Last summer, when the Supreme Court declared in Kelo v. New London that states may condemn private property and transfer it to developers and businesses for 1/economic development” projects, the nation reacted with outrage. The House of Representatives overwhelmingly denounced the decision, and immediately began considering ways to forbid local governments from paying for such projects with federal dollars. Meanwhile, state officials picked up on the Supreme Court’s statement that “nothing in our opinion precludes any State from placing further restrictions on its exercise of the takings power,” and 38 of the states began drafting such restrictions. Columnists and bloggers began talking of a “Kelo backlash.”
Today, eight states have enacted new laws in response to the Kelo decision. But despite the optimism that the “backlash” has generated among defenders of property rights, few of these laws provide meaningful protection for property owners. In fact, with the exception of South Dakota’s new law, bills in Pennsylvania, Indiana, and Michigan – which have not yet been enacted – and part of an otherwise illusory reform law passed in Texas, these measures are major disappointments to property rights defenders. In some cases, such as that of Ohio, the reforms are outright frauds. These laws offer important lessons for what other states ought to avoid if they want to provide meaningful protection from eminent domain abuse.
Alabama
Alabama became the first state to respond to Kelo when it passed a law during a special legislative session only two months after the decision was announced. S.B. 68A, which was signed by Governor Bob Riley on August 3, prohibited the use of eminent domain” for the purposes of private retail, office, commercial, industrial, or residential development; or
primarily for enhancement of tax revenue; or for transfer to a person, nongovernmental entity, public-private partnership, corporation, or other business entity.” Had this been the entire text of the bill, S.B. 68A would have meant significant protection for the property rights of Alabamans. Since at least the 1950s, the state’s courts have upheld the kind of economic development projects that Kelo permitted. Alabama law allows local governments to condemn property for “urban renewal” or “redevelopment,” each of which is described in a separate chapter of the state code.
Chapter 2, which covers redevelopment, explains that government may seize private property when it is in a “blighted area,” which is defined as an area with buildings that suffer from “dilapidation, obsolescence, overcrowding, faulty arrangement or design, lack of ventilation, light and sanitary facilities, excessive land coverage, deleterious land use or obsolete layout, or any combination of these or other factors.” Once such property is seized, it can be sold or leased to a private company to build a store or a hotel or whatever project bureaucrats believe necessary to improve the economy. More, Chapter 2 allows officials to seize property to prevent blight, even if the blight has not yet occurred.
And the state supreme court has allowed seizures of non- blighted property if it is near property that is blighted: “the mere fact that some of the buildings in the area are standard and substantial,” the court has declared, “does not require that they be omitted from the operation of the project.” Urban renewal is covered under Chapter 3, which allows bureaucrats to write an “urban renewal plan” and implement it by seizing
The city was so enthusiastic for the condominium project that it defined “blight” as including any home that lacked a two-car garage or central air conditioning.
property in the neighborhood. Like the redevelopment chapter, the urban renewal chapter lets the government condemn non-blighted, commercially viable property, if it stands in the way of a new shopping center, hotel, or restaurant.
S.B. 68A does not alter these chapters in any way. In fact, immediately after prohibiting condemnations for purposes of economic development, the bill adds this sentence: “Provided, however, the provisions of this subsection shall not apply to the use of eminent domain by any municipality, housing authority, or other public entity based upon a finding of blight in an area covered by any redevelopment plan or urban renewal plan pursuant to Chapters 2 and 3 …” Thus economic development condemnations can continue in Alabama, so long as local officials first declare that their seizures of homes and businesses are necessary to alleviate “deleterious land use or obsolete layout” or other barriers to economic performance.ยท Given the malleable definition of “blight” in Alabama law, it is not difficult for bureaucrats to target property by declaring it blighted before deciding to condemn it. When signing S.B. 68A, Governor Riley applauded himself for “leading” a “property rights revolt” that he claimed was “sweeping the nation.” But S.B. 68A provides virtually no protection for the owners of homes and businesses in Alabama.
Texas
The same problem dogs Texas’ S.B. 78, which was signed into law on September 1. Like the Alabama measure, S.B. 7B prohibits any condemnation which”confers a private benefit on a particular private party through the use of the property” or which “is for a public use that is merely a pretext to confer a private benefit on a particular private party.” While these prohibitions are laudable, they do not change the law in any way. Kelo itself declared that local governments are “forbid- den from taking … land for the purpose of conferring a private benefit on a particular private party . . . [or from taking] property under the mere pretext of a public purpose, when its actual purpose was to bestow a private benefit.”
What makes Kelo such a threat to property owners is not that it allowed condemnations for purely private benefits, but that it declared that condemnations which “create jobs” or “improve the economy,” or even just raise tax revenue, don’t qualify as private benefits. By expanding the definition of “public” to include the economic consequences of private transfers of land, the Kelo decision makes it virtually impossible for a court to recognize that a condemnation is really a private redistribution of wealth. Kelo does not allow private takings; it just allows virtually any taking to qualify as public. Thus, the first two prohibitions in the Texas statute do nothing to change the current law.
The third prohibition is also an illusion. Like the Alabama measure, S.B. 7B grants government a loophole that undoes most of the protection that legislators promised to provide: bureaucrats may not condemn property “for economic development purposes,” the bill declares, “unless the economic development is a secondary purpose resulting from municipal community development or municipal urban renewal activities to eliminate an existing affirmative harm on society from slum or blighted areas under … Chapter 373 or 374, Local Government Code.”
These two chapters of the Local Government Code cover “community development” and “urban renewal,” respectively, and they are unusually explicit in acknowledging the use of eminent domain to give property to private businesses.
Chapter 373 allows government to condemn property if it is “blighted, deteriorated, deteriorating, undeveloped, or inappropriately developed from the standpoint of sound community development and growth”; if it “is appropriate for … the beautification of urban land”; “for the provision of recreational opportunities or the guidance of urban development”; or if the property “is to be used for … other improvements eligible for assistance under this chapter or is to be used for other public purposes.” The law allows government to condemn property for the purpose of “assistance in and financing of … private acquisition of those properties for rehabilitation,” and for “disposition, by sale, lease, donation, or otherwise, of real property acquired under this chapter.” And it authorizes officials to use seized property for “activities that are conducted by … private entities if the activities are necessary or appropriate to meet the needs and objectives of the community development plan.”
Chapter 374 allows government to seize homes or businesses and to give, lease, or sell the property to private entities to use for their own profit. It allows for the “public acquisition of real property” so as to “prevent the spread of” blight and for “the disposition of property acquired in affected areas and incidental to the purposes stated by this subsection,” and it reiterates that “private enterprise [should] be encouraged to participate in accomplishing the objectives of urban renewal to the extent of its capacity and with governmental assistance as provided by this chapter” – a clear invitation to companies to join with government agencies in employing eminent do-
Property rights, like other fundamental constitutional rights, are not supposed to be subject to political decisions in the first place.
main for”economic development” projects. As if this weren’t clear enough, the law goes on to permit “the disposition by the municipality of property [that has been condemned] … including the sale or initial lease of the property at its fair value.” Both chapters are preserved unchanged under Texas’ eminent domain reform law.
Astonishingly, these loopholes were not enough for Texas legislators, who, at the last minute, amended S.B. 7B specifically to allow the Dallas Cowboys to continue seizing land to construct a football stadium.
There are some beneficial aspects to S.B. 7B. First, the law does limit economic development condemnations to two sec- tions of the state’s law. Before, there were a variety of other statutes giving officials the power to seize property; the new
Kelo does not allow private takings; it just allows virtually any taking to qualify as public.
law closes off these additional sources of authority. But this protection is of little use, since virtually any property can still be condemned under Chapters 373 and 374.
Second, and more importantly, the new law clarifies that when the government decides to seize property, courts are allowed to review the decision independently. Although the courts have long claimed that power, in recent years they have adopted an increasingly deferential attitude toward local officials, declaring that condemnations will not be stopped except in extremely unusual circumstances. By creating more independence for the courts, S.B. 7B may possibly give property owners an opportunity to defend themselves in court. Still, that seems unlikely given the government’s wide – and unchanged – power to use condemnation for “urban renewal” projects.
Wisconsin
Wisconsin’s newly enacted A.B. 657 also provides weak protection for property owners. Although purporting to restrict the definition of blight, the bill simply declares that government can seize property that is Udetrimental to the public health, safety, or welfare” due to “dilapidation, deterioration, age or obsolescence,” “faulty lot layout in relation to size, adequacy, accessibility, or usefulness,u or other conditions – in the opinion of bureaucrats, of course.
Delaware
Vastly different from the Alabama, Texas, and Wiscon- sin measures is Delaware’s newly enacted S.B. 217. Whereas the other laws claim to limit the eminent domain power, the Delaware law merely requires officials to tell property owners what they plan to do with land once they seize it. Bureaucrats must “describe” the “public use” for which property is to be taken”at least 6 months in advance of the institution of condemnation proceedings.” The bill puts no limits on what sorts of things government may do with seized property, and does not try to define “public use.” It merely requires the government to announce its plans six months in advance.
The idea, presumably, is to allow potential victims of condemnation time to rally with their neighbors and picket city hall. This may be a helpful idea; in some recent cases, political activism has stopped impending condemnations. Most notably, voters in Lakewood, Ohio, narrowly defeated a project that would have seized a tidy middle-class neighborhood for a condominium project. The city was so enthusiastic for that project that it defined “blight” as including any home that lacked a two-car garage or central air conditioning. After be- ing featured on CBS’ “60 Minutes,” the redevelopment plan was voted down in a referendum.
But while it’s gratifying to see property owners keep their homes, the Lakewood incident is not a sign of political health. Property rights, like other fundamental constitutional rights, are not supposed to be subject to political decision in the first place. As Supreme Court Justice Robert Jackson once explained, “the very purpose of a Bill of Rights was to withdraw certain subjects from the vicissitudes of political controversy, to place. them beyond the reach of majorities and officials and to establish them as legal principles to be applied by the courts. One’s rights to … property … may not be submitted to vote; they depend on the outcome of no elections.” Citizens should not be forced to organize and protest to keep their homes or businesses free from government seizure. If their ownership depends on the political power they can muster on election day, then they do not have property rights at all, but merely permissions, which can be revoked at any time.
Ohio
The prize for the worst response to Kelo goes to Ohio. One of the worst abusers of eminent domain in the nation, the state seized more than 90 properties for private development in just five years. Nor were bureaucrats deterred by the debacle in Lakewood. In a case now before the state supreme court, city officials condemned non-blighted property to transfer it to a private developer who had lobbied the city council repeatedly to transfer the land to him. The city’s excuse was that the seizure was necessary to prevent”deterioration” in an otherwise average middle-class neighborhood.
In response to public outcry over Kelo, Ohio lawmakers enacted S.B. 167, a bill which puts a one-year moratorium on certain condemnations. During this hiatus, a 25-member task force will write a report on the use of eminent domain. The legislature is not required to act on the report in any way, and the task force has been carefully designed to include several reliable advocates of redevelopment. Once the year is over, the government can return to its former practice without delay. What’s more, the moratorium does not apply at all to property that has already been declared blighted. As the Cincinnati Enquirer noted, the moratorium “is expected to have minimal impact on development projects in Greater Cincinnati.”
Perhaps it is no surprise that a state which regularly uses eminent domain for redevelopment projects would do nothing more than declare a one-year “time-out” – and not even apply that delay to most major condemnation projects in the state.
What Other States Should Avoid
If nothing else, the five laws I’ve reviewed are important examples of what property rights advocates must avoid if they are to accomplish meaningful eminent domain reform. In particular, reformers must avoid the temptation to allow government to continue engaging in economic development of “blighted” property.
Economic blight can be solved in far less intrusive ways – through tax cuts, better enforcement of property rights, and project plans that respect the rights of owners. Seattle
recently completed a successful redevelopment project that involved no seizures of property, and there is no reason why this project could not serve as a model for other cities. If government does use eminent domain to combat “blight,” however, then property owners must insist on a clear and narrow definition of that term, to ensure that cities are not allowed to continue condemning property virtually at will.
So far, only three states have enacted genuine protection for private property in response to Kelo: South Dakota, Indi- ana, and Georgia.
South Dakota
On Feb. 27, 2006, Gov. Mike Rounds signed H.B. 1080, which declares, in its entirety,
Section 1. No county, municipality, or housing and redevelopment commission, as provided for in chapter 11-7, may acquire private property by use of eminent domain:
(1) For transfer to any private person, non-governmental entity, or other public-private business entity; or
(2) Primarily for enhancement of tax revenue.
Section 2. No county, the municipality, or housing and redevelopment commission, as provided for in chapter 11- 7, may transfer any fee interest in property acquired by the use or threat of eminent domain within seven years of acquisition to any private person, nongovernmental en- tit)’, or public-private business entity without first offering to sell such fee interest back to the person who originally owned the property, or such person’s heirs or assigns, at current fair market value, whether the property has been improved or has remained unimproved during the interval, or at the original transfer value, whichever is less.
Unlike its predecessors, this law contains no exceptions allowing the condemnation of “blighted” propert~ or other similar loopholes. The law reflects South Dakota’s tradition of respecting property rights; the state has no record of abusing eminent domain.
Indiana
Indiana has also enacted a powerful new law which restricts the use of eminent domain for redevelopment projects. H.B. 1010, signed on March 24, defines the term “public use” as “possession, occupation, and enjoyment of a parcel of real property by the general public or a public agency for the purpose of providing the general public with fundamental services, including the construction, maintenance, and reconstruction of highways, bridges, airports, ports,” and other infrastructure. It also prohibits the use of eminent domain for “the public benefit of economic development, including an increase in a tax base, tax revenues, employment, or general economic health,” and it carefully defines “blight” in a way that only allows the government to condemn property that is abandoned, vermin-infested, a fire-hazard, or in some similar way a danger to the community. It also guarantees attorneys fees for property owners who challenge condemnations, re-
Perhaps it is no surprise that a state which regularly uses eminent domain for redevelopment projects would do nothing more than declare a one-year “time-out.”
quiring the government to pay 125% of the value of seized property. The fact that Indiana has, in recent years, shown an increasing willingness to abuse its eminent domain powers makes H.B. 1010 the most significant advance for property rights since the Kelo decision.
Georgia
Georgia’s H.B. 1313, signed into law on April 4, also significantly limits the term “blight,” allowing government to seize property only when it is “conducive to ill health, transmission of disease, infant mortality, or crime in the immediate proximity,” and specifically barring officials from declaring property blighted “because of esthetic conditions.” Although the new law still allows government too much leeway in condemning blighted property, the new protections ensure that Georgians will face far less danger from such condemnations than formerly.
Pennsylvania
An even more welcome change from the charlatanism of Alabama-style “reforms” is Pennsylvania’s H.B. 2054 and S.B. 881. The Pennsylvania House and Senate bills – virtually identical measures that are now being worked into a single bill for the governor’s signature – declare that property may not be taken for economic development at all. They allow condemnations for purposes of eradicating blight, but they define “blight” as actual dangers to public health and safety: for instance, “a structure which is a fire hazard or is otherwise dangerous to the safety of persons or property,” or a vacant lot in a residential neighborhood which “by reason of neglect or lack of maintenance, has become a place for accumulation of trash and debris or a haven for rodents or other vermin.” In addition, the bills place a ten-year limit on the lifespan of any declaration of blight. This is a welcome improvement, given that current law allows cities to condemn property at any time after it has declared an area blighted, even when market forces have improved the neighborhood in the interim.
Michigan
Finally, the Michigan legislature has agreed to put before the voters an amendment to the state constitution that would prohibit “the taking of private property for transfer to a private entity for the purpose of economic development or enhancement of tax revenues.” More: the amendment would require the state to pay 1250/0 of fair market value whenever it seizes a private residence. The proposal – called Senate Joint Resolution E – is the first proposed state constitutional amendment to reach the ballot box, making Michigan the leader of eminent domain reform in the nation. After all, it was Michigan’s Supreme Court that prohibited redevelopment condemnations only Months before the Kelo decision was announced. If one’s ownership of private property is forever subject to the government’s determination that another private party would put one’s land to better use,” the court explained, Uthen the ownership of real property is perpetually threatened by the expansion plans of any large discount retailer, ‘megastore,’ or the like.”
But it remains to be seen whether the Pennsylvania or Michigan bills will become law. On March 8, New Mexico Governor Bill Richardson vetoed H.B. 746, which had passed both houses of the state legislature by unanimous votes. The bill declared simply that uThe state or a local public body shall not condemn private property if the taking is to promote private or commercial development and title to the property is transferred to another private entity within five years following condemnation of the property.”
Richardson insisted, despite his veto, that he Utake[s] a backseat to no one when it comes to protecting private property rights,” and he promised to appoint a committee to examine the issue. But he complained that the bill would Ustop public projects that encourage environmental conservation, mass transportation and smart urban development, simply because private entities playa role in the project.” Nevertheless, the bill would not have restricted the state from condemning dangerous property. It would not have affected traditional public projects such as highway construction in any way. And nothing about environmental conservation requires the government to transfer title to property from one private owner to another.
Richardson’s claims that conservation and transportation projects would have been obstructed by the bill were disingenuous. His reference to U smart urban development” reveals his real concerns. Contrary to his claims, his veto was simply an endorsement of Kelo-style takings.
One reason for the slow pace of reform so far has been that most state legislatures went out of session shortly after the Kelo decision was announced, and only returned with the
Texas legislators, at the last minute, amend- ed the law specifically to allow the Dallas Cowboys to continue seizing land to construct a football stadium.
new year. As lawmakers reconvene, there is hope that more meaningful reform, on the Indiana or Pennsylvania models, will soon follow. But if private property rights are to receive serious protection from the government, citizens will need to watch carefully that their representatives do not follow the lead of Alabama, Texas; Wisconsin, Delaware, and Ohio. Otherwise they will find that both their property rights and their faith in representative democracy are delusions.