Legal Plunder — The Cato Institute, 1/9/05

By Doug Bandow
Doug Bandow is a senior fellow at the Cato Institute and a former special assistant to President Ronald Reagan
For more than two decades the Michigan Supreme Court's decision in Poletown Neighborhood Council v. Detroit allowed governments in that state to take most any property they wanted to transfer to most anyone they wanted for most any reason they wanted. The U.S. Constitution's "public use" restriction was satisfied, the court ruled, even when Detroit seized an entire ethnic neighborhood to hand over to General Motors for a new factory.

Alas, this case was no anomaly. As Steven Greenhut, an editorial writer for the Orange County Register, observes in his timely new book, Abuse of Power: How the Government Misuses Eminent Domain (Seven Locks Press, 311 pages, $17.95), "governments increasingly use eminent domain to take property from one private owner in order to give it to another private owner." A small home owner or businessman then "must surrender his home or business because a wealthy developer — perhaps a big campaign contributor and mover and shaker in the community, or an out-of-town corporation promising an expanded tax base for the city — has bigger and better plans for it."

The abuses are legion. But sometimes property owners — "ordinary heroes," Greenhut calls them — fight back and beat city hall. Today they often do so with the aid of the Washington-based Institute for Justice, which has made protection of property rights one of its most important objectives.

So rank have been the outrages that in July the Michigan Supreme Court expressly overruled its Poletown decision "in order to vindicate our constitution, protect the people's property rights and preserve the legitimacy of the judicial branch as the expositor, not creator, of fundamental law." The new case, Wayne County vs. Hathcock, barred use of eminent domain to construct an industrial and office park. Michigan may no longer seize private property for "economic development," that is, to hand to new private owners who might pay more in taxes.

Although the case has no formal legal force outside of Michigan, it reflects a slow renaissance of judicial respect for property rights. The Poletown decision was oft-cited by other courts as they ruled that public officials could take land at their pleasure. Wayne County will help shift legal currents in the other direction.

Indeed, all legal eyes now fall on the U.S. Supreme Court, which is considering a case involving the city of New London, Connecticut. The Connecticut Supreme Court, relying upon the reasoning of Poletown, upheld the plan by the New London Development Corporation to take scores of modest riverfront homes and businesses to build luxury houses, expensive office space, and a hotel. "How come someone else can live here, and we can't," asks Susette Kelo, one of the dispossessed landowners.

It's a good question, and Steven Greenhut's answer is that someone else gets to live there when local officials decide to engage in social engineering for fun and profit. Not always, of course — sometimes eminent domain is used for traditional purposes as road-building.

But increasingly government deploys eminent domain in an attempt to create "high-valued," meaning taxable, development. That goal often supplements the desire to benefit local elites, usually with the connivance of the usual civic boosters, including the media. Greenhut dissects how journalists routinely fail to question even the most obvious eminent domain abuses.

The heart of Greenhut's book is a series of examples of government's routine misuse of power. There's abundant bad news. Public officials typically favor the wealthy and influential because they are wealthy and influential. But Greenhut also found good news: though property owners often lose, increasingly they are fighting back and winning.

For instance, the city fathers of Garden Grove, a working class community south of Los Angeles, decided to turn a tidy neighborhood of 400 into a theme park. Explains Greenhut: "There was no developer in mind, just an idea in the head of the city's top planners and bureaucrats. They were going to do what they had been doing on a smaller scale across the city: play land developer by condemning property, then trying to market the acquired tracts to some big out-of-town development company."

Officials attempted to deny the obvious, while treating the neighborhood as blighted. No normal person would have thought that but, writes Greenhut, "Blight, as advocates of redevelopment and eminent domain often point out, is a legal term rather than a descriptive term."

Happily, homeowners organized effectively and forced the city to back down. Garden Grove removed the neighborhood from its "redevelopment" area, while proceeding with similar efforts elsewhere.

Equally outrageous was the attempt by Cypress, another southern California city, to seize Cottonwood Christian Center in order to transfer the property to Costco. Churches don't deliver much in the way of property or sales taxes, a black mark in the view of city councilmen dedicated to the old principle of tax, spend, and elect.

In Cypress, writes Greenhut, "City officials did not dress up what they were doing in legalistic language. They were brazen in their goals. They ridiculed church members at public meetings. They bragged about their ability to use eminent domain for whatever reason they chose, and they made it clear that the government's desires should take precedence over the desires of `a narrow special interest,' which is how city officials repeatedly referred to the church."

The 4,500-member interdenominational congregation fought back, aided by the Becket Fund, which specializes in defending religious liberty. To its credit, the church rejected an offer by Cypress to trade for the property next door — which the city would seize from its owner through eminent domain. Eventually, Cypress, which lost a preliminary court ruling, agreed to a voluntary land swap which yielded the church more room for its new worship center.

Adverse publicity helped derail an abusive taking by Atlantic City. Vera Coking, a widow, was unfortunate enough to live across from Donald Trump's casino. He asked the local redevelopment agency to take her property for a limousine parking lot for high rollers. With the help of the Institute of Justice, Coking won: the term "blight" could be most accurately applied to Trump's enterprise, which has veered towards bankruptcy.

Eminent domain was long thought to be justified for a genuine "public use," that is, something used by the public. That's why the framers of the Constitution included a limited power to take property in the Fifth Amendment. Yet today the public use requirement has almost disappeared, as officials, with judicial approval, regularly take property from Peter to give to Paul. Only if officials forget to invoke an alleged public interest could it be stopped.

Although the courts have been more willing to enforce the provision requiring payment of compensation, they too often have allowed governments to take advantage of property owners. Moving expenses, business goodwill, advantageous locations, as well as real values often are lost or minimized when figuring compensation.

The result would still be rank injustice even if the property was taken for a real public purpose. Instead, more often than not eminent domain is now used as a form of corporate welfare, intended to enrich billionaire retailers like Costco and millionaire real estate moguls like Donald Trump. Other favored beneficiaries are owners of hotels, race tracks, and sports franchises. Its "legal plunder," Greenhut writes, just like the historical experience of mercantilism, which featured "a powerful central state that worked in concert with established, private interests."

Greenhut's worthy call to arms concludes with a practical primer on how individuals, families, churches, and communities can fight back. Most important is an aroused citizenry prepared to defend their rights. "Ordinary heroes" helped create this nation more than 200 years ago. They helped preserve America through many difficult trials in peace and war. They can help restore life to constitutional provisions that were meant to protect all of us from government misuse of its power of eminent domain.

---

The Cato Institute: www.cato.org