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Eminent Domain: Does Your Property REALLY Belong to You?


Written By: A. Wilt

July 2015

In June of 2005, The United States Supreme Court handed down one of its most controversial decisions in Kelo v The City of New London, which held that governments had the ability to take property under their eminent domain powers and resell it to private developers. Ten years later, the public outcry at the decision can still be heard in Court decisions across the nation.

Back in the USA News Story: Eminent Domain: Does Your Property REALLY Belong to You?. www.backintheusa.us
The Kelo House

Eminent Domain is a power of the government, granted by the 5th Amendment to the Constitution, with the words “nor shall private property be taken for public use, without just compensation.” In lay terms, federal, state, and local governments have the ability to take private property, paying a fair market value, as long as the land will be used for the public benefit.

Before Kelo, such eminent domain powers were typically exercised for the development of public structures – such as freeways, bridges, and schools. While the concept is distasteful to many, it is also generally accepted because the “public use” standard was clearly met. Kelo changed the game.

At issue in Kelo were the City of New London’s efforts to use the powers of eminent domain against a group of homeowners in a neighborhood known as New Trumbull, to sell their property, so that the city might resell the property to Pfizer, who had recently built a research facility near the area. The City argued that the public use would be in the fact that Pfizer would pay more in city taxes, thus increasing the city’s tax base and vitality.

The nine Plaintiff homeowners, who held 15 properties in all, argued that their neighborhood was not “blighted” and that the condo and retail redevelopment of the area was not necessarily in the interest of the public. They further argued that eminent domain should not be used for projects where the primary income recipient was not the city or its citizen but was instead, a private developer. The City countered by arguing that the project would increase tax revenues, but would also bring jobs to the area.

Back in the USA News Story: Eminent Domain: Does Your Property REALLY Belong to You?. www.backintheusa.us
One of the few remaining houses in the Fort Trumbull neighborhood, September 1, 2006. Underneath the white paint can just barely be read the words "THANK YOU GOV. RELL FOR YOUR SUPPORT" and the web URLs of two organizations protesting over-use of eminent domain, Castle Coalition and Institute for Justice. Photo by Nard

In a decision that many compared to corporate welfare, the Court ruled in favor of the city, granting them the property. Further, the rationale behind the decision was based almost entirely on the private development, with Justice Stevens writing in the decision:

"The city has carefully formulated a development plan that it believes will provide appreciable benefits to the community, including, but not limited to, new jobs and increased tax revenue."

With a 5-4 ruling, the decision was very close and there were scathing dissents from other Justices of the Court, including this one from Justice O’Connor:

“Under the banner of economic development, all private property is now vulnerable to being taken and transferred to another private owner, so long as it might be upgraded–i.e., given to an owner who will use it in a way that the legislature deems more beneficial to the public–in the process. To reason, as the Court does, that the incidental public benefits resulting from the subsequent ordinary use of private property render economic development takings “for public use” is to wash out any distinction between private and public use of property–and thereby effectively to delete the words “for public use” from the Takings Clause of the Fifth Amendment.”

Nevertheless, the decision held and the City was able to take the homeowners’ properties.

Upon acquiring the property, New London’s plan was to raze the homes in the neighborhood of New Trumbull, thus making way for further Pfizer development, including condos, office buildings, and a conference center to complement their research facility. To further incentivize Pfizer, the city also promised an 80% tax cut on the property tax for ten years. The city’s hope was that the development would bring in new jobs, new residents, and revitalize the city. 

As it turns out, it was a useless hope. In 2008, the company in charge of developing the land backed out due to lack of capital. In 2009, Pfizer left the City, later selling its research facility to a submarine manufacturer. Two later plans to develop the property also fell through.

Though faint, there is a good result to come out of the case. The theory of eminent domain, long considered archaic and not well publicized, came back to the public's attention. According to the Institute of Justice, who represented the homeowners in the Kalo case,

43 states passed constitutional amendments or statues that reformed eminent domain laws to better protect property rights, nine state high courts ruled against the use of eminent domain for economic development, and at least 44 projects—where eminent domain was to be used for private gain—have been defeated since the Kelo ruling.

Further, many developers have shied away from proceeding with such projects, preferring not to get involved in lengthy legal battles with poor public relations outcomes.

Back in the USA News Story: Eminent Domain: Does Your Property REALLY Belong to You?. www.backintheusa.us

As recently as May of this year, the Kentucky Court of Appeals ruled 3-0 in favor of landowners who had protested their properties being used for natural gas pipelines, ruling that the Bluegrass Pipeline LLC did not have the power of eminent domain because it was a private company and not a publicly regulated utility.

As far as the City of New London? Their plan has been called an ‘unmitigated failure.’ Ten years later, the property remains vacant; a powerful symbol that economic growth predicated on forcibly taking private property cannot lead to lasting growth.

~~~~~

Other Articles of Interest:

Civil Forfeiture Laws: Fight for your right to keep your cash

How Much Does Government Regulation Cost?

The Widening Gap between the Rich and the Rest of Us

Do You Listen to Economists? You Shouldn't

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