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Reason Foundation

The Journal Gazette

Property 'Takings' Evolved Over Years

Indiana needs to balance private property rights and the public interest

Samuel Staley
June 26, 2005

The message in Indiana as well as the rest of the nation is clear: Private property is not safe if the government wants it, even if the benefits are going primarily to other private businesses and property owners.

Even before Thursday's U.S. Supreme Court decision, Indiana's General Assembly and Indiana cities have been increasingly following in the footsteps of other cities and states in using eminent domain to seize private property for whatever local government might covet.

Eminent domain is the legal authority of governments to seize, or "take," private property for public use. The action is part of the police power and is explicitly granted to governments in the U.S. and Indiana constitutions so long as the taking is for public use and private property owners are given "just compensation." Unfortunately, the courts have interpreted the term "public use" so broadly that even professional football teams can fall into the category.

"Indiana is growing more aggressive in its use of eminent domain to benefit private parties," notes attorney Dana Berliner in "Public Power, Private Gain," a survey of state and local actions to condemn and take private property for private interests. Berliner defends private property owners in eminent domain cases for the Washington-based Institute for Justice. Nationwide, she identified 10,282 cases of "filed or threatened condemnations" for private uses over a five-year period in her report. In Indiana, she found at least four instances where cases were filed and 51 cases where eminent domain was threatened.

Cases crop up in big and small cities. In Indianapolis, the city got tired of trying to negotiate with a parking garage owner and seized the property so the city could sell the land to private developers. It served the city's redevelopment goals.

In Mishawaka, the county government used the threat of eminent domain to close the deal on 51 homes that stood in the way of AM General's plan to expand an automobile manufacturing facility.

In Indianapolis, the city, ironically, is now using the threat of eminent domain to remove a 60-year Indianapolis business to make way for a parking lot for the new Colts stadium. Apparently, the desire to keep the Colts is more important than preserving and protecting the property rights of longtime residents and businesses.

The U.S. Supreme Court hasn't been any help.

One of the most significant cases addressing eminent domain in years, Kelo v. City of New London, was decided Thursday. The case pitted property owners against New London's redevelopment authority and the city's plans to revitalize a neighborhood. The city wanted to buy the properties, many of them historic, raze them to the ground, and sell the land at steeply discounted prices to private developers who would build new shops and offices to support a nearby Pfizer research facility.

The city condemned the properties even though it didn't have clear plans or projects for the use of the property at the time. Most of the neighborhood was already gone, but a few residents and business owners dug in their heels and tried to hold on, setting Kelo v. City of New London in motion.

During oral arguments in February, questioning by the U.S. Supreme Court justices was vigorous and heated. At the end of the day, however, the court did not overturn previous precedent. It continued to grant wide latitude to cities, counties and state legislatures over when and how they can use eminent domain for redevelopment purposes. It would seem that cities now have no limits in this regard.

That would leave everyone's property at risk. As courts have become less and less willing to question the substance of government eminent domain decisions, the targets have moved from poor to middle-income homeowners and businesses, from rundown neighborhoods to stable and growing neighborhoods. Virtually anything in the way of a government redevelopment project can be taken.

City development plans almost always trump private efforts. Indianapolis businessman Bob Parker, for example, assembled properties in the mid-1980s to develop an industrial park, notes attorney Dana Berliner.

However, the city of Indianapolis later decided it would develop its own industrial park, but its plans were bigger and more expansive. So, rather than incorporate Parker's properties into the larger plan, the city condemned his land and 70 additional acres to create the Keystone Enterprise Park.

Condemnations are just the tip of the iceberg. Often, cities appraise properties well below their value on the open market. In Bob Parker's case, the city offered $349,950 for his 10 acres although he estimated its market value at $3.8 million. The owner of a property in Indianapolis in the way of the Colts Stadium project was offered well below the listed price of $350,000, according to a recent report in the Indianapolis Star.

What distinguishes the current era of condemnations is the degree to which local governments are willing to use this power to achieve ever wide-ranging public-policy goals. Sometimes they succeed.

Sometimes they're driven back by public protest or the courts. In Lakewood, Ohio, a growing neighborhood was saved from the wrecking ball only after a citywide vote that rejected the city's development plan for the area. But cities, counties and states across the nation are pushing the boundaries.

Jeff Finkle, president of the International Economic Development Council, a trade association representing development and redevelopment organizations and agencies, believes eminent domain is critical to the revitalization of cities. He argues that few projects in urban areas occur on small, isolated lots, and the costs of negotiating with dozens of property owners are simply too high. In addition, he says, some property owners refuse to sell or set an unreasonable price, scuttling projects with large benefits for the community.

"Lose eminent domain in urban settings," Finkle told Reason magazine, "and the only land that will be developed is green space on the edge of cities."

Even Finkle, however, recognizes that the power of eminent domain should have limits. Taking private property, he says, "should be the last possible tool. If negotiations fail, if the bully pulpit fails, then you go to a takings case."

But Finkle's view is not necessarily the dominant one. When pressed during oral arguments in Kelo v. City of New London, attorneys for the city admitted that they wanted enough freedom to use eminent domain so they could replace a low-budget hotel such as Motel 6 with a luxury hotel such as the Ritz-Carlton. A goal, of course, is more tax revenue.

In the current climate, many of the traditional constraints on public takings of private property have disappeared. Most redevelopment laws explicitly acknowledge that land can be taken even if the beneficiaries will be other private parties. This principle is even articulated in federal law through the 1954 Supreme Court decision Berman v. Parker, which allowed local governments to condemn land for urban renewal and then transfer title to private parties. But even then, local governments didn't have carte blanche; they had to justify the taking as a way to mitigate "urban blight."

Over the years, however, that term has become little more than a name for property a government wants to take. Today, redevelopment agencies enjoy more discretion than ever, and eminent domain is their tool of choice.

In Indiana, legislation was introduced several years ago in the Indiana General Assembly to allow "quick takes" of private property. The legislation was said to be necessary to facilitate government attempts to redevelop land. The bill died in committee, but the sentiment is alive.

This year, the Indiana General Assembly passed House Bill 1063, establishing a commission to review the use of eminent domain and takings at the state and local level.

As this commission convenes over the summer to deliberate on reform of Indiana's statutes, members may want to consider the following guidelines to ensure, regardless of the Supreme Court ruling, that Indiana statutes properly balance private property rights and the public interest:



Samuel Staley is Research Fellow


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