Eminent domain: is this land really your land?

IN KELO V. CITY OF NEW LONDON, a group of private property owners asked the United States Supreme Court to prohibit the government from condemning and using their property to create jobs, increase tax revenues, and compliment the construction of a $300 million research facility by Pfizer Inc. On June 23, 2005, the Court ruled against the landowners, holding that a city's decision to take private property for economic development purposes satisfies the "public use" requirement of the Constitution's Fifth Amendment.

While Kelo makes economically motivated condemnations constitutional, it does not require that every state allow such condemnations. In contrast to this national trend, Utah recently limited the government's power to condemn for redevelopment purposes. Sweeping changes to Utah's Redevelopment Agencies Act, signed into law by Governor Huntsman on March 21, 2005, indicate that Utah is not likely to soon permit the type of economic condemnations at issue in Kelo.

The Constitutional Framework of Eminent Domain 

The United States Constitution provides that private property may not be taken for a "public use" unless "just compensation" is paid to the property's owner. In a typical condemnation case, this simply means that the condemning agency must pay fair market value in return for land acquired through condemnation.

In some cases, however, affected landowners challenge the purpose of the proposed taking. The Constitution's reference to a "public use" has been interpreted as a restriction on the scope of the eminent domain power. In order for a taking to be constitutional, property must be taken for a public use.

Like most states, Utah has a statute that defines the "public uses" for which property may be taken. These include the construction of public buildings, reservoirs, roads, pipelines, and telephone lines--uses which inure to the public good, and which would be difficult or impossible to achieve absent the power of eminent domain.

In the 1954 case of Berman v. Parker, the United States Supreme Court expanded the "public use" concept. The Court held that government may take property and sell it to private developers if the ultimate goal of the project is to clear a "blighted" area for the public good. Because the goal of such projects serves the public's interests, a condemning authority does not violate the Constitution though the property taken is put to a private use.

Facing fierce competition to attract jobs and sales tax revenues, condemning agencies have stretched the holding of Berman beyond takings to cure blighted neighborhoods. In Kelo, the condemning agency sought to take a number of admittedly "unblighted" properties in order to attract commercial development. To meet this goal, the condemning agency planned to raze the homes and lease the property to a private developer for 99 years at a price of $1 per year.

Several homeowners in Kelo fought the condemnation, but the Connecticut Supreme Court held that such a taking was permissible if the agency's goal was to improve the local economy. The United States Supreme Court affirmed this ruling, reasoning that local governments are entitled to "broad latitude in determining what public needs justify the use of the takings power." Because the challenged development plan served the "traditional and long accepted governmental function" of promoting economic development, it "unquestionably serve[d] a public purpose" within the bounds of the Constitution.

Utah Legislature Limits Takings in Connection with Redevelopment

Consistent with the Supreme Court's decision in Berman. Utah law used to allow redevelopment agencies to declare an area blighted and employ the power of eminent domain, even if the property taken ultimately was put to a private use such as a hotel or retail development.

Bucking the trend exemplified by Kelo, however, the Utah legislature recently enacted major changes to Utah's Redevelopment Agencies Act. Most significantly, the new law provides that redevelopment agencies "may not use eminent domain to acquire property" except in very limited circumstances.

In light of these amendments, the Kelo decision should have little impact on Utah condemnations. Absent a radical change in current political climate or an economic opportunity that is just too good to pass up, the Utah legislature is unlikely to allow takings based solely on economic considerations. It is unclear what impact this will have on the ability of Utah to compete with "eminent domain friendly" states for attractive employers and retailers, but it certainly is an issue worth watching in the coming years.

Paul Drecksel, a shareholder with Parr Waddoups Brown Gee & Loveless, practices in the area of commercial litigation with an emphasis on eminent domain and real estate matters. He spends half his time representing condemning authorities and half representing landowners subject to condemnations. He can be reached at [phone] or [e-mail].