Economic Development, Eminent Domain and the Property Rights Movement Copyright © 2005 Thomson/West. Originally appeared in the Spring 2005 issue of Real Estate Finance Journal. For more information on that publication, please visit http://west.thomson.com. Reprinted with permission.
Leonard A. Zax and Rebecca L. Malcolm
As the battle against using eminent domain for economic development reaches the Supreme Court, litigants on both sides have raised serious legal and policy questions. As the authors explain, the Supreme Court is now faced with how to balance individual property rights with the need of cities to encourage public/private redevelopment projects.
‘‘Public/private partnerships’’ have become the watch- cation, the situation in New York at one time might words for urban revitalization projects in American have been described: Rockefeller Center could have cities. The public sector has used its unique resources condemned Saks Fifth Avenue so long as Robert Mo- and powers—including condemnation for land as- ses said it was okay. sembly—to leverage private sector capital and devel- Recently, however, several state appellate and lower opment expertise for projects that have reshaped the courts have rejected attempts by municipalities to use skylines of cities and changed the landscape of condemnation for economic development, applying a neighborhoods. From the Pennsylvania Avenue rede- more exacting level of scrutiny to such transfers. Last velopment in the Nation's capital to downtown San October when the U.S. Supreme Court convened for Diego, eminent domain has been a critical tool in eco- another term, the Court surprised a lot of real estate nomic redevelopment projects. executives and government ocials by taking a case that raised this issue squarely. In Kelo v. City of New Like other ambitious, well-intentioned eorts of London, Docket No. 04-108, the United States Su- government, the results of these public/private ventures preme Court now is considering whether, or under have included many highly successful projects and what circumstances, a municipal authority can con- some that have been economic and social failures. demn private property for transfer to another private For more than a half century, courts have avoided owner for economic development. The oral arguments the largely political question of trying to distinguish in the Supreme Court on February 22, 2005 received between good and bad projects, instead upholding widespread national press coverage the next day. broad local government condemnation powers in sup- The Kelo plaintis assert that condemnation for port of economic development and deferring to the private economic development projects does not con- government ocials' determination of what furthers stitute a ‘‘public use’’ under the Constitution or, sec- the public interest. At the risk of dramatic oversimpli- ondarily, that the Court should signicantly limit Leonard A. Zax is a partner, and Rebecca L. Malcolm is an associate, in government discretion in this context. The City of New the Washington, D.C. oce of Latham & Watkins LLP. London and the New London Development Corpora-
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tion (NLDC) argue that condemnations for economic momentum for city revitalization. Although the NLDC development should be subject to the Supreme Court's would own the land at issue, the plan calls for long longstanding deference to legislative public use deter- term ground-leasing of various parcels to private par- minations and, in the alternative, that the condemna- ties for development. The plan is projected to create in tion in Kelo would still pass constitutional muster excess of one thousand jobs, in addition to increasing under a more rigorous level of scrutiny. Thirty-eight tax and other revenues for the city. amicus briefs have been led by a diverse group of Designated a ‘‘distressed municipality’’ by Con- organizations and individuals interested in the resolu- necticut's Oce of Planning and Management, New tion of the issues presented in Kelo, with 26 briefs sup- London is one of the state's poorest cities. However, porting the property owners and 12 on the side of the government ocials did not complete a formal process City. to designate the project area as blighted but there is no The outcome of Kelo could redene the way in question that the city has experienced three decades of which redevelopment projects are structured, with economic and population decline and, with 56 percent important practical consequences for developers, lend- of city real property exempt from real estate taxes, few ers, and others involved in urban revitalization. Even options exist to reverse this downward trend. The before the Supreme Court announces its decision, departure of one of the region's principal employers in developers and lenders involved in current and future 1996 left New London with an unemployment rate that redevelopment projects can take steps to reduce the is close to double that of the rest of the state. In the potential risks posed by recent litigation. Fort Trumbull neighborhood where the Kelo Plaintis reside, tax revenue is low, most construction predates A Growing Property Rights Movement 1950, and more than 88 percent of buildings were in ‘‘worse than average’’ condition in December 1998. The Fifth Amendment of the Constitution clearly al- Before the Connecticut Supreme Court, the Kelo lows the government to take private property for pub- homeowners argued that the condemnation of private lic use, ‘‘ … [N]or shall private property be taken for property for economic development is inconsistent public use, without just compensation.’’ U.S. Const. with prior public use cases. The homeowners also as- Amend. V. Based on the language and history of the serted that any public benets owing from the con- Amendment, many have argued that its principal focus demnations were merely speculative, despite extensive is to provide compensation to those whose land is economic impact reports supporting the redevelopment taken, rather than to act as a substantial restraint on that forecasted the creation of between 1000 and 1500 government determination of what is in the public new jobs for the community. The Connecticut high interest. court disagreed with the plaintis, holding that eco- In recent years, some courts have more narrowly nomic development qualies as a valid public use dened the meaning of term ‘‘public use’’ in condem- justifying the exercise of eminent domain power under nation disputes for economic property. In Kelo, the the nearly identical provisions of the Connecticut and Connecticut Supreme Court narrowly held that eco- federal constitutions. The Court reasoned that any nomic development satises the Constitution's public private gain to developers was secondary to the public use requirement, if the primary reason for the exercise benet of signicant economic growth in the New of eminent domain is to benet the community at-large. London community. Since that ruling, property rights advocates have put the full force of the movement behind Susette Kelo An Emerging Public Use Puzzle and her plight to save her home, which has become a focal point for t-shirts and bumper stickers, in addition For several decades, most judicial decisions have up- to more traditional legal advocacy. held broad local government power to condemn sites for private redevelopment. On ve occasions in the past half-century, the Supreme Court has upheld the The Kelo Controversy transfer of private property to private redevelopers. In Kelo involves a large economic redevelopment plan in the seminal case, Berman v. Parker, 348 U.S. 26 the city of New London, Connecticut. The plan, pre- (1954), the Supreme Court upheld comprehensive pared by the NLDC, a private non-prot corporation, housing redevelopment legislation in the District of in conjunction with the city government, seeks to Columbia allowing the condemnation of slums and revitalize a ninety-acre area of this economically blighted areas for redevelopment in private hands. In distressed city, to complement a nearby Pzer research Berman v. Parker, the property owner contesting the facility. Under Connecticut law, a city may designate a condemnation was located in an area that had been non-prot corporation to act as its development agent designated as blighted even though his building, a for an economic development project. The plan in- department store, did not itself constitute blight. Ber- cludes a waterfront hotel and conference center, oce man established a standard of extreme judicial defer- space for high tech research and development, retail ence to legislative public use determinations. Once a space, and eighty new residences, all intended to build legislative public use determination has been made,
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@MAGNETO/VENUS/PAMPHLET02/ATTORNEY/REFJ/ZAXCPY SESS: 1 COMP: 04/14/05 PG. POS: 2 the Court reasoned, ‘‘the public interest has been The High Stakes in Kelo declared in terms well-nigh conclusive.’’ 348 U.S. at Property rights advocates argue that the words ‘‘public 32. use’’ in the Fifth Amendment require courts to place a The Supreme Court echoed its endorsement of meaningful limitation on term ‘‘public use,’’ and give broad state condemnation power thirty years later in less deference to legislative judgment in this arena. Hawaii Housing Authority v. Midki, 467 U.S. 229 The Institute for Justice, a District of Columbia-based (1984), conrming that condemned property trans- nonprot organization representing the Kelo plaintis, ferred to private beneciaries can still evince a public asserts that the ‘‘economic development condemna- purpose. The unanimous Midki Court ruled that the tion’’ at issue in the case exceeds the proper scope of public use requirement is coterminous with the scope local government condemnation power and violates of a sovereign's police powers. Id. at 240. The Court the constitutional rights of New London property also rearmed Berman's holding that the judicial role owners. in reviewing public use determinations is extremely Reversal of the Connecticut Supreme Court Kelo narrow; great deference must be shown to such legisla- decision has the potential to undo more than fty years tive judgments. Id. at 240-241. Importantly, in reach- of Supreme Court precedent endorsing broad local ing its conclusion, the Midki Court also opined that government condemnation power and judicial defer- ‘‘it is only the Taking's purpose, and not its mechan- ence to legislative public use determinations. This half ics, that must pass scrutiny under the Public Use century of precedent established that the focus of any Clause.’’ Id. at 244 (emphasis added). These two public use inquiry should be on whether the taking will Supreme Court cases established a standard of broad produce signicant public benets, rather than on the local government power to determine the scope of means by which those benets come to fruition. Broad ‘‘public use’’ for condemnation that has, until Kelo, condemnation power, and specically the govern- remained untouched by the Supreme Court for over ment's power to condemn property for transfer to an- half a century. other private owner for redevelopment, has been a crit- However, the Court's decision to hear Kelo follows ical tool in public-private partnerships for civic on the heels of several recent state and lower federal redevelopment. Without these powers, the assembly of court decisions applying a less deferential approach to land for development projects necessary to revitalize local government use of condemnation power for eco- distressed communities would, at a minimum, be nomic development. These cases apply a more strin- exceedingly dicult. gent level of scrutiny, even when citing Berman and Eminent domain allows the proponents of redevel- Midki, to legislative determinations of public use. See, opment projects to prevent lone ‘‘holdout’’ property e.g., Southwestern Ill. Dev. Auth. v. Nat'l City Envtl., owners from standing in the way of large projects L.L.C., 768 N.E.2d 1, 7-11 (Ill.) (rejecting economic- intended to benet entire communities. Through con- development argument for the use of eminent domain demnation proceedings, municipalities can force to expand parking at a privately-owned sports facility otherwise reluctant property owners to sell, and provide under similar state and federal constitutional provi- them with just compensation for their land. Threatened sions) cert. denied, 537 U.S. 880 (2002); Bailey v. My- condemnation also has greatly facilitated negotiated ers, 76 P.3d 898 (Ariz. Ct. App. 2003) (striking down, purchases for redevelopment projects. If the Supreme under the Arizona Constitution, a city use of eminent Court were to signicantly limit this power in Kelo,a domain to transfer private property for redevelopment single ‘‘holdout’’ could thwart a project that oers by private developers). great economic benets to the community as a whole. Most notably, the Michigan Supreme Court re- In fact, if the Supreme Court places far more weight versed its landmark Poletown decision, which autho- private property rights than it has in the past half- rized the municipal condemnation of an entire neigh- decade, Kelo could change the basic assumptions and borhood in Detroit to build a new General Motors structure of many redevelopment eorts throughout plant, last July. Poletown Neighborhood Council v. the country. City of Detroit, 304 N.W.2d 455 (Mich. 1981). In reversing Poletown, the Michigan Supreme Court ruled that generalized economic benets, such as alleviating What Can Be Done Now unemployment and revitalizing the economic base of a Even before the Supreme Court announces its deci- community, were insucient under the takings clause sion, developers and lenders undertaking civic redevel- of the Michigan Constitution to justify the transfer of opment projects should consider taking specic steps condemned property to a private entity. County of to reduce the potential exposure for both current and Wayne v. Hathcock, 684 N.W.2d 765, 787 (Mich. future projects. Redevelopment projects should be 2004). This seismic shift for the Michigan Supreme structured and documented in a way that maximizes Court was a key victory for the property rights move- the likelihood that they could meet stricter standards. ment and suggests the possibility of a shift in takings Here is what investors, developers and lenders can do jurisprudence and the meaning of ‘‘public use.’’ now:
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1. Blight or Economic Distress. Courts have been 7. Why Project Will Be Developed After more supportive of condemnation for economic Condemnation. Attorneys for the Kelo plaintis development where condemned areas are either point out that in a number of cities speculative eco- blighted or in severe economic distress. Developers nomic development projects never did move for- and lenders should review state statutes regarding ward after condemnation. It would be helpful to blight and economic distress carefully because in have such evidence as economic studies, developer many jurisdictions blight would include, for ex- commitment letters, nancing commitment letters ample, vacant land and underutilized land. and other evidence that can show that the hoped-for 2. Public Benets. For any condemnation for eco- redevelopment is reasonably expected to occur after nomic development, the primary purpose should be condemnation. to benet the public. Developers, bankers and government ocials should show that the public 8. Governmental Role in Redevelopment. One fac- benets accruing from a redevelopment project are tor cited by some courts taking a less deferential ap- direct, rather than merely incidental to private gains. proach to the use of eminent domain for redevelop- The public record should include economic impact ment is the lack of continued governmental reports, illustrating specic benets to the immedi- involvement after a transfer of property to private ate area being condemned, as well as broader ben- parties. Ground leases, where the government ets to the community as a whole. maintains ownership of the fee interest in the prop- 3. Condemnation as a Tool of Last Resort. Docu- erty and may share in redevelopment prots, provide ment prior attempts to negotiate purchases from one mechanism to increase the governmental role. property owners. It is important to be able to prove Other redevelopment eorts provide that a public that condemnation is necessary to achieve the agency retains some control over the project, and desired public benet, because of each individual that the developer must act according to a owner's unwillingness to accept fair market value legislatively-approved plan. A continuing govern- for the property. mental role in the project would provide additional 4. Statutory Procedures. Most state and local rede- evidence of the continuing public purposes served velopment statutes employ detailed procedures to by condemnation for economic development. ensure that owners of condemned property are 9. Exhaustion of Administrative Remedies. Some- treated fairly. These procedures sometimes include times blight and redevelopment determinations are oering the property owner the chance to partici- made years before condemnation proceedings pate in the project, as well as prohibitions against begin. In such instances, developers and govern- pre-determining the outcome of a redevelopment ment ocials should ensure that challengers have contract before a property owner accepts or declines followed the required procedures, including the such an oer. Developers should make eorts to exhaustion of administrative remedies, before chal- ensure that no such pre-determination occurs, even lenge in court. if the developer and the city think pre-determination has some desirable elements. 5. Developer Selection Process. Developers should Tough Questions be selected in a manner that protects the integrity of As the battle against using eminent domain for eco- the redevelopment process and inspires public nomic development reaches the Supreme Court, liti- condence. It is better to have transparency and a gants on both sides have raised serious legal and policy detailed public record of how the public interest is questions. Some urban economic development eorts served in the selection of a particular developer. have been successful, while others have been case stud- Open competition often is preferable, but in certain ies in what government should not do. cases it may be appropriate to make a developer There have been some terrible abuses of eminent selection based on an unsolicited proposal or on a domain in America. Urban renewal bulldozed historic sole-source basis. neighborhoods in some cities, uprooting families while 6. Public Involvement. Redevelopment projects all too often failing to realize ambitious project goals. should include broad public involvement not only However, those personal hardships and project failures to show citizens received notice and an opportunity often did not relate to whether the next use was by a to comment on these public endeavors but also to private redeveloper or for a public highway. There create a project that better serves the public interest. have been just as many tragic urban renewal stories Developers and government ocials should reach involving condemnation for highways, infrastructure out to the public to ensure that the interests of af- and government oce centers. fected property owners, as well as the general com- The nature of real estate development in American munity, are heard and considered. Supports from cities today will make it dicult for courts—in Kelo community organizations and leaders will also help and in other cases—to divide ‘‘public use’’ from ‘‘pub- bolster the public nature and benets of any redevel- lic benet’’ or ‘‘public purpose.’’ Public/private opment project. partnerships often blur the line between public and
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@MAGNETO/VENUS/PAMPHLET02/ATTORNEY/REFJ/ZAXCPY SESS: 1 COMP: 04/14/05 PG. POS: 4 private, raising questions that will make it dicult for There are several problems with requiring a nding judges to adopt a narrow denition of public use: of blight. The property owner in Berman had a depart- E If a developer builds on publicly-owned land, ment store that was not itself blighted but was located with the fee interest remaining in the government in a blighted neighborhood. Moreover, as Justice Gins- but subject to long-term ground leases that facili- berg noted in the rst question from the Court during tate nancing and private development, is this sit- the Kelo oral argument, New London is in ‘‘a depressed uation ‘‘public use’’ because the government economic condition’’ and ‘‘a depressed community.’’4 holds the fee? If a private developer ‘‘master In many states, the depressed economic condition of a leases’’ an entire building to the government, is community would appear to support a formal blight there a ‘‘public use’’ even though ownership of declaration. Limiting condemnation for economic the land and building remains vested in the pri- development to blighted areas could also make poor vate sector? and minority citizens more vulnerable to condemna- tion and push projects into poor neighborhoods rather How should judges deal with the fact that the E than locations that best further city planning and other private sector now develops and owns toll roads, public policy goals. Justice O'Connor asked whether arcades, plazas, stadiums and streets that previ- condemnation could be used to condemn a Motel 6 for ously were thought of as ‘‘purely’’ public? redevelopment as a Ritz-Carlton.5 E Should a judge permit condemnation of private Moreover, in a number of states, the denition of property to transfer land ownership to a city for a blight includes not only slum but also ‘‘under produc- municipal stadium but prohibit condemnation to transfer land for a privately-owned stadium that tive’’ and ‘‘vacant’’ land. And if condemnation is is open to the public on substantially the same permissible for blighted areas, why should condemna- terms as a municipally-owned stadium would be? tion not be permitted to avoid foreseeable blight in the near term future? If courts were to block condemnation that would E Attorneys for the property owners in Kelo suggested transfer land from one private owner to another that the Supreme Court add a test of whether the for a mixed-use development project, then would intended economic development uses are reasonably it be constitutionally permissible to use condem- expected to occur. Briefs for the property owners point nation to acquire private property for the roads out that many economic development projects do not and infrastructure serving only the new mixed- come to fruition and, before taking a citizen's house use development project located on private land? for private redevelopment, a court should look closely E If condemnation for private industrial develop- to determine whether there is a reasonable basis to ment would not be permitted under the Constitu- believe the redevelopment will occur. tion, could a city lawfully use tax revenues to buy Urban renewal eorts do not always have a happy the property for the same project without condem- 1 ending. In the 1960s, for example, the City of Paterson, nation? New Jersey condemned large portions of a predomi- E As Justice Scalia asked during the Kelo oral argu- nantly residential neighborhood for a heliport that ment, is it clear that ‘‘elevating the city from would have provided regularly scheduled helicopter depressed to prosperous is a better justication service from Paterson to all of the major airports in the than elevating a city from prosperous to more New York metropolitan area. The Paterson newspapers prosperous?’’2 How depressed must a city be in talked about the future of a city in which you could order for condemnation to be justied? board a helicopter and y swiftly to what is now E How dierent are condemnations for ‘‘blight re- Kennedy International Airport for a plane to almost moval’’ from those for ‘‘economic revival’’? As anywhere in the world. Unfortunately, the city had no Justice Kennedy observed during oral argument agreement with the New York helicopter company that for Kelo, ‘‘Blight is in the eye of the beholder.’’3 supposedly was going to provide the helicopter service. One of the arguments repeatedly made by the prop- In Paterson, residents were uprooted and displaced erty rights side of the Kelo case is that the concept of from their homes while the land remained vacant for ‘‘public benets’’ is much more susceptible to manipu- decades. Paterson today remains in serious economic lation than the actual words ‘‘public use’’ used in the decline. Constitution. Recognizing that it may be dicult to get Some of the most important economic development the Supreme Court to turn away from over half a projects of our time that have relied on condemnation century of law and overturn Berman v. Parker, the Kelo did not go forward on schedule. On the other hand, plaintis distinguished Berman as a case involving a sometimes the delays have resulted in projects that determination of blight. This line of argument would have provided far greater public benets than originally suggest that it is not unconstitutional to have condem- planned. nation to eliminate blight for the purpose of private The Pennsylvania Avenue development took de- economic redevelopment but, the Constitution does cades to go forward. Had this project proceeded on not permit condemnation for economic redevelopment time, two historic hotels—The Willard and the Hotel where there is no nding of blight in the area. Washington—would have been razed, a gigantic
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square—critically dubbed ‘‘Red Square’’—would verse Berman v. Parker and prohibit the use of have been built, and the rest of the Nation's Main eminent domain to take property unless the prop- Street would have been boxy brutalist oce buildings erty is transferred to a government entity or pub- not unlike the FBI Building. Instead, Pennsylvania Av- lic carrier.6 enue is lined with a mix of old and new oce build- E Second, the Court could rearm its long-standing ings, rental apartments, condominium units, shops and practice of strong judicial deference to legislative restaurants that today represents one of the most suc- public use determinations. In upholding New cessful urban economic redevelopment projects in London's public use determination, the Court America. could nd no dierence between the economic Similarly, New York's 42nd Street redevelopment development goals in Kelo and the blight removal beneted greatly from the fact that economic condi- and land redistribution goals in Berman and tions caused the original planned oce development Midki. Under this scenario, the current redevel- project to languish. Today, lively entertainment, retail opment process would continue largely and other commercial uses from a later plan have unchanged. revitalized this area in a way that large, austere oce E Third, the Court could overturn the Connecticut buildings would not have accomplished. In these in- Supreme Court's decision in Kelo and bar the use stances and many others, the challenging projects that of eminent domain to transfer property from one can do the most to help a city could not be implemented private owner to another as a tool for economic on the original timetable. development in the absence of either: (a) the nd- In many jurisdictions faced with a scarcity of local ing of severe blight evidenced in Berman;or(b) resources, cities have looked to the redeveloper to pay other public harms, like the land oligopoly in the costs of acquiring private property for economic Midki. This approach would allow the condem- development ‘‘up front.’’ Many jurisdictions permit nation of private property for transfer to another and encourage redeveloper funding of condemnation private owner only in such limited circumstances land acquisition costs. The practice eliminates what and would narrow the denition of ‘‘public use’’ some have viewed as an additional restraint on govern- accordingly. ment use of eminent domain—i.e., that eminent domain would be used to help a private developer only when E Fourth, the Court could articulate an approach absolutely necessary because the city itself would have somewhere between the previous two positions, to pay for the property. Having the redeveloper fund imposing some level of heightened scrutiny on the acquisition costs may provide additional evidence the review of condemnations for transfer of land that the project is reasonably expected to proceed, but from one private owner to another for such developer funding also may complicate the anal- redevelopment. Under this approach, which ysis of whether the project is primarily for the benet reects the analysis of some state courts and the of the private developer or primarily for public benet. dissenting justices of the Connecticut Supreme Court, the scope of ‘‘public use’’ would remain The Supreme Court justices will consider many of broad, but the burden on proponents of redevelop- these questions in Kelo. The court will seek to balance ment projects to prove purported public benets property rights with the need of cities to encourage would increase. The court could require proof public/private redevelopment projects to improve the that eminent domain is reasonably necessary, in economic conditions of cities and neighborhoods. In nature and extent, to justify the use of eminent Kelo and in other similar cases, the real estate industry domain for economic development. should watch closely to see how judges carve out an appropriate role for the courts, and while deferring, If the Court turns away from a long history of case when appropriate, to elected ocials and administra- law and holds that condemnation cannot be used to fur- tive agencies. ther private economic development with substantial public benets, then we will enter a new era of public/ private partnerships reshaped by the Court's decision. Possible Kelo Outcomes Even if the Court does not prohibit the use of condem- Prognostication is an inexact science, particularly nation for economic development, investors and lend- when it comes to predicting what the Supreme Court ers should understand the issues raised in this article of the United States will decide. Many people have because some state supreme courts will still have the been wrong in trying to call a case based on the oral opportunity to act as the Michigan Supreme Court did argument, and prediction is even more dicult here and prohibit condemnation for economic development because Chief Justice Rehnquist and Justice Stevens, based on state constitutional protections. who could not attend the argument, have indicated that they will participate in the decision. The Future The Court is likely to take one of four approaches: Eminent domain, the ability to take one's private home E First, and most drastically, the Court could re- or private business to further a public good, is one of
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@MAGNETO/VENUS/PAMPHLET02/ATTORNEY/REFJ/ZAXCPY SESS: 1 COMP: 04/14/05 PG. POS: 6 the most coercive powers of government in a free led suit, claiming that the Landmarks Commission society. If the property rights movement does not win had ‘‘taken’’ its property without just compensation in Kelo, what can be done to reduce the trauma of by signicantly diminishing the value of the site. The special hardship in eminent domain relocations? Most Supreme Court upheld both the New York Landmarks likely, the property rights movement would be more Preservation Law and its application to Grand Central. eective if it focused its talents, resources and energies In Penn Central, the Supreme Court recognized that on legislative bodies and state and local ocials. The government regulations can go too far and require just pain of condemnation is largely unrelated to who compensation, setting the stage for later land regula- builds what on that land that a relocated family once tion opinions that protect the rights of property owners called home. There are many potential legislative solu- from overreaching government regulation of private tions that could expand current relocation benets to property. Penn Central requires that a judge consider provide assistance beyond the Constitutional minimum (i) the character of the governmental regulation, (ii) its compensation for a family who suers additional economic impact, and (iii) its interference with the consequential damages and subjective injuries. Impor- owner's distinct investment-backed expectations. See tant legislative and administrative improvements could Penn Cent. Transp. Co. v. New York City, 438 U.S. become the primary means for dealing with eminent 104, 124 (1978). The determination of whether a domain abuse. regulation has ‘‘go[ne] ‘too far’’’ and eects a taking The history of government eorts to improve the is an ‘‘essentially ad hoc factual inquir[y],’’ Lucas v. economic condition of American cities has long cre- S.C. Coastal Council, 505 U.S. 1003, 1015 (1992), but ated tension between private and public interests. The the touchstone of the inquiry is whether the govern- simple words ‘‘public/private partnerships’’ result in ment has ‘‘forc[ed] some people alone to bear public complex transactions in which public and private re- burdens which, in all fairness and justice, should be sponsibilities are heavily negotiated and documented. borne by the public as a whole.’’ Armstrong v. United The complicated nancial structure of urban develop- States, 364 U.S. 40, 49 (1960). Whether individual ment projects makes it particularly dicult to adopt a laws and regulations trigger a regulatory taking under narrow denition of public use. these standards likely will be the continuing focus of In the public use debate, the interests of government takings litigation. often align with the interests of major developers, There is some irony in the fact that Kelo puts the bankers and investors. Both the real estate industry and property rights movement in a position that is adverse government often support judicial deference to govern- to most of the banker, developer, investor and other ment agency determinations that public/private devel- professionals who read the Real Estate Finance opment projects satisfy the public use requirement by Journal. In the future, the constitutional battleground providing the means to achieve public benets. in which the interests of the real estate industry and the Beyond the ‘‘public use’’ language, there are other private property movement align will be in the area of portions of the Just Compensation Clause in which the regulatory takings litigation against the government. real estate industry will nd common ground with the The federal courts will face questions about how far property rights movement. The property rights move- regulation must go before it constitutes a taking requir- ment has also challenged ‘‘regulatory takings,’’ the ing the payment of just compensation. The litigation fact that regulations so intrude on the rights of private under the U.S. Constitution will be over when govern- property owners that they require just compensation ment can avoid paying for far-reaching regulations, under the Constitution. In regulatory takings, the not whether government can take property after paying interests of major developers, investors and lenders on just compensation. the one hand, and the property rights movement on the other, often align against overreaching government regulation. This concept of regulatory takings is likely 1 Justice Souter explored this possibility in questions to to be the focal point of future takings litigation under plaintis' counsel during the oral argument for Kelo. See the U.S. Constitution. Transcript of Kelo oral argument, at pp. 8-9 (Feb. 22, 2005). The government routinely regulates property and 2 Transcript of Kelo oral argument, at p. 4 (Feb. 22, 2005). generally may do so without paying compensation. 3 Transcript of Kelo oral argument, at p. 13 (Feb. 22, However, ‘‘if regulation goes too far it will be recog- 2005). nized as a taking.’’ Pa. Coal Co. v. Mahon, 260 U.S. 4 Transcript of Kelo oral argument, at pp. 1-2 (Feb. 22, 393, 415 (1922). The leading modern precedent is Penn 2005). Central Transp. Co. v. New York City, 438 U.S. 104, 5 Transcript of Kelo oral argument, at p. 30 (Feb. 22, 124 (1978), in which a property owner sought to build 2005). a skyscraper above an historic railroad terminal. The 6 See, e.g., University of Chicago Law School Professor New York Landmarks Preservation Commission had Richard Epstein's Brief of the Cato Institute as Amicus Cu- rejected the proposal because of its impact on the riae in Support of the Petitioners, Kelo v. New London, historic Grand Central Terminal. The property owner (2005) (No. 04-108).
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