Have Redevelopment Agencies Gone Too Far Using the Power of Eminent Domain? the Supreme Court May Soon Tell Us
O'Connor, Sean, Real Estate Issues
FEW WOULD DISAGREE THAT REDEVELOPMENT--in its traditional context--can be beneficial to society. Redevelopment has been responsible for revitalizing blighted and dilapidated communities where the previous property owners were either unwilling or economically unable to improve the property on their own. But while few would deny the possible benefits of redevelopment, few would also disagree that redevelopment, with its attendant power of eminent domain, is subject to abuse. This is primarily because although the Fifth Amendment places a "public use" limitation on the power of eminent domain, the term "public use" is largely undefined and left to the determination of local governmental entities.
The result is inconsistent and contradictory case law across the country, leaving property owners, practitioners and developers in a state of confusion. The United States Supreme Court may provide some much-needed guidance in this regard, as on September 28, 2004, it agreed to hear the case of Kelo v. City of New London, a case involving redevelopment and the expansive use of the power of eminent domain. The Supreme Court is expected to determine whether the Constitution allows the government to use eminent domain to take property for the purpose of economic development. This case will also provide the Supreme Court with an opportunity to provide a workable definition of "public use" in the context of the Fifth Amendment.
TRADITIONAL REDEVELOPMENT AS A PUBLIC USE
The Fifth Amendment prohibits the "taking" of private property for anything other than "public use." In the redevelopment context, the Supreme Court has held that this "public use" limitation is satisfied when eminent domain is used to eliminate slum housing. Berman v. Parker, 348 U.S. 26 (1954). The redevelopment act at issue in Berman allowed for private enterprise to redevelop properties once they were acquired by the government through eminent domain. Because private enterprise was involved, the property owners in Berman contended the "public use" requirement of the Fifth Amendment was not satisfied. But the Supreme Court concluded that because the taking was for the public purpose of clearing blighted areas, the means of redevelopment through private enterprise did not violate the public use clause of the Fifth Amendment.
Although Berman dealt with the exercise of eminent domain to redevelop a severely troubled area, Berman also spoke in terms of judicial deference toward legislative determinations of public use. Accordingly, many jurisdictions interpreted Berman to allow for a more expansive use of eminent domain in the redevelopment context.
THE MORE EXPANSIVE USE OF EMINENT DOMAIN IN REDEVELOPMENT
Following Berman, there are innumerable examples of the expansive use of eminent domain in the redevelopment context. For example, in 1981, the Michigan Supreme Court allowed the City of Detroit to take an entire neighborhood, complete with more than 1,000 residences, 600 businesses and numerous churches in order to give the property to General Motors for an auto plant. Poletown Neighborhood Council v. City of Detroit, 304 NW.2d 455 (1981). In Poletown, General Motors had announced its intention to close a plant, thereby losing more than 6,000 jobs, but General Motors offered to build a new assembly complex in the city if a suitable site could be found. The City of Detroit used its power of eminent domain to acquire the necessary properties, but the property owners contended that the taking was not for a public use.
The Michigan Supreme Court concluded that the taking of a residential neighborhood, for the purpose of conveying that property to General Motors for construction of an assembly plant, was a public use under the state constitution because of the economic benefits of the jobs and tax revenue that would result from the plant's construction. The case had national implications, and stood for the broad proposition that, for the most part, courts would not interfere with the local government's determination of "public use. …