COVER STORY, AUGUST 2005

SUPREME COURT UPHOLDS PROPERTY TAKINGS FOR ECONOMIC DEVELOPMENT
In a narrowly divided decision, Supreme Court justices find in favor of the city of New London, Connecticut.
Matthew J. Kiefer

Kiefer

The case began in 1990, when the state of Connecticut designated the city of New London a “distressed municipality” under a statewide program providing funding and eminent domain powers to promote economic development. The city, through the non-profit New London Development Corporation, drew up a plan for 90 acres in the Fort Trumbull neighborhood, an older, mostly working-class neighborhood on a peninsula in the Thames River. The plan proposed 90,000 square feet of office/research and development space for Pfizer, a conference-oriented hotel, a new neighborhood with local retail and restaurant uses, and a number of public amenities. The plan encompassed not only federal land from a closed naval facility, but also 115 privately owned properties. Most owners were willing to sell, but nine holdouts, including Susette Kelo, the lead plaintiff, and several other homeowners and small business owners, were not. Represented by the Institute for Justice, a Washington, D.C.-based legal foundation, they sued to challenge the proposed takings, which were upheld by the Connecticut Supreme Court and have now been upheld by the U.S. Supreme Court.

At issue in the case was the meaning of the words “public use” in the Fifth Amendment to the U.S. Constitution, which states, with striking brevity, that “private property shall not be taken for public use without just compensation.” Nobody disputes that this allows government to take private property for government facilities, such as parks, roads and schools. In the 19th century, this was expanded to allow private companies such as railroads to use eminent domain for rail lines and stations that would be available for public use.

Then, in a landmark 1954 decision in the case of Berman v. Parker, the Supreme Court unanimously upheld the seizure of private property in a blighted, economically decaying area for transfer to other private owners for redevelopment purposes, as part of a comprehensive plan under the District of Columbia’s urban renewal program. The decision found that the elimination of threats to public health, safety and welfare and the benefits of economic development constituted a sufficient public purpose to justify the use of eminent domain. But Connecticut’s “distressed municipalities” program differs from Washington, D.C.’s urban renewal program in one important respect: It does not require a finding that the properties to be seized are blighted. In fact, the plaintiffs’ properties were well maintained, and the city did not contend that the Fort Trumbull neighborhood was blighted.

State courts that have considered the question of whether the benefits of economic development are alone sufficient to justify takings have split almost evenly on the issue. Kelo has now answered the question in the affirmative. The reasoning of the majority opinion, written by Justice John Paul Stevens, is straightforward. The Court found that the benefits of economic development — jobs, tax revenue and public amenities — constitute a sufficient public purpose to justify the use of eminent domain powers, particularly when specifically authorized by state legislation and carried out after an extensive public review process in compliance with the legislation.

The Court declined to second-guess either the judgment of the Connecticut legislature about what constitutes a sufficient public purpose, or the judgments of the New London City Council and other state and city agencies that approved the specific Fort Trumbull plan and takings in accordance with the legislation. In this regard, the Court’s decision is merely the latest in a long line of cases deferring to the actions of representative branches of government that place society’s changing needs above individual property interests.

The Court’s decision would appear to be good news not only for economically distressed cities such as New London that are anxious to stimulate private investment, but also for developers interested in making such investments. One might also conclude that the decision is good news for residents and taxpayers in such municipalities (other than, of course, those whose homes are being taken), who can look forward to a lower tax burden and increased public amenities in their cities if redevelopment plans such as Fort Trumbull’s succeed. The decision has already provoked a considerable backlash, however, led by property rights advocates emboldened by the closeness of the vote and the strength of the dissenting opinions by Justices Sandra Day O’Connor and Clarence Thomas. The Connecticut state legislature is considering a moratorium on takings pursuant to the program at issue in Kelo while it considers changes to the legislation, and other state legislatures may similarly carve back on eminent domain powers in urban renewal and other economic development programs. For this reason, even though the highest court in the land has now spoken, the issue presented by the Kelo case is unlikely to go away. And municipalities, far from being emboldened by the decision, are likely to be even more cautious in using eminent domain powers for economic development.

Matthew J. Kiefer is a land use and real estate attorney at the Boston law firm of Goulston & Storrs.

©2005 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.