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By Thomas M. Carpenter, Little Rock City Attorney
A group of citizens in a small town in New Hampshire
are trying to condemn a farmhouse more than a century
old with the hopes of attracting a new hotel complex
that would spawn economic redevelopment in the area.
While the idea of a hotel complex may not be serious,
the passions of the persons behind this effort are intense.
The farmhouse belongs to Justice David Souter of the
U.S. Supreme Court, and the condemnation effort is reaction
to his vote with the majority in Kelo v. City of New
London, a case the Court handed down on June 23. The
opinion in Kelo has spawned totally opposing reactions.
The June 27 edition of the Nation's Cities Weekly, published
by the National League of Cities, hailed the opinion
as assurance that "[c]ities across America will be able
to continue to use the power of eminent domain-one of
their most effective tools for ensuring economic development
... ." NLC President Anthony A. Williams, the mayor of
Washington, D.C., noted that the opinion merely reaffirmed
he current use of eminent domain power. However, on June
30, the U.S. House of Representatives, by a vote of 365-33,
passed a resolution offered by Congressman Phil Gingrey
of Georgia which disagreed with the majority opinion
in Kelo "and its holdings that effectively negate the
public use requirement of the takings clause ... ." What
is the fuss all about? The NLC says that nothing has
changed, and Congress says that an aspect of the constitutional "takings
clause" has been negated. More to the point, what does
the Kelo decision actually hold, and what are its ramifications
for Arkansas? The specific question in Kelo was whether
the "public use" provision of the Takings Clause permits
a local government to use its power of eminent domain
to assemble private property that will later be sold
to private parties for a redevelopment project. By a
5-4 majority, the U.S. Supreme Court said yes. The city
of New London, Connecticut had experienced hard times.
Since a major U.S. Naval school closed, the unemployment
rate had nearly doubled the state average. In 1990, the
city was designated a "distressed municipality." Its
population in 1998 was at its lowest since 1920. This
situation prompted local officials to seek an economic
revitalization project. The project would include a $30
million pharmaceutical research facility, and would also
attract various recreational and commercial activities
to the area. This redevelopment plan moved forward, but
certain persons refused to sell their property to the
government. Eventually, the city condemned the property.
This condemnation was challenged, though, because there
was no "public use" anticipated since the property was
later to be sold to private developers. The Takings Clause
of the Fifth and Fourteenth Amendments to the U.S. Constitution
permit the government to take private property (1) for
a public purpose, (2) after the payment of just compensation.
In Kelo, there was really no question about the compensation
offered. The issue was whether this use constituted a "public
use." To answer the question, the Court noted that there
are two relevant poles in this area of takings litigation.
First, it is clear that a government cannot take property
for the sole purpose of transferring it to a private
individual. Second, the government can take private property
that it later gives to a private entity if there is a
future use by the public in the taking. This second example
deals with situations like condemnation of railroad right
of way. Since the railroad is a common carrier for the
public, then the condemnation fulfills a public use.
The issue in Kelo is where condemnation for a redevelopment
project fell between these two poles. It was obviously
not a simple matter of giving property to a private individual,
or entity, since certain requirements in the redevelopment
project had to be met. For example, the pharmaceutical
facility had to be built, and the mall area with shops
and restaurants had to be built. But is this enough to
fulfill a "public use" test? A question raised in Kelo
was whether the local government should have to prove
that the expected public benefits of the redevelopment
project will occur? If so, what kind of proof had to
be provided. Should, for example, a local government
had to show within a "reasonable certainty" that a specific
taking for a specific redevelopment project would, in
fact, lead to the public benefits suggested by the project?
The Court refused to get involved in this kind of analysis.
Since there was a statutory redevelopment plan in place
that had been followed by the City, the Court refused
to challenge the efficacy of that plan. Further, the
Court concluded that the "public use" analysis really
did not turn on whether the projections of the plan were
sufficiently established. Since the creation of a redevelopment
plan, under the state statutory process, involved legitimate
public debate, the Court was willing to defer to the
state and local governments on these last two issues.
Essentially, all the Court held is that if the process
is in place and properly followed, then the condemnation
meets the "public use" requirement. Justice Anthony Kennedy,
who joined the majority opinion, also issued a concurring
opinion that sounded a warning. While he was willing
to accept the factual record that the New London redevelopment
project was not solely for the benefit of the pharmaceutical
company, he also suggested that a future case might require
a more demanding review. He acknowledged that there may
be cases where the benefits are suspicious, or the procedures
are abused, and if so the Court's conclusion that a "public
use" is present will have to be revisited. The dissenting
opinions echoed this concern in more detail. Does Kelo
really affect local government action in Arkansas? Yes.
But, does it answer any questions that may arise under
Arkansas law? That question awaits a final determination.
After the passage of Amendment 78, the General Assembly
approved Arkansas Community Redevelopment Financing Act.
Ark. Code Ann. §§14-168-301 to -322 (West 2004). This
Act has been most recently debated for its provisions
on tax increment financing. Yet, the same kinds of eminent
domain provisions present in the Kelo case are also involved
in this Act. Perhaps the most important sections of the
Act deal with the public hearings that must be held on
the creation of a redevelopment district, and before
the approval of a proposed project plan. These hearings
not only outline the scope of the district and the project,
but are intended to permit the kind of legitimate public
debate that the Court, and especially Justice Kennedy,
found significant in Kelo. In short, Kelo merely affirmed
in the economic development context what has been the
law in other contexts-i.e., the public taking of property
and later transfer of title to a private entity for a
project that truly benefits the public fulfills the "public
use." But, economic development does not fit into a neat
category in the way that a railroad, or a public utility,
fits. Instead, the legitimacy of the taking is as much
involved with the process used to approve the project
as anything else. If there is a caveat for local government
officials in Arkansas, it is to remember that the proffered
project should demonstrably provide a positive impact
to a community. The redevelopment act clearly outlines
the types of issues that Arkansas local governments should
consider, and should be willing to reconsider, after
public comment. As long as the local government is developing
the project for its community, instead of merely taking
property for a developer, Kelo suggests that the court
should defer to the decisions of the local government.
(The Kelo opinion can be accessed at www.supremecourtus.gov.
Upon entering the site, click on opinions, and then click
on slip opinions and scroll down to those issued on June
23).
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The First Round of the "Public Use" Question: Kelo v. City of New London
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