Feature

by Emily Landes

Two years ago, no one wanted to talk about eminent domain—the government’s ability to force the sale of private properties for the greater public good. Then, in June 2005, the United States Supreme Court announced its 5-4 decision that affirmed eminent domain could be used not just for “public use,” as is specified in the Constitution, but for “public purpose” as well. The implication is that eminent domain can be used to take private property not just to build roads, schools or parks, but to build company headquarters, shopping malls and other private developments that could be considered an improvement to the community. In an instant, eminent domain became one of the hottest topics for the property rights community and set off a national firestorm of controversy, pitting private citizens against their local governments.

At press time, 25 states had enacted legislative measures that attempt to reform eminent domain. Several states will address the issue on their ballots in November, including California’s Proposition 90. But Prop. 90 has proven to be almost as controversial as the Supreme Court’s decision: proponents claim it is the only way to end eminent domain abuse and make sure property owners can feel safe in their own homes, while critics call it a bait-and-switch proposition that will seriously compromise the government’s ability to redevelop and regulate.

The Decision
The case that brought eminent domain back to the forefront of the political landscape was Kelo v. New London—a legal fight that pitted homeowner Susette Kelo against the City of New London, Connecticut, which attempted to use eminent domain to take Kelo’s little pink cottage in the name of greater economic development. The city launched its redevelopment plan in 1998 after pharmaceutical company Pfizer decided to build a plant in the Fort Trumbull area of the city. The area was considered economically depressed and the city saw an opportunity to build on the new jobs and high visibility Pfizer would bring. City officials decided to redevelop the area with a resort hotel and conference center, a new state park and retail and office space.

The city turned to the New London Development Corporation, a private company under the control of city government, to plan the redevelopment. It was able to buy 100 of the 115 commercial and residential lots needed for the redevelopment to take place. Fifteen owners, including Kelo, didn’t want to sell, so the city used eminent domain to condemn the holdouts’ homes and lots. The owners sued the city in the Connecticut courts, saying that the government had abused its eminent domain power. The Supreme Court took up the case in 2005; it was the first eminent domain issue heard by the court since 1984.

On June 23, 2005, the court decided 5-4 in favor of New London. Justice John Paul Stevens wrote the majority opinion (joined by Justices Anthony Kennedy, David Souter, Ruth Bader Ginsburg and Stephen Breyer), which stated that the city should be given a wide breadth of opportunities, including new jobs and tax revenue, to seize land if it benefits the community. Regardless of the fact that eminent domain had largely been used for public projects historically, Justice Stevens argued that there was “no principled way of distinguishing economic development from the other public purposes that we have recognized.” Justice Sandra Day O’Connor wrote the dissenting argument (joined by Chief Justice William Rehnquist and Justices Clarence Thomas and Antonin Scalia); she worried that the majority’s decision would allow big corporations to take land from small property owners if they do so in the name of “public purpose.”

After the Kelo decision, most of the remaining holdouts sold their properties to the city. Susette Kelo continued to fight the decision until this past summer, when the city agreed to move her cottage to another area in the city. Ironically, this is the solution Kelo had suggested herself when the city first approached her about selling her property more than five years ago.

The Fallout
Of course, by now, the Kelo decision has become about much more than saving one woman’s cottage. The decision was hugely unpopular (most national polls placed the disapproval rate between 65% and 97%) and quickly became a lightening rod for property rights activists. Legislatures in 25 states have passed laws designed to blunt the government privilege affirmed by Kelo, and a handful of states are currently debating the issue in their legislatures. A wide variety of city measures that curb eminent domain have been passed as well. It is important to note that none of these legislative changes have attempted to alter the way eminent domain is used for public works like parks or roads; the outrage and subsequent legislation is all directed toward the government’s ability to take private land for projects that even partially benefit private groups.

Lower courts have also weighed in against the liberties granted to governments by Kelo. The Ohio Supreme Court, the first of the state high courts to take up the decision, recently ruled unanimously that a Cincinnati suburb could not take the homes from a few holdouts to build a $125 redevelopment project containing offices, shops and restaurants in a depressed neighborhood. The court said that economic factors should be considered when determining if eminent domain can be used, but that it should not be the only support for the decision.

In addition to new legislation and court decisions that speak to the continuing anger about Kelo, many states will have initiatives to protect homeowners from eminent domain abuse on their November ballots. These measures can largely be found in Western states, where land-use regulation is often the toughest and land, therefore, comes at a premium. California is no exception. Two eminent domain measures competed to get on the state’s November ballot—one a narrow measure that simply curtails the government’s ability to take property for private gains and the other a wide-reaching initiative that not only contains the prohibitions of the other measure, but also mandates that the government compensate property owners for any future regulatory actions that reduce their property values. Due to this “regulatory takings” provision, the latter initiative is far more controversial than the first; it is also the only initiative that garnered enough signatures to appear on the November ballot.

Protecting Homes or Taxpayer Trap?
Called the “Protect Our Homes” initiative by its ardent supporters and the “Taxpayer Trap” initiative by its equally spirited opponents, Proposition 90 is further exacerbating the Kelo wedge between property owners and city redevelopment agencies and land-use regulators. Interestingly, both sides appear to support some form of eminent domain reform. It is the regulatory takings provision and what some call the vague language in the proposition that have been the sources of most of the controversy.

One of the most vigorous local proponents for the measure is Oakland’s John Revelli, who was personally affected by eminent domain when the Oakland Redevelopment Agency took his nearly 60-year-old auto shop so that a private real-estate developer could build a subsidized housing project with 20,000 square feet of commercial space and a park. Revelli co-wrote the ballot argument for Prop. 90, which states “Proposition 90 protects our fundamental right to own—and keep—our homes and private property. It’s called the ‘American Dream’ and the government should not be in the business of destroying it.”

The ballot argument also acknowledges those who criticize the proposition in no uncertain terms, calling them “greedy government bureaucrats who want higher taxes and mega-developer campaign contributors who make millions using agricultural land, residential neighborhoods, businesses and churches seized through eminent domain to develop strip malls and other projects.”

But San Francisco land-use lawyer and active Prop. 90 critic Andrew Schwartz contends that he gains nothing by campaigning against the initiative. In fact, in a talk hosted by the San Francisco Planning and Urban Research Association, Schwartz said that Prop. 90 would be great for business. “I’ll have more work than I could ever want until I retire if this thing passes,” he claims. The reason, according the Schwartz, is that every word of the proposition’s nebulous language surrounding regulatory takings will have to be litigated before its impact is fully realized.

He further contends that the specter of spending millions in lawsuits will have a direct result on government regulations. Rather than enforcing regulations that might entitle property owners to monetary compensation under Prop. 90 or proceed with an expensive legal case that could prove why that compensation is unmerited, Schwartz predicts government agencies will simply stop enforcing any land-use regulation or environmental protection. “Government doesn’t have the money to pay for regulations. The government would shrink down to regulating purely health and safety regulations,” he says. If local agencies do decide to pay for their regulations, he suggests, the costs would fall squarely on the backs of taxpayers. His opinion is supported by an analysis from the state’s Legislative Analyst’s Office (a nonpartisan fiscal and policy advisor). It reads, “The measure’s provisions regarding economic losses could have a major effect on future state and local government policymaking and … it is likely to result in significant net costs on a statewide basis.”

But those who support Prop. 90 say that only new regulations will be subject to the regulatory takings provision and that current state and local environmental, consumer protection and public safety laws will not be affected. Section six of the proposition states “the provisions added to this section shall not apply to any statute, charter provision, ordinance, resolution, law, rule or regulation in effect on the date of enactment.”

Perhaps the most striking testament to the ongoing controversy surrounding this proposition is that, at press time, neither gubernatorial candidate had taken a position on it. Perhaps that is because, according to a recent Field Poll, 51% of Republicans, 42% of Democrats and 43% of independents support the measure. Overall, 46% of likely voters backed the measure after it was briefly explained and only 31% were opposed. The rest were undecided.

Both sides acknowledge that California is an influential and important battleground in the fight over eminent domain. It appears that even if the Supreme Court decision brought eminent domain back into the spotlight, the voters’ ruling on Proposition 90 may be an even more important contribution to the national debate over property rights.

The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of SFAA or the San Francisco Apartment Magazine. Emily Landes is the managing editor of San Francisco Apartment Magazine and Rental Housing Magazine. Copyright © 2006 by San Francisco Apartment Magazine. All rights reserved.