Aug. 11, 2005
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| Dr. Neil E. Harl |
So should average property owners be concerned about the decision?
WHAT THE CASE INVOLVED
Seven years ago Pfizer, the pharmaceutical company, announced the development of a waterfront research facility in New London, CT. This was expected to provide much-needed jobs and tax revenue in an area that had suffered economic decline. The city set up a development corporation to put together a plan for revitalization of the area around the new research facility. The city granted the development corporation the power of eminent domain, which is not uncommon in such situations. The corporation filed eminent domain proceedings against homeowners in the targeted area who refused to sell. Some of the homes had been in their families for more than a century. The homeowners asserted the eminent domain action was unconstitutional.
WHAT IS "EMINENT DOMAIN"?
Basic to the idea, which goes back to William the Conqueror in 1066, is that those who acquire land do not acquire land in absolute ownership. The king, in old England, always retained some rights over land. Today those retained rights include the power to tax, the power to regulate and the power to take private land if needed for a public purpose.
In this country the right to take private property for a public use has been enshrined in the U.S. Constitution. The eminent domain clause of the Fifth Amendment to the Constitution states, "nor shall private property be taken for public use without compensation." If land is needed by a public body for a public need, the public body can force the sale of the land in question to the public body.
Generally, in the United States, it's unconstitutional to take private property without compensation. There's often a question of what is fair "compensation." It's probably fair to say that it usually means something close to fair market value, although often forced takings that are challenged involve a premium level of compensation. Nonetheless, some argue compensation means whatever the property owner believes the property is worth, limited only by the expected profitability of the entire project. That is clearly not required by the Constitution.
The other major requirement is that the taking must be for a public use. For years, that meant it had to be used by the public. But that concept has been greatly broadened. In a 1954 U.S. Supreme Court decision, the court upheld a lower court decision allowing the use of eminent domain to develop slum areas for possible sale to private interests. In 1981 the Michigan Supreme Court permitted the neighborhood of Poletown to be taken in order to build a General Motors plant. Courts in other states relied on that decision, which was overturned in 2004.
The U.S. Supreme Court, in a 1984 decision, confirmed the ability of the state of Hawaii to use eminent domain so long as the "exercise of the eminent domain power is rationally related to a conceivable public purpose."
BACK TO THE NEW LONDON CASE
In Kelo v. City of New London, by a 5 to 4 decision, the court held that the major taking of private property to sell for private development qualified as a taking for a public use. The court said the city's development plan "unquestionably serves a public purpose" and, therefore, satisfies the public use requirement of the Fifth Amendment to the Constitution. The court indicated that the pursuit of economic development is a public use and stated that there is "no principled way of distinguishing economic development from the other public purposes that we have recognized."
Remember, the taking was accompanied by a requirement that compensation be paid.
IN CONCLUSION...
The decision essentially places the issue in the hands of local leaders, most of whom are elected, to develop reasonable plans to deal with economically distressed areas. The court made it clear that government cannot take private property simply to confer a private benefit on a particular private party and noted that the economic development project in question involved "a carefully considered development plan."
Dr. Neil E. Harl is Charles F. Curtiss Distinguished Professor in Agriculture and Emeritus Professor of Economics, Iowa State University, Ames, IA. He is a member of the Iowa Bar.
