Wrecking Property Rights

How cities use eminent domain to seize property for private developers.

Sam Staley from the February 2003 issue

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Although "the Court is sympathetic to Mr. Bailey's position," Myers wrote, the city "properly" used its eminent domain power to take his property. Mesa could effectively close down Bailey's business because it had presented, in court, "some reasonable support in the facts, even though those findings may be reasonably doubtful and fairly debatable." In essence, Myers concluded that the city could take just about anyone's property in town as long as it conducted the right number of public hearings and talked enough about the property in a public forum.

Myers' unwillingness to question Mesa's determination that it was necessary to take Bailey's property is rooted in a 1983 decision by the Arizona Supreme Court, City of Phoenix v. Superior Court, Maricopa County. That ruling separated takings decisions into two components. The first considered "necessity," which the court considered a legislative decision. The second component was "public use," which the court determined was subject to judicial review. The Arizona courts, unfortunately, have typically avoided applying judicial scrutiny to the public use aspects of a project, ruling against cities only if the owners could demonstrate fraud or "arbitrary and capricious conduct." Apparently, Mesa's policy of enabling well-established private businessmen to covet their neighbor's property and use the city's power of eminent domain to seize it is not arbitrary or capricious.

Myers' approach is not unique to Arizona or his courtroom. On the contrary, it's the rule. Property rights do not get the same level of protection as other fundamental liberties, such as free speech, the right to assemble, or the right to an impartial jury. Restrictions on other rights have to meet a "means-ends" test: There has to be a compelling government interest to justify them. "In eminent domain," notes Notre Dame law professor Nicole Garnett, "there is no means-end scrutiny at all. [The courts] don't even bother to check to see if the government is advancing a public use. They wash their hands of it. They don't ask if economic development could be done another way."

Not surprisingly, the entire Arizona bar is watching this case. No "cleaner" case is likely to be found that tests the words of the Arizona Constitution or the Phoenix decision, notes Bailey's attorney Tim Keller. If the city's taking of Bailey's property is upheld on appeal, it will be open season on private property in Arizona.

Turning Tide?

Supporters of eminent domain disagree. "The fact is that in the average community in the typical state, the system is working well," claims the American Planning Association's policy guide to takings. "Property rights advocates are waging a guerrilla war of soundbites, misleading 'spin doctoring' and power politics which characterizes government at every level as evil empires of bad intent."

Finkle, the president of the International Economic Development Council, echoes this sentiment. The Institute for Justice in particular, he argues, has "done a great job of taking the absolute horror cases and publicizing them." For the most part, Finkle and other redevelopment advocates claim, eminent domain is used reasonably and appropriately.

Nevertheless, a few recent court cases may signify a trend toward stricter scrutiny of local government decisions. "Courts are getting involved because they are seeing abuses," says Scott Bullock, an attorney at the Institute for Justice. "A fundamental lesson of history is that power is abused. First it's urban renewal as a part of an effort to redevelop cities. Soon it becomes a way for developers to get land on the cheap and well-connected developers to do projects in their particular area."

Not every court has been as amenable to eminent domain abuses as Myers'. As we saw, the Illinois Supreme Court invalidated a development authority's attempt to seize private property for a racetrack parking lot. In Las Vegas, Carol Pappas lost her apartment building and livelihood, but the Nevada Supreme Court has been harshly critical of the city's handling of the case, which it is reviewing.

Garnett, the law professor, questions whether such cases really indicate a shift in judicial attitudes. "What might be happening," she notes, "is we are cycling back into the 'too much' use of eminent domain. Now that economic development incentives are everywhere, cities and states are using eminent domain as another incentive. We are seeing an uptick in takings challenges because we are seeing more eminent domain cases, and we are seeing more cases reining in abuses."

"I see a modest increase in the [eminent domain] cases largely because the door to the federal courthouse is slightly ajar, and plaintiffs would like to pry it open," says William Fischel, a Dartmouth economist who has written extensively on the issue. "The Supreme Court clearly does not like most of these cases and is leery of giving plaintiffs a federal forum. They want to keep the cases in the state courts."

There is an important potential downside to curbing eminent domain, Finkle warns. Local governments are pragmatic. They will do what seems practical at the time, and they rarely make decisions in the context of broad policy issues or goals. Without the ability to transfer property seized through eminent domain to private developers, local governments might instead choose to take property and keep it. Rather than assemble land for private redevelopment, Finkle argues, local governments will own shopping centers, office buildings, and factories.

"Communities will just use alternative means for achieving economic development ends," he says.

That may already be happening. In Chester County, Pennsylvania, near Philadelphia, the city of Coatesville, population 11,000, has decided it's going to revitalize itself with a 230-acre recreation center. Plans include two ice rinks, bowling alleys, a go-cart track, rock climbing walls, a 270-room hotel and conference center, an 18-hole golf course, miniature golf, pitch 'n' putt, and a driving range, among other attractions. The city manager, Paul Janssen, thinks the project will attract corporate executives to the former steel town once they see the downtown (which will "soon" be revitalized). The average home in Coatesville is worth $56,000. Local homeowners are resisting the attempts by the city to condemn their land, but their prospects are dim. Dick Saha's farm has been condemned even though it's located outside the city limits. He can't even vote for or against the people who are taking his land.

Beyond the Courts