What Kelo Does Not (Necessarily) Change
By George Kroculick
Retail Law Strategist
From a pure condemnation law perspective, Kelo changes very little. The only impact that can be stated with some certainty is that there will be more condemnations as a result of this decision by the Supreme Court. Having said this, it is important to note that Kelo has not changed redevelopment law or condemnation law in any substantive way. As the Supreme Court itself said, states may still impose more rigorous standards than the one it announced in its decision. Rather, as to both development law and condemnation law, the decision is important as it applies to the future decisions of legislative bodies and the courts, particularly in states that have imposed the more rigorous restrictions, or where the courts have not spoken on the issue of condemnation solely for economic development.
The above paragraph (as well as Sections I - IV below) were written within days of the release of the Supreme Court's decision. The original analysis of the Supreme Court's decision remains valid, though. As noted in Section V below, the public backlash against the decision has been swift and loud.
I. "Blight" vs. Economic Development
The Connecticut statute at issue, pursuant to which the challenged condemnations were filed, was not Connecticut's urban renewal statute—which permits the use of eminent domain to rehabilitate blighted areas—but rather a statute that governs municipal development projects. The Supreme Court of Connecticut held that none of the challenged condemnations violated the U.S. or Connecticut constitutions or the municipal development project statute. Interestingly, three of the justices concurred in part with the majority but dissented on the "majority's conclusions . . . pertaining to private economic development as a public use under the Connecticut and federal constitutions and the taking of [Petitioners'] properties."
The Supreme Court of the United States viewed the question as ". . . 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." The Court recognized that "There is no allegation that any of these properties is blighted or otherwise in poor condition; rather, they were condemned only because they happen to be located in the development area." Accordingly, the Court ". . . granted certiorari to determine whether a city's decision to take property for the purpose of economic development satisfies the 'public use' requirement of the Fifth Amendment."
A number of state supreme courts have previously ruled on the issue of whether property may be taken for economic development alone. Connecticut, Kansas, Maryland, Minnesota, New York and North Dakota have all held that increasing tax revenue and creating jobs are public purposes and that eminent domain for those purposes is constitutional. On the other hand, a number of states have ruled against the use of eminent domain only for economic development (Arkansas, Florida, Illinois, Kentucky, Maine, Montana and South Carolina), while several other states have indicated that they would probably rule against condemnation without blight (Delaware, New Hampshire and Massachusetts).
The Supreme Court stated that "'The disposition of this case turns on the question of whether the City's development plan serves a 'public purpose'." In concluding that the plan indeed served a public purpose, the Court observed that the City's "determination that the area was sufficiently distressed to justify a program of economic development is entitled to our deference." ln upholding the use of condemnation for economic development, the Court stated: "Promoting economic development is a traditional and long accepted function of government. There is, moreover, no principled way of distinguishing economic development from the other public purposes that we have recognized."
In light of the facts of the case before it and in light of the Supreme Court's analysis, it is still necessary to review and understand the constitutional and statutory scheme in each state. Perhaps just as important will be vigilance in observing changes to state statutes and the opinions of the court in each state as a result of the Kelo decision. The decision alone does not automatically change the analysis of a state constitution or statute. As the Supreme Court itself recognized: "We emphasize that nothing in our opinion precludes any State from placing further restrictions on its exercise of the takings power. Indeed, many States already impose 'public use' requirements that are stricter than the federal baseline." So, it will bear watching to see whether states continue to view their own constitutions and statutes as requiring a public purpose in the form of rehabilitating blight, or whether the legislatures of certain states will now perceive that the shackles have been removed.
II. Public Taking Solely for Private Gain
The Kelo majority has left open the methodology for analyzing the propriety of " . . . a city transferring citizen A's property to citizen B for the sole reason that citizen B will put the property to more productive use and thus pay more taxes. Such a one-to-one transfer of property, executed outside the confines of an integrated development plan is not presented in this case."
Again, the court focused on both an economic development plan and deference to the legislative bodies issuing the plan. Absent a bright-line rule in this regard, questionable transfers of this nature are still subject to challenge.
III. Challenging a Taking
The ability to challenge a taking also has not changed. A taking can be challenged at the time of the legislative determination of the need to take. Most state statutes require in-depth analysis of the development program with numerous studies and public hearings. These requirements allow the public to weigh in at a number of different levels in the process. Moreover, most states impose rigorous notice requirements so that the public is made aware of the plans of the government. Additionally, at least one state (New Jersey) has held that a taking may also be challenged on the public use requirement as late as the filing of the condemnation complaint itself.
IV. Enabling Acts
Finally, it should be noted that a governmental entity's enabling act ordinarily sets forth the types of projects and the reasons for the project. For example, a municipality may not condemn property and turn it over to the school board. So, it is still a worthwhile exercise to analyze the enabling act as it applies to the proposed project.
V. The Backlash
Even Justice Stevens, author of the Kelo opinion, told the New York Times in an August 25, 2005, article: "I would have opposed if I were a legislator." The objections have grown louder from the public.
Since the Kelo decision, most states (currently, about 35 states are considering eminent domain reform of some sort) have reacted to the public outcry by introducing legislation that would prohibit condemnation to further redevelopment without a specific finding of blight. The U.S. House of Representatives has also passed a bill that would withhold funds from municipalities that allow condemnation for purely economic reasons. An excellent summary of the various pieces of proposed legislation can be found on The Castle Coalition's website at http://www.castlecoalition.org/legislation.
Interestingly, few of those bills introduced have actually become law (Alabama and Texas are the exceptions). Clearly, Kelo has brought the business of redevelopment and condemnation "out of the closet" for most of the public. Furthermore, while most lawmakers have reacted to the outcry, it remains to be seen how many will follow through completely and enact the introduced legislation.
George J. Kroculick is a partner in the Philadelphia office of Duane Morris and a member of the Real Estate Practice Group and co-chair of the Eminent Domain and Land Valuation Practice Group. His practice is concentrated in the areas of eminent domain, highway access management and control; relocation assistance, land use and land use litigation; tax appeals; and commercial litigation.
Reprinted by permission of Retail Law Strategist.