Build On This!

A pending U.S. Supreme Court case, Kelo v. City of New London, could have significant consequences for individual owners of real estate. Increasingly, cities are using the power of eminent domain to take property that is located within a redevelopment area and transfer it to a private developer. Although the taking of private property is authorized under the United States Constitution, governmental entities may only do so if it is for a “public use.” As cities become active participants in economic revitalization efforts, the nature of the debate between private rights and public needs is evolving, along with the definition of “public use.”

The central issue before the U.S. Supreme Court is whether a city's condemnation of non-blighted, private property for the purpose of developing private residential and office space is a valid "public use." The increased tax revenues to be paid by the new development are seen as benefiting the public as a whole. This redefinition of "public use" strikes a sensitive nerve, particularly given that today, the developers and the cities are often on the same side of a land-ownership dispute. In a typical land use takings case from earlier times, the developer would oppose the city's actions or ordinances on the grounds that they constitute an uncompensated taking of the developer's property rights. In the Kelo v. City of New London case, however, the developers are supporting the use of the government's power of eminent domain to take property from private individuals – the owners of property needed for an economic revitalization project. The common perception is that the land is really just being swapped from one private entity to another, with the government serving only as a middleman.

A city’s ability to take land by using the power of eminent domain arises from the Fifth Amendment to the United States Constitution, which states in part, "Nor shall property be taken for public use, without just compensation." The Fifth Amendment protects the right to own private property, but it also recognizes that the greater good may require the government to take private property for public use. The definition of "public use," however, has evolved over the years. Initially, takings disputes largely centered on wide-open areas needed for railroads and other public facilities.

More recently, the battleground became the urban neighborhood, where cities faced declining tax revenues as areas became "blighted" and values decreased. In 1954, this use of eminent domain was upheld by the U.S. Supreme Court in Berman v. Parker, where the Court held that the use of eminent domain as a planning tool to eliminate "blight" was a valid public use. Cities are now further expanding their use of eminent domain to take private property that is not blighted and transfer it to private developers with the expectation that the new development will generate increased tax revenue for the city. This expanded use of eminent domain gave rise to the case currently before the Supreme Court, Kelo v. City of New London.

In this case, the Supreme Court will address the use of eminent domain to take property from a private individual (the homeowner) and give it to another private individual (the developer). Cities argue that the redevelopment of property, even though it is not blighted, leads to an increased tax base, which benefits the public in general. Opponents argue that the practice is not about “public use,” but rather about giving favorable deals to developers.

While cities generally are in favor of an expansive power of eminent domain, there is growing opposition from private citizens concerned that without sufficient restrictions on the power, anyone's property can be taken whenever a developer proposes a new use that may generate greater tax revenue. On the other hand, economic revitalization of urban areas may be severely restricted without the use of eminent domain. Whatever the outcome by the Supreme Court, it is expected that the limits of the use of eminent domain should be established this year by this Supreme Court’s decision in Kelo v. City of New London.

by John Slagter.

On Thursday, June 23, 2005, the United States Supreme Court decided the case of Kelo v. City of New London. In a 5-4 decision, the majority of the Court (consisting of Justices Stevens, Kennedy, Souter, Ginsberg and Breyer) held that local governments may seize an individual’s home or business for private economic development. The Kelo case has been hailed as one of the most important eminent domain cases to reach the Supreme Court.

Increasingly, municipalities are using the power of eminent domain to acquire property for redevelopment projects with private developers. Although the taking of private property is authorized under the United States Constitution, governmental entities may only do so if it is for a “public use.” As cities become active participants in economic revitalization efforts, the nature of the debate between private rights and public needs is evolving, along with the definition of “public use.”

The central issue before the U.S. Supreme Court in Kelo was whether a city's condemnation of non-blighted, private property for the purpose of developing private residential and office space is a valid "public use." Justice Stevens, writing for the majority, noted that the Court has defined the concept of “public purpose” broadly, reflecting a “longstanding policy of deference to legislative judgments in this field.”

The majority specifically rejected the idea of employing a bright-line rule that economic development does not qualify as a public use. Rather, the Court noted that promoting economic development is a traditional and long accepted function of government. Moreover, the Court noted that there is no principled way of distinguishing economic development from the other public purposes that the Court has recognized in the past.

However, municipalities exercising the power of eminent domain for economic development purposes should still be cautious. First, the Court approved the City of New London’s actions on the basis that it was supported by a carefully considered, comprehensive development plan that was not adopted to benefit a particular class of identifiable individuals. Second, the Court noted that nothing in the decision was meant to preclude a State from placing more stringent controls on the exercise of eminent domain. Whether States will enact such controls remains to be seen.

by John Slagter.

One week after the U.S. Supreme Court decided Kelo v. City of New Haven, two Gahanna City Councilmen, Nick Hogan and John McAlister, proposed amendments to the Gahanna City Charter that would ban the exercise of eminent domain powers for the Gahanna City Charter. The US Supreme Court ruled last week that city governments were permitted to take away anyone’s private property if they expected to receive higher property taxes from someone else.

“In light of the Supreme Court's recent 5-4 vote to attack private property rights, I believe it is absolutely necessary for Gahanna to stand up to be heard and counted,” declared Gahanna Councilman Nick Hogan. “We need to pass a law and better yet a Charter change to forbid anyone, including government, from taking one’s home for private development."

The Libertarian Party of Ohio has taken the lead on eminent domain abuse. “Not only do homeowners often receive free legal help,” mentions Ohio Director Robert Butler, “there's a complete package of eminent domain protest materials from yard signs to political strategies from The Castle Coalition”

“It’s a dark day for American homeowners. While most constitutional decisions affect a small number of people, this decision undermines the rights of every American, except the most politically connected. Every home, small business or church would produce more taxes as a shopping center or office building. And according to the Court, that’s a good enough reason for eminent domain,” said Dana Berliner, a senior attorney who works with the libertarian, pro bono Institute for Justice and defended the residents of New London, Connecticut.

"All politics is local," notes Libertarian City Councilman John McAlister. "I agree with Nick that as a city council we should do everything possible to stand up to tyranny and look out for the rights of our constituents. We all took an oath to uphold the Constitution of the United States, not Supreme Court decisions that try to take away rights rather than protect rights.”

“This is a litmus test,” challenges Libertarian State Chair Jason Hallmark. “If Republicans and Democrats won’t defend a person’s home, what good are they?”

Earlier this year, State Representative Robert Ward proposed legislation “to prohibit the acquisition of small owner-occupied residential dwellings by eminent domain for use in a municipal development project that will be privately owned or controlled.” A copy of proposed Connecticut legislation can be found here. It was defeated in the Connecticut General Assembly on June 28, 2005.

Shortly after the U.S. Supreme Court case Kelo v. City of New London was decided, the State of Connecticut (the State where Kelo originated) proposed a moratorium on the use of eminent domain, declaring that no municipality — including New London — should be permitted to exercise the power of eminent domain until the legislature revised the law to protect the rights of private homeowners.

State based reaction to Kelo may have been the result of the Court’s pronouncement that nothing in the decision was meant to preclude a State from placing more stringent controls on the exercise of eminent domain.

by John Slagter.

On August 3, 2005, lawmakers introduced legislation in the Ohio Senate that would place a moratorium on the power of eminent domain in Ohio until the end of 2006. The senate bill proposes a moratorium on the use of eminent domain when used for private economic development in response to the recent U.S. Supreme Court decision in Kelo v. City of New Haven. The proposed Senate bill would also create a 25-member task force to study the Kelo decision and make recommendations on ways the power of eminent domain can be changed to protect individual rights.

Fox News recently reported this morning that the U.S. Supreme Court will not revisit its decision in Kelo v. City of New Haven. Justice John Paul Stevens specifically commented last week in a speech in Las Vegas before the Clark County Bar Association that the ruling was legally correct, stating that the high court has "always allowed local policy-makers wide latitude in determining how best to achieve legitimate public goals."

A copy of Justice Stevens remarks on Kelo, Allapattah, Apprendi and statutory construction, among other topics, to the Clark County Bar Association in Las Vegas, Nevada can be viewed here: Download file

The Cleveland Plain Dealer reported today that the Ohio Senate unanimously passed Senate Bill 167, a bill designed to place a moratorium on the government's ability to seize homes and businesses for economic development in non-blighted areas until 2007. Senate Bill 167, co-sponsored by Senator Tim Grendell, was recently introduced in August in response to the U.S. Supreme Court decision in Kelo v. City of New Haven. The bill also creates a committee charged with the tasks of examining Ohio's eminent domain laws and making recommendations for reform. An analysis of SB 167 from the Ohio Legislative Services Commission can be found here.

SB 167 now must go to the House, and then to the Govenor for final approval. Speaker Jon Husted predicts that the chamber will approve some sort of eminent domain legislation by year's end. Another interesting aspect of SB 167 is that it provides a "grandfather clause" for eminent domain resolutions passed before SB 167 goes into effect. Municipalities who begin the process to take property for economic development purposes may still be able to acquire that land through eminent domain regardless of SB 167.

John Slagter, Chair of the Real Estate & Construction Practice Group at the law firm of Buckingham, Doolittle & Burroughs, LLP, will be discussing Senate Bill 167, among other topics related to eminent domain, at the Cleveland Bar Association's 27th Annual Real Estate Law Institute. The Institute will be held on October 18 - 19 at the Metropolitan Ballroom in the Huntington Bank Building, 917 Euclid Avenue, 21st Floor, Cleveland, Ohio 44114. You can register here for the event.

The York Dispatch reported this afternoon that York County, PA commissioners Lori Mitrick and Doug Kilgore voted yesterday to take the first step toward seizing the bulk of a 750 acre farm through eminent domain. The owners of the farm, children of the late Laura Kohr and a bankruptcy trustee, vowed to fight any seizure of their property in court.

There's a good article in the Chesapeake Bay Journal discussing the legal wrangling in York County, Pennsylvania involving the County's attempts to seize land through the power of eminent domain.

In York County, PA, the County Commissioners recently voted to condemn, with the intention of seizing through eminent domain, an "archaeologically and ecologically valuable property along the Susquehanna on which a local developer had intended to erect a subdivision." As the Chesapeake Bay Journal reports:

The 80-acre parcel, on which developer Peter Alecxih Jr. had proposed to build more than 50 houses in a subdivision called Highpoint and over which Alecxih is now suing the county, was originally part of a much-larger property known as Lauxmont Farms, which was owned by the Kohr family for about 30 years. In the late 1980s, the Kohr family declared bankruptcy, and has since sold off portions of the property and pursued plans to subdivide others in an effort to fulfill their obligations to creditors. The family still owns about 500 acres, including a portion of the property with unquestioned archaeological significance. County officials have made purchase offers to the respective owners of each tract of land, but their offers were reportedly rebuffed. The Kohr family denies that most of their remaining 500 acres were ever even for sale, and has called the county’s contention that family members had made sale overtures to county officials as “fiction fabricated to advance [their] agenda.”The county officials, joined by state leaders including Gov. Ed Rendell, are hopeful the Lauxmont Farms and Highpoint properties will form the spine of a riverfront park that preserves the archaeological and ecological integrity of the landscape. They envision a publicly accessible “Susquehanna Riverlands Preservation Project” that will include an environmental education center, trail network and Native American heritage site.

A decision in the Highpoint eminent domain case is slated to come out today.

The Patriot News reports that the York County, Pennsylvania eminent domain dispute (among others) have placed some focus on recently proposed eminent domain legislation in the Commonwealth. Pennsylvania's Eminent Domain Staute can be found here. Currently, there are three proposed bills in Pennsylvania aimed at curbing eminent domain abuses. They are:

H.B. 1836 which amends the Eminent Domain Code’s Section 406 on Preliminary Objections and sponsored by: State Representative Thomas Yewcic. The bill was introduced on July 1, 2005, and sent to Committee on State Government.

S.B. 881 which prohibits the condemnation of private property for private commercial development. The bill is sponsored by State Senator Jeffrey Piccol. It was introduced on October 3, 2005, and sent to Senate Committee on State Government.

S.B. 897 which amends the eminent domain procedure code. The bill is sponsored by State Senator David Brightbill. It was also introduced on October 3, 2005.

The York County Court of Common Pleas rendered a decision in the High Point eminent domain case today. You can download the decision here.

The Cleveland Plain Dealer reported that on October 3, 2005, the Ohio Supreme Court accepted the appeal in Norwood v. Gamble. This will be the first time a State supreme court has accepted an eminent domain case after the U.S. Supreme Court decided Kelo v. City of New London. A copy of the jurisdictional brief filed with the Supreme Court petitioning the Court to review the case can be downloaded here.

Yesterday, the U.S. Senate approved an amendment to the FY2006 Transportation, Treasury and Housing Spending Bill. The amendment, introduced by Senator Kit Bond (R-Mo.), would restrict the use of federal funds on private development projects that seek to use the power of eminent domain for economic development purposes. Senator Bond's amendment, adopted on a voice vote, also requires the Government Accountability Office to study the use of eminent domain. As Law.com reports, the full bill is expected to pass when it comes up for a vote next week.

Missouri, Senator Kit’s home State, has already commissioned a task force to study eminent domain. The task force’s report can be found here.

The Cleveland Plain Dealer reported today that Senate Bill 167, a bill that would place a moratorium on the exercise of eminent domain for economic development purposes, was passed by the Ohio General Assembly yesterday.

The bill now goes to Governor Taft. Once sent to the Governor, he has ten days after receiving it to sign or veto it. If it is signed, SB 167 becomes law in 90 days unless otherwise specified. If it is vetoed, it is returned to Senate with the governor's written objections. A three-fifths majority is required in both houses to override a veto. If the governor fails to either sign or veto the SB 167, at the end of ten days, it becomes law without his signature.

However, even if passed, SB 167 does not place a moratorium on all eminent domain actions by the government. Municipalities, among other governmental entities, may still take property within blighted areas or for other traditional, public purposes such as road-building or utility projects. Moreover, the moratorium only applies to takings actions on or after the effective date of the bill. Consequently, eminent domain actions occurring (or commencing) before the effective date of the bill will be “grandfathered” or exempted from the moratorium.

For more information on Senate Bill 167, read previous posts by the Real Estate & Construction Practice Group at Buckingham, Doolittle & Burroughs, LLP here.

Springfield v. Gross (Oct. 14, 2005), Clark Cty. App. No. 2004-CA-81, 2005-Ohio-5527, a recent decision from the Ohio Court of Appeals for the Second Appellate District, is an important reminder of the importance of carefully drafting appropriation ordinances when taking property through eminent domain. In Gross, the City of Springfield, Ohio passed an ordinance to take private property for a sewer lift station. The City of Springfield then filed an action to take the property using its powers of eminent domain. The property owners (Donald and Carol Gross) filed a motion to dismiss the City's complaint on the basis that a portion of the property that the City sought to take was slated to be used as a construction and equipment storage area, and not for a sewer lift station. Consequently, the property owners contended that a portion of the property the City sought to take was not for a proper public purpose as set forth by the City's ordinance. The trial court agreed with the property owners and dismissed the City's appropriation action.

The Second Appellate court affirmed the trial court decision, and found that only a portion of the property was being taken for the stated purpose (sewer lift station), as the remainder was going to be used to store construction equipment. The Second Appellate court specifically held that: “Because the ordinance passed by the City Commission stated that the purpose of the appropriation was to install a replacement sewer lift station, we conclude that the City has failed to define specifically in its legislation the purpose of the excess appropriation in accordance with City of Cincinnati v. Vester, 281 U.S. 439 and City of East Cleveland v. Nau (1931), 124 Ohio St. 433.” Therefore, the trial court properly dismissed the action. Affirmed."

The New York Times reports that the U.S. House approved H.R. 4127 entitled the “Private Property Protection Act of 2005” by a vote of 376 to 38 on Thursday, November 3, 2005. The bill would deny federal economic development assistance to any State or local entity that uses the power of eminent domain for economic development and would prohibit Federal agencies from engaging in this practice. The bill would also specifically prohibit State and local governments from taking private property and conveying or leasing that property to another private entity, either for a commercial purpose or to generate additional taxes, employment, or general economic health.

A State or local government found to have violated this prohibition would be ineligible for certain federal economic development funds for two years, but could become eligible by returning or replacing the property. The bill would give private property owners the right to bring legal actions seeking enforcement of these provisions and would waive States’ constitutional immunity to such suits.

The bill was introduced in response to the U.S. Supreme Court decision, Kelo v. City of New London. In Kelo, the Court held that economic development as a public use for the taking of private property under the U.S. Constitution's Fifth Amendment.

A similar bill is under consideration in the U.S. Senate.

Recently, State Issue 1 was passed by a majority of voters in the State of Ohio. State Issue 1 proposed an amendment to the Ohio Constitution, and authorizes over $2 billion in bonds for public works and research. You can download the text of the Constitutional Amendment here. A story discussing the practical effect of State Issue 1 can be read here.

An interesting aspect of State Issue 1 that has not received much attention involves its provision discussing eminent domain. Section 3(F) of the Constitutional Amendment provides, in relevant part, that: “This section shall otherwise be implemented in the manner and to the extent provided by law by the General Assembly, including . . . provision for restricting or limiting the taking of private property under Section 19, Article I for disposition to private sector entities for the purposes of division (A)(2) and (3) of this section or restricting the disposition of that property to private sector entities or individuals . . .” Divisions (A)(2) and (3) of the Constitutional Amendment sets forth as proper development purposes “research and development in support of Ohio industry, commerce and business” and “development of sites and facilities in Ohio for and in support of industry, commerce, distribution, and research and development purposes.”

So how does one read this provision? At first glance one may say there is a bit of an ambiguity here. Does this provision permit the taking of private property through eminent domain for economic development so long as the taking is either for (1) research or development in support of Ohio industry, commerce and business or (2) the development of sites and facilities in Ohio for and in support of industry, commerce, distribution, and research and development purposes? Or does one read it to mean that the taking of private property through eminent domain is prohibited for any of the purposes set forth in Division (A)(2) and (3) of the Constitutional Amendment?

Governor Bob Taft signed Senate Bill 167 yesterday placing a moratorium on the exercise of eminent domain for economic development purposes. The bill goes into effect immediately after it is signed and filed with the Ohio Secretary of State. The bill also creates a committee charged with the tasks of examining Ohio's eminent domain laws and making recommendations for reform. For more information, take a look at these previous entries.

Eminent Domain Watch blog reports that Scott Wolstein will be making offers soon to property owners on the east bank of the Flats in Cleveland, Ohio. Mr. Wolstein recently proposed a major plan to redevelop 14 acres on the east bank of the Flats for a mixed-use development composed of 300 housing units (both condominums and apartments) and commercial and retail uses. If property owners reject Wolstein’s offer, it has been reported that the Cleveland-Cuyahoga County Port Authority stands ready to take the land through eminent domain. To read more about Wolstein's Cleveland Flats project, click here.

The Ohio Supreme Court has posted streaming video of the oral arguments in City of Norwood v. Horney, the first eminent domain to reach the Court following the United States Supreme Court's decision in Kelo. Click here to view.

The Second District Court of Appeals has held that a municipality may not use its power of eminent domain to appropriate land in excess of what is needed for the purpose stated in the ordinance authorizing the appropriation.

The First District Court of Appeals has upheld a trial court's admission of expert testimony concerning the "visibility" value of property taken by eminent domain. In Norwood v. Burton (2005), 164 Ohio App. 3d 136, the court held that the testimony of signage expert Dr. R. James Claus was properly admitted to establish that the value of the owner's property greatly exceeded the value established by a "cost approach" appraisal. Because the property was located accross from a major shopping center, the jury could properly consider all the facts contributing to the property's value, including its high visibility.

Ohio lawmakers have suggested that an amendment to Ohio's constitution may be necessary before the State can limit cities' eminent domain power because of the "home rule" powers granted by the Constitution. Such an amendment would require a state-wide vote. More details are available in this article from the Cincinnati Enquirer. A moratorium on the use of eminent domain is currently in effect.

The Cleveland Plain Dealer reports that State Senator Timothy Grendell led an 11 member panel that heard opinions on both sides of the issues. Homeowners, academics and municipal officials all weighed in on the controversial topic.

The Cleveland Plain Dealer reports that the Cleveland-Cuyahoga County Port Authority has voted to use the power of eminent domain to take property needed for a proposed redevelopment of the east bank of the Flats. The Port Authority stated that eminent domain will only be used if negotiated sales cannot be achieved. Some property owners, however, feel that the vote was premature because negotiations for sales have only just begun.

Eminent domain filings have surged across the country, reports the Washington Times. Nearly 6,000 properties have been threatened or taken by eminent domain since the United States Supreme Court's decision in Kelo v. New London. That number is more than half the total of the previous five years. Contact attorney John Slagter for information on eminent domain issues.

Land use and zoning attorney John P. Slagter reports:

In a dramatic departure from the U.S. Supreme Court decision in Kelo v. City of New London (2005), 126 S. Ct. 326, the Supreme Court of Ohio unanimously held in Norwood v. Horney (2006) that without an additional public benefit, a property cannot be appropriated through eminent domain powers merely to provide an economic benefit to the community. Furthermore, the Court held that courts shall apply heightened scrutiny when reviewing statutes about eminent-domain powers and that the term ‘deteriorating areas’ is unconstitutional as used as a standard for taking property because inherently incorporates the future of the property, as opposed to examining the property as it is at the time of the taking.

In the first national election since the Supreme Court’s Kelo v. City of New London decision, dismay with the decision registered in some ballot boxes. The Court in Kelo ruled that promoting economic development as part of a comprehensive plan was a valid “public use” under the Fifth Amendment, and a government may use its eminent domain power to promote such development. The Washington Times reports that voters in the following nine states bypassed their respective state legislatures and enacted measures to limit the scope of the decision: Arizona, Florida, Oregon, Michigan, North Dakota, New Hampshire, South Carolina, Georgia, and Nevada. Voters in California, Washington, and Idaho, however, rejected such measures.

The First District Court of Appeals has ruled that the City of Cincinnati's denial of a landowner's application for a curb-cut to access a public road constitutes a taking of the owner's property for which the City must pay compensation. In State ex rel. Hilltop Basic v. Cincinnati, the Court followed established Ohio precedent, holding that "An owner of a parcel of real property has a right to access public streets or highways on which the land abuts." Even though the owner had access to the public road via a license agreement across a neighboring property, the City's refusal to allow access from the Owner's own land justified the issuance of a writ of mandamus compelling the City to begin eminent domain proceedings.

The Cleveland Plain Dealer reports that Cuyahoga County Probate Judge John Donnelly ruled in favor of the city of South Euclid, which sought to obtain a portion of the Cedar Center shopping center for redevelopment. Four tenants contested the city's right to take the property. The city will now proceed with selecting a developer to rehabilitate the South Euclid portion of the shopping center.

The Cleveland-Cuyahoga County Port Authority is suing to take nine properties by eminent domain for a planned redevelopment project by developer Scott Wolstein. The case will be heard in Cuyahoga County Probate Court and several weeks of testimony are expected, reports the Cleveland Plain Dealer. If the court finds that the taking is justified, the value of the properties will be determined by a jury. Opponents contend that the use of eminent domain in this case is not for the benefit of the public, but for the benefit of a private developer. Proponents argue that the redevelopment of the run-down east bank of the Flats will benefit the entire city.