Let there be blight: blight condemnations in New York after Goldstein and Kaur.

• Author: Somin, Ilya
• Position: Fordham Urban Law Journal Symposium

Introduction I. Background to the Two Cases A. The Background to Goldstein B. The Background to Kaur II. A Blight Unto the World: Upholding Unconstrained Blight Condemnations A. A Virtually Limitless Definition of Blight B. Endorsing Highly Biased Blight Determination Studies C. Blight Designations Based on the Blight Created by the Very Parties that Stood to Gain from Condemnation D. Implications III. Eviscerating Pretextual Takings Standards A. The Magnitude of Expected Public Benefits B. Pretextual Motive C. The Extent of the Pre-Condemnation Planning Process D. The Presence of a Known Private Beneficiary of the Taking E. Implications Conclusion INTRODUCTION

The New York Court of Appeals' two recent blight condemnation decisions are the most widely publicized and controversial property rights rulings since the Supreme Court decided Kelo v. City of New London. (1) In Kaur v. New York State Urban Development Corp., (2) and Goldstein v. New York State Urban Development Corp., (3) the Court of Appeals set new lows in allowing extremely dubious "blight" condemnations. The court ruled that such condemnations are permissible under the state constitution's Public Use Clause, which permits private property to be condemned only for a "public use." (4) It also adopted an extremely narrow approach to interpreting what qualifies as an unconstitutional "pretextual taking." (5)

This Article analyzes these aspects of Kaur and Goldstein, and argues that the New York Court of Appeals erred badly, by allowing highly abusive blight condemnations and defining pretextual takings so narrowly as to essentially read the concept out of existence.

Part I briefly describes the background of the two cases. Goldstein arose as a result of an effort by influential developer Bruce Ratner to acquire land in Brooklyn for his Atlantic Yards development project, which includes a stadium for the New Jersey Nets basketball franchise and mostly market rate and high-income housing that he plans to build. (6) Kaur resulted from Columbia University's attempts to expand into the Manhattanville neighborhood of West Harlem. (7) When some of the landowners refused to sell, Rather and the University successfully lobbied the government to declare the land they sought to be blighted and use eminent domain to transfer it to them. (8)

Part II addresses the issue of blight condemnation. Goldstein and Kaur both applied an extraordinarily broad definition of "blight" that included any area where there is "economic underdevelopment" or "stagnation." (9) Almost any property can be described as underdeveloped relative to some other potential use of the land. In addition, the court ruled that even if the property somehow falls outside this definition, state judges can only strike down a condemnation if "there is no room for reasonable difference of opinion as to whether an area is blighted." (10) But with just about any area, there is at least some room for "reasonable" difference of opinion on the question of whether it is stagnant or underdeveloped.

In adopting an extremely broad definition of blight, the Court of Appeals was roughly in line with many other states that define blight expansively. (11) Even so, this definition is at odds with the text of the New York Constitution, which allows blight condemnations only in "substandard and insanitary areas [sic]." (12)

Moreover, the court broke dubious new ground in three other crucial respects. First, it chose to uphold the condemnations despite evidence suggesting that the studies the government relied on to prove the presence of "blight" were deliberately rigged to produce a predetermined result. (13) Second, it dismissed as unimportant the fact that the firm which conducted the studies had a serious conflict of interest in that it had previously been on the payroll of Ratner and Columbia--the private parties that stood to benefit from the blight condemnations. (14) Finally, the court refused to give any weight to extensive evidence indicating that Ratner and Columbia had themselves created or allowed most of the "blighted" conditions subsequently used to justify the condemnations to develop. (15) Both separately and in combination, these three elements of the court's approach are extremely troubling. They open the door to serious abuses of the blight condemnation process on behalf of politically influential private interests.

Part III discusses Goldstein and Kaur's treatment of the federal constitutional standard for "pretextual" takings. In Kelo and earlier decisions, federal courts made clear that "pretextual" takings remain unconstitutional despite the Supreme Court's otherwise highly deferential posture on "public use" issues. (16) Unfortunately, the Supreme Court has been extremely unclear as to what constitutes a "pretextual taking." (17) As a result, both state courts and lower federal courts have taken widely differing approaches to the issue. (18)

Nevertheless, Kaur and Goldstein are outliers in this area, deferring to the government more than any other court that has addressed the question since Kelo. In Goldstein, the property owners' federal pretext claim had already been rejected by the Second Circuit. (19) I therefore analyze the federal decision in that case, as well as the state decision.

State and federal courts have identified four possible indications of a pretextual condemnation: the magnitude of the expected public benefits of the taking; the extent of the planning process that led to it; whether or not the taking has an identifiable private beneficiary whose identity was known in advance; and evidence of the intentions of the condemning authorities. (20)

In Kaur and Goldstein, all four of these factors were present. Yet the New York Court of Appeals in Kaur dismissed the property owners' pretextual takings claims out of hand. The Second Circuit did much the same in Goldstein. With one possible exception, (21) these were the most extreme pro-government pretext rulings of the post-Kelo era. They open the door to a wide range of pretextual condemnations.

Overall, Goldstein and Kaur probably rank among the most dubious blight condemnation decisions in American history. They make it easier than ever for well-connected interest groups to use blight condemnations to transfer property to themselves at the expense of those with less political influence.

1. BACKGROUND TO THE TWO CASES

   Both Goldstein and Kaur arose in large part as a result of efforts by private interest groups to acquire land for their own purposes. While that fact does not by itself prove that the resulting condemnations were unjustified or illegal, recognition of it is essential to any understanding of the two cases' history.

   1. The Background to Goldstein

      In Goldstein, the court upheld a major condemnation as part of the Atlantic Yards development project. The Empire State Development Corporation (ESDC), a state agency, took a large area for the purpose of transferring it to Forest City Ratner (FCR), a finn owned by politically influential developer Bruce Ratner. Ratner sought to use the site primarily to build high-income housing and a new stadium for the New Jersey Nets basketball team, which he owned at the time. (22) First announced in 2003, the Atlantic Yards project was intended to include sixteen high-rise buildings, office and retail space, and a new stadium for the New Jersey Nets, of which Ratner was the majority owner until 2009. (23) The project area in question covered twenty-two acres and included a variety of buildings used for both residential and commercial purposes. (24) Far from being a slum of any kind, much of it was actually middle class housing located in a reasonably well-off neighborhood. (25)

      Not until 2005, thirty-one months after the project was announced and seventeen months after it was endorsed by the city and state governments, did the ESDC--the government agency that approved the project and later sanctioned the use of eminent domain--conclude that the area in question was "blighted." (26) The "blight" study commissioned by the ESDC was undertaken by Allen, King, Rosen, and Fleming (AKRF), a consulting firm with serious conflict of interest problems. (27)

      FCR and city officials claimed that the Atlantic Yards project would produce some 2250 "affordable" housing units, as well as several thousand others. (28) However, most of "the units that are labeled affordable will in fact be at or above market rate for Brooklyn, and out of the price range for many existing residents." (29) Moreover, FCR is not legally required to build more than three hundred of the "affordable" units for many years; in the meantime, hundreds of existing housing units in the area have been destroyed as a result of the project and its use of eminent domain. (30)

      Similarly, claims that the project will produce massive increases in jobs and economic development are questionable in light of the fact that the project has absorbed hundreds of millions of dollars in public subsidies (even without counting the use of eminent domain as an implicit subsidy), and the FCR has no legal obligation to actually produce any of the promised jobs. (31) A 2009 New York City Independent Budget Office report found that the arena portion of the project would result in only a modest twenty-five million dollar net increase in tax revenue for the City and an actual loss of forty million dollars in revenue for the state over the next thirty years. (32) Moreover, the net increase for the City is wiped out once we take account of later revelations showing a previously unaccounted for thirty-one million dollars in infrastructure subsidies for the project. (33) Including this sum in the analysis would make the fiscal impact for both levels of government negative.

      Because the Atlantic Yards takings encompassed a large area and threatened to forcibly displace many people and businesses, the project aroused widespread public opposition and a...