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Eminent Domain Ruling Sparks Debate

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July 12, 2005--A backlash of legislation from both the House and the Senate related to the topic of eminent domain highlights the opposing views that have sprung up in response to the Supreme Court's controversial Kelo v. City of New London ruling last month.

In late June, the House passed an amendment to an appropriations bill that would deny federal funding to any projects involving the seizure of private property under 'eminent domain,' while the Senate has introduced a similar measure.

While many vilify the ruling for weakening individual property rights, which they believe are the cornerstone of economic growth, others argue that small and medium privately held businesses are often the beneficiaries of urban redevelopment plans that depend on the use of eminent domain -- the power to take private property for public use.

The Supreme Court's 5-4 ruling allowed the city of New London, Conn., to acquire property at Fort Trumbull for redevelopment. Perhaps prompted by the fact that when the city first proposed its redevelopment plan in 1998, Pfizer had announced that it would build a $300 million research facility next to the approved site, some groups see the ruling as benefiting politically connected large corporations at the expense of lower income homeowners and smaller businesses.

"The decision says that local governments can take private property and give it to another entity, if the second is going to upgrade the property in some way," said Mark Moller, senior fellow in Constitutional Studies at the Cato Institute, a libertarian public policy think-tank. "There is no reason why this would not apply to businesses. The only check remaining is the political dynamics of local government. To the extent that businesses do not have political clout, they will also be vulnerable."

But the New London case is "not a representative example," according to Bart Peterson, vice-president of the National League of Cities and the mayor of Indianapolis. "It is not common for a company like Pfizer to be involved." More often, he said, redevelopment targets "blighted" areas with the help of small, local businesses, such as in the case of Fall Creek Place in Indianapolis.

Fall Creek, Peterson claimed, was a "crime-ridden neighborhood where much of the housing stock was vacant," but with the help of six private home-building companies, four of which were local businesses launched by the redevelopment project, is now a "beautifully restored, mixed income, mixed race neighborhood with a large proportion of first-time home owners."

Further, Peterson said that in general, " 'eminent domain' is used as a last resort because there are legal and political constraints." Its use is sometimes contingent on proving that an area is legally "blighted" as is the case in at least eight states including Arkansas, Florida, Illinois, Kentucky, Maine, Montana, South Carolina, and Washington.

The perspective of local business owners affected by eminent domain is likely to be more nuanced. "They may be residential property owners who have to give way," said Jack Wilson, head of land-use practice at the Richmond office of Hunton & Williams, an international law firm. "On the other hand, they may be the ones to get into a market for redevelopment."




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