January 2006     

The Ripple Effect of Kelo

The Issue in a Nutsell:

By The Institute for Justice

On July 19, 2004, the Institute for Justice petitioned the U.S. Supreme Court to hear one of the most important property rights cases in the past 50 years.

Kelo v. New London puts the issue to the U.S. Supreme Court in the clearest possible terms: Does the U.S. Constitution allow the government to take property from one private party, in order to give it to another private party, because the new owner might produce more profit and more taxes for the City from the land?

The rights of all home and business owners hang in the balance.

In a 4-3 decision earlier this year, the Connecticut Supreme Court ruled that even if there is nothing wrong with your home, your business, or even your neighborhood, the government can use eminent domain to take your land, and give it to the developer for his private gain. This ruling is an invitation to disaster, because every business generates more taxes than a home, and every big business generates more taxes than a small one. If the ruling stands, any property can be taken through eminent domain.

The U.S. Constitution, and every State Constitution, requires that private property only be taken for "public use," such as a road or a public building - not for private economic gain. The use of eminent domain for the creation of tax revenue is the broadest and most dangerous expansion of eminent domain yet realized.

The time is ripe for the U.S. Supreme Court to once again review the Constitutional limits on one of the most serious powers a government has at its disposal. The High Court has not considered an eminent domain case dealing with development since Berman v. Parker was decided 50 years ago. With the appeal of the Connecticut decision, the Court may consider whether the Constitution's public use requirement means anything at all.

When Susette Kelo purchased her two-bedroom, pink house in 1997 along the Thames River - a beautiful stretch of waterfront property in New London, Conn. - she thought she had her work cut out for her just restoring the house and designing the garden. That turned out to be the least of her worries.

Susette Kelo received notice of condemnation from the NLDC the day before Thanksgiving, 2000

Unbeknownst to Susette, the City, the New London Development Corporation (NLDC), (a private development corporation), and Pfizer Corporation, had reached an agreement. Pfizer would build a new facility nearby. The NLDC would take all the land in Susette's neighborhood and transfer it to a private developer, who would, in turn, build an expensive hotel for Pfizer visitors, expensive condos for Pfizer employees, an office building for biotech companies, and other projects to complement the Pfizer facility. The State, and the City, would contribute millions of dollars. The only thing standing in the way was Susette and her neighbors.

Susette Kelo is not alone. All across the country, state and local governments are abusing the power of eminent domain to take private homes and businesses for the benefit of other, more politically favored private businesses who promise more jobs and taxes. In just five years, the government filed, or threatened condemnation of more than 10,000 properties for private parties.

In the face of such statistics, the Institute for Justice, a Washington, D.C., public interest law firm, has waged a national campaign in court, and in the court of public opinion to restrain government's abuse of eminent domain and to restore Constitutional protection for private property.

According to the Connecticut Supreme Court, the single fact that your City is strapped for cash, justifies condemning your home. After all, richer people could be living there and paying more taxes. Office buildings could be built there, employ more people than you employ at your house, and pay more taxes. Taking your home is for the good of the city - it's "economic development."

Using eminent domain for "economic development" alone is a new phenomenon. Usually, governments try to at least claim that the area is a "slum" or "blighted," but Connecticut has dispensed with that pretense, and admits outright that if another business could make a profit on your land, the government can take it. The U.S. Constitution specifically prohibits this kind of taking, limiting the power of eminent domain to "public use." The Connecticut Supreme Court decided that "public use" just means that it could have some benefit to the public, like more tax money in City coffers.

The Connecticut Supreme Court's reasoning effectively reads the Constitution's protections out of existence. Whose land wouldn't produce more taxes if it were an office building instead of a home? Allowing condemnation for "economic development" just allows cities and developers to pick whatever land they want, without regard to the people who live or work there.

The Supreme Court needs to address this radical departure from the language of the Constitution. Its last case involving private development was 50 years ago, and it allowed the clearance of an area so blighted that most buildings lacked plumbing. For the last 50 years, without further guidance, it's been up to States to set their own rules. Not surprisingly, the States have reached conflicting conclusions. Some States, like Connecticut, allow condemnations for "economic development." Other States, like Washington, South Carolina and Maine, do not.

The Constitution is supposed to apply to all United States citizens, and U.S. Supreme Court guidance is desperately needed to prevent the continuing and growing abuse of eminent domain.

Institute for Justice
www.ij.org