Eminent Domain Update

When the power of eminent domain is abused by politicians, those most likely to suffer, of course, are homeowners and small business owners. History has shown that time and again.

SBE Council noted in a recent report (“Stopping Kelo One Year Later: Legislative Efforts to Reverse Eminent Domain Abuse”) legislative changes passed or under consideration at the federal and state level after the U.S. Supreme Court’s egregious Kelo decision in June 2005. A recent SBE Council Fact of the Week (“Property Rights on State Ballots”) also looked at measures on state ballots this year regarding property rights.

It’s worth taking a look at what’s going on in a few spots around the nation to reinforce that restrictions on eminent domain are both needed and desired around the nation:

• The Village of North Hills in New York was considering the use of eminent domain to take a private golf club so that village residents could use it. Earlier this month, state legislators and Governor George Pataki came up with a narrow, unique solution. As 1010 WINS radio website reported: “The new law says land in a groundwater protection area -- which the golf club is in -- can not be seized by eminent domain if the municipality plans to use the land for the same thing as the private owner.” A more comprehensive answer to New York’s liberal and abusive eminent domain ways would have been welcome, but this at least stops one case of government theft.

• Earlier this month, voters in Clayton, Missouri, voted overwhelmingly – with 70.8 percent of voters, according to the Citizen Journal – to approve strong limitations on the city’s power of eminent domain “in conjunction with any economic development or redevelopment project.” However, this was a non-binding, advisory measure, so it will be interesting to see how city officials react.

There already is a test. As the Citizen Journal reported:

“One such development that fits that definition is a Centene redevelopment gearing up in Clayton's central business district. The $190 million project will include Centene's national headquarters, which will accommodate 1,200 corporate staff members. City and Centene officials have said the redevelopment would create 800 new jobs.

“City officials also believe the development could seriously bolster the city's economy while adding hundreds of thousands of additional tax dollars to the city and Clayton School District each year.

“But the development also came with the first use of eminent domain in the city. Two property owners along Forsyth Boulevard reportedly lost their properties to Centene through eminent domain, with the court deciding the compensation. City officials said two other property owners have court dates scheduled for October to determine if their properties could be taken through eminent domain as well.”

• An August 15 Bloomberg News story by reporter Greg Stohr offers a few highlights of what’s going on around the nation since the Kelo decision. For example, he noted:

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“Officials in Riviera Beach, Florida, needed to act fast. Governor Jeb Bush was poised to sign a bill to limit government seizures of private land, jeopardizing the town's vision for a $2.4 billion waterfront redevelopment. So city officials called an emergency meeting for May 10, the night before Bush's planned signing. Looking to beat the clock, the City Council approved a contract with the project's developer and promised to use the city's power to take land for public use to secure the necessary property.”

- “New York City aims to build a new arena in downtown Brooklyn for professional basketball's Nets, while San Francisco plans to redevelop 150 blocks in its Bayview-Hunters Point neighborhood. And in an unusual twist, officials in Hercules, California, are vying to seize land owned by Wal-Mart Stores Inc. in the hope of filling the space with smaller shops.”

- “The Institute for Justice says it has identified almost 5,800 instances in which agencies at least threatened to seize properties for transfer to other private parties in the year following the Kelo decision. That's up from an average of about 2,000 annually in the five preceding years, according to the group's figures.”

• Finally, settlements were reached between the parties in the Kelo case in New London, CT. On August 22, the Associated Press reported:

“The state spent $2.3 million to settle with New London property owners in a landmark eminent domain dispute that reached the U.S. Supreme Court, an official said Tuesday. The six property owners received the money to settle their claims and pay for their relocation, according to Tom Londregan, city attorney for New London. That figure does not include about $1.1 million in back rent officials agreed to waive and about $1.7 million that had been held in escrow for the property owners since their homes and businesses were condemned by the New London Development Corp. in 2000, officials said…

“The last two holdouts in New London's Fort Trumbull neighborhood agreed in June to give up their land to make way for private development. Susette Kelo, the lead plaintiff in the case, agreed to have her pink cottage moved elsewhere in New London. Pasquale Cristofaro, the other holdout, has agreed to give up his home but is entitled to purchase a new one in the neighborhood at a fixed price if new homes are built. The Cristofaros and Kelo had faced the possibility of forced eviction from their homes to make way for a riverfront project slated to include condominiums, a hotel and office space.”

It’s fitting to note the comment from one of the New London property owners, William Von Winkle, who declared: “I can't go buy anything with a gun like they did. This money was to make them look good. I will look for something safe from eminent domain, if that's possible in this country now."

Raymond J. Keating

Chief Economist

Small Business & Entrepreneurship Council

August 23, 2006