States race to respond to Supreme Court takings case

In a surprising twist, the most controversial decision from the U.S. Supreme Court's recently ended term has turned out to be a takings case.

The decision, which allowed a local municipality to use its power of eminent domain to seize private property for the purpose of economic development, has precipitated an avalanche of proposed legislation in Congress and states around the country.

Alabama became the second state to enact legislation on this topic when the governor signed a bill on Aug. 3. Delaware was the first, taking action on June 30.

Fifteen other states have also introduced new legislation in the wake of Kelo v. City of New London (125 S.Ct. 2655): California, Connecticut, Florida, Illinois, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Tennessee and Texas.

In several of these states, Constitutional amendments have been introduced in addition to, or in lieu of, state legislation.

Legislators in another seven states are planning to introduce measures - Alaska, Louisiana, Oklahoma, Ohio, South Dakota, South Carolina and Wisconsin - while Connecticut and New York have seen calls for a moratorium on the use of eminent domain pending legislative action.

According to condemnation attorney Michael Berger, the extent of the response is stunning. Berger practices at Manatt, Phelps & Phillips in Los Angeles.

The normal news cycle for a Supreme Court decision is two or three days, noted Joel R. Burcat, chair of the Environmental Law Group at Saul Ewing in Harrisburg, Pa.

But it's been over a month now, and this is still a very, very hot issue - and one that is not going to go away anytime soon, he said.

John Kramer, Vice-President of Communications for the Institute for Justice, which represented the plaintiffs in front of the Supreme Court, agreed.

There is no other issue that has so resonated with the public, he said. The Court has clearly heard from the public that they do not like this opinion.

Kramer said that his organization has been contacted by legislators from 28 states seeking to place limits on the Kelo decision, in part because government entities acted quickly to enforce their powers of eminent domain after the Supreme Court announced its ruling.

Literally hours afterwards, cities began announcing seizure actions, he said, including local governments in Illinois, Maryland, Massachusetts and Texas.

According to Burcat, this occurred because a number of states and municipalities were waiting to take action until they saw how the Supreme Court ruled.

Kramer said the result has been the perfect storm. Developers are rushing to city councils and governments to push things through in window of opportunity, and the public is rushing to their state legislators for protection.

But Larry Morandi, Director of the Environment, Energy and Transportation program for the National Conference of State Legislatures in Denver, cautioned that because most state legislatures are currently in recess, many bills might remain pending for an indefinite period.

Right now, this is a hot topic, but will it still be hot in January, when the majority of state legislatures come back? he wondered.

Power Belongs To The States

Before the Kelo decision was announced, Connecticut, Massachusetts and North Dakota had state statutes allowing the use of eminent domain for economic development purposes, and nine states - Kansas, Louisiana, Maryland, Minnesota, Missouri, New Jersey, New York, North Dakota and Ohio - had case law upholding such seizures.

In six states - Arkansas, Kentucky, Maine, New Hampshire, South Carolina and Washington - courts had prohibited reliance on a purely economic intent to seize private property.

The case before the Supreme Court dealt with a plan by the city of New London to revitalize its economy, using eminent domain to take several properties as part of the development - although the properties themselves were not blighted.

The owners challenged the condemnation, arguing that it violated the Fifth Amendment because the taking wasn't for public use, but private development.

In a 5-4 opinion, the Supreme Court disagreed.

Promoting economic development is a traditional and long accepted function of government. There is, moreover, no principled way of distinguishing economic development from the other public purposes that we have recognized, the court held in a decision authored by Justice John Paul Stevens.

But the court made explicit that the power of eminent domain resides in the states.

We emphasize that nothing in our opinion precludes any state from placing further restrictions on its exercise of the takings power. Indeed, many states already impose 'public use' requirements that are stricter than the federal baseline. Some of these requirements have been established as a matter of state constitutional law, while others are expressed in state eminent domain statutes that carefully limit the grounds upon which takings may be exercised, the Court said.

In the wake of the Court's decision, many states are doing just that, said Morandi.

While the proposals vary from state to state, he said legislation generally focuses on three issues.

First, the power of eminent domain shouldn't be used strictly for economic development; second, the primary purpose of development shouldn't be to generate tax revenue or more sales tax; and third, the government entity shouldn't be able to transfer the property seized to a private entity, Morandi explained.

Delaware was the first state to actually pass legislation.

Kelo came down on June 23, and they passed their bill on the 30th, he said.

Not surprisingly for a statute written in a week, the new Delaware law is fairly vague, Morandi noted. What it says is that the use of eminent domain is restricted to recognized public uses - but it doesn't define what those are.

He said Alabama's new law is much more specific.

Alabama's statute prohibits the use of eminent domain for retail [or] commercial [use], for the purpose of generating tax revenue, [or to] transfer property to another private use, he explained.

The statute does carve out an exception for property determined to be blighted, which can be turned over to a private interest.

Morandi said that generally speaking, other legislation under consideration is more specific than Delaware's version, but less so than Alabama's.

For example, New Jersey's proposed bill prohibits the use of eminent domain to condemn legally occupied residential property, a nod to the well-maintained homes of the plaintiffs in Kelo. Oregon's pending legislation would outlaw property seized by eminent domain from being transferred to a private party.

Texas, which called a second special session of its legislature to address this issue, established a long list of exceptions in its bill, specifically permitting for development to continue on a new stadium for the Dallas Cowboys.

Matthew J. Kiefer, a land use attorney at Goulston and Storrs in Boston, said legislation is pending in Massachusetts even though it already allows eminent domain to be used for economic development, because the state's highest court never ruled on whether a finding of blight is necessary.

The current proposal would require such a finding.

California is considering a constitutional amendment to address the issue, said L.A. lawyer Berger.

Although constitutional amendments are much more difficult to pass than general legislation, if the amendment is successful, the redevelopment process in California would drastically change.

The pending amendment requires that property required through condemnation must be owned and occupied by the government agency condemning it, Berger explained. And that just doesn't happen with redevelopment projects. Typically, the government clears the place and then turns it over to some private redeveloper.

Balancing Act

Morandi said the states are now struggling to achieve the right balance: respecting private ownership rights while recognizing the need for economic development and renewal.

How do we not put a complete damper on economic development while still encouraging strong property rights? he asked.

Kiefer said that while eminent domain is an important tool that cities need to attract private investment, it's a tool that should be used sparingly. One lesson to public officials it to be careful how you use it, particularly in light of this backlash.

In his view, increasing suburban sprawl and the resulting need for urban redevelopment makes eminent domain a necessary tool for cities.

Cities are dependent on property tax revenue, and as investment increasingly goes out to the suburbs, cities need new tools and strategies to attract private investment back to the city, he said. The loss of eminent domain as one of those tools creates a potential chilling effect on urban redevelopment, he added.

Berger agreed that the rush to jump on the anti-Kelo bandwagon may have repercussions.

The passage of anti-economic development legislation could put a severe crimp in some otherwise worthwhile programs, he noted.

Copyright 2005 Dolan Media Newswires
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