Masters of Eminent Domain

The good folks at the Institute for Justice have compiled a terrifyingly complete record of eminent domain abuses over the past five years in these United States.

No one?at least no one besides lawyers and bureaucrats?would think ?public use? means a casino, condominiums or a private office building. Yet these days, that?s exactly how state and local governments use eminent domain?as part of corporate welfare incentive packages and deals for more politically favored businesses. This is the first report ever to document and quantify the uses and threats of eminent domain for private parties. We have compiled this information from published accounts and court papers covering the five-year period from January 1, 1998 through December 31, 2002. The results are chilling.

Check it out here, wipe your eyes with a copy of the Constitution, and then bitch at your nearest local official the next time they start eyeing your neighbor's property.

Comments

[Jim]

One might want to ask why you get the 'no show slumlord' and neighborhood blight in the first place... rent control, outrageous property taxes, 'tennant's rights' laws that come straight out of a Marxist textbook, probably. Most folks don't have a natural interest in letting their property go to hell.
Any time the only way to improve a dilapidated property is confiscation from its owners, there's something else wrong with the system.

[Grant Gould]

The problem is structural. Eminent domain is necessary to make public works work, pretty much inescapably (go ask a pipeline landsman what would happen if the government had to do his job for every inch of pipe laid in a city). The problem is that the fair compensation that the law demands is too often figured in a broken way or by people who have an interest in keeping it low.

The fair compensation for a corner store being razed to build a casino is not the tax-assessor's "value" of the store (impossible to fairly compute anyway, and generally far below true market rates) but the value of the most profitable thing that could be put there instead (for instance, a fraction of a casino). This imbalance means that the state can actually run something like a profit off of eminent domain, precisely the opposite of what was supposed to happen. The state is supposed to have to sacrifice in order to seize.

So here's the bright-line test that eminent domain should be following: If the state can profit from it, it's doing something wrong. Eminent domain is supposed to be hard and expensive, ie requiring truly fair compensation, to dissuade the state from seeking it casually.

[Jim]

Grant,

Can't fault your logic on the 'profit' thing, problem is it's too flexible a standard and will allow for abuse in practice. Kind of like the used car dealer who tells you he's not making any money on this deal. Sure.

The situation you describe with the pipeline is more of an easement issue; the city never needs to confiscate your whole property to put such things in, but they should still pay you something for the easement in order to compensate you for making that particular bit of land un-buildable. This is far less controversial than taking someone's entire lot, evicting them and razing the building(s) on it.

[joe]

"One might want to ask why you get the 'no show slumlord' and neighborhood blight in the first place... rent control, outrageous property taxes, 'tennant's rights' laws that come straight out of a Marxist textbook, probably." Actually, I was referring to commerical buildings, whose tenants are not protected by any of those things. And if you think property taxes played a significant role in the blighting of formerly vibrant cities, you've either got a lot of reading to do or a lot to forget.

"Most folks don't have a natural interest in letting their property go to hell." You'd think so, wouldn't you? Sadly, it ain't necessarily so. There is a distinct sub-species of building owner who is perfectly happy to collect stagnant or decreasing rents on his mortgage free property without putting a dime into upkeep. Sometimes, the owner is just too rich to give a shit. Sometimes, it's someone sitting on a dilpidated building waiting for the dream buyer willing to pay way too much for the property, and letting the place go to hell until that happens. When you get into a vicious cycle of disinvestment, physical deterioration, and economic decline, the market isn't going to save you. Maybe in econ class, but not in the real world. People don't always behave as the textbooks predict, rationally seeking to maximize their returns. Sometimes, they take a "good enough" profit, in exchange for the chance to be lazy and cheap at the expense of their neighbors.

But these cases aren't what the IJ's paper is about. The casino/stadium/slum clearance projects they discuss are outrageous examples of public officials with an "ediface complex" - not responsible urban planning. For all of the libertoid complaints about "bureaucrats," this type of project is almost always the brainchild of elected officials.

[different joe]

"And if you think property taxes played a significant role in the blighting of formerly vibrant cities, you've either got a lot of reading to do or a lot to forget."

Hey Joe, couldn't disagree more (with that one sentence). How many times have we all heard the story about the old widower who had to sell her house in the city cuz she (usually a she) can't afford the property taxes. The house goes to hell before that happens. A retiree often cannot afford to fork over $2000 - $4000 per year in taxes on a very modest house in a major city. There isn't money left over for things like fixing the gutters, repairing the roof, replacing rotted window sills, paint, sometimes electricity. Every summer there are stories of older people who die in heat waves because they can't afford to run a fan. Not an air conditioner, a fan! An extra hundred bucks per month in property tax savings could go a long way to help these people.

Going way off topic, but IMO, this is to some extent their own fault. They had their entire lives to see it coming. Go ahead and live the exciting city life while you have a good income, but be smart enough to get out when the money stream dries up. There is no need to live in the close-to-work high rent district once you don't have a job any more.

[joe]

That scenario does happen, but...

1. I was writing about commercial property, not residential. Commercial areas don't become blighted because of property taxes - they become blighted because the demand for their space dries up, for one reason or another. One particularly relevant reason is that a few property owners let their buildings go to hell, and the entire district gets a reputation as "run down." Another reason is that the layout or access is obsolete, and the district needs to change, or it becomes a black hole, dragging down everything around it.

2. Neighborhoods full of homeowners don't become blighted because the little old lady doesn't fix her shutters.

3. Most cities (where I come from, anyway) have tax break programs for elderly homeowners, so this is becoming less and less of a problem.

4. Blighted residential neighborhoods are almost always the result of blighted Central Business Districts (resulting from regional economic decline or the flight of capital to the suburbs), not of anything that began in the neighborhood itself (with the exception of polluted brownfields). Even "white flight" is a result of other pressures, despite the hype.

I don't have all the answers on this issue, but the IJ's paper and the libertarian posts here are heavy on market theory, light on understanding how cities work. When the facts and theory don't match up, it isn't the facts that you should ignore.

[Anonymous]

Who cares if they take my neighbors land, we'll get bread and circuses from it.

[Patrick]

Gosh, wouldnt it have been nice if the framers made an ammendment preventing the federal government from providing bread or circuses?

[Rick Barton]

Title for Joe's Posts on this concern: Wrong and Wronger. Lets check it out, but first: Just the fact that are so incredibly many of what you concede are "horror stories" Joe, is reason enough to give IJ our support. Remember there is
real world human suffering and deprivation of individual liberty in each of these government actions that IJ is fighting.

Joe claims: "Sometimes takings are the only way to save a neighborhood."
As with other coercive government "solutions" the fact that takings is there and paid for with tax money often crowds out other remadies which bare a real cost on those who undertake them. And
whats worse is that takings often come at the behest of those wishing to relize their ends using government force and largess rather than dealing with a market envirnment.

Joe claims: "... if you think property taxes played a significant role in the blighting of... cities, you've either got a lot of reading to do or a lot to forget."
The correlation between taxes including property taxes and urban decay is well documented. It's especially blighting is when government reqires new residents to pay the back taxes. Also, Why else would the creation of urban "enterprise zones" almost always include reduction or elimination of property and/or other taxes to "attract buisnesses back into the area"?

Joe claims: "Commercial areas don't become blighted because of property taxes - they become blighted because the demand for their space dries up, for one reason or another."
In depressed areas taxes often make the normal rent lowering rent senarios unviable. Of course proximity to government "public housing" projects are a well known cause of comercial blight as well.

Joe claims: "Blighted residential neighborhoods are almost always the result of blighted Central Buisiness Districts..."
Actually it goes both ways. In fact the most numerous type of residential urban decay sites are government or government subsidized housing which in turn blight commercial areas. And Joe, why do you think that there would be a "flight of capital to the suburbs"? Hint: It starts with with a T. Joe.

For all these silly "reasons" Joe claims that takings is "(an essential function of cities that has been practiced from their beginnings)"

Yet another outright falsehood. The Constitution was better observed in earlier times.

[Rick Barton]

oops. Re my last post: I'm sorry for the ignominy of misspelling "environment" on Earth Day. Come to think of it, with all the environmentalist claptrap extant Im sorry that there even is an "Earth Day".

[joe]

IJ goes too far with this one. They list a lot of horror stories, then make the illogical leap that the existence of bad examples means the entire process is corrupt. This is the equivalent of using Mai Lai to argue that the Army should be disbanded.

One no show slum lord can destroy the economic viability of an entire commercial district. Sometimes properties are blighted, and sometimes blight creeps. Sometimes takings are the only way to save a neighborhood. The IJ's efforts to eliminate the ability of cities to redevelop areas when necessary (an essential function of cities that has been practiced from their beginnings) demonstrates a remarkable lack of understanding about how an urban system functions.

[different Joe]

You could argue every 100 year old home is "blighted" - just look at the sagging glass and those old wood floors. There is almost no private residence that could not be knocked down to build something a yuppie would call an improvement (vinyl siding over wafer board houses with homeonwner's associations - runs a shiver down my spine).

Didn't we KILL assholes who tried pulling this crap a couple hundred years ago? Couldn't we do it agai....

[Rick Barton]

Joe,
You wrote:
"I support much of what IJ is trying to do. The takings process is being abused."
Here Here!
You wrote:
"What I object to is their attempt to piggyback an ideological agenda on their legitimate points"
What you consider an "ideological agenda" I consider acting on a principle of non-aggression. Fair play is important.
You wrote:
" But the thrust of your argument, that cities shouldn't be able to buy someone out if their property is destroying a neighborhood, or to arrest a spiral of decline that is dragging down local businesses, is wildly irresponsible."
If only the reality of takings were as benign as
buying someone out. Its at best a forced "sale".
The pretext of the "disaster" situations is what allows the abuses to occurr. Another important
point is that much more dynamic, bountiful and fair free market processes are crowded by takings.
You wrote:
"you're just treating the symptoms, which is neither a viable long term strategy for recovery, nor smart long term fiscal policy."
Taxes (government regulation as well) can hardly be described as "symptoms" of depression when they are causes.
You wrote:
" Blaming the hollowing out of our cities during the 20th century on urban tax rates is wildly inaccurate."
Ive seen color coded tax maps which show the tax burden superimposed on metro areas and very often the center of the area has the highest tax burden.
Also, Why then is the hall mark of successful attempts (enterprise zones) to reinvigorate these depressed areas reduced or eliminated taxes?
You wrote:
"...they were acting like cities before, during, and after your mythical heyday of Constitutionalism..."
Nothing mythical at all, it was limited government mandated by the constituion that allowed for the dynamic development of our cities and unheard of prosperity. Sadly, also there is nothing mythical about the diminishiing restraints
of the constitution.
You wrote:
"including carrying out redevelopment projects. Without these powers, human settlements would never have gotten beyond the township stage."
What?! Thats crazy. Are you joking? It doesn't even make sense. If human settlements wouldn't have gotten beyond the "township stage" what were
they redeveloping?? The statement just runs counter to the historical record.

[joe]

Rick,

I support much of what IJ is trying to do. The takings process is being abused. What I object to is their attempt to piggyback an ideological agenda on their legitimate points, throwing the baby out with the bath water. If no city ever used eminent domain to allow the construction of a privately owned stadium again, I would be thrilled. But the thrust of your argument, that cities shouldn't be able to buy someone out if their property is destroying a neighborhood, or to arrest a spiral of decline that is dragging down local businesses, is wildly irresponsible.

"As with other coercive government "solutions" the fact that takings is there and paid for with tax money often crowds out other remadies which bare a real cost on those who undertake them. And
whats worse is that takings often come at the behest of those wishing to relize their ends using government force and largess rather than dealing with a market envirnment." I agree that takings are overused, and should be a solution of last resort. But sometimes the market looks at certain parts of town and says, "Bleah!" Market solutions often involve using taxes and grants to bribe private industry into doing business in an area that makes no sense to do business in. At the end of the 20 year tax abatement period, you end up with a business demanding further tax breaks not to leave. How much better to change the failed area into a location that businesses want to go to, without needing incentives?

"The correlation between taxes including property taxes and urban decay is well documented." Yes: when urban decay sets in, a city loses its tax base and is forced to raise taxes on the remaining businesses and residents in order to maintain adequate services, further driving them out. Tax rates have never caused a succesful city or district to become blighted.

"In depressed areas taxes often make the normal rent lowering rent senarios unviable." If structural problems are causing an area to become depressed, those causes should be addressed. Otherwise, you're just treating the symptoms, which is neither a viable long term strategy for recovery, nor smart long term fiscal policy.

I won't argue with your analysis of blighter public housing; poorly planned develoment usually fails, and harms what's around it in the process. But these sites are not actually "neighborhoods," for the most part; that's why they failed in the first place.

"And Joe, why do you think that there would be a "flight of capital to the suburbs"?" Lots of reasons, with tax differentials being a relatively small factor which came into play late in the process. Bigger reasons are poor access from workers' suburban homes, poor parking and loading facilities, small sites, incompatible land uses nearby, the inability to assemble land for expansion, tax and infrastructure policies that make new construction in the suburbs artificially profitable compared to redevelopment, crime, poor infrastructure and services in the cities, yadda yadda yadda. Blaming the hollowing out of our cities during the 20th century on urban tax rates is wildly inaccurate.

And Rick, there were cities before 1789, and they were acting like cities before, during, and after your mythical heyday of Constitutionalism - including carrying out redevelopment projects. Without these powers, human settlements would never have gotten beyond the township stage.

[joe]

"I can agree that there will be an occasional absentee landlord that is willing to exchange minimal reinvestment for a 'good enough' profit. However given that most people tend to take care of their properties, paid for or not, I don't think there will be enough of these folks out there to cause an entire neighborhood to go downhill. Sooner or later, all other things being equal, someone else will recognize the lost profit potential and try to buy out that individual. Assuming said owner already does not care much for his/her property, they should be willing to sell, at a diminished price following Joe's own reasoning."

This is how it works in the text books. Often, it is how it works in real life. But it is also common that owners do not follow a rational profit maximizing model, and do allow their properties to decline in value, bringing the rest of the district down with them. I've seen it too many times.

In particular, people who are wealthy enough to own large amounts of space tend to be the ones who don't try to maximize their profits, since their already rich. This is not typical, but happens often enough to preclude its dismissal as an aberration. It seems to be particularly common with property owners who inherited their wealth, gained it through speculative buying and selling of vacant or underutilized properties (as opposed to the development of those properties to higher, more profitable uses), or otherwise became rich without actually generating new wealth.

In addition to driving away investment by letting their buildings go to hell, these slumlords also hold out for fantastic sale prices, refusing to sell at market price to neighbors who want to expand, or newcomers who want to set up, viable businesses. This drives/keeps them out.

Student to Econ Professor: Look, Professor! A ten dollar bill!

Professor to Student: Nonsense, my boy! If there were a ten dollar bill on the ground, someone would have picked it up by now!

[Rick Barton]

Joe,

You wrote: "As I said, this is the outcome. I also explained how this works. Please reread."
The high taxes are first and foremost a cause of
urban decay, which you denied. Higher taxes can be something of an "outcome" when in reponse to depression, governments in an especailly insipid move even for them, actually raise taxes. Its like putting Gasoline on Fire.

You wrote: "Redevelopment is just one of a toolbox of processes that normal people call "regulating land use," and libertarians call "destroying the property rights of innocent people," that have been necessary to the development of cities from their beginning."
Fortunatly, they weren't used in the beginning or anytime near it. If they were we wouldn't have ejoyed the dynamic prosperity that we have. Look at Hong Kong. Totally unregulated for years and look at the result. Incredible! Even more so when you consider the part of the world where its located.

You wrote "Yes, the pretext of having an army is what allowed Mai Lai to occur? Do we solve this pproblem by disbanding the army? Of course not..."
Those two "pretexts" aren't exactly analagous but any way just because we shouldn't abolish the army
( bringing them home? now thats different) doesn't mean we shouldn't ban some government actions and abolish other government agencies.

[joe]

Rick,

If raising local property taxes is a (paticularly dumb) response to a depression, how can they be the cause of that depression? The hollowing out of America's cities happend because of shifts in regional economic and social patterns after World War II, which were caused by a combination of government policy, technology and social dynamics. Tax increases were a response to declining revenues resulting from this shift; they were not the cause of the shift, nor of the urban decline that the shift brought.

At this point, we're just asserting contradictory opinions, and I suggest we move on to more valuable insights.

Yankees suck!

[Rick Barton]

Joe,
High taxes are one of the most prominent causes of
depression both local and national. Raisng the taxes in face of falling revenue is not only dumb
but mean. Tax increases are indeed part of government policy that you include in the constellaton of causes; They were not just a response.

Thank you for the exchange. I don't follow baseball but: Go Broncos!

[joe]

Rick,

You wrote, "Ive seen color coded tax maps which show the tax burden superimposed on metro areas and very often the center of the area has the highest tax burden." As I said, this is the outcome. I also explained how this works. Please reread.

Redevelopment is just one of a toolbox of processes that normal people call "regulating land use," and libertarians call "destroying the property rights of innocent people," that have been necessary to the development of cities from their beginning.

"The pretext of the "disaster" situations is what allows the abuses to occurr." Yes, the pretext of having an army is what allowed Mai Lai to occur? Do we solve this problem by disbanding the army? Of course not - though a segment of radicals trying to find a hook for their agenda seized on that solution right away.

[Jim]

I can agree that there will be an occasional absentee landlord that is willing to exchange minimal reinvestment for a 'good enough' profit. However given that most people tend to take care of their properties, paid for or not, I don't think there will be enough of these folks out there to cause an entire neighborhood to go downhill. Sooner or later, all other things being equal, someone else will recognize the lost profit potential and try to buy out that individual. Assuming said owner already does not care much for his/her property, they should be willing to sell, at a diminished price following Joe's own reasoning.

Sometimes neighborhoods do decline from 'natural' (i.e. free market) reasons, such as suburban flight (which has many causes, government policies being only part of the picture) or the loss of the dominant industry in the area. All other things being equal, at some point these underutilized resources should appeal to someone to purchase and rebuild or reinvest in as a project that makes economic sense. Big emphasis on 'other things being equal' since zoning limits what one can do with the land so perhaps the best use (or only economically viable use for the property) is not permitted. Taxes also have to be a factor. City taxes will always be higher than rural taxes (because of the cost of better services supplied by the city) but if the benefits of being in the city outweigh the costs, people and businesses will tolerate said taxes. Not sure if it matters which comes first (high taxes or blight) but it should be pretty freakin' obvious that raising the taxes on areas with increasing vacancy and falling rents is only going to accelerate the problem in a nasty vicious cycle - hence the 'innovation' of tax-free redevelopment zones.

I grew up in a small suburban town and saw the decline of our downtown occur during my childhood and young adulthood. Ironically the actual neighborhoods improved in value over time as it basically became a bedroom community due to proximity to neighboring 'sprawl' areas that had bigger stores and more parking. I worked part time for one of the small business owners in the downtown who remarked to me that the city council was driving all new business out of the downtown by trying to protect the business interests of the existing owners (which it was doing a miserable job of judging by the number of businesses that continued to close their doors). I may not have the expert background on this issue that some do, but IMO, the market should work (it generally does in other areas of life) so when it doesn't, it begs an explanation. In my experience, that explanation is usually rooted in the consequences of some governmental policy.

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