The Volokh Conspiracy

Journalist Jeff Benedict is the author of an excellent book on the Kelo condemnations, that I reviewed here. In this Hartford Courant op ed, he discusses the Pfizer Corporation’s recent decision to close down its headquarters in the New London, Connecticut neighborhood where it had previously played a key role in instigating the notorious condemnations that led to the Kelo litigation:

I’m often asked if I’d consider writing a novel. My answer is always no, truth is better than fiction ... and often harder to swallow.

Consider the bitter pill that Pfizer Inc. slipped New London this week. Barely a decade after constructing a $300 million research and development headquarters in the city, the pharmaceutical giant announced it was shutting down the facility. Just like that, New London will lose 1,400 jobs and become home to a gigantic, vacant office park that sprawls over a 24-acre campus.

Never mind that an entire residential neighborhood was bulldozed by New London to change the look of a 90-acre landscape around the Pfizer campus. And never mind that along the way the city used eminent domain to drive out homeowners and then fought a costly eight-year legal battle against holdouts Susette Kelo and her neighbors that went all the way to the U.S. Supreme Court....

After all the shouting, the developer ran out of money and the city has zero prospective replacements. Barren weed fields are all that exist where homes once stood.

Now that all of New London’s best-laid plans have been laid to rest, Pfizer is leaving, too. It’s tempting to suspect a connection. After all, let’s not forget that Pfizer never wanted to make its corporate home on the edge of New London’s urban Fort Trumbull neighborhood. “Pfizer wants a nice place to operate,” one well-connected Pfizer employee famously told a reporter shortly after New London officials courted the drug company. “We don’t want to be surrounded by tenements.”

What Pfizer wanted next door is what drove New London’s plan to raze buildings and replace them with a five-star hotel, a health club and spa, office space and upscale housing. At one point, Pfizer even talked about guaranteeing 50 percent occupancy at the hotel. The state did its part to sweeten the deal by kicking in close to $100 million in public money to the project, some of which was used to acquire and demolish private homes.

In the end, the Pfizer facility is the only thing that went up, although many would argue that a lot of taxpayer money went up, too — in smoke, that is. At least Pfizer employees haven’t had to look at tenements for the past 10 years. But how are those brownfields looking about now?

I have previously written about Pfizer’s withdrawal from New London and its role in the Kelo takings in this series of posts, and in a recent New York Times forum.

The New York Times Room for Debate blog has a forum on the implications of Pfizer’s decision to abandon its New London headquarters. Pfizer and its New London facility had previously played a key role in instigating the condemnations that led to the Supreme Court’s decision to uphold the use of eminent domain for “economic development” in Kelo v. City of New London. My contribution argues that Pfizer’s role in the Kelo takings and their failure to produce any actual development bolsters the case for strengthening protection for property rights. Here’s an excerpt:

Far from producing the promised “development,” the condemnation of private property in New London under Kelo damaged the local economy by destroying homes and businesses and wasting taxpayer money.

This result should not have been surprising. Government planners who undertake “economic development” condemnations have strong incentives to approve takings that benefit well-connected interest groups, even if they end up destroying more development than they create. Usually, as in Kelo, those targeted for condemnation are poor or politically weak.

I previously wrote about Pfizer’s role in the Kelo case and its recent withdrawal from New London here, here and here.

Over at the Land Use Prof Blog, property scholar Matt Festa has a good discussion of the implications of Pfizer’s decision to close down its New London headquarters for the ongoing debate over the use of eminent domain to promote economic development. As I explained in this post, the construction of this Pfizer facility was at the center of the firm’s successful efforts to lobby for the condemnations that eventually resulted in the Supreme Court’s controversial decision upholding “economic development” takings in Kelo v. City of New London.

Festa suggests that this experience, as well as other cases such as the notorious 1981 Poletown condemnations where some 4000 Detroit residents were forced out of their homes so that General Motors could build a new factory, may lead local governments to be more skeptical of economic development condemnations that depend on a single big firm for their viability:

Politicians and planners might be more cautious about hitching their redevelopment wagons to one big private entity. I’m as enticed as anyone by the idea of revitalizing a downtown/waterfront/etc. with a grand scheme that involves jobs, tax revenues, public-private partnerships, mixed-use development, walkable urbanism, transit, and the creation or enhancement of public space. But if the plan is based around promises from Pfizer, or GM, the incoming sports team, or any other single private entity or group, then the whole plan risks failure if the private actors decide to go elsewhere . . . When these plans fail to deliver, both the eminent domain power and the public fiscal resources are wasted.

I hope he is right. But I fear that this analysis may be too optimistic. The Kelo and Poletown takings occurred in large part because politically influential corporations (GM and Pfizer) lobbied for them in the first place. One of the designers of the Kelo development plan described Pfizer as the “10,000 pound gorilla” behind the taking (quoted in this article, pg 266). If the true purpose was to benefit these firms rather than promote development that benefits the general public, future “politicians and planners” might not be deterred from undertaking similar actions in the future merely because the promised long-term development could fail to materialize. To be sure, voters may eventually punish them at the polls. But, as I argued here and here, years are likely to pass before the project’s failure becomes clear. By that time, public attention is likely to have moved on to other issues, and the politicians who originally approved the taking may no longer even be in office.

The Pfizer Corporation has announced that it will close down its headquarters in New London, Connecticut. [HT: my former student Josh Blackman, and other VC readers]. As our regular readers may recall, Pfizer played a key role in instigating the notorious condemnations that led to the Supreme Court’s decision upholding the taking of private property for “economic development” in Kelo v. City of New London. Pfizer lobbied state and local governments to undertake the condemnation so that the land could be transferred to developers who would build facilities that were expected be useful to the firm and its employees. The head of the New London Development Corporation – the quasi-governmental agency that ordered the takings – had close ties to Pfizer and was married to a Pfizer executive.

The Kelo condemnations inflicted great harm on the people who lost their homes and businesses and led to the expenditure of some $80 million in public funds. To date, however, nothing has been built on the site, and there is no prospect that anything will be in the foreseeable future. Pfizer’s decision to leave New London makes it even less likely that anything productive will be done with the condemned land anytime soon. So far, the main beneficiaries of the Kelo takings seem to be the feral cats who have settled in the area. Far from producing the “economic development,” the Kelo condemnations have actually damaged the local economy by destroying taxpaying homes and businesses and expending large amounts of public money for no return.

For reasons I discuss in much greater detail in this article, this outcome should not be surprising. State and local governments that undertake “economic development” condemnations have strong incentives to approve takings that are expected to benefit well-connected interest groups even if they destroy more development than they create.