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The Condemned

In Ohio, and across the country, homeowners are battling cities and developers conspiring to seize their property.

When Institute for Justice lawyers Scott Bullock and Dana Berliner first visited Norwood in December 2002, they were pleased with what they saw: "a classic mixed-use neighborhood, in perfectly fine condition," as Bullock puts it. That boded well for the institute -- which Bullock describes as an "unabashedly libertarian" organization and which gets much of its funding from wealthy opponents of big government like energy magnates David and Charles Koch -- and its overall goal of reversing what it sees as a disastrous half-century of eminent domain jurisprudence.

Governments have always taken land on behalf of private interests; owners of mines and railroads relied heavily on condemnations for their rights of way, which were granted because, as one Pennsylvania court put it, "the necessities of a great public industry, which although in the hands of a private corporation, [serve] a great public interest." But in Berman v. Parker, a 1954 case, the Supreme Court ruled that the District of Columbia could seize a fully functional store in a blighted neighborhood on the grounds that, as Justice William O. Douglas wrote in the unanimous opinion, "It is within the power of the legislature to determine that the community should be beautiful as well as healthy, spacious as well as clean, well-balanced as well as carefully patrolled." It was not up to the courts to insist "that public ownership is the sole method of promoting the public purposes of community redevelopment projects." Legislatures, in other words, were free to determine -- as the Norwood City Council did -- that one private use of a property was better for the overall community than another, and to use eminent domain to enforce this finding.

According to the IJ’s Berliner, the Berman decision has devolved into a license for cities to "rent out" their eminent domain powers to private developers, with bogus blight designations providing the legal cover. But Jason Jordan, a government affairs director at the American Planning Association, sees the decision as underpinning the "hottest" trend in urban renewal: replacing economically obsolete neighborhoods with large-scale, tax-generating developments like Rookwood Exchange. "Eminent domain is an important tool for communities interested in revitalizing themselves," Jordan told me, and, according to Jeffrey Finkle, head of the International Economic Development Council, it's also a needed tool for reducing sprawl. "Unless we want to pave over all the land outside cities, we have to be able to do these projects inside the urban ring. How can we reposition cities if they don’t have the power to acquire private land?" The ability to team up with developers is indispensable to this agenda, Finkle adds. "Communities have to respond to market opportunities," he says. "If you have a developer willing to invest millions of dollars, it’s important to make that happen."

Rick Dettmer, who runs Norwood’s one-man municipal development office out of the basement of City Hall, says this is precisely why Norwood couldn't turn Anderson away. "The reality is that you need to rely on developer interest in order to facilitate projects. We're not paying for this party." If he were, Dettmer says he might throw it elsewhere -- perhaps in Norwood's decaying downtown, less than a mile from the Rookwood complex. But Norwood, which has suffered two decades of factory closings, and which has a $1.5 million budget deficit, desperately needs this party, wherever it is held.

Many American cities are in a similar predicament, and in the wake of Berman and related state and federal court decisions, cities and entrepreneurs have worked out an elaborate courting ritual in which local governments offer up their eminent domain authority while developers tout the economic benefits of their projects to the electorate. "All the developer has to do," says the IJ’s Bullock, "is to convince the city that it’s good for them and that he will pay for it, and the city will start taking away people’s property." He adds that cities often offer more than condemnations. "Eminent domain is part of a whole set of incentives -- tax breaks and deferrals and other public subsidies -- that add up to massive corporate welfare. Often the numbers fail to live up to expectations. Jobs don't materialize or the economic benefits don’t outweigh the subsidies or the drain on public services that the development creates." When this happens, Bullock says, cities are left holding the bag.

The IJ took on its first eminent domain case in 1996, winning a favorable ruling for an elderly homeowner who refused to sell her Atlantic City property for a Donald Trump casino. "After that decision, we were swamped with phone calls," Bullock recalls, "and we started to think that courts might be willing to revisit this issue." The IJ has since taken on several cases nationwide, and saw Norwood -- with its unblighted neighborhood, its developer-driven condemnations, and its questionable public use -- as another opportunity to illustrate to a court how wrongheaded the private use of eminent domain is. An Ohio judge, however, was unswayed, ruling in June that although the neighborhood was not blighted, it was "deteriorating," and on these grounds, Norwood could go ahead and condemn the holdouts' properties; they are appealing.

In the meantime, a series of jury trials will decide the value of the five condemned properties. (In September, in the first of these trials, Horney’s house was valued at $233,000, money that, he says, "I hope I never see.") But developments elsewhere might make these trials irrelevant. In August 2004, the Michigan Supreme Court invalidated its 1981 landmark Poletown v. Detroit decision, which had determined that "one entity's profit maximization contributed to the health of the general economy." Stating that "Poletown's 'economic benefit' rationale would validate practically any exercise of the power of eminent domain on behalf of a private entity," the court refused to allow Wayne County to condemn land for an industrial park. "State courts from Nevada to Connecticut have relied on Poletown in upholding condemnations," Berliner said. "Now the same case will work for our side."

Add this case to those roiling communities across the country (see "Doing Developers' Dirty Work," page 44), and you have the kind of confusion in lower courts that begs for clarification from the U.S. Supreme Court. And indeed, shortly after the Poletown decision, the court agreed to hear another IJ case, in which the city of New London, Connecticut, condemned an unblighted neighborhood in order to make way for a hotel and condominium complex. Bullock hopes the Supreme Court will revisit the scope of the Berman decision, and rein in the privatization of eminent domain.

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