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January|February 2005

The Goods, the Bads, and the Ugly

The Fifth Amendment says that the government can take private property from its owners for public use. Just what that means is a question the Supreme Court is reconsidering.

By Thomas W. Merrill

THE WATERFRONT NEIGHBORHOOD OF FORT TRUMBULL had taken a beating. On the Connecticut coast in New London, the area was once the port of a vibrant whaling town and then home to an active mill and military training facility. By the 1990s, though, it housed a condemned factory and a large sewage plant—and it had one of the highest unemployment rates in the region.

In 1998, Pfizer, the pharmaceutical giant, moved its research headquarters to the old military site and things began to turn around. The project brought jobs and much-needed tax revenue into the city. A local redevelopment agency decided to acquire 90 acres beside the Pfizer facility to provide sites for other commercial tenants. To build momentum for further revitalization of the area, Connecticut agreed to create a new Fort Trumbull State Park nearby.

New London succeeded in buying most of the private lots in the redevelopment area, but a few residents would not be moved. Matt Dery, who had lived his whole life in the neighborhood, wouldn't sell. Neither would his octogenarian mother, who was born in the house where she still lives. Nor would Susette Kelo, a more recent transplant who enjoyed the charm of her small Victorian home on the water.

So the city moved to condemn their properties. The takings clause of the Fifth Amendment, which says, "nor shall private property be taken for public use without just compensation," has been interpreted to mean that the government can take private property only for a public use and if it pays the owners just compensation. Nearly all state constitutions, including Connecticut's, contain similar qualifications on the power of eminent domain. New London claims that it is justified in taking the lots from their current owners, so long as it compensates them, because the new development will bring business to the city.

Kelo and her neighbors disagreed, arguing that New London's plan to improve the local economy was not a public use under the takings clause. Last September, the Supreme Court accepted the case, Kelo v. City of New London, and will consider whether the New London project is a valid public use under the Constitution.

THE QUESTION OF WHAT CONSTITUTES A PUBLIC USE has long been a vexing one for courts, because it requires judges to distinguish between different ends to which government power is put, some "public" and others "private." The core case of an impermissible private use—when the government takes A's property and gives it to B, with no justification other than that A has more political influence—has always been clear. But it has always been unclear exactly what sorts of additional justifications can transform a taking from the private category into a public use. Distinguishing public from private has become increasingly difficult as the functions of government have expanded in the modern era to include far-flung activities like stimulating economic growth, revitalizing city centers, beautifying landscapes, and securing habitats for endangered species.

Generalizing broadly, there have been three different judicial definitions of public use, although they do not coincide precisely with particular historical periods. The first, which has always been regarded as an uncontroversial minimal definition, is that public use means public ownership. Under this basic definition, a taking is for public use if the government will own and control the property after the condemnation is complete. Many routine assertions of eminent domain, such as the acquisition of land for a highway, fit this definition.

But the public ownership definition has long been regarded as too narrow to describe all valid public uses. Starting in the early 19th century, courts frequently allowed states to delegate the power of eminent domain to privately owned turnpike, canal, and railroad corporations. The widespread practice of delegating the power of eminent domain to these sorts of private corporations has meant that courts have almost never regarded public ownership as a complete definition of public use.

A second, more inclusive, definition provides that public use literally means use-by-the-public. Under this definition, title to the property after condemnation is not relevant. What is decisive is whether the property is open to the public as a matter of right. This definition expands eminent domain to include delegations to railroads, turnpike companies, and the like, because these are common carriers that must serve the public on a nondiscriminatory basis.

This definition also has problems: Military bases, many government offices, and prisons are typically off-limits to the public, yet no one doubts that these are public uses of the land. Similarly, gas pipelines and electric distribution grids are not literally accessible to the public, although the public is able to use the services these companies provide. So the use-by-the-public definition of public use has also been regarded as being too narrow. The Supreme Court in the 1920s rejected use-by-the-public as a standard of federal constitutional law, and it is at most a tiny minority position among state courts today.

The third and by far the dominant definition is that public use means public purpose or benefit. Under this expansive conception, property can be taken for any purpose with a plausible public interest justification. Since the courts embraced this view in the last century, the power of eminent domain has become virtually limitless. The Supreme Court has said that the public use requirement is "coterminous with the scope of a sovereign's police powers," meaning that property can be condemned for any purpose that would be a proper end of government. Under the public purpose test, land has been condemned for casinos, shopping centers, and privately owned factories. California was even allowed to consider condemning the Oakland Raiders professional football team. In each case, the justification was that the taking would stimulate the local economy—a valid public interest that has been thought to satisfy the public purpose definition of public use.

Why have courts been drawn to the public purpose definition? The simplest answer is that at key points in our history, forced transfers of property have been perceived to be the best solution to particular social problems. One such moment occurred in the 19th century, when there was great interest in harnessing the power of streams and rivers for water mills. Many state legislatures passed so-called Mill Acts to facilitate such projects. These acts typically authorized landowners to construct dams for water mills and flood the land of upstream owners, provided the mill owner compensated the people whose land was flooded. The courts generally (although not universally) held that the Mill Acts were a taking of property for a valid public use. This result could not be justified under either the public ownership or public access definitions, and so required that public use be defined as public purpose or benefit.

Another key moment occurred after World War II, as cities were drawn to large, ambitious urban renewal projects. Urban renewal typically requires the acquisition of whole neighborhoods dotted with blighted properties, usually through the use of eminent domain. Once the land is acquired, it is bulldozed and retransferred to new owners who agree to build new structures. This use of eminent domain was deemed a public use by the Supreme Court in the 1954 decision in Berman v. Parker. Again, the result could not be justified under either the government ownership or public access theories, because the taking would result in the transfer of property from one private owner to another with no public right of access after the transfer was complete. To sustain the use of eminent domain for urban renewal, the courts had to embrace the public purpose definition. The Supreme Court has since affirmed its endorsement of this definition and has declined to take a public use case for 20 years.

KELO IS EXPECTED TO END THAT LONG SILENCE, but a victory for the Fort Trumbull residents is by no means assured. In light of the longstanding judicial commitment to the public purpose definition, how can the court avoid the conclusion that an urban redevelopment project like New London's is a public use? A recent decision of the Michigan Supreme Court, County of Wayne v. Hathcock, points to a possible means of narrowing the court's definition. Prior discussions have assumed that a project constitutes public use if it meets one of the three definitions: public ownership; use by the public; or public purpose. Hathcock breaks new ground by developing a more complex, multi-part definition. In effect, the Michigan court held that a project is public use if it meets either the public ownership or use-by-the-public definitions. If it is justified under the public purpose definition, however, the state must pass a higher bar. In such cases, the purpose must be related to an adverse condition of the property itself.

Notice the trick here: Instead of embracing public purpose as an open-ended alternative to public ownership or public access, the court gives the definition a new, more restrictive meaning. Public purpose is now limited to the elimination of "bads," like blighted property. It cannot be extended to encompass the provision of "goods," like expanding the economy or the tax base, unless there is something wrong with the property itself.

Applying this new multi-part test, which is grounded in Michigan constitutional law, Hathcock held that a condemnation of property for a technology park next to the Detroit airport was not a public use under any of the court's criteria: The land was slated for retransfer to private parties, the public would not have had free access to the property, and the land was not blighted.

Taking a cue from Hathcock, the petitioners in Kelo will likely argue that the Supreme Court should adopt a similar multi-part public use test as a matter of federal constitutional law. They will argue that, under such a test, the projected condemnation in New London is not a public use, because the land is slated for retransfer in the form of long-term leases, the public will have no right of access to all parcels, and there has been no finding that the property is blighted. The court's previous decisions endorsing the broad public purpose definition will be distinguished on the ground that in prior cases, the land was condemned in order to mitigate some problem inherent in the property. The New London condemnations, in contrast, have been justified solely in terms of their proposed benefits to the city, in the form of increased economic activity and tax revenues.

The Hathcock test, with the new restrictive definition of public purpose as the elimination of "bads," seems like an arbitrary rule cobbled together to grandfather past decisions while cutting off further expansion of eminent domain. If the court adopts a rule like Hathcock, it would likely preclude the use of eminent domain for a variety of redevelopment projects. Hathcock seems to say that these sorts of projects can be undertaken only if the government owns the property itself, or if private owners can buy up all the properties without the help of the government. The sensible intermediate option of condemning the property and retransferring it would be eliminated.

Consider a couple of examples of how the restrictive Hathcock test might lead to unduly limited policy choices. The first is urban sprawl. Sprawl is driven in part by the fact that new shopping centers, big box stores, and town house complexes need large tracts of land. Large sites in existing urban centers are hard to come by, because ownership of urban land is typically chopped up into dozens of small parcels, making assembly of large sites time-consuming and expensive. It is much easier to acquire large tracts of land by buying up green fields at the outer fringes of urban areas. The result is ever more sprawl.

One way to reduce the advantage that developers see in greenfield development is to have a government redevelopment agency, like the one in New London, acquire tracts of land in declining inner city areas, using eminent domain if necessary, and retransfer the land to developers. Hathcock would seem to bar this use of eminent domain.

Or consider conservation easements, which allow the government to compensate landowners for restricting development on environmentally sensitive land. These easements are increasingly popular as a tool of environmental protection, because they generate less resistance from landowners than regulatory mandates, for which owners receive no compensation. Typically, they are negotiated voluntarily with the owners of the land. But what if the owner of some particularly sensitive land that, say, serves as the critical habitat of an endangered species, refuses to agree to an easement? Under a broad conception of public use as public purpose, one option would be for the government to condemn such an easement in return for compensation for the loss of development rights. But under Hathcock, this might not be possible.

The Supreme Court should exercise great caution before using Kelo as the occasion to announce a new multi-part definition of public use that says "this far and no further." Eminent domain, like any type of government power, is subject to abuse. But even without a strict public use requirement, owners of property are protected against abuse. The law requires that they receive just compensation for any taking of their property, and due process affords them a fair hearing on the legal authority for the taking and the amount of just compensation they are entitled to receive. And of course, any taking that lacks a real public justification is, and has always been understood to be, a taking without public use. When that happens, courts step in and enjoin the taking as a violation of constitutional rights.

Eminent domain is a harsh power, and we can understand how Kelo and her neighbors resent being forced to move. But eminent domain has this coercive effect no matter what purpose the government asserts by way of justification. The solution to the problem of coercion is to use eminent domain sparingly, and to guarantee that owners receive compensation that is truly just. The Supreme Court should think long and hard before going beyond these existing protections. Defining public use narrowly would put a straitjacket on governments in devising solutions to difficult social problems.

Thomas W. Merrill is the Charles Keller Beekman Professor at Columbia Law School and is the co-author of Property: Takings.

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