The U.S. Supreme Court has been asked to rule on whether local governments may use eminent domain for economic development when the property being taken is not blighted.
In a July 19 petition, the Washington, D.C.-based Institute for Justice asked the court to review a recent Connecticut state Supreme Court ruling that approved the taking of non-blighted homes for economic development. Officials in New London, Conn., want to take 15 homes and businesses owned by seven families and give the land to a private developer to create facilities to complement the nearby Pfizer (NYSE: PFE - news) research center.
If the Supreme Court agrees to hear the case it could resolve an issue that has divided the states as more localities, including San Diego, use eminent domain powers in the pursuit of increased tax revenues and jobs. At question is when does a city's appetite for revenue and jobs crash head on with the constitutional rights of a private property owner?
"If jobs and taxes can be a justification for taking someone's home or business, then no property in America is safe because anyone's home can create more jobs if it is replaced by a business and any small business can create greater taxes if it is replaced by a bigger one," said Dana Berliner, senior attorney with the Institute for Justice.
The Fifth Amendment allows the government to use eminent domain to take private property for "public use." Institute for Justice lawyers are asking the Supreme Court to clarify the definition of public use, which historically has included amenities such as public roads, schools and parks. In a 1954 decision in Berman v. Parker, the U.S. Supreme Court approved the use of eminent domain to remove blight and for urban renewal.
The issue is pending in court here as Ahmed Mesdaq, owner of the Gran Havana Cafe and Cigar Shop in the Gaslamp section of downtown, fights city efforts to condemn his newly renovated property. The San Diego City Council voted 8-1 on April 27 to condemn the shop in favor of a new $70 million, 334-room Marriott Renaissance Hotel.
A Nov. 19 trial date has been set for the condemnation case brought by the city, according to Mesdaq's attorney, Catherine Richardson, a partner with the firm Thorsnes Bartolotta & McGuire. Richardson is also representing Mesdaq in a lawsuit against the city because it refused to consider his own development plans prior to the condemnation, and a separate federal claim to prevent the city from condemning the property.
"Before, cities were using redevelopment to clean up blighted areas," Richardson said. "Look at the Gaslamp district and Mr. Mesdaq's property, it's not blighted in any sense of the word."
Hotel developer Ramin Samimi, principal owner of GRH LLC, has agreed to cover the city's condemnation costs. Samimi has acquired nine parcels of land along Fifth, Sixth and Island avenues and J Street since the 1990s. Mesdaq has operated the cafe at its current location at the corner of Fifth and J Street for nearly three years and about 10 years in another location.
Mesdaq has plans to add 10 loft condominiums to the property and claims he did not know of the hotel development plans when he purchased the land. The city approved an $800,000 renovation of the property shortly after it was purchased.
The cafe is not blighted, but it is in an area that has been defined as such under the city's redevelopment plan, which includes about 1,500 acres of land in the downtown area, according to David Allsbrook, manager of contracting and public works with the Centre City Development Corp. (CCDC).
State redevelopment guidelines allow local governments to condemn property and pay its owner market value. The city may then sell the parcel to a developer or use it for public use such as a park or road.
CCDC has recommended that the City Council use its eminent domain powers 14 times since the city began redeveloping downtown San Diego in 1992, according to a l ist of projects supplied to the council in March. In four separate projects, eminent domain was used to take homes or businesses in favor of a larger private development, while the rest were taken to relieve a blight or nuisance, or for public use. The biggest use of this power resulted in the development of Petco Park. According to the CCDC's accounting, 56 condemnation cases were filed for the ballpark, which opened this year. Forty-nine cases settled out of court, one is still pending and six cases proceeded to trial.
The document states that the redevelopment has generated significant taxes for the city and an "unpredicted physical transformation" of downtown.
"We've used the power of eminent domain, I think, judiciously since the plan was adopted," Allsbrook said July 27.
A national problem
But cities like San Diego all across the country are taking their power too far, and too often at the behest of developers peddling convention hotels or national retailers like Costco (Nasdaq: COST - news) and Target (NYSE: TGT - news), according to Scott Bullock, a senior attorney at the Institute for Justice. He called the relationship an "unholy alliance" that frequently results in the developer paying for blight studies and condemnations. In a 2003 report titled "Public Power, Private Gain," the institute found that between 1998 and 2002 there were more than 10,000 filed or threatened condemnations that involved private-to-private transfers of property in 41 states. California is among the most active states that have condemned property for the benefit of other private parties, with San Jose listed among the "worst" cities engaged in the practice, according to the report. Bullock said the trend began in 1981 with the landmark decision in Poletown Neighborhood Council v. Detroit by the Michigan state Supreme Court. The ruling allowed Detroit to condemn a Polish neighborhood so that General Motors (NYSE: GM - news) could develop a plant there. The city argued at the time that the plant would help turn around its deteriorating economic condition. The state court is reconsidering that decision and is expected to issue a ruling July 31. The Institute for Justice hopes the Supreme Court will be compelled to hear the case because of numerous conflicting appellate court decisions on the issue. Bullock said the court is likely to make its decision in October. Seven state supreme courts have upheld the right of cities to take non-blighted property for economic development, while eight states forbid private-to-private transfers where there is no blight. Another three are preparing to rule such condemnations unconstitutional, according to the institute's petition to the court. California is not included in any category.