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By 5-4 Vote, U.S. Supreme Court Rules that Exercising Eminent Domain for Private Economic Development is a Public Use

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Issue 28, Summer 2005

By 5-4 Vote, U.S. Supreme Court Rules that Exercising Eminent Domain for
Private Economic Development is a Public Use
by Jim Schaafsma, MPLP Housing Law Attorney

In a 5-4 decision released near the end of its recently concluded session, the U.S. Supreme Court held that the a city's exercise of its eminent domain powers to enable private development was a legitimate public use for purposes of the 5th Amendment's Takings clause. The case is Kelo v. City of New London, Connecticut, 125 S.Ct. 2655 (2005).

As part of an ambitious economic redevelopment plan, the City of New London brought condemnation proceedings against property owners in its Fort Trumbull area, including many low to moderate income homeowners, who refused to sell their land. The narrow majority, in an opinion written by Justice Stevens, said that while the City would be prohibited from taking land to confer a private benefit on a particular private party, the Court has long interpreted public use to mean "public purpose", a concept which itself it has broadly defined, in line with its policy of deference to legislative determinations about what public needs justify the use of eminent domain. It found that the city's plan was comprehensive and thoroughly considered, consistent with a state statute authorizing eminent domain to promote economic development, and served a public purpose.

It rejected the call to adopt a rule that economic development does not qualify as a public use, saying that "promoting economic development is a traditional and long accepted function of government." It also rejected the argument that these kinds of takings" require a ‘reasonable certainty' that the expected public benefits actually accrue."

Interestingly, the Court said that no State is precluded from restricting its exercise of eminent domain, noting that Michigan, by its Supreme Court, has done so. (in the case of County of Wayne v. Hathcock, 471 Mich 445 (2004), a divided Michigan Supreme Court said that the condemnation of private property for transfer to a private entity for creation of a business and technology park near Detroit's Metro Airport as part of an economic redevelopment program satisfied Michigan's eminent domain statute, but did not advance a "public use" as required by Michigan's Constitution. In reaching this result, the Court overturned its 1981 Poletown decision. Also, after the Kelo decision was released, a bill was introduced in the Michigan House that would amend the state's eminent domain statute, MCL 213.23, to say that "a taking of private property…is not considered to be for the use or benefit of the public if the property is transferred to a private entity for the primary benefit of the private entity.")

The dissents in Kelo called the result "far reaching and dangerous", saying that it was a victory for the wealthy and well-connected, and its effects would fall hardest on the poor and minorities who would be mostly likely to be displaced by projects such as New London's. Saying that depending on the States to regulate these situations was an "abdication of our responsibility, Justice O'Connor said the ruling means that "the specter of condemnation hangs over all property", and "[n]othing is to prevent the state from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory." In his dissent, Justice Thomas said that "no compensation is possible for the subjective value of these lands to the individuals displaced and the indignity inflicted by uprooting them from their homes."

From the perspective of advocates for low income persons, this case presents some very intriguing questions to contemplate.