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In a comment to my previous post, Ron expresses his dislike of local uses of eminent domain: "calling decent neighborhoods "blighted" just so a shopping mall can be built." Indeed, this does to stretch the definition of "public good" that our Constitution requires. Claiming increased tax revenues as a public good seems ridiculously far-fetched for a few reasons:

1. Citing increased tax revenue as your justification is risky because the public benefit is just a projection. If tenants don't buy spaces in your new mall, the projected revenue gains can become overall losses when you factor in other economic incentives that are usually offered to large-scale developments.

2. Those being displaced are often cut out of any benefit that the new development generates. If I live in municipality X and X takes my house to build a mall, then I only benefit from the higher property values, lower taxes and/or increased spending now available to X if I stay in X. And since eminent domain claims seem to buy up inexpensive land and replace it with more expensive properties, the trend is that displaced homeowners often must relocate outside their community.

3. Increased tax revenue by a municipality is a benefit to those who live in that municipality, but in the hypothetical case it is easy to extend the current trend so that all residences are replaced with higher revenue businesses. For this scenario, in the absence of any citizens, there is no longer any public benefit. This raises the question of whether there is a lower threshold than 100% displacement that mitigates the public benefit. Is it 50%? Half are evicted to benefit the other half? That seems unfair. But what is the threshold, and can we apply it evenly and fairly.

Eminent domain seizures are a tricky business. Even ignoring the new spin put on it by using projected increases in tax revenues as a justification, it fails my basic test of all government action: Does it offer benefit to many while protecting the rights of the few?

Eminent domain's public good requirement is designed to cover the first tenet while the compensation requirement is designed to cover the second. But even in this, I feel that our current system of eminent domain fails. I don't believe that offering fair market value for property is fair compensation. It fails to account for moving costs, severed community connections, and sentimental attachment. It also appears that some developers use eminent domain as a crutch that allows them to avoid legitimate negotiations with property owners regarding the purchase of their home.

I am not arguing against eminent domain. I think it is an important tool that should be available to governments. However, I would like to see legislation that puts some restrictions on its use:

1. Governments should be required to show exactly what will be built on land that they are seizing.

2. Tax revenue projects, if they are allowed to justify eminent domain seizures at all, must be developed by an independent that is immune to influence from developers or government.

3. Eminent domain must be a tool of last resort. All reasonable efforts to purchase property must be exhausted before eminent domain can be asserted. Further, I think it reasonable to assume that a developer's desire for the property should be allowed to inflate its market value, but there should be some reasonable cap to this amount. That is, if a homeowner rejects an offer of, for example, fair market value + moving expenses + 20%, the developer should then be able to pursue eminent domain.

4. Compensation for seized property should also pay more than the market value prior to the announcing of the new development. This compensation should cover things like moving expenses and the like, but it should cap at less than the amount of the cap available under the previous step. This would encourage developers and property owners to reach an agreement before the government becomes involved. But it does keep the door open to homeowners who think that the fair market value being offered is unfair and to developers who are forced to deal with property owners who won't budge under any circumstances.

Anyway, that's my eminent domain plan. I'd be interested in hearing what all of you think about this issue. I'd also recommend this as an inter sting debate on the issue.

Posted by on 18 September 2006 at 3:03 PM