TSCRA Members Hear Background On Eminent Domain Controversy
By Colleen Schreiber
SAN ANTONIO — The June 2005 U.S. Supreme Court decision commonly known as the Kelo case sparked a firestorm across the country which brought the issue of eminent domain front and center. Austin-based attorney Trey Blocker, an associate with Jackson Walker
, told participants in a legal seminar held in conjunction with the annual Texas and Southwestern Cattle Raisers’ convention here that the Supreme Court’s Kelo decision shouldn’t really come as a surprise.
“It’s simply an affirmation of how the use of eminent domain has evolved over the years,” Blocker said.
In his overview presentation of the federal and state laws pertaining to eminent domain, he reminded TSCRA members that eminent domain is an inherent power of the government. However, how that inherent power may be used is clearly defined both in the U.S. Constitution as well as in the Texas Constitution. The state constitution in Article 1 Section 17 says, “No person’s property shall be taken, damaged or destroyed for or applied to public use without adequate compensation.”
The Fifth Amendment of the U.S. Constitution deals with eminent domain. It says, “No person shall be ... deprived of life, liberty or property, without due process of law; nor shall private property be taken for public use, without just compensation.” The term “eminent domain,” Blocker noted, is derived from the Latin phrase dominum eminens, which means “supreme Lordship.” “The residents of New London certainly got a taste of this supreme Lordship.” On June 23, 2005, the U.S. Supreme Court held in the Kelo v. City of New London that governmental entities can condemn private property and transfer it to a private interest for economic development purposes. “Basically, what the court said was someone can take your property and give it to someone else who can generate more tax revenue than what you were generating, so long as just compensation is paid.”
The city of New London had been experiencing economic decline for decades. In 1990 a state agency declared the city to be a distressed municipality. Then in 1996 the naval base outside New London was shut down, and by 1998 the city’s unemployment rate was double that of the rest of the state.
In an effort to reverse the economic decline, the city activated the New London Development Corporation. The group was tasked with setting up a revitalization plan for the area. The ultimate plan focused on about 90 acres of the Fort Trumbull area, Blocker said. Within those 90 acres were 115 privately owned properties and another 32 acres around the former naval facility. The city authorized the NLDC to acquire property for the revitalization plan and delegated to it the power of eminent domain.
“At no point did the city allege that the area was blighted or otherwise in poor condition, which is oftentimes a prerequisite under urban renewal plans,” Blocker pointed out. “Its stated goals were to create jobs, generate tax revenues to make the city more attractive, and to create recreational and leisure areas along the waterfront.”
The vast majority of land acquired by the corporation was acquired through negotiation with landowners. Nine of the landowners, however, refused to sell. Among those nine was Susette Kelo. She objected to the taking of her property, arguing that it was not sought for a public use as required under the Fifth Amendment of the U.S. Constitution.
The case eventually made its way to the U.S. Supreme Court. Oral arguments were heard in February 2005 and the Supreme Court issued its decision in June of that year.
“The court, in its opinion, stated that it had long ago rejected ‘any literal requirement that condemned property be put into use for the general public.’
“In fact, in the mid-19th century the Court embraced the broader and more natural interpretation of public use as ‘public purpose.’ “The lesson I take away from this is that when the Supreme Court doesn’t like a word in the Constitution they simply change that word,” Blocker told listeners. “That’s what they’ve done here.” Much deference, he noted, has been given to the government’s definition of what is and isn’t a “public” use. He cited a 1984 Supreme Court case, Hawaii Housing Authority v. Midkiff, as an example. “I was shocked when I came across this case,” Blocker commented.
In the 1960s it was pointed out that the state and federal governments owned almost 50 percent of the land in Hawaii. Another 47 percent was owned by 72 private landowners. The legislature concluded that such concentrated land ownership “skewed the state’s residential fee simple market, inflated land prices, and injured the public tranquility and welfare.”
“To remedy these problems, the legislature passed a law that said if you are leasing or renting property from one of these 72 landowners, you can request that the Hawaii Housing Authority condemn the property and sell it to you,” Blocker said. “Additionally, the housing authority would lend them the money to buy the property.”
In its 1984 ruling, the U.S. Supreme Court said it “would not substitute its judgment for a legislature’s judgment as to what constitutes a public use unless that use is palpably without reasonable foundation.” The Court concluded that the Hawaiian law was constitutional. The court said the act “presumes that when a sufficiently large number of persons declare that they are willing but unable to buy lots at a fair price, the land market is malfunctioning.” Thus condemning this property “is a comprehensive and rational approach to identifying and correcting market failure.” “I don’t think Joseph Stalin died. He just got tired of the cold weather and moved to Hawaii,” Blocker quipped. “One thing that is abundantly clear to me is that these justices must have been absent in high school economics class when they taught the concept of a willing buyer and a willing seller.”
Dissenting in the Kelo case were Justices O’Conner, Scalia, Thomas, and Chief Justice Rehnquist. Justice O’Conner, in her dissent, noted that “the specter of condemnation hangs over all property. Nothing is to prevent the state from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory.”
“What’s interesting about this quote in Justice O’Conner’s dissent is that she wrote the majority opinion in the Midkiff decision in 1984,” Blocker told listeners. “I guess we should be happy that she saw the light and decided property rights were worth protecting.”
Blocker shifted his attention from the federal level to what’s happening in Texas specific to eminent domain. He told listeners that the progression of the eminent domain law in Texas almost mirrors the federal law. “For at least the past 25 years, cities in Texas have had the same authority that the city of New London had to condemn for economic purposes,” he told TSCRA members. “Most people weren’t aware that this existed on the books.”
It didn’t start out that way, however. For more than 50 years the state followed and enforced a strict interpretation of the laws pertaining to eminent domain. He talked about the 1905 Borden v. Trespalacious Rice & Irrigation Co. case in which the Texas Supreme Court issued an opinion that property is taken for a public use “only when there results to the public some definite right or use in the business or undertaking to which the property is devoted.”
“For most of us that means projects such as roads, railroads, public buildings, city halls, jails, libraries or common carriers for transporting gas, electricity and water, etc.” Beginning in 1957 the Texas Supreme Court seemed inclined to expand its interpretation of what constitutes public use. “In 1957 the State took a major step closer to condemnation of private property for economic development when it passed the Texas Urban Renewal Act of 1957,” Blocker opined. “This law permits blighted and slum areas to be condemned by cities and turned over to private interests for development.”
There are those who argue that this law has led to revitalized inner cities and increased economic prosperity. Others contend that the law has only served to force out low income residents and profitable small businesses.
He pointed to an example in San Antonio where a federal housing project just south of the convention center was in very poor condition with a high crime rate. The City of San Antonio, with state and federal assistance, demolished the federal housing project and replaced it with a newer, more modern complex.
“I don’t know this for a fact, but I would suspect they could not have done that without the power of eminent domain. So the law cuts both ways. Sometimes it may be deemed a necessary evil, other times it might be used for a good purpose, and still other times it might be abused.” In 1979 the state legislature passed the Economic Development Act, which allows cities to create economic development corporations that can exercise the power of eminent domain for economic development purposes. And, in 1994, the U.S. Fifth Circuit Court of Appeals, he noted, upheld the city of Arlington’s condemnation of homes and businesses to build a parking lot and office complex for the Texas Rangers baseball team.
Currently the city of Freeport is condemning 50 year-old Western Seafood Company to build a multi-million-dollar arena for private use.
Blocker concluded his remarks with an overview of Texas’ Senate Bill 7,
enacted in the second special session in the fall of 2005. “The bill prohibits any entity, governmental or private, from taking property through eminent domain if the taking confers a private benefit on a particular private party, is for public use that is merely a pretext to confer a private benefit on a particular private party, or is for economic development purposes, unless the economic development is a secondary purpose resulting from an urban renewal project. “If it makes sense to you, then I think Jackson Walker may look to hire you, because it doesn’t make any sense to me,” he told listeners.
Various exceptions were added to the bill in the form of amendments, Blocker noted. The exceptions included such things as transportation projects, water supply projects, public buildings, hospitals, parks, waste disposal projects, libraries, museums and the like. In addition, an exception was made to allow the city of Arlington to condemn property to build a new stadium for the Dallas Cowboys.
Some senators insisted that language be included which required an interim study so good law could be developed.
“One thing can be certain — come next session in 2007 several bills will be filed, and we’ll be chasing them around to make sure that good law does come forth.”
He noted that statutes can be changed by a simple majority of each chamber of the legislature, but if real reform is the goal, a constitutional amendment might be needed.
“Even at that, this subject probably won’t be settled without years and years of litigation and interpretation by the courts, which brought us here in the first place,” Blocker pointed out. He made a plea for TSCRA members to be cognizant of who the TSCRA political action committee supports in various judicial races.
“The thought may have crossed your mind a time or two as to why this organization would want to get involved in these judicial races. The Kelo decision is a prime example of why that is important, because no matter how well you draft a statute, no matter how well you draft a constitutional amendment, it’s always going to be subject to the interpretation of the court, and because of that it’s important that we get to know our judges and that we elect qualified judges who are going to respect property rights,”
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