June 24, 2005

Kelo v. The City of New London

The Wall Street Journal has a very good editorial on the disastrous ruling in Kelo v. the City of New London:

The Supreme Court's "liberal" wing has a reputation in some circles as a guardian of the little guy and a protector of civil liberties. That deserves reconsideration in light of yesterday's decision in Kelo v. City of New London. The Court's four liberals (Justices Stevens, Breyer, Souter and Ginsburg) combined with the protean Anthony Kennedy to rule that local governments have more or less unlimited authority to seize homes and businesses. No one disputes that this power of "eminent domain" makes sense in limited circumstances; the Constitution's Fifth Amendment explicitly provides for it. But the plain reading of that Amendment's "takings clause" also appears to require that eminent domain be invoked only when land is required for genuine "public use" such as roads. It further requires that the government pay owners "just compensation" in such cases. The founding fathers added this clause to the Fifth Amendment--which also guarantees "due process" and protects against double jeopardy and self-incrimination--because they understood that there could be no meaningful liberty in a country where the fruits of one's labor are subject to arbitrary government seizure. That protection was immensely diminished by yesterday's 5-4 decision, which effectively erased the requirement that eminent domain be invoked for "public use." The Court said that the city of New London, Connecticut, was justified in evicting a group of plaintiffs led by homeowner Susette Kelo from their properties to make way for private development including a hotel and a Pfizer Corp. office. (Yes, the pharmaceutical Pfizer.) The properties to be seized and destroyed include Victorian homes and small businesses that have been in families for generations.

Prior to the Kelo decision, a government could only take private property by eminent domain if the property was necessary for a "public use" or "public purpose" (for example, the property would be used in order to widen a street or construct a public works project). Following this decision, however, the government may now take private property for use by a private party (for example, the government may acquire the land to convey it to Wal-Mart, Best Buy, or the developer of a new skyscraper, etc.). Essentially, the Supreme Court now views the collection of taxes and economic development as a sufficient public purpose to permit use of the power of eminent domain.
The government is required to pay "just" compensation for the property it condemns by eminent domain. However, the City's appraisers will be very conservative in ascertaining market value. If a property owner doesn't agree with the valuation, then the property owner would have to spend time and money fighting the valuation in court.
Moreover, the government will pay a property's fair market value based on its current use. However, the value of a parcel of land significantly increases if the private developer needs the land to complete an assemblage. Let me assure you that Wal-Mart, Home Depot, Menards, JC Penney et. al. would pay significantly more than the fair market value if it meant they could have the full 20-25 acres they need for a big box development. For example, one of these companies might pay $250,000 for land that would other wise be worth $150,000 for its current use as a home.
This substantially diminishes the concept of property rights. I think this is tremendous overreaching by the Supreme Court that will no doubt lead to abuse by politicians making back room deals with wealthy developers.
George Will sums it up pretty well:
The question answered yesterday was: Can government profit by seizing the property of people of modest means and giving it to wealthy people who can pay more taxes than can be extracted from the original owners? The court answered yes.
I will post more on the decision later (I have to prepare for a conference call). In the meantime, see the following links for further coverage on the decision: Professor Bainbridge, Instapundit, Vodkapundit,
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