I would like to thank Professor John Mogk for his reply to my post on the Michigan Supreme Court’s overruling of Poletown, and also thank the Volokh Conspiracy for providing such a worthy forum for our debate.
Readers of the Conspiracy may recall that Poletown was the notorious 1981 decision in which the Court had upheld the city of Detroit’s decision to condemn the homes of over 4200 people in order to transfer the property to General Motors so that it could build a new factory. The recent Hathcock decision overruled Poletown and held that private property could not be condemned for transfer to other private interests so long as the sole rationale for doing so was “economic development.”
Unfortunately, Prof. Mogk continues to be mistaken in his claim that all the other 25 largest cities in the country have the power to condemn private property for transfer to other private interests purely for purposes of “economic development.” He is also off-base in his discussion of the consequences of the Poletown decision itself, which did not create 6000 jobs, as he claims. Finally, the fact that Detroit remains the poorest large city in the country after 23 years during which the Poletown rule was in effect undermines Mogk’s claim that Poletown takings are essential for economic progress in “distressed areas.”
In my original criticism of Prof. Mogk’s argument, I cited decisions by Illinois, California, and Florida supreme courts that concluded that economic development was not an adequate rationale to justify takings that transfer property to private interests. Obviously, these states include cities that are clearly among the nation’s largest, and have somehow managed to prosper without a rule similar to Poletown. It is misleading for Mogk to argue that these cases “are distinguishable on the basis of involving a predominant private benefit or not being authorized by the legislature.” The whole reason why these courts decided that the condemnations at issue involved a predominant private benefit or were not authorized by legislation is precisely because the only public benefit claimed was economic development. For example, the Supreme Court of Illinois concluded that a “contribu[tion] to economic growth in the region” cannot be a legitimate ground for condemnation because “incidentally, every lawful business does this.” Southwestern Illinois Development Authority v. National City Environmental, LLC, 768 N.E.2d 1, 9 (Illinois 2002). This is virtually the exact same reasoning that the Hathcock court adopted in overruling Poletown on the ground that its “economic benefit” rationale “would validate practically any exercise of the power of eminent domain on behalf of a private entity.”]
Prof. Mogk’s claim that Poletown contributed to Detroit’s development by “transferring 6000 jobs” to the city is also misleading. Detroit and GM claimed at the time that this would happen. In reality, the new factory employed only 2500 people as of 1988. It has never employed anywhere near 6000 workers. See, e.g., Marie Michael, “Detroit at 300: New Seeds of Hope for a Troubled City,” Dollars & Sense, July 2001. Moreover, the Poletown condemnation wiped out some 400 businesses, 16 churches and a number of hospitals and schools. It is quite possible that these institutions employed as many or more workers as the factory did. If you factor in the destruction of 4200 peoples’ homes and the fact that the City spent over $200 million “preparing the site” for GM, it is highly probable that Poletown inflicted far more harm on Detroit’s economy than benefit. Sadly, the Poletown Court did not even consider these massive economic harms in its decision.
Another serious flaw of Poletown is that it imposed no obligation on the new private owners to actually provide the “economic development” that supposedly justified the condemnation in the first place. Poletown created a blank check for takings that transferred property to GM and other powerful corporations on the basis of dubious claims of economic benefit that the new owners had no obligation to live up to. Obviously, GM and others took full of advantage of this loophole. The political power of the new owners had far more influence on condemnation decisions than any economic benefits they might create for the community. Thus, it is no surprise that, as Prof. Mogk himself points out, Detroit remains the nation’s “most economically distressed” large city even after 23 years of Poletown-style condemnations.
Finally, it is difficult to understand Prof. Mogk’s claim that condemnation is necessary to facilitate development in “distressed areas [where] the market is virtually non-existent or in a state of collapse,” despite the fact that he admits it is “not needed to further economic development where the market is strong and growth is occurring.” As anyone who has ever tried to buy real estate knows, it is much easier to acquire property in “distressed areas” — where prices tend to be low, especially if the market is “in a state of collapse” — than in growth areas, where they are usually much higher. If a developer has a viable project in a distressed area, she should find it easier to buy the necessary property there than in a growth area. If, on the other hand, the project is not viable, then it certainly should not be supported by the use of eminent domain.
In addition to inflicting grave injustices on property owners, takings that transfer property to powerful private interests are not needed to rescue distressed urban areas. Indeed, as Poletown dramatically demonstrated, they are often likely to do more harm than good.
Readers wanting more detail on the case against Poletown can find it here and here.
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