July 8, 2016

Stopping economic development takings

By Stopping economic development takings

Many of our readers are aware of the Supreme Court’s decision in Kelo v. City of New London. In that 2005 case, the Court held that a city may take property from homeowners and give it to a large corporation based on the promise that the taking will lead to higher tax revenues. In other words, a taking is permissible when based on the promise of economic development.

A vast majority of Americans, regardless of geographic, political, and racial differences condemn Kelo. In response to this case, forty-four states enacted laws or amended their state constitutions to prohibit the type of takings permitted by Kelo. High courts in seven states have rejected Kelo‘s reasoning and have interpreted their state constitutions to prohibit takings for economic development.

Sadly, the backlash following Kelo has not stopped state and local governments from seeking to take private property for private gain. In Louisiana, the St. Bernard Port, Harbor, and Terminal District is trying to condemn the property of Violet Dock Port, a business that operates an industrial port facility, so that the District can transfer the property to Associated Terminals, another private company. After the transfer, Associated Terminals will likely conduct many of the same activities that Violet Dock Port currently does. However, it appears that the District approved the taking because Associated Terminals claims that it will improve some of the facilities that are on Violet Dock Port’s property. Ineed, this taking appears to be a Kelo style taking that drew the ire of the public in 2005.

PLF filed this brief in the Louisiana Fourth Circuit Court of Appeal, asking the Court to hold that the District’s actions violate the Public Purpose Clause of the State’s constitution.

Our brief discusses three major public policy reasons why the Louisiana Court of Appeal should interpret its Public Clause narrowly, and disallow the District’s attempt to take Violet Dock Port’s property. First, broad eminent domain powers lead to governmental favoritism; special interest groups will collude with their government friends to take private property if given the opportunity. This is especially problematic in poor and minority communities, where homes and businesses tend to be condemned at higher rates. It is sadly not surprising that poor and minority communities are condemned at higher rates; their properties are worth less and so they are cheaper to condemn. Second, we point out the broad implication of considering economic development to be a valid public c purpose. For instance, as Justice Sandra Day O’Connor noted in her dissent in Kelo, government could transfer property from a Motel 6 to a Ritz Carlton if economic development is a valid public purpose. Finally, we point out that the court should be skeptical about any asserted benefits from eminent domain use, because quite often those benefits never materialize. Indeed, the Supreme Court allowed the taking in Kelo based on the city’s plan to develop a marina, park, hotel, office space, and upscale housing. But today, the site of the condemned homes is an empty lot that only serves as a habitat for feral cats.

Property owners should not be vulnerable to eminent domain abuse just because they are not wealthy or well-connected. Hopefully, the Louisiana Fourth circuit Court of Appeal agrees with this principle and holds that the District’s taking violates its Public Purpose Clause.

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St. Bernard Port, Harbor & Terminal District v. Violet Dock Port, Inc., LLC

The St. Bernard Port, Harbor & Terminal District condemned Violet Dock Port’s property in order to hand it over to a competitor’s business—merely because the district believed that the competitor could operate the dock better and charge more favorable rates. A Louisiana appellate court upheld the condemnation as a valid “public use” because the government said it would help the area’s economic development. In January 2018, the state supreme court delivered a mixed decision and denied a rehearing. Violet Dock Port has asked the U.S. Supreme Court to review the case. PLF argued in a supporting brief that the economic development rationale is commonly used to circumvent the Constitution’s prohibition against private takings. The decision from the United States Supreme Court was unfavorable, in that the Court denied the Petition for Writ of Certiorari.

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