Court's eminent domain decision is mixed news.

In a narrowly divided 5-4 decision issued June 23, the U.S. Supreme Court ruled that cities do have the right to condemn one person's private property and transfer it to another private entity if the new development would generate more tax revenue for the city.

At issue in Kelo v. City of New London, Conn. ((04-108) 268 Conn. 1,843 A. 2d 500, affirmed) was whether the city could condemn the homes of seven owners who had rejected the city's compensation offers to make way for a proposed 90-acre private waterfront redevelopment project. New London argued that its economic health depended on attracting new businesses and new jobs to the city, which the waterfront project would do. The Fifth Amendment to the Constitution allows governments to take private property in return for "just compensation" as long as the land will be for "public use." Typically, eminent domain claims involve improving public services, such as roads, schools and parks. This one was unique because the "public good" at issue was an enhanced property tax base.

This decision is mixed news for real estate owners. On one hand, it creates a favorable precedent for value-added development that may involve apartment firms. However, it also allows municipalities to seize private property if there is the prospect of higher tax revenue, and it allows them to make planning decisions about private development that would otherwise require the approval of private property owners. It should be noted that many states already impose stronger "public use" requirements on eminent domain claims, such as creating public facilities or eliminating blight, and these would not be altered by this decision.

In a dissenting opinion, Chief Justice Rehnquist and Justices O'Connor, Scalia and Thomas stated that "all private property is now vulnerable to being taken and transferred to another private owner, so long as it might be upgraded.... 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." Copies of the opinions are available at http://straylight.law.cornell.edu/supct/html/04-108.ZD.html.