The Kelo Backlash So Far: Positive Liberty, 12/05

By Timothy Sandefur, Pacific Legal Foundation

In the months after the Kelo decision was announced there was much talk of a "backlash" in the states. Since state law can provide greater protections to people than federal law does, people hoped to change state law to protect themselves from eminent domain abuse. But, as I argue in a forthcoming paper, the backlash so far has accomplished little.

Most state legislatures have been out of session since shortly after Kelo was announced, which means that so far only four states have enacted laws in response to Kelo: Alabama, Texas, Ohio, and Delaware. Unfortunately, these four provide little protection for property owners, despite their big promises. In other states, the situation has been even more disappointing. California's legislature considered three measures to limit eminent domain abuse, and turned all three down, even though two of these would have been band-aid solutions that would have done very little.

When the other state legislatures come back into session in January, can citizens of other states hope for greater protection? Only time will tell, but I'm pessimistic. There are two major obstacles to serious eminent domain reform: the public choice effect, and the sad state of American political philosophy. Still, there may be reason for optimism: the Pennsylvania state house has passed a bill which, if enacted, would create excellent protections for the state's property owners, and the U.S. House of Representatives has also passed an excellent bill limiting the availability of federal funding for projects in which eminent domain is used for economic development.

Let's take a very brief look at the four bills that have passed, as well as the three proposals that failed in California, and then the Pennsylvania and federal laws that have each made it half way through their respective legislatures.

On August 3, Alabama became the first state to respond to Kelo by enacting S.B. 68A. This law adds two sections to the Alabama State Code. After reaffirming the power of eminent domain, the operative paragraph of the first section declares that

Notwithstanding any other provision of law, a municipality or county may not condemn property for the purposes of private retail, office, commercial, industrial, or residential development; or primarily for enhancement of tax revenue; or for transfer to a person, nongovernmental entity, public-private partnership, corporation, or other business entity. Provided, however, the provisions of this subsection shall not apply to the use of eminent domain by any municipality, housing authority, or other public entity based upon a finding of blight in an area covered by any redevelopment plan or urban renewal plan pursuant to Chapters 2 and 3 of Title 24, but just compensation, in all cases, shall continue to be first made to the owner.

The italics highlight the problem. Although SB 68A forbids the use of eminent domain for private uses or solely to enhance tax revenue, it continues to permit the use of eminent domain for redevelopment pursuant to two chapters of Title 24 of the Alabama Code, sections devoted to urban renewal and redevelopment projects.

Chapter 2 of Title 24 targets neighborhoods which "impair economic values and tax revenues, cause an increase in and spread of disease and crime and constitute a menace to the health, safety, morals and welfare of the residents of the state." It allows "the clearance, replanning and preparation for rebuilding of these areas and the prevention or the reduction of blight." The "clearance" — i.e., condemnation — of such areas is declared to be a "public use[] and purpose[] for which public money may be spent and private property acquired." The chapter specifically authorizes a government "housing authority…or any incorporated city or town" to use eminent domain

(1)…[t]o acquire blighted areas, which are hereby defined as areas, including slum areas, with buildings or improvements which, by reason of dilapidation, obsolescence, overcrowding, faulty arrangement or design, lack of ventilation, light and sanitary facilities, excessive land coverage, deleterious land use or obsolete layout, or any combination of these or other factors, are detrimental to the safety, health, morals or welfare of the community;

(2) To acquire other real property for the purpose of removing, preventing or reducing blight, blighting factors or the causes of blight….[and]

(4) To sell or lease land so acquired for uses in accordance with the redevelopment plan….

Chapter 3 gives similar authority to officials to "plan and undertake urban renewal projects," including the authority to "eliminat[e] (and…prevent[]…the development or spread) of slums or blighted, deteriorated or deteriorating areas." Among the things that cities may do to "prevent the development of deteriorating areas" are the following:

Acquisition of real property [through eminent domain] and demolition, removal or rehabilitation of buildings and improvements thereon, where necessary to eliminate unhealthful, unsanitary or unsafe conditions, lessen density, reduce traffic hazards, eliminate obsolete or other uses detrimental to the public welfare, or to otherwise remove or prevent the spread of blight or deterioration or to provide land for needed public facilities.

Before exercising the power to "acquire," or "demolish," or "remove" buildings which are "obsolete" and "detrimental to the public welfare," city officials must create a redevelopment or urban renewal plan. Such a plan must "provide[] an outline for the development or redevelopment of [the targeted] area and [must be] sufficiently complete:

(1) To indicate its relationship to definite local objectives as to appropriate land uses and improved traffic, public transportation, public utilities, recreational and community facilities and other public improvements;

(2) To indicate proposed land uses and building requirements in the area; and

(3) To indicate the method for the temporary relocation of persons living in such areas and also the method for providing, unless already available, decent, safe and sanitary dwellings substantially equal in number to the number of substandard dwellings to be cleared from said area, at rents within the financial reach of the income groups displaced from such substandard dwellings.

This requirement is a procedural barrier that is quite easy for city officials to cross. The requirements impose no limit on the uses to which private property may be put as part of a redevelopment plan, so a plan may include redistribution of property to private developers. Even non-blighted, commercially viable property may be condemned in Alabama if it is part of a neighborhood that is declared blighted: "the mere fact that some of the buildings in the area are standard and substantial does not require that they be omitted from the operation of the project." And since Alabama's redevelopment laws allow not only for the eradication of slums, but also for the "prevention" of "deteriorating" areas, redevelopment authorities are free to condemn property solely for the purposes of improving the local economy.

So, under Title 24, city officials may declare property "deteriorating" whenever it fails to perform economically up to an standard that they would prefer to see. Officials may draft a redevelopment plan, adopt it by a city council vote, and use it to condemn homes and businesses for economic development.

None of this is changed by SB 68A. It specifically preserves the operation of Chapters 2 and 3 of Title 24 without alteration. The new law simply reiterates that the state may condemn property only after it has followed the relatively simple procedure of declaring the area blighted and preparing a redevelopment plan. These are not serious obstacles to determined developers and bureaucrats.

On September 1, Texas Governor Rick Perry signed SB 7B, a long bill which in some ways repeats the errors of the Alabama legislation, and in other ways, does improve protections for Texas property owners. SB 7B amended Texas' eminent domain laws to prohibit "the use of eminent domain" if the taking:

(1) confers a private benefit on a particular private party through the use of the property;

(2) is for a public use that is merely a pretext to confer a private benefit on a particular private party; or

(3) is for economic development purposes, unless the economic development is a secondary purpose resulting from municipal community development or municipal urban renewal activities to eliminate an existing affirmative harm on society from slum or blighted areas under:

(A) Chapter 373 or 374, Local Government Code, other than an activity described by Section 373.002(b)(5), Local Government Code; or

(B) Section 311.005(a)(1)(I), Tax Code.

As with the Alabama law, the exceptions provided for in subsection 3 undo many of the promised protections of subsections 1 and 2. Under the Fifth Amendment's Public Use Clause, even after Kelo, it is already unconstitutional for states to employ their eminent domain power to "confer a private benefit on a particular private party" or to do so under a pretext. The problem is that "public benefit" is defined so broadly, and that legislatures are given so much judicial deference, that almost any private benefit can be rationalized as being public benefits, and hence evade the supposed limits on eminent domain.

Although the Texas Constitution declares that property may only be taken for a public use, the state's courts, like federal courts, have interpreted the "public use" requirement to allow the transfer of condemned property to private parties so long as doing so benefits the public in some way. In fact, chapters 373 and 374 of Texas' Local Government Code — which cover "community development" and "urban renewal," respectively — are unusually explicit in the degree to which they allow for private entities to benefit from the use of eminent domain. Under Texas law, eminent domain may be used to condemn private property that fails to perform economically, and to transfer, lease, or sell that property to private developers who use the property for their own profit.

There are, however, two significant improvements in the Texas reform measure. First, although it allows condemnations under chapters 373 and 374 to continue unaltered, it does limit the use of eminent domain as provided for by other Texas statutes. The state's laws allow cities to condemn property to construct sports stadiums, or to provide "librar[ies]," "auditorium[s]," "market house[s]," "recreational facilit[ies]," or "for any other municipal purpose the governing body considers advisable." Texas even explicitly allows local governments receiving federal economic development grants to "lease or convey [condemned] land…without the solicitation of bids, to a private, for-profit entity or a nonprofit entity…if the land or interest will be used by the private, for-profit entity…in carrying out the purpose of the…grant…if the [city] adopts a resolution stating the conditions and circumstances for the lease or conveyance and the public purpose that will be achieved." All of these provisions are now restricted. This was made clear by the fact that, at the last minute, some craven legislators amended the bill specifically to allow the Dallas Cowboys to continue with their plan to condemn private property for the construction of a football stadium!

The second improvement in SB 7B is its limitation on the deference accorded to condemnation decisions. It declares that "the determination by the governmental or private entity" that a proposed condemnation "does not involve" a forbidden private taking "does not create a presumption" which courts are obliged to follow. In simpler terms, a legislative declaration that a taking is for a public use shall not receive judicial deference. This is probably the most significant part of the legislation, given the threat that such deference poses to property owners. In the past, Texas courts have declared that "where the legislature has declared a certain act to be for a public use, such declaration must be given weight by the courts," which makes it difficult for property owners to prevail. By eliminating this presumption, SB 7B provides for genuine judicial review of the legitimacy of takings.

S.B. 217, signed by Governor Ruth Ann Minner on July 21, is little more than a paragraph long. It declares that:

Notwithstanding any other provision of law to the contrary, the acquisition of real property through the exercise of eminent domain by any agency shall be undertaken, and the property used, only for the purposes of a recognized public use as described at least 6 months in advance of the institution of condemnation proceedings: (i) in a certified planning document, (ii) at a public hearing held specifically to address the acquisition, or (iii) in a published report of the acquiring agency.

The bill also amends a section of the law to pay for the attorneys' fees of parties whose property is taken through eminent domain.

While the six month cooling-off period may have its advantages, it has three major flaws. First, the provision does not affect the definition of a "public use" in any way. Second, while allowing the public an opportunity to protest the condemnation of property is certainly laudable, the security of private property rights cannot be entrusted to the political process. Third, a six-month cooling off period may prove unworkable without exceptions, which may doom this provision to being amended and eventually repealed.

The definition of "public use" is, of course, at the heart of the entire controversy over eminent domain. The Delaware reform measure simply refers to "a recognized public use." But the state's courts have held that "agencies of the State may condemn private property [and transfer it to private parties] provided that the primary purpose of the condemnation is to benefit the public." Without defining "public use" with greater precision, the Delaware reform measure will do little.

The six-month requirement is likely to give residents of affected neighborhoods time to rally in opposition to an exercise of eminent domain, and such political opposition has proven effective in restraining abuses of eminent domain. But political opposition is simply not enough to prevent the abuse of this power. As Justice Robert Jackson famously noted, "[t]he very purpose of a Bill of Rights was to withdraw certain subjects from the vicissitudes of political controversy, to place them beyond the reach of majorities and officials and to establish them as legal principles to be applied by the courts. One's right to…property…may not be submitted to vote; they depend on the outcome of no elections." While it is gratifying to see citizens protesting the abuse of their rights and challenging such abuses at the ballot box, it is not a sign of constitutional health.

Finally, the prevalence of so-called "quick take" measures reveals that in many circumstances, a strict waiting period is simply not considered possible, and it is easy to conceive of at least some emergency instances in which it would be legitimate for government to condemn property more quickly. In such a circumstance, it is far more likely that exceptions will be added to the sixth-month requirement than that the state will abide by it in the face of extraordinary pressure. As Alexander Hamilton once observed, "[w]ise politicians will be cautious about fettering the government with restrictions that cannot be observed, because they know that every breach of the fundamental laws, though dictated by necessity, impairs that sacred reverence which ought to be maintained in the breast of rulers towards the constitution of a country, and forms a precedent for other breaches where the same plea of necessity does not exist at all, or is less urgent and palpable."

Ohio is one of the most abusive states when it comes to eminent domain. The state's courts are extremely deferential to legislative declarations that an area is "blighted," and they will only overturn such declarations when they are "arbitrary," "unconscionable," or if there is "no sound reasoning process that would support that decision." Thus Ohio courts not only interpret "public use" liberally, but even give "a liberal interpretation" to the term "blight."

Ohio's reaction to Kelo, SB 167, imposes a moratorium, effective until December 31, 2006, on all condemnations of "private property that is not within a blighted area, as determined by the [condemning agency], when the primary purpose for the taking is economic development that will ultimately result in ownership of that property being vested in another private person."

During the moratorium period, a Legislative Task Force to Study Eminent Domain and Its Use and Application, will convene to study the issue and write a legislative report. This task force will be made up of 25 members: three members of the state House, three members of the State Senate, one "member who shall be a statewide advocate on the issues raised in Kelo," one attorney representing Ohio property owners, two attorneys with special expertise in eminent domain law, one non-attorney representative of Ohio property owners, one person representing small businesses, one person delegated by the Director of Development, another delegated by the Director of Transportation, and one member each representing the following: the "home building industry," the real estate industry, the planning industry, licensed realtors, labor unions, historic preservation organizations, municipal corporations, counties, townships, and a representative of the Ohio Prosecuting Attorneys Association or the Ohio Association of Probate Judges.

Three observations come immediately to mind: First, this moratorium does not apply at all to condemnations of property that are already "within a blighted area." Condemnations in these properties may proceed unhindered. Second, it seems to apply only to condemnations of property for "economic development," as distinguished from condemnations that are supposed to eradicate blight. But these are not distinguishable concepts. Because properties are often declared blighted due to their failure to perform up to a desirable economic level, economic development projects routinely start with a declaration that the current use of property constitutes a blight. Finally, and most importantly, the Ohio Legislature is not obligated to act on the Task Force's report in any way. Considering the state's record it seems highly unlikely that serious reform will follow the Task Force's report.

Despite much public outrage over the Kelo decision, California has yet to enact any provision to limit the abuse of eminent domain. Three attempts to limit the power redevelopment condemnations were quickly buried by the state Legislature.

The first proposal, SCA 12, would have amended the state Constitution by adding a single sentence: "Public use does not include the taking of owner-occupied residential property for private use." This provision has two flaws. First, it is already the law, and always has been, both in California and nationally, that private property may not be taken for "private use." Kelo does not declare otherwise. It simply held that a taking is not a "private use" if it is rationally related to a legitimate public interest. Since condemnation and private transfer of property in blighted areas is considered a public use, a ban on takings for "private use" would be legally meaningless. Second, SCA 12 would have applied only to "owner-occupied residential property," and not to businesses, apartments, churches, or other private property throughout the state. This is startling, given that most victims of private takings in California appear to be small businesses. The condemnation of the Gran Havana Cigar Factory in San Diego is a prime example.

The second California proposal, SB 1026, was also limited to "owner-occupied residential property." Like the Ohio reform measure, this proposal would have imposed a two-year moratorium on condemnations of such property, while a committee wrote a report on eminent domain abuse. Like SCA 12, this proposal would have done nothing to protect businesses, churches, apartment buildings, or other properties. Unlike SCA 12, this proposal actually defined "private use" — as "any use other than as a public facility or a public works that is owned and operated by the public entity" — which would have given the proposal at least some legal significance. But since it only imposed a moratorium, without requiring that the state legislature do anything once the investigation was completed, the proposal would probably have accomplished little.

The third proposal, SCA 15, would have imposed meaningful limitations on the abuse of eminent domain. It would have amended the state Constitution to prohibit the use of eminent domain except where the taken property was "owned and occupied by the condemnor, or another governmental agency utilizing the property for the stated public use…or…leased only to entities…regulated by the Public Utilities Commission." Although it allowed for the incidental use of government property for "gift shops, newsstands, shoeshine stands" and other occasional uses, as well as the use of eminent domain to provide for public utilities, SCA 15 would have forbidden government from taking people's homes, businesses, farms, churches, or other property, and giving the land to private commercial entities for their own use and profit. SCA 15 would therefore have restored the "actual public use" interpretation of the public use clause, whereby eminent domain could only have been used to provide government-owned, and government-operated buildings, including roads, schools, or parks.

All three of these proposals were defeated in the state legislature. As well-known Sacramento journalist Dan Walters noted, defenders of eminent domain hoped to "cool off the anti-eminent domain fervor," by drafting "legislation that would place a two-year moratorium on the seizure of private homes (but not commercial property), and authorize a study of the practice, thus giving their members a chance, or so it seemed, to side with the anti-eminent domain sentiment without doing any real damage to redevelopment agencies." But even such watered-down proposals failed. At the time of this writing, several other bills are still pending in the legislature, but few of them promise serious protection for property owners.

On November 1, the Pennsylvania House of Representatives passed HB 2054. This bill prohibits the use of eminent domain "to take private property in order to use it for private commercial enterprise." The only exceptions are cases in which the property owner consents, where the property is transferred to "a common carrier" or "incidental" commercial activities such as gift shops or newsstands in government buildings, where the condemnation is necessary to eliminate public nuisances or dangerous buildings, or where the condemnation is necessary to eliminate "blight" as narrowly defined by the bill itself.

The definition of blight in HB 2054 eliminates the possibility of economic development condemnations in the style of Kelo: it allows government to declare property blighted only if it is actually a danger to the public (e.g., "a structure which is a fire hazard or is otherwise dangerous to the safety of persons or property"; or "any vacant or unimproved lot…in a predominantly built-up neighborhood which, by reason of neglect or lack of maintenance, has become a place for accumulation of trash and debris or a haven for rodents or other vermin"). In addition, it places a 10-year limit on the lifespan of any declaration of blight.

The Pennsylvania bill is a well-crafted, carefully thought-out measure which provides serious protection for property owners, while allowing government to eliminate actual cases of dangerous or misused property. It contains none of the loopholes of the Alabama or Texas measures. The bill is now awaiting approval in the Pennsylvania State Senate.

The United States
Although the federal government does not usually engage in redevelopment condemnations itself, federal funding is behind a great many such cases, including the notorious Poletown case in Michigan. HR 4128, the "Private Property Rights Protection Act of 2005," received an overwhelming vote of 376 to 38 on November 3. The bill prohibits states or cities from exercising eminent domain "over property to be used for economic development…if that State or political subdivision receives Federal economic development funds." It defines condemnation for economic development as "taking private property, without the consent of the owner, and conveying or leasing such property from one private person or entity to another private person or entity for commercial enterprise carried on for profit, or to increase tax revenue, tax base, employment, or general economic health." It allows condemnations for common carriers, roads, military installations, the elimination of nuisances, and other traditional uses of eminent domain. States or cities violating the prohibition are punished by being made ineligible for federal funding for two years.

Considering the enormous influence that federal funding has on local governments, there is reason to believe that if HR 4128 is passed by the Senate and signed by the President, it will greatly limit the number of Kelo-style redevelopment takings.

Positive Liberty: http://positiveliberty.com

Timothy Sandefur is an attorney with the Pacific Legal Foundation: