Eminent domain--for the greater good? The U.S. Supreme Court decision in Kelo v. New London has prompted states to look at their own eminent domain practices.

When Suzette Kelo received a notice from the city of New London, Conn., to vacate her property, little did she or the city know that they were about to embark upon an historic journey that would wend its way to the U.S. Supreme Court. And little did she know that the case that ensued, Kelo v. New London, would prompt legislatures in several dozen states to look at their eminent domain practices.

The New London Development Corporation, a public/private effort promoting mix-used developments, wanted Kelo's property in order to redevelop some 90 acres of her mostly working-class neighborhood. Employing the use of eminent domain, they were trying to make way for a multi-million dollar conference center and hotel complex designed to complement a new $270 million global research facility owned by Pfizer Incorporated.

The city argued that the proposed redevelopment served a "public purpose" by creating new jobs, increasing tax revenue and leading to urban revitalization that would benefit the entire community. Kelo countered that condemning private property for economic development did not qualify as a "public use" under the state and federal constitutions.

But the Supreme Court, in a 5 to 4 vote in June, decided in favor of New London. The Court determined that the comprehensive nature of the city's redevelopment plan, which was adopted pursuant to a state statute, served a public purpose that satisfied the public use requirements of the constitution. It deferred to legislative judgment in defining public use, as it had in previous court decisions. At the same time, the Court invited more state legislation by emphasizing that nothing in its decision precluded a state from restricting the use of eminent domain for economic development purposes.

LAWMAKERS STEP IN

Legislatures are following suit. At least 12 states that were in session following the Court's decision considered bills to restrict the use of eminent domain for economic development purposes. Four of them--Alabama, Delaware, Ohio and Texas--passed laws.

For critics of eminent domain, Kelo represents a practice that has become increasingly prevalent. "By our own count, over a 5-year period, we have found about 10,000 instances where a local government either used or threatened to use eminent domain in order to take a home or parcel of property from one person and give it to another," says Dana Berliner, a senior attorney with the Institute for Justice, a property rights group that represented Kelo and her fellow New London homeowners before the Supreme Court.

"It is obviously more widespread and commonly practiced than most people could ever imagine," she says. "And it is a power that essentially allows a government entity to take any person's home away from them, to ruin their business or destroy their lives, whatever the case may be."

HAS A PURPOSE

But for city and state officials across the country, eminent domain is a vital tool, and in some cases the only tool left when it comes to improving a blighted area, transforming dangerous, abandoned and oftentimes drug-infested neighborhoods into modern mixed-use retail and residential complexes that not only create new jobs but also generate tax revenue.

"I can't even imagine how bad it would be if this tool was taken away from us," says William J. Kearns, the general counsel to the New Jersey State League of Municipalities.

"Every city has within its borders large areas of land that are sitting there unused or are in a deteriorated or dangerous condition," says Kearns.

"It would be nice if the owners of these kinds of properties would step forward and arrive at a fair market price for what they own and then sell it," Kearns says. "But all too often, owners can't be found or have no concern about the condition the property is in, and feel no responsibility to the surrounding area. To take away a city's power to change that means huge areas of blight would remain just that, and would probably only grow larger."

Eminent domain as a tool has been around since the beginning of the Republic. "It is hard to imagine how we would have grown and expanded as a country without eminent domain," says Jon Santemma, the author of "Condemnation Law and Procedures in New York," who also served on the commission that wrote the eminent domain procedure law for the state.

"The growth of the railroad industry would probably never have taken place in the 1800s had it not been for eminent domain, which gave it land to build on," Santemma says. The same can be said of the Tennessee Valley Authority and the first interstate highway network.

But these were public projects, and using eminent domain to acquire property was usually an orderly process with owners selling at a fair market price or through a process of just compensation.

"For years most people really have not paid much attention to this process," says Richard Epstein, a professor of law at the University of Chicago and the author of Takings--Private Property and the Power of Eminent Domain.

"Those who were subject to eminent domain accepted the reasons the government gave for wanting to acquire their land," says Epstein. "If there was a battle it had to do with how much the property was worth."

Los Angeles attorney Gary Kovavic says he's been practicing eminent domain law in relative obscurity for 29 years. "Most of that time litigation has centered around things like what is the fair market value of the property or what is the fair market value of the improvements to the property."

But in recent years, Kovavic says a growing percentage of litigation revolves around challenges to the practice of eminent domain. "That was almost unthinkable a generation ago."

SUCCESS AND FAILURE

Along its historic waterfront, beginning in the late 1970s, the city of Baltimore launched what has been since hailed as one of the most successful uses of eminent domain. The city acquired some 150 acres of blighted and abandoned properties, including existing businesses, to make way for an urban renovation that included the Rouse company's Harborplace, which would go on to win applause from city planners around the world.

Baltimore was not only able to open up large swaths of land--some of which contained houses from the 18th century--for redevelopment, it was also able to realign city streets so that they would create an easy access to the waterfront.

"The amazing story of Baltimore's revitalization would never have taken place had it not been for the city's willingness to use eminent domain," says Rob Puentes, a fellow with the Brookings Institute's Metropolitan Policy Program.

"In fact, the challenges faced by Baltimore were typical of the challenges faced by many cities in the east and both the older suburban areas and the small towns of the Midwest that have simply run out of room to grow," says Puentes. "The only way they can get a handle on blight and limited growth is to target large sections of the city where redevelopment can only take place if what is already there is removed."

A less successful use of eminent domain, coming just as Baltimore unveiled its Harborplace, occurred in Poletown, a section of Detroit. Some 1,000 homes and 600 businesses in a predominantly Eastern European community were razed to make way for a new General Motors plant.

In 2004 the Michigan Supreme Court, reviewing the process by which eminent domain was used, agreed in a unanimous decision that the local government was "without constitutional authority to condemn the properties." Hundreds of residents said they did not want to leave Poletown and were forced out. But the court decision was too late for them. Most of Poletown's houses and businesses had long since been destroyed.

What separates Baltimore and Poletown from New London, contends New York attorney Jon Santemma, is that "the property in New London was not really blighted or debilitated at all. It was a low-income but stable neighborhood on the waterfront with families who had lived in the same house for generations."

"If eminent domain can be used in a place like New London," says Santemma, "does that mean it can be used almost anywhere else? What are the limits to its use? Is any house safe?"

Even before the Kelo decision, some states had been asking themselves those very questions. Arkansas, Florida, Illinois, Kentucky, Maine, Montana, South Carolina and Washington all have court decisions forbidding the use of eminent domain when the purpose is not to eliminate blight.

Since Kelo, Alabama, Delaware, Ohio and Texas have passed laws that restrict the use of eminent domain for private development. Alabama Senator Jack Biddle says he was inspired to propose legislation after eminent domain was used in his legislative district: "They just came in and put a bunch of individual stores out of business so that they could make way for a Wal-Mart," Biddle says. "And I didn't like that. None of these stores even had a choice and some of them had been there for 15 or 20 years."

Passed unanimously, Biddle says his bill means that "eminent domain can no longer be used for any for-profit business. It can only be applied to a genuinely declared area of blight--and it has to be that."

In Kansas, Senate Majority Leader Derek Schmidt and Senator Greta Goodwin have proposed a constitutional amendment guaranteeing that private property cannot be taken through eminent domain except for a public use.

"I think the whole issue of eminent domain has become scary to people," says Goodwin. "And this being a rural state where people greatly value their land makes the issue even more important to us."

In Maryland, Delegate David Boschert also is backing a constitutional amendment limiting the state's ability to seize private property for public use only.

"This is becoming one of the most hot-button issues I have ever seen at the state level," says Boschert. "We are hearing more and more about it from our constituents who are upset and angry. And I think they have a right to be."

But others urge caution.

In Connecticut, which generally has been supportive of the use of eminent domain for private development, Representative Michael Lawlor says lawmakers should proceed carefully when it comes to getting rid of a power that can be used for revitalizing economically depressed neighborhoods.

"You want to have the ability to take property if it is necessary to achieve a greater goal," says Lawlor. "But the process by which you accomplish that and the amount of money you have to pay in order to do it ought to be carefully thought out."

Lawlor said he is particularly concerned about public projects that may include private development. Should eminent domain be prohibited in such cases?

"A public economic development project is a lot different than a private developer trying to put in something like a mall," says Lawlor. "Should we really allow one or two property owners to hold out and demand a price so high that they could stop a project altogether? Should we risk creating opportunities for speculators to come in and buy up property and then hold out for top dollar when they sell? I think the potential for abuse exists on both sides."

Caught between trying to promote economic development, particularly in blighted areas, and protecting the rights of homeowners, some lawmakers have decided to take a second look at the process of eminent domain in their states. It is a move that is winning the support of advocates on both sides of the issue.

"It would be wrong to take away the power of eminent domain completely," says Los Angeles attorney Kovavic, who also sits on the city council of Arcadia, Calif. "But I don't think there is anything wrong with inserting as many protections into the process as you can. We can develop rules for making certain the property in question is really blighted. We can require such decisions be made by only a supermajority of the public body that votes on it."

Making certain the process is more open, thinks Puentes of Brookings' Metropolitan Policy Program, "will actually in the long run be good for both sides. It will mean that everyone will have been listened to. It will make it more likely that solutions can be found through negotiation rather than the court room."

RELATED ARTICLE: What's up in Congress?

Congress didn't ignore the Kelo case. Bills were introduced that would withhold some sort of federal funding if a state or locality uses eminent domain for economic development purposes. Most of them do not define economic development.

The most important to watch:

HR 3058, the Transportation, Treasury, Housing and Urban Development, the Judiciary, the District of Columbia and Independent Agencies Appropriations Act of 2006. This bill passed both houses of Congress and is awaiting President George Bush's signature. It will prohibit transportation funds to be used to support state or local projects that seek to use eminent domain powers unless they are for public use. The bill defines public use as mass transit, rail, seaports or airports, utility projects and brownfields. It also calls for a state-by-state study on the nationwide use of eminent domain. Bill sponsors are New Jersey Representative Scott Garrett and Missouri Senator Kit Bond.

HR 4128, the Private Property Rights Protection Act of 2005. It passed the House by a margin of 37038, and prohibits a state or locality from using eminent domain for economic development or subsequent economic development if the state or locality gets federal economic development funds. So even if the taking is completely in accordance with the state's own statutes and ordinances, the state will lose all federal economic development funds for a period of two fiscal years after a court determines there has been a violation.

HR 4128 also revokes states' constitutionally granted 11th Amendment sovereign immunity and permits private rights of action in state or federal court. Wisconsin Representative James Sensenbrenner is the sponsor.

HR 3405, the Strengthening the Ownership of Private Property Act of 2005. Approved by the House Agriculture Committee by a vote of 40-1, it withholds federal economic development funds if a state or locality uses eminent domain for private commercial development or fails to pay relocation costs to displaced property owners. An amendment limits penalties for two years and allows municipalities to "cure" the violation by returning the properties. The bill's sponsor is Texas Representative Henry Bonilla.

S 1313, the Protection of Homes, Small Businesses and Private Property Act of 2005. This bill would preempt state eminent domain authority by permitting it to be used only for a "public use." It applies to all state and local eminent domain authority that involves federal funding. The bill is in committee. Texas Senator John Cornyn is the sponsor.

There are other bills out there: HR 3083 from Montana Representative Dennis Rehberg, HR 3087 and HR 3268 sponsored by Georgia Representative Phil Gingrey, HR 2980 from Colorado Representative Tom Tancredo and HR 3315 sponsored by California Representative Maxine Waters.

--Susan Parnas Frederick, NCSL 

Garry Boulard, a frequent contributor to State Legislatures magazine, is a freelance writer from Albuquerque, N.M.