The Neglected Political Economy of Eminent Domain

Michigan Law Review Volume 105 Issue 1 2006 The Neglected Political Economy of Eminent Domain Nicole Stelle Garnett Notre Dame Law School Follow this and additional works at: https://repository.law.umich.edu/mlr Part of the Constitutional Law Commons, Law and Economics Commons, Legal Writing and Research Commons, and the Property Law and Real Estate Commons Recommended Citation Nicole S. Garnett, The Neglected Political Economy of Eminent Domain, 105 MICH. L. REV. 101 (2006). Available at: https://repository.law.umich.edu/mlr/vol105/iss1/2 This Article is brought to you for free and open access by the Michigan Law Review at University of Michigan Law School Scholarship Repository. It has been accepted for inclusion in Michigan Law Review by an authorized editor of University of Michigan Law School Scholarship Repository. For more information, please contact [email protected]. THE NEGLECTED POLITICAL ECONOMY OF EMINENT DOMAIN Nicole Stelle Garnett* This Article challenges a foundational assumption about eminent domain-namely, that owners are systematically undercompensatedbecause they receive only fair market value for their property. In fact, scholars may have overstated the undercompensation problem because they have fo- cused on the compensation required by the Constitution, rather than on the actual mechanics of the eminent domain process. The Article examines three ways that "Takers" (i.e., nonjudicial actors in the eminent domain process) minimize undercompensation. First, Takers may avoid taking high subjective value properties. (By way of illustration,Professor Garnett dis- cusses evidence that Chicago's freeways were rerouted in the 1950s to avoid urban Catholic churches.) Second, in addition to paying compensation for the condemned property, Takers frequently must pay additional compensation to property owners in the form of "relocation assistance." Third, Takers and property owners may voluntarily settle on above-market compensation during precondemnationnegotiations. (As an example, Pro- fessor Garnett includes an empirical case study of property acquired, under the threat of eminent domain, for a manufacturingfacility in Indi- ana.) The Article concludes by reflecting upon current efforts to reform eminent domain legislatively. Prominent legal scholars recently have pro- posed compensation-based reforms as an alternative to constraints on the use of eminent domain. This Article rejects that suggestion, arguing that there are two problems, unique to takings raising "public use" questions, that more money cannot solve: first, high compensation levels may under- mine political resistance to questionable projects; second, private takings may generate noninstrumental harms that will persist even as compensation increases. * Lilly Endowment Associate Professor of Law, Notre Dame Law School. I am indebted to Vicki Been, David Dana, Bob Ellickson, John Fee, Lee Anne Fennell, Rick Garnett, Michael Heller, Jim Krier, Tom Lee, John McGreevy, Tom Merrill, John Nagle, Eduardo Penalver, Peter Schuck, Christopher Serkin, and Julian Velasco for comments and suggestions. I also benefited from comments received during faculty workshops at the BYU, Notre Dame, Northwestern, and UCLA law schools, at the AALS Annual Meeting (Joint Session of the Property and Local Government Sec- tions), and at the Richard E. Nelson Symposium on Local Government, University of Florida Levin College of Law. I could not have completed the historical portions without the help of Notre Dame Research Librarian Patti Ogden. Craig MacNab of AM General, LLC and Patrick McMahon of Project Future provided invaluable insight on the H2 project. Baird Allis, Derek Muller, and Krista Steinmetz provided excellent student research assistance. Mistakes are my own. Michigan Law Review [Vol. 105:101 TABLE OF CONTENTS INTRODU CTION ...................................................................................... 102 I. UNJUST COMPENSATION? ...................... .. .. .. .. .. .. .. .. 106 A . Economic Losses ............................................................... 106 B . Subjective Losses ............................................................... 107 C . Dignitary Harm s ............................................................... 109 II. AVOIDING SUBJECTIVE LOSSES: CHICAGO'S EXPRESSWAY CHURCHES ....................................... 110 A . Political Rallying Points.................................................... 111 B. The Few and the Many ...................................................... 115 C. The Limits of Avoidance .................................................... 119 III. LEGAL ENTITLEMENTS TO ABOVE-MARKET COMPENSATION ............................................ 121 A. FederalRelocation Assistance........................................... 121 B. State Relocation Assistance ............................................... 123 C. Relocation-AssistanceStudies ........................................... 124 IV. BARGAINING IN THE SHADOW OF THE LAW ............................ 126 A. PrecondemnationBargaining ............................................ 127 B. Building the H2 Plant:A Bargaining Case Study ............. 130 V. REFORMING EMINENT DOMAIN: IS MORE MONEY THE A NSW ER? ........................... .. .. .. .. .. .. .. .. .. .. 136 A. The UncertainRelationship between Compensationand Deterrence.......................................... 138 1. Higher Compensation as Deterrent............................ 138 2. Higher Compensation May Impede PoliticalResistance ..................................................... 142 B. Private Takings May Generate Unique D ignitaryH arm s ............................................................... 143 1. Why Private Takings Are Different.............................. 144 2. Beyond Information Costs........................................... 146 CONCLUSION: THE POST-REFORM POLITICAL ECONOMY OF EMINENT D OM AIN ............................................................... 149 INTRODUCTION At least thirty-five Catholic churches line Chicago's Dan Ryan, Kennedy, and Stevenson Expressways.' Driving through the city, it is easy to forget that these churches once served as the spiritual and social hearts of neighborhoods now buried under fourteen lanes of concrete. When the expressways were 1. This number is based upon my evaluation of a map prepared for the Sesquicentennial of the Archdiocese Chicago, which is on file with Notre Dame Law Library. This map does not include parishes closed prior to 1993, including several that are adjacent to the expressway. See Archdiocese of Chicago Parish Map, http://www.bigstickinc.comlmap-parish.asp (last visited May 11, 2006). Interstate 90/94 is called the Dan Ryan Expressway southeast of central Chicago and the Kennedy Expressway to the northwest of the city. The urban portion of Interstate 55 is known as the Steven- son Expressway. October 20061 The Neglected PoliticalEconomy of Eminent Domain 103 built in the mid-1950s, over two million Catholics lived in the Archdiocese of Chicago, more than half of them in densely populated urban neighborhoods like the ones dissected by these freeways.2 Yet, while expressway construction displaced thousands of parishioners, only five Catholic churches were destroyed. Planners assiduously avoided the Archdiocese's four hundred other churches. And, when they did not, they were made to wish that they had: in several cases, the outcry over the news that parishes were threatened by highway construction led planners to reroute the expressways. 3 The history of Chicago's expressway churches yields insights valuable to current debates over the use of eminent domain sparked by the recent Kelo v. City of New London opinion.4 In Kelo, a divided United States Su- preme Court ruled that the public use limitation of the Fifth Amendment's Takings Clause rarely prevents the government from taking property by eminent domain and transferring it to a private beneficiary. The holding in Kelo was not unexpected: in Berman v. Parker' and again in Hawaii Hous- ing Authority v. Midkiff,6 the Court had made clear that federal judicial review of eminent domain should be extremely deferential. Nonetheless, the opinion set off a firestorm of popular outrage, prompting federal and state efforts to impose legislatively the restrictions on eminent domain that the Supreme Court rejected in Kelo.' This Article takes up the recent suggestions by prominent scholars that more money is the "answer" to the public use problem. In an important amicus brief in the Kelo case, for example, Professor Thomas Merrill argued that "[a]djusting compensation awards to provide more complete indemnifi- cation would be a far more effective reform of the existing system of eminent domain than increasing federal judicial review of public use determinations ' s This suggestion builds upon the Supreme Court's assertion that the Fifth Amendment's "just compensation" guarantee requires only that a property owner receive the fair market value of her property-i.e., "'what a willing buyer would pay in cash to a willing seller' at the time of the taking."9 Several justices pressed the attorneys during oral argument in Kelo about whether 2. ALAN EHRENHALT, THE LOST CITY: DISCOVERING THE FORGOTTEN VIRTUES OF COM- MUNITY IN THE CHICAGO OF THE 1950s, at 119 (1995). 3. STEVEN M. AVELLA, THIS CONFIDENT CHURCH: CATHOLIC LEADERSHIP AND LIFE IN CHICAGO, 1940-1965, at 216-17 (1992). 4. 125 S. Ct. 2655 (2005). 5. 348 U.S. 26 (1954). 6. 467 U.S. 229 (1984). 7. E.g.,

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