8/08/2005

Eminent Domain: Making Omelets or Protecting Nest Eggs

Wayne Lusvardi

Aesop’s Fable of the Hen and the Fox

A fox was out looking for a late supper. He came to a henhouse, and through the open door he could see a hen far up on the highest perch, safe out of his reach.

Here, thought the fox, was a case for diplomacy. Either that or go hungry! So he gave considerable thought to just how he should approach his intended supper.

“Hello, there, friend hen,” said he in an anxious voice. “I haven’t seen you about of late. Somebody told me that you have had a sick spell and I was sincerely worried over you. You look pale as a ghost. If you will just step down I’ll take your pulse and look at your tongue. I’m afraid you are in for quite a siege.”

“You never said a truer word, cousin fox,” replied the hen. “It will have to be a siege, for I am in such a state that if I were to climb down to where you are, I’m afraid it would be the death of me and my nest eggs.”

Moral: Beware of insincere friends!

An oft-heard justification for the use of eminent domain to acquire private property for redevelopment projects is that you “need to break some eggs to make an omelet”

As someone who worked 20 years acquiring property by eminent domain for public agencies, I find this to be a bad analogy. A better analogy might be that people’s nest eggs need protection lest predator foxes steal the eggs under the guise of helping the food chain.

Redevelopment is sold to the public as revitalizing older commercial districts, increasing the property tax base and sales taxes, and stimulating jobs and the local economy. The reality behind the facades of the new malls is quite different than the appearance however. Redevelopment actually has little to do with actual redevelopment and more to do with a struggle for the benefits and wealth-transfers it creates for others.

Communities see very little of the increased property tax from redevelopment projects as most of it is used to pay off bonds and pay bond underwriter lawyers. And more is set aside for paradoxical affordable housing in upscale areas, which is nothing more than corporate welfare.

Redevelopment merely replaces small businesses and non-union jobs with big businesses and union and government jobs.

License to steal
There is only so much expendable income that can be spent on retail products and services in a community. Where redevelopment is successful is when it can “steal” customers from other cities or attract new residents with higher incomes.

So in the San Gabriel Valley of Southern California where I live, Pasadena’s redeveloped historical “Old Town” venue snares customers from a huge catchment area in Southern California. The nearby City of Alhambra “steals” auto buyers with its redevelopment auto mall row; and develops its own new night spots to keep its residents from spending in Old Town Pasadena. The nearby City of Monrovia stops other cities from “robbing” its consumers by using redevelopment to create its own family restaurants. The Fair Oaks Avenue Renaissance Plaza in Pasadena attracts new higher income residents to the surrounding area comprised mostly of minorities, stimulating gentrification and displacing lower income residents.

Redevelopment is a game of value capture. The windfall property values created by redevelopment are pirated away from small owners and often handed to crony developers. Some is circulated back to politicians. The public is left with the not unrealistic impression that government exists for the well-connected, labor unions, lawyers, and bureaucrats rather than ordinary citizens.

Just compensation or just desserts?
Why do we as a society say that landowners must incur any decline in value from the downzoning of their property; but when it comes to the upzoning of property by redevelopment, we require the property’s value appreciation to be transferred to others who are politically connected? If we can’t stop the predatory game of redevelopment at least we could let small landowners have their “just desserts,” not merely “just compensation” for the lowest and worst use of their properties.

The proper role of government under the U.S. Constitution is to protect one’s liberties and nest-eggs of property. This somehow has been twisted into sanctioning the plundering of other’s private property for the personal and collective gain of others and throwing a bone back to those whose property is taken.

Part of the reason for this was U.S. Supreme Court Justice Oliver Wendell Holmes disastrous definition of “just compensation” as “what somebody lost, not what they can gain.” But this has been twisted into a license for others to steal what one could gain from a favorable regulatory change to the zoning of one’s property under the guise of the “public use” doctrine. Like the Aesop’s fable cited above, we should be wary of those who sincerely offer just compensation for our property nest eggs under the pretense that “some eggs have to be broken to make an omelet.”

That is why we should urge our state legislators to vote for Senator Tom McClintock’s proposed State Constitutional Amendment 15 (SCA-15), which would at least make cities have to pay owners the full appreciated value of their properties for redevelopment without the use of eminent domain.


Wayne Lusvardi: waynelbox-blogger@yahoo.com

Wayne Lusvardi worked for 20 years for the Metro Water District of So. Cal. and lives in Pasadena. The views expressed are his own.