ALI-ABA Course of Study Eminent Domain and Land Valuation Litigation. January 3-5, 2008 San Francisco, California

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1 7 ALI-ABA Course of Study Eminent Domain and Land Valuation Litigation January 3-5, 2008 San Francisco, California We Don't Have To Follow any Stinkin' Planning -- Sorry About That, Justice Stevens By Gideon Kanner Of Counsel, Manatt, Phelps, & Phillips, LLP Burbank, California

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3 9 529 We Don t Have to Follow Any Stinkin Planning Sorry About That, Justice Stevens Gideon Kanner* Introduction IN HIS EXTRAJUDICIAL STATEMENTS, U.S. Supreme Court Justice John Paul Stevens, the author of the majority opinion in Kelo v. City of New London, 1 has repeatedly voiced his belief that when the Court upheld New London s power to take unoffending homes of lower middle class families for commercial redevelopment, it did no more than defer to the city s carefully considered redevelopment plans. 2 In a striking obversion of the usual Bill of Rights jurisprudence, where individual constitutional rights secured by the Bill of Rights get to trump the collective, here the Court held that the plans of the collective would trump the constitutional rights of individuals, ostensibly protecting them from having their homes taken for transparently private, profit-making uses. 3 The Court rejected the use of the constitutional term public use and in an act of semantic manipulation asserted that public purpose was a more accurate meaning of the constitutional language, i.e., that use means purpose. 4 This act of judicial deference to a small town s desire to increase its cash flow was so great that the claims of constitutional protection asserted by New London residents being displaced from their homes to make room for more favored, wealthier individuals, had to yield to the city planners vision of the redevelopment project as a whole, leaving precious little of the ostensible protection of the Public Use Clause as well as of the constitutional concept of checks and balances. *Professor Emeritus, Loyola Law School, Los Angeles. Of counsel, Manatt, Phelps & Phillips, Los Angeles. Editor, Just Compensation, a monthly reporting service on eminent domain, inverse condemnation, and relocation assistance law. The author was co-author of an amicus curiae brief in the Kelo case, filed on behalf of the American Farm Bureau Federation, supporting Suzette Kelo and her neighbors. The author gratefully acknowledges the assistance of Emily Madueno, third year law student at Loyola Law School U.S. 469 (2005). 2. See infra note 17, and accompanying text. 3. Kelo, 545 U.S. at Id. at 480. ABA-TUL Kanner.indd 529

4 THE URBAN LAWYER VOL. 39, NO. 3 SUMMER 2007 This article examines the law that governs the implementation of the municipal plans underlying the use of the eminent domain power for redevelopment. In the process it takes a look at the aftermath of several high-profile condemnation cases arising from projects that either proved to be failures or did not follow the plans underlying the condemnations that preceded them. It demonstrates that the vaunted comprehensive character of the municipal plans that so impressed Justice Stevens and the Court s majority, and formed the pillar on which the Kelo Court s reasoning ultimately rests, are not enforceable. Once title to the taken property is transferred to a condemnor those plans are of no binding effect and not worth the paper they are written on. The article concludes that the Court s reasoning is not rooted in reality, that in this instance it has jettisoned the doctrine of checks and balances for the sake of unenforceable municipal plans, and that it de facto facilitates government profligacy and abuse of faultless citizens. Even on its own premise, the prevailing Supreme Court right-to-take jurisprudence only raises the question whether the Justices understand the huge gap between the precondemnation plans so uncritically accepted by them and the reality of those plans implementation. The Role of Planning in the Kelo Decision It seems safe to assume that, unless you have been sojourning in outer space for the past year or so, as a reader of this publication you are familiar with the U.S. Supreme Court s decision in Kelo. 5 There the Court held that the Fifth Amendment s public use limitation does not bar municipal takings of privately owned homes for so-called economic redevelopment. 6 Unlike traditional redevelopment, this type is not concerned with clearance of slums or blight, or elimination of other social detriments. 7 Rather, the purpose of economic redevelopment is to seize unoffending homes, evict their inhabitants and turn over their razed sites (either gratis or at a substantial land write down ) 8 to municipally favored redevelopers who plan to build what they and the condemnor-city predict will be more profitable improvements, generating more private and, 5. Id. at Id. at See Berman v. Parker, 348 U.S. 26 (1954) (slum clearance); Haw. Hous. Auth. v. Midkiff, 467 U.S. 229 (1954) (land redistribution to eliminate perceived oligopoly in land available for housing). 8. An example of this common practice is provided by Kelo itself, in which the plan called for the redeveloper obtaining a 99-year lease on a 90-acre tract of waterfront land for a rent of $1 per year. 545 U.S. at 476 n.4. ABA-TUL Kanner.indd 530

5 11 SORRY ABOUT THAT, JUSTICE STEVENS 531 by a trickle-down process, public funds. Typically, those are shopping malls, automobile manufacturing plants and dealerships, office buildings, and even gambling casinos. 9 In theory, these activities are supposed to increase private spending, create jobs, and generate new tax revenues, thus increasing local prosperity, all of which the Court deemed to be a public purpose, a term said to be synonymous with the constitutional phrase public use. 10 Paradoxically, though the Court upheld the use of economic redevelopment on the basis of a Connecticut statutory scheme that has nothing to do with blight elimination (which is subject to another state statutory scheme), the Kelo opinion harps on New London s status as a distressed municipality that has been in a state of decline for decades, 11 thus inappropriately suggesting a redevelopment rationale that sounds like blight elimination even though New London did not rely on Connecticut s blight elimination redevelopment statutes, and the subject area was not blighted. For all that appears from Kelo s black letter holding, economic redevelopment can be freely used by affluent communities as well as distressed ones. In other words, this approach to redevelopment is based on reverse Robin Hoodery: a wealth transfer from the lower middle class to the very rich and a municipal hope that as redevelopers are enriched, some of the new revenues generated by the increased private commerce anticipated from the redevelopment project will trickle down into the community See Serge F. Kovaleski, Casinos Reaping Anti-Blight Cash, N.Y. TIMES, Jan. 28, 2007, 1, at 1 (reporting disbursements of tens of millions of dollars from the New Jersey Casino Reinvestment Development Authority s funds that were to be used for community improvement, to casinos.) [D]espite the authority s disbursements, Atlantic City continues to grapple with blocks of dilapidated buildings and seamy motels that draw drug dealers and prostitutes, all within the shadows of towering, brightly lighted casinos. Id. In spite of this largesse, Atlantic City Casinos are experiencing a downward trend. See Gary Rivlin, Atlantic City Aiming Higher as Casinos Slip, N.Y. TIMES, Mar. 19, 2007, at A1. So much for community revitalization through redevelopment. 10. Kelo, 545 U.S. at 480. For a discussion of the semantic confusion on which this approach is based, see ELLEN FRANKEL PAUL, PROPERTY RIGHTS and EMINENT DOMAIN 92 93, 95 (1987); Gideon Kanner, Kelo v. New London: Bad Law, Bad Policy and Bad Judgment, 38 URB. LAW. 201, (2006) [hereinafter Kanner, Bad Law]. 11. Kelo, 545 U.S. at 473, This can be a dubious proposition (see supra note 9). Also, because the revenues generated by redevelopment projects have to be diverted away from usual municipal expenditures (such as schools, police, and fire protection) to pay the principal and interest on the bonded indebtedness incurred to finance the redevelopment projects, the net cash flow that actually trickles down can be more modest than prognosticated. In their eagerness to attract redevelopers, municipalities often grant them tax concessions that diminish the flow of tax revenues for years or even decades to come. Thus the most notorious project of that sort a veritable poster child for redevelopment abuses was the destruction of the Poletown neighborhood in Detroit to provide a new Cadillac plant site for General Motors. Poletown Neighborhood Council v. City of Detroit, 304 N. W.2d 455 (Mich. 1981), overruled by Wayne County v. Hathcock, 684 N.W.2d 765 ABA-TUL Kanner.indd 531