This Land is Their Land?


“Free enterprise
is one thing, but profiteering is another.” So said a Rosemount Port Authority official to justify taking a citizen’s land away. Why? Because the city wants it, and the owner’s price is too high.

I’m not a total absolutist on the eminent domain matter, and I can understand the city’s frustrations, but on the other hand: tough beans, Rosemount. This isn’t a road or a dam or an airport; it’s a commercial development. It’s redefined as a “public good” because it’s prettier than what it replaces, and it will provide more tax money. Perhaps. But often the rationale sounds a bit thin and self-serving, like a man who divorces his wife for a younger, prettier model, and insists he’s performing a public good because more people will like to look at her.

A holdout can make things difficult, of course. For a long time I’ve wondered about the story behind this old New York postcard picture:

 

The City Investment Building obviously had some muscle behind it, but couldn’t quite convince the fellow on the corner to sell. Maybe he held out too long; maybe his price was too high. Maybe he hated the building, but wouldn’t be muscled out by no man, no how; perhaps he had tremendous sentimental attachment to his property, and didn’t want to see the corner swallowed by another giant office tower, by crackey. Whatever the reasons were, the City Investment Building lost a wing. Somehow New York survived.


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Robbin' Robin Hood

The appropriation of public power to benefit private business seems to be an increasing phenomenon. Here in Syracuse NY, the city has been quite vigorous in using eminent domain powers to evict productive, taxpaying businesses from an area north of downtown, so that a mall developer can expand. The project (DestinyUSA) has been touted as a complex larger than Mall of America, and has been on-again off-again for a number of years while the developer plays city politicians off against the county and state, seeking more land and increased tax-exemptions.

When did it become the responsibility (or the right, for that matter) of government to advocate for one private business against another... or against the rest of the community?


Maybe I'm unusual

But I believe that it looks better having left the other building in place and building around it. It feels like the street has a life for people to experience rather than monolithic block-long similarity. Far too often "planners" underestimate the importance street life to a building's usefulness and appeal.


How much deference?

In the Kelo decision, Stevens said, "Those who govern the City were not confronted with the need to remove blight in the Fort Trumbull area, but their deterrmination that the area was sufficiently distressed to justify a program of economic rejuvenation is entitled to our deference."

The Supreme Court moved the bar from "blight" to "sufficiently distressed to justify rejuvenation." The Rosemount Port Authority is now trying to move it to "stagnant." Where does it end?

Leave it to a government official to resort to name-calling. "Profiteering"? Is Dr. Hansen (the entreprenuerial veterinarian who bought the property) holding a gun to the City's head to force it to buy the property? Oh, that's right, it's the city with the gun.


yup, it would be the city

yup, it would be the city with the gun. I think they are thieves. They do it all the time. Land in someone's family for centuries, if they want it, they steal it. This is the "Great America" they all want us to beleive. It's only great for the rich. What a pity


Amusing fact: After Kelo

Amusing fact: After Kelo lost Kelo v. New London, the big U.S. Supreme Court eminent domain case, the City of New London had the colossal gall to send her a bill for rent - because, obviously, her house had been sitting on city land during the whole case.


Oregon made the this illegal...

- using eminent domain to benefit private development, that is.
...or perhaps I should say that the citizens of Oregon did. Citizen referendum (the ability of citizens to put measures on the ballots to become law or amend the constitution) is one of the greatest things ever.

If you don't have it - you need it. Because politicians are venal and greedy.


Shoot the duck! Shoot the duck!

I believe there were two Bugs Bunny cartoons that remind me of that postcard. One involved the construction of a building that required the iwascible wabbit to move, and the other was in the construction of a freeway.

Both ended with Bugs Bunny thwarting the construction crews with his usual combination of wit and heavy objects dropped from great heights. They ended up building around him. I believe both cartoons ended with a remark about how a man's home is his castle, and the sanctity of the American home must be "presoived."

If we updated the cartoons to modern day, Bugs would have to outsmart a team of lawyers and high-court judges to evict him. I expect he'd beat them by having himself declared an endangered species. (Have you got a fwicaseeing wabbit license?)


Eminent Domain

James, I agree with you in general. Eminent domain should be limited to roads and other clear public uses (uses, not benefits). Private land ownership and strict limitations as to why the government can force a private owner to sell are right up there with freedom of speach and religion in terms of basic rights that define our country.

However, this is not a senior citizen or poor small business owner trying to protect their home/business from greedy private developers being abetted by equally greedy public officials.

I am a real estate finance professional. What I get from that story was the current owner purchased the land for an above market price hoping to leverage the city's desire for the property into a profit.

If the city was low balling the prior owner in its negotiations then they are partially to blame. Clearly the prior owner was willing to sell if they had made an attractive enough offer.

If the city wouldn't go over the appraised value then that was foolish. If they are proposing to take the land based on the public benefits that will be generated by the improvements, then the value of the land was clearly more than if it retained its current usage (which is to say, the value of the land as an assemblage for redevelopment is greater than as a run down gas station and truck rental location).

it's one thing for a long-term land owner to hold out for the best possible price for his/her land, but I don't think that a speculator should be allowed to hold up the development.


Why Shouldn't the person profit

If the land is so valuable, then let the government pay the owner the value of the property AFTER redevelopment.


Why not?

Why shouldn't a speculator be able to hold up the development? This is a private development. The fact that the city is willing to use its police power to support the private developer doesn't improve the private developer moral position one whit.
Obvously, the private developer failed to take reasonable precautions to keep the plans under wraps until the property had been bought up. Why shouldn't the speculator be able to profit from that?


Assuming the now owner didnt

Assuming the now owner didnt have inside information that they were planning on building on this site before the general public, why not make a profit? He risks his money to buy the property. This is the way things work. If the city has issue with it, they should have offered the original owner more money.

"Several Port Authority commissioners expressed frustration at Hansen's tactics, pointing out that he bought the property knowing that the city was eyeing the parcel for redevelopment, and that it could be subject to condemnation. Ratzlaff has said that Hansen paid him significantly more than the price offered by the city's developer, which was based on an appraisal."

In other words they low balled the owner, thinking that he had no choice in the matter and that he could only deal with the city. They blew the negotiations and now want to use the iron fist of government to cover their ineptness.


corporatism

Few things are as worrisome as government teaming up with big business to take away citizens' rights.

"Fascism should more properly be called corporatism because it is the merger of state and corporate power." - Mussolini

This is how Russia is these days, and this is where American politicians are taking the US.


Macy's

The big Macy's on Herald Square had the same issue. Macy's has the whole block except for a tiny corner that has a small store (though now the building is owned or leased by Macy's)

http://upload.wikimedia.org/wikipedia/commons/thumb/3/35/NY_Broadway_m_2005.jpg/300px-NY_Broadway_m_2005.jpg

Macy's also has a store on Queens Blvd. that is very striking -- a round department store. Well, almost round. One neighbor refused to move out:

http://www.amny.com/media/photo/2006-03/22470925.jpg

If you look at the picture, you can see a notch in the otherwise perfectly round building -- that was to accommodate a piece of the holdout's yard. While I don't think the house is there today (IIRC, it is now a gas station), the notch remains


The owner is asking market price


What I get from that story was the current owner purchased the land for an above market price hoping to leverage the city's desire for the property into a profit.

The market price is by definition the price that the owner ultimately gets for the property. Therefore he purchased if for market price. He may be seeking an above market price now (which he may not get), but whatever he sells it for will be the new market price. Since the land is more valuable as commercial property in high demand for a new mall, he is entitled to seek a higher price than he paid for it and thus establish the new market price.


The speculator always

The speculator always assumes the risk that the city may drop the project. There is no such thing as "overpaying" for anything or "profiteering" for anything unless goods are stolen or otherwise accumulated or distributed in an illegal fashion. Usually, profiteers can't exit without the help of government protection from market forces, ie. Enron.


Sure he should...

On what legal basis should the "speculator" have lesser private property rights than a "long-term owner"?

The speculator took a risk here, too. The city, or the private developer, could decide that the hassle is just too much, and locate the new development elsewhere. Then, the speculator might end up losing money on his investment.

To reuse the Bugs Bunny motif, remember that glassy-eyed look greedy people would get in some scheme, with $$ signs in their eyes instead of pupils? That's the look that public officials get whenever some slick developer promises them "economic development" which will "create jobs." I know. I've worked with them and for them when they get that look. Critical thinking goes out the window, and if you're against this project, you're against jobs and economic development. And that's when the officials and the developers aren't corrupt and no councilman is getting his pocket lined. When there is some corruption going on, it gets even worse!

The market will win out, always. If a development is really worthwhile (i.e., likely to be profitable), then it will get done, even if government does nothing. But businesses have learned that they can profit even more by playing local governments and states off on one another, almost extorting development funds, expropriations, and other concessions from the government so that it will locate in THIS community rather than THAT one. The governments need to realize they're being taken and shut this practice down.


Eminent Domain Cleaned Up in Minnesota in 2005-06 legislature

I'm not sure what that city is trying to get away with, but after the terrible taking of property so Best Buy could build what and where it wished, in the 2005-06 legislative session Minnesota enacted "SF2750 A bill for an act relating to eminent domain...."
Quoted in part:

"Section 1. Subd. 2. Requirement of public use or public purpose. Eminent domain may only be used for a public use or public purpose."

Paraphrased Section 2 Subdivision 11 narrowly defines public purpose and goes on:
"(b) The public benefits of economic development, including an increase in tax base, tax revenues, employment, or general economic health, do not by themselves constitute a public use or public purpose."

Personally I would have preferred a stronger bill but the core cities fought for the means to grab run down areas to redevelop although the legislature saddled them with much tougher standards for defining the run down properties and provided a new fair appraisal process.


What difference does it make why the owner bought it?

Why should the city have any say whatsoever in what should be a deal between two private entities?

If the developer wants to build on the property, he/she should have to purchase it from the owner regardless of why the owner originally purchased it.

The point is that the city is using eminent domain to take property away from one private entity in order to give it to another.


another holdout

I think there was a strawberry farmer that had part of the block Disneyland is on. He held out til a couple of years ago. Memory is uncertain but I recall he got $99.9 million for his land.


Who's the real profiteer?

Commissioner Mark DeBettignies smears Hansen as a "profiteer" but in truth the developer and the Rosemount Port Authority are the real profiteers. Hansen was able to negotiate with the prior owner to purchase the property for $450K--nothing prevented the developer from offering just a little more, or offering the same amount before Hansen did. Why didn't they offer more? Because they wanted the property cheap, so they could increase their profits on the deal. Now they want to use eminent domain to force Hansen to sell, and they will probably demand that Hansen sell at a loss. Why? So the developer can increase its profits, and Rosemount can collect more taxes.

The real profiteers are the developer and the port authority. Shame on them for using the power of government for their own profit.


Re: Eminent Domain Abuse

Several states (Arizona, Washington) have constitutional provisions prohibiting the taking of private property for private uses. The state courts in those jurisdictions have begun to limit this type of economic redevelopment justification. However, there is still a long way to go.

While I lived in NYC for some time, I don't recognize the building shown in the postcard and I can't find a picture through a quick google search. However, the postcard does look like amazingly like the situation existing at the northwest corner of 6th Ave. and 49th Street. The pub owner on that corner held out when Rockefeller Center was being built. The (now) GE building is built around that lone holdout.


Shoot the Duck!

Shucks.

You beat me to it.

At least, my thought was - What would Bugs Bunny do?


We had a country club here

We had a country club here close up shop and sell its land to a developer who wanted to build homes.

After the club was closed down and the developer closed on the sale of the land, the local government seized it and turned it into a public golf course.

A bridge or a highway is one thing.. but if some local government ever decides to seize my home or business to hand over to another private interest, they'd better bring a company of infantry.


property rights

The last I checked, the right to one's property was a right. It was not condition on one's "reasons".

A right to property means that one can use or dispose of it as one wishes. Disposal can include selling. That means the new buyer has the same rights!

(Otherwise the seller didn't have the right and only defrauded the buyer).

Look beyond the altruist paradigm. It doesn't matter which is the "little guy" and which is the "big" (or rich) guy. Either we live in a society based on absolute respect for the individual rights of life, liberty, and property, or else we're evolving towards a utopia like China, Cuba, or Saudi Arabia.


Appraisal

A man at my church is currently in a battle over his property. They are building a development and setbacks require that a road run through his three-acre parcel, taking out his house. This saddens him— he's lived there for decades— but that is not what he's fighting.

What he's fighting is the appallingly low offer of around $300,000 they want to give him for the property. This is in an area of California where McMansions on lots of maybe 2000 square feet go for $400,000 and up (and small doubt but that the McMansions of this development are slated for similar amounts.) In other words, they'd take his three-acre parcel, with the storage "barn" and the house he raised his kids in, and not even give him enough money for what is laughingly called a starter home here.

Even though they've paid more to take over smaller vacant parcels.

The California Legislature tried to pass a bill that theoretically was to protect property owners, but it was so badly written that even the law-happy voters of the land of fruits and nuts could see it made things worse, and it was voted down. Unfortunately, I haven't heard of any further progress on a better law, one which would clearly establish eminent domain as for public use alone.


google images ~ City

google images ~ City Investing

http://www.viewimages.com/Search.aspx?mid=3275847&epmid=3&partner=Google

Today One Liberty Plaza occupies the site.

http://en.wikipedia.org/wiki/Singer_Building

Love your blog James and I agree, "tough beans, Rosemount."


On the subject of the City

On the subject of the City Investing building, It's likely that the developers only bought the smallest parcel they could get a hold of to be able to have a Broadway address and had the architect add the wing above.

On the subject of State Sanctioned land theft, one wonders that with all the guns in this country why more government officials don't suffer from 'lead poisoning' than they generally are.

Or why there aren't as many Marvin Heemeyers out there...

http://www.headinjurytheater.com/article80.htm

Admittedly the expense of building an armoured Killdozer is a bit on the much side for the average Joe, but I would guess we're a lot saner than we're given credit for...


This is so lame.

When I hear stories of governments screwing property owners, I start to think that Eminent Domain should be banned. Pay for the property or you can't have it. If a road or fire house has to go somewhere else, so be it.

By the way, what's up with the italics?


I'm fixing the italics

Someone (figures he wasn't verified (rolls eyes)) forgot to close their italics bracket. This should fix the problem now.

Okay, no more italics for anyone. Dougger used them all.


_@_v - more info on the city investing building...

_@_v - from kings guide to nyc 1908...

city investing building at time largest office building in the world. 34 stories, 485 ft high covering plot of 27,000 sq ft - 13 acres per floor (the world trade center floors were only an acre each) room for 6000 tenants. the broadway wing was 38' by 315'. 6th avenue el had station on church street side.

_@_v - the little building it wrapped around was known as the wessels building. city investing bought their air rights to ensure light and air for their tower.

_@_v - if you can find it there was a reprint compilation of moses king's guides to new york city and brooklyn put out by the arno press back in 1977 (was a reprint from a 1974 Benjamin Blom complilation with a new intro from A.E. Santaniello). you got the full kings guides of 1896, 1908 and 1915 and the 1905 to brooklyn, new york as well as a back section with pix from 1903,1905, & 1911. best 20 bucks i ever spent


Citizen Referendum

Yeah. We have that in Massachusetts, too. But when you have a Legislature that is so dominated by one party that the other can't even maintain a filibuster, they can prety much ignore any referendum they don't like. Or they can just decide to use procedural rules to get around putting anything on the ballot they don't like. It has happened here with bilingual education (we voted overwhelmingly to end it, they just decided we didn't know what we were voting for and ignored the results), taxes (we voted to end the emergency tax increase put in by Dukakis more than 20 years ago. They ignored that result too), gay marriage (they blocked putting it on the ballot despite the large number of people who signed the initiative..which as a good libertarian I wouldn't sign...marry your toaster for all it afects me) and various others. No, when your local or state government is a corrupt bunch of jackals who own the process lock stock and barrel, refereendums mean nothing, either.


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