New York’s Highest Court to Hear Important Eminent Domain Case

The New York Court of Appeals – the state’s highest court -is about to consider an important property rights case, Goldstein v. New York State Urban Development Corporation. The case involves a challenge to the condemnation of large amounts of property for the purpose of transferring the land to influential developer Bruce Ratner, who plans to use most of it to build a stadium for the New Jersey Nets (which he owns), and “luxury housing.” The targeted property owners argue that these takings are not for a “public use,” as the New York state constitution requires. Certainly, the case is a fairly egregious example of the use of eminent domain power to benefit private interests. I wrote about this taking in a 2008 post addressing the federal court case in which the Second Circuit Court of Appeals upheld these condemnations under the federal Constitution (as it was required to do, given the Supreme Court’s decision in Kelo v. City of New London):

…[T]he fact that much of the condemned land is to be used to build a sports stadium raises serious red flags about the true likelihood that the general public will benefit from the condemnation. Numerous studies by economists show that public subsidies for stadium construction create no economic benefits for the general public….

Second, the court claims that the creation of “affordable housing” for the poor is one of the public benefits to be expected from the project. The project will indeed create some new housing units (in addition to the stadium). However, as the Second Circuit opinion concedes (pg. 15), almost 70% of the new housing units will be “luxury” units for the wealthy, and the remainder is mostly not guaranteed to be ever built and is still intended for the “middle class” rather than the poor. Like the stadium, the housing portion of the project seems likely to be a straight redistribution of wealth from the current residents of the area to the very wealthy Mr. Ratner and the types of wealthy people who will be able to afford to buy the luxury housing he intends to build. To say the least, it is hard to discern any genuine public benefit here.

The Second Circuit also justifies the takings on the basis that they will serve to alleviate “blight.” New York City has indeed designated much of the area condemned area as blighted. However, the validity of this designation is debatable at best (the plaintiffs pointed out that much of the land in the area is among the most valuable in Brooklyn). . . . New York is one of many states with a definition of “blight” so broad that it can encompass virtually any property. Even if the area really is “blighted,” it doesn’t necessarily follow that the current owners and residents should be expelled and their land transferred to a politically powerful developer. Cities have many other options for alleviating genuine blight that do not infringe so greatly on property rights. At the very least, there is no good reason to condemn the 50% of the project area that even the city acknowledges to be free of blight….

In this case, as in Kelo itself, the court took account of the claimed benefits to the general public, but explicitly refused to consider the massive costs (pp. 13-15). Ignoring cost is a requirement under Kelo. But it is not a good way of determining whether a planned condemnation is actually likely to serve a “public use” – even if “public use” is defined broadly to include indirect public “benefits….” Ignoring costs is a blank check for local governments to undertake condemnations that benefit politically powerful interests while imposing the costs on taxpayers and the politically weak.

Finally, the Second Circuit notes that “Ratner was the impetus behind the [condemnation] Project, i.e., that he, not a state agency, first conceived of developing Atlantic Yards, that the Ratner Group proposed the geographic boundaries of the Project, and that it was his plan for the Project that the ESDC [government agency undertaking the condemnations] eventually adopted without significant modification.” The court is probably right to conclude that this is not enough to prove that the taking was a “pretextual” one under Kelo. At the very least, however, such a pattern of events should trigger heightened judicial scrutiny of the government’s true purposes in undertaking the condemnation.

Damon Root of Reason has some more details here:

In December 2003, Bruce Ratner, a New York real estate tycoon and owner of the New Jersey Nets basketball team, announced his long-simmering plans to build a 22-acre “urban utopia” in central Brooklyn, featuring more than a dozen office and apartment towers rising as high as 60 stories, a 180-room hotel, and a fancy new basketball arena for Ratner’s Nets to call home…..

So Ratner did what most politically-connected elites do when they run into trouble: He turned to the government—including his old Columbia law school pal Gov. George Pataki—for a bailout. More specifically, Ratner partnered with the Empire State Development Corporation (ESDC), a controversial and embattled state agency with the power to bypass zoning laws and seize private property via eminent domain.

It’s a classic case of eminent domain abuse. Ratner isn’t planning to build a bridge or a road or any other legitimate public project that might permit the forceful taking of private property. He wants to build a basketball arena, sell tickets to the games (not to mention sell broadcast rights, advertising space, concessions, and merchandise), and make a big fat profit. That’s not public use, it’s private gain.

Furthermore, state officials have gone out of their way to put those profits in Ratner’s hands. Consider that when the project was officially announced in 2003 there was no mention of blight, which is the state of extreme disrepair frequently cited by the ESDC to trigger an eminent domain taking under state law. Two years later, however, Ratner and the ESDC started claiming that the neighborhood was “blighted.” Yet by that point Ratner had already acquired many of the properties he wanted (thanks to eminent domain) and left them empty, thus creating much of the unsightly neglect he now cites in support of his project.

Moreover, the ESDC report counted minor things like “weeds,” “graffiti,” and “underutilization” as evidence of blight….

New York case law is among the most hostile to property rights in the entire country, allowing the condemnation of virtually any property for any reason. For example, a 2001 state appellate court decision ruled that Times Square was blighted, allowing the condemnation of property there for the purpose of transferring it to the New York Times to build a new headquarters. New York is also one of only seven states that have enacted no eminent domain reform law whatsoever since the Supreme Court’s controversial 2005 decision upholding “economic development” condemnations in Kelo. For these reasons, I am not optimistic about the property owners’ chances in this case. However, the litigation might still do some good by focusing greater attention on eminent domain abuse in New York. Moreover, there is always the possibility that the state supreme court will change its ways, as several other state high courts have done in recent years.

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