Eminent Domain

Eminent Domain

 Should localities be able to seize private property for economic development?

PRO: Too much ado about a beneficial power.

David R. Gill – a lawyer in the real estate and land use department in the Tysons Corner office of McGuireWoods LLP.

Much has been made in the media over the recent Supreme Court decision in Kelo v. The City of New London, which upheld the right of New London to exercise its power of eminent domain to aid in the revitalization of the employment base of the
Connecticut city. However, the hullabaloo surrounding the decision has ignored the necessary role the takings power has in creating vibrant, growing and stable communities.

            In this era or reduced support from the state and federal governments, local governments have increasingly been turning to public-private partnerships to fund vital public improvements. These partnerships turn on the ability of the locality to consolidate sufficient property to create a viable project that allows the private sector to bear the cost of providing broad public benefits.  Allowing one or two holdouts to thwart a publicly beneficial project – one that increases the tax base, improves employment opportunities and provides vital public infrastructure – simply because holdouts do not wish to move, hamstrings the ability of local government to provide vital, growing and safe communities. The holdouts also force the rest of the community to bear the cost of higher taxes and reduced employment opportunities.

            Further, the impact of this decision, and the takings power generally, has been greatly exaggerated. The decision merely reinforced the law as it existed for almost the past 200 years. From the time of the founding fathers the takings power has been used to benefit private parties. For example, the takings power was often used to benefit timber mill owners who needed to flood neighboring properties to create timber ponds. Since the 1960’s localities have had the right to take “blighted” properties in an effort to revitalize their communities.

            In addition, Americans now move, on average, every seven years, so the effect on a vast majority of people would be minimal. Lastly, taking people’s home is incredibly unpopular politically. It is an option of last resort. In fact the Supreme Court emphasized that the takings power has to be exercised in an open and public manner subject to a legitimate public process to ensure the purpose of the taking will truly benefit the community.

            In the end, the political and popular opposition to this decision will likely lead many states to limit or curb the takings power. This is already happening as Congress and more tan 24 states (including
Virginia) are exploring legislation to overturn or limit the impact of the Kelso decision.. This myopic, knee-jerk reaction will further limit the ability of local government to create better and more successful communities.

CON: Kelo decision chips away at rights.

Joanna Frizzell – a lawyer in the real estate and land use department at the Tysons Corner office of McGuireWoods LLP.

In the supreme courts recent decision, Kelo v. City of
New London, the court took the public purpose clause of the Fifth Amendment to the Constitution one step further, removing a barrier that previously served as the upper limit of local governments power to take property. In the words of justice Sandra Day O’Connor, the decision allows the locality to”…. Take private property currently put to private use, and give it over to for a new, ordinary private use, so long as the new use is predicated to generate  some secondary benefit for the public.”

            What does that mean for today’s property owner?  While the short term effects of this decision are not likely to be drastic, in the long term, local governments are may begin to push this new outer limit to the detriment of individual property ownership rights. The Kelo case simply put, states it is constitutional for the government to take property that is not being used to its full potential if the government finds what it believes to be more productive use for the property.

            The Supreme Court had already expanded the traditional “public use” definition to include addressing social harms caused by the property, such as blight. However, the Kelo decision further expands the definition to include addressing social harms that are not directly related to the property being taken. For example, as held in Kelo, local governments may transfer private property from one owner to another simply in order to increase the tax base of an economically strapped town.

            By validating the local government’s ability to take property for this purpose, the Supreme court has created the need for the property owner to be politically aware and even active in order to prevent his or her property to be taken for the benefit of a development plan. While property owners have always had an obligation to be aware of zoning regulations and changes that might affect their property , until Kelo the Constitution prevented local governments from implementing the zoning changes by redeveloping the property without the owners consent simply for economic gain.

            The saving grace for property owners is state law, like that of
Virginia, where permissible local government action is proscribed. The state has the ability to define the purpose for which a local government may take property. Therefore we must rely on the state legislatures to narrow the ability of local governments to take advantage of this newly validated mechanism for increasing their tax base. The public purpose clause is meant to provide protection for the individual property owner against the will of the whole. The Kelo decision slowly chips away at this protection, leaving property owners vulnerable to the political process without the constitutional shield to stand behind.


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