The U.S. House of Representatives sent a loud message to the Supreme Court Thursday night: We intend to do everything we can to nullify your controversial ruling last summer that allows homes to be seized and transferred to builders and investors for private "economic development."
By a 376-38 vote, the House passed the Private Property Rights Protection Act of 2005 (H.R. 4128). The bill would punish any local government that uses its eminent domain powers to transfer privately-owned real estate to developers and investors solely to generate tax revenues or increase local employment.
The punishment: Withholding of all federal development and infrastructure-related funds to the offending local government for two full years. That means all funding for transportation, infrastructure, housing and commerce-related activities -- millions of dollars in budgetary support for many municipalities. The National League of Cities reacted with horror over the passage of the bill, predicting that it would not merely "chill but rather freeze the process of economic development across the country."
The legislation, which is now on a fast track for Senate action, is Congress's response to the Supreme Court's decision June 23 in "Kelo v. City of New London." In that case, the court upheld New London, Conn.'s seizure of 15 houses near its waterfront for transfer to private redevelopers. The owners of the houses, led by Susan Kelo, a nurse who lives in a modest cottage, had refused to sell their houses at any price. They argued that neither their properties nor their Fort Trumbull neighborhood are blighted, run-down or crime-ridden -- traditional rationales for municipal eminent domain seizures.
The sole purpose of the city's condemnations, they told the Supreme Court, was to take houses that generated low tax revenues and hand them over to private investors who promised to build office, retail, hotel and condominiums that would yield far more in taxes.
Justice Sandra Day O'Connor wrote a bitter dissent against the 5-4 majority decision. By giving local governments unlimited discretion in eminent domain proceedings, O'Connor said, the high court was essentially abandoning its duty to protect ordinary citizens from unconstitutional seizures of their homes. Under the court's rationale in Kelo, wrote O'Connor, "the specter of condemnation hangs over all property. Nothing is to prevent the state from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, any farm with a factory."
Municipal, state and planning groups supported the Kelo ruling, arguing that small handfuls of property owners should not be able to block a city's redevelopment efforts to stimulate job growth and improve the local economy.
The Fifth Amendment prohibits eminent domain seizures of private property "for public use" without "just compensation." For decades "public use" was construed by courts quite literally to mean direct public ownership and use of the facilities built on seized property -- hospitals, roadways, convention centers, schools and parks. But in recent years the Supreme Court has broadened the idea of "public use" to include projects that contribute to the "public benefit," even if they are privately owned.
Numerous downtown renewal projects -- Baltimore's Inner Harbor and New York City's Times Square redevelopment are two examples -- were accomplished through eminent domain condemnations.
If the Senate, as expected, now approves its companion version of the private property rights bill, local and state governments will have to think hard and long before condemning privately-owned real estate. The Supreme Court may support their right to use eminent domain any way they want. But the Supreme Court doesn't send them money.