Archive | Eminent Domain

Proposed California Referendum Initiative Would Make it Even Easier to Declare Property “Blighted” and Condemn it

Timothy Sandefur of the Pacific Legal Foundation has a good post outlining the the dangers posed by a California ballot question drafted by local governments interested in expanding their already very broad power to condemn property:

[J]ust before Christmas, the law firm of Rutan & Tucker—the leading California law firm for cities that want to steal your land for redevelopment—filed a new ballot initiative [that]… would bring back redevelopment as the “Jobs and Education Development Initiative.” But what’s even more remarkable is how it would expand the power of eminent domain even further than California’s already extremely broad Redevelopment Law allows. Indeed, if this initiative were to pass, it would essentially declare the whole state of California “blighted….”

Quick background: to take property for redevelopment, a local redevelopment agency (typically the City Council) has to declare an area “blighted.” They don’t have to declare each structure to be blighted—they can condemn whole neighborhoods, including perfectly adequate property, if lots down the street or around the corner are “blighted.” And what is the definition of “blight”? The Redevelopment Law contains two lists of factors (“physical” and “economic”), and the officials have to declare that one item from each list is present. That’s all. And the factors are already very vague. My personal favorite is “conditions that prevent or substantially hinder the viable use or capacity of buildings or lots.” What does that mean? It means whatever the government says it means.

That’s the current law. It is already so bad that practically any property in the state can be declared blighted if local officials want to do it. What the new initiative would do is expand these two lists even more.

For example, it changes “conditions that prevent or substantially hinder the viable use or capacity of buildings or lots” to

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Christian Burset on William Baude on Federal Eminent Domain

Last year I published an article in the Yale Law Journal arguing that the Constitution did not give the federal government the power of eminent domain. The Necessary Proper Clause was originally understood not to implicitly grant “great” powers to the federal government, and I argue that eminent domain (at least over land) was best understood as an example of a great power. The Takings Clause, passed a few years later, was not understood to grant the federal government any new powers. And from the Founding until the Civil War, the federal government never exercised a direct power of eminent domain in the states, instead relying on states to take land for any federal project that needed it. (Ilya critiqued the article here.)

Now the California Law Review’s online supplement has published a substantial response to my piece by Christian Burset, a law and history student at Yale. My thoughts are below the fold. His piece begins:

This Response critiques Baude’s historical account. He is absolutely right that the “great powers” doctrine needs more sensitive historical treatment, and he has greatly advanced our understanding of that history by recovering the lost case against federal takings. But he takes his case too far in arguing that from the Founding to the Civil War, “the federal government was not understood to have the power to exercise eminent domain inside a state’s borders.”

More generally, Baude, like his scholarly predecessors, errs in searching for a single historical understanding of federal takings. Until the Supreme Court settled the issue in Kohl, there was no consensus on the matter. Debate emerged in the 1780s and quickly became entangled with broader questions of federal power, slavery, and states’ rights. Baude rightly argues that Kohl was the first case to declare definitively the federal government’s

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Upcoming Federalist Society Faculty Conference Presentation on my Next Book – The Grasping Hand: Kelo v. City of New London and the Limits of Eminent Domain

Next week, on Friday, January 3, between 5 and 6:15 PM, I will be doing a presentation on my next book, tentatively entitled The Grasping Hand: Kelo v. City of New London and the Limits of Eminent Domain at the Federalist Society’s annual faculty conference. This will be a preview of the book, which will be the first book-length treatment by a legal scholar of Kelo v. City of New London – one of the most controversial decisions in the modern history of the Supreme Court, and the important constitutional property rights issues it raises. The book considers Kelo from the standpoint of both originalist and living constitution theory, and also has the most complete analysis to date of the enormous political reaction that Kelo generated. I have completed a first draft of the book, but will be making revisions over the coming months.

The Federalist Society conference will be held in parallel with the annual AALS conference nearby. I will be presenting as part of a panel focusing on works in progress. If you are coming to the AALS conference and are interested in constitutional theory, property rights issues, or eminent domain, I hope you will consider dropping by. Legal blogosphere mavens may be interested to know that Dan Markel of Prawfsblawg, a leading criminal law scholar, will be presenting a paper as part of the same panel.

UPDATE: In the initial version of this post, I accidentally forgot to include a link to the Fed Soc faculty conference’s website. I have now fixed that problem. [...]

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New London Mayor Advocates Devoting the Kelo Condemnation Site to a True “Public Use”

Eight years after the Supreme Court ruled in Kelo v. City of New London that private property can be taken and transferred to other private owners in order to promote “economic development” because such development qualifies as a “public use” under the Fifth Amendment, the Kelo condemnation site still lies empty. But New London Mayor Justin Finizio, who previously apologized for the original Kelo condemnations, has proposed devoting the property for a true public use:

The 2005 Supreme Court decision in New London v. Kelo [sic], in which the court by a 5-4 majority constitutionally validated the New London Development Corp.’s use of eminent domain to purchase and raze the homes of Fort Trumbull residents who refused to sell, remains a “black stain” on the city, said its mayor

NLDC wanted to clear the site to attract large corporate development and expand the city’s tax base. Its judicial triumpth proved a pyrrhic victory, the decision widely despised for interpreting “public use” to include the government taking the property of citizens to turn over to private developers. Count the New London mayor among the despisers. He characterized the Kelo decision as a “corruption of the constitutional interpretation of public use.”

Fort Trumbull has seen no new construction since the bulldozers departed the flattened neighborhood.

Mayor Finizio said he would like New London to symbolically overturn Kelo by undertaking a true “public use” of the seized private properties. He offered as an example a parking garage, under discussion recently as a means of meeting the parking demands generated by Electric Boat’s offices in the former Pfizer buildings, the one major project resulting from NLDC’s corporate development vision.

This would not be any municipal parking garage, but one with solar panels to power it, landscaping and design to fit it into

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Philadelphia Condemns Artist’s Studio to Build a Supermarket and Parking Lot

Nick Sibilla of the Institute for Justice has a good article on the City of Philadelphia’s dubious efforts to condemn a successful artist’s studio in order to transfer it to a new private owner that would build a supermarket and parking lot on the site. This scheme isn’t quite paving paradise to put up a parking lot. But it’s almost equally egregious:

James Dupree has been celebrated around the world for his art. But now he is being condemned by the city of Philadelphia—literally.

His art has been shown at many museums, including the Philadelphia Museum of Art, the Pennsylvania Academy of Fine Arts…

But the city of Philadelphia has other plans for his property. In November 2012, the Philadelphia Redevelopment Authority (PRA) was authorized to acquire 17 properties to build a supermarket in Mantua. According to the redevelopment plans, the PRA wants to bulldoze Dupree’s studio to make room for the privately-owned grocery store and its parking lot. No tenant has been identified yet, but the supermarket project has received $2.75 million in state subsidies….

Dupree estimates professionally moving his oeuvre would cost at least a quarter of a million dollars. So just relocating his vast collection actually costs more than what he originally paid for the building.

Transforming a broken-down garage and warehouse into a top-notch art studio was no easy feat. “When I purchased the property, it was basically condemnable,” he said. The roof leaked when it rained. The plumbing and electrical were “next to nil.”

“I invested everything I owned into this property…I was basically broke,” Dupree remarked. The property itself cost a little under $200,000. Installing new electrical and plumbing: $60,000. Fixing the roof was another $68,000. Thousands more were spent on renovations, furnishings and appliances.

But Dupree sensed the property at 3617-21 Haverford

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My Talks about “Great Powers” and Eminent Domain Next Week

Next week I’ll be giving two talks about my most recent article (and I think it’s my best!) — Rethinking the Federal Eminent Domain Power. Here’s Ilya’s JOTWELL post about the piece. (Even if you think you don’t care about the federal eminent domain power, I promise it’s far more interesting than that, since it’s really also about federal enumerated powers more generally, including original understanding of the First Amendment, federal courts questions like commandeering and sovereign immunity, and the Chief Justice’s opinion in NFIB v. Sebelius.)

The first talk will be Monday, November 4th, at 3:00 pm at the University of Illinois Law School, courtesy of Professor Kurt Lash’s constitutional law colloquium.

The second talk will be Thursday, November 7th, at 12:00 pm at Yale Law School, courtesy of the Yale Law School Federalist Society’s Young Scholars Series. I believe it will be in Room 122. [...]

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NSFWCorp Article on Eminent Domain Relies on Inaccurate Name-Calling Instead of Argument

The NSFWCorp website has published an article by Yasha Levine (subscription required) attacking me and other libertarian critics of the City of Richmond’s plan to use eminent domain to condemn mortgages. Unfortunately, Levine doesn’t actually answer any of the arguments against the plan advanced by libertarian critics. Instead, he devotes his entire article to claiming that libertarian critiques of eminent domain can be dismissed because Koch Industries contributes money to various libertarian organizations, the Kochs benefit from the use of eminent domain for oil pipelines, and libertarians (presumably in order to protect the Kochs’ interests) do not criticize oil pipeline takings.

If Levine had actually bothered to research this issue, he might have learned that I in fact have criticized oil pipeline takings (see here and here). So has the Cato Institute (another target of Levine’s attacks), which published an article by legal scholar Alexandra Klass urging the imposition of tighter constraints on such condemnations in 2008 [I had accidentally typed 2011 here earlier]. In this more recent law journal article, Klass discusses how eminent domain reform laws championed by libertarians (among others) have recently been used as the basis for lawsuits seeking to constraint pipeline takings.

Levine also ignores the reality that there are important constitutional and policy distinctions between pure private-to-private takings and those that transfer condemned property to public utilities or common carriers (the latter include some, but not all, oil pipelines), which are required to serve the public by law. These differences are well known to eminent domain experts; I discuss some of them in this article. It is not necessarily inconsistent to oppose takings that transfer property to, say real estate developers and auto manufacturers, while supporting at least some takings for public utilities and common carriers (though I believe the [...]

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New Jersey Adopts Dubious Post-Kelo Eminent Domain “Reform” Law that is Likely to Endanger Property Rights More than it Protects Them

New Jersey recently became the 45th state to adopt an eminent domain reform law in the aftermath of the Supreme Court’s controversial 2005 decision in Kelo v. City of New London, which ruled that it was constitutionally permissible for government to condemn private property and give it to another private owner in order to promote “economic development.” Unfortunately, as John Ross of Reason explains, the new law does not actually impose any meaningful constraints on the use of eminent domain, and may even actually promote abusive “blight” condemnations:

The law purports to do two things: first, codify a 2007 New Jersey Supreme Court ruling favorable to property owners and, second, decouple eminent domain from redevelopment subsidies. It fails miserably at both.

When local officials declare that an area is blighted and “in need of redevelopment,” the designation both allows them to offer economic development incentives and authorizes the use of eminent domain. But sometimes officials honestly don’t want to seize anyone’s property; they just want the ability to offer subsidies to developers.

But officials cannot credibly promise not to condemn property once it has been declared blighted. Officials can change their minds. And the next city council isn’t bound by past promises….

Decoupling the incentives from condemnation would remove the threat. And the law appears to do just that, allowing for the creation of “non-condemnation redevelopment areas.” But the law lets officials transform a non-condemnation area into a condemnation area if property owners refuse to sell….

The law also muddies the issue of blight.

In Gallenthin v. Paulsboro, the New Jersey Supreme Court held that before cities can seize property for private development, officials must show “substantial evidence” the property is blighted.

Prior to Gallenthin, municipal officials could claim a variety of vague, subjective conditions like

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My JOTWELL Post on Will Baude’s “Rethinking the Federal Eminent Domain Power”

In my capacity as one of the editors for the constitutional law section of JOTWELL (a sited devoted to reviewing important new legal scholarship), I review an important new constitutional law article every summer. I usually try to pick articles that are 1) within one of my fields of expertise (primarily federalism and property rights), 2) make a major contribution, and 3) are written by younger scholars who are not yet among the most famous people in their field, and therefore exposure at JOTWELL could help get their work the attention it deserves. This year, I chose co-blogger’s Will Baude’s excellent recent work, “Rethinking the Federal Eminent Domain Power.” I should note that I picked the article and wrote the review long before I knew that Will was going to become one of my Volokh Conspiracy co-bloggers (new VC bloggers are chosen by senior Conspirator Eugene Volokh, and he doesn’t always inform me of his decisions ahead of time).

Here is an excerpt from my review:

One of the most widely accepted truisms of American constitutional law is that the federal government has the power to condemn property through eminent domain. In modern times, even scholars and jurists who generally take a narrow view of federal power—myself included, until I read this pathbreaking article—did not question this idea. Yet, as William Baude shows, the conventional wisdom at the time of the Founding, and for many decades thereafter, was exactly the opposite: the federal government did not have the authority to condemn property within the territory of state governments. It could only do so in the District of Columbia and the federal territories. Baude’s research has important implications for the constitutional law of both federalism and takings….

I have a few reservations about Baude’s excellent analysis. Most important is

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Sacramento and Washington, DC Threaten to Use Eminent Domain to Take Property to Build Sports Stadiums

Nick Sibilla of the Institute for Justice describes Sacramento and Washington, DC’s ill-advised plans to use the threat of eminent domain to acquire property to build sports stadiums on:

In less than a week, two capital cities are preparing to use eminent domain to build professional sports stadiums. Talk about foul play.

The Sacramento city council voted 7-2 on August 13 to help the Sacramento Kings negotiate with the owner of a Macy’s. As the Sacramento Bee points out, “The city’s involvement in the talks carries with it a key negotiating tool: the threat of seizing control of the property through eminent domain.” That Macy’s Men Store is the last property the Kings have yet to acquire for the arena and may be condemned if negotiations fail. But just because they’re called the Kings doesn’t mean they should have the right to seize peasants people’s land.

Construction hasn’t even begun and the Kings are already corporate welfare queens: the city council has voted to provide the arena $258 million in public funding. Unfortunately, sports subsidies are increasingly common.

Over in Washington, D.C., officials are prepared to authorize eminent domain to build a new stadium for the DC United, the worst team in Major League Soccer. This 20,000 seat stadium is expected to cost $300 million, with half of that coming out of the taxpayers’ pockets. Yet the team sold for $50 million in 2012. In other words, the United will be getting a brand new stadium that’s worth six times as much as the team itself. [links in original post omitted].

Government subsidies for sports stadiums are almost always net losers for the communities that enact them. Using eminent domain to take the property just compounds the losses endured by taxpayers with additional harm inflicted on property owners, many [...]

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My USA Today Column on the City of Richmond’s Plan to Condemn Mortgages

The USA Today website just published my column criticizing the Richmond, CA’s plan to condemn mortgages:

The City of Richmond, California is threatening to use eminent domain to condemn over 600 mortgages on homes that are now worth less than the outstanding debt on the mortgages themselves. The city plans to write down the value of the mortgages and transfer most of the value to the current owners of the homes.That’s a move that could have nationwide implications for homeowners and those who aspire to join them if the idea spreads….

Various banks and investors have filed lawsuits arguing that the Richmond policy is unconstitutional. Some of their arguments have merit… Advocates claim that the program will actually pay for itself. But the idea that the city will be able to strip distressed mortgages from one set of owners and sell new smaller mortgages to investors at a profit is speculative at best. If the rosy scenario doesn’t materialize, taxpayers will be left holding the bag; future home buyers will suffer even if it does….

[T]he Richmond takings probably won’t be invalidated because they transfer property to private interests, even though the Constitution only allows takings that are for a “public use.” But Richmond’s plan has another constitutional defect: undercompensation. The Fifth Amendment requires the government to pay “just compensation” when it condemns property, which the Supreme Court has long interpreted as “fair market value.”

The City is offering to pay lenders 80% of the home’s currently assessed value, irrespective of the amount of money still owed on the mortgage, which is often far more than that. For example, if a home is currently worth $200,000 on the open market, and is mortgaged for a total of $400,000, the city would pay lenders $160,000. Even if the owner defaults, the

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Will the City of Richmond’s Plan to Condemn Mortgages Really Cost Taxpayers Nothing?

In an earlier post, I noted that one of the problems with the California City of Richmond’s plan to use eminent domain to condemn mortgages is that taxpayers will have to pay for it. However, some defenders of the plan – such as Mortgage Resolution Partners – the “community advisory” firm that has been hired to organize the plan for the city – claim that “no taxpayer funds will be used in connection with the [p]rogram.”

This claim is hard to credit, given that any time the government condemns property, it must pay fair market value compensation. Therefore, the city of Richmond will have to spend public funds to condemn the mortgages, at least initially. MRP’s position seems to be based on the idea that, after writing down the condemned mortgages, the City will transfer them to investors who put up money to buy the now-reduced loan, thereby offsetting the public funds spent on the taking. As the New York Times explains, the city could take a $400,000 mortgage on a home now valued at $200,000, condemn it while paying only $160,000 in compensation, and then restructure it into a new $190,000 loan that could be sold to private investors. Advocates assume that the city, MRP itself (which is to be paid $4500 per mortgage), and the investors could actually profit from the $30,000 difference.

Unfortunately, there are two serious flaws in this reasoning. First, it assumes that investors really will be eager to purchase the new mortgages at a price that will offset the city’s costs. This is far from certain. The very fact that the city has condemned these mortgages in the first place is likely to lead future investors to be wary of mortgages in this area. After all, the city could resort to eminent [...]

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Lawsuit Challenges Richmond, CA’s Plan to Use Eminent Domain to Condemn Mortgages

A group of bond investors has filed a lawsuit challenging the California City of Richmond’s plan to use eminent domain to condemn mortgages:

Bond investors including Pacific Investment Management Co. and BlackRock Inc. (BLK) are seeking a court order blocking Richmond, California, and Mortgage Resolution Partners LLC from seizing mortgages through eminent domain, saying the initiative would hurt savers and retirees.

The city’s plan is unconstitutional, according to a complaint filed today by mortgage-bond trustees in federal court in San Francisco. The trustees, Wells Fargo & Co. (WFC) and Deutsche Bank AG, were directed to take the action by investors in the debt that also include Jeffrey Gundlach’s DoubleLine Capital LP, said John Ertman, a partner at Ropes & Gray LLP….

The plan advanced last month with Richmond backing offers to buy 624 loans, making it the first city to push the idea so far forward. Those offers would need to be refused before the city could follow through with its mayor’s vow to invoke its potential powers to force sales of the mostly non-delinquent loans, so that homeowners could get their debt balances cut to less than the current values of their properties…

The plan is also discriminatory because it targets only certain loans, the trustees alleged. It violates California and U.S. constitutional protections against impairing private contracts and the taking of private property for public use without just compensation, according to the complaint.

I criticized the Richmond plan on policy grounds here. In a later post, I explained why the plan is likely unconstitutional because the compensation the city proposes to pay falls below the “fair market value” standard required by the Fifth Amendment’s Just Compensation Clause. The news report quoted above seems to say that this is one of the causes of action advanced [...]

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Just Compensation Problems with the City of Richmond’s Plan to Use Eminent Domain to Condemn Mortgages

In my previous post on the the California city of of Richmond’s plan to use eminent domain to condemn underwater mortgages, I noted that the plan is likely to be permissible under the Supreme Court’s decision in Kelo v. City of New London, which says that a taking is for a constitutional “public use,” so long as it might advance some “public purpose” that isn’t “pretextual.” It may well also be permissible under California courts’ lax interpretation of of public use under their state constitution. But I didn’t consider another possible constitutional problem with the Richmond plan: undercompensation [HT: multiple VC readers who have directed my attention to this problem]. When the government condemns private property, the Fifth Amendment requires it to pay “just compensation,” which the Supreme Court has long interpreted as “fair market value.” As Matthew Yglesias sugggests, in many cases the formula used by Richmond would result in compensation below FMV (which is usually defined, roughly, as what the value of the asset in question would be if offered up for sale on the open market).

Here’s the compensation Richmond is offering, as described by the New York Times:

The city is offering to buy the loans at what it considers the fair market value. In a hypothetical example, a home mortgaged for $400,000 is now worth $200,000. The city plans to buy the loan for $160,000, or about 80 percent of the value of the home, a discount that factors in the risk of default.

If the home is worth $200,000 on the open market, as in the hypothetical example above, it is likely that the fair market value of the $400,000 mortgage should be at least that much, or close to it. Even if the owner defaults, the lender can recover that [...]

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Using Eminent Domain to Condemn Mortgages

The New York Times has an interesting article describing one California city’s plan to use eminent domain to condemn and restructure mortgages [HT: numerous readers who have written me requesting that I do a post about this issue]:

The power of eminent domain has traditionally worked against homeowners, who can be forced to sell their property to make way for a new highway or shopping mall. But now the working-class city of Richmond, Calif., hopes to use the same legal tool to help people stay right where they are.

Scarcely touched by the nation’s housing recovery and tired of waiting for federal help, Richmond is about to become the first city in the nation to try eminent domain as a way to stop foreclosures…

Richmond is offering to buy both current and delinquent loans. To defend against the charge that irresponsible homeowners who used their homes as A.T.M.’s are being helped at the expense of investors, the first pool of 626 loans does not include any homes with large second mortgages, said Steven M. Gluckstern, the chairman of Mortgage Resolution Partners.

The city is offering to buy the loans at what it considers the fair market value. In a hypothetical example, a home mortgaged for $400,000 is now worth $200,000. The city plans to buy the loan for $160,000, or about 80 percent of the value of the home, a discount that factors in the risk of default.

Then, the city would write down the debt to $190,000 and allow the homeowner to refinance at the new amount, probably through a government program. The $30,000 difference goes to the city, the investors who put up the money to buy the loan, closing costs and M.R.P. The homeowner would go from owing twice what the home is worth to having $10,000

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