Archive | Eminent Domain

Pfizer Corporation Plans to Abandon New London Headquarters that Led to the Kelo Takings

The Pfizer Corporation has announced that it will close down its headquarters in New London, Connecticut. [HT: my former student Josh Blackman, and other VC readers]. As our regular readers may recall, Pfizer played a key role in instigating the notorious condemnations that led to the Supreme Court’s decision upholding the taking of private property for “economic development” in Kelo v. City of New London. Pfizer lobbied state and local governments to undertake the condemnation so that the land could be transferred to developers who would build facilities that were expected be useful to the firm and its employees. The head of the New London Development Corporation – the quasi-governmental agency that ordered the takings – had close ties to Pfizer and was married to a Pfizer executive.

The Kelo condemnations inflicted great harm on the people who lost their homes and businesses and led to the expenditure of some $80 million in public funds. To date, however, nothing has been built on the site, and there is no prospect that anything will be in the foreseeable future. Pfizer’s decision to leave New London makes it even less likely that anything productive will be done with the condemned land anytime soon. So far, the main beneficiaries of the Kelo takings seem to be the feral cats who have settled in the area. Far from producing the “economic development,” the Kelo condemnations have actually damaged the local economy by destroying taxpaying homes and businesses and expending large amounts of public money for no return.

For reasons I discuss in much greater detail in this article, this outcome should not be surprising. State and local governments that undertake “economic development” condemnations have strong incentives to approve takings that are expected to benefit well-connected interest groups even [...]

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New York’s Highest Court to Hear Important Eminent Domain Case

The New York Court of Appeals – the state’s highest court -is about to consider an important property rights case, Goldstein v. New York State Urban Development Corporation. The case involves a challenge to the condemnation of large amounts of property for the purpose of transferring the land to influential developer Bruce Ratner, who plans to use most of it to build a stadium for the New Jersey Nets (which he owns), and “luxury housing.” The targeted property owners argue that these takings are not for a “public use,” as the New York state constitution requires. Certainly, the case is a fairly egregious example of the use of eminent domain power to benefit private interests. I wrote about this taking in a 2008 post addressing the federal court case in which the Second Circuit Court of Appeals upheld these condemnations under the federal Constitution (as it was required to do, given the Supreme Court’s decision in Kelo v. City of New London):

…[T]he fact that much of the condemned land is to be used to build a sports stadium raises serious red flags about the true likelihood that the general public will benefit from the condemnation. Numerous studies by economists show that public subsidies for stadium construction create no economic benefits for the general public….

Second, the court claims that the creation of “affordable housing” for the poor is one of the public benefits to be expected from the project. The project will indeed create some new housing units (in addition to the stadium). However, as the Second Circuit opinion concedes (pg. 15), almost 70% of the new housing units will be “luxury” units for the wealthy, and the remainder is mostly not guaranteed to be ever built and is still intended for the “middle class” rather than

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Goldstein v. Pataki and the Shortcomings of Kelo:

The US Court of Appeals for the Second Circuit recently decided Goldstein v. Pataki, a case challenging the condemnation of homes and other property in Brooklyn for the purpose of transferring them to developer Bruce Ratner, owner of the New Jersey Nets. Ratner plans to use the land to build a new stadium for the Nets, as well as other facilities, including some 2250 new housing units.

Not surprisingly, the Second Circuit upheld the condemnations. Under Kelo v. City of New London, they had very little choice. As I discuss in great detail in this article, Kelo mandates very broad judicial deference to the government in determining whether a condemnation is a genuine “public use” under the Fifth Amendment. Any potential benefit to the general public is sufficient, even if it is greatly outweighed by the project’s cost.

The case nonetheless reveals some of the serious shortcomings of Kelo and related precedents. Goldstein v. Pataki is a correct application of Kelo; it is also an example of the sort of abuse that more robust judicial protection of property rights could prevent.

First, the fact that much of the condemned land is to be used to build a sports stadium raises serious red flags about the true likelihood that the general public will benefit from the condemnation. Numerous studies by economists show that public subsidies for stadium construction create no economic benefits for the general public (see, e.g, this book published by the liberal Brookings Institution).

Second, the court claims that the creation of “affordable housing” for the poor is one of the public benefits to be expected from the project. The project will indeed create some new housing units (in addition to the stadium). However, as the Second Circuit opinion concedes (pg. 15), almost 70% of the [...]

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