Kelo v. City of New London, Connecticut: Putting Things Into Better Perspective
February 16, 2006
Mark E. Burkland- Chicago
Richard Redmond - Chicago
Broadcast and print media and legislators around the country have reacted strongly to the U.S. Supreme Court’s decision in Kelo v. City of New London, Connecticut, expressing concerns that the decision now means private homes will be seized or Motel 6’s bulldozed to make way for the next Walmart store or Four Seasons Hotel. Because much of this reaction has been misleading, it is important to put things into better perspective.
One long-standing, and now revived, misconception is that an individual’s property rights are unlimited. Property rights historically have been subject to significant constraints that for decades have had real impact on property values. For example, most municipalities have zoning regulations that limit uses, sizes and other elements of development.
Another well-accepted limit on property rights is the sovereign power of eminent domain. The founding fathers, adopting English common law, understood that an inherent right of the government is to acquire private property provided just compensation is paid. Over the decades, both federal and state governments used their eminent domain powers to build not only public facilities, but also quasi-public facilities like railroads and utilities, and to revitalize blighted areas in partnership with the private sector.
The real question in Kelo was not how extensive is the power of eminent domain, but rather what are the limits placed on it by the Fifth Amendment to the U.S. Constitution. The answer is Kelo actually increases the limits on the eminent domain power.
First, a summary of the Kelo ruling: the Fifth Amendment provides that private property may be taken only for a “public use.” The Supreme Court ruled that economic redevelopment is a legitimate “public purpose” that can satisfy the “public use” standard of the Fifth Amendment.
And how does Kelo actually increase the limits on eminent domain power? The Supreme Court effectively imposes a “planning” requirement that had not previously been articulated. In his majority opinion, Justice Stevens wrote that one measure of determining whether a taking meets the “public purpose” test is whether the taking is part of a comprehensive redevelopment plan. Justice Stevens discussed extensively the fact that the New London Development Corporation (NLDC) had taken great care in planning its redevelopment project for the city – drafting a comprehensive plan, thoroughly deliberating its merits, and holding a series of neighborhood meetings to educate the public about it. The Supreme Court placed great weight on the fact that such comprehensive planning indicated the NLDC had a real public purpose in mind rather than merely picking properties to condemn on a piecemeal basis that may or may not benefit the public but certainly would benefit a private developer.
The NLDC’s planning and decision-making process gave private property owners a voice in the redevelopment process and required that agency and New London to justify the elements and scope of their redevelopment project.
The Supreme Court did not increase eminent domain authority, but instead applied decisions the Court made from 30 to 100 years ago. The Kelo majority relied principally on two earlier Court opinions in Berman v. Parker and Hawaii Housing Authority v. Midkiff. It is important to understand those cases.
In the 1954 Berman case, the Court ruled that the taking of private property as part of an economic development project was a valid “public use” in an area that had been designated as blighted. Congress had declared an area of Washington, D.C. blighted and created the “District of Columbia Redevelopment Land Agency” to redevelop the area. Although some of the area (which included some 5,000 residents) would be condemned for streets, schools and other public facilities, much of the land was targeted for transfer to private parties to build housing and other private facilities.
Long before Berman – in the 1890s – the Supreme Court had rejected the notion that the Fifth Amendment’s “public use” requirement was so limited as to require actual use of the subject property by the general public. In those 1890s cases the Supreme Court determined that land could be taken from one private owner and transferred to another for such purposes as building a dam or an irrigation ditch or to advance the growth and prosperity of a state.
In the Midkiff case decided in 1984, the Supreme Court upheld a Hawaii law authorizing land to be taken away from a few very rich landlords who owned an inordinate percentage of all Hawaiian land and given to those who leased that land from the landlords. The Court ruled that dismantling the Hawaiian oligopoly was a “public purpose” allowed under the Fifth Amendment. The immediate transfer of the condemned property to private individuals did not diminish the public character of the condemnation.
Kelo affirms the use of eminent domain for comprehensively planned economic redevelopment, and validates the use of public/private partnerships that more often than not are required to successfully revitalize distressed areas. This is good news for municipalities that suffer with shuttered businesses, deteriorating buildings, crumbling infrastructure, fleeing residents and stagnated property values. It is also good news for developers who look favorably on the opportunities to join with these municipalities to rebuild those distressed areas.
But the Kelo Court takes care not to go too far. The Court, citing Midkiff, stated definitively that the City of New London would be forbidden from taking private property for the purpose of conferring a private benefit on a particular private party. Justice Kennedy wrote in his concurring opinion that a taking should be struck down if it favors a particular private party and the public benefits are only incidental or pretextual.
Also, it is important to remember that the Fifth Amendment requirement that a taking be for a “public use” is but one of three potential sources of limits on the eminent domain power.
As reflected in the important recent ruling by the Michigan Supreme Court in County of Wayne v. Hathcock, which held that the Michigan state constitution bars exercise of the eminent domain power for economic redevelopment, a second source of limits is that each of the 50 states has its own constitution with its own limits on the eminent domain power. Given the controversy generated by the U.S. Supreme Court’s interpretation of the “public use” limits on the eminent domain power in the federal constitution, we can expect to see similar cases arising in state courts.
The Illinois Supreme Court recently did address the “public use” limitation on the eminent domain power in Southwestern Illinois Development Authority v. National City Environmental. The plaintiff, a state-created economic development authority, had attempted to utilize its eminent domain power to acquire a single parcel of property for the purpose of conveying it to the adjoining automotive race track so the racetrack’s parking lot could be expanded. The Illinois Supreme Court held this failed to meet the “public use” test because the taking did not occur within the context of an overall economic development plan. This case was decided three years before the Kelo case. However, the rationale supporting both decisions is the same: while economic development is an important public purpose, to meet the “public use” test, takings for economic development must be part of a public planning process.
A third source of limits is Congress and the state legislatures. While Congress cannot reinterpret the Fifth Amendment, it can withhold federal funds from a state or local government that exercises eminent domain in a manner Congress finds unacceptable. State legislatures have more direct authority than that; they can amend existing laws, or enact new laws, limiting or even eliminating the exercise of eminent domain power by local governments. The Kelo Court specifically noted that a state legislature may impose restrictions greater than the “public use” requirement on its state’s exercise of the takings power.
At a minimum, each determination by a city in the future to condemn property for economic development, while entitled to judicial deference, will be subject to the tests whether the city’s plan is thoughtful and comprehensive and whether the taking of private property pursuant to the plan serves public purposes or merely benefits private parties.
State legislators who have spoken against what they see as a broadening of eminent domain power will rely on the dissenting opinion in Kelo written by Justice O’Connor. Justice O’Connor wondered how a line can be drawn between “public” and “private” property use. She declared that the majority opinion effectively deletes the words “for public use” from the Fifth Amendment.
Justice O’Connor characterized the issue of takings for economic redevelopment as one of first impression, not before considered by the Supreme Court. She distinguished the rulings in Berman and Midkiff because “[i]n both those cases, the extraordinary, pre-condemnation use of the targeted property inflicted affirmative harm on society” (blight with extreme poverty in Berman and an oligopoly resulting from extreme wealth in Midkiff.) In those cases, Justice O’Connor wrote, the takings directly achieved a public benefit. In contrast, the properties being taken in Kelo are not themselves a source of social harm and the taking of them achieves no direct public benefit.
Legislators also will take note of the dissent by Justice Thomas who rejected the notion that any taking can be constitutional if it results in the giving of the property to a private party with no right of use by the general public. Justice Thomas declared Berman and Midkiff fatally flawed because they depend on the concept of “public purpose” which Justice Thomas declared is a “boundlessly broad and deferential conception of ‘public use’ ... .” Justice Thomas also worried that that the “harmful” consequences of urban renewal projects in which properties are taken for economic redevelopment will fall disproportionately on the less politically powerful and minorities.
Some existing state laws may be declared unconstitutional because they grant eminent domain power to local governments for economic redevelopment without including any standards for the exercise of that authority. If a law allowing a city to condemn for economic redevelopment does not require the city to have sufficient planning or goal-setting processes, then that law may be subject to attack. In Illinois, one particular law stands out for scrutiny – that is, the Business District Development and Redevelopment Act, which grants broad eminent domain power but has little in the way of process, and no criteria, governing the creation of a “business district” in which that power can be exercised.
Other state laws authorizing condemnation, however, are valid under the Fifth Amendment. Redevelopment laws such as tax increment financing (TIF) laws typically set specific standards and processes for determining when a TIF district may be established and property may be condemned. These laws, like the Illinois TIF Act for example, often include many criteria (such as deterioration, crime, and public health and safety) in addition to just economic criteria (such as stagnant property values and dwindling tax revenues).
For more information, e-mail Mark E. Burkland or Richard A. Redmond at mark.burkland@hklaw.com or richard.redmond@hklaw.com, respectively, or call toll free, 1-888-688-8500.