Property Takings To Lift Economy Fall In Michigan

By Dean Starkman

In a decision with wide implications for property rights nationally, the Michigan Supreme Court ruled that the state and local governments may not take property from one private owner and give it to another purely for the purpose of economic development.

The 7-0 decision handed down Friday night overturns a landmark 1981 case in which the same court allowed the city of Detroit to take 1,000 homes and 600 businesses to make way for a General Motors Corp. plant. The earlier case, called Poletown after the neighborhood that was condemned, was widely cited by state courts around the country in cases that vastly expanded local governments' power to take private property for public purposes.

"We overrule Poletown in order to vindicate our constitution, protect the people's property rights and preserve the legitimacy of the judicial branch as the expositor, not creator, of fundamental law," the court wrote.

Dana Berliner, a lawyer for Institute for Justice, a Washington-based property-rights law firm that filed a brief in the case, said she expects the decision to have broad impact, since other state courts have long relied on Poletown to uphold condemnations. Now they can no longer do so and may revisit the question altogether, as the Michigan high court did, she said.

Wayne County drew support from real-estate trade groups and the National Congress for Community Economic Development, a Washington based association representing 3,600 local community-development groups, which warned in a friend-of-the-court brief that a reversal of Poletown would "impose new constitutional restraints on takings that could destroy the public's ability to take property where necessary to achieve community-development goals."

Mark Zausmer, a lawyer for Wayne County, said the ruling will restrict cities' powers to spur their local economies, making some projects "impossible because an individual owner can simply decide that he doesn't want to sell."

The federal and most state constitutions, including Michigan's, require that government takings of private property serve a "public use." Citing Poletown, state courts have allowed local governments to stretch the definition from more traditional projects, such as roads, bridges and slum clearance, to include the taking of nonblighted property on the principle that another private owner could better create jobs and increase tax revenue. As a result, local governments began taking property for private developments such as office parks, big-box stores, racetracks and the like.

Cities and redevelopment agencies argue that economic development is a valid "public use." Property owners argue that takings for strictly private businesses are unconstitutional and lead to abuses.

The recent case stemmed from efforts by Michigan's Wayne County to spur economic development through the construction of a business and technology park near the Detroit Metropolitan Wayne County Airport. After assembling all but 40 acres of a 1,300-acre site, the county in 2001 sued to take the remaining parcels owned by Edward Hathcock, a local property owner, and others, and transfer the property to private developers.

On Friday, the court resoundingly sided with property owners. In its 85-page ruling, the court said it rejected the principle that "a private entity's pursuit of profit was a `public use' for constitutional takings purposes simply because one entity's profit maximization contributed to the health of the general economy."

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