Posted on 08/05/2005 11:16:36 AM PDT by WayneLusvardi
An oft-heard justification for the use of eminent domain to acquire private property for redevelopment projects is that you “need to break some eggs to make an omelet”
As someone who worked 20 years acquiring property by eminent domain for public agencies, I find this to be a bad analogy. A better analogy might be that people’s nest eggs need protection lest predator foxes steal the eggs under the guise of helping the food chain.
Redevelopment is sold to the public as revitalizing older commercial districts, increasing the property tax base and sales taxes, and stimulating jobs and the local economy. The reality behind the facades of the new malls is quite different than the appearance however. Redevelopment actually has little to do with actual redevelopment and more to do with a struggle for the benefits and wealth-transfers it creates for others.
Communities see very little of the increased property tax from redevelopment projects as most of it is used to pay off bonds and pay bond underwriter lawyers. And more is set aside for paradoxical affordable housing in upscale areas, which is nothing more than corporate welfare.
Redevelopment merely replaces small businesses and non-union jobs with big businesses and union and government jobs.
License to steal
There is only so much expendable income that can be spent on retail products and services in a community. Where redevelopment is successful is when it can “steal” customers from other cities or attract new residents with higher incomes.
So in the San Gabriel Valley of Southern California where I live, Pasadena’s redeveloped historical “Old Town” venue snares customers from a huge catchment area in Southern California. The nearby City of Alhambra “steals” auto buyers with its redevelopment auto mall row; and develops its own new night spots to keep its residents from spending in Old Town Pasadena. The nearby City of Monrovia stops other cities from “robbing” its consumers by using redevelopment to create its own family restaurants. The Fair Oaks Avenue Renaissance Plaza in Pasadena attracts new higher income residents to the surrounding area comprised mostly of minorities, stimulating gentrification and displacing lower income residents.
Redevelopment is a game of value capture. The windfall property values created by redevelopment are pirated away from small owners and often handed to crony developers. Some is circulated back to politicians. The public is left with the not unrealistic impression that government exists for the well-connected, labor unions, lawyers, and bureaucrats rather than ordinary citizens.
Just compensation or just desserts?
Why do we as a society say that landowners must incur any decline in value from the downzoning of their property; but when it comes to the upzoning of property by redevelopment, we require the property’s value appreciation to be transferred to others who are politically connected? If we can’t stop the predatory game of redevelopment at least we could let small landowners have their “just desserts,” not merely “just compensation” for the lowest and worst use of their properties.
The proper role of government under the U.S. Constitution is to protect one’s liberties and nest-eggs of property. This somehow has been twisted into sanctioning the plundering of other’s private property for the personal and collective gain of others and throwing a bone back to those whose property is taken.
Part of the reason for this was U.S. Supreme Court Justice Oliver Wendell Holmes disastrous definition of “just compensation” as “what somebody lost, not what they can gain.” But this has been twisted into a license for others to steal what one could gain from a favorable regulatory change to the zoning of one’s property under the guise of the “public use” doctrine. Like the Aesop’s fable cited above, we should be wary of those who sincerely offer just compensation for our property nest eggs under the pretense that “some eggs have to be broken to make an omelet.”
That is why we should urge our state legislators to vote for Senator Tom McClintock’s proposed State Constitutional Amendment 15 (SCA-15), which would at least make cities have to pay owners the full appreciated value of their properties for redevelopment without the use of eminent domain.
I'm glad to see there are politicians who think the same way I think about this issue and are preparing legislation based on that thinking.
There is nothing here that defines "full appreciated value". Every public works project I have ever worked on has required property and most of them have required the use of eminent domain. The full value of the property, all moving costs, taxes, and miscellaneous costs are paid to the owner. What does "full appreciated value" do differently?
Full value of the property as what? It's current use or its highest value use?
A funny twist is when somebody buys a piece of land that appears to be in the proposed ROW of a street extension, puts up a cheap shopping mall, and then waits for eminent domain to take the property, and then the project is delayed, and delayed, and delayed, and disappears, and there is this silly little strip mall renting out spaces by the month for next to nothing.
Redevelopment is different than eminent domain for a utility line or street. Under redevelopment a property is upzoned, say from single family residential to commercial; but compensation is paid only for the residential use not the highest and best commercial use. While this sounds fair what really happens is that politicians broker off your property appreciation to the politically connected. Conversely, if your property is downzoned you have to incur the loss. Can't have it both ways. WL
Good question. If you own a home to be acquired by eminent domain for redevelopment you are paid for highest use as residential; but the city will upzone the property to a new higher and better use for commercial which you will not be paid for. The market appreciation of your property is sucked up by politicians and sold to others under the public use doctrine. Conversely, if you property is downzoned and value declines, you are not paid for that loss. So why should the appreciation of your property be any different?
At its current use. If you change to pay to the future use, shouldn't that be zero if the use is a road? No one is making money off of that.
I live is a backwater part of the US, so maybe I have not seen the problems you have. I have been involved in several TIF projects for stores or condos. The people who redevelop depressed areas are not the rich, greedy, capitalists that they are pictured as in FreeRepublic. The politically connected, rich people are busy developing land on the outskirts of town were they can build on an ex-cornfield and don't ahve to get involved with condemnations (note that there is ONE exception to this).
The people who redevelop near downtown cannot build what they do and cannot sell or rent them for enough to pay for the moving of utilities, demolishing deserted properties, or disposing of the asbestos and other things in them safely. The people who develop in cornfields don't have any of those problems. The TIF funds are supposed to make the development near downtown equal to developing in a cornfield. Of course, it never really does, though.
There are many here who say that the property should not be redevloped, then. The problem is that you have people moving, and moving, and moving again out to the moving suburbs while the center of the city gets burned out and becomes a perfect place to breed crime. In addition, the size of the City grows, placing more of a burden on the taxpayer to maintain the additional roads, sewers, and other things in the physically larger, but little more populated, city.
Not redeveloping the center of the City hurts conservatives as well as liberals. BTW, I believe that the biggest source of stealing in condemnation/redevelopment/TIF is with sports stadiums (which thankfully, my town has refrained from doing). That is the only time you seen the rich, politically connected messing about downtown. And many of the people here support sports stadiums.
Eminent domain for redevelopment is for shopping centers, big box retail centers, auto malls; not public streets. WL
A road has tremendous value. Just because you aren't charged to use it doesn't mean it has zero value. It also increases the value of nearby realestate.
Good post. The proposed eminent domain initiatives sweeping many states in the U.S. are NOT for abolishing redevelopment. Instead they are for removing coercive eminent domain and low ball prices for property acquired for redevelopment. Let's say you are farmer Joe and the path of development finally creeps out to your cornfield. Your cornfield appreciates immensely in value from $5k acre to say $100K acre! Under redevelopment that $95 K appreciation wouldn't be yours but would be appropriated by others in the name of a public use. Capish?
Actually, I hear almost daily from people who say putting a road near their home wil DECREASE its value. I have NEVER heard a person next to a road we are going to build say that it will increase the value of their property.
Actually, except for roads or utilities, I have never ever heard of the property of a farmer being condemned (the use of eminent domain). In every case that I am aware of where a cornfield is developed, there is a willing buyer and a willing (VERY willing) seller.
The only place I have heard or seen eminent domain used for redevelopment is for inner city property. The increase in value for the inner city development is entirely due to the cost of developing the property, the cost of which the original owner did not contribute. There are risks and rewards in redevelopment. Some have failed. It is not an automatic cash machine (at least the ones that I am aware of around here).
I still see posts on this website saying that people are offered nothing. I have been doing public works projects (including some redevelopment) for 12 years and I have never seen that happen.
It can increase the value of commercial property. In Texas most freeways have frontage roads built along side the highway from which drivers can enter or exit the highway. The land adjacent to these frontage roads usually greatly increases in value in anticipation of highway construction. There have been cases where land owners have been willing to donate land for rights of way in order to profit from from the increase in value of their land adjacent to the freeway.
I don't doubt what you say is true. The point I am getting at is what the people involved say and what the truth is are not always the same.
I have seen many things posted here about eminent domain that are either outright lies or (if it is true) what was done was totally illegal and any lawyer looking for an easy score would be pounding down the doors of the people involved begging to represent them. Since that is not reported as happening, I think what is being reported is not true.
But roads aren't private property and not salable except in rare cases of private streets. Roads are public goods; shopping centers, sports stadiums, and auto malls are private commercially transactable goods. By the way, when private streets sell, it is usually for a huge discount or for a premium, neither of which reflect fair market value. Roads do add value to landlocked land; but may detract from nearby properties if the traffic becomes a nuisance. Good question though. WL
Here in California before the Redevelopment Law was reformed, you could condemn vacant "cornfields" or lots for redevelopment. And many cities did so before the law was changed. Actually, agricultural lands were condemned for flood channels, roads, etc. Before acquiring by eminent domain however a redevelopment project area must be formed, which is nothing more than a dragnet thrown over property so that the redevelopment agency can have first dibs at buying it in the future. I will try and write a sequel explaining more about redevelopment. WL
In reply to your unsupported charge that what I've written is untrue I offer the following. I've worked for three different public agencies buying land by eminent domain for public utilities and redevelopment. I've written over 35 articles in academic and professional journals on the subject. I've been a speaker numerous times at legal and real estate seminars on the subject. Outside of government, I have appraised property for owners impacted by redevelopment, including the three largest eminent domain court awards in California. WL
I never said that anything YOU said was untrue. However, I have posted on many eminent domain threads and there are MANY people there who post about a friend of a friend knew somebody who had their land taken without any compensation at all. If you have posted here very often on the subject, you know that it true. You also know (from you experience) that that is untrue.
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