High court eminent domain ruling spurs local worries: Business Journal of Phoenix (AZ), 7/3/05

The U.S. Supreme Court's ruling last week backing up government eminent domain powers in redevelopment cases has Arizona property rights advocates distressed such powers will run amuck to the determent of homeowners and small businesses.

The court decision in a Connecticut property case could help regional redevelopment efforts by taking the federal courts out of the picture for those appealing eminent domain moves.

Greater eminent domain powers could help government entities acquire parcels for Arizona State University's downtown campus, the Tempe Marketplace shopping center and revitalization efforts in south Scottsdale, downtown Glendale and along Grand Avenue in west Phoenix.

That worries property rights supporters in the political and legal realms.

"The decision has put wind in the sails of redevelopment-minded cities and developers who would get into bed with those cities," said Steve Hirsch, a condemnation expert and attorney in Bryan Cave's Phoenix office.

Hirsch said he could see the city of Tempe attempting to use wider eminent domain powers in efforts to acquire parcels for the development of the 1.3-million-square-foot Tempe Marketplace shopping center slated to be built by Vestar Development.

That center is expected to be home to a number of big-box stores (Target, Barnes & Noble, Best Buy) as well as a Harkins Theatres movie complex, but some property owners on the site do not want to sell to the city and developer.

The city of Phoenix also is expected to use eminent domain powers to purchase downtown parcels for an expansion of ASU's downtown campus.

Greater eminent domain and government- taking powers also could help in Phoenix Mayor Phil Gordon's program to redevelop a corridor between the state Capitol and ASU's Tempe campus.

Local property-rights experts point out that the state constitution limits eminent domain powers to public projects, not private ones. That provision played out in the city of Mesa's failed attempt to forcibly acquire a small brake shop and turn the site over for an Ace Hardware store.

"Before the central-planning crowd in Arizona gets too excited about a new tool in their toolbox, they should be reminded that Arizona's founders were far too smart to leave property rights to the federal government." said Steve Voeller, president the Arizona Free Enterprise Club, a conservative advocacy group. "The Arizona Constitution provides us added protection."

Hirsch said he also believes the Mesa case involving Bailey's Brake Shop will protect state property owners from government takings for private developments.

Jay Kaprosy, vice president of the Greater Phoenix Chamber of Commerce, said his business group received a number of calls from small businesses worried about government property powers.

Kaprosy expects to see tightening of eminent domain powers by the Republican-dominated state Legislature next year.

"The decision does not preclude states from placing further restrictions on eminent domain, and it appears likely that the Legislature will take action to clarify Arizona's policies," Kaprosy said.

That could include legislation or a ballot question.

Economic developers and redevelopment supporters welcomed the decision, hoping it will help clear up future eminent domain disputes that may hamstring key projects.

"I feel that the judicious use of condemnation for redevelopment purposes does make sense as an important tool, but past abuses have led to a backlash in Arizona against this," said Scottsdale Economic Vitality Manager David Roderique.

Roderique said he does not expect to see widespread use of eminent domain in Arizona, even after the Supreme Court decision. He also worries that cities lack a comprehensive set of tools to encourage in-fill development or new projects and that it remains easier to build in outlying suburbs with undeveloped land.

John Bowers, director of the Arizona Association for Economic Development, defended eminent domain, saying that without it, key projects won't get built.

"Without the leverage afforded by eminent domain, the last parcels needed for any large projects requiring land assembly will have infinite value, and those projects just won't happen," said Bowers.

The Connecticut case, Kelo v. New London, involved government efforts to forcibly acquire residential properties and turn the land over to pharmaceutical giant Pfizer for a research facility. Pfizer is paying a $1 a year lease on the parcel, and some of the displaced homeowners have lived in the impacted homes for decades.

The court decided by a 5-4 decision that the economic benefit of the Pfizer project is a worthy reason for eminent domain. Conservatives on the court, as well as Justice Sandra Day O'Connor, dissented, arguing the ruling erodes private property rights and the less-influential will get pushed aside in the name of redevelopment.

Raymond Hunter, a partner with the Phoenix law firm Galbut & Hunter, said the Connecticut ruling means that local eminent domain cases will be fought out here in Arizona.

"Local ordinances will continue to apply to local decisions. Local governments are free, if they wish, to make eminent domain more stringent than the 5th Amendment requires," said Hunter. "Thus, eminent domain disputes will continue to be fought and resolved at the state and local level."

Business Journal of Phoenix: http://phoenix.bizjournals.com/phoenix