New London Eminent Domain Case Dissent

You asked for a summary of Justice Zarella’s dissenting opinion in Kelo v. New London (268 Conn. 1 (2004)).

In Kelo v. New London, the Connecticut Supreme Court considered the condemnation of privately owned land by a private, nonprofit economic development corporation authorized to act under a development plan. The development corporation would own the land and lease it to private developers requiring them to comply with the plan (268 Conn. 1 (2004)). The court considered whether this use of eminent domain was a public use and whether it violated the federal and state constitutions. Among its rulings, the majority found that economic development could be a valid public use and evidence supported the conclusion in this case that the takings were primarily intended to benefit the public interest and not private entities (see OLR Report 2004-R-0394 for a summary of the majority opinion in this case).

Justice Zarella wrote a dissenting opinion, joined by Chief Justice Sullivan and Justice Katz. Justice Zarella distinguishes the use of eminent domain for private economic development from other uses of eminent domain, such as for building roads or eliminating blight. He finds that economic growth is a more indirect and uncertain benefit. He requires a higher level of judicial scrutiny as the type of public use changes from direct public use to indirect public benefit from private economic development. He proposes a four-step test.

1. The court must determine if the statutory scheme is constitutional, with the party opposing the taking required to prove that the public use of private economic development is unconstitutional.

2. If it is a valid public use, the party opposing the taking must prove, with deference to the legislature’s determination, that the primary intent is to benefit the private rather than the public interest.

3. If the court finds the plan constitutional, the taking party must prove by clear and convincing evidence that the specific economic development in the plan will in fact result in public benefit.

4. Finally, the party opposing the taking must prove, with deference to the legislature’s determination, that the specific condemnation is not reasonably necessary to implement the plan.

This approach differs from the one taken by the majority in that it requires greater scrutiny of whether the economic development will actually occur. In this case, Justice Zarella finds that the third step is not satisfied because the record does not contain clear and convincing evidence that the properties would actually be developed to achieve a public purpose. He finds little evidence that the predicted public benefit will be realized with any reasonable certainty because there is no signed agreement to develop the properties, the economic climate is poor, and the development plan has no conditions on a future development agreement to ensure achieving the public benefit if the development does occur. He concludes that the takings are not constitutional.

This case involves a development plan area in New London of about 90 acres on the Thames River, adjacent to the proposed Fort Trumbull State Park and the Pfizer global research facility that opened in June 2001. It includes residential and commercial areas with about 115 land parcels and also includes the closed U. S. Naval Undersea Warfare Center and the regional water pollution control facility. Under the development plan, the development corporation will own the land and lease it to private developers who must comply with the plan. A timeline of events in the case is included in 2004-R-0394.

Justice Zarella states that private economic development differs from how the court previously defined public use. He distinguishes private economic development under the municipal development statutes used in this case for the following reasons.

1. Traditional takings are almost always followed by an immediate or reasonably foreseeable public benefit while large-scale private economic development projects may not be completed for decades. With economic development, there may be much more uncertainty as to when and how the public may benefit.

2. The public benefit in a conventional taking typically flows from the actions of the taking party. When the taking is for private economic development, the taking party must transfer ownership to private developers who execute a plan to accomplish the public purpose. When public agencies work with private developers to achieve the plan, there is the possibility that the public agency may use its power to favor purely private interests.

Justice Zarella then distinguishes the eminent domain statutes for redevelopment from those for municipal development projects. He states that under the redevelopment statutes, properties are acquired to eliminate blight, make improvements, and dispose of the land. The public benefit is clearly defined and is accomplished relatively quickly with a high degree of certainty because a public agency funded with public money brings it about. In contrast, he states that the municipal development statutes have the “more abstract and ill-defined” goal of promoting “continued growth of industry and business” and there is no clear description of how to accomplish these goals except by conveyances to private parties. Once properties are conveyed, they are subject to land use restrictions and sometimes state oversight but he states there is no statutory assurance that the public will benefit or that the development will occur. He states that the projects are based on financial predictions and possibilities that cannot be certain and the statutes also allow abandonment of the development plan.

Economic growth is a far more indirect and nebulous benefit than the building of roads and courthouses or the elimination of urban blight. Indeed, plans for future hotels and office buildings that purportedly will add jobs and tax revenue to the economic base of a community are just as likely to be viewed as a bonanza to the developers who build them as they are a benefit to the public. Furthermore, in the absence of statutory safeguards to assure that the public purpose will be accomplished, there are too many unknown factors, such as a weak economy, that may derail such a project in the early and intermediate stages of its implementation.

He states that private development under the municipal development statutes is only “governmental” in nature if the benefits of increased tax revenue and jobs are actually realized. Justice Zarella concludes that the possibility that the development plan may be abandoned after acquiring the property, combined with the uncertainty of achieving the public benefit, raises concerns about the limits of the taking power. He also cites growing fears expressed by commentators about the potential abuse of eminent domain.

He argues that the court must focus not only on the constraints that assure public use, as the majority does, but also whether there is any reasonable prospect that the expected development will in fact occur.

Justice Zarella states “…just as the taking of nonblighted property in a blighted area is subject to additional scrutiny to determine whether the taking is ‘essential’ to the redevelopment plan…so, too, should a heightened standard of judicial review be required to ensure that the constitutional rights of private property owners are protected adequately when property is taken for the purpose of private economic development…” He states that other jurisdictions have done so.

1. The court must determine if the statutory scheme is constitutional. The party opposing the taking must prove that the public use of private economic development is unconstitutional.

2. If the court finds it a valid public use, the party opposing the taking has the burden of proving, with deference to the legislature’s determination, that the primary intent is to benefit private rather than the public interest.

3. If the court finds the plan constitutional, the taking party must prove by clear and convincing evidence that the specific economic development in the plan will in fact result in public benefit. The clear and convincing evidence standard is used to protect particularly important individual interests or with important questions of fact. It is appropriate here because of the social costs of the takings, which are difficult to quantify. Families that have lived in their homes for decades and want to remain should not be “summarily dismissed as part of a cost/benefit analysis typically performed by the legislature. ”

4. Finally, the court must determine whether the condemnations are reasonably necessary to implement the plan. The party opposing the taking, with deference to the legislature’s determination of public use, must prove that the specific condemnation is not reasonably necessary to implement the plan.

Justice Zarella states that the burden shifting analysis is consistent with takings procedures in other jurisdictions that do not place the burden of attacking the taking on the property owner as Connecticut does. He states that Connecticut law allows the taking party to allege only that it determined the land was necessary for a public use and then the property owner must attack the decision. He states that the most common method in other jurisdictions is for the taking party to file for a court hearing where the taking party must establish its right to condemn the land and, in some jurisdictions, the necessity of the taking.

Justice Zarella agrees with the majority that the municipal development statute is constitutional and the primary purpose of the taking is to benefit the public. But he finds that the third step in his test is not satisfied because the record does not contain clear and convincing evidence that the properties would actually be developed to achieve a public purpose. He concludes that the takings are not constitutional.

Under the third step, Justice Zarella states that the constitutionality of the condemnations depends on the goals in the development plan and the prospect of achieving them. The taking party must prove by clear and convincing evidence that the anticipated public benefit will be realized and the court does not defer to the local legislative authority’s decision. Justice Zarella finds little evidence that the predicted public benefit will be realized with any reasonable certainty because there is no signed agreement to develop the properties, the economic climate is poor, and the development plan has no conditions on a future development agreement to ensure achieving the public benefit if the development does occur.

He states that it is impossible to determine if future development will primarily benefit the public without a development agreement. He states that there were only limited prospects of public benefit at the time of the takings and the record does not establish that the project had momentum or any reasonable development prospects for the parcels. He also distinguishes this case from cases cited by the majority because they involved identified prospective developers prepared to develop the properties or a very positive economic climate.

1. a proposed, unsigned agreement that would lock the city into a long-term commitment to a single developer who could reap substantial rewards without a penalty for not performing as expected;

2. testimony about low demand in the market for office buildings and no tenant commitments;

3. questions about the tax increase estimates and the lack of a development schedule that makes it unclear when they would be realized;

4. a potential tax revenue increase of $ 680,544 to $ 1,249,843 that “can hardly be considered a major financial benefit to the public” in light of a public investment of close to $ 80 million;

5. lack of evidence about when or if the projected indirect benefits (spin-off economic activities and indirect jobs) would be realized;

6. questions about building high end housing, which might result in a limited tax revenue increase but which cannot be evaluated because it is unknown if a future development agreement will include tax abatements or other terms that may not meet the general purpose of the plan or statutes; and

7. few if any performance requirements for future development, no firm timetable for project implementation, no indication whether future developers will be offered tax abatements or other incentives that might not be in the public interest, and no indication of possible penalties if developers do not perform as required.

Justice Zarella states that an absolute guarantee that private economic development will occur is unrealistic because unforeseen events affect plans (such as positive economic trends that falter and committed developers who face unanticipated difficulties). But he adds that, “When such difficulties are apparent at the very outset of the planning process, however, a course of action should not be endorsed based entirely on speculation. ”


April 15, 2004		2004-R-0401
NEW LONDON EMINENT DOMAIN CASE DISSENT

By: Christopher Reinhart, Associate Attorney