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Legally Speaking

 

Issue: October, 2005
Author: James L. Radda

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Kelo v. City of New London - “Economic Development” as a “Public Use” under the Fifth Amendment

The Public Use Clause, which appears in the last line of the Fifth Amendment, states, “nor shall private property be taken for public use, without just compensation.” Only the exercise of eminent domain for a public use, then, satisfies that requirements of the Fifth Amendment. But what exactly is a public use? Is public use synonymous with public purpose? Does public use include economic development? Is economic development a public use even in situations where the condemned land is transferred to a private developer?

Stated another way, can the government, consistent with the Public Use Clause, “transfer[] citizen A's property to citizen B for the sole reason that citizen B will put the property to a more productive use and thus pay more taxes[?]”

The United States Supreme Court recently answered these questions in Kelo v. City of New London, Connecticut, a case in which the Court ruled that the exercise of eminent domain by the City of New London, for the stated purpose of economic development, satisfied the requirement of the Fifth Amendment that property be taken for a “public use.”

As the opinion in Kelo explains, the City’s decision to condemn followed decades of economic decline, resulting in the designation of the City in 1990 as a “distressed municipality.” The City was struck an economic blow in 1996 with the closure of the Naval Undersea Warfare Center, which had been located in the Fort Trumbull area of the City and had employed 1,500 people. By 1998, the City’s unemployment rate was double that of the State, and its population of just under 24,000 people was at its lowest since 1920.

In its attempt to help revitalize New London, the State in 1998 authorized two bond issues – $5.35 to support the City’s planning activities and $10 million to fund the creation of a state park in the Fort Trumbull area of the City. Soon thereafter, the pharmaceutical company Pfizer announced plans to build a $300 million research center adjacent to the Fort Trumbull area.

Hoping that Pfizer would attract new business to the area, the City embarked on a plan to redevelop the Fort Trumbull area. After submitting six alternative proposals to various State agencies, the City in January 2000 settled on a development plan that included approximately 90 acres located on the Thames River, adjacent to the proposed Fort Trumbull State Park and the proposed Pfizer facility.

The proposed development, which creates seven parcels of land, includes plans for a waterfront conference hotel at the center of a small urban village, with restaurants and shopping marinas for both recreational and commercial uses; a pedestrian riverwalk connecting areas of the development; a renovated marina; approximately 80 new residences organized into an urban neighborhood; a new U.S. Coast Guard Museum; at least 90,000 square feet of research and development office space; and office and retail space, parking, and water-dependent commercial uses.

The purpose of the condemnation was economic development – to “capitalize on the arrival of the Pfizer facility and the new commerce it was expected to attract” by creating jobs, generating tax revenue and helping to build momentum for the revitalization of the City’s downtown area.

The proposed 90-acre area included 115 privately owned properties. The City successfully negotiated the purchase of all but 15 of those properties, before initiating condemnation proceedings against the nine owners of those properties. The 15 properties were not blighted. Rather, the City condemned them only because they were located in the proposed redevelopment area.

The landowners’ defense was that economic development was not a “public use.” Their position became more compelling when, during the course of the trial court proceedings, the City announced that it was negotiating a 99-year ground lease with respect to some of the parcels, at a nominal rent of $1 per year, with a private developer chosen from a group of applicants.

The United States Supreme Court ruled in the City’s favor, stating that the development plan furthered a valid public purpose and, therefore, qualified as a public use under the Fifth Amendment. The Court acknowledged that Public Use Clause prevented the City from taking the 15 properties for the purpose of conferring a private benefit on a particular private party. Nor could the City, stated the Court, take the property under the mere pretext of a public purpose, if it truly intended to confer a private benefit.

The City’s taking, however, was executed pursuant to an express statutory provision, a carefully considered development plan and without any evidence to benefit a particular class of identifiable individuals. Further, even though the City was not planning to open most of the condemned land to use by the general public, the Connecticut legislature had determined that the redevelopment served a public purpose. Noting that, historically, the Court has defined “public purpose” broadly, in deference to legislative judgments in this field, the Court declined to second-guess the City’s legislative determination.

Kelo has sparked a national debate about whether the government – federal, state or local – should be allowed take the non-blighted property of a private person, for which the government pays just compensation, for the express purpose of economic development. Should Wyoming residents be concerned about their own properties being “taken” for economic development? The answer is uncertain.

Wyoming’s eminent domain statute, WYO. STAT. § 1-26-504, generally provides that the power of eminent domain may be exercised only in cases where the public interest and necessity require the project or the use of eminent domain is authorized by the Wyoming Constitution. Kelo was based, in significant part, on a state statute that expressly authorized the use of eminent domain to promote economic development. To the extent that any express authorization is absent from the Wyoming eminent domain statutes, a Wyoming governmental entity may have a more difficult time satisfying the Public Use Clause in an attempt to take property for economic development.

Further, WYO. STAT. § 1-26-801 provides that the state, county or municipal corporation may condemn any real property as sites for public buildings “or for any other necessary public purpose.” The limitation associated with “necessary” public purpose also may make it more difficult to convince Wyoming courts that economic development qualifies as a public use.

The Wyoming Legislature, of course, is free to limit the use of eminent domain in any way not inconsistent with the Wyoming Constitution. In Kelo, the Court noted that California law restricts the taking of land for economic development to blighted areas. The Wyoming Legislature constitutionally could do the same.

Further, Wyoming’s Public Use clause, which is similar to its federal counterpart, states, “[p]rivate property shall not be taken or damaged for public use without just compensation.” The Wyoming Supreme Court arguably is free to interpret “public use” in such a way as to prohibit a taking for economic development, as at least one other court has already done.

Although Kelo has decided – at least under the facts of that case – that economic development qualifies as a public use under the Fifth Amendment, questions still remain as to how Wyoming courts will view takings for economic development in this State.


James L. Radda is a Deputy County and Prosecuting Attorney with the Teton County Attorney's Office, Jackson, Wyoming.


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