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Eminent domain debate suggests states should respond; was there a plan for Atlantic Yards?

There was a surprising amount of agreement in a debate held last week about the Supreme Court's controversial eminent domain ruling in Kelo v. New London last year. First, the lawyer for the unsuccessful plaintiff in the 5-4 case, Scott Bullock of the libertarian Institute for Justice, did not attack the concept of eminent domain but rather "eminent domain abuse." His opponent, Michael Dorf of the Columbia University School of Law, said he wouldn't defend any specific instance of eminent domain, but argued that the court's decision did what was appropriate: it prompted state legislatures and courts to more narrowly define the issue.

And for observers from Brooklyn, the discussion provided hints about a challenge to eminent domain in the Atlantic Yards project. "The real issue is the fear of abuse. I don't want to minimize it," Dorf said. The appropriate solution is the one we're seeing, in the political process." He noted that the court--or at least Justice Anthony Kennedy, in his concurrence--left open the possibility of challenging eminent domain "when it looks like an inside, sweetheart deal."

Whether the Atlantic Yards project is a "sweetheart deal" will surely be debated. But it is clear that developer Forest City Ratner devised the project, and city and state officials endorsed the sole-source deal 18 months before the Metropolitan Transportation Authority (MTA) solicited bids for its Vanderbilt Yard, which would be more than one-third of the project footprint.

The debate, titled, Kelo and its Consequences: Should homeowners fear the Supreme Court’s decision?, was held 3/14/06 at the CUNY Graduate Center in New York and sponsored by the Donald and Paula Smith Family Foundation. A podcast should be available.

Kelo summary

In the decision, the Court upheld the exercise of eminent domain by the city of New London, Connecticut, after nine petitioners, owning 15 of the 115 privately-owned properties, challenged the city.

The court summary:
In 2000, the city of New London approved a development plan that, in the words of the Supreme Court of Connecticut, was “projected to create in excess of 1,000 jobs, to increase tax and other revenues, and to revitalize an economically distressed city, including its downtown and waterfront areas.” In assembling the land needed for this project, the city’s development agent has purchased property from willing sellers and proposes to use the power of eminent domain to acquire the remainder of the property from unwilling owners in exchange for just compensation. The question presented is whether the city’s proposed disposition of this property qualifies as a “public use” within the meaning of the Takings Clause of the Fifth Amendment to the Constitution.

Universally despised?

"It is the most universally despised decision by the Supreme Court in decades," Bullock declared, noting that is drawn the ire of such strange bedfellows as George Will and Molly Ivins, and Ralph Nader and Pat Robertson. "About the only people in favor," he said, "are those who stand to benefit: city officials, planners, and developers."

Also in favor, Bullock added, are a few editorial pages, including that of the New York Times. Then again, he said, the Times would have to fall into the previous category as well, since the newspaper--he didn't say "parent company"--is building a new headquarters on land acquired via eminent domain. The audience clapped derisively; many were conservatives drawn to the event by the co-sponsor, The Federalist Society New York Lawyers Chapter.

Public use, public purpose

The Constitution contemplates the exercise of eminent domain; the Fifth Amendment states: nor shall private property be taken for public use, without just compensation.

The term "public use" has evolved in jurisprudence to encompass "public purpose," including economic development and the removal of blight. Bullock contended that the court's decision opens up the possibility of government taking anyone's home: "If that's the case, there are few if any limits. Every home could produce more taxes and jobs if it were a business."

Dorf disagreed. "When Justice O'Connnor said there's nothing to stop people from taking your house, it's sheer nonsense," he added. "The thing to stop them is sheer democracy."

Both Bullock and Dorf suggested that state legislatures and courts could step in. Dorf said the Supreme Court followed long-established law: "People have discovered what the law is, and they've reacted exactly the way they should."

Dorf hearkened back to the 19th century, where eminent domain was used to build public works projects like the Erie Canal. He noted that eight of nine justices accepted the notion of "public purpose" for an eminent domain project, while only the conservative Justice Clarence Thomas "wants to roll you back to 'use.'"

Opponents of the Kelo decision backed themselves into a corner, he argued: "Had New London said, 'we're going to do the development ourselves,' that would've been acceptable to opponents."

Just compensation

Dorf said that the requirement of "just compensation" for those unwilling to sell is an enormous check on the abuse of eminent domain. Because of that, local officials now try to purchase as much property as possible.

(In the Atlantic Yards case, that's what Forest City Ratner has been trying to do. According to a list from FCR, the Courier-Life chain reported that the developer now owns or controls 91 percent or 63 of the 69 condos, coops and owner occupied units in the site area; 75 percent or 12 of the 16 rental buildings; 79 percent or 81 of the 102 rental units; and 63 percent or 27 of the 43 commercial properties.)

Just compensation, Bullock responded, "is not an effective check," because it's often not what a developer would have to pay through negotiation.

Dorf said that might be a good thing, because a "holdout" can charge an extortionate price in a free market. "Just compensation is without a holdout premium."

But what if people don't want to sell, not because they want more money, but because they want to stay in their homes? Dorf acknowledged that was a tough issue, but it was contemplated by the framers of the Constitution: "If it's sufficiently important, it can be overcome."

A questioner pointed out that, in New York, there are some skyscrapers wrapped around townhouses. Bullock agreed, nothing that, "most of the time, development can happen." He cited a book mentioned in the court case, New York's Architectural Holdouts, that shows how architects and planners have managed the issue in New York.

The role of a plan

Justice John Paul Stevens' decision, Bullock acknowledged, contained a limitation, in that the New London project was pursuant to a carefully formulated plan. "He saw that as some type of check against eminent domain abuse," Bullock said.

However, he added, "At every single case in which I've litigated, there's a plan" regarding permitting and approval. "To think this provides a check is foolhardy."

The city did hold the necessary hearings, he said. "When you say taxes and jobs are public benefits, it's very hard to separate public and private," he said. (This goes to the question of the costs and benefits of the Atlantic Yards project would bring, and how many jobs.)

The court on planning

The Supreme Court opinion stated:
The disposition of this case therefore turns on the question whether the City's development plan serves a "public purpose." Without exception, our cases have defined that concept broadly, reflecting our longstanding policy of deference to legislative judgments in this field.

It cited how, in Berman v. Parker, the Court upheld a redevelopment plan targeting a blighted area of Washington, DC, and in Hawaii Housing Authority v. Midkiff, the Court approved a Hawaii statute which broke up a land oligopoly (with just compensation) to reduce the concentration of land ownership. But Kelo wasn't about blight:
Those who govern the City were not confronted with the need to remove blight in the Fort Trumbull area, but their determination that the area was sufficiently distressed to justify a program of economic rejuvenation is entitled to our deference.

Atlantic Yards plan?

Was there a plan for the Atlantic Yards project? There was no planning process before the project was announced, but the Empire State Development Corporation is conducting an environmental review, citing the removal of blight and economic revitalization. The Draft Scope of Analysis states:
The overarching goal of the proposed project is to transform an area that is blighted and largely underutilized into a vibrant mixed-use community over a newly-renovated Rail Yards with enhanced storage, increased inspection capacity, and improved functionality. The proposed project aims to provide greatly needed affordable and market-rate housing, a state-of-the-art arena, first-class commercial retail and office space, publicly accessible open space, and a hotel. Each element will be designed by world-class building and landscape architects in a way that will enhance the Brooklyn skyline and connect the surrounding neighborhoods, which are currently separated by the open Rail Yards and a major avenue (Atlantic Avenue) with inadequate street crossings.

Impermissible favoritism

Justice Anthony Kennedy's concurrence has given encouragement to Atlantic Yards project opponents:
A court confronted with a plausible accusation of impermissible favoritism to private parties should treat the objection as a serious one and review the record to see if it has merit, though with the presumption that the government's actions were reasonable and intended to serve a public purpose. Here, the trial court conducted a careful and extensive inquiry... The trial court considered testimony from government officials and corporate officers; documentary evidence of communications between these parties; respondents' awareness of New London's depressed economic condition and evidence corroborating the validity of this concern; the substantial commitment of public funds by the State to the development project before most of the private beneficiaries were known; evidence that respondents reviewed a variety of development plans and chose a private developer from a group of applicants rather than picking out a particular transferee beforehand; and the fact that the other private beneficiaries of the project are still unknown because the office space proposed to be built has not yet been rented. (Emphases added.)

In the Atlantic Yards case, public funds were not committed before the developer was announced. And the city did not review a variety of development plans.

What the planners say

The American Planning Association filed an amicus brief in support of the city of New London. It seemed to inform the court's acknowledgement of the planning process. The APA brief states:
Another source of protection for all property owners is to assure, to the extent possible, that eminent domain is exercised only in conjunction with a process of land use planning that includes broad public participation and a careful consideration of alternatives to eminent domain....
We do not suggest that a mandate to engage in a sound planning process can be extracted from the “public use” requirement of the Fifth Amendment....We do think, however, that the presence of these features is relevant to this Court’s consideration of whether the public use determination of New London and the New London Development Corporation was a rational one. New London and its Development
Corporation engaged in an extensive planning process before determining that it was necessary to exercise the power of eminent domain; they provided multiple opportunities for public participation in the planning process; and they gave extensive consideration to alternative plans before settling on the final plan.

Another passage in the APA brief points to an absence in the Atlantic Yards process:
One other procedural requirement, of course, is important. The legislature or its delegate must make an actual determination that condemnation is for a public use before exercising the power of eminent domain. We do not believe that a restrictive judicial gloss should be imposed on the meaning of public use, or that courts should apply a heightened standard of review to public use determinations. But we do believe it is important that some politically accountable body determine that the exercise of eminent domain is for a public use, and that judicial review of such determinations remain available, even if under a deferential standard. (Emphasis in original.)

There's been considerable debate about whether the Atlantic Yards site is blighted. In New York, it's not difficult to claim blight. A tougher challenge for those exercising eminent domain for the Atlantic Yards project may be proving to the courts that planning took place.