Lawmakers consider proposals to limit eminent domain and TIF: Kansas City (MO) Star, 4/12/06

By Kelly Wiese and Chris Blank, Associated Press

Legislators in the [Missouri] House and Senate took initials steps Wednesday toward limiting the use of eminent domain and tax breaks in certain redevelopment projects.

The Senate gave first-round approval to legislation [SB832] that tweaks how tax breaks for redevelopment projects can be used. The House later voted 150-7 to give initial approval to a bill [HB1944] designed to limit the use of eminent domain.

The general issue of how the government intercedes on behalf of developers gained attention nationally after a U.S. Supreme Court decision last summer allowing the use of eminent domain to transfer property from one private owner to another for economic development purposes.

Gov. Matt Blunt and legislative leaders made the enactment of new eminent domain restrictions a top priority for the 2006 legislative session. With that has come a re-examination of tax increment financing [TIF] districts, which often rely on the same "blighted" designations used in eminent domain to declare an area eligible for developer tax breaks.

TIF districts allow a portion of the future taxes generated by a development to pay for the project's costs instead of going to schools, cities and other government entities.

In the House, members overwhelmingly defeated an amendment that would have barred the use of eminent domain for projects "primarily" designed for economic development. Lawmakers instead opted for the lower standard of barring eminent domain for projects "solely" for economic development.

Rep. Mike Daus, D-St. Louis, said the lower standard welcomes the return of past abuses of eminent domain, because developers or their attorneys "will always be able to come up with an excuse" to justify how a project is not solely for economic development.

But others, Democrats and Republicans, said barring the use of eminent domain primarily for economic development purposes would stifle economic development and kill jobs.

"The reality is that in the real world it's simply an unworkable definition," said Rep. Bryan Pratt, R-Blue Springs.

The eminent domain bill, sponsored by Rep. Steve Hobbs, R-Mexico, would give a bonus to landowners whose property is taken - on top of any other compensation - based upon how long they owned their land. It also would require that property owners facing eminent domain proceedings be given written notice of their rights. But it would not require that property taken through eminent domain be for a public use or declared to be "blighted."

The House considered but rejected by a 134-21 vote a new definition for blight.

Even so, "the development community is going to have difficulties with this bill, because they will not willy nilly be able to secure some stretch of the definition of blight," said Rep. Tim Flook, R-Liberty.

Although lawmakers from both parties backed the bill, even some supporters said it didn't do enough. Rep. Rick Johnson, D-High Ridge, said "too often in recent years, eminent domain has been eminent demise for our families, homes and history and heritage."

Lobbyists for organizations on opposite sides of the debate - such as utilities and rural landowners - expressed disappointment with the bill, either for going too far or not far enough.

The Senate legislation generally requires approval by a special commission for TIF districts to proceed. If a local government wants to press on despite the commission's opposition, it would need a public vote or a two-thirds vote of the local government body.

The bill prohibits using tax increment financing on greenfields, or vacant areas outside city limits, in the St. Louis region. It also bars using it on vacant land for solely residential developments. It allows projects to have a residential component, but in those, two-thirds of the local government must sign off on the projects. Otherwise, the taxes generated from the residential piece of the project go to schools and other local entities as they normally would, rather than to a fund to pay off development costs.

That provision was a compromise worked out to appease rural interests. Previously under the bill, the prohibition referred to predominantly residential developments, and local school district interests on the special commission had to agree to the projects.

The bill by Sen. John Griesheimer, R-Washington, does not alter the definition of "blight," one of the criteria local governments use to seize property in redevelopment projects, because the senator said it was too controversial.

Some lawmakers wanted to scale blight back to what they said was its original intent, basically limiting its use to improving areas of urban decay.

Sen. Chuck Gross, R-St. Charles, proposed that to be found blighted, a property would need to be in an area of high unemployment and low income, compared to the surrounding area, and have a lower property value.

"If we want to take TIF back to what it was originally designed for, then we'd pass this in a heartbeat," Gross said.

Others, however, said Missouri can't be shortsighted in removing that option when it's competing with surrounding states for business.

"It's being driven by a competitive nature and it's a national problem," said Sen. Matt Bartle, R-Lee's Summit. "If we take a unilateral step back I fear that we've closed our eyes to the market reality we're immersed in."

Gross withdrew the amendment without it coming to a vote.

Kansas City Star: http://www.kansascity.com