Limits of Urban Redevelopment?
The U. S. Supreme Court decision in Kelo v. New London reaffirms the deferential standard of review of legislative takings. Minnesota courts nevertheless are challenged to balance the benefits of redevelopment with the private property rights of landowners.
highlighting the almost unfettered power of the government to seize
a person’s property, the Supreme Court’s ruling in Kelo v. City of New London, 125 S. Ct. 2655
(U.S. 2005) has generated a great deal of discussion. The Kelo decision, however, is not a radi
Background of Kelo
By the 1990s, New London, Connecticut was suffering from economic stagnation. In 1990, a state agency designated the city a “distressed municipality.”1 Six years later, the federal government closed the Undersea Warfare Center, which had employed 1,500 people in New London, whose population was 24,000. By the late 1990s, New London’s unemployment rate was nearly twice the Connecticut average.
In response, state and city officials targeted New London for economic revitalization. The New London Development Corporation (“NLDC”), an economic development corporation established by the city, created a mixed-use development plan covering 90 acres of the Fort Trumball area divided into seven parcels. The plan consisted of a hotel, museum, housing, restaurants, retail shops, offices, a marina, a riverfront walkway, and parking facilities. The city expected that the redevelopment project, in connection with the construction of a new $300 million research facility by Pfizer Inc., would rejuvenate New London’s downtown and waterfront areas and potentially stimulate economic growth throughout the city.
In January 2000, the NLDC began purchasing the land necessary for its redevelopment project, but several owners would not sell their properties. Suzette Kelo would not agree to sell because she had made significant improvements to her house and valued its water view. Another affected owner, Wilhelmina Derby, was born in her house in 1918 and had lived there her entire life. None of the homes of the owners who refused to sell were blighted or otherwise in poor condition.2
Unable to purchase the homes from Ms. Kelo and eight other owners, the NLDC commenced condemnation in November 2000. The trial court granted permanent injunctive relief to two of the owners, finding that these properties were not necessary to the development; however, the court approved the taking of the other properties. The Connecticut Supreme Court reversed the injunction and allowed all of the takings. The owners then appealed to the United States Supreme Court under the 5th Amendment of the United States Constitution.
The Supreme Court’s Decision
The Supreme Court’s decision in Kelo has two significant components. First, the Court held that the Constitution does not preclude the government from condemning nonblighted property for private economic development. Second, the Court ruled that a condemning authority’s decision to take private property is subject to de minimus review.
The Court’s first holding revolves around the Court’s interpretation of the phrase “public use.” The Takings Clause of the 5th Amendment grants the government the power to take private property only if the taking is for a public use and the government pays just compensation.3 While the Court’s majority conceded that the condemned land would not — at least in its entirety — be used by the general public after redevelopment, it circumvented this pitfall by holding that the term public use was synonymous with the term “public purpose.”4 In other words, if the government takes property to advance a legitimate public purpose, that taking constitutes a public use of the property. The underlying rationale for the Court’s expansive interpretation of the phrase “public use” was that a broad construction was necessary “given the diverse and always evolving needs of society.”5 The Court held that this condemnation served a public purpose, even though private parties would ultimately own the condemned land, because the taking advanced the economic development of a community.6 The economic development of the Fort Trumball area, if it came to fruition, was expected to generate higher tax revenues, create employment, and improve the overall aesthetics of the waterfront area.
The second component of the
opinion centers on the level of review that the Court applied to the
condemning authority’s rationale for taking the property.
The Court noted that the city’s decision to create a redevelopment
plan for the waterfront area is “entitled to our deference.” The Court furthe
The majority asserted that
its ruling was a natural progression of the Court’s prior eminent
domain decisions, namely Berman
v. Parker, Midkiff, (1984). In
Berman, the Supreme Court approved the
taking of private property to relieve the “urban blight” of a Washington
D.C. neighborhood, even though one or more of the properties affected
by the taking were not blighted.9
Deferring to the judgment of the condemning authority,
the Court found that it is often necessary to redevelop a community
as a whole, instead of on a piecemeal basis.
The Court also relied on the Midkiff
decision, which upheld a Hawaii statute that transferred fee title
to land, upon the payment of just compensation, from owners to tenants
in order to break up a “land oligopoly.”10
Rejecting the notion that this law merely took land
from one private person to give to another for he
In this context, the majority
found that because New London officials had created a comprehensive,
carefully considered, redevelopment plan designed to revitalize their
At least one of the justices
in the majority felt that the standard of review needed to be explicitly
defined. Justice Kennedy, who provided the majority’s
Justice O’Connor, writing for the four dissenters, pointed out that by blurring the distinction between public and private use the majority’s decision effectively erased the words “public use” from the Takings Clause of the 5th Amendment, therefore sweeping away the limitations the Constitution placed on the government’s taking power.13 Consequently, all private property is now at risk of being taken by the government and given to another private owner under the guise of economic redevelopment for the construction of a newer, bigger building or facility, which ultimately may or may not benefit the public.14 The dissenters consider economic development takings unconstitutional for failing to be a valid public use of the condemned property. Lastly, Justice O’Connor noted that by leaving states with the ability to impose stricter limitations on the government’s right to take private property by eminent domain, the majority had abdicated its responsibility.
Justice Thomas, in a separate dissent, initially focused on the majority’s holding that public use is synonymous with public purpose. Justice Thomas noted that the term public use limits the government’s condemnation powers to takings that ultimately result in the government owning the land (e.g., army base) or in the general public having the right to use the land (e.g., streets and parks).15 He opined that by adopting the public-purpose test, which does not require public ownership or access, the majority effectively removed this constitutional restraint on the government’s condemnation powers.16
Justice Thomas then focused on the level of deference that the majority opinion affords the condemning authority’s decision. He argued that the rational-basis test, when combined with the public purpose definition of public use, effectively eliminates meaningful review of the government’s exercise of eminent domain.17 Justice Thomas further noted that the Court has emphasized the sanctity of the home when reviewing whether the government may search the home, but that the Court is unwilling to engage in serious review when the government takes the home. He wrote, “Though citizens are safe from the government in their homes, the homes themselves are not.”18
Condemnation Law in Minnesota
Minnesota condemnation law mirrors Kelo’s significant
holdings. Yet there are criti
The similarities between Minnesota law and the significant Kelo holdings are obvious. When addressing the public use requirement of a taking, the words “public purpose” are considered to be interchangeable with “public use” under Minnesota law.20 Likewise, Minnesota courts have recognized economic development as a legitimate public purpose.21 Moreover, the scope of review that Minnesota courts apply to the decisions of the condemning authority is extremely narrow, and the condemnation will be reversed only if the government’s actions are “manifestly arbitrary or unreasonable.”22
One major distinction between federal and Minnesota condemnation law is that under Minnesota law the condemning authority must show that the taking is necessary.23 A taking is necessary only if the government intends to use the property for an identifiable public purpose “now or in the near future.” Thus, the government may not stockpile property through condemnation for future speculative use.24
In Kelo, the NLDC did not know how it was going to use a substantial portion of the condemned property. Of the 25 properties targeted for condemnation, 11 were located on a parcel whose use was not specified by the NLDC’s development plan.25 At oral argument before the Supreme Court, New London conceded the vagueness of its plans and suggested that “the parcel might eventually be used for parking.”
The NLDC’s opaque plan might not have passed muster in Minnesota.26 In fact, when the University of Minnesota failed to identify its planned use for a targeted property, the Minnesota Court of Appeals held that the University did not establish that the taking was necessary.27 The vitality of the necessity requirement was recently reaffirmed by Hennepin County District Court. In Minneapolis Cmty. Dev. Agency v. Reichold, Inc., the district court ruled that, when the Minneapolis Community Development Agency (“MCDA”) let the exclusive development rights granted to the proposed developer expire, the MCDA had failed to establish that the taking was necessary.28
Another difference between
the Kelo decision and
The Minnesota Supreme Court’s initial public purpose justification for redevelopment condemnations was based exclusively on the removal of blight. Requiring blight limited the type of property subject to condemnation for economic redevelopment.29 A series of subsequent cases seems to have eroded the protection afforded by the blight requirement, but the Minnesota Supreme Court has not addressed the constitutionality of a redevelopment condemnation in the absence of blight.
The constitutionality of condemning land for redevelopment was first squarely addressed by the Minnesota Supreme Court in the late 1950s.30 The Court’s emphasis on the removal of blight, as opposed to the economic gains occasioned by redevelopment of the land, was motivated by the restrictions placed on eminent domain by the Minnesota Constitution.31 In Hous. & Redev. Auth. of St. Paul v. Greenman, 96 N.W.2d 673 (Minn. 1959), the targeted landowner argued that, because the condemned land would ultimately by transferred to private parties, the condemnation was for a private purpose, not a public use as required by Minnesota Constitution.32 The Court avoided this obstacle by focusing on blight. The Court’s rationale for finding the taking constituted a public purpose was entirely based on the removal of blight, with the Court emphasizing that the “subsequent transfer of these lands to private parties is incidental to the main public purpose.”33
The Minnesota Supreme Court
expanded the definition of public purpose to include economic development
The Minnesota Court of Appeals
ventured beyond Greenman
the Minnesota Supreme Court considered the validity of the taking
The Minnesota Supreme Court’s hesitancy to affirm such a weak blight finding was demonstrated by its split decision in Walser. The decision of the Court of Appeals was confirmed as a result of a three-three tie, with Justice Lancaster recusing herself.37 The Walser decision seemingly represents an attempt by at least three of the justices to return to the original rationale that underpinned the public purpose finding in Greenman, the removal of blight, as opposed to the economic development rationale more recently advanced by the Court of Appeals in Opus.
It is worth noting here that
the United States Supreme Court opinion in Kelo conceded that none of the targeted properties were blighted.38 Nevertheless,
the Court held that deference must be given to the city’s conclusion
The reservations that the Minnesota
Supreme Court displayed in Walser
would likely be amplified if the Court were faced with the absence
of blight that presented itself in Kelo. Given the Walse
3 U.S. Const.
amend. V (“[N]o
4 Kelo at 2662-3.
14 Id. at 2676 (“Nothing is to prevent the State from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory.”)
Hous. & Redev.
Hous. and Redev. Auth. of
25 Kelo at 2671-2 (O’Connor, J., dissenting).
27 Univ. of
29 A non-blighted
property may be targeted for a redevelopment condemnation if it is
located in a blighted area and the property’s condemnation is necessary
for a redevelopment plan that results in the removal of blight.
Hous. & Redev.
32 Greenman, 96 N.W.2d at 702-3.
& Redev. Auth.
Hous. and Redev. Auth. of
39 Terry Fiedler,
“Target, Allies Fill Up Office Space,” Minneapolis
40 Kelo, 125
JEFFREY W. POST is an officer at Fredrikson & Bryon and has represented both the government and property owners in condemnation actions.
MELISSA A. BAER, a lawyer at Lindquist & Vennum, PLLP, practices in the area of real-estate law. She represents developers and lenders in various real-estate transactions.