Topic:
ECONOMIC DEVELOPMENT; EMINENT DOMAIN; CONSTITUTIONAL LAW;
Location:
EMINENT DOMAIN;

OLR Research Report


April 20, 2004

 

2004-R-0394

NEW LONDON EMINENT DOMAIN CASE

By: Christopher Reinhart, Senior Attorney

You asked for a summary of the ruling in the eminent domain case, Kelo v. New London (268 Conn. 1 (2004)).

SUMMARY

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. The court ruled that an economic development plan that the legislative authority rationally determined will promote significant municipal economic development is a valid public use. The court cited the plan's public economic benefits of creating new jobs, increasing tax and other revenues, and contributing to urban revitalization. The court stated that a legislature's public use determination receives great deference but ultimately it is a judicial question. It stated that courts can determine whether the facts and circumstances of a case show the primary purpose benefits the public but the balancing of benefits and social costs for a project is a legislative function.

The court also ruled that the transfer of land to private entities does not defeat a public purpose, especially when successful achievement of the public purpose of economic development requires private sector involvement. The court found that the evidence in this case supported the conclusion that the takings were primarily intended to benefit the public interest rather than private entities.

The court also found the city's delegation of the eminent domain power to the nonprofit private economic development corporation constitutional. It stated that a delegation is constitutional if the public purpose is advanced and there is a benefit to the general public. The court found, in this case, the public use and benefit in the first instance is economic revitalization and the same public use continues after the property is transferred to private parties.

The court also ruled that:

1. the development statute allows a city to acquire and improve unified land and water areas, and this does not limit the city to acquiring vacant land;

2. the economic development plan had sufficient statutory and contractual constraints;

3. taking houses for land to build office buildings was not impermissibly speculative;

4. taking the houses but not a private social club did not violate the equal protection clause of the constitutions; and

5. the trial court gave insufficient deference to the legislative determination of necessity for taking houses on the parcel designated for park or marina support.

Justice Zarella wrote a dissenting opinion, joined by Chief Justice Sullivan and Justice Katz, which is summarized in OLR Report 2004-R-0401.

FACTS

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.

The court provided the following timeline.

1. The New London Development Corporation was established in 1978 to assist the city in planning economic development.

2. In January 1998, the state bond commission authorized bonds for Fort Trumbull area planning, to allow the development corporation to acquire property, and to provide funds for creating a state park.

3. In February 1998, Pfizer, Inc. announced it would develop a global research facility on a site adjacent to the Fort Trumbull area.

4. In April 1998, the New London city council initially approved a development plan and the development corporation began holding informal neighborhood meetings.

5. In May 1998, the city council authorized the development corporation to proceed.

6. The state bond commission approved more funds for the development corporation

7. In June 1998, the city conveyed property to Pfizer.

8. In July 1998, a consulting team was appointed for the environmental impact evaluation and to prepare the development plan. They considered six plans.

9. The development corporation board approved the development plan in early 2000 and the city council approved it. The plan received other required approvals as well. The city council authorized the development corporation to acquire property.

10. In October 2000, the development corporation voted to use eminent domain to acquire property from owners who were unwilling to sell their land.

11. In November 2000, the corporation filed condemnation proceedings.

12. In December 2000, the property owners challenged the condemnations.

ECONOMIC DEVELOPMENT AS A PUBLIC USE

The court considered whether the public use clauses of the federal and state constitutions authorize the use of eminent domain for an economic development plan. Connecticut Constitution, Article First, 11 provides that, “The property of no person shall be taken for public use, without just compensation therefore.” The 5th Amendment of the U.S. Constitution provides that, “No person shall be…deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.” The court stated that the plaintiffs did not expressly state that the state constitution offers greater protection than the federal constitution and it addressed the two simultaneously because they have virtually identical “public use” language.

The court concluded that economic development projects that have the public economic benefits of creating new jobs, increasing tax and other revenues, and contributing to urban revitalization, satisfy the public use clauses of both constitutions.

The court stated that its cases and those of the U. S. Supreme Court have taken a broad, purposive view of public use and are deferential to legislative determinations of public use. The court stated that it has long taken a flexible approach to the public use clause, beginning in 1866, citing its previous cases stating that:

1. there is no precise limit on the legislature's power of eminent domain and it requires elasticity to meet new conditions, improvements, and the increasing needs of society;

2. promoting public safety and general welfare is a recognized public use; and

3. the test is not how the use is furnished but the right of the public to receive and enjoy the benefit.

The court stated that the U.S. Supreme Court has given similarly broad treatment to the federal public use clause and has never held a compensated taking to be prohibited by the public use clause. The court cited U.S. Supreme Court cases stating that:

1. once the object is within the authority of Congress, the right to realize it through eminent domain is clear because it is the means to the end, and

2. the courts will not substitute their judgment for a legislature's as to what constitutes a public use unless it is palpably without reasonable foundation.

The court concluded that this state's “well established approach to judicial review of legislative public use determinations, first articulated more than 125 years ago…is in harmony with the approach of the federal courts…” It added that, “Both federal and state courts place an overwhelming emphasis on the legislative purpose and motive behind the taking, and give substantial deference to the legislative determination of purpose.”

The court concluded that an economic development plan that the legislative authority rationally determined will promote significant municipal economic development is a valid public use. It stated that courts in several states have used the same approach to reach the same conclusion. The court reasoned as follows.

1. Public use is not limited to possession, occupation, or direct enjoyment by the public. Taking land for purposes of great advantage to the community is a taking for public use.

2. Public use changes with the varying conditions of society, new appliances in the sciences, changing concepts of the scope and functions of government, and other differing circumstances because of the increase in population and new modes of communication and transportation.

3. The test for public use is not how the use is furnished but the right of the public to receive and enjoy the benefits.

4. A court will not substitute its judgment for the legislature's about what constitutes a public use unless it is palpably without a reasonable foundation. If a state or federal legislature determines there are substantial reasons for using the taking power, the court must defer to the determination that the taking serves a public use.

5. Municipal economic development can be a constitutionally valid public use under the broad, purposive approach to the takings clauses.

6. The transfer of land to private entities does not defeat a public purpose, especially when successful achievement of the public purpose of economic development requires private sector involvement. The private benefit from the economic development is secondary to the public benefit from significant economic growth and the community's revitalized financial stability. Evidence supported the conclusion that the takings were primarily intended to benefit the public interest rather than private entities.

7. Courts give great deference to legislative public use or purpose determinations but public use is ultimately a judicial question. Courts can determine whether the facts and circumstances of a case show the primary purpose benefits the public, but the balancing of benefits and social costs is a legislative function.

8. Using eminent domain is unreasonable if the facts and circumstances show the taking was primarily intended to benefit a private party rather than the public. Judicial oversight of the ultimate public use question “does much to quell the opportunity for abuse of the eminent domain power.”

9. The “trial court correctly identified the ample public benefits that the development plan, once implemented, was projected to provide.” “Assuming them to be correct,” the plan projected hundreds of construction jobs, about 1000 direct jobs and hundreds of indirect jobs, and property tax revenue of $680,544 to $1,249,843 (compared to $325,000 presently), while the city had experienced serious employment declines recently.

The court also found that the trial court properly determined that the city's economic development plan had sufficient statutory and contractual constraints to assure the private parties would adhere to the development plan's provisions. The court stated that even though the private non-profit economic development corporation owned the land and did not have formal commitment for one parcel, the plan had parcel-specific land uses that private developers had to follow and significant state involvement provided government oversight.

DELEGATION TO DEVELOPMENT CORPORATION WAS CONSTITUTIONAL

The court ruled that the city's delegation of eminent domain power to the non-profit, private economic development corporation was constitutional even though the public did not have direct access to the property and a developer selected the tenants. The court reasoned as follows.

1. A delegation is constitutional if the public purpose is advanced and there is a benefit to the general public.

2. In this case, the public use and benefit in the first instance is economic revitalization and the same public use continues after the property is transferred to private parties.

3. The development corporation is not acting exclusively for its own benefit but is implementing a development plan with property acquisition provisions accepted by the city.

4. Determining what property is necessary for the public purpose is an exercise of legislative power and when it delegates that power to another agency, that agency's decision is subject to judicial review only to see if it was unreasonable, in bad faith, or an abuse of power.

5. Nothing indicated bad faith or a dishonest motive and evidence supported the trial court's decision upholding the development corporation's taking of houses for land to build office buildings as reasonably necessary to achieve the goals of the plan.

6. A taking that is purely speculative is not reasonably necessary. Since the public use was economic revitalization, ignoring considerations of investment and marketability would frustrate the public purpose and be an unreasonable and arbitrary legislative act. Needs that will arise in the reasonably foreseeable future must be taken into consideration. This requires suitable investigation to inform the assessment of future needs.

7. The trail court could conclude that the taking was not impermissibly speculative. Although the market for that type of office building was less than conducive to development, the trial court's deference to legislative determinations was supported by studies and projections of future demand as a result of the new Pfizer facility.

EQUAL PROTECTION

The court also ruled that the decision to condemn the houses but not a private social club building on the same parcel did not violate the state and federal equal protection clauses. The court stated that equal protection under the U.S. Constitution “is essentially a direction that all people similarly situated should be treated alike.” The court assumed without deciding that the houses and club were similarly situated. The court reasoned as follows.

1. The plaintiffs must identify and relate specific instances where people situated similarly in all relevant aspects were treated differently.

2. Legislation that does not infringe on a fundamental right or affect a suspect group does not violate equal protection if it is rationally related to a legitimate public interest. The plaintiffs must prove there is no conceivable rational basis for retaining the club's building.

3. Equal protection is satisfied if (a) there is a plausible policy reason for the classification, (b) the legislative facts on which it is apparently based rationally may have been considered as true by the government decision-maker, and (c) the relationship of the classification to its goal is not so attenuated as to render the distinction arbitrary or irrational.

4. A rational basis existed in this case since the club's social functions were consistent with the social elements and community atmosphere of the development plan as a whole.

5. The plaintiffs did not carry their burden of proving that the development corporation acted arbitrarily or irrationally. Beyond claims of preferential treatment of the club, they offered no arguments that the decision lacked any conceivable rational basis.

6. The rational basis offered by the city, with the plausible reasons found by the trial court, and the failure of the plaintiffs to carry their burden, compels the conclusion that the decision did not violate the equal protection clause.

REASONABLE NECESSITY OF TAKINGS ON ANOTHER PARCEL

The plaintiffs also questioned the use of part of another parcel of land that was designated for park or marina support and had no development commitment or formal site plan in place. The plan stated that a portion of the land would be redeveloped to support the state park, such as parking, or for retail to serve park visitors and community members. It had an alternative use as support for a marina or marina training facility that would be located on another part of the parcel. There was also testimony about discussions with the Coast Guard to place a museum on this land.

The court stated that the determination of what property is necessary to effectuate a public purpose is a matter of legislative power and when the legislature delegates that determination to an agency, that agency's decision is conclusive. The court stated that the decision is subject to judicial review only to see if it is unreasonable, in bad faith, or an abuse of power.

The trial court found the plans for this parcel of land too vague and the museum plans too speculative to make the constitutionally required determination of whether the takings were necessary. The Supreme Court found that this analysis went beyond the scope of review permitted by law and gave insufficient deference to the legislative determination of necessity. The court stated the agency must allege the specific public purpose for which it seeks property, but the lack of a development commitment or formal site plan for the parcel did not necessarily indicate an unreasonable decision, bad faith, or an abuse of power.

The court stated that the master planning process evolves over time and must be flexible. It stated that the intended uses for this parcel, while not subject to definite commitments, showed that the development corporation had given reasonable attention and thought to the land's potential use.

CR:ts