Reason Foundation - Authors > John P. Blair

Eminent Domain, Private Property, and Redevelopment

sam.staley@reason.org (Samuel Staley) info@reason.org (John P. Blair) — Thu, 03 Feb 2005 18:00:00 EST

Executive Summary

Eminent domain is the power governments have to confiscate, or take, private property as long as it is for a legitimate “public use” and property owners receive “just compensation.” Whereas eminent domain was initially intended to ensure that public services, such as roads and highways, were available to the public, local and state governments often use eminent domain for any project that is considered economically beneficial. Public use, as a practical matter, has morphed into a more ambiguous “public benefit.”

An estimated 10,000 cases between 1998 and 2002 involved projects where private parties benefit substantially from government seizures of property under the banner of economic development or urban redevelopment.

The result of this broadening discretion may be exemplified by Kelo v. City of New London, a case before the U.S. Supreme Court in which property owners are challenging the decision of New London, Connecticut to seize their homes because the city decided redevelopment for commercial purposes would generate higher property values and taxes.

Eminent domain in urban development projects tends to be:

Arbitrary, driven by local politics rather than standards and objective criteria;
Inequitable, giving large and well-connected property developers an advantage over existing homeowners and businesses;
Serving private purposes, effectively becoming a legal way private developers can circumvent the conventional real estate market and force other property owners to sell their property to developers while reaping substantial financial gains; and
Without substantive limits, because statutory criteria for blight determinations are so broad they fail to constrain eminent domain’s use for redevelopment purposes.

Economic development planners and city officials claim that redevelopment could not happen without an ability to consolidate property and comprehensively redevelop it. They also claim that eminent domain is only used as a last resort after less intrusive and aggressive approaches have failed.

Two Case Studies: Mesa and Lakewood

The two cases studied here—Mesa, Arizona and Lakewood, Ohio—show that eminent domain is not treated as a last resort, but as just another strategy in the redevelopment tool box.

In Mesa, Arizona, eminent domain was used by the city to promote downtown redevelopment. A detailed analysis of city procedures involving a redevelopment project intended to encourage the expansion of a local hardware store revealed:

Eminent domain was a tool of first resort, not last resort.
Properties targeted for redevelopment were identified by potential private investors, and the city then proceeded to condemn the properties in order to sell them to the private developers.
The city’s redevelopment agreement with private developers would have amounted to effective subsidies ranging from $176,000 to $592,000 dollars.
Existing small business owners and homeowners were effectively shut out of the negotiations and redevelopment decisions.
Many properties seized were viable and growing. Property values in the neighborhood increased by 19.3 percent between 2000 and 2002.

In Lakewood, Ohio, the city’s redevelopment plan for the area estimated that the total tax value of real estate in the West End could increase from $31.3 million to $131.1 million by transforming the area from an older, affordable residential neighborhood to a mixed-use “lifestyle center” with offices, high-end restaurants, luxury apartments, and movie theaters. To use eminent domain the City had to declare the entire West End neighborhood “blighted” or “deteriorating.” An analysis of trends in the neighborhood found:

Property values in some parts of the West End were increasing faster than for the city as a whole, suggesting a strong real estate market.
Residential vacancy rates for homeowners were falling faster in the West End neighborhood than for the city as a whole.
Homeownership rates had increased in the West End neighborhood between 1990 and 2000.
The West End neighborhood was healthy, growing, and stable using standard criteria of neighborhood development.

Policy Implications

The study recommends urban policymakers refocus urban redevelopment policy by:

Focusing on the achievable, not grand visions for change, transformation and redevelopment;
Using the private sector whenever possible, but ensuring projects with local government involvement serve a legitimate public purpose (not net fiscal benefit);
Focusing on core competencies, such as providing key public services well to lay a foundation for broadbased investment and economic development;
Creating sustainable economies through private investment;
Providing leadership that is focused and transparent to create accountability;
Respecting the rights of all citizens, not just those able to access the political process;
Encouraging voluntary and incremental redevelopment to build a strong foundation for future development by securing property rights for a broad-based citizenry and business community, not those with political access to economic development initiatives; and
Rigorously evaluating blight determinations to limit the arbitrary and often capricious use of eminent domain to serve narrow public and private interests.

Getting the Right People for the Right Job

Mon, 01 Sep 2003 00:00:00 EDT

Policy Summary

The federal government faces a crisis of human resource management. The federal workforce is aging: the baby boomers, with their skills and experience, are drawing nearer to retirement and new employees joining the workforce today have different employment options and different career expectations from the generation that preceded them, making government work less attractive.

Today, the average federal employee is 46 years old, as compared to 42 in 1990, and more than half the workforce is between 45 and 69 years old. By 2004, nearly one-third of the federal workforce will be eligible to retire and another 21 percent will be eligible for early retirement. That means more than 900,000 employees, or over 50 percent of the workforce, will be eligible to leave federal service. By 2010, approximately 71 percent of the current federal workforce will be eligible for either regular or early retirement and 40 percent of those employees are expected to retire. Furthermore, census bureau projections show that between 2010 and 2030 the workforce will shrink by 10 percent, making staffing the federal government even more difficult, with fewer choices yet more spots to fill.

Additionally, the work of the federal government has dramatically changed, creating new challenges to human capital resources. As more complex and technical agencies and programs were created over the last 50 years, a majority of federal workers are in higher pay scales where skills and expertise are in higher demand. Add inflexible rules and regulations that lead to a stifling work environment limiting creativity and personal development, and the government is left with difficult recruitment issues.

To address these issues, two pillars of the President’s Management Agenda (PMA) include the strategic management of human capital and competitive sourcing. They exemplify some of the most dramatic changes in management priorities and tools, and illustrate how the individual parts of the PMA are mutually reinforcing. The PMA is all about performance, and the changes include basing many aspects of human resource management on performance criteria. To date, those in federal agencies and in Congress who focus on human capital or on sourcing management and policy rarely seem to see that human capital is much more easily managed if an agency’s sourcing efforts are performance-based, and that sourcing efforts are more effective if human capital management is performance-based.

Following the PMA will lead agencies to determine their core competencies and decide whether to build internal capacity or contract for services from the private sector. Competitive sourcing has proven itself an important tool that produces dramatic, measurable results. Recognizing these successes, on May 29, 2003 the OMB released new A-76 guidelines to facilitate competitive sourcing. Sourcing more jobs and positions will help agencies tackle their human capital crunch, providing them with maximum flexibility in getting the job done effectively and efficiently. In turn, agencies will become more focused on the core missions of the agency while utilizing the highest performing mix of in-house assets and contractors. Essentially the focus becomes one where the agency has the internal capacity to manage service planning rather than actually participating in service delivery. Furthermore, the agencies will gain valuable access to expertise and a tremendous amount of flexibility in performing their missions. Thinking strategically about how an agency sources its assets allows it to have the right people, in the right place, at the right time.

Decentralization is another tool available to federal managers in coping with their human capital management plans. There are vast resources, in terms of talent and skills, outside of the beltway that can help human capital managers solve agency shortcomings. Defense Secretary Donald Rumsfeld, speaking about moving defense resources away from the Pentagon, said that “it’s a big country we’ve got, and everything does not have to be located in the Washington, D.C., area…I think that just the health of the country would be better if everything weren’t here.” Different labor markets around the country give human capital managers access to expertise and specializations that may not be available in sufficient quantity or quality inside the beltway.

It also would assist with national security and the continuity of the federal government in the event of a catastrophic event in the Washington, D.C. area. Again, Sectary Rumsfeld said it best when he opined, “concentration of Defense Department activities in a single area is probably not a smart idea.”