Ohio Court Restores Balance to Eminent Domain

Norwood went too far and state court reels city in

In a controversial case last year, a divided U.S. Supreme Court ruled that the use of eminent domain by local governments to take the property of private citizens for “economic development” purposes was consistent with the Fifth Amendment to the U.S. Constitution, which permits the taking of private property “for public use” with just compensation.

Traditionally, the government’s exercise of eminent domain authority has been restricted to actual public uses, such as building roads or public schools. In recent years, courts have upheld governments using eminent domain to take private property in “blighted” or “slum” areas because eliminating blight served a public purpose consistent with the Fifth Amendment.

The U.S. Supreme Court’s decision effectively did away with traditional “public use” limitations on eminent domain authority. Under the court’s new doctrine, if a private developer can convince a locality that the developer can put property to “better” use than the current owners, including generating more tax revenue, the local government entity has a green light to condemn the property.

Justice Sandra Day O’Connor criticized the court’s new doctrine in her dissenting opinion noting that “under the banner of economic development, all private property is now vulnerable to being taken and transferred to another private owner.”

O’Connor concluded the beneficiaries of the court’s decision are “those citizens with disproportionate influence and power in the political process, including large corporations and development firms,” at the expense of individual property owners.

A majority of the court did recognize, however, that “many states already impose public use requirements that are stricter than the federal baseline” as a “matter of state constitutional law.” Last week, the Ohio Supreme Court did just that by concluding that the Ohio Constitution places stricter limits on the use of eminent domain in Ohio, thereby providing greater protection of private property rights, than the U.S. Constitution.

Like the U.S. Constitution, the Ohio Constitution provides that private property may only be taken for a public use, and the Ohio Supreme Court has always required an actual public use for a taking to be valid.

The Ohio case involved the taking of property by the city of Norwood, a Cincinnati-area suburb, for the purpose of transferring the property to a private developer to build a complex of offices, rental apartments and chain retail stores.

While the area at issue was not blighted, Norwood determined it was a “deteriorating” area in danger of becoming blighted. Some of the property owners objected to Norwood’s actions and their case made it to Ohio’s highest court.

Justice Maureen O’Connor’s opinion for a unanimous Ohio Supreme Court acknowledged that the case involved “two competing interests of great import in American democracy: the individual’s rights in the possession and security of property, and the sovereign’s power to take private property for the benefit of the community.” Ohio’s highest court concluded that the rights of individuals to be secure in their own property outweighs the interests of local governments in taking that property merely for “economic development” and increased tax revenue.

The court specifically noted that eliminating slums and blight may be a valid use of eminent domain authority, even if the property is eventually transferred to a private entity for redevelopment. The court acknowledged that the elimination of blight may be a public use because taking such property destroys a threat to the public’s general welfare and well-being.

Norwood’s actions, however, went too far. The area at issue was not blighted and did not pose a threat to the public’s general welfare or well-being. In fact, when concluding the area was “deteriorating,” Norwood relied on such factors as high diversity of ownership and increased traffic congestion. The Ohio Supreme Court recognized that those factors exist all across Ohio and refused to give a green light to local governments to take property in those areas merely because a private developer could make “better” use of the property.

The Ohio Supreme Court struck the right balance. It preserved the ability of local governments to exercise eminent domain authority for true public uses while protecting the rights of individuals to be secure in their property.

David J. Owsiany is a policy analyst at Reason Foundation. Reason’s eminent domain research and commentary is here.