Supreme Court Appears Split over 'Economic Development' as Public Use

Supreme Court Appears Split over 'Economic Development' as Public Use
April 1, 2005

Steve Stanek

Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute and managing... (read full bio)

U.S. Supreme Court justices seemed divided on February 22 when lawyers argued over whether local governments may condemn a person's home or business for private redevelopment.

Property rights advocates say the decision in the case of Kelo v. City of New London, Connecticut could be the most important property rights decision of the past 50 years.

New London is trying to take the property of homeowners in the city's Fort Trumbull neighborhood to make way for a luxury hotel, high-end condominiums, and private office space development.



Constitutional Protection

City officials argue they are justified in condemning the property for private development, because the development will generate more tax revenue than the neighborhood's homes and small businesses. Use of eminent domain for economic development is a public use allowed under the U.S. Constitution, city officials say, even when the property in question is not blighted, neglected, or abandoned.

Defenders of property rights say the city is going too far.

"This is where eminent domain is not Constitutional. We're trying to set the outer boundary," said John Kramer, a spokesperson for the Institute for Justice, which is defending owners of 15 houses slated for condemnation. "What New London is proposing is limitless eminent domain."

This became clear during questioning by the justices.

Justice Sandra Day O'Connor asked New London attorney Wesley Horton, "For example, a Motel 6. The city thinks it should have a Ritz-Carlton, [to] have higher taxes. Is that OK?"

"Yes, Justice O'Connor, that's OK," Horton answered.

Justice Antonin Scalia asked, "You can take from A and give it to B, if B pays more in taxes?"

Horton answered, "If it's a significant amount."



Public Use Redefined

The Fifth Amendment to the U.S. Constitution says private property may not be "taken for public use, without just compensation." Public use has long been understood to be a use specifically by and for the public, such as public roads, schools, buildings, or utilities.

"Most people understand 'public use' to mean things like highways, bridges, and prisons--not a casino, condominiums, or a private office building," said Dana Berliner, one of the Institute for Justice attorneys representing the New London homeowners, in a statement shortly before the Supreme Court hearing. "But for too long, courts have failed to check the marriage of convenience between government and developers, declaring 'public use' to mean whatever politicians say it means, no matter how blatantly private the project."

Berliner said private developers "love eminent domain" because "they can secure land on the cheap without the hassles of negotiating with individual owners. And local officials get to trumpet exciting projects promising new jobs and taxes. But since everyone's home or small business would generate more jobs or taxes as a big-box retailer, no one's land is safe."

Fellow Institute for Justice attorney Scott Bullock made much the same point during his arguments before the justices. He told them if New London prevails, no property--no matter where it is located or how it is cared for--would be safe from condemnation.

"Every home, church, or corner store would produce more tax revenue and jobs if it were a Costco or a shopping mall," Bullock said.



Some Justices Appeared Skeptical

Justices Ruth Bader Ginsburg and David Souter seemed skeptical of that argument.

"You're leaving out that New London was in a depressed economic condition," Ginsburg said. "The critical fact, on the city's side, at least, is this was a depressed community, and it wanted to build it up to get more jobs."

The development would be built as an enhancement to a $270 million research and office facility of the Pfizer pharmaceutical company.

Two justices--Chief Justice William Rehnquist and Justice John Paul Stevens--were absent from the oral arguments.

The case reached the Supreme Court in 2004, after the Connecticut Supreme Court issued a 4 to 3 ruling that even if there is nothing wrong with a home, business, or neighborhood, the government can use eminent domain to take the land and give it to a private developer who would reap a financial gain and generate more taxes in the process.


Steve Stanek (stanek@heartland.org) is managing editor of Budget & Tax News.


For more information ...

More information on Kelo v. City of New London, Connecticut is available on the Institute for Justice Web site at http://www.ij.org/private_property/connecticut/index.html.

Steve Stanek

Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute and managing... (read full bio)