Ohio community tests eminent domain: USA Today, 2/20/06

By Dennis Cauchon

Joe Horney used a small inheritance from his grandparents to make a down payment on a $63,900 house [in Norwood OH] in 1991.

He lived in the house for a while, fixed it up and rented it out for 10 years. He went on to manage construction of luxury homes and own other rental properties.

Then came Sept. 28, 2002. In a penthouse office overlooking Horney's rental property, a developer told local residents that he wanted to buy all the homes on the block, tear them down and build condos, retail shops and parking garages.

A PowerPoint presentation made clear what would happen to those who refused to sell: eminent domain. The city of Norwood would use its governmental power to transfer ownership of the property from uncooperative owners to the developer.

Horney, 36, got angry and left the meeting. "From that moment on, my mind was made up," he says. "They can't take my property just because they want to. That's not right."

Now, his case is before the Ohio Supreme Court in an important test of how far governments can go in using the power of eminent domain. It's the first such case to reach a state's high court since the U.S. Supreme Court ruled in a 5-4 decision in June that the Constitution did not prohibit New London, Conn., from confiscating waterfront homes to promote economic development.

State and local governments traditionally have confiscated private land to build roads, schools and other public facilities. In return for what the Constitution calls "just compensation" to the property owners, governments in recent years have used eminent domain to turn over property to private developers to rebuild neighborhoods with shops, office buildings and new homes.

The neighborhoods are often economically depressed, but sometimes they are not. Cities have labeled farmland, waterfront homes and middle-class neighborhoods as "blighted" and subject to eminent domain.

Highway split town in two
Norwood is a town of 21,000 residents tucked in 3 square miles entirely surrounded by Cincinnati.

It has become a focus in the nationwide debate on eminent domain because the battle moved to state courts and legislatures following the Supreme Court ruling.

Mayor Tom Williams says the city would suffer if it didn't use its condemnation powers for the shopping and condo development.

"We're an old industrial town that has to reinvent itself to survive," says Williams, 66, a lifelong resident and former police chief.

Norwood lost a General Motors plant in 1987. It has been losing population and was fundamentally changed 35 years ago, when Interstate 75 was built through the middle of town. The neighborhood on one side of the highway started to deteriorate, becoming home to bars and auto repair shops, Williams says.

A developer built two successful upscale shopping centers — including stores such as Ann Taylor and Gap — and an office building in the struggling area in the 1990s. Now, he wants to expand onto neighboring blocks — and that's where Horney's property stands.

"We've never used eminent domain for this before," the mayor says. "We don't sit back and say, 'Hey, how can we get national publicity about what bad guys we are?' This is good for all of Norwood."

Three owners hold out
Sixty-five of 77 properties were sold to the developer before the city began using eminent domain. Only three of the dozen resistant property owners have refused to settle. "We followed the law," Williams says. "We've been upheld in the courts. We paid people more than their property would sell for on the open market."

A jury ruled that Horney's property — a three-story house built on one-tenth of an acre in 1925 — was worth $233,000. The money sits in a court bank account, not collecting interest, because Horney has refused to collect his compensation.

"This is a matter of principle. I wouldn't sell for $1 million," says Horney, who has spent $70,000 in legal fees and received free help provided by the Institute of Justice, a libertarian public-interest law firm that has led the fight against eminent domain.

A court injunction prevents the developer — who now holds the title to Horney's vacant property — from tearing down the house and another one nearby. The two-block area used to lie in a working-class neighborhood of single-family homes. Now it has been surrounded by a metal fence. The street is closed.

Other than the construction zone, the neighborhood doesn't appear blighted. A piano shop has opened in a newly renovated brick building. Two local lounges serve customers. There are occupied homes, a wine store, a hairdresser and other businesses.

"The developer wants my property for the same reason I do: It's in a good location," Horney says.

The Ohio Supreme Court is expected to rule this summer.

USA Today: www.usatoday.com