Court’s Eminent Domain Ruling Settles Nothing
Editorial By George Anderson
With all due respect to the majority of justices on the Supreme Court of the United States, who recently ruled that local governments could take private property using eminent
domain laws to facilitate commercial development – they got it wrong.
What was happening before the ruling, as the Atlanta Business Chronicle points out, was that local “cash-starved governments” were using eminent domain “to turn so-called
blighted areas into virtual cash registers.”
With the Supreme Court ruling, many expect the pace of eminent domain condemnations to increase. This will bring more controversy for retailers, especially those operating big
boxes, because in many instances properties have been condemned to make way for retail projects.
As the Atlanta Business Chronicle reports, “As recently as June, for example, Kmart Holdings Corp. was forced to sell one of its properties in North Bergen, N.J., to make
way for a Home Depot. And in 2003, a homemade furniture store in Harlem, N.Y. was forced to sell to make way for a Home Depot parking lot.”
Home Depot spokesperson Jerry Shields said retailers are not the guys wearing the black hats in these cases.
“When cities or states identify areas for redevelopment and present them to The Home Depot for consideration, the company has an obligation to its customers, shareholders and
associates to make a careful review of the potential investment, its return to the shareholders and the community,” he wrote. “If a city moves forward with plans to use eminent
domain, The Home Depot is often one of the most desired tenants to participate in this type of redevelopment.”
A RetailWire poll from last December asked, “Are retailers justified in pushing for government to invoke eminent domain laws so that their businesses can develop land
for their corporate commercial use?” Eighty-two percent of respondents answered no.
Moderator’s Comment: Are retailers blameless in eminent domain cases as Home Depot’s response to the Atlanta Business Chronicle suggests? Do the
pros outweigh the cons of developing stores for retailers in the cases where eminent domain is invoked? –
George Anderson – Moderator
Local governments are elected by the people who live there. When Kmart decides to “go dark” and relet the space to a lower class tenant, the landlord and the town are powerless to do anything about it. They are expected, I presume from some earlier comments, to just sit back and let their retail areas decline. Kmart has the option to do something in a “bargain and sale” type of way to gain the highest value from their investment. But they chose to just sit back and do nothing…the easiest course of action. So why not have the power to write them a check for the market value and get them out of there? (By the way, they are being compensated for the value of their property by due process of law…in case no one caught that.)
It’s about time that localities had some kind of “stick” to use with lazy landlords and recalcitrant retailers, since the “carrot” of tax incentives, etc. doesn’t seem to work.
And not to be too hasty to blame landlords, many are hand-tied by lease provisions and IRS tax laws that make it impossible to effect change on their own.
Please spare me the armchair quarterbacking on the U.S. Constitution and the Supreme Court’s interpretations. What could be more democratic than citizens getting together to vote and electing local politicians to keep their towns vibrant? As long as eminent domain is fairly applied and would work for Kmart one day if the shoe was on the other foot, I applaud the Court’s interpretation.
I can’t believe that you are even asking about the pros and cons of public seizure for private purposes. This suggests that whether the Supreme’s decision is right or wrong is nuanced by judgment. Outrageous! The positive in this is that the court only represents 1/3 of our government. We the people, through our elected representatives, can send up to them a fresh set of laws if need be. And our executive, over time, can winnow muddleheaded judicial activists.
Retailers and developers are not blameless, however, they owe it to their stockholders to make money — any legal way they can. From my experience, if property is actually blighted, whatever takes its place will be a white elephant. In the stories we read about, I don’t think the land is really blighted, it’s just more valuable to someone else and the owners are not selling. The word “blight” has lost its definition. If anyone has flown into the Cleveland airport during the past 10 years, you may have noticed that one home was left on an island of vacant land by the car rental complex. Only in the past couple of years was it finally torn down. I heard stories of the old lady who would not sell out. Even if you don’t sell out, those in power make you wish you had. I don’t like it, but money buys influence and power.
The founding fathers of the United States of America were mostly people that fled oppression abroad, often due to religious differences. In light of that fact, this government was built on the premise that the will of the majority should not trample the rights of the minority. There is no smaller minority than the minority of one; the owner of private property. We must be very, very careful when we propose to seize anyone’s property “for the public good”–that is the start down a morally slippery slope that threatens the rights of all individuals.
For retailers that take advantage of eminent domain seizures, there is an additional issue, beyond the legal and moral question of obtaining land in that manner. Do you really want reports of your store’s grand opening running side-by-side with an interview of a disenfranchised grandmother who is still having to cope with the loss of her house? Suppose some of the former property owners decide to exercise their freedoms of speech and assembly in front of your store at the grand opening, each of them prepared to speak out to the news media and your prospective new customers. How ironic it would be, to see the former owners arrested for trespassing on private property that was taken from them through eminent domain.
There’s a little voice whispering in my ear, “If we don’t grab the land, someone else will.” I can feel my blood starting to boil as it persists. “We have a duty, a responsibility to our customers who really would want to give us the money if only they had the opportunity. We will be giving something back to the community by developing the property, creating jobs, paying our taxes and generally improving the economy.” In the other ear is the voice of local government saying, “We would regenerate these areas if only we could afford it. Our intentions are good; all we want to do is improve the quality of life for the people living in our community.”
Well, let me tell you a little story (with apologies because this is turning into a lengthy diatribe). A while back Tesco wanted to build a superstore in a town that already had a couple of their stores but not within spitting distance of every single house in the town. The residents, parish, district and county council all opposed the plan, saying they had enough “choice” from the existing Tesco outlets. But our deputy prime minister decided that their views were not sufficiently important and gave Tesco the go-ahead. No sooner did they have permission to build a store of one size than they instantly increased the size. To build the store, they had to build a tunnel enclosing a railway line for the store to go on top of, in spite of engineers’ reports suggesting that it would de-stablise the land. Cuz they hadda have room for a parking lot as well so all the folks could flock in from miles around. Can anyone guess what happened next? You got it. The bridge collapsed into the tunnel, only by the grace of whatever god in which you believe not hurting or killing anyone in the process. Lots of I told you sos followed but, as far as I know (because the press coverage disappeared instantly), once the tunnel is cleared out, building will begin again.
OK so maybe this isn’t exactly eminent domain (although what’s going to happen to residents and businesses in the vicinity of the 2012 Olympic Stadium sure is) but the principle remains the same. Retailers believe they know what customers want and then shove it down their throats, take their money and see that as vindication that they were right. But there are a few of us who still disagree.
I watched with some interest that one developer was going to try to get one of the Justices’ home taken to open a hotel in its place on the theory that it would generate more property tax revenue for the taxing bodies.
I say, if Home Depot or others want a property, go buy it and pay whatever the owner wants. Having it taken by eminent domain is a perversion of the law. “Public good” needs to stick to roads, highways and the like.
I think the local taxing bodies are just going to have to suck it up and cut costs or raise taxes. They are unwilling to do either, figuring they will only p.o. a dozen or so people by seizing their property instead of all the firefighters or all the property owners.
This theory is much more dangerous than any provision of the Patriot Act…look at my library records if you want but don’t take my property!
What happened to our country? There was a time when, if you owned a valuable piece of real estate and a developer wanted it, he had to pay a premium for it. That notion fueled speculation, built wealth and engaged the marketplace in a healthy, competitive and free atmosphere.
Now Kmart is forced by the government to sell their property to Home Depot and, in another instance, a local business owner is forced to sell his business and see it razed, in order for Home Depot to have some extra parking. The sticking issue with a case like Kelo v New London is that, while the tax base will undoubtedly grow larger, the residents who have been contributing and benefiting from that tax base can no longer live in their homes. It is preposterous to believe that the tax base is in place to benefit the government that administers it, as opposed to the (soon to be former) residents who were governed.
Have we lost sight of the foundation of “life, liberty and the pursuit of property” set by George Mason in 1776 in the Virginia Declaration of Rights, which the Library of Congress has stated was relied upon by Thomas Jefferson as a template for the Declaration of Independence?
The problem for the retailer who is offered the eminent domain space is that if he does not take it, another retailer will. So the damage to the original owner is done, regardless.
One solution is for the National Retail Federation or another industry group to adopt a voluntary code of ethics. The code could include a position on taking eminent domain locations. If the code were publicized, then customers who care could reward the stores that behave appropriately. Furthermore, if land use authorities knew in advance that “blue chip tenants” would refuse to take the space offered, then this type of land-grab might be reduced.
Of course, the stores adopting the “location code of ethics” could stock petitions for people to sign asking their legislatures to make this type of land grab illegal, anyway.
Let’s encourage people to work together. Visionary leadership can lead to enlightened collaboration.
I did some more research on this issue. It turns out that a group of people who run socially responsible investment pools totaling several billion dollars wrote a report with some recommendations for retailers. The report is at http://www.cbisonline.com/file/StoreSitingGuidelines.pdf
If retailers’ shareholders want them to be more socially responsible, they will be. Would you like to be an executive of a retail firm whose stock is targeted for divestment due to its poor standing when evaluated by successful socially responsible investment funds?
The funds make a good business case: that siting decisions can entail “reputation risk” which translates to financial issues for sales, raising capital, recruitment, stock price, etc.