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Kelo Backlash Update:

An excellent paper by Tim Sandefur summarizes the disappointing results of the political backlash stimulated by Kelo v. City of New London, which upheld the use of eminent domain to transfer property from one private citizen to another for purposes of "economic development."

In the aftermath of Kelo, many commentators, including Judge Richard Posner and Chief Justice John Roberts at his Senate confirmation hearings claimed that state legislative reform is a viable alternative to judicial enforcement of public use limitations. Posner even claimed that it provides justification for the Court's decision in Kelo itself (see my paper on Kelo, pg. 65-66). Although some forty states have either adopted or considered legislation to curb eminent domain power in the aftermath of Kelo, Sandefur concludes that only five - "Indiana, South Dakota, Georgia, Pennsylvania, and Florida" have enacted laws that actually provide "strong protections for property rights." Numerous other states have passed laws that purport to restrict eminent domain abuse but actually do little or nothing.

In my view, the situation may be even worse than Sandefur suggests. Of the five states that have enacted meaningful legislation, two (South Dakota and Georgia) have little or no history of private-to-private condemnation for economic development in any case, and one (Florida) already has a judicial ban on economic development takings (though the new Florida law also restricts "blight" condemnations). As Sandefur points out, the Pennsylvania law to a large extent excludes the cities of Philadelphia and Pittsburgh, where most of the state's development condemnations actually occur. Thus, only the Indiana and (to a lesser extent) Florida laws represent truly significant progress. I also think, for reasons discussed in my own forthcoming article on Kelo, that Sandefur is overly optimistic about anti-Kelo legislation being considered by the US Congress.

Why has the Kelo backlash largely failed? Sandefur blames the political power of development interests who benefit from private-to-private condemnations and the lack of a strong philosophical commitment to property rights. Both of these factors play a role. But Sandefur and other analysts fail to explain how development interests could overcome the opposition of the vast majority of the electorate that, according to surveys, opposes Kelo-style takings.

I would argue that political ignorance on the part of voters also plays a major role. A great deal of specialized knowledge and study is required to tell the difference between an anti-Kelo bill that meaningfully restricts eminent domain power and one that does little or nothing. The devil (and the angel, if any) is in the details! Most voters lack the ability or the incentive to scrutinize such details closely. Indeed, as I have argued in much of my scholarly work, it is rational for voters to pay little attention to the details of public policy because there is so little chance that any one voter's decision will have a decisive impact on electoral outcomes.

Developers and other interest groups, on the other hand, have far superior knowledge about the details of legislation and strong incentives to keep track of them. Thus, skilled politicians can satisfy voters angered by Kelo by passing laws purporting to "reverse" it, while simultaneously avoiding the ire of development interests by ensuring that those laws are actually toothless. For the same reasons that ordinary voters don't pay attention to the details of eminent domain law, they are also unlikely to pay attention to the details of its implementation. Thus, most will not notice that little has changed after the passage of "anti-Kelo" laws in their states. Run of the mill takings, even if abusive, are not likely to get the kind of widespread press coverage and attention that Kelo did. This dynamic will only get stronger as the excitement generated by Kelo begins to dissipate and public attention moves on to other issues.

This does not mean that all post-Kelo legislative reform is hopeless. It does, however, suggest that there are severe limits to what such reform can be expected to achieve. At the very least, supporters of property rights should be highly skeptical of claims that legislative reform is an adequate substitute for judicial enforcement of limits on the scope of public use.

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Interesting Post-Kelo Public Use Case:

An interesting and potentially important post-Kelo public use case is now before the U.S. Court of Appeals for the Fifth Circuit (hat tip to Wright Gore, President of the Western Seafood Co., who brought this case to my attention). In Western Seafood Co. v. City of Freeport, part of a property owner's lot is being condemned and transferred to a neighbor so that the latter can build a marina for the asserted purpose of promoting "economic development" in the area. In Kelo v. City of New London, the Supreme Court of course held that "economic development" is sufficient justification to allow condemnation of private property for transfer to a new private owner.

In one sense, Western Seafood is a less egregious example of eminent domain abuse than many previous cases. The planned condemnation will not displace dozens of people (as in Kelo) and certainly not thousands (as in the notorious Poletown case, and many "urban renewal" takings). However, to a greater extent than Kelo, Western Seafood seems to be a case where there is a pure "A to B" condemnation where most if not all the benefits flow to an identifiable private party.

In Kelo, the Supreme Court majority indicated that the lack of an identifiable private beneficiary was one factor in its decision to uphold the condemnation. In reality, the Kelo taking was to a large extent instigated by the Pfizer Corporation, but as I explain in my forthcoming article on Kelo (pp. 57-58), this was not fully understood until after the case was decided by the Supreme Court. Western Seafood will help determine how important this factor really is.

My own view is that this will be a difficult case for the property owner to win. The Freeport condemnation is part of a city development plan, albeit one that may be dubious in nature. The Kelo majority repeatedly emphasized that a condemnation undertaken as part of an "integrated development plan" is virtually immune from public use challenge. Courts are not supposed to "second guess" the planners, require them to prove that the condemnations are necessary to achieve the plan's goals, or even ask the government to demonstrate that the plan has any prospects for success (see my article, pp. 48-49, 56-57). While Justice Kennedy's concurring opinion is slightly less deferential to the government than Justice Stevens' opinion for the Court, Kennedy signed on to the majority opinion, so his own handiwork has no binding precedential significance for lower courts.

Nonetheless, the Western Seafood case will help delineate the outer limits of Kelo and therefore bears close watching. The case also raises public use issues under the Texas state constitution and under Texas' new post-Kelo eminent domain reform law. Unfortunately, the Texas law is quite weak, as I documented in my article linked above, because it continues to allow condemnations for "community development," which is defined broadly enough to encompass virtually any condemnation for "economic development."

Note: the link above is to a website run by the property owners and reflects their perspective on the case. However it also includes links to the City of Freeport's briefs, thereby enabling you to get their side of the story as well.

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Columbia University May Use Eminent Domain to Take Over a Harlem Neighborhood:

As this New York Times Magazine article explains, Columbia University may be planning to use eminent domain to acquire property from unwilling owners in a Harlem neighborhood where the University would like to build new facilities (hat tip to Propertyprof Blog). Like most private organizations, Columbia lacks the power to condemn property on its own. But university leaders seem confident that they can persuade New York City officials to condemn the property for them, perhaps due to the University's extensive political influence and NYC Mayor Michael Bloomberg's strong support for the unrestricted use of eminent domain.

The key facts:

Columbia's plans are ambitious: across a large swath of Upper Manhattan, the university wants to create an academic enclave that will both nurture intellectual progress and revitalize an urban area . . .

But in the eyes of many local residents, [Columbia's] optimistic rendering obscures the fact that to fulfill its vision, the university will have to bulldoze almost everything that's already there. About 1,600 people are currently employed in this part of Manhattanville, and some 400 live there . . .

Columbia has already purchased more than half the property it would need. But some owners have refused to sell, and Columbia says that eminent domain remains an option if negotiations fail. It's a dicey option, however. Throughout the country, public opposition to eminent domain has mounted since last summer, when the Supreme Court ruled that private property can be seized by local governments for private development. Virtually every state has considered changing its eminent-domain laws; at least 13 different bills on the subject have been introduced in Congress. As Justice Clarence Thomas noted in his dissent in the recent Kelo case, concerning New London, Conn., an expansive definition of "public use" in the 50's and 60's permitted local governments to eliminate entire minority neighborhoods through eminent domain in the name of "urban renewal" — soon known as "Negro removal" among blacks.

As the NYT article suggests, this potential condemnation is part of a longstanding pattern under which politically powerful interests have used eminent domain to acquire property at the expense of the politically weak. Poor blacks have been victimized especially often, and this pattern may repeat itself here. To avoid misunderstanding, I should emphasize that I do not believe that Columbia is targeting this area out of racism. If the identity of the residents mattered to Columbia, key variable was probably the relative political weakness of the people in the neighborhood, not their skin color. Nonetheless, eminent domain abuse need not be racist to be reprehensible.

An ironic aspect of Columbia's plan is the role of the University's President Lee Bollinger (also noted in the article). He became famous as a defender of affirmative action during his tenure as President of the University of Michigan at the time the Gratz and Grutter affirmative action cases were before the Supreme Court. Bollinger is now a major supporter of the the Columbia expansion and seems more than willing to use eminent domain to get the property the university wants, despite the fact that poor African-Americans would be the major victims. There may not be a direct contradiction between Bollinger's stance in Grutter and Gratz and his position now. But his current position should certainly increase skepticism about Bollinger's claims to be a defender of "diversity" and minority rights.

A few relevant facts that the article omits:

1. Even if Columbia does not actually resort to eminent domain but merely continues to threaten it, this could cause serious harm to the property owners. The mere threat of eminent domain will usually depress property values in the area, and often force owners to sell "voluntarily" in order to avoid the costs of prolonged litigation. Moreover, owners who do not sell quickly may face even greater price declines in the future if the government moves to condemn some of their neighbors' land. This is one of the reasons why a bright line rule against "development" condemnations is necessary. Even if it is unclear whether courts will uphold a given condemnation or not, the mere possibility that they might can be used to drive down property values and compel "voluntary" sales. Such pernicious dynamics are particularly severe if the property owners are poor and/or legally unsophisticated and therefore unable to bear the burden of fighting city hall for their land.

2. The article seems to accept at face value Columbia's claims that they can't carry out their expansion plans without resorting to eminent domain because of the danger of "holdouts." In reality, private developers - including major universities such as Harvard - routinely assemble large tracts of property without resorting to eminent domain. To prevent holdouts, they purchase the land secretly and only announce the building project after they have purchased what they need; in this way, potential holdouts never get a chance to stop the project in order to extort abnormally high payments for themselves. For a more detailed explanation of this admittedly complex issue, see my article here, pp. 21-28. While "holdout" problems sometimes do justify the use of eminent domain, it is far more common for this issue to be used as a dubious pretext for coercing property owners who are not holding out for a higher price but are genuinely unwilling to sell. This seems to be the case here.

3. New York state has some of the worst public use jurisprudence in the country. New York courts have allowed the use of condemnation for "economic development" purposes for decades (long before Kelo), and they are willing to endorse even the most blatant transfers of land for the benefit of private interests. In a 2001 case, for example, a New York appellate court upheld the condemnation of property in Times Square in order to allow the NY Times to build a new headquarters. The ostensible justification was that the area was "blighted" and that the condemnation would help alleviate the alleged blight. See In re W. 41st St. Realty v. N.Y. State Urban Dev. Corp., 744 N.Y.S.2d 121 (N.Y. App. Div. 2002). At least in the short term, Harlemites cannot expect courts to save them from Columbia's expansion plans.

On the other hand, major universities fear negative publicity to a far greater extent than most commercial developers do. Hopefully, there will be a big enough outcry to persuade President Bollinger and Columbia to reconsider their plans.

UPDATE: For those who may be interested, the NAACP's amicus brief supporting the property owners in Kelo contains a wealth of information on how eminent domain abuse has disproportionately victimized poor blacks over the last several decades - often even in the absence of racist motivation on the part of the state.

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Universities, Public Benefits, and Eminent Domain:

Both Columbia President Lee Bollinger and some of the commenters to my previous post defend the use of eminent domain to transfer property to universities on the ground that universities create "public benefits." While universities do provide important benefits to society, this does not justify allowing them to condemn property.

Most of the benefits provided by universities are "private goods" that are fully captured by their students and faculty. For example, going to college greatly increases a student's earning prospects, but that student will himself capture the benefits. Basic economics shows that there is no need for government subsidies for these kinds of private goods.

Universities do also provide some "public goods" - benefits to society that the university, its faculty, and its students cannot fully capture. Perhaps the most important is basic scientific research. Another might be educating underprivileged students, though this is less clearly a public good than basic research is, since most of the benefits are captured by the students themselves. However, both research and student tuition are already heavily subsidized by the government through a wide variety of programs. For extensive data, see this recent book by economist Richard Vedder. There is no reason to believe that they require the additional subsidy provided by the use of eminent domain. Even if additional public subsidy is warranted, the best way to provide it is to allocate additional funds earmarked for research or education, not allow universities to use eminent domain. Condemnation of property is rarely if ever actually useful for the purposes of advancing research or educating poor students. In general, research can be undertaken and students educated just as well on voluntarily purchased land. Education and research can be conducted in a wide variety of locations and thus are not vulnerable to the "holdout" problems usually cited as a justification for condemning property. Even if holdouts do become an issue, universities can and do use secret purchase and other market-based methods to get around them without resorting to eminent domain(see Point 2 in my earlier post on Columbia).

Obviously, students and faculty sometimes can benefit from acquiring land through condemnation. But the benefits in question (primarily esthetic and lifestyle-related) are not public goods that should be subsidized by the state. If universities wish to pursue these goals by acquiring additional land, they should do it by competing with other potential buyers in the real estate market.

Finally, a possible argument for allowing universities to use eminent domain is that they supposedly act only for the public interest. As President Bollinger puts it, "We are not a profit-making institution looking out for our own advantage," he said. "We are trying to do things that help the world more broadly." Unfortunately, this claim is at best a half-truth. Universities do sometimes "help the world more broadly," but their policies are also heavily influenced by the self-interest of faculty, administrators, and (to a lesser degree) students. Anyone familiar with academic politics knows that self-interest plays a major role. The mere fact that a university is a nonprofit entity does not prove that it acts only out of altruism. Self-interested behavior by universities is often perfectly legitimate, but it does undercut claims that universities should be allowed to use eminent domain because they do not "look out for [their] own advantage" and only "do things that help the world more broadly."

Even under a narrow definition of public use, condemnations that transfer property to public universities would be constitutional, since government ownership of land is automatically considered a "public use" under the federal Takings Clause and most state constitutions. Condemnations for private universities are much more legally problematic, and I would argue that they violate the Fifth Amendment and many state constitutions as well. But whatever its legal status, taking property for the benefit of universities is both unnecessary and unjust.

UPDATE: Another possible "public" benefit of universities is that they may improve the local economy. I did not address this in the original post because it is not a benefit specific to universities, but can be claimed for virtually any enterprise. However, to the the extent that this argument is used to justify using eminent domain to transfer property to universities, it is no different from the arguments used to justify condemning property for the benefit of private commercial developers. I criticize such claims in great detail here and here.

UPDATE #2: I was perhaps less clear than I should have been about what it means for a student to be able to "capture" the benefits of his own education. So long as the societal benefits created by it are reflected in increased income for the student, he or she can be said to capture those benefits and government subsizidation is therefore unnecessary. For example, it is certainly true that more educated workers are more productive than less educated ones and this benefits the economy. But their higher productivity is reflected in higher pay, and so they "capture" the benefits. In any event, I should emphasize that even if government subsidization of higher education is desirable to a greater extent than I contend, it does not follow that such subsidies should take the form of allowing universities to acquire property through condemnation.

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Town-Gown Conflicts over Property Use and Eminent Domain:

Notre Dame property law professor Nicole Garnett has an interesting post on the town-gown conflict over neighborhood redevelopment in her home base of South Bend, Indiana. Unlike Columbia, Notre Dame (as far as I know) is not threatening to use eminent domain. Nonetheless, the dispute illustrates the ways in which efforts by universities to transform local neighborhoods (as opposed to merely acquire individual property tracts) often stem from the self-interest of the academic community rather than from efforts to promote education and research, the major public goods provided by universities. In this case, the university people would like to turn the neighborhood into a "new-urbanist enclave," while the "mostly working class and African-American" townies tend to be opposed.

I like new urbanist enclaves as much as the next law professor and I have no objection to Notre Dame's plan as described by Nicole. Maybe that's why I'm an academic, not a townie! But I see no reason why university efforts to cater to the neighborhood lifestyle preferences of academics and students should be supported through the use of eminent domain. The case for eminent domain is especially weak in situations where university "elites" (to borrow Nicole's terminology) are trying to impose their preferences at the expense of communities far less affluent than they are themselves. Whatever the merits of using government power to redistribute wealth from rich to poor, I see no reason to support Robin Hood in Reverse condemnations.

To be sure, the opportunity to live in a "new urbanist enclave" may attract some professors to Notre Dame who might otherwise hesitate to take up residence in South Bend, and for that reason promote research and/or education. However, an academic good enough to be hired by Notre Dame is also likely to have offers elsewhere, and there is no reason to believe that the overall level of public good provision by universities will diminish if he goes to another school. It is also unlikely that any significant number of potential academics will choose nonacademic careers merely because some schools are unable to reshape the neighbohoods around them to the would-be professors' liking.

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Another Failure of the Kelo Backlash - President Bush's Executive Order on Takings:

In an earlier post, I described how the political backlash against the Supreme Court's decision Kelo v. City of New London has largely fallen short of the mark, despite massive public outrage against the condemnation of property to promote "economic development" by other private parties. I noted that numerous state legislatures are enacting laws that supposedly ban Kelo-style but actually achieve little or nothing.

Today's presidential executive order on eminent domain continues this pattern. On the surface, the order seems to forbid federal agencies from undertaking economic development condemnations. But its wording undercuts this goal. Here is the key part of the text (hat tip: InstaPundit):

By the authority vested in me as President by the Constitution and the laws of the United States of America, and to strengthen the rights of the American people against the taking of their private property, it is hereby ordered as follows:

Section 1. Policy. It is the policy of the United States to protect the rights of Americans to their private property, including by limiting the taking of private property by the Federal Government to situations in which the taking is for public use, with just compensation, and for the purpose of benefiting the general public and not merely for the purpose of advancing the economic interest of private parties to be given ownership or use of the property taken.

Read carefully, the order does not in fact bar condemnations that transfer property to other private parties for economic development. Instead, it permits them to continue so long as they are "for the purpose of benefiting the general public and not merely for the purpose of advancing the economic interest of private parties to be given ownership or use of the property taken."

Unfortunately, this language validates virtually any economic development condemnation that the feds might want to pursue. Officials can (and do) always claim that the goal of a taking is to benefit "the general public" and not "merely" the new owners. This is not a new pattern, but one that bedeviled takings litigation long before Kelo. Indeed, the New London authorities made such claims in Kelo itself and they were accepted by all nine Supreme Court justices, including the four dissenters, as well as by the Connecticut Supreme Court (including its three dissenters). This despite considerable evidence that the takings were instigated by the Pfizer Corporation, which at the time hoped to benefit from them. Not all the evidence of Pfizer's role was available at the time of the trial, but enough was submitted to demonstrate that Pfizer played a crucial role (e.g. - the head of a firm that helped prepare New London's development plan testifed that Pfizer was the "10,000 pound gorilla" behind the takings). Nonetheless, the courts accepted New London's claims that its officials acted in good faith, since they could have been intending to benefit the public as well as Pfizer.

As the Kelo experience shows, it is usually difficult or impossible to prove that such claims are insincere. Indeed, at least to a certain extent, the claims will always be correct. Virtually any economic development condemnation provides at least some benefit to "the general public," if only because the productivity of the new owner's business is likely to increase, thereby promoting development and raising tax revenue. The problem, as I have documented in great detail elsewhere, (e.g., here and here), is that these benefits can usually be achieved by methods other than coercion, and are unlikely to be worth the cost of condemning the property and eliminating preexisting uses.

Even had President Bush's order been better worded, its impact would have been limited. The vast majority of economic development condemnations are undertaken by state and local governments, not by federal agencies. Nonetheless, it is unfortunate that the Bush administration has chosen to join in the charade of pretending to do something about Kelo while actually doing little or nothing.

UPDATE: Tim Sandefur of the Pacific Legal Foundation takes a similarly critical view of the executive order. I agree with almost everything Tim says. However, I am not as certain as he is that "it's gratifying to see the President take an interest in this issue." Bogus reform efforts such as this one create a danger that the public will be falsely persuaded that the problem has been solved; indeed, I suspect that in some cases that is part of their purpose (though I have no evidence of the Bush Administration's motives for issuing this order). Sometimes, a bogus reform is worse than no reform at all.

UPDATE #2: Some commenters cite Section 3 of the order (which I did not quote, but did link) and argue that it provides a good list of the situations where eminent domain should be allowed. I agree that Section 3 would be quite defensible if it were an exhaustive list of the situations where the order permits federal agencies to condemn property. In fact, however, Section 3 is a list of exceptions to the rule set out in Section 1. This is evident from the fact that Section 3 is entitled "Exclusions" and begins with the words:

Nothing in this order shall be construed to prohibit a taking of private property by the Federal Government, that otherwise complies with applicable law, for the purpose of: [a list of purposes follows].

Therefore, Section 3 merely lists situations where property can be condemned even if doing so violates the rule set out in Section 1: that condemnations must not be "merely for the purpose of advancing the economic interest of private parties to be given ownership or use of the property taken."

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