You asked if other states have recently restricted or considered restricting government’s ability take property by eminent domain for economic development.

SUMMARY

At least 28 states have recently restricted or considered restricting using eminent domain to acquire and transfer property to private developers. Most authorize this power as a way to eliminate slum and blight in designated economically distressed areas and provide land for their redevelopment.

(In contrast, Connecticut authorizes municipalities, under separate statutes, to take and transfer blighted property for redevelopment (CGS § 8-128) and any property for municipal development, including economic development (CGS § 8-193)).

At least six states enacted laws within the last six years affecting economic development takings. Utah repealed redevelopment agencies’ eminent domain powers (2005), Delaware limited eminent domain takings to “recognized public uses” (2005), and Maryland limited the scope of its quasi-public economic development corporation’s eminent domain powers (2005). In 2005, Indiana and Missouri established task forces to study eminent domain takings.

At least five states added more steps to the condemnation process.

• Arizona required (1) public hearings on condemnations, (2) affected property owners to be notified about hearings, (3) local legislative bodies to approve condemnations by two-thirds vote, and (4) redevelopment area designations to sunset after 10 years if no redevelopment occurred (2003).

• Colorado (1999 and 2004), Florida (2004), and Nevada (2005) tightened the criteria for designating development areas where takings are authorized. Colorado required local legislative bodies to hold hearings on proposed condemnations and approve them based on a property’s condition. It also shifted the burden of proof to condemning agencies when a property owner contests a taking.

• Iowa prohibited taking agricultural property for private development without its owner’s consent (1999).

Nevada required condemning agencies to negotiate takings in good faith and compensate business property owners for their loss of good will. It also set conditions under which the former owners of condemned property may reacquire it.

At least 14 states have considered or are considering bills to limit or prohibit economic development takings. Nine of these have considered prohibiting taking property for private development, improving tax revenues, or creating jobs (Alabama, Florida, Georgia, Minnesota, Mississippi, Oregon, Pennsylvania, Texas, and Tennessee); three, narrowing the types of properties that can be taken (California, New Jersey, and Texas); and three, explicitly prohibiting government from taking property for a predetermined developer (Hawaii, Michigan, and Oklahoma).

Other aspects of economic development takings concern the requirements for designating areas where the takings can occur and the steps agencies must follow when condemning property.

• Two states have considered tightening designation criteria or sunsetting designations if no redevelopment occurred there within a specified time (Florida and Pennsylvania).

• Five states have considered requiring (1) agencies to insure that an economic development taking benefits the public more than specific private interests and (2) legislative bodies to approve economic development takings by a super majority (Florida, Illinois, New York, Rhode Island, and Virginia).

• Five states have considered requiring condemning agencies to prove in court, if challenged, that a taking serves a public purpose or requiring courts to assess each taking without deference to legislative actions (California, New Jersey, Oregon, Pennsylvania, and Tennessee).

• California and Pennsylvania considered giving the former owners of condemned property the right to reacquire it if the condemning agency no longer needs it (Virginia recently gave this right to all former owners of property taken for economic development or other purposes).

• Pennsylvania considered requiring condemning agencies to hold a public hearing on each taking and to wait 10 years before transferring a condemned property.

• Maryland considered repealing its quasi-public economic development agency’s condemnation powers.

Recent state court decisions have also affected the extent to which agencies can take property for private economic development.

• The Washington, Illinois, and Michigan supreme courts overturned takings for economic development or other private purposes (2000, 2002, and 2004, respectively).

• The Arizona Appellate Court ruled that lower courts must determine if a taking violates the state constitution’s public use requirement without deferring to legislative actions (2003).

• The California Appellate Court overturned local plans to redevelop designated areas because they did not meet statutory criteria (1998-2002).

• The Colorado Supreme Court held that an agency could not retake a previously condemned property if it was redeveloped according to the agency’s plan and remained in good condition (2004).

ALABAMA

The legislature is currently considering several bills and proposed constitutional amendments that prohibit agencies from taking property for private development, tax revenue enhancements, or conveyance to private entities. The bills give the prior owner of a condemned property to right to reacquire it if the condemning agency does not use it for a public purpose or decides to sell it (HB 14 and 89 and SB 92).

HB 102 proposes a constitutional amendment prohibiting taking and transferring property to private entities for increasing tax revenues, creating jobs, or producing other economic benefits.

ARIZONA

Recent Legislative

In 2003, the legislature required municipalities to take certain steps before they could take property in designated redevelopment areas. It prohibited a municipality from taking a property unless its legislative body finds, by a two-thirds vote, that:

1. the property is critical to the project,

2. its current use is incompatible with that project, and

3. the property cannot be incorporated into or excluded from the redevelopment plan (2003 Ariz. Sess. Laws 246).

It also required the municipality to hold a hearing before designating an area, notify the affected property owners about the hearing, negotiate in good faith with a property owner before starting eminent domain proceedings, and, if negotiations failed, hold a hearing on the taking and notify the owner about it. Lastly, the legislature required an area’s designation to terminate after 10 years if the municipality failed to remove the slum or blight that led to the area’s designation.

Appellate Court

In 2003, the Arizona Appellate Court ruled that trial courts must independently determine if a redevelopment taking is constitutional (Bailey v. Meyer, 206 Ariz. 244). The state’s constitution specifies that

Whenever an attempt is made to take private property for a use alleged to be public, the question whether the contemplated use be really public shall be a judicial question and determined without regard to any legislative assertion that the use is public (Ariz. Const. Art I, § 17).

Consequently, courts must determine if a proposed redevelopment taking will substantially benefit the public more than the property’s private users.

CALIFORNIA

Proposed Bills and Constitutional Amendments

The legislature is currently considering a bill banning government from taking unblighted property for private business development (AB 590). It is also considering several proposed constitutional amendments that impose a similar ban, but that also require the courts to independently determine if condemnation was the agency’s only reasonable alternative.

The amendments also give the former owner of a condemned property the right to reacquire it if the condemning agency no longer uses it for a public purpose. The agency must sell the property for its fair market value or the price it paid when it took the property, whichever is less.

Court Cases

From 1998 to 2002, the Appellate Court overturned municipal development plans because the areas they designated for redevelopment failed to meet statutory criteria. By focusing on the blighted nature of property, these decisions could narrow the range of properties subject to potential condemnations (Public Power, Private Gain, Institute for Justice, April 2003 summarizes these cases. )

COLORADO

RECENT STATUTORY CHANGES

Colorado law allows local urban renewal agencies to take and transfer property in designated slum or blighted areas for urban renewal. In 1999, the legislature tightened the criteria for designating these areas (HB 99-1326).

In 2004, the legislature added more steps to the condemnation process. It tightened the designation criteria in situations where an urban renewal agency intends to acquire and transfer property for private development (HB 04-1203). It allowed property owners in these areas to challenge an agency in court when it determines that their properties are blighted and placed the burden of proof for that determination on the agency. Lastly, the legislature required the municipality’s governing body to hold a hearing on whether to allow a condemnation and base its final decision solely on the property’s condition.

Court Case

In 2004, the Colorado Supreme Court overruled an agency’s attempt to retake and transfer a previously condemned property to private interests. It did so because the property had been redeveloped according to the agency’s plan and was no longer slum or blighted (Arvada Urban Renewal Authority v. Columbine Professional Plaza Association (No. 03SA329 (2004)).

DELAWARE

A bill currently awaiting the governor’s signature restricts takings to “recognized” public uses. It also requires agencies to hold hearings on each taking at least six months before starting condemnation proceedings and to identify their public use (SB 217).

FLORIDA

Recent Statutory Changes

In 2002, the legislature changed the criteria for designating blighted areas. Under prior law, an area was blighted if it met at least one of eight conditions that had the effect of substantially impairing or arresting a municipality’s (or county’s) sound growth and menaced the public health, safety, morals, or welfare. The legislature dropped the requirement that the conditions have these effects, but added more conditions and required that at least two be present before the municipality could designate the area (2002 Fla. Laws ch. 294).

Proposed Changes

In 2005, the Florida Senate considered but did not enact a bill that would have:

1. required the courts independently to review takings intended to preserve and enhance a municipality’s tax base;

2. required municipalities to designate areas based on a predominance of various factors, such as unsanitary or unsafe conditions; and

3. allowed municipalities to designate coastal and tourist areas as redevelopment areas based on economic distress factors (S 2300).

Proposed Constitutional Amendment

The Florida House is currently considering a constitutional amendment to prohibit economic development takings (HJR 31, filed July 6, 2005).

GEORGIA

In 2005, the legislature considered but did not pass a bill that explicitly stated that taking and transferring property to a private developer or to improve tax revenues or tax bases was not a public purpose (SB 86).

HAWAII

In 2005, the legislature considered but did not enact a bill prohibiting counties from taking property on behalf of a private party that expressed an interest in the property. The bill did not prohibit a county from taking and transferring property under a redevelopment plan as long as it did not do so for a predetermined developer (SB 411).

ILLINOIS

Proposed Changes

The legislature is currently considering two bills addressing economic development takings. SB 235 reauthorizes the Southwestern Illinois Development Authority (SWIDA) to take land under an expedited, “quick-

take” statute for itself or on behalf of municipalities and private developers, but only as a last resort and only after efforts to purchase the property failed. The bill also requires SWIDA to:

1. verify that the project needs the property and that it cannot be acquired without using the quick take statute;

2. identify the project’s public benefits, such as eliminating blight, revitalizing the economy, or creating jobs; and

3. respond to any claims that the developer can achieve his goals through other feasible means.

HB 4091, on the other hand, explicitly prohibits any state, county or municipal government from taking and transferring property for private ownership and control without legislative authorization.

Court Case

In 2002, the Illinois Supreme Court held that SWIDA exceeded its eminent domain power when it took and transferred private property on behalf of a raceway for additional parking (Southwestern Illinois Development Authority v. National City Environmental, L. L. C, 304 Ill. App. 3d 542 (2002)).

The court rejected arguments that the taking would foster economic development, insure public safety, and prevent or eliminate blight. Instead it found that the taking benefited only the raceway and noted that its owner rejected building a garage on his property because of the cost.

INDIANA

Recent Legislation

In 2005, the legislature created an interim committee to study taking and transferring blighted property for commercial development (HB 1063). Among other things, the committee must examine whether blighted properties are usually located in areas where “normal development” is impossible. It must complete the study by January 1, 2006.

The bill’s original version prohibited agencies from taking property for commercial uses unless the owner rejected an offer that was equal to at the least the higher of 150% of the property’s assessed value or the average value of three appraisals.

IOWA

In 1999, the legislature prohibited municipalities from taking and transferring agricultural property in locally designated economic development zones for retail, health, and professional service projects without the owner’s consent (1999 Iowa Legis. Serv. 171).

MARYLAND

In 2005, the legislature limited the eminent domain powers of the state’s quasi-public economic development agency to those of the county or municipality where the subject property is located. (2005 Md. Laws 582). In 2003, it considered but did not adopt a bill repealing the agency’s eminent domain power (HB 716).

MICHIGAN

Proposed Legislation

The legislature is currently considering a bill prohibiting state and local agencies from taking and transferring property to a private interest solely to benefit that interest (HB 5060).

Court Case

In 2004, the Michigan Supreme Court reversed its landmark 1981 Poletown decision, which upheld taking property for a General Motors factory as a valid public use under the state’s constitution (Poletown Neighborhood Council v. Detroit, 304 N. W. 2d 455 (1981)). In its reverals, the court held that taking property for developing a business and technology park did not constitute such a purpose (County of Wayne v. Hathcock 471 Mich. 445 (2004)).

In reaching its decision, the court found that:

1. the taking did not satisfy a public need, such as providing land for constructing railroads, canals, or other infrastructure;

2. the park’s owner would not remain accountable to the state after the development was completed; and

3. the condemned properties posed no threat to the public health and safety.

MINNESOTA

In 2005, Minnesota considered but did not enact bills prohibiting economic development and private interest takings (HF 117 and 123, respectively).

MISSISSIPPI

In 2002 and 2003, the legislature considered but did not enact several bills affecting takings for economic development. HB 996 (2002) and HB 294 (2003) explicitly restricted takings to governmental purposes and specified that, “title to property taken by eminent domain shall never vest in a private entity or person. ” HB 1250 (2002) specified that government could take property only to construct roads, buildings, and school facilities.

Instead, in 2002, the legislature allowed counties to take property for economic development under an expedited, “quick take” statute (2002 Miss. Laws 464). A county can use the statute if it is a member of a regional economic development alliance and received confirmation that the proposed project will be located in the county.

MISSOURI

After the U. S. Supreme Court issued its Kelo decision (June, 2005) Missouri’s governor created a nine-member task force to study the state’s eminent domain laws and recommend changes by October 1, 2005. Among other things, he required the task force to study taking and transferring property for private uses (Executive Order 05-15).

NEVADA

The legislature recently enacted two laws tightening the conditions for taking property and adding more steps to the taking process. One law increases the criteria for designating blighted areas where redevelopment

agencies can take property by eminent domain. It also requires these agencies to negotiate in good faith before condemning a property and give owners 30 days to act on an offer before starting condemnation proceedings (2205 Nev. State. 461).

Another law requires these agencies to make certain findings before taking a property. They must either find that the property is blighted or that at least two-thirds of the properties in the designated area are blighted. The law also requires the agencies to compensate business property owners for the value of doing business at the location (i. e. , “loss of goodwill”), in addition to their property’s value, if they cannot relocate and reestablish the business at different location. Lastly, it requires any condemning agency to offer a condemned property back to its original owner if it fails to use the property as planned or plans to convey it within 15 years after taking it. The offer must equal the property’s fair market value, but cannot exceed the amount the agency paid for it (2005 Nev. Stat. 423).

NEW JERSEY

In 2004, New Jersey considered shifting the burden of proof in a condemnation action involving a business property to the condemning agency. S 177 would have required the agency to show, “by a preponderance of the evidence,” that the public’s need for the property justified relocating or closing the business.

The legislature is currently considering a bill that would prohibit redevelopment agencies from taking legally occupied homes and apartments that meet all code requirements (S 2739).

NEW YORK

The legislature is currently considering a bill requiring local legislative bodies to vote on each proposed condemnation. The law already requires condemning agencies to hold hearings on proposed condemnations during which they must explain the reasons for condemning the property and how that would affect the area (NY §§ 201-208).

OKLAHOMA

In 2002, the legislature considered but did not enact a bill that would have prohibited state and local agencies to take private property “for purposes which appear on the face to be for a public use, but are false in fact” (SB 1614).

OREGON

The legislature is currently considering a bill prohibiting condemning agencies from transferring property to private parties except under specified situations, which include property taken in slum or blighted areas or that threaten the public health, safety, or welfare (HB 3505). The bill also requires courts to independently determine if a taking complies with its provisions without regard to legislative findings or statements.

PENNSYLVANIA

The law allows municipal redevelopment authorities to take and transfer property in designated redevelopment areas to private interests. In 2001, the legislature considered but did not enact a bill requiring these authorities to wait at least 10 years before selling, leasing, or transferring the property to a private interest (HB 545).

It also considered a bill that specified criteria for designating redevelopment areas and requiring condemning agencies to:

1. hold public hearings on designations,

2. notify affected property owners about it,

3. bear the burden of proving that an area is blighted, and

4. wait two years before including a property that was subject to a prior but unapproved plan (HB 615).

The bill (1) terminated an area’s redevelopment designation after 10 years if the authority failed to implement the redevelopment plan and (2) required the agency to redesignate an area that was developed but then deteriorated.

The legislature is currently considering bills prohibiting quasi-public authorities and other local and state agencies from:

1. transferring condemned property to private interests,

2. taking property to increase a jurisdiction’s tax base, and

3. taking property without first reassuring its owner that it would revert back to him or his heirs if it is used for a private purpose (HB 1835 and HB 1836).

RHODE ISLAND

In 2005, the legislature considered but did not enact several bills allowing agencies to take and transfer property to private interests only if “(1) public necessity of the extreme sort requires collective action; (2) the property is subject to public oversight, following transfer to a private entity; or (3) the property is selected based on facts of independent public significance, rather than on the interests of the private entity to which the property is eventually transferred” (HB 5242 and S 88).

The House also considered but did not enact a bill creating a special seven-member House commission to study eminent domain takings.

TEXAS

The legislature is currently considering bills and proposed constitutional amendments to curb or ban economic development takings. SB 62 allows these takings only to implement community development or urban renewal projects where the main purpose is to eliminate blight or address other specified community needs. HB 73 allows economic development takings only in blighted or slum areas. HB 78 bans economic development takings. HB 86 bans taking property to promote economic development, create jobs, generate tax revenue, create leisure or recreational opportunities, or create aesthetic pleasure.

SJR 15 allows economic development takings only if (1) the public can use the property; (2) the government needs the property to run a public facility; or (3) the taking prevents a menace to health, safety, morals, and welfare. SJRs 9 and 10 and HJR 19 simply ban economic development takings.

TENNESSEE

The legislature considered bills banning taking private property solely for improving tax revenue or economic development. They also ban taking and transferring property to private developers and other private entities solely for this purposes (SB 2418 and HB 2426).

HB 2426 also requires courts to construe its ban narrowly and the condemning agency to prove that the taking serves a public purpose. It reaffirms the right to take and transfer blighted properties to private interests, but explicitly requires governments to use this power sparingly and to protect the property owners’ interests over those of private developers.

UTAH

In 2005, the legislature prohibited redevelopment agencies from taking property in most circumstances and increased the criteria for determining if an area is blighted (SB 184)

VIRGINIA

The legislature considered but did not enact a bill allowing takings for private interests only if they would benefit the public more than those interests (HB 1806). But it did give former owners of condemned property the right to reacquire it if the condemning agency declared it surplus within 10 years after taking the property. The agency must offer to sell the property for the price it paid the owner plus 6% annual interest (2005 VA. Acts ch. 2).

WASHINGTON

In 2000, the Washington Supreme Court held that the state constitutional ban on taking property for private use was absolute, regardless of whether the owner was justly compensated (Manufactured Housing Communities v. Washington, 13 P. 3d 183 (Wash. 2000). Although the case did not involve an economic development taking, the decision appears unequivocally to prohibit taking and transferring property for private development, which the law allows in designated blighted areas.

JR: dw/ts