by David Parkhurst
Posted: October 18, 2004

The National League of Cities will intervene in a Supreme Court case that could have a significant impact on cities’ ability to use eminent domain to acquire private property for economic development purposes.

The United States Supreme Court recently agreed to review a case involving New London, Connecticut’s use of eminent domain for a redevelopment plan that requires the city to acquire private homes. A group of homeowners filed a suit in December 2000 opposing the plan. On appeal of a state trial court’s decision, the Connecticut Supreme Court ruled 4-3 in favor of the city’s plan.

At issue is the scope of the Fifth Amendment, which allows governments to take private property for a public use through eminent domain in consideration for giving the owner “just compensation.”

Under the proposed redevelopment plan, the City of New London would convey the acquired property to its non-profit, private economic development corporation to implement a comprehensive mixed-use redevelopment plan.

The plan relies on private sector participation and promises not only jobs and new tax revenues for this economically distressed community, but other proposed public benefits including new parking facilities for a state park, expanded retail space, public marinas and a waterfront walkway.

An important influence on the redevelopment plan was the decision by Pfizer Inc., to establish its global research facility, which opened in 2001, beside the proposed redevelopment site.

The homeowners asked the court to stop the city from taking their property, arguing that the city had no assurance that the private sector participation would occur and, without it, there was no assurance that the promised public benefits from the redevelopment would materialize.

The Connecticut Supreme Court found that there were sufficient checks in place to assure that the private sector participants would adhere to the plan and supported the city’s action.

“This case deals with an essential local government tool for economic development,” said NLC Executive Director Donald J. Borut. “While it is one case involving one city, a Supreme Court decision stopping New London from using eminent domain to implement this economic development plan would have major ramifications for every city in America.”

Borut asked NLC’s Legal Advisory Committee, chaired by S. Ellis Hankins, executive director of the North Carolina League of Municipalities, to review the case. The committee recommended that NLC participate as a “friend of the court” on behalf of the City of New London and its economic development corporation.

He also asked the State and Local Legal Center, which frequently intervenes in Supreme Court cases on behalf of state and local governments, to review the case and consider intervening.

NLC First Vice President Anthony A. Williams, mayor of Washington, D.C., in an October 4 interview with The Bond Buyer, cautioned that a reversal in the New London case would lead to “jacking up the cost of economic development in poor neighborhoods dramatically, because then people can just sit, and sit, and sit, and wait, [and] bring their costs up way beyond just compensation.”

“The way the opponents of eminent domain always want to portray it is, ‘Oh, Old Mother Hubbard is getting kicked out of her cupboard by an evil government,’” he said.

The Supreme Court will review the case early in 2005.

More Information: Eminent Domain Vital to Local Economic Development

Eminent Domain Vital to Local Economic Development

by Donald J. Borut and S. Ellis Hankins
Posted: October 18, 2004

The recent decision by the U.S. Supreme Court to review a case involving a local government’s use of eminent domain threatens to unravel more than 50 years of constitutional precedent that provides broad judicial latitude to municipalities in carrying out economic development plans.

The case — and the eventual Supreme Court ruling — has far-reaching implications for cities and towns of all sizes throughout the country. It deals with a fundamental economic development tool that must be protected.

The ability of local leaders to reenergize communities through economic development demands local and regional self-sufficiency, not naïve reliance on a continuous and sufficient flow of state and federal dollars.

Therefore, it is in the public interest for municipalities to pursue economic development locally and regionally because a healthy economy helps generate the revenue necessary to provide services and infrastructure needs of the public. At times, the ability to provide for the public good requires municipalities to exercise the power of eminent domain granted by state authority.

That authority must be available to be used wisely, with considerable caution and with an eye toward achieving a greater public good that will benefit the entire community and the region.

The challenge from private property rights advocates that will play out when the case of Kelo vs. City of New London comes before the U.S. Supreme Court puts that tool at risk.

Opposition to eminent domain also has unintended consequences because marketplace uncertainty and increased risk threatens to increase municipal borrowing costs associated with economic development projects.

That’s why NLC is intervening in the case on behalf of all cities and towns. This case is a perfect example of the important role the National League of Cities plays not only in lobbying Congress and the administration on federal priorities for cities and towns but also in ensuring a local voice on precedent setting court cases.

More than a year ago, NLC expanded its legal advocacy work by creating a special fund and establishing a Legal Advisory Committee to decide when and how NLC will intervene in court cases. One fundamental criterion for intervening is the importance of the case to the interests of local government. This eminent domain case clearly meets that standard, and we want to make sure that the local message is heard and considered.

Beyond the New London case, NLC is already advocating on behalf of municipalities before the judicial and legislative branches to protect the ability of state and local governments to conduct economic development that is necessary to promote economic growth, including job retention and creation.

NLC’s advocacy efforts, however, do not include unqualified approval of the indiscriminate use of economic incentives by state and local governments to induce firms to move from one location to another. NLC believes that with legislative authority comes legislative responsibility to negotiate economic development incentive packages that avoid “smokestack chasing,” to design redevelopment plans that protect the public interest from predatory redevelopment and to ensure efficient economic outcomes that provide tangible public benefits.

NLC is prepared to take the lead in the legal and legislative battles brought on by attempts to reverse more than 50 years of legal precedent that supports municipal authority to conduct economic development.

Be assured that NLC will work tirelessly to preserve the ability of municipal officials to use their best judgment to improve their communities.

Donald J. Borut is executive director of the National League of Cities.
S. Ellis Hankins is executive director of the North Carolina League of Municipalities, and chair of NLC’s Legal Advisory Committee.