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If You Ever Build It, Maybe Some Economic Development Will Come - The New London Development Project Since Kelo:

When the Supreme Court upheld the condemnation of private property for transfer to other private parties in Kelo v. City of New London, it was in large part on the theory that courts should defer to local governments' judgments about when the use of eminent domain is needed to promote "economic development." However, two and one half years after the Supreme Court ruled in favor of the city and some seven years after the condemnation proceedings were first initiated, little or no economic development has occurred on the condemned land. As the New London Day documents in this recent article and this editorial, the New London Development Corporation (the city agency responsible for the condemnations) and its designated private developer Corcoran Jennison have missed repeated deadlines to begin construction of the new housing that they were supposed to build in the area. Indeed, as The Day points out, no construction at all has taken place on the site since the Supreme Court's decision was issued in June 2005.

Yesterday, the NLDC and Corcoran reached an agreement under which the developer must meet a May 29, 2008 deadline to secure financing for the construction of 66 luxury apartments and 14 townhouses in the area. If it fails to do so, it will forfeit its right to develop the property and the NLDC will be free to pick a new firm to develop the area.

Even if Corcoran Jennison and the NLDC finally get their act together, it is unlikely that their project will produce enough economic development to offset the more than $80 million public funds that have already been spent on the project (see my article on Kelo for the source for this figure). And that estimate does not include the economic damage inflicted on New London by the destruction of the precondemnation uses of the property, including a significant number of homes and businesses. It also does not include the economic costs of letting the area lie unused for a period of several years while the NLDC and Corcoran tried to find a way to finance their planned development project.

If the Kelo condemnation ultimately ends up creating more economic costs than benefits, that would not be a surprising development. For reasons I have explained in great detail in several articles (e.g. here and here), economic development takings often harm local economies more than they benefit them. Local governments and the private interest groups that seek to acquire condemned land have strong incentives to overstate the benefits of such condemnations, while understating the costs. And it is extremely difficult - often impossible - for voters to assess their self-serving claims accurately.

What is striking about the Kelo takings is that this pattern held true even in a case where intense nationwide media scrutiny was focused on the local government and its chosen developer. The Day also deserves credit for providing some excellent local coverage of the controversy. In more typical cases, where there is much less media attention, local governments have even less incentive to actually produce the "economic development" that supposedly justified condemnation in the first place.

SupremacyClaus (mail) (www):
In its 100 uses of the word, property, in Kelo, not one had the adjective, real. If Kelo applies to chattel, it may be its greatest use.

What do lawyers think about taking organs for transplants into dying patients, under Kelo? It is better than transplanting them into the stomachs of worms. The savings to the taxpayer far exceed the value of increased real estate taxes.
12.13.2007 1:24am
Ilya Somin:
In its 100 uses of the word, property, in Kelo, not one had the adjective, real. If Kelo applies to chattel, it may be its greatest use.

Most of the Supreme Court's property rights decisions (including Kelo) treat real property and personal property identically.
12.13.2007 1:41am
TonyRyan (mail):
In all of the discussions I have ever heard regarding the Kelo decision I have never heard anyone mention what seems to be the most troubling part of the development story to me. Are we really building a resort hotel (the primary element of the development) for businesspeople visiting a drug company or out-of-towners who want to visit the submarine museum? Doubtful. What is more likely is that New London really had its eye on capturing some of the business from Foxwoods, the world's largest casino, which happens to be 15 minutes down the road. Anyone visiting Foxwoods, Mohegan Sun (next door, also among the largest casinos in the world, and home to a WNBA franchise), or the almost finished new billion-dollar MGM usually travels through New London and New London has been trying to leverage this position for the past two decades - often with little success. Just to be clear, we are talking about more gaming square footage than the Las Vegas Strip or Atlantic City in three casinos and you are the only substantial town within an hour's drive. The decision in Kelo was not particularly popular but I wonder how much less popular it would be if opponents framed it as the city trying to get a luxury hotel that would cater to gamblers instead of simple "economic redevelopment."
12.13.2007 1:42am
theobromophile (www):

but I wonder how much less popular it would be if opponents framed it as the city trying to get a luxury hotel that would cater to gamblers instead of simple "economic redevelopment."

Call me a cold-hearted capitalist, but that would make it more justifiable to me. That at least sounds like a business plan - and people who win at casinos often spend a good chunk of their winnings that night.
12.13.2007 4:07am
American Psikhushka (mail) (www):
Most of the Supreme Court's property rights decisions (including Kelo) treat real property and personal property identically.

In that case its good that people's bodies are protected by the criminal law and civil tort law.
12.13.2007 6:00am
FantasiaWHT:
Hah, sounds a lot like Milwaukee and the Park East freeway. The idiots tore down an entire spur of a freeway that served the area just north of downtown, claiming they would fill its footprint with all sorts of development, including a Harley Davidson museum. 5 years later? It's still all empty land.
12.13.2007 8:19am
NatSecLawGuy (mail):
Just a short comment of the use of "If you build it, they will come." Being an Iowan, thus having some attachment to the phrase, I have always been more than happy to restrict that phrase to its facts. Guess its all those empty shells that my local municipality told me would be filled if they built it.
12.13.2007 8:20am
A.C.:
Ah, the folly of letting your interpretation of constitutional rights be determined by a (temporary) property boom... I'm sure a lot of building projects are hanging fire these days.
12.13.2007 8:31am
Tim Dowling (mail):
Speaking of Kelo, I'd be interested in hearing Prof. Somin's views on the most recent proposed Kelo reform measure, which is about to go to a vote this week in the U.S. Senate (perhaps today). Senators Craig, Allard and Brownback have proposed an amendment to the farm bill that would prohibit federal, state, and local officials from condemning farmland for use as a public park. On the Senate floor (Dec. 10), Craig stated: "If the city wants to create a park, go find a willing seller and a willing buyer. That is the way it has been done historically--not to use the power of eminent domain given them, if you will, by the Kelo decision." Regardless of what thinks of the taking of farmland for parkland as a policy matter, wouldn't everyone here agree that public parks are a traditional public use as a matter of constitutional law, and not in any sense newly authorized by the Kelo ruling? Even Justice Thomas expressly refers to public parks as a public use in his Kelo dissent. The amendment is supported by certain loud voices within the so-called property rights movement, but it seems intellectually incoherent even by their standards. The penalty for violating the proposed ban is a loss of all federal financial assistance and funding for five years, including funding to prevent terrorism or federal emergency assistance to respond to hurricanes, floods, and the like. Thoughts?
12.13.2007 9:10am
RainerK:
theobromophile:

Your capitalist argument makes sense, but I doubt it will convince the anti-gambling crowd. However, I thought the cas*no business model was to make a very healthy profit. Will there be enough people with winnings or will most have to move to the Relax Inn? Perhaps to prevent this problem, the New London movers and shakers should think about condemning the Relax Inn.

(Casino is a blacklisted word? Works here, but not above. TonyRyan got away with it. The challenges of spam prevention.)
12.13.2007 9:12am
David A. Smith (mail) (www):
Without in any way seeking to defend the developer -- because I don't know any of the facts -- don't forget that devleopments plans occur in a timetable. All the litigation served to delay the project for years and years, and in the interval the market for financing has tanked. So it's well within the realm of possibility that it could have produced the claimed benefits but delay has made the numbers, which used to work, fail now.

Delay for the purpose of rendering developmetn cost-prohibitive or financially infeasible is, unfortunately, all all-too-common strategy. See New York CIty's historic-review processes!
12.13.2007 9:17am
John (mail):
Unfortunately, the stupidity or corruption of local governments, even if proved in some general sense, is not relevant to the Kelo analysis. It is only relevant (or should be) to voters.
12.13.2007 10:18am
rmark (mail):
Why not require the developer to post a bond that covers the economic value?
12.13.2007 10:25am
Adam J:
David- yeah and we all know how poorly NYC does development-wise... oh wait.
12.13.2007 12:12pm
Ilya Somin:
Without in any way seeking to defend the developer -- because I don't know any of the facts -- don't forget that devleopments plans occur in a timetable. All the litigation served to delay the project for years and years, and in the interval the market for financing has tanked. So it's well within the realm of possibility that it could have produced the claimed benefits but delay has made the numbers, which used to work, fail now.

I would note 2 points:

1. Several of these missed deadlines were set after the litigation was over and even the ones that occurred before were set at a time when it was ongoing.

2. The city government should have taken into account the possibility of a market downturn. A longterm development project that makes sense only under very optimistic econoimc projections is probably one that doesn't make much sense at all.

3. If there was a strong likelihood that financing couldn't be found, that strengthens the case for not undertaking the condemnations in the first place.
12.13.2007 1:03pm
Russ (mail):
Individual property was abolished with Kelo. There is no real private property if the government can invent a reason to seize it.

Government was supposed to secure our rights, not take them.
12.13.2007 1:22pm
Sean O'Hara (mail) (www):

I would note 2 points:

1.

[...]

2.

[...]

3.


Nobody expects the Spanish Inquisition!
12.13.2007 2:08pm
Gideon Kanner (mail):
To David A Smith
A dispatch from the real world: eminent domain is a type of litigation that is least susceptible to delaying tactics on the part of property owners. Every state that I know of has some form of a so-called OIP procedure (Order for Immediate Possession, also known as quick-take -- the feds call it a declaration of taking) whereby upon the filing of a condemnation action the condemnor can take immediate possession and in some jurisdictions title, to the subject property ex parte, without notice to the owner and without a hearing (Florida is an exception -- it requires a hearing and a judicial order of taking and California just added a statute requiring a noticed hearing). Due process? Never heard of it, unless you are a drug dealer (see the James Good Realty case). But that only goes for forfeiture cases, not eminent domain. The Supreme Court says that takings can be accomplished by physical seizure, and that it has never seen any value in providing compensation either before tghe taking or contemporaneously with it, though it concedes that in theory that should be the case. As long as the government syas it wil pay, that's OK. That is known as the "someday your price will come" approach. At least two circuits have stated in haec verba that the government can just seize your property and say "sue me." Then there is legislative expropriation, whereby Congress passes a law saying that as of a stated date your property is the government's, relegating you to hiring lawyers, expert witnesses, etc. and filing suit in the US Court of Federal Claims which only has jurisdiction to award compensation -- if you want to challenge the taking you have to file another suit. If your claim is $10,000 or less - which is economically imposssible to litigate -- you can sue in the local US District Court and don't have to shlep to Washington. Big deal!

In Connecticut (and in a few other states -- e.g., Rhode Island, Kansas and New York [in takings by the state]), you don't even get that. There, the taking is administrative, accomplished by a unilateral non-judicial act of the condemnor, such as filing of an official map showing your property as part of te condemnor's project. If the owners don't like the compensation proffered by the taker, or want to challenge the taking, they have to take the initiative, hire lawyers, etc., and file a separate lawsuit.

Welcome to my world.
12.13.2007 2:27pm
Ilya Somin:
I would note 2 points:

1.

[...]

2.

[...]

3.


Yes, I added a third point, but forgot to change "2 points" to "3 points." Sue me!
12.13.2007 4:24pm
Mr. Liberal:
I just want to point out a single anecdote does not count as significant evidence.

The wisdom of the Kelo project has nothing to do with the wisdom of the Kelo decision.

All you property rights fanatics can come up with is that you do not like the results of democracy, based on the assumption that local government will be corrupted.

(1) May I suggest that to the extent that local government is corrupted, that this represents a massively larger problem than issues going to mere takings.

(2) You need more evidence of corruption that mere general theoretical statements or particular anecdotes.

(3) Your evidence of corruption must be widespread, isolated incidents are not adequate.

(4) So far, you have only perhaps shown that the Kelo incident was perhaps an unwise decision, not a corrupt one. Not only is this a single anecdote, it is a single anecdote that does not say much of importance. Unwise decisions occur all the time in both the private and public sector. Exhibit A: subprime mortgages and the mortgage bubble.

Finally, notice how people are using the Kelo decision to attack takings generally. Public parks have always been considered a public use. But, suddenly, people are citing Kelo to justify curtailing such takings. Why is it that property rights fanatics can't at least be honest? Kelo has nothing to do with takings for public parks.

Which brings up my final point. Property rights fanatics tend to impugn the integrity of local governments. But, given their own dishonesty, shouldn't we be concerned about the integrity of property rights fanatics?

And why is the right to property so important to property rights fanatics, but the right to medical care when you need it so unimportant? It seems to me that property rights fanatics like excessively strong property rights that trump other important rights because they are elitist and exclusive, and dislike a right to medical care because such a right would be egalitarian and raise the negotiating power of the masses you would like to lord over.

Property rights fanatics think that if you do not have enough property, you should not get medical care. It really is fascinating how these strange beliefs have come about. A desire for privilege over those lacking significant property is probably the only reasonable explanation.
12.13.2007 9:00pm
godelmetric (mail):
Actually, as I recall the Kelo plan was corrupt, but that didn't become clear until after the SC decision, which is part of what makes the case so confusing. That discovery was the first thing that came to my mind as the likely explanation for the lack of development. Need some more facts here.
12.13.2007 9:17pm
Gideon Kanner (mail):
Mr. Liberal:

Do read Carla T. Main's new book BULLDOZED, subtitled "Kelo," Eminent Domain and the American Lust for Land. She is a former opinion editor of the National Law Journal, and before becoming a journalist, practiced eminent domain law (on the government side, if memory serves) in New York.

And speaking of Kelo, would it surprise you that according to the NY Times, as the New London - Pfizer deal was negotiated, the head of NLDC and the Pfizer head of research (running the $300 million Pfizer research center next to Fort Trmbull) were married? To each other that is.

And no one has ever explained why the New London Italian-American club, located within the redevelopment area was exempt from the taking.
12.13.2007 9:57pm
Gideon Kanner (mail):
Another thought for Mr. Liberal:

Perhaps you can explain why folks like you who profess tender love for the downtrodden little people, and view big corporate interests with suspicion if not hostility, line up on the side of the new robber barons when it comes to eminent domain -- e.g., Pfizer, General Motors, Daimler-Chrysler, the NY Stock Exchange, the NY Times (oh, yes), Otis Elevator, Target, Costco and all the mega-buck developers who fatten on redevelopment projects that have been displacing not just lower middle class folks as in Kelo, but also primarily, poor, non-propertied urban tenants who have been displaced from their modest dwellings by the hundreds of thousands per year with no compensation whatever until the 1970s, and pecious little thereafter. In California where I live, redevelopment bonded indebtedness has gone from $5 billion in 1985 to $61 billion in 2004. Could that sort of thing have anything to do with the practice known as "land writedown" whereby cities acquire land by eminent domain and pay for it, and then reconvey it to the redevelopers for next to nothing -- e,g. in Kelo the plan calls for the redeveloper getting a 99-year lease on 90 actes of waterfront land for $1 per year. Nice deal, eh? But that was peanuts compared to what General Motors got in the Poletown atrocity. Detroit spent $200 million on acquisition (in 1980s dollars) and then conveyed the land to GM for $8 million, plus GM got a decade-long tax abatement.

For the record, unlike the gung-go libertarians, I am not opposed to eminent domain. But as the Illinois Supreme Court put it, eminent domain should be used with restraint, not abandon. Its victims ahould be fairly compensated which at this time they are not.
12.13.2007 10:25pm
Russ (mail):
"All you property rights fanatics can come up with is that you do not like the results of democracy, based on the assumption that local government will be corrupted."

Property rights fanatics?!?! Are you kidding?

I'm not even sure how to respond to someone who thinks that expecting what we own to not be taken by the government is an okay thing to do.
12.13.2007 11:50pm
David A. Smith (mail) (www):
To Gideon Kanner:

Regarding quick-take, I've seen it both ways. That is, I've seen quick-takes that ran roughshod over the property holder, and I've seen minority holders use procedural delays for purely obstructive purposes. Granted, not always eminent domain legal delays, sometimes faux-historic designations, or claiming that a particular tree is a rare species (yep!).

I've also seen cities suffer because some neighborhoods turn into drug zones *until* they used eminent domain to make neighborhood-level change. I posted about one such example in "Eminent domain done right", posted 8/14/06 at http://dasblog.org.

In short, I think eminent domain for economic development is an essential tool for modern cities — in this I disagree with Professor Somin, as he and I have discussed in email exchanges — *BUT* also think it should be used with discretion, and not as a lever to bludgeon or simply run over small holders.

David Smith http://dasblog.org
12.14.2007 9:14am
Adam J:
Mr. Liberal- watch the government take your land and see how quickly you too would become a property right "fanatic". By the way, (1) is completely irrelevant, simply because there is a larger problem doesn't mean you don't act to solve the smaller problem as well. Regarding(2), how do you propose find evidence of corruption other then the two methods you disregard? Apparently you can't find specific evidence because it's merely an "anecdote", and you can't do a study because it's merely "theory". With(3), I don't understand why you feel that evidence of widespread corruption is required, are we required only to deal with problems that are widespread? And corruption is notoriously difficult to uncover, let alone "widespread" corruption, should we presume that governments won't act corruptly, or should we take proactive steps to prevent corruption? Your point (4) is redundant with 2 &3, and your example is completely irrelevant for so many reasons, but mainly because the subprime bubble hurt people who voluntarily chose to take a subprime mortgage, while takings hurt people who's land is taken from them involuntarily.

Finally, I'm not sure what your point about some "fanatics" thinking the government shouldn't take land at all, that's hardly a crazy position, nor do all people who were upset with Kelo feel that way.
12.14.2007 10:47am
Gideon Kanner (mail):
To David A Smith:

Please, please, don't treat me like an idiot who just fell off a turnip wagon. I have been practicing, teaching, commenting and lecturing in this field for over 40 years, which has given me ample data and opportunity to form my judgments. The complaints, especially in recent years, have been rightly focused, not so much on the use of eminent domain to create public projects (but see my comment post on waste of public funds), but on the crude misuse of eminent domain for private, profit-making purposes. It's done openly and cynically, with judges being complicit in it, just as they were in the 19th century in the case of railroad robber barons. When a lone, courageous judge comes along and blows the whistle on these practices it's a big deal -- see the 99 Cents Only Stores v. Lancaster case and Shepardize it. Interestingly, both the majority and the dissenters cited it approvingly in Kelo.

Do some property owners try to game the system? Sure. But the ability to do so in eminent domain cases is miniscule compared to other fields of law. Interestingly, the abuses on the side of the owners usually take place outside of litigation, and involve sweetheart deals with complicit or corrupt government types. See State ex rel Mosk v. Barenfeld, or the sweetheart deal with Strom Thurmond and his friends, or a similar deal with Michael Dukakis' frieds in Massachusetts (citations on request).

I find it bizarre that you would pick as an example of the goodness of redevelopment takings (in your private corresponsence with me) the anecdotal instance of the creation of a wholesome community for low income folks. That falls in the category of hens' teeth. Redevelopment has historically been a massive engine of destruction of urban low and moderate income housing, displacing hundreds of thousand of people annually -- in the case of low income tenants with no compensation whatever, until the last couple of decades.

And I haven't touched on the gross problem of huge, wasteful expenditures on eminent domain acquisitions for projects that either fail (e/g. the Los Angeles "Intercontinental" airport in Palmdale ($100 million of 1980s dollars down the tubes with absolutely nothing to show for it), or are grossly underestimated (e.g., Boston's "Big Dig" estimated at $2.6 billion but so far costing some $16 billion, and counting).

And even on your premise, how do you justify the procedural mistreatment and rampant undercompensation of condemnees, particularly in cases of redevelopment where the avowed purpose is to increase cash flow to the redevelopers and by a trickle-down process to the community?

Whether on grounds of fairness, or integrity, or good governance, the use of eminent domain for redevelopmen in its present form is a field that is ripe -- make that overripe -- for serious reform. There comes a point beyond which people who defend and promote it in its present manifestation become de facto facilitators of moral, economic and civic evil.
12.14.2007 11:00am
lucia (mail) (www):
@Russ--What did you think of the connection between "property rights fanatics" and supposed opposition to universal medical coverage in Mr. Liberal's comment?

It seems to me I've met people who own property, wish to keep it out of the grasp of local politician and also support universal public health care. In fact, it seems to me, my sister, who lives in a million dollar + house in Highland Park Illinois is one of these people. Her son, who rents in Manhattan, also supports both universal publich health car and the general notion that private property rights are a good thing.

Of course there are just anectdotes. Maybe Mr. Liberal can support his contentions about the belief system of "fanatical property owners" with studies?
12.14.2007 12:05pm
PersonFromPorlock:
lucia:

1. People who amass property are greedy.

2. Greedy people are cruel and uncaring.

3. Cruel and uncaring people are against medical care for the poor. QED. ;^)

What I wonder is, if the economic development in Kelo falls through, and given the resources to argue the case, could Kelo's plaintiffs institute a new suit to require New London to return the property and make them whole?
12.14.2007 12:47pm
Gideon Kanner (mail):
To: PersonFromPorlock

The answer to your question is "No." See Gideon Kanner. We Don't Have to Follow Any Stinkin' Planning -- Sorry About that Justice Stevens, 39 Urban Lawyer 529 (Summer 2007).

The only country that I know of where expropriated land is returned to its former owner when the public use does not occur or ceases is Israel.
12.14.2007 2:04pm
theobromophile (www):

And why is the right to property so important to property rights fanatics, but the right to medical care when you need it so unimportant? It seems to me that property rights fanatics like excessively strong property rights that trump other important rights because they are elitist and exclusive, and dislike a right to medical care because such a right would be egalitarian and raise the negotiating power of the masses you would like to lord over.

No... it's because I believe in liberty. I want the right to own property, free from government intrusion; I also want the right to seek medical care, free from government intrusion.

I do not see how you can have a government that may take your property at any point in time and be free, as it could essentially run people out of town or make them subject to the government for their basic viability. (See, if you are actually liberal, the sex offender statutues which may amount to "takings" of land, as they prohibit sex offenders form living in most areas of town.) Likewise, I do not want the government dictating to doctors what they will receive for my treatment, as that makes my medical care dependent upon the government.

You're a liberal. If the government were to pay for health care, how would you feel about the Hyde Amendment writ large? What if the gov't refused to cover contraceptives? Certain medications for diseases contracted disproportionately by the poor or racial minorities? AIDS?

Under your system, those who wanted such coverage would have to pay twice, if they were lucky: first from their tax dollars for everyone else, then from their own pockets to cover themselves. That assumes that the government would not preempt private health care. Oh, you liberals would not be happy if young women were denied universal health coverage for contraception, would you? The political problem: making use of limited resources to meet unlimited demand.

At least under our system, you could allocate your resources as you see fit, instead of having them allocated ofr you as others see fit.

"If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself. A dependence on the people is, no doubt, the primary control on the government; but experience has taught mankind the necessity of auxiliary precautions."
~James Madison, Federalist No. 51

The government is not perfect - I do not expect that the people who run the DMV will be any better at running my health care. (The only gov't system that works well, IMO, is the post office, and that has competition from UPS, FedEx, DHL, and the internet.) I certainly do not want the government in charge of my health care, telling me which doctors to see, which procedures I may have, and the like. If an HMO makes a bad decision, I can sue or tell other people, who will do their best to not patronise that person; the government would be an un-suable entity with no alternatives. How that amounts to compassion is beyond me.
12.14.2007 7:47pm