Wrecking property rights: how cities use eminent domain to seize property for private developers

Reason, Feb, 2003 by Sam Staley

Turning Tide?

Supporters of eminent domain disagree. "The fact is that in the average community in the typical state, the system is working well," claims the American Planning Association's policy guide to takings. "Property rights advocates are waging a guerrilla war of soundbites, misleading 'spin doctoring' and power politics which characterizes government at every level as evil empires of bad intent."

Finkle, the president of the International Economic Development Council, echoes this sentiment. The Institute for Justice in particular, he argues, has "done a great job of taking the absolute horror cases and publicizing them." For the most part, Finkle and other redevelopment advocates claim, eminent domain is used reasonably and appropriately.

Nevertheless, a few recent court cases may signify a trend toward stricter scrutiny of local government decisions. "Courts are getting involved because they are seeing abuses," says Scott Bullock, an attorney at the Institute for Justice. "A fundamental lesson of history is that power is abused. First it's urban renewal as a part of an effort to redevelop cities. Soon it becomes a way for developers to get land on the cheap and well-connected developers to do projects in their particular area."

Not every court has been as amenable to eminent domain abuses as Myers'. As we saw, the Illinois Supreme Court invalidated a development authority's attempt to seize private property for a racetrack parking lot. In Las Vegas, Carol Pappas lost her apartment building and livelihood, but the Nevada Supreme Court has been harshly critical of the city's handling of the case, which it is reviewing.

Garnett, the law professor, questions whether such cases really indicate a shift in judicial attitudes. "What might be happening," she notes, "is we are cycling back into the 'too much' use of eminent domain. Now that economic development incentives are everywhere, cities and states are using eminent domain as another incentive. We are seeing an uptick in takings challenges because we are seeing more eminent domain cases, and we are seeing more cases reining in abuses."

"I see a modest increase in the [eminent domain] cases largely because the door to the federal courthouse is slightly ajar, and plaintiffs would like to pry it open," says William Fischel, a Dartmouth economist who has written extensively on the issue. "The Supreme Court clearly does not like most of these cases and is leery of giving plaintiffs a federal forum. They want to keep the cases in the state courts."

There is an important potential downside to curbing eminent domain, Finkle warns. Local governments are pragmatic. They will do what seems practical at the time, and they rarely make decisions in the context of broad policy issues or goals. Without the ability to transfer property seized through eminent domain to private developers, local governments might instead choose to take property and keep it. Rather than assemble land for private redevelopment, Finkle argues, local governments will own shopping centers, office buildings, and factories. "Communities will just use alternative means for achieving economic development ends," he says.