Urban revitalization in the post-Kelo era.

• Author: Blais, Lynn E.

1. INTRODUCTION

   Freeport, Texas is a small city situated near the confluence of the Brazos River and the Gulf of Mexico. (1) Home to a large and thriving port, (2) the city itself has been in a period of decline for several decades. (3) In an attempt to reverse this trend, the City Council hired the Maritime Trust Company, a consulting firm, to evaluate the economic status and prospects of the city, and, if necessary, to make recommendations for revitalization. (4) The resulting report highlighted the lack of commercial and retail establishments in downtown Freeport and the excessive vacancy rate and disrepair of downtown buildings. The report concluded that the area was in a general state of decline that would require government intervention to reverse. (5) Ultimately, the report recommended that the City undertake a planned effort to revitalize the downtown area around a marina, concluding that development of a large, mixed-use marina was "probably the single most important development that can bring significant economic stimulus to the city." (6) Following the report's recommendations, the City and the Freeport Economic Development Council ("FEDC") entered into an agreement with Freeport Marina LP, a private company, to develop and operate a large mixed-use marina on the banks of the Old Brazos River. (7) The agreement called for extensive public investment in the project, by means of low interest loans combined with substantial private investment by Freeport Marina. (8) The FEDC estimated that the marina would attract $60 million worth of hotels, restaurants, and retail establishments to the City's downtown area and create between 150 and 250 new jobs. (9)

   Plans to develop the marina proceeded uneventfully, with the FEDC purchasing property designated in the development plan from private landowners. When the FEDC sought to purchase two seafood processing properties located on land crucial to the development, however, the owners of both operations objected. (10) Ultimately, Western Seafood Company sued the FEDC, arguing, among other things, that the planned marina did not constitute a valid public use, and that, therefore, the FEDC lacked constitutional authority to exercise eminent domain powers for this project. (11) The district court rejected Western Seafood's claims, concluding that the Public Use Clause of the Constitution was to be broadly interpreted with a particular deference to legislative judgments, and that Freeport's redevelopment plan clearly survived this deferential review. (12)

   Western Seafood appealed, and while its appeal was pending, two important events transpired. First, the Supreme Court decided Kelo v. City of New London, (13) in which it reaffirmed the cases that formed the basis of the district court decision in Western Seafood. (14) In particular, the Supreme Court held that the public use limitation on the exercise of eminent domain requires only that the state establish that its use of the property will serve a public purpose, that economic development was a legitimate public purpose, and that legislative determinations regarding the public benefit offered by a proposed project are generally entitled to substantial judicial deference. (15) Second, as happened in many other states, the Texas legislature responded to Kelo by adopting a statute, The Limitations on the Use of Eminent Domain Act (the "Act"), limiting the use of eminent domain for economic redevelopment. (16) Thus, when the Fifth Circuit addressed Western Seafood's claims, it recognized that the district court had correctly rejected the federal constitutional claim, as Kelo had made clear, but that the court's interpretation of the state constitutional claim might be affected by the subsequent passage of the Act. (17) Accordingly, the Fifth Circuit remanded the case to the district court to resolve the state claim in light of the new statute. (18)

   This scenario--an ongoing urban revitalization project arrested by legislative responses to the Kelo decision--is likely to play out in many cities and towns across the country in the next few years. (19) Since Kelo was decided, thirty-four states have adopted some responsive legislation or constitutional amendment. (20) These new laws, to varying degrees and using various mechanisms, limit the power of state and local governments to use eminent domain to facilitate economic redevelopment projects. This Article explores the reach of these statutes and their likely consequences for ongoing and future urban revitalization projects. Part II of the Article explores the problems inherent in attempting to craft a judicially enforceable public use limitation for the exercise of eminent domain and the Supreme Court's response to that dilemma, culminating with its recent decision in Kelo. Part III explores and analyzes the impressively swift and extensive legislative responses to the Kelo decision among the states. Part IV evaluates the urban revitalization movement leading up to Kelo and the importance of the use of eminent domain to the success of a comprehensive urban revitalization plan. Finally, Part V evaluates the consequences of those state reactions to Kelo for the continued viability of urban revitalization initiatives. This section concludes that such initiatives are likely to continue essentially unabated, but that as a result of these legislative responses they will necessarily be constructed in a less efficient manner and will almost certainly have distressingly disproportionate impacts on poor minority communities, much like the now-discredited urban renewal projects of the past.

2. THE PROBLEM OF PUBLIC USE: A BRIEF HISTORY AND KELO

   Much has been written of the United States Supreme Court's inability or unwillingness to craft a meaningful public use limitation on the Takings Clause. (21) The Fifth Amendment to the United States Constitution states: "nor shall private property be taken for public use without just compensation." (22) While it is not self-evident that the "Public Use" Clause in this Amendment is actually a constraint (it is sometimes suggested that it is merely a description of the particular type of eminent domain for which compensation is required), (23) most scholars assume it is a limiting clause and the Court has consistently treated it as such. (24) The extent of the limit, however, is unclear.

   The easy cases of public use entail the condemnation of private property for government ownership of public infrastructure, such as roads, schools, and government buildings. (25) The inquiry is made more difficult, however, when the use to which the government wishes to put the property entails private ownership. Some such cases are still rather obviously valid public uses; for example, the provision of essential public infrastructure by highly regulated private entities, such as railroads and utility companies. Since such uses are essentially "open to the public" and highly regulated, most theories of public use readily encompass them. (26) In contrast, if the government proposes to condemn property solely for the purpose of transferring it from one landowner to another, to be put to whatever use the second landowner wishes, such a transfer is rather clearly not for a public use. (27) In between these two extremes, however, lies the public use dilemma.

   The question of whether a particular use that falls within these extremes constitutes a permissible public use or a prohibited private benefit is both indeterminate and inextricably intertwined with the traditional police powers of legislative bodies to act for the public health, safety, and welfare. As a consequence, scholars troubled by the public use dilemma have generally attempted to solve it by shifting the focus from the central question of what counts as a public benefit to a proxy question designed to provide judicially manageable standards for limiting impermissible takings without treading on traditional legislative prerogatives. (28)

   Jed Rubenfeld, for example, recommends adopting a "jurisprudence of usings," which would focus not on the purported benefit that would arise from a proposed project, but simply on the use to which the condemned property would be put. (29) Under his conception of the Public Use Clause, the compensation requirement would apply only so long as the condemned property was actually "used" by the government. (30) Taking a dramatically different approach, Thomas Merrill argues that courts are unwilling or ill-equipped to resolve the central question of what constitutes a valid public use, and therefore should determine the means by which government entities should acquire private property rather than evaluate the ends to which the property will be put. (31) Under this approach, courts would focus on "where and how the government should get property, not [on] what it may do with it." (32) Nicole Garnett extends this argument, proposing that courts should apply a Nollan/Dolan type of essential nexus and rough proportionality test to exercises of eminent domain power. (33)

   While scholars have been struggling for theoretical clarity, courts have been busy resolving public use challenges. As John F. Hart's extensive chronicle of colonial era land use regulation makes clear, land ownership in this country has long been subject to extensive governmental control. (34) Town leaders, tasked with facilitating the development of entirely new, productive settlements, aggressively managed the type and intensity of land use permitted on private parcels. (35) Regulations authorizing condemnation of private property for the economic benefit of the community were extensive, and private property was regularly transferred from one private owner to another owner in order to facilitate construction of necessary infrastructure that the town leaders felt would be better run by private enterprise, such as mills and roads. (36) Many of these land use decisions were challenged as...