6/27/2005

A looser rein on eminent domain: Milwaukee (WI) Journal Sentinel, 6/23/05

High court affirms use in developments; local projects may benefit

By Tom Daykin

The power of the government to seize private property for commercial developments - used throughout the Milwaukee area to help build shopping malls, business parks and other projects - was strengthened by a narrow U.S. Supreme Court decision issued Thursday.

The court ruled 5-4 that local governments can buy property, even when it isn't blighted, as long as the owner is fairly compensated.

That power, known as "eminent domain," has existed since the United States was founded, and has been used by government to obtain land for public projects such as highways and schools. The power, also referred to as "condemnation," allows local governments to take the land even if the owner isn't willing to sell, as long as the property owner is fairly compensated.

The condemnation power has been expanded over the past several decades to include projects where governments will buy "blighted " properties - such as vacant buildings - and then sell them to new owners who develop the parcels privately. That creates jobs and property tax revenue for a community.

An expansion of condemnation was challenged by a group of New London, Conn., residents whose homes are slated for destruction to make room for an office complex. They had argued that cities have no right to take their land except for projects with a clear public use, such as roads or schools, or to revitalize blighted areas.

The court's ruling, however, upholds this expanded power of eminent domain.

Up to local officials
Writing for the court, Justice John Paul Stevens said local officials, not federal judges, know best in deciding whether a development project will benefit the community.

"The city has carefully formulated an economic development that it believes will provide appreciable benefits to the community, including - but by no means limited to - new jobs and increased tax revenue," Stevens wrote in an opinion joined by Justices Anthony Kennedy, David H. Souter, Ruth Bader Ginsburg and Stephen G. Breyer.

"It is not for the courts to oversee the choice of the boundary line nor to sit in review on the size of a particular project area," he added.

Justice Sandra Day O'Connor issued a dissent, arguing that cities should not have unlimited authority to uproot families, even if they are provided compensation, simply to accommodate wealthy developers.

"Any property may now be taken for the benefit of another private party, but the fallout from this decision will not be random," she wrote. "The beneficiaries are likely to be those citizens with disproportionate influence and power in the political process, including large corporations and development firms."

O'Connor was joined in her opinion by Chief Justice William H. Rehnquist, as well as Justices Antonin Scalia and Clarence Thomas.

Ruling welcome
Developers, city economic development officials and commercial real estate attorneys - including some involved with eminent domain cases - have been waiting for the decision.

Condemnation has been used for such Milwaukee-area projects as the Valley Business Center, a new business park being developed in Milwaukee's Menomonee Valley; the redevelopment of Bayshore Mall, in Glendale, into Bayshore Towne Center, a mix of stores, restaurants, offices and condominiums; and the remodeling of the former Younkers building at Southridge Mall, in Greendale, into new stores, such as Steve & Barry, Linens 'n Things and Cost Plus World Market.

The court's ruling was welcomed by community officials such as Richard Maslowski, Glendale city administrator. The Glendale Community Development Authority has played a major role in the Bayshore project, which is under construction north of W. Silver Spring Drive and east of N. Port Washington Road.

"It clears some legal clouds we were beginning to experience for Bayshore," Maslowski said.

Negotiations on relocating some of Bayshore's tenants have been delayed lately, Maslowski said.

He believes the attorneys for some tenants were deliberately postponing meetings in hopes of using a court ruling that would have curtailed condemnation powers. Such a ruling would have given tenants additional leverage to negotiate better terms for their relocation, Maslowski said.

The court's ruling to uphold the expanded right of condemnation should "eliminate that cloud," Maslowski said.

Milwaukee uses eminent domain "only as a last resort," said Department of City Development spokeswoman Andrea Rowe Richards.

But condemnation is an important and powerful tool, she said, citing the Valley Business Center, which recently landed a Palermo Villa Inc. frozen pizza facility. The business park is expected to eventually have 800 to 1,200 jobs, replacing a former rail yard.

In West Allis, officials have been seeking the revitalization of West Allis Towne Center, an underused shopping center at W. Greenfield Ave. and S. 70th St. The possible use of condemnation to accomplish that goal could have been eliminated as an option if the Supreme Court had ruled differently, said John Stibal, West Allis development director.

Property rights concerns
Strengthening the power of eminent domain raises concerns about the rights of private property owners, said John D. Finerty, a Milwaukee real estate attorney.

In the case of West Allis Towne Center, a condemnation proceeding could be used to seize the property, and then resell it to another developer, Finerty said.

That could amount to a community preferring one developer over another, he said.

State law does give property owners and tenants certain rights in condemnation cases.

A government that wants to condemn a property must pay for the property owner's appraisal of the parcel. After a government seizes property and pays for it, the property owner may then appeal to the courts to seek additional money. Also, the government must relocate a property owner's business to a comparable property, and pay for the relocation costs.

Stibal doesn't expect the ruling to have any major effects on the negotiations that occur when West Allis gets involved in condemnation cases.


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