1/04/2005

Ruling could affect projects here — St Louis (MI) Post-Dispatch, 1/2/05

By William C. Lhotka

If the U.S. Supreme Court were to reverse the 50-year-old decision on the government's taking of private property for urban renewal, it could spell the death knell for major economic development projects in the St. Louis area and throughout Missouri and Illinois.

Local experts say that such projects as the hospital development in the Central West End, the St. Louis Galleria, Brentwood Promenade and even the redevelopment of the West County Center owe their genesis to that high court ruling in 1954 allowing government to seize property for economic benefits.

"Clearly, much of the major developments that have occurred in the St. Louis metropolitan area have benefited from tax-increment financing or some other form of public subsidies," said Gerard Carmody, a Clayton lawyer often involved in property disputes.

And one of the most recent additions to the shopping scene, Maplewood Commons, almost mirrors the case in Connecticut that the Supreme Court will take up, Carmody said.

Maplewood Commons includes a Wal-Mart and Sam's Club on Hanley Road just south of Highway 40.

Local lawyer Jerome Wallach said the pendulum had swung so far away from the constitutional rights of property owners that legislators can set any rules they want regarding property condemnation and the blighting of property, and lower courts can do nothing about it.

Some pundits have described the use of condemnation powers and tax-increment financing in recent years as a reverse Robin Hood rule - take from the poor and give to the rich. Wallach agrees: "At the very least, it is taking from the middle class and giving to the rich."

"At the end of the day, the taxpayer pays for everything, and the developer owns it," Wallach said. "I'm not sure the framers of the Constitution ever intended for that to happen."

The Institute for Justice, a Washington-based, libertarian public interest law firm, doesn't think so either. It is spearheading the Connecticut case before the high court. Joining the institute in seeking a drastic revision of government policy are such diverse groups as the NAACP and the AARP.

The Connecticut case
In the land dispute in Connecticut, the Supreme Court is being asked this simple question: Can the government seize people's property for economic development projects?

Susette Kelo is one of 10 landowners in the Fort Turnbull neighborhood of New London who refused to sell property to a company that plans a major development along 90 acres on the Thames River, adjacent to Pfizer Inc.'s new global research facility.

The development plan includes a hotel and conference center, a marina, 80 houses, space for a Coast Guard museum, a high-tech research building, parking for an adjacent state park and more than 140,000 square feet of office and retail space.

The planners said the development would bring more than 1,000 jobs to what the state has declared a distressed city because of high unemployment in recent years.

New London officials signed a 99-year lease with a private developer to market and develop the plan. The 10 landowners refused to sell. They own 15 of the 115 parcels within the proposed development. Their property is being condemned.

During a seven-day nonjury trial, the owners said they loved their homes, didn't want to sell and argued that economic development was not a public use under state and federal constitutions.

A trial judge sided with the developers. So did the Connecticut Supreme Court, in a 4-3 decision on March 9.

The Connecticut majority said: "We conclude that economic development projects ... that have the public economic benefits of creating new jobs, increasing taxes and other revenues, and contributing to urban revitalization, satisfy the public use clauses of the state and federal constitutions."

Like the Connecticut case, Maplewood Commons is expected to generate taxes for a revenue-starved Maplewood, create more jobs and revitalize the area. Those who had opposed the project argued that the city was destroying a neighborhood of 130 houses for the economic betterment of a developer.

Basis for ruling
The Connecticut judges relied heavily in their decision on the case of Berman v. Parker. In that case in 1954, the U.S. Supreme Court said it was OK for a developer in Washington to use government condemnation power to rebuild a neighborhood.

Urban renewal, the judges said, was a public purpose and legislatures could decide what was a blighted area for condemnation or renewal purposes.

The Fifth Amendment to the U.S. Constitution limits the government's power of eminent domain or taking of land, saying: "Nor shall private property be taken for public use, without just compensation."

Until the Berman ruling, courts generally restricted condemnation cases to such obvious public uses as highways and bridges. Exceptions included a series of railroad cases in the 19th century in which lands seized to build railroads were approved on the theory that a railroad like a highway provided public transportation.

The courts also allowed legislators to decide if private enterprise or public authorities should develop projects that promoted the public interest

In recent years, the pendulum has begun to swing in the other direction from Berman. Courts in at least nine states have issued rulings saying in effect that economic development is by itself not public use for eminent domain purposes.

"A lot of municipalities have got caught up in the idea that they can't build a project without giving a benefit to someone, somewhere," Clayton lawyer John King said. "And a lot of it is unnecessary."

Madison County case
One such case took place in Madison County. In a decision frequently cited by proponents of property rights, the Illinois Supreme Court invalidated a taking of private land to create additional parking for Gateway International Raceway.

On April 4, 2002, the judges in a 5-2 decision allowed National City Environmental, a metal recycling company, to keep the 148.5 acres that an economic development agency had taken from National City by condemnation.

The Southwestern Illinois Development Agency merely took property from one business and gave it to another, the Illinois Supreme Court held.

"Using the government for purely private purposes to allow Gateway to avoid the open real estate market and expand its facilities in a more cost-efficient manner, and thus maximizing corporate profits, is a misuse of the power entrusted by the public," the court said.

The future
No expert is predicting how the Supreme Court will rule in the Connecticut case - either that government's action for economic development is a usurpation of private property rights or it is a proper use of public power for the greater good.

Carmody said a ruling favoring the property owners could have an immediate effect on some developments here. He noted that Rock Hill was attempting to develop the corner of Rock Hill and Manchester roads, and government subsidies to developers are a possibility. A ruling saying economic development alone is insufficient for government intervention could adversely affect that project.

Almost every major development project in the St. Louis area recently has relied on some sort of government subsidy, Carmody said. He included on his list the expansion of the new West County Center in Des Peres and the developments in the Central West End by the Washington University Medical Center Redevelopment Corp.


St Louis Post-Dispatch: www.post-dispatch.com