Eminent Domain: Properties, Principles, and Strange Bedfellows

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Date: Wed, 13 Feb 2008 07:44:40 EST
Subject: "Eminent Domain: Properties, Principles, and Strange Bedfellows"
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Good article. I contacted the author.

Michael D. D. White

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The Current: Winter 2007

Eminent Domain: Properties, Principles, and Strange Bedfellows
Evan Daar

With the ten-day hunger strike that occupied South Lawn in November, the controversies surrounding Columbia's planned expansion into Manhattanville were once again headline news. The strikers' general demand was that Columbia "expand responsibly through community input." Specifically, the strikers demanded that "Columbia needs to take eminent domain off the table for the commercial property-owners in the area and reach agreements with them on an individual basis."

Eminent domain—the power of the government to seize private property for public use, with compensation—is a key point of contention in the debate over Columbia's Manhattanville expansion plans. Many opponents of the planned expansion view eminent domain as a forceful, harmful tool that the university could call upon New York State to use to condemn the property of tenants and business owners who refuse to cooperate voluntarily with Columbia. Thus those opponents have demanded that the university promise not to use eminent domain. Proponents of the expansion— mostly Columbia administrators—have been less clear on how, if at all, eminent domain might be used.

It is important to clarify the terms of this debate, and it is important for the University's proponents and opponents alike to understand the consequences of eminent domain.
***

Columbia first announced its plans to expand into the West Harlem Manhattanville neighborhood in Spring 2004. The $7 billion, 18-acre project includes the construction of the Jerome L. Greene Science Center, which will help advance Columbia's research into mind, brain and behavior. The science center will be funded in part by a $200 million gift from Greene's widow, Dawn. Columbia has also announced plans to move the Graduate School of Business to the Manhattanville campus, and wants to construct an open-space park for students and Manhattanville residents.

The planned expansion into Manhattanville required the University to go through a lengthy bureaucratic process of outlining for the city government the details of the expansion and the expected impact on the local community. This process finished in December, when when the City Council approved by a vote of 35-5 Columbia's plans for Manhattanville. The University now has the city's approval to move forward.

Of course, all of these plans hinge on whether the University will actually be able to acquire the land it seeks.

Since the initial announcement of the expansion plans, Columbia has faced stiff resistance from students, Manhattanville residents and local business owners. While Columbia now owns 75 percent of the land in the expansion area, there are still a number of local business owners and residents who have refused to sell their land to Columbia. The school is still in negotiations with many of these property owners, but if Columbia is unable to acquire the rest of the Manhattanville land on its own, the question becomes whether eminent domain will be an option for the school.
***

Columbia initially promised that it would make all efforts to purchase the land from the local property owners on a voluntary basis, so that it would not have to request that the State use eminent domain. And in the face of sustained opposition, Columbia announced this past July that it would not use eminent domain to acquire residential properties in the area. But Columbia has not ruled out the use of eminent domain to seize commercial properties in the area.

The final step in the expansion process will be a vote by the Empire State Development Corporation—a New York State entity with the powers of eminent domain. The ESDC will not vote on any aspect of the expansion plans. Instead, it will vote on whether Manhattanville is a "blighted" area—a determination which would allow it to use eminent domain to seize the commercial property hold-outs.

Like many members of the Columbia community, I would like to see the University expand into Manhattanville and begin construction on many of the promising projects it has outlined. Such an expansion would undoubtedly benefit the University, enhancing its research capabilities and adding much-needed space for students and faculty. The expansion will also benefit the local community with expanded job opportunities and all the economic opportunities that follow an institution like Columbia. However, the prospect of using the state's eminent domain power is a hard pill to swallow. And the implications of such a decision might outweigh any benefits derived from expansion.
***

The power of eminent domain can be traced back to ancient Rome, when the Roman government could seize property for public projects, provided they compensate the owners. English sovereigns enjoyed similar powers, such that by the time of the American Revolution the power of the British government to take private property for public uses was well established.

Once the American colonists gained independence and, a little later, drafted their Constitution, it was uncontroversial to write in the Fifth Amendment: "nor shall private property be taken for public use without just compensation." This single clause, though worded as a limit on government power, establishes the government's ability to transfer property from private owners to itself in order to provide for public use. This is the power of eminent domain.

This power has sparked much debate over the past two centuries. Much of the recent debate revolves around the words "public use." Many interpret these words strictly, arguing that "public use" only refers to public goods like parks, schools or military bases. Others see the words as meaning "public purpose" or even "public benefit." This debate played out on the national stage after the Supreme Court's 5-4 decision in Kelo v. New London in 2005.

In Kelo, the Supreme Court held that it was within the constitutional authority of the city of New London, Connecticut to seize the home of Susette Kelo in order to pave the way for a public/private development plan. The city's aim was to revitalize a neighborhood it viewed as in decline, by capitalizing on a decision by the pharmaceutical company Pfizer to build a large research facility in the area. The proposed plan for Ms. Kelo's land included, among other things, the construction of a small research and development office to complement the main research facility. Other homes in the area were to be taken to make way for a state park, retail space, and residential development.

Writing on behalf of the Court's majority, Justice John Paul Stevens argued, "Without question, our cases have defined that concept of public purpose broadly reflecting our longstanding policy of deference to legislative judgments in this field." Here, we already see Justice Stevens using "public use" and "public purpose" synonymously. Further blurring the meaning of "public use," Stevens went on to say "[t]here is ... no principled way of distinguishing economic development from the other public purposes that we have recognized." Here Stevens essentially argues that so long as the use of eminent domain results in "economic development," it is justified.

Many were outraged by the decision and Stevens's majority opinion. The term "public use" is absolutely clear, critics argued. There is no way that one can reasonably conclude that "public use" encompasses private developments that provide for private uses, like the one planned for Ms. Kelo's New London neighborhood.

(As a result of the public outcry against the Kelo decision, Pfizer eventually decided that it was no longer politically viable to continue with its construction plans. Two years after the decision, no new construction has begun in New London, and Ms. Kelo still lives in her home.)

But Stevens' decision still stands, serving as precedent throughout the judicial system, and critics remain outraged. Just how outrageous was Stevens's interpretation of "public use" in Kelo?

To his credit, his interpretation of "public use" in Kelo was not far out of line with previous Supreme Court interpretations of eminent domain power. In the 1954 case Berman v. Parker, the Court upheld the government's power to use eminent domain to initiate "urban renewal," where the government could remove slums and eliminate blight in a neighborhood that was threatening the public welfare. The Berman case was the first time the Court decided that "public use" could be considered equivalent to "public purpose."

In the 1984 case Hawaii Housing Authority v. Midkiff, the Court further broadened the definition of "public use," ruling that the state of Hawaii could seize private residential property and transfer it to other private groups in order to break up a land oligopoly. Midkiff, combined with the finding in Berman, made it clear that the power of eminent domain would allow the government to transfer private land from one individual to another, so long as certain conditions were met, namely that the state was correcting for some harm. In Berman, the harm was blight or slums; in Midkiff, the harm was a land oligopoly.

Building on precedent, then, the Court's decision in Kelo extended this interpretation even further. For the city of New London did not seek to use eminent domain to correct for any harms: Susette Kelo's home was not a slum, nor was it "blighted." Instead, the Court upheld the use of eminent domain to transfer Kelo's property to another private entity, namely Pfizer, simply for purposes of "economic development."

***
Are we now seeing the consequences of the Kelo decision play out in Manhattanville? Has it become easier for private institutions like Columbia to team up with local governments and condemn property in the name of "economic development"? In a dissent to the Kelo decision, one Justice sounded an ominous warning about these potential consequences:
Extending the concept of public purpose to encompass any economically beneficial goal guarantees that these losses will fall disproportionately on poor communities. Those communities are not only systematically less likely to put their lands to the highest and best social use, but are also the least politically powerful.

It may surprise some readers that these are the words of Justice Clarence Thomas—whose conservatism is often characterized by critics as callous or unsympathetic.

Justice Thomas's words ring especially true in the context of Manhattanville. It is certainly likely that Columbia's Manhattanville campus will benefit the public with more research, more jobs and a broader tax base for the city. But does this excuse the condemnation of land in the area?

Thomas was warning of just this situation: Columbia, a politically powerful institution, using its connections to overstep Manhattanville small business owners, who have few connections in City Hall or Albany, and who may not put their property to the "highest and best social use."

In 2007, the Institute for Justice—a Washington, DC public interest law firm specializing in property rights and eminent domain cases—commissioned a study to assess Thomas's predictions about the disproportionate impact that Kelo would have on the poor. The study's authors examined the economic and demographic conditions of more than 150 communities that had been threatened with the use of eminent domain for private development purposes.

Also examined were surrounding neighborhoods not threatened with the use of eminent domain.
A schematic model prepared by Columbia to demonstrate its plans for developing the Manhattanville neighborhood of West Harlem.

The study found that Thomas was largely correct. In targeted areas, 58% of residents were minorities, compared to 45% in the surrounding community. The median income of targeted areas was less than $19,000, compared to $23,000 in the surrounding areas. Furthermore, 25% of residents living in these targeted areas live at or below the poverty line, compared with 16% in the surrounding areas.

These data confirm Thomas's fears that poor, minority neighborhoods are disproportionately the victims of eminent domain use.

***

Might Manhattanville be the next victim of eminent domain abuse?

In the debate at Columbia over expansion into Manhattanville, two sub-fights within the larger eminent domain controversy are particularly important: First, whether Manhattanville is a "blighted" area. And second, what kind of compensation the landowners would receive if eminent domain were to be used by New York State.

In October 2006, New York State officials confirmed that they would begin an assessment of the Manhattanville neighborhood that could result in a designation of "blight." If Manhattanville were determined to be "blighted," it will open the door for the Empire State Development Corporation to condemn the land and transfer it to Columbia. (If the University were to do this, it would be relying less on the language in Kelo than on the language in Berman vs. Parker, which allowed for the transfer of private property to get rid of "blight.")

Such designations of "blight" are a main tool used by state governments to condemn land for private development. The Manhattanville case is only one example, but it illustrates a national phenomenon. Local and state governments, in cooperation with politically powerful private groups, target areas for redevelopment, and use political muscle to declare an area "blighted" and seize its land.

There are a number of problems with declaring an area "blighted." First, the definition of blight is vague in most states, giving the government wide latitude in making such a declaration. In California, for instance, factors that may make an area blighted include: "substandard design, inadequate size given present standards and market conditions, [or] lack of parking."

Furthermore, it is the government—or an agency of the government, like New York's ESDC—that retains the power to declare an area "blighted." Once that designation is official, property owners in the "blighted" area have a hard time reversing that decision. And in most states, a "blight" designation lasts indefinitely, meaning that the government forever retains the ability to use eminent domain, even if the area's conditions improve.

In theory, there are supposed to be checks and balances when it comes to declaring an area "blighted." The main check is the ability of property owners to challenge the designation in court.

But reversing a designation in court is very difficult. Importantly, courts are by and large deferent to the decision of the local government. Even the Supreme Court in Kelo ruled that New London's "determination that the area was sufficiently distressed to justify a program of economic rejuvenation is entitled to our deference." This kind of deference has been shown by state and federal judges across the country—and now, since Kelo, it comes with the imprimatur of the Supreme Court.

It is unclear how the situation in Manhattanville will play out. We do not know whether the ESDC will determine that the area is "blighted," and in any case the ESDC's decision will be hard to fully comprehend and judge. Understanding the wide latitude given to local governments in declaring an area blighted, as well as the courts' deference to such declarations, should cause us to be skeptical of a "blight" designation in Manhattanville.

***
The other important issue in the Manhattanville debate relates to compensation. If eminent domain is used on Manhattanville properties, the state is required to pay the property owners "just compensation."

Legislators have been struggling for many years to define what qualifies as "just compensation."

The question ultimately asks us to determine how much a property is worth. One way of measuring worth in many states is "fair market value," which is based on an objective appraisal of the property. But many argue that "fair market value" does not adequately capture the true value of the property. Given that eminent domain is mostly used in situations where property owners do not want to move, there are additional costs to take into account, like the cost of moving when the property owner would otherwise not want to, and the costs of finding a new property. Thus in the wake of the Kelo decision, some state legislatures enacted laws requiring the government to pay upwards of 150% of fair market value.

Some would argue further that "just compensation" is an entirely subjective measure—one that the government cannot and should not make. In determining how much a property is worth to someone, there are a number of personal factors to consider, including sentimental attachment and the general desire not to endure the difficulties of moving. These factors make it almost impossible to come up with a "fair market value." In a truly fair market, an object's price is the amount which pleases both the object's buyer and seller. This is why markets are considered efficient—the buyer and seller both enter into the transaction voluntarily, because both consider themselves better off afterward (they both have "economic surplus," economists say).

But when an appraiser attempts to assign a "fair market value" to a property, he will most likely fail. It is near impossible to calculate a price that both the particular buyer and seller would have agreed to in a "fair market." There is a plethora of personal factors that would have contributed to that final price, and no objective appraiser can possibly take all those subjective factors into account when assigning a value.

The problems with "just compensation" are particularly relevant in Manhattanville. Columbia has been negotiating for the sale of the remaining businesses in the West Harlem neighborhood for months. But because there are still some property owners who refuse to sell, we can assume that Columbia has not offered them a price that justly compensates them for their property. Otherwise, they would have sold the property.

If eminent domain is used on the remaining properties, it is impossible to know what the state will decide is "just compensation." However, it is safe to bet that it will not exceed the offers already made by Columbia.

***
The debate around eminent domain and Manhattanville has led to the formation of some counterintuitive political coalitions worth noting.

In the Supreme Court, the Kelo decision was split down traditional liberal-conservative lines. In addition to Stevens, the four other justices in the majority were Ruth Bader Ginsburg, Stephen Breyer, David Souter and Anthony Kennedy—considered by many to be "liberal" or "moderate" members of the Court, to the extent such terms are applicable. In the minority were the Court's "conservatives:" Thomas, Antonin Scalia, Sandra Day O'Connor and William Rehnquist.

The neat liberal-conservative divide seen on the Court, however, has not been mirrored in national debates over Kelo. By and large, conservatives, who tend to be hard-line property rights advocates, opposed the decision. The American Conservative Union described it as a particularly outrageous example of "judicial activism." Republican Senator John Cornyn responded to the decision by introducing the "Protection of Homes, Small Businesses, and Private Property Act of 2005" to limit the use of eminent domain for economic development. And on June 23, 2006, on the first anniversary of the original decision, President Bush issued an executive order admonishing the federal government to avoid using eminent domain for economic development purposes.

Liberals, on the other hand, have been more splintered in their responses to Kelo. The New York Times editorial page, which almost certainly sympathizes with the Court's liberal justices, described the decision as "a welcome vindication of cities' ability to act in the public interest."

And another liberal publication, The American Prospect, ran an article defending the decision on similar grounds. "[L]ocal governments are also under attack for their efforts around economic development -- projects that, when they're done right, bring in urgently needed jobs and tax revenue," the article declared.

But strangely enough, lining up with conservatives have been staunchly liberal figures like Ralph Nader and Los Angeles Congresswoman Maxine Waters. Nader has a history of being critical of the impact that eminent domain has on poor communities, and Waters introduced a bill in the House similar to John Cornyn's Senate Bill. Moreover, advocacy groups like the NAACP and the AARP—considered to be closely aligned with Democrats—took the side of Susette Kelo from the beginning, submitting amicus briefs outlining the negative impact that eminent domain has on poor urban communities.

The strange political alignments seen in the wake of Kelo are playing themselves out around Columbia's Manhattanville debate. Campus groups that supported the hunger-striker's anti-eminent domain demand included: the Columbia Coalition Against the War, the Columbia College Democrats, and the Barnard/Columbia International Socialist Organization. But along with these left-leaning campus groups, right-leaning national organizations have joined their ranks. Dana Berliner, of the Institute for Justice, came out against eminent domain use in Manhattanville at a Columbia Political Union panel in April 2007. "Once [developers] have the power [of eminent domain], they can't be bothered to find ways to work around it," Berliner said.

Liberals and conservatives who have come out against the Kelo decision (and, on campus, against eminent domain use in Manhattanville) argue on similar grounds: property rights. For conservatives, this seems like a natural fit, as they generally see a protection of property rights as a fundamental part of the Constitution, dating back to its philosophical origins in John Locke's Second Treatise of Government.

For non-conservatives who have been critical of eminent domain use in Manhattanville, though, the property rights argument is stranger. Particularly for groups like the International Socialist Organization, which are more often skeptical of property rights, arguments in favor of property rights for Manhattanville residents appear to be more out of convenience rather than of conviction.

***
Because of purposeful vagueness on the part of the University, the future of Manhattanville is uncertain. In the end, Columbia will most likely be able to expand into the West Harlem neighborhood and begin construction on many of the new buildings it has proposed. And let's not forget that much good will probably come of this, specifically in the way of more research opportunities for the University, more space for students and faculty, and more economic opportunities for the surrounding community.

But the potential abuse of the state's eminent domain power should temper our support of Columbia's expansion. That a private institution like Columbia can call on New York state to designate an area as "blighted," seemingly for the sole purpose of Columbia's expansion, is not what the framers intended by the term "public use" in the Fifth Amendment.

Indeed, when everyone from Clarence Thomas to Ralph Nader to the Columbia Coalition Against the War can agree on something, it probably means that the University should stop and re-think its plans for Manhattanville.

Evan Daar is a junior in Columbia College majoring in Economics. He can be reached at ehd2106@columbia.edu.

http://www.columbia.edu/cu/current/articles/spring2008/eminent-domain.html