain[ing] provisions entitling the public to accommodations.”3 In an ironic twist, the same court 100 years later would be among the first in the nation to cast such strictures to the wind, ushering in an age of economic development takings that would sweep across the country with its 1981 decision in a notorious case known as Poletown, discussed below.

While some courts in the eastern part of the United States were still grappling with Mill Acts, westward expansion was bringing another sort of eminent domain case before the courts: railroad cases. Here again, we see nineteenth-century takings in which the government condemns land and immediately transfers it to a private party (i.e., a railroad company). What is impressive about the railroad cases is the extraordinary sense of gravity and urgency of purpose that permeates the U.S. Supreme Court’s reasoning. These are not mealy-mouthed deferments to the judgment of a legislature or vague nods in the direction of a hoped-for economic boom. Unlike the late twentieth-century and early twenty-first-century takings cases, in which state courts have signed off on statutes enacted on a legislative “Luck Be a Lady Tonight” prayer for economic revitalization, the U.S. Supreme Court in the railroad cases tended to get right to the heart of the standard under which the terrible coercive power of eminent domain would be justified: that is, “making it possible for government to execute and carry out its purposes,” as the court noted in Cherokee Nation v. Southern Kansas Railway Co.4 In a railroad case called Kohl v. United States, in which the U.S. Supreme Court held that the federal government may take land belonging to states through eminent domain, the court saw the power to “appropriate lands or other property within the States for its own uses . . . [as] essential to [government’s] independent existence and perpetuity.”5

The Supreme Court made clear the extremely close nexus between the taking of land for railroads and the public purpose to be served, circling back to questions of grave necessity, public use, and efficiency in public administration. Just as it was essential in the early nineteenth century that corn get milled, it was essential to lay railroad tracks in the late nineteenth century. The court looked to the Cherokee Nation precedent, which established that the power of the federal government to build highways and bridges “was essential to the complete control and regulation of interstate commerce.” The court reasoned that if government itself had the power to regulate commerce by building highways, bridges, and the like, then it would be a legal absurdity to insist that it could not — to use the modern parlance — outsource the work to a private corporation.

Throughout the nineteenth and early twentieth centuries, canals, railroads, bridges, and roads were built across America, often within this model of outsourced government authority under the takings clause. Yet local municipalities did not run amok; eminent domain was still perceived as a course of last resort, an action closely tied to necessity, and one that ran cheek by jowl with a tangible public purpose that actually involved either government use or members of the public actually walking over, riding on, or otherwise coming into darn close proximity with the taken land.

 

Land lust

But if the public purpose/public benefit seeds were planted in the case law so early, then the question is not why state legislatures have gone so hog wild lately, passing condemnation statutes premised on nothing more than revitalizing a depressed downtown, but what kept them from going hog wild much earlier?

A number of factors may have contributed to that self-restraint. Clearly, before the New Deal, it hadn’t occurred to many local legislatures that they held the magic wand to revitalize their sagging waterfronts or depressed downtowns. Tinkering with the economy, strictly speaking, was not government work. Such notions are taken for granted today.

Still, it seems something deeper was also at play. What if we were to apply to the history of eminent domain the essential elements of proving a crime? (And there are those who would argue that such an analogy is particularly apt.) Then we would look for means, motive, and opportunity in the expansion of the definition of public benefit to include economic development takings.

In the early application of public benefit analysis in the case law, we certainly have some courts supplying the “means” by which legislatures could have been emboldened beyond the Mill Acts. But so long as there was land aplenty, there was no pressing “motive” for one private party to lobby the legislature to take another’s property so that the first could prosper. And until the mid-twentieth century, there was no signal moment, no galvanizing case that sent a message to a restless nation that boundless “opportunities” existed to take that which did not belong to them.

Alas, the land, which looked infinite to the early pioneers, was, in the end, finite. And the galvanizing cases eventually came in the form of Berman v. Parker, Hawaii v. Midkiff, and Poletown Neighborhood Council v. Detroit.

In some conservative and libertarian circles, the prevailing assessment of the motives underlying economic development takings is that they are purely matters of greed and legislative influence peddling. But such takings are too widespread, popping up in too many different locales, for those motivations to be the sole cause (though greed or corruption may play a role in many). These explanations also fail to take into account the genuinely decent intent that many communities may start with on the road to self-improvement. No, the second peg of our criminal law analogy goes deeper than greed; a better description of motive here is the American lust for land.

To understand this, one must consider how deeply ingrained the idea of land is in the American character. After all, it was land that lured the original colonists to America’s shores.6 At its inception, America was in essence a great mass of land: a beckoning, seemingly limitless siren teeming with wild-life and brimming with rich, arable soil. (The native cultures that inhabited North America were seen by the colonists as obstacles or guides, but not an enticement.)

And all of it safely tucked an ocean away from the ancièn regime of Europe, with its rigid class structures and feudal limitations on land ownership. “Land hunger doubtless attacked all landless European emigrants . . . coming from countries wherein economic independence and social status rested on the land. In America, economic advancement sprang from its easy acquisition. Most colonial fortunes were founded on it.”7

As Marion Clawson noted in America’s Land and Its Uses, our colonial history was nearly as long as our history as a nation if one counts the colonial period as beginning with the settlement of Jamestown in 1607 and ending with the Declaration of Independence in 1776. Those 169 years were a hurly-burly land-grab, with the nations of Europe competing ferociously for territory in the New World.

That crucial century and a half of colonial history set the stage for Americans’ deeply personal and abiding relationship to, and their ongoing obsession with, the land. Tossing off the shackles of entailment, primogeniture and other vestiges of traditional European restrictions on land ownership, American colonists during that period saw the beginnings of a far more permanent way of owning real property that is still in predominant use today: fee simple ownership. That is, buy it and keep it — all of it — including whatever mineral riches may lie within it and whatever air rights may lie above it. Oh, and your children get to keep it too.8

Now add to the security of fee simple ownership the intoxication of abundance: The sheer amount of land in America gave rise to something not seen before in the tiny fiefdoms of Europe, where scarce land had been parceled out manor by manor. By contrast, in America, there was so much land that speculators took to buying it up and trading it. Railroad companies bought vast tracts on the chance they might someday want to lay rails through it. The government gave it away to homesteaders to encourage people to move to the Western territories.

Indeed, there was so much cheap land available that it became a political bone of contention in the early nineteenth century. Northeastern states, fearing a labor drain, were opposed to the quick and cheap sale of public lands in the West, and southern states — in order to check the power of the North — aligned themselves with the western states that favored such sales to entice settlers.9 As Clawson wrote, “Land gradually came to be a commodity and fortunes were made through land transactions. Most of the prominent citizens in the colonial period — and many in the national period — were active speculators in land. The suburban land speculator of today is their descendant.”

Never before in human history was so much land available to so many, so cheaply, and with so few questions asked. Come here, get yourself some fee-simple land and suddenly, miraculously, you’re somebody. Our forefathers cleared the land, deforested it, pushed aside its great boulders, and plowed it into tidy squares across millions of acres with the single-minded tenacity one finds among only the faithful and the insane. Land ownership is not a sideshow to the American experience; it is a central component of what makes us American.

The act of settling the land shaped our character: Americans are a restless people. We abhor decay and feel compelled to improve, to upgrade, to develop, to renew, or — in the jargon of modern urbanists, to “revitalize.” I would argue that all of this stems from Americans’ early and enduring relationship to the land. Anyone who doubts it need only turn on Home and Garden Television. There, one sees modern suburban folks who, with no acreage left to clear, now act out their pioneer instincts by ripping out perfectly good kitchens and gardens and doing them over — the type of hyperactive American endeavor it is difficult to imagine any but the richest and most bored Europeans engaging in.

Chasing a dream is not a habit of mind that wears off easily. While the urge to build and revitalize was a positive thing for the country so long as the land held out, the American lust for land has outlived the days of limitless supply — and that is a dangerous state of affairs for private property owners. What we are now witnessing is the American inability to pass up an opportunity to build or to stand by while things decay, coupled with the American talent for envisioning possibilities — and our long experience in land speculation and development — running smack up against the end of limitless supply. This has led us to what would have been unthinkable at Jamestown in 1607: We are cannibalizing each other’s land in our zeal to keep on building America. The new tool we are using to eat up each other’s land is economic development takings.

The supply of cheap, easily attainable land began to grow tighter after the first half of the twentieth century. The last of the territories became states in 1912, and the growth of the suburbs began in earnest after World War ii. The motive had begun to emerge for economic development takings; all we needed after that was the opportunity. That came in 1954 with Berman v. Parker.

At the close of World War ii, much of Washington, D.C., was a deplorable slum. Congress passed the District of Columbia Redevelopment Act of 1945, which made a legislative determination that there was housing within the District that was substandard for human habitation. The statute declared that blighted areas be eliminated.

The owner of a department store within the blighted area of D.C. challenged the taking. He argued that his store was not blighted and that it was one thing to knock down old houses that lacked indoor toilets and electricity and build new ones but quite another to take away his perfectly good business. The federal district court agreed with him in principle but saved the statute by reasoning that that it was constitutional so long as it condemned property to remove conditions “injurious to the public health, safety, morals and welfare.”10

The U.S. Supreme Court thought there was no need to pussyfoot about this way. To define the limits of the police power that may be exercised by the legislature, wrote William O. Douglas, would be “fruitless.” Why stop at public safety or public health? “Miserable and disreputable housing conditions may do more than spread disease and crime and immorality. They may also suffocate the spirit by reducing the people there to the status of cattle. . . . They may also be an ugly sore, a blight on the community which robs it of charm, which makes it a place from which men turn.”

 

The age of urban renewal

It didn’t take urban planners long to catch on to the potential laid out in Berman. Just seven years after Berman, Jane Jacobs, in the seminal The Death and Life of Great American Cities (Random House, 1961), was already cautioning about what she saw as the overuse of eminent domain and questioning its basic fairness. The ensuing four decades have borne out her thesis. As she noted in her brief to the Supreme Court in Kelo, after the Berman decision, eminent domain was used liberally to reshape American cities, with a disproportionate impact on black Americans — so much so that some ruefully came to call urban renewal “Negro Removal” (a phrase that can be traced to James Baldwin).11

The Berman case, and the vigorous workout that eminent domain was getting in the American landscape, was a turning point in the expansion of the public use doctrine. Given Justice Douglas’s sweeping language in Berman, it seemed only a matter of time until the criteria for the use of eminent domain would expand beyond slum removal. If blight, why not beauty? If beauty, why not bounty?

The unlikely focus of an early experiment in a quest for such bounty from the fountain of eminent domain took place in a gritty neighborhood of Detroit, the first great experiment in a large-scale economic development taking.

Poletown, Michigan, was a place that, by all rights, never should have made it onto any historian’s map. It was just a working-class neighborhood of Detroit, about half white (Polish Catholic) and half black, composed of single-family homes, churches, schools, and businesses. Its residents were working-class people who had jobs in nearby factories and quietly went about the business of pursuing the American dream. Yet Poletown has acquired a kind of infamy in legal and social science circles, forever equated with the idea of government folly, gross waste, and a what-were-they-thinking sort of horror. It was not destroyed on the grounds of blight, like so many neighborhoods taken in the post-Berman years, for Poletown was not blighted. It was reduced to rubble because those in positions of power were of a single mind, and they believed its sacrifice was necessary in a desperate bid for the survival of the city as a whole. Poletown was a living, breathing neighborhood that more than 3,000 people called home — before the city leveled it by bulldozer to make way for a factory.

In 1980, Detroit was in dire straits. Deep in the throes of the rust belt era and weighed down by an 18.3 percent unemployment rate, Detroit was willing to grasp at just about any straw that General Motors was willing to throw its way. gm had a plant in the Detroit vicinity that was getting old and needed to be retooled. Rather than retool it, which would have been very expensive, in fall 1980 gm proposed to the city to build a new plant, one that would provide 6,000 jobs. All Detroit had to do was provide the land. And not just any land: It had to have 500 contiguous acres and be accessible by highway and rail, cleaned of any toxic waste, leveled of any structures, and suitably cheap. The deal had to be ready to close mighty quick. Tax abatements were demanded, too. Absent these terms, gm would take its business and its 6,000 jobs elsewhere.

Like an ugly duckling asked to the prom by the captain of the football team, the city fell over itself in its effort to accommodate gm. After surveying the possibilities, the Poletown neighborhood was fixed upon because of its configuration and proximity to transportation. The city did not see the thousands of people who lived, went to school, owned businesses, and worshipped in churches there as an insurmountable impediment. They would be cleared out — fast. In addition, the Detroit City Council granted gm a 12-year, 50 percent tax abatement for the new plant.

Naturally, gm required clear title to the entire, contiguous parcel, with no hangers-on, recalcitrant sellers, or other troublemakers. The contract between the city and gm required the city to deliver title by May 1, 1981, according to Alan Ackerman, a Michigan attorney who represented business owners in certain aspects of the Poletown litigations. That was an extraordinarily short period of time in which to assemble such a large parcel of land free and clear of title encumbrances. There is only one way to acquire so much land from so many people so quickly: through the coercive power of eminent domain. The city filed suit against the homeowners and business owners on November 24, 1980, to acquire title by court order. There were 144 businesses taken in condemnation by the city, as well as 1,500 homes, two schools, a hospital, 16 churches, and an abandoned concrete factory (that element of the project alone cost a fortune in demolition expenses). In all, some 3,400 people were uprooted and relocated.

One might expect that factions would have emerged among the powerful in Detroit, yet, recalled Ackerman, “There was a sense of inevitability about the whole thing. . . . You had massive pillars of the community” such as the archdiocese, the mayor, the United Auto Workers, Governor Bill Milliken, and gm “all supporting something.”

But was this really a tale, as the Poletown mythology would have it, of a mighty corportion steamrolling over a distressed city? Coleman Young, Detroit’s first black mayor, was not a man to be trifled with. Young had come up the hard way and had stood up time and again to some of the biggest bullies America had to offer. Consider his confrontation early in his public life during a session before the House Un-American Activities Committee, which investigated him in connection with his role as a labor organizer in the automobile industry. Young mocked the committee members, refused to answer their questions and famously corrected the way Frank Tavenner, the committee’s counsel, pronounced the word Negro (“It’s Negro, not nigra.”)12 In essence, Young told the committee to bugger off. They took no further action against him.

When Young took office in 1973, Detroit was a city in transition. There was nearly a 50–50 balance of white and black citizens, with blacks gaining in population and white flight diminishing the tax base. Young was faced with a rising crime rate, a double-digit unemployment rate, and the general economic decline of the rust belt. Yet he showed himself to be a savvy player, ahead of his time in his ability to partner with the private sector in development projects, finding ways to attract businesses and keep them in Detroit. Indeed, according to Wilbur C. Rich’s hagiography, it was Young who approached gm with the idea of building a new plant within the city limits — not the other way around.13

Young also knew his way around Washington; his contacts established during the Carter administration would prove invaluable during the Poletown crisis in 1980. When push came to shove, Young was able to rustle up a then-extraordinary sum of $138 million in hud loans and grants to help cover Detroit’s costs for the project. It’s reasonable to posit that in Young’s view, GM was not the barbarian at the gate, but rather the savior of jobs — indeed, the savior of the city itself, a city with an increasing black constituency.

Before committing to the deal, the Detroit Community Economic Development Department conducted a cost-benefit analysis to determine whether the project was worthwhile for the city. No matter how favorably they projected the benefits, once discounted to present value, the projections showed that Detroit would still lose money.14 And even in 1980, gm was making noises about future automation of some jobs. Yet to refuse the deal was politically untenable, as gm had made clear it would take its business elsewhere.

This left Young, a shrewd politician, with what to his mind may not have been a terribly difficult choice. Obviously, many whites in Poletown, and blacks too, would have to lose their homes. But since the 1950s, large numbers of people, most of them minorities, had been dislocated in massive urban renewal projects all over the United States. And the dirty little secret of urban renewal, no doubt well-known to many black Americans at that time, was that the black populations removed from blighted areas seldom, if ever, subsequently returned to their old neighborhoods following “renewal.” Indeed, in the case of the neighborhood in northwest Washington, D.C., that had been the subject of the famous Berman decision, according to the Jacobs brief submitted in Kelo, “only 310 of the 5900 new residences constructed after the condemnations were classified as affordable to the displaced residents of the area, and within a few years the neighborhood became majority white.”

This time, neither the black nor the white residents would be relocated in vain: 6,000 jobs would be created. Or so gm led Mayor Young and the city of Detroit to believe.

Between October 8, 1980, when gm made its formal offer by letter to acquire the site, and the decision of the Michigan Supreme Court on March 13, 1981, holding that the taking was lawful, Poletown was in chaos. The homes of many had already succumbed to the wrecking ball. Fires were rampant night after night, and scavengers combed through empty houses at will. Parents feared for their children’s safety as the piles of abandoned and bulldozed debris lay right next to occupied houses. It would not be long before civil resistance efforts began. Activists occupied a church until the last moment before bulldozers destroyed it.

Unlike the subjects of many large-scale blight takings that had occurred in the past, many of the white residents of Poletown were not going quietly into the night. A small grassroots contingent of residents emerged, led by local Roman Catholic priests, who organized a “necessity challenge” to the condemnation of Poletown — that is, they brought a legal challenge to the right of the city to take the land in the first place. The necessity challenge — which became the famous lawsuit known as Poletown Neighborhood Council v. City of Detroit — soon expanded into an all-out citywide rumble. The priests found themselves going toe-to-toe not only against city hall, but against their own diocese. Residents reported feeling betrayed by their local government, by the Catholic Church (which sided with the government), by the uaw, and by gm.

The Michigan Supreme Court put the parties to the necessity challenge on an accelerated briefing schedule. An examination of copies of the file-stamped original briefs shows that the court had the reply brief in hand less than a month before rendering its opinion on May 13, 1981. Given time for oral arguments, it is likely the court made and wrote its decision in about two weeks. Such complex matters of state constitutional law are typically disposed of over a judicial term. Looking back, it is a measure of the desperation that all of the rust belt must have felt and the thrall in which gm must have held even the highest court in Michigan. The court wrote the landmark decision so hastily that Judge Ryan submitted his now widely quoted dissent several days later; in it, he admonished the majority for acting too quickly on so grave a matter.

Given the sense of inevitability in the air at the time, the majority of the residents and businesses did not join in the necessity challenge. Many businesses did, however, challenge the amounts the city offered them. The valuation challenges proved difficult and bitter, not least because of mistakes the city made in its haste. From a shoe repair shop to a hospital, Detroit fought dozens of such mini-suits and ended up paying hundreds of millions more in compensation than it had planned. Surprisingly, despite the image of Poletown as working-class and run-down, there was substantial value in the 500-acre community. Ackerman, for example, represented a barrel company and an oil distributor. “The city offered $350,000 for the oil distribution company,” he recalled. At trial, the company got $5 million. Estimates differ on how much the Poletown taking finally ended up costing Detroit (or more accurately, federal taxpayers, the state of Michigan, and Detroit, in that order), but the consensus from a variety of sources is in the range of $300 million. gm snapped up the site for a mere $8 million.15

Clearly, the ugly duckling’s date with the football captain didn’t turn out well. Cost overruns are not unusual when governments involve themselves in real estate transactions. Unanticipated costs also plagued New London, Connecticut, the site of the Kelo case. There, the damage has been protracted political bitterness as well as financial strain.

But what about all those gm jobs? In the end, after the bulldozers were through, gm built its Cadillac assembly plant, but it seldom operated at the double-shift, 6,000-job capacity the company and city had advertised. It sputtered along, providing about 3,000 jobs at its peak. The city had no recourse, having entered into a purely one-sided deal; gm had council-approved, long-term tax abatements and no obligations to employ anyone.

Like a lab rat that learns it will get a treat if it bangs its head enough times against the feeder, the Detroit elders soon repeated the Poletown scenario and quickly made a similar deal with Chrysler. Indeed, in the decades that followed, the city demanded, again and again, that land development projects be ginned up by the use of eminent domain.

Not surprisingly, the intoxicating blend of hud monies, cheap land for the asking, public-private partnerships, state funding, and other goodies that typically go with economic development takings put a gleam in the eye of municipal legislatures all over the country after Poletown. The social cost of Poletown, and its rather anemic fiscal results, did nothing to dissuade other states from jumping on the bandwagon. Today, economic development takings go on in California, Connecticut, New York, Kansas, Louisiana, Maryland, Minnesota, and North Dakota. In Florida, such takings occur through a “blight” loophole.

Those in Michigan who had been mainlining economic development takings in Michigan for 20 years had to go cold turkey in the summer of 2004. A decision called County of Wayne v. Hathcock16 reversed Poletown. Hathcock relied on the case law available at the time the 1963 Michigan constitution was ratified to divine the drafters’ original intent. The court concluded that the public in 1963 could never have understood “public use” to mean the taking of private property for unfettered enjoyment by other private owners for the sole purpose of raising tax revenue or generating jobs. The court found that, much like the nineteenth-century cases discussed above, property could be taken and given to other private entities only if there was absolute necessity (such as railroad tracks) or an operation that guaranteed continued public monitoring (such as a waterworks). A third exception was a circumstance in which the very act of condemning the land served a public purpose, such as eliminating a slum — a circumstance not present in Hathcock, which involved razing a residential area near an airport in order to create a business and technology park.

 

On to Kelo

Exactly how did things stand, then, when the Kelo case came before the Supreme Court for argument in February 2005, and how did the Institute for Justice (ij) formulate its strategy on appeal?

On a federal level, the court’s primary references would be Berman and a 1984 case called Hawaii Housing Authority v. Midkiff.17 Justice O’Connor, writing for a unanimous court, held in Midkiff that a Hawaii statute authorizing the condemnation of private parcels of land for sale to long-time lessees — against the lessors’ wishes — was a constitutional exercise of the takings clause. The court reasoned that the statute was rationally related to a public purpose because the sales were done to break up vast land oligopolies. The public benefit of eliminating the “economic evils of a land oligopoly” was sufficient to pass Fifth Amendment muster.

On the state level, some continued to allow economic development takings, and others didn’t. Connecticut fell into the former camp; its state Supreme Court had decided in March 2004 that the takings in New London were constitutional. Four months later, Hathcock rocked the takings world. The Michigan decision was completely at odds with Connecticut’s. While it is not the role of the U.S. Supreme Court to resolve conflicts in state law (and the Kelo case went up on a federal constitutional issue), the dichotomy helped to put the takings clause on the national radar screen. Suddenly, the public use clause seemed up for grabs. If the Supreme Court nixed economic development takings on federal constitutional grounds, then many states would have to follow Michigan’s path. If Kelo went the other way, then states that hadn’t made up their minds about such takings might decide to walk in Connecticut’s footsteps.

In 1998, New London, Connecticut, was a city in decline. Pfizer came in, bought up some land, and built a corporate park adjacent to the Fort Trumbull neighborhood of New London. The city saw this as an opportunity for salvation. The New London Development Corporation (nldc), established years earlier, was reactivated and rustled up $73 million from the state. It made a plan to raze some land in Fort Trumbull to build a hotel, offices, and condominiums that would serve Pfizer’s guests and employees. There would also be a marina with restaurants and shopping. There were seven parcels in the overall plan. Many of the homeowners sold voluntarily. But some wanted to stay.

From the outset, ij was faced with some tough choices. Midkiff, and most especially the sweeping language of Berman, seemed to have sealed the fate of the Kelo petitioners. How ij approached the briefing and argument of the case is a matter of some interest, since it is an advocacy organization advancing a particular political ideology — one that sees no room for compromise on the question of economic development takings and looks with great suspicion on all uses of eminent domain.

ij had first to decide whether to try to overturn precedent or to work within precedent by arguing for a change in the constitutional standard. Under the first strategy, one would argue that Berman and Midkiff were fundamentally wrong and should be overturned. The Cato Institute argued, in an amicus brief written by Professor Richard Epstein of the University of Chicago, that those cases improperly expanded the public use clause beyond any plausible understanding of its meaning, conflating it with public benefit in an improper way. Alternatively, one could primarily urge the court to adopt a stricter standard of scrutiny than the one established in 1984 in Midkiff, which held that the court would not invalidate a takings statute that was “rationally related to a conceivable public purpose.”

As its primary argument, ij asked the court to establish a bright-line rule — no economic development takings whatsoever — but without explicitly overturning Berman and Midkiff, in which the takings benefiting private parties were justified for public purposes other than economic development.

Judicial philosophies at the high court have an ebb and flow, with different alliances favoring “rules” and others favoring “standards” (or balancing tests) at various points in the court’s history. As Kathleen M. Sullivan deftly described in her oft-cited article, “The Justices of Rules and Standards,” the conservative justices on the modern court, most especially those who have gravitated toward Justice Scalia, can usually be counted on to favor rules, while the liberals on the court tend to favor more flexible, fact-sensitive weighing of interests. She cited Justice Stevens (who would write the Kelo decision) chiding Justice Scalia, who favored a bright-line rule in a regulatory takings case: “ ‘[L]ike many bright-line rules, the categorical rule established in this case is only “categorical” for a page or two in the U.S. Reports before it gives way to an exception.’ ”18

When ij came before the court in Kelo, its primary task was not to persuade the conservatives on the bench; they were already predisposed in the petitioners’ favor. By arguing for a bright-line rule, ij was preaching to the choir and alienating the very audience it most had to persuade.

There is no doubt that on the day of the oral argument, the bright-line argument had all the buoyancy of a lead weight. The justices struggled with how to square such a draconian outcome with the sweeping language of Berman, which allows for the taking of private property for turnover to other private parties for purposes as amorphous as improving the human spirit. Logic led them more than once to ask why the petitioners’ position would not require the court to overturn Berman and Midkiff. Justice O’Connor repeatedly asked for a constitutional test (in lieu of a bright-line rule). Scott Bullock, arguing for ij, finally offered a “reasonable forseeability” test as an alternative — that is, that project planners should demonstrate some reasonably foreseeable likelihood of achieving their economic goal. “That’s a big retreat,” said Justice Breyer, “and it comes to me that now you’re getting to what I think is a possible realm of reason here.”

The Supreme Court is a place where vocabulary matters tremendously, and fashioning the request for relief in the language the court is accustomed to allows the court to fit the case into its long lines of jurisprudence. It was clear that the court was frustrated by a lack of familiar arguments. There was a key point in the oral argument at which Justice Kennedy, in classic appellate court fashion, made an analogy to the nineteenth-century railroad cases and to public utility cases, inviting Bullock to distinguish them. He responded with an ij stump speech against economic development takings.

When it came time for the city’s attorney to speak, he was hardly given a free pass. It was equally clear that the justices were troubled by the idea of the government taking from a to give to b simply because b would pay more in taxes, and they returned more than once to the issue of just compensation. The city’s attorney, Wesley Horton, conceded that he did not agree with imposing any judicial test on an economic development taking, nor did he think it necessary to confine economic development takings to depressed areas. “[U]nder your theory of public use, [a city could] say, yes, we are not doing badly, but we could do better,” said Justice Scalia. Horton agreed.

In the end, the court majority rejected the adoption of a higher standard of review in economic development takings, finding it inconsistent with the precedent of Berman, which gives deference to legislative judgment, expressly out of fear that it would create an impractical system in which such takings would be mired in litigation to test their “reasonableness” before new projects could ever begin. Nonetheless, the majority practically invited state legislatures to pass laws prohibiting such takings: “We emphasize that nothing in our opinion precludes any State from placing further restrictions on its exercise of the takings power. Indeed, many States already impose ‘public use’ requirements that are stricter than the federal baseline . . . as a matter of state constitutional law [or] state eminent domain statutes.”

The dissenters, led by Justice O’Connor, seemed alarmed by the potential for cherry-picking of individual properties, as well as by the facts laid out in the amicus briefs detailing the disparate impact of such takings on the poor and minorities. O’Connor argued that the majority’s holding essentially rendered the public use clause of the constitution meaningless. Picking up the thread of the Hathcock decision, she distinguished Berman and Midkiff by reasoning that in those cases the very acts envisioned by the condemnation statute advanced the public interest because they eliminated blight and a pernicious oligopoly, respectively.

 

A groundswell of takings

The decision set off a firestorm. Debates about eminent domain have found their way into local, state, and national politics. The National Law Journal (August 1, 2005) reported that in the months following the decision, legislatures in 28 states have introduced more than 70 bills aimed at curbing local eminent domain powers, and legislators in five states have proposed constitutional amendments to prohibit eminent domain for private development. Alabama has passed a statute prohibiting economic development takings but making an express exception for “blighted properties” (which could easily become a loophole). Two federal bills have been introduced. Each, with variations, would prevent the use of federal money by states and local governments for eminent domain projects in which private economic development is the goal; they would also prohibit the federal government from undertaking such projects.

The debate has entered local politics in many strange permutations. For example, in what can only be regarded as comic relief for those who live in New Jersey — a state that never met an eminent domain project it didn’t like — warring gubernatorial candidates Douglas Forrester (a Republican) and Jon Corzine (a Democrat) have tried mightily to outdo each other in demonstrations of outrage over Kelo. The mini-melodrama illustrates just how insular and tangled up in local intrigue eminent domain abuses can become. Within weeks of the Kelo decision, Forrester called a news conference to announce solemnly the creation of a task force “to study the impact of the court’s ruling.” He did not wait for its report to denounce an abuse of eminent domain in the proposal to build a golf course on Petty’s Island — a project reportedly supported by a New Jersey Democratic power broker close to Corzine (according to Forrester). Corzine soon fired back with his own seven-point plan — which he insisted he had formulated even before the Kelo case was decided — for ridding New Jersey of the evil of eminent domain abuse, “except in rare and exceptional circumstances.”

Not to be outdone by their neighbors across the Hudson, the challengers in the New York City primary race for Public Advocate — always a slugfest — were also slinging mud over eminent domain this summer. In the post-Kelo world, it seems, it is de riguer for politicians to at least look as if they despise eminent domain. The incumbent public advocate, Betsy Gotbaum, was feverishly attacked for publicly supporting the highly controversial Atlantic Yards project on Brooklyn’s waterfront (an enormous economic development taking) while at the same time insisting that she is opposed to such takings. Among her critics was a city councilwoman who has introduced a bill to prevent the use of city funds to facilitate such takings. Gotbaum countered that the powerful and well-funded developer was still negotiating buyouts with the holdout residents, and besides, the developer had told her “he didn’t want to use eminent domain.” That’s a bit like saying that a robber who puts a gun to a man’s head and takes his wallet did not obtain it by force since he never actually pulled the trigger.

All of this nuttiness would be amusing if one could feel certain that it would lead to some lasting reform. But other forces have been at work since the Kelo decision. For one thing, there has been a groundswell of takings activity, as the many development projects that were put on ice while Kelo was pending before the high court have now been reactivated. In addition, it is not at all clear that the many bills introduced in state legislatures around the country will actually become law. The lobbies against such bills are many and highly organized: state and local governments, real estate developers, sports franchises in search of arenas, the hotel industry, big-box retailers, and many others with an interest in seeing urban and even rural development in convenient locations through the use of economic development takings.

On the other hand, opposition to such projects — and hence support for pending legislation — is by definition scattered. Its base is primarily and most fervently composed of people who stand in harm’s way of such takings. But while the fervor generated by the decision may have been enough to get the bills introduced, it may not be enough, with such supporters relatively few in number, for politicians to take the issue to the mat against powerful lobbies.

And even if they are passed, blight removal — an eminent domain category that traditionally has been as slippery as an eel — can always surface again as a convenient loophole (as it has in the Alabama statute). Or legislatures, under pressure from business lobbies, might fashion some other standard under which to test the confines of lawful takings.

As for the homeowners in Fort Trumbull, their fate is still uncertain. The city, sore winners, slapped a bill for unpaid “rent” on the Kelo homeowners, reasoning that since petitioners lost the case, they have effectively been living in city-owned property for several years now. Connecticut Governor M. Jodi Rell, a Republican, has called for a moratorium on takings until the legislature can consider a pending bill on the subject. The city of New London has become embittered, to say the least. The nldc, whose executives are not elected, ran through nearly all of its $73 million and went begging to the city for an additional $4 million in 2003. The city council agreed and then changed its mind after the nldc demanded that the city immediately bond the money, which would have meant an even greater tax hike for its citizens. The council’s relationship with the nldc deteriorated so badly that after two years of haggling, in March 2005, the council and nldc entered into mediation workshops with a professional conflict resolution consultant.

As the Kelo majority noted, it is now a matter for individual state legislatures and state courts. While a lot of hot air has been blowing, it remains to be seen whether Connecticut or other states will reverse their course as Michigan has done. Political passions, after all, come and go. It is worth bearing in mind that it took Michigan’s high court 23 years to reverse itself after what had been one of the greatest mass uprootings of a civilian population in America since the 1950s, when Robert Moses used eminent domain as a blunt instrument to slice the Bronx in half to build the Cross Bronx Expressway. If we are to be serious about eradicating economic development takings, it must become an issue that is more than just a passing political fad.

1 Samuel R. Staley and John P. Blair, “Eminent Domain, Private Property, and Redevelopment: An Economic Development Analysis,” Policy Study 331 (Reason Foundation, February 2005).

2 Henry J. Munneke, “Eminent Domain: Lessons From the Past,” Office of Real Estate Research Letter, (University of Illinois at Urbana-Champaign, Spring 1991). Available at www.business.uiuc.edu/orer/v5-2-1.pdf.

3Ryerson v. Brown, 35 Mich. 333, 338 (1877).

4Cherokee Nation v. Southern Kansas Railway Co., 135 U.S. 641, 656 (1890).

5Kohl v. United States, 91 U.S. 367, 371 (1875).

6 “[L]and was the bait to attract farmers into the colonies; it was used also to attract artisans and investors, develop industry, and settle frontier defenders. Tracts of public land were set aside for the support of schools, churches, and colonial governments. Land was given . . . as reward [to public servants and others].” Edward T. Price, Dividing the Land: Early American Beginnings of Our Private Property Mosaic (University of Chicago Press, 1995), 3.

7 Francis S. Philbrick, The Rise and Fall of the West 1754–1830 (Harper & Row, 1965), 91.

8 Marian Clawson, America’s Land and Its Uses (Johns Hopkins University Press, 1972), 18.

9 Homer Caret Hockett, The Political and Social Growth of the American People, 1492 to 1865 (Macmillan, 3rd Edition, 1940), 571.

10Berman v. Parker, 348 U.S. 26, 31 (1954).

11 According to Jacobs, between 1949 and 1963, 60 percent of all families displaced by urban renewal condemnations were nonwhite, and of the 5,012 persons displaced in the Berman taking, 97.5 percent were black. See the Jacobs brief submitted in Kelo. See also the NAACP brief submitted in Kelo.

12 Wilbur C. Rich, Coleman Young and Detroit Politics: From Social Activist to Power Broker (Wayne State University Press, 1989), 72.

13 Rich, 182.

14 David Fasenfast, “Community Politics and Urban Redevelopment: Poletown, Detroit, and General Motors,” Urban Affairs Quarterly, 22:1 (September 1986).

15Poletown Neighborhood Council v. Detroit, 410 Mich. 616, 655 (1981).

16County of Wayne v. Hathcock, 471 Mich. 445 (2004).

17Hawaii Housing Authority v. Midkiff, 467 U.S. 229 (1984).

18 Kathleen M. Sullivan, “The Justices of Rules and Standards,” Harvard Law Review 106 (November, 1992).

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