Published on Wednesday, April 05, 2006

Is your house generating enough tax revenue? Would it benefit your community if the government took your house and turned it into a parking lot? These questions are important for property owners after the now infamous U.S. Supreme Court decision in Kelo v. City of New London.

According to the Supreme Court, the government can take private property and transfer it to another private party for economic-development reasons, arguing that there can be a “public benefit” from such effects as increased tax revenue.

As the Observer argued in a recent editorial, North Carolina needs a constitutional amendment to protect against these economic development takings, which rely on the wrongful conflation of “public benefit” and “public use,” the latter being the actual constitutional standard involved. It is true that there is no explicit statewide law that says the government can take property for economic development. But a law does not have to be statewide nor explicit to allow for mischief. Current state law does exactly that.

For example, the General Assembly has already approved local bills that expressly permit the taking of private property for economic development. In 2001, lawmakers enacted a bill authorizing Charlotte to take property in this manner. The legislature was permitting economic development takings even before the Supreme Court held that it was constitutional. Now that the legal standard has been dramatically loosened, just imagine the (unsavory) possibilities.

The biggest threat to North Carolinians’ property rights in this area is the state’s urban redevelopment law. It creates three different types of “redevelopment areas” where a local government can seize private property: “blighted areas,” “nonresidential redevelopment areas” and “rehabilitation, conservation, and reconditioning areas.”

Common sense leads to the conclusion that properties in blighted areas are “blighted,” and properties in the other areas aren’t “blighted.” Urban redevelopment laws are supposed to be concerned with blight. Why then does North Carolina’s Urban Redevelopment Law permit taking two other, non-blighted categories of property?

“Nonresidential redevelopment areas” (which, despite the name, can include residences) are concerned with properties that cause alleged economic harms, such as significantly impairing the “sound” growth of the community. What does “sound” mean? A community can be experiencing economic growth, but a government official might believe that a new project would be more “sound.” This type of subjective and broad language can lead to the taking of property in areas where economic transactions are occurring every day — but just not the ones that a government official might prefer. Think about it this way: In every economic transaction, the parties to the transaction will benefit (otherwise, they wouldn’t agree to the deal), but other parties may suffer harm. A successful restaurant may benefit the owners, employees and customers, but a competing restaurant may lose business. Surely, we don’t want government officials, armed with a vague authorization to promote “sound” economic development, to have the ability to second-guess the market decisions of buyers and sellers, and to do so armed with eminent domain.

The other non-blighted category of takings under current law, referring to “rehabilitation, conservation, and reconditioning areas,” worries me even more. It is based on a potential for future harm, rather than anything one can point to today as causing harm. Thus, the test relies on the fortunetelling skills of government officials. Again, is this really the posture North Carolina should be taking regarding the sanctity of private homes and businesses?

The urban redevelopment law essentially encourages developers to approach local officials and ask them to declare an area a “redevelopment area.” Once this happens, the developers can have private properties seized for their own private projects. It’s a lot easier to negotiate favorable prices when the property owners have no choice but to sell.

In these situations, the reason for seizing private property generally is to benefit developers, not to fix some type of problem affecting public health or safety. Addressing “blight” is a smokescreen, or pretext, for the true motivation, which is to help private developers. The Ohio State Supreme Court, in a case getting national headlines, is currently addressing this type of situation.

At a recent John Locke Foundation presentation, Professor Patrick Hetrick of the Campbell University law school described how property rights have been drastically weakened over the last 50 years in a variety of ways, legislative and judicial. Kelo took this assault to the next, dangerous level. State laws that are subjective and easy to abuse for purposes of seizing private property should be eliminated immediately. The North Carolina Urban Redevelopment Law should be first on the list.

Daren Bakst, an attorney, is legal and regulatory policy analyst for the John Locke Foundation in Raleigh.