Eminent Domain in Practice

In June the Supreme Court handed down it's decision in the landmark case Kelo v. New London, upholding the right of municipalities to sieze property under the power of eminent domain, for development by private interests, so long as there is some "public purpose" to the development, up to and including direct and indirect economic benefits to the municipality as a result of the development. The case was decided by a bare majority of 5-4 justices, and has been roundly criticized for providing no practical limitations on under what cirucmstances and to what purpose a municipality may condemn someone's land for development. A story in today's Dallas Morning News examines the consequences of that decision close to home, in the City of Arlington's pursuit to condemn land for a future stadium for the Dallas Cowboys.

"While planning for a new Dallas Cowboys stadium, Mayor Robert Cluck said the city would use eminent domain only as a last resort to assemble the needed land. But condemnation has become the rule rather than the exception. The City Council has condemned or sought to condemn more than three-quarters of the properties it has acted on in the past four months, an analysis has found."

A municipality has two options when it comes to acquiring somenone's property for development. Like anyone seeking to own someone else's land, they can simply buy it. But they also have the power to condemn the land under eminent domain. The use of the eminent domain power triggers the application of the 5th amendment of the Constitution, which requires "just compensation" for such a taking. At law, all land is presumed to belong ultimately to the state; the state unquestioningly has the right to take land for public use, provided they are willing to pay a "just" price for it. In theory the Constitution protects the rights of the legal owners of that land to be duly paid for the loss of their property. But the reality can be quite different.

"People are digging in their heels because the city's estimate of the market value wouldn't allow them to buy a comparable home, he said. The stadium site is centrally located near major highways – State Highway 360 and Interstate 30 – and the city's entertainment district.'Finding replacement property as well located as this area in Arlington is going to cost much more money than what these offers are based on,' Mr. Sodd said. 'This is a nice location for a lot of different reasons.' Also, he said that home builders aren't constructing houses in this price range – most of the house are valued at less than $70,000 – so that further limits homeowners' options.Walter Herrington, a landlord with rental houses in the area, said replacements for the post-World War II homes are tough to find.'You can't go out and buy anything for these prices,' he said."

This is a problem separate from the problem of whether the land is being taken for private gain or public use. To what extent must the landowners whose property is condemned by compensated? The Constitution only says that the compensation be "just"; most courts have held this to be the "fair market value" of the home, or something approximating that value. The problem is that for many home owners, the fair market value as calculated does not take into account factors that the owner would consider if they were selling the propert of their own accord. It does not take into account that they will need to find somewhere else to live. It does not take into account the sentimental value of the property. It does not take into account the overall disruption of the owner's life. Instead the fair market value price seems to represent the value of the property to the city, or more accurately in some cases, the private interest that wants that property. And as we all learn in Economics 101, people sell things at the price they want to sell them, not at the price somebody else want to buy them.

Since the power of eminent domain is essential a state power conferred upon municipalities, some states, including Texas, have taken steps to limit the use of that power. Texas passed a law in August in direct response to the decision in Kelo, making it illegal to use eminent domain to condemn property for the purposes of "economic development alone." The stadium development, while valid under Kelo, would seem to be directly impacted by this new law...except for a loophole that exempts the stadium from the law. Unfortunately, the landowners have no recourse but to take their cause to the courts, many of which are sympathetic to the fair market value standard.

It's my opinion that Kelo goes too far. Not only does it allow municipalities to condemn property under too flexible a standard that leaves it up to the city to basically decide what is and is not "public use." The Supreme Court does not address the issue of a fairer standard of compensation, because the issue wasn't before them, but as it stands cities can coerce and cajole property owners with the threat of eminent domain to keep the bargaining price down, then simply condemn the property anyway and pay the lowest price allowable for it. The decision both goes too far, and not far enough, at the same time. The issue won't be visited by the Supreme Court anytime soon, but at least there is some recourse, however uncertain, in state legislatures.