To borrow from Rudyard Kipling’s poem “If,” what if a governmental agency had to show that a redevelopment project would net economic benefits before it could initiate eminent domain proceedings? What if local government had to show a public benefit rather than just a public use for the condemned property? What if courts no longer showed judicial deference in eminent domain cases and were required to show a greater sense of proof that the redevelopment project would actually succeed?

These are the issues of Kelo v. City of New London, which was argued before the U.S. Supreme Court on February 22, 2005, and these are the “what ifs” that developers need to be aware of both before and after the Kelo ruling. The Supreme Court had not released its decision by press time. For the decision and reactions, go to the Land Development Today website at www.LandDevelopmentToday.com.
The threshold issue of Kelo is whether any limits exist on government’s eminent domain power under the public use requirement of the Fifth Amendment.
For decades, the Supreme Court has applied a deferential standard in eminent domain cases and allowed local governments wide latitude in condemnation for redevelopment projects. In Berman v. Parker, 348 U.S. 229 (1984), the Supreme Court established a standard of judicial deference to the legislature as to what constitutes a “public use.” This train of thinking continued and was bolstered by Hawaii Housing Authority v. Midkiff.

In Midkiff, the Supreme Court ruled that the public use requirement is as broad as the government’s police power and that courts should show extreme deference to the legislative judgments relative to eminent domain. Under Supreme Court precedent, a local government needed to only show that the condemned property would be put to public use. Kelo could be the case that allows the Supreme Court to overturn the deferential standard and require heightened scrutiny for eminent domain cases.

The backdrop for the Kelo case is the “distressed municipality” of New London, Connecticut.

New London had experienced a period of significant economic downturn. Unemployment was on the rise, partly as a result of the closure of the United States Naval Undersea Warfare Center and the transfer of almost 1,000 jobs to Rhode Island.

In order to invigorate the economy of New London, a development corporation, sponsored by the city, received approval for property acquisition in the Fort Trumball area of the city. Thereafter, Pfizer announced plans to build a global research facility adjacent to the Fort Trumball area.

To complement the new research facility, the city engineered a development plan that would include a waterfront hotel, a conference center, marinas for transient tourist boaters and commercial fishing boats, residential uses, and retail/commercial uses. The project is anticipated to yield 2,000 new jobs, increase the local tax base, increase tax revenues, and revitalize the downtown and waterfront areas of the City.

However, in order to assemble the properties necessary for the development plan, the development corporation voted to use eminent domain to acquire those properties within the development area from owners that would not sell their property outright. In December 2000, the petitioners challenged the condemnations. The Connecticut Supreme Court held that economic development is a valid “public use” and upheld the development corporation’s use of eminent domain.

The U.S. Constitution allows government to condemn private property for “public use.” This power is enumerated in the “takings clause” of the Fifth Amendment and has been the tool by which government frees up blighted areas for redevelopment. Kelo could redefine how local governments use their condemnation power for redevelopment projects.

During oral argument in front of the United States Supreme Court, the Institute for Justice served as the counsel for Kelo and argued that a line should be drawn between blight as a permissible government rationale for eminent domain and economic revival, which, according to counsel for Kelo, would require a more restrictive analysis before condemnation could be used.

Further, Kelo’s counsel advocated minimum standards that would have to be demonstrated such as a commencement date for the project, a construction schedule, and financial eligibility for the developers. The goal would be to have some reasonable certainty that the public benefits advertised prior to the condemnation actually come about.

While the transcript of the oral arguments do not indicate which way the U.S. Supreme Court will rule, public-private partnerships need to be mindful that Kelo could be a bellwether for a change in eminent domain jurisprudence and require a more narrow justification for condemnation. Even if Kelo is upheld, a movement seems to be afoot that may require condemning agencies to show a reasonable foreseeability that the redevelopment project will succeed in its goals. SLDT