Monthly Archives: November 2009

Of Mice and Men and Just Deserts — New London’s [Re]development Entity Is in Trouble

         The Day, the New London, Connecticut, newspaper brings us the latest dispatch from New London, Connecticut. The New London Developmemt Corporation, those wonderful folks who gave us the wretched Kelo case, in which they sold their planned vision of the Fort Trumbull redevelopment project to the U.S. Supreme Court as being so great and so carefully thought out that it was above and beyond judicial review. As our readers know, the redeveloment project went nowhere, a viable lower middle-class neighborhood was destroyed, and some $80 to $100 million in public funds, was wasted, with nothing to show for it.

          Now, the NLDC is in trouble. We quote from K. Edgecomb, NLDC’s Budget is Down to “Bare Minimum,” The Day, Nov. 7, 2009:

“It’s a long way from the heady days of 10 years ago.

“Back then, the New London Development Corp. had about $130 million is state money and private donations and an operating budget of more than $400,000 to develop Fort Trumbull and the state pier, revitalize downtown, finish the Waterfront Park and overhaul Ocean Beach Park.

“On Friday morning the NLDC executive committee proposed to reduce the annual operating budget to $142,000 and recommended [that] the executive director become part-time and the financial officer be contracted for just 20 hours per month.” 

No comment appears necessary, but we can’t help wondering about the identity of the folks who came through with those “private donations.” Could it have been the Pfizer company?

Vox Populi -The Texas Constitutional Amendment Limiting Eminent Domain Passes by 80%

          As regular readers of this blog probably know by now, Proposition 11 was overwhelmingly adopted by the voters of Texas on Tuesday, two days ago. While not as good as it might have been, it does provide some modest new limits on the exercise of the power of eminent domain in Texas.

          What is most significant about it, however, are the numbers. Proposition 11 received the votes of over 80% of Texas voters. Numbers like that are simply unheard of in politics. So what this suggests is that the people have had it up to here with abuses of eminent domain. And while ordinary folks are understandably more interested in making a living and enjoying what pleasures life can offer, so they must be forgiven if they do not devote their effort to curbing this despotic power of government to the degree it calls for, these huge numbers do suggest that people are genuinely pissed off about misuse of eminent domain for private gain, no matter how semantically disguised as “public benefit.”

         If we were a condemning agency, we would be very, very careful about messing with the people’s justified anger, because when pissed-off people are finally stirred into action, they may not be very fastidious about what correcive measures they adopt.

Kleptocracy, Misrule and Waste in Wisconsin

         A while back, the Wall Street Journal characterized some of prevailing eminent domain practices as “kleptocratic.” And so they are. We are hard put to come up with an example that in our opinion, justifies that pungent characterization more appropriately than the outrageous case of City of Milwaukee Post No. 2874 VFW v. Redevelopment Authority, 768 N.W.2d 749 (Wis. 2009).  

        This elephantine, 74-page judicial opus of the Wisconsin Supreme Court (consisting of a 46-page majority opinion, 2-page concurrence by Ziegler, J., and a 26-page dissent by Prosser, Crooks and Roggensack, J.J.) is devoted to a fulsome exposition of a non-existent rule of law. The majority spills a barrel of ink in defense of the assertion that, when the U.S. Supreme Court held explicitly in Boston Chamber of Commerce v. Boston, 217 U.S. 189 (1910), per Holmes, J.,  that:

“[T]he Constitution does not require a disregard of the mode of ownership — of the state of the title. It does not require a parcel of land to be valued as an unencumbered whole when it is not held as an unencumbered whole”

it actually meant the opposite; i.e., that in valuing property in eminent domain cases, the true state of title must be disregarded and property that is owned by several people must be valued as if owned by one person. And in disregard of the further Boston holding that “the question is what has the owner lost, not what has the taker gained,” the Wisconsin Supreme Court’s majority asserted that value is to be determined by what the taker has gained (i.e., the fee simple title), not what the owner of each interest has lost, and that therefore it was all right for the trial court to disregard the existence of a valuable lease under which the VFW was able to occupy its premises for $1 per year for 99 years, and to pretend that the lease did not exist. The trial court awarded the VFW $0 — that’s right, nothing, nada, zip — for the bonus value of its lease, that ran into six figures. 

         The 10-story subject building housing the VFW was owned by the Maharishi Vedic University which evidently had more money than brains, because, though it bought it (subject to VFW’s ground floor lease), it neither occupied it nor maintained it — with predictable results. It deteriorated. Acting on demands of neighbors, the city filed a condemnation action to acquire it. The trial court found $140,000 to be the value of the Maharishi Vedic University’s interest, and $300,000 to be the bonus value of VFW’s lease. But the problem was that the city had to pay $970,000 for asbestos removal and demolition of the building, so it argued that after offsetting those costs the owners were not entitled to any net compensation. Whatever the merits of that argument may have been as far as the Maharishi folks were concerned, it obviously had nothing to do with the VFW, which as a tenant, had neither the duty nor the right to maintain the portions of its landlord’s building that it did not occupy.

          Nevertheless, the trial court invoked the so-called “undivided fee rule” under which the condemned property is first valued as if owned in fee simple by one owner, and then the lump-sum awarded for it is apportioned between parties such as landlord, tenant, easement holder, etc., as their respecive interests in the property may appear. Ordinarily, the rule is innocuous because whether valued using the undivided fee rule or the competing aggregate-of-iterests rule, the result is pretty much the same. But there are cases, such as this one, in which consideration and valuation of individual interests results in a total value that is significantly different than the one derived under the undivided fee rule. What then?

          Better reasoned cases in several states, that have confronted that problem, have held that under those circumstances, whatever the merits or lack thereof, of the undivided-fee rule, an exception must be made, lest the tenant or other owner of a partial interest in the subject property be deprived of his just compensation in whole or in part. The leading case on that point is People etc. v. Lynbar, Inc., 62 Cal.Rptr. 320 (Cal.App. 1967), explaining that under the U.S. Supreme Court’s holding in the Boston case, the court is not at liberty to disregard the true state of title and indulge in the fiction that title is other than what it actually is. To do so, held the Lynbar court, would deny the owners of partial interests in the subject property the just compensation to which they are entitled under the Constitution.

         We could spend more time analyzing the legal absurdity of the undivided-fee rule under which courts say that the whole is less than the sum of its parts (and come to think of it, we have done so — see 5 Univ. San Francisco L. Rev. 39), but there is more to this story than this outrageous “valuation.”

          The Milwaukee Journal Sentinel of October 27, 2009, has just blown the whistle on the equally outrageous non-legal aspects of this caper (Former Hotel Site Remains a Vacant Lot, by Tom Daykin). It turns out that after spending some $856,000 on acquisition (in 2001), and after blowing $970,000 on remediation (in 2003) nothing has been done with this property which, being now owned by the city, has  presumably been removed from public tax rolls, and the debt of $3.69 million that is “tied to” the idle hotel site (as the Journal Sentinel puts is), now has to be paid for by taxes diverted from  public schools and the like, while the site remains vacant, doing no one any good.  .

          Your tax money at work. 

Another Redevelopment Project Down the Tubes — This One in Miami

          Poinciana Park, the touted “$250 million retail and office complex rising from the barren landscape of a distressed area [of Miami] that smoldered during the 1980 riots” has proven to be chimerical.

          “Poinciana Park was to house biopharmaceutical powerhouses, like Wyeth Pharmaceuticals, and brainy researchers from the Massachusetts Institute of Technology. The park on 15 acres then owned by Miami-Dade . . . would be a hub for 3500 jobs.” But it didn’t happen.

        This redevelopment project was ginned up in the wake of the 1980 (and 1983) riots in the Liberty City part of Miami. While the Florida Legislature was tightfisted and popped for only some $10 million in aid money on the grounds that it was in no mood to reward rioting, the feds were more generous. The Carter administration came up with an over $70 million “aid package” which was later supplemented by another $10 million.

         Fast forward to 2009.

         The October 30, 2009, issue of the Miami Herald (Builder’s Arrest Offers Lessons, Lost Promises) reports that “[t]oday [Poinciana Park is] mostly 15 empty acres in a still distressed area. No new jobs, just the same old poverty and decades of missed opportunities.” That would be a familiar story, but this one comes with a twist. Evidently the site was entrusted by the county to a redeveloper who, according to the Herald story, was just arrested for bilking the county.  The facts reported in this Miami Herald story are sketchy, so we reserve judment on who did what to whom until more details become available. In the meantime, the Herald reports that “the County lost the land to a bank’ after the redeveloper “charmed the Miami-Dade County Commission into paying him to build to build the biotech park and never delivered.”

          Your tax money at work. Again.

Follow up. The deal described in this Miami Herald article was “worked out by the now defunct Miami-Dade Empowerment Trust, which was supposed to spruce up 10 poor areas in the county. The Herald reports that the “Trust essentially squandered $68 million that was meant for those poor communities before the county cut the cord. For some details on how it was done, go to http://www.miamiherald.com/multimedia/news/povped/part4/