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Eminent Domain, the Kelo Case, and Propositions 98 and 99

By Peter L. Stahl
Pete Rates the Propositions

In 2000 the city of New London, Connecticut, in dire need of an economic boost, approved a redevelopment plan for the middle-class neighborhood of Fort Trumbull. The centerpiece was a major new research facility for Pfizer pharmaceuticals. Also included were a hotel and conference center, a new state park, and office, retail and residential space. To make room for the project, the 115 existing property owners were offered buy-outs. Fifteen owners, including ten who lived there, refused the offers. So the city invoked eminent domain and condemned their lots.

Eminent domain requires that property be taken for public benefit. The holdouts in Fort Trumbull sued the city, arguing that their property was being taken not for public benefit, but for the private benefit of the new owners (principally Pfizer). The case made it all the way to the U. S. Supreme Court, as Kelo v. City of New London. In 2005 the court ruled, in a 5-4 vote, that the city could condemn the property. Justice John Paul Stevens’ majority opinion stated, "The city has carefully formulated a development plan that it believes will provide appreciable benefits to the community, including, but not limited to, new jobs and increased tax revenue." (Emphasis mine)

The Kelo decision has caused quite a stir. Before the decision, eminent domain was used only to raze blighted or hazardous areas, or to make room for public works such as schools, aqueducts and roadways. Now the government can condemn perfectly viable property and sell it to new, private owners, solely to jack up tax revenue.

Imagine the implications for California, where Proposition 13 suppresses property taxes far below their potential. If your town felt the need to pump up its property tax revenues, under Kelo, it could condemn, rebuild and resell a few hundred homes and businesses, particularly those with longtime owners (and therefore artificially-low assessed value). Tax revenue from the freshly reassessed property would jump all right, by tens of millions of dollars. Your town would be allowed to do this because, according to the decision, increased tax revenue is a sufficient benefit to the community to justify eminent domain. Would your city fathers be able resist that huge payoff? Don't bet on it.

In November 2006 we saw a ballot proposition hoping to prevent this scenario. Prop 90 would have amended the state Constitution to prevent the taking of property via eminent domain, except to build facilities offering public services or to correct a public nuisance on a specific parcel. But Prop 90 also contained abhorrent provisions that would have effectively ended all future zoning and environmental regulation. Luckily the voters narrowly defeated Prop 90. (I ascribe this less to the wisdom of the electorate than to Ballot Fatigue. The first seven statewide propositions on that ballot passed, while the remaining six, including Prop 90, failed.)

This June's election includes two more propositions purporting to address the Kelo ruling. Prop 98 would prohibit use of eminent domain to convey property from one private owner to another. But it also contains much more important provisions abolishing rent control, eliminating eviction protections for renters and mobile home owners, and potentially gutting environmental regulations. I oppose Prop 98.

Prop 99, on the other hand, is exclusively concerned with Kelo. All it would do is prevent use of eminent domain to transfer owner-occupied homes to another private party, as happened back in old Fort Trumbull. I support Prop 99.

Since 1980, when he was a student at Harvard, Pete Stahl has been writing what he calls "sensible" opinions on the California ballot propositions. Often provocative, frequently irreverent, usually progressive, Pete cuts through the posturing on either side of each measure, distilling the true issues underlying them. Pete Rates the Propositions is non-partisan and unaffiliated with any candidate or organization. Pete remains obstinately undoctrinaire, considering each ballot proposition on its merits. He is proud to have offended (and persuaded) voters of all political stripes. This originally appeared on Pete Rates the Propositions and is republished with the permission of the author.

Posted on May 23, 2008

Comments

Peter,
Are you same Knucklehead who recommended everyone vote yes on Proposition 93: Legislative Term Limits last February? You sure got fooled on that one, I'm glad California voters did'nt.

Posted by: Jeff at May 23, 2008 04:35 PM

If you're interested in this case, check out Lucas v. South Carolina Coastal Council. It deals with eminent domain and regulatory takings.

Posted by: Greg Wilson at June 9, 2008 06:03 PM

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