8 simple rules for taking my urban property: Part 2

November 22, 2005 | Eminent domain, Government, Housing, Legislation and policy, Multipart posts, Tenure, Theory, US News, Zoning and land use

[Continued from Part 1]

 

Kelo came about as a result of a brilliantly orchestrated multi-year strategy by a small advocacy group, the Institute For Justice.  For fifteen years they’ve worked on takings matters, first in regulatory takings — First English, Nollan, Palazzolo, and Tahoe-Sierra – with efforts that have largely failed.

 

They’ve cherry-picked plaintiffs with great acuity, choosing horror stories of abuse of ED4ED and then having an eighty-year-old woman wheeled into Supreme Court oral argument by a uniformed officer.  They had their public relations machine geared up for a win or a loss, with the goal of turning to legislation post-Kelo.

 

After Kelo, the Institute For Justice caught a break when Justice Stevens, author of the majority opinion, seemed to retreat from his own writings:

 

It is not every day that a Supreme Court justice calls his own decisions unwise. But with unusual candor, Justice John Paul Stevens did that last week in a speech in which he explored the gap that sometimes lies between a judge’s desire and duty.

 

Justice_stevens

“Did I just say something controversial?”

 

As the Institute For Justice crowed:

 

Washington, D.C.—U.S. Supreme Court Justice John Paul Stevens, who wrote the majority opinion in Kelo v. City of New London upholding eminent domain for private development, said during a speech last week that the result in the case is one “I would have opposed if I were a legislator,” the New York Times reported today.

 

In a speech to the Clark County Bar Association in Las Vegas, Stevens noted that the result of his majority opinion in Kelo is “entirely divorced from my judgment as concerning the wisdom of the program” to take homes for private development.  “My own view is that the free play of market forces is more likely to produce acceptable results in the long run than the best-intentioned plans of public officials,” he said.

 

While Stevens reiterated his belief that eminent domain for economic development is constitutional under the Fifth Amendment to the U.S. Constitution, he noted that as a matter of policy, the result in Kelo is “unwise.”

 

Justice Stevens meant, of course, that the appropriate use of and limitations on ED4ED is to be set by legislators, not judges.  And legislators respond to voters:

 

Our informal post-Kelo survey indicates that the use of ED4ED by local government deterred or delayed.  Indeed, ED4ED is used very rarely: over the last five years, in cities of over 100,000 population, there have been an average of fewer than four cases per city.

 

That reasoning will only get you so far, because on similar statistics, no one should become upset about the death penalty, since so few people are actually executed under it.  Nevertheless, Professor Kagan’s correct that, for a tool that is used seldom, there has been an extraordinary blowback against Kelo, even in a state as liberal as Massachusetts. 

 

Thirty-five states have proposed legislation to limit or ban ED4ED.  Oregon, not exactly a conservative hotbed, adopted Measure 37 which had eminent domain implications, although an Oregon county judge recently ruled Measure 37 unconstitutional. 

 

What does Kelo mean, judicially and otherwise?  Said Professor Kayden:

 

1.       The Constitutional war is over.  If stare decisis ["to let stand what is decided" -- Ed.] means anything, the public use/ public purpose question is done.  Now the issues are around ‘just compensation.’  [Didn't you say that months ago? -- Ed.  Why, yes, now you mention it!]

 

2.       Federalism is alive and well.  State constitutional battles are just beginning.  In Michigan, for instance, Wayne v. Hathcock overrode Poletown (where a large part of Detroit‘s Polish community was taken to make way for a new GM plant).  The condition precedent of blight is being challenged [because it has been stretched -- Ed.].

 

Poletown_holdout_resident 

John Saber, one of the last residents of Poletown, sits on the front steps of his home on Kanter Street in 1983.


 

3.       Separation of powers is also alive and well.  Executive and legislative branches are springing into action.  Just a couple of weeks back, by a 376-38 vote, the House of Representatives passed a law denying Department of Transportation or HUD funding for economic development projects to any city that uses ED4ED. 

 

4.       ED4ED now has a procedural road map.  If you want to take property in ED4ED, follow the nominal terms of Kelo.  There are eight simple rules

 

Which I have transcribed in this handy do-it-yourself takings kit:

 

Ritter_8_simple_rules

“I don’t want to hear about transparent and open processes, young lady!”

 

Jerold Kayden’s 8 Simple Rules For Taking My Urban Property

 

1.       Be comprehensive.  Make your redevelopment authority program comprehensive.

2.       Follow due and open process.  Adopt it deliberately, transparently, with thorough consideration that you carefully document.

3.       Emphasize public-use benefits.  Parks and waterfronts trump jobs, and jobs trump new revenues.

4.       Compete the bid.   Use an RFP (Request For Proposal) or other competitive process to select the plan and developer and to eliminate the presumption of a hard-wired sweetheart deal.

5.       Get what you pay for.  Use performance benchmarks — cash flow participations, clawbacks, rescission, right of final refusal — to make developer perform. 

6.       Give back what you reap.  Earmark incremental benefits like real estate taxes for public-use projects.

7.       Embrace public oversight.  Have a special public oversight mechanism on the developer.

8.       Use ‘public-private’ partnerships.  Use new forms of public-private partnerships that “muddy the private waters.”  Long-term ground leases are not good enough.

 

Regardless of their efficiency in takings-defense prophylaxis, these are good rules, from a public-policy standpoint.

 

Some of us take little comfort at the thought of a public or quasi-public entity handling the urban renewal, since it was just such entities (Robert Moses, anyone? New York‘s Urban Development Corporation?) that ran the most roughshod over neighborhoods and got into so much trouble: 

 

To create more low-income housing, Rockefeller created the unprecedented-in-its-power New York State Urban Development Corporation (UDC), which could override local zoning, condemn property, and create creative financing schemes to carry out desired development. (UDC is now called the Empire State Development Corporation, which forms a unit, along with the formerly independent Job Development Authority, of Empire State Development.)

 

Ny_daily_news_1976 

New York Daily News, October 30, 1975

Gerry Ford never said those words, but he was remembered as having said them!

 

Personal sidebar down memory lane, otherwise known as, “how soon we forget.”  I started in this business in the late summer of 1975, amid a lingering nasty recession brought on by the Arab Oil Embargo, and found myself, for the first time in my young life, facing events where I knew more than the newspaper.  UDC, a public agency set up by Nelson Rockefeller to jump-start redevelopment in New York City, had sold billions of dollars’ worth of bonds (back when that was a lot of money!), very few of which could pay their debt service because the properties they had financed — low-income affordable housing, for the most part — were not renting up as had been originally and optimistically projected.   With the bonds in default, New York City (which had backed them somehow, as about half of the UDC properties, including many of the worst dogs, were in the Big Aggle) was itself in danger of default.  There was serious talk of the city going bankrupt.

 

I began my career first typing offering prospectuses describing the risks of affordable housing, and then within twelve months was writing computer programs to estimate the tax and investment financial consequences of foreclosure on these very UDC properties.  Then I went on to trying to work out many of said UDC properties, and thereby hangs a tale …

 

But the punch line is this — when researching this post, I spent an hour Googling for “UDC” and “bond default crisis” and find the whole thing has been swept down Orwell’s memory hole.  UDC is now called Empire State Development Corporation, and its sordid past is buried, the better to be forgotten.

 

Now back to our regularly scheduled broadcast …

 

Professor Kagan is entirely right, the jurisprudence favors a public body doing the dirty work over the ‘reflecter’ sale where the public takes from one private party and immediately flips the property to another. 

 

So I propose a basic principle: ED4ED should be a means of last resort.  There are alternative ways of assembling land without it.  Harvard University has done quite well assembling large parcels in Allston using time-honored techniques like straw buyers [Laughter] [And threats of eminent domain! -- Ed.]

 

Development agencies should justify the wisdom and fairness of using public-private partnership for development in cities.  We should do more scholarly research to examine why and how public-private partnership delivers benefits to society.  We have good tales to tell:

 

Pennsylvania Avenue [Washington, DC]

Times Square [Noo Yawk]

Dudley Street [Boston, which played a role in the Dartmouth Hotel rehab]

 

At this point, his talk turned a remarkable corner:

 

We’re not even sure that urban redevelopment is a good thing.  We need much more scholarship to test that hypothesis and prove or disprove it.

 

Say what ???

 

Baby_annoyed 

 

Like any other tool, ED4ED is value-neutral: it can be used For Good or For Evil.  Maybe it’s less a question of whether ED4ED is proper in the abstract, and more the distinguishing of best practice from worst practice.  Which brings us back to the question that remains fully open:

 

In eminent domain for economic development, what is ‘just compensation’?

 

We can actually break that question down into three further questions:

 

  1. Who should be compensated: individual property owners, the community at large, or both?
  2. How do we measure the damage done: by property taken or something less tangible?
  3. If compensation includes a performance component (more than up-front cash), what should that be?

Highway takings — while incontrovertibly for public use and often (if not always) through areas of blight — can kill neighborhoods because they destroy its cryptobiotic societal infrastructure:

 

  • In Hartford, I-84 cut Asylum Hill off from downtown, dooming the neighborhood to thirty years of decline.
  • In New York, Moses’ Cross Bronx Expressway amputated that chunk from the city body, with horrendous consequences that made “the South Bronx” a symbol of urban failure.

Even though money is the lifeblood of commerce, watering a relocated plant does no good if all its roots have been severed.  An urban ecosystem can be swiftly killed but cannot be swiftly revived after such cauterization.  If the party being harmed is not just the owners whose property is taken (and paid for) but the urban ecosystem itself, then solely monetary relief can never be a sufficient remedy any more than paying the widow brings back the husband.

 

We already have a policy example of damage remediation in kind: in strip-mining, if you slice the land open, then you stitch it back together afterwards.

 

In fact, even in the context of urban redevelopment, there actually is a truly remarkable success story where the ‘just compensation’ for eminent domain taking was paid not to individuals but for benefit of the community, and not simply in money but in a structured enduring intervention. 

 

“Who, what, where?”  I hear you cry. 

 

Clamor 

“Guys, please, I’m posting as fast as I can!”

 

That’s a post for another day.

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