Archive for September, 2008

Florida Supreme Court Chickens Out

Sunday, September 28th, 2008

       About a year ago, on Septemeber 25, 2007, we blogged about the Florida Supreme Court decision in Strand v. Escambia County, 2007 Fla. LEXIS 1598, holding that under the Florida Constitution, government bonds required a referendum, so that TIF bonds could not be issued in the future without one. As you can imagine, there was a great hue and cry from the government folks who — horrors! — were now facing an obligation to get the voters’ approval and couldn’t just spend the taxpayers’ money on their own say-so. As we noted, the Florida Supreme Court responded by granting rehearing. Now the new opinion has come down. Strand v. Escambia County, 2008 Fla. LEXIS 1745, filed on September 28, 2008.

     The court flipped on this one and this time, affirmed the lower court decision upholding the bond issuance without their validation in a referendum. Chief Justice Quince dissented, characterizing the majority’s decision as supportive of a “local-government shell game, which is played to avoid the Florida voter.”

      So it’s business as usual in Florida: the government can spend fortunes and put the taxpayers in hock up to their ears without giving them an opportunity to decide for themselves whether they think that the promised benefits are worth the financial burden. In a country that is sinking in public and private debt anyway, that’s something to ponder somberly. Rememeber that these are typically 30-year bonds, so that when they mature and the time comes to pay them off (or to face default, as the case may be) the politicians who issued them will have gone to their reward or out of office. So either way, there is nothing the taxpayers can do. The pols can just borrow and spend without giving the proverbial rat’s patoot about the soundness of the schemes financed by them or the long-term state of the public treasury. 

       A related thought. Out here in la-la land, redevelopment bonded indebtedness has gone from $5.3 billion in the 1984-1985 fiscal year  to $41.8 billion in 1996-1997. It will be interesting to see how this debt is paid off if the current market foofaraw results in a decline in property tax revenues. Stay tuned.

The Little Man Who Wasn’t There

Sunday, September 28th, 2008

          Last night I saw upon the stair
          A little man who wasn’t there
          He wasn’t there again today
          Oh, how I wish he’d go away

       We try not to involve politics in this blog, but sometimes it’s inevitable. We have been thinking about the recent presidential candidate debate, and it seems to us that there are some things that weigh heavily on today’s America, but that these guys never mentioned. Like, what to do about eminent domain law. The U.S. Supreme Court told us in Kelo that the decision to condemn private property for redevelopment is legislative, which is to say political. So who should address it if not politicians? Nor can there be any rational question that Kelo and its aftermath have had a profound impact on the country’s thinking, and that the people want some serious change in what has been going on. Y’all hear that, Senator Obama? Change. As in your favorite slogan. As for Senator McCain, he has come out against Kelo-style takings, but — what do you know? – in those debates he didn’t mentiion the subject either.

       Which sems passing strange when you reflect on the fact that, according to the polls, eminent domain abuse is of greater interest to the American public than just about any other subject, producing rates of disapproval of “economic redevelopment” in the 90%+ range — utterly unheard of in polling on other subjects.

       So what do you think is going on here?

Eminent Domain CLE Program Announced

Saturday, September 27th, 2008

       CLE International is planning to present a CLE program on Eminent Domain on December 8-9, 2008, at the Grand Hyatt Hotel in San Francisco. For details contact CLE International, 1620 Gaylord St., Denver CO 80206, telephone (800) 873-7130.

The Penn Central Mess

Friday, September 26th, 2008

       Time for the next installment of our saga about failed eminent domain controversies. This one involves inverse condemnation, no less a jewel in the crown of jurisprudence — if you’ll forgive our sarcasm – than Penn Central Transportation Co. v. City of New York, 438 U.S. 104 (1978), the case that was declared retrospectively by the Supreme Court to be the “polestar” of inverse condemnation law. The controversy started when Penn Central railroad, faced with declining rail traffic, filed for bankruptcy along with several other railroads in the Northeast, and realized it had a problem. The cost of operating the Grand Central Terminal was higher than the income it produced, and Penn Central – being a regulated public carrier as well as a bankrupt – could not just stop the unprofitable operation. So it made a deal with a developer who would build a 50-story office building on top of the Grand Central Terminal. But the city Historical Preservation Commission would not permit it. So Penn Central sued, arguing that the ordinance relied on by the Commission guaranteed it economically reasonable use, defined in terms of excess of income over expenses. And since Penn Central’s “excess” was negative, it was locked into a perpetual deficit condition, so it seemed like an open-and-shut case of taking of Penn Central’s property. The trial court agreed, and that’s when the fun began. 

            The trial court decision was so obviously correct that the city was ready to settle, but under pressure from local influential environmentalists, it decided to appeal. The New York Appellate Division reversed on a point of valuation law. Penn Central, said the appellate court, should have used a different accounting approach. It should have imputed a rent payable by its railroad operation  to its real estate operation. But, as pointed out by the dissenting judge, all that would not have made any difference because even under that approach there still would have been an ongoing operational deficit, albeit a smaller one. 

        When Penn Central took its case to the next court level, the New York Court of Appeals, all hell broke loose. That court ignored the issue raised by the record and the parties’ submissions, and went off on an ideological toot, straight out of Henry George. It asserted out of the blue that Penn Central was not entitled to a reasonable return on its property, but only on that increment of its value attributable to private, not public influences, and that Penn Central would have to separate these elements of value even though the court conceded that they were “inseparably joint.” How to separate the inseparable, the court did not explain. Economist William Wade has aptly termed that decision to be judicial “economic lunacy,” see Penn Central’s Economic Failings Confonded Taking Jurisprudence, 31 Urban Lawyer 277, 282 (1999).

            So Penn central took its case to the U.S. Supreme Court where it was born again and raised an entirely new issue – it argued that the city took the air rights above Grand Central Terminal. Normally, you can’t raise new issues in the U.S. Supreme Court, but in this case the Court accepted the case for review anyway. In later public disclosures, the  Supreme Court clerks who worked on the case made clear that at the time they did not understand the importance of this case and thought that, as one of the Justice Department lawyers who worked on it put it, it was a “ho-hum” case. Why then did the court accept the case for a decision on the merits, is obscure. If you are interested in the details of that fiasco, see Looking Back on Penn Central: A Panel Discussion with Supreme Court Litigators, 15 Fordham Environmental L. Rev. 287 (2004) — containing a transcript of a roundtable discussion among counsel who argued Penn Central and the Supreme Court clerks who worked on it.

        The rest is history. The Court held that since Penn Central changed its position and conceded that it was getting a reasonable return on the terminal, there was no regulatory taking. All this is an oversimplification of what happened, compelled by space limitations. If you want the gory details, do read Gideon Kanner, Making Laws and Sausages: A Quarter-Century Retrospective on Penn Central Transportation Company v. City of New York, 13 William & Mary Bill of Rights Journal 653 (or 679) (2005). We are told that reprints are available from the British Library.

            But the point of this post is not just the litigational saga, but also what happened after it was over. The city’s victory in the Supreme Court only confronted it with the fact that at the time the architecturally glorious Grand Central Terminal was a neglected mess, favored as sleeping quarters by the homeless, and reeking of stale urine in places. Furthermore, Penn Central was broke and could do nothing by way of its clean-up and restoration. So the city had to face reality and took over the terminal, spending its own money to restore it – which is what should have been done to begin with. For a description of this segment of the Penn Central saga see Chapter 4 of The Zoning Game Revisited, By Richard F. Babcock and Charles L. Siemon, (1985), pp. 59-75. Though we don’t agree with everything Babcock and Siemon have to say, they are well informed gents, and we recommend that you read what they have to say.

        So in the end the city wound up worse off than it would have been had it accepted the trial court’s judgment (which Penn Central was willing to waive) and allowed Penn Central to proceed with its project. What’s the moral of it all? A kings’ ransom was spent on litigation, the New York Court of Appeals produced an absurd ideological Georgist tract that has not been applied in subsequent cases, the U.S. Supreme Court produced a confusing opinion that decided nothing and confounded the law (the Court couldn’t even articulate the elements of a regulatory inverse condemnation action – it only listed three “factors” that no one understands – pleading its inability to formulate a coherent rule), and in the end Penn Central did not have to pay for the terminal’s restoration – the city did.

        Today, the terminal is leased by the Metropolitan Transit Authority which is operating it at a substantial deficit that is vastly greater than that suffered by Penn Central when it operated it, and the costs of its restoration are being absorbed by the public.

       Stories are supposed to have a moral and so does this one. The process of preservation and maintenance of a civilization’s great artifacts is not cost-free, and it is up to the community that cherishes them to absorb that cost rather than trying to fob it off on have-nots who are incapable of shouldering the economic burden. In other words, there is no free lunch, or as New Yorkers put it in their quaint patois, for nuttin’ you get nuttin’. One would like to think that New York has learned that lesson. But did it?

Are Our 200 Years Up?

Tuesday, September 23rd, 2008

       This isn’t what you might call an eminent domain related item, but in light of last week’s events, it seems proper to share it with our readers. We recently came across the following statement attributed to Alexander Fraser Tytler in his book The Decline and Fall of the Athenian Republic (1776): 

A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that the democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world’s greatest civilizations has been 200 years. These nations have progressed through this sequence: ‘From bondage to spiritual faith; From spiritual faith to great courage; From courage to liberty; From liberty to abundance; From abundance to selfishness; From selfishness to apathy; From apathy to dependence; From dependence back into bondage.”

 So are our 200 years up? What do you think?

UPDATE: We finally got around to checking out this quote, and alas, it turns out to be too good to be true. Good old Snopes.com — the familiar source of debunking urban legends and such, informs us that “there is no record of The Decline and Fall of the Athenian Republic in the Library of Congress, which has several other titles by Tytler.” Snopes’ on-line search of Tytler’s work led it to conclude that “[i]n no case was text identified that was remotely similar to in words or intent to tyhe alleged Tytler quote.”

Still, if ol’ Tytler didn’t say it, perhaps he should have.

To Sprawl or Not to Sprawl, Is that the Question?

Monday, September 22nd, 2008

Sep. 08, 2008
By Gideon Kanner
Reprinted from the Los Angeles Daily Journal


      When the Los Angeles Times waxes orgasmic on its editorial page over something, it’s a good idea to check it out carefully. Case in point: the Times’ support for legislation to put an end to sprawl. What’s wrong with that? Nothing. It’s just that the proposed cures don’t work. For one thing, there is no concise, workable definition of sprawl. One man’s suburban growth is another man’s sprawl. So let’s see how we got that way.
      As Jane Jacobs notes in her acclaimed book “The Death and Life of American Cities,” the push for sprawl started in the 1930s when Herbert Hoover came out “against the moral inferiority of cities and [delivered] a panegyric on the moral virtues of simple cottages, small towns and grass.” He was joined on the left by Richard G. Tugwell, the federal administrator responsible for the New Deal’s Green Belt demonstration suburbs, who wanted the government to entice people to move out of cities.
      Then, after World War II, we got the GI Bill, one of the greatest, though underappreciated, events in American history. In one fell swoop, hordes of young, formerly working-class types became “college men” – what before the war was a privilege of the rich. This was something. By graduating from college in those days, you became a member of the middle class, with all the ambitions and appetites of the middle class, one of which was a desire to live in a suburban house. No sooner said than done. The GI Bill made low-cost home financing available with no money down, and the Federal Housing Administration insured similar housing loans for civilians. Enter Bill Levitt, who built Levittown and started selling real suburban homes en masse for under $10,000 with no money down. What a deal!
      The rest is history. People started moving out of cities to the suburbs. Also, Federal legislation (12 U.S.C. Section 1701n) required federal agencies to reduce the vulnerability of cities to enemy attack by promoting urban decentralization. New roads were built with federal funds to facilitate commuting to city jobs. Before long, businesses followed their customers, making life still more convenient in the suburbs. City neighborhoods began to empty out. Some, like the South Bronx, were abandoned altogether. That urban vacuum was partially filled by a migration of Southern blacks whose old rural lifestyle came to an end as sharecropping ceased to be viable. Besides, they wanted to get away from oppressive Jim Crow laws. Urban areas in the industrial North thus experienced a culture clash. Some of it was inspired by racism, but some was not. “Block busting” and “white flight” followed, leaving behind more abandoned city neighborhoods.
      In the wake of the 1960s riots, Department of Housing and Urban Development assistant secretary Charles Haar conducted a study that concluded that cities faced a choice: Become armed camps or face more “white flight.” President Lyndon Johnson got wind of that study and ordered it classified for 30 years. The flight to the suburbs continued. You can read about in Roger Biles’ November 1998 article in the Journal of Urban History, “Thinking the Unthinkable About Our Cities, Thirty Years Later.”
      Next came urban redevelopment, which became a machine of mass destruction of low- and mid-priced urban housing, displacing hundreds of thousands of urban dwellers annually, and replacing their homes with shopping malls and downtown office buildings mostly occupied by day by commuting suburbanites who wouldn’t be caught dead living in the city, and who, at the end of the day went home to the suburbs, leaving behind empty city streets of interest only to cops and robbers. And speaking of cops, the 1970s saw a decline in law enforcement and a rise in urban crime. Living in cities meant fearing for one’s safety when walking down city streets. Suburbs kept looking better and better.
      The unkindest cut was the catastrophic decline in quality and safety of urban schools. Quality of local schools is the most important factor in families’ decisions on where to live, so the consequences were predictable. Busing of students made it worse. The Supreme Court held in Milliken v. Bradley, that busing was OK only within the school district being integrated. That prompted more parents to get out of Dodge.
      Could it get worse? It could, and it did. The laid-back, pot-puffing hippie culture was replaced by illicit distribution of hard drugs. Cocaine, “the caviar of drugs,” became cheap crack that metastasized into the city, motivating junkies to turn to crime to finance their habit. All these things pushed people out of cities, but some things pulled them out.
      Buying a good suburban home became a road to wealth in one’s old age. In time, those little Levittown homes that sold new for under $10,000 rose to over $400,000. And let’s not forget Mom. With the coming of feminism, women gained lucrative employment and, acting alone or pooling incomes with their husbands, could buy bigger and better homes. But homes like that are either unavailable or exorbitant in cities. Not in the suburbs. The rest is a no-brainer. Remember all those lines in front of suburban home sales offices?
      But if you move to the suburbs, you face the NIMBY problem – Not In My Back Yard. Those nice folks who you would join as your neighbors, don’t want you there and protect their turf with exclusionary land-use regulations. Two Presidential Commissions on Housing have concluded that the NIMBY phenomenon is a major cause of escalation of home prices. It’s supply and demand. You demand suburban housing and they constrict the supply. So you (and the developers who want your business) head out to the urban fringe, where land is cheaper and there are no NIMBY neighbors to keep you out. More sprawl.
      But there is always the unexpected, and now it’s gas prices that though rolled back temporarily, bid fair to move up again sooner or later. A $100 per tank gas fill-up gives one pause. Will that put an end to suburban growth? Maybe. While some people will likely move closer to work, some employers may move to where their workforce lives. Stay tuned on that one.
      So now, along come the New Urbanism mavens, who tell us that sprawl is out and city living is in, that it’s time to chuck that four-bedroom, 3,500 square foot, three-car garage manse, compleat with the two-story foyer and a red tile Mediterranhean-style roof, and move back into a cramped city apartment. Will it work? You tell me. All I know is that the leadership of urban society isn’t moving en masse from Westlake Village to Echo Park. The Census Bureau says that American cities continue to lose populations and the suburbs continue to grow.
      The solution? I’m not sure there is one in the short run. It took over a half-century of government policies and lavish government financing to get us to where we are, and it will take time and effort to reverse things, assuming we want to reverse them and that they are reversible.
      City living can be civilized, provided so is the city. And there’s the rub. Unless the quality of city life improves, don’t expect an exodus from the suburbs. As New York Times columnist David Brooks put it: “Go ahead and denounce the soullessness of planned communities and condo villages and exurban developments. But it’s way out there, amid the new towns and barely charted byways, that the American dream is most largely lived.”

Kleptocracy

Saturday, September 20th, 2008

 This is a reprint of a paper presented at the 2008 ALI-ABA program on Eminent Domain and Land Valuation, in San Franscisco, California.

ALI-ABA COURSE OF STUDY MATERIALS
Eminent Domain and Land Valuation Litigation

COURSE NUMBER: SN041
January 2008

KLEPTOCRACY
By Gideon Kanner

A few years ago the Wall Street Journal aptly characterized current state of eminent domain law as a “kleptocratic” process. That it is. All those who work in this field of law know that in the hands of judges the constitutionally promised “just compensation” can be a cruel joke. By definition, it excludes compensation for a variety of incidental economic losses suffered by property owners whose land is condemned, notably but not exclusively for businesses which in most cases can be destroyed without their owners receiving a nickel’s worth of compensation. Even the vaunted “fair market value” that the US Supreme Court has adopted as the standard of “just compensation” fails to compensate the condemnee-owners by definition. As the Court conceded: “just” compensation is not just but harsh, and that “In giving content to the just compensation requirement of the Fifth Amendment, this Court has sought to put the owner of condemned property ‘in as good a position pecuniarily as if his property had not been taken.’” Gee, that sounds pretty good, doesn’t it? But don’t get your hopes up; it all comes apart in the next sentence where the Court drops the other shoe and delivers its “however.” “However, this principle of indemnity has not been given its full and literal force.” United States v. 564.54 Acres, 441 U.S. 506, 510-511 (1979). Why not? The Court didn’t say. In other words, says the Court, you get indemnity for your condemnation-caused losses, except that you don’t. All you get is the supposedly “fair” market value. But do you? Not really.
 
Beginning in the 1960s, studies made of condemnation compensation practices have concluded that the condemnee-owners were actually undercompensated (“undercompensated” is a two-bit word for “cheated”). In a great many cases the government offers that are made are lowballs, often below the government’s own appraisal figures. How do we know it’s so? Because condemnation lawyers by and large charge their clients contingent fees with the contingency calculated only on the overage, not on the entire recovery like tort lawyers do. In other words, the owners don’t pay unless their lawyers demonstrate in court to a judge’s or jury’s satisfaction that the government’s valuation is too low. So if the government appraisals were fair or generous (as condemnor advocates like to say), those condemnation lawyers would starve to death. But they don’t. They do right well. How do they do it? Take it from us, they are not magicians able to bamboozle the judge or jury in the great majority of cases. Remember that jurors are taxpayers themselves. It follows that the typical government appraisal is deficient and its deficiencies can be demonsrtrated in court. That perception may strike you as conjecture, so we need to ask: are there any hard data to substantiate it. Actually, there are.
 
It began with the congressional hearings back in the 1960s, in which it became obvious that government agencies were shortchanging American property owners on a large scale. Government acquisition personnel were taking advantage of the fact that most owners lacked the funds and the sophistication to hire appraisers and specialized lawyers who understand eminent domain’s weird legal and appraisal rules, and know how to try those cases. It was routine then that the government offered the owners whose properties were in the path of public projects less than its own appraisers showed to be just compensation. This forced the owners either to accept the inadequate offers or to hire lawyers and appraisers just to get the compensation to which even the condemnor privately conceded they were entitled, thus losing even when they won because from their award the owners had to deduct the cost of litigation, thus never obtaining the full amount of the court award. And in eminent domain you don’t get general damages that you can use to pay your lawyers and experts and still keep your hard-core compensatory damages. Also, in eminent domain there is no collateral source rule which enables tort plaintiffs to collect more than once.
 
Responding to the manifest need to reform the law, the California Law Revision Commission was directed by the legislature to conduct a study of eminent domain law with the aim of protecting the interest of property owners. It found that there was widespread dissatisfaction with the state of eminent domain law. Its 1976 recommendations resulted in the enactment of the Eminent Domain Law (Cal.Code of Civil Procedure, Sec. 1230.010 et seq.) that corrected some of the worst injustices in California eminent domain law, but fell short of eliminating the undercompensation practices.
 
In 1967, two prestigious academics wrote an article in which they took a look at condemnation practices in Nassau County, New York. They found that the facts were every bit as bad and at times worse than the evidence revealed in those congressional hearings. Property owners were routinely being offered “compensation” that was less than the condemnor’s own appraisals. Curtis J. Berger and Patrick J. Rohan, The Nassau County Study: An Empirical Look Into the Practices of Condemnation, 67 Columbia Law Review 430 (1967).
 
There followed a number of other academic writings on the subject of “just” compensation, all agreeing that under what passes for eminent domain law, condemnees are routinely undercompensated. But hard data like Berger’s and Rohan’s have been hard to come by. Nonetheless, some investigative newspaper reporters looked from time to time into the realities of compensation in eminent domain and reached the same conclusions.
 
A 1999 study by the Salt Lake Tribune indicated that of the Utah property owners who rejected condemnor offers and insisted on valuation trials to establish their compensation, 80% recovered more in court than the condemnor’s offers, with the average increase averaging 40% over those offers. Ray Rivera, UDOT: Fair Deals or Land Grabs? Salt Lake Tribune, Oct. 24, 1999, at p. Al, Ray Rivera and Dan Harrie, UDOT Appraisals Lose in Court, Salt Lake Tribune, Oct. 24, 1999, at p. 1A.
 
Then there was the Minneapolis study by Dan Browning, MnDOT’s Tactics Squeeze Landowners, Minneapolis Star Tribune, Sep. 21, 2003, at page 1A. “The Star Tribune analyzed MnDOT’s computer records showing more than 1,200 cases since the late 1980s in which disagreements over land value were decided by court-appointed commissions. In two-thirds of those cases, the commission determined that property owners deserved at least 20% more money than MnDOT first offered. In a third of the cases, the award was at least double [MnDOT's offer].” * * * “When Minnesota property owners refuse MnDOT’s purchase price, they can appeal to a commission appointed by the court to determine the value. These commissions often find MnDOT’s offers too low. Here are the results of 847 such cases decided from 1998 to 2003. MnDOT’s appraisals: $ 78.8 million. Amount paid or pending: $ 130.5 million.”
 
Now, yet another study has been made in Georgia by two professors of planning and business respectively, with similar results. Interestingly, these two gents are not condemnation lawyers and therefore don’t have a dog in this fight. See S. Alan Aycock, CPA, PhD, and Roy T. Black, PhD., J.D., Special Master Bias in Eminent Domain Cases (unpublished paper). The results of their study play a familiar tune. Undercompensation of condemnees is the norm in Georgia, even though the special masters usually award more than the condemnor’s offers. This is no place to go through the entire study which you can get by contacting Roy_black@bus.emory.edu, but its bottom line is that “condemnor appraisals are consistently lower than either the property owner appraisal or the final award.” Aycock and Black found that the average condemnor appraisal was $ 32,722, the special master award was $ 51,304, and the final [judicial] award was $ 177,758 (over five times the condemnor’s offer). The authors concede that this study was based on a small data base and they urge additional studies using a larger data base. But even so, these results are consistent with the results of earlier studies mentioned above. As those dead old Englishmen used to say, res ipsa loquitur they speak for themselves.

Was the “Free Lunch” Really Free?

Friday, September 19th, 2008

       Professor George Lefcoe of the USC Law School loves redevelopment, which is his prerogative, of course. But as he goes about acting as cheerleader for that widely despised process, perhaps he ought to be a little more careful about his factual conclusions. In his latest article, Redevelopment Takings After Kelo: What’s Blight Got to Do With It? 17 So. Cal. Rev. L. & Soc. Justice  803 (2008) Professor Lefcoe offers a number of “urban renewal success stories” even though he concedes as he must, that “these projects came at a high price in tax dollars and evictions. Whether they could be justified on a cost benefit basis is debatable. That they produced substantial civic benefit is not” (id. at 836). Oh really? That all depends on whom you ask, how you measure “success” and how you define “benefit,” doesn’t it? Like, is Professor Lefcoe thinking of net benefits, after considering both the economic and social costs of the project, or is he just thinking about the benefits alone? Besides, if a project fails the cost-benefit test, i.e., where the sum of all its costs exceeds its benefit, can it be counted as a “substantial benefit,” civic or otherwise? What do you think?          

         Case in point: the Los Angeles’ Bunker Hill redevelopment that Professor Lefcoe lists among his examples of successful redevelopment projects. Successful? Bunker Hill? For the benefit of readers who have had better things to do in life than to follow the adventures and misadventures of the Bunker Hill project, here are a few additional facts.

             There is no question that the Bunker Hill project produced the familiar, downtown cluster of glassy high rises in the center of Los Angeles. But as the readers of this blog know, there ain’t no such thing as a free lunch, and here the price was steep. And we don’t just mean the fate of those poor souls who got kicked out of their Bunker Hill homes, back in the days when there were no relocation benefits, so that residential condemnee-tenants and small business owners got nothing. One effect of the Bunker Hill redevelopment project was the economic destruction of the nearby commercial Los Angeles downtown center, notably Spring Street, known before then as “the Wall Street of the West.” As the businesses located there moved out and relocated to take advantage of the new, subsidized facilities being built on Bunker Hill, they left behind a swath of shabby, urban blight that has been resistant to improvement ever since. How long has it been this way? Let’s put it this way, your faithful servant began practicing law in 1964, and his firstest court appearance was on some godforsaken motion having to do with the taking of the last house on Bunker Hill. Now, your servant is a retired geezer, close to a half-century has gone by, and there is still vacant land on Bunker Hill.

             And as for Spring Street, it remains blighted in spite of the redevelopment agency’s repeated efforts to revive it. At one point the agency had to refund the purchase price to some poor suckers who bought condos in a converted Spring Street office building, only to realize after moving in, that they were now living in the midst of urban blight. So has anyone toted up the cost of the economic destruction of the Spring Street area? The uncompensated losses suffered by the erstwhile inhabitants of Bunker Hill? The lost tax revenues that were foregone while the land taken on Bunker Hill sat there vacant and unused for decades? Not as far as we know. It’s a lot easier to point to those Bunker Hill high-rises, and say that they’re just swell. Well, they may be swell for somebody, but in terms of their overall, objective benefit to the city that created them by subsidizing their developers, the jury is out, and it ain’t coming back. So the bottom line is that we don’t know whether the overall impact of the Bunker Hill project was positive, or whether its detriments outweigh its benefits. Remember that even without that redevelopment project, the Bunker Hill area abutting on L.A.’s civic center, would have been redeveloped privately, at least in part, as were other areas in Los Angeles, and that too has to be figured in to get an accurate picture. 

           We could stop here, but we won’t. “Los Angeles” is not just a city – the area loosely called Los Angeles is more of a region. with many cities and redevelopment projects. Have those been uniformly successful? Not on your life. Space limitations preclude going through their misadventures in detail, but we should at least list some of the problem children among them. There have been major redevelopment failures in Hawthorne, Redondo Beach, Pasadena and North Hollywood, to name a few. The last one alone went through $117 million and produced nothing – the Los Angels Times blew the whistle on that caper and disclosed that the NoHo redevelopment area was worse off after 20 years of redevelopment agency’s efforts than similar, surrounding areas that did not receive the “benefit” of agency ministrations. Oh yes, we almost forgot. The agency did accomplish one thing: it inspired such fury on the part of NoHo residents that, fearing for its safety, it had to move its office to a more secure location. With successes like that, who needs failures? 

           So all things considered, was the Bunker Hill redevelopment a “substantial civic benefit”? You tell us.

In Pursuit of the Free Lunch – Take Two

Wednesday, September 17th, 2008

        Check out our second update to the post entitled In Pursuit of the Free Lunch, Jun. 14, 2008. It’s the latest dispatch from the New York Times on subsidies to the New York Yankees for their new stadium. A New York Assemblyman charges that for the $1.3 billion in subsidies the taxpayers are getting “little in return other than higher ticket prices and the loss of parkland.” The charges are being denied. So stay tuned — if we’re lucky we may even find out who is right.

Justice Delayed Is Still a Form of Justice, or How the Bad Guys Got their Just Deserts

Monday, September 15th, 2008

            In keeping with our retelling of failed eminent domain projects, here is another one. This one was not as notorious as Poletown, or Midkiff, or Kelo, but for sheer abuse of citizens’ rights it’s up there in that league. Except that this one had a happy ending of sorts; the bad guys got nothing in the end and had to eat the green wienie to the tune of $14 million.            

          If you are into eminent domain law, you might want to start by reading the New York Court of Appeals decision in Yonkers Community Redevelopment Agency v. Morris, 335 N.E.2d 327 (N.Y. 1975). The short version is that Otis Elevators had a plant in Yonkers and in the 1970s it was prospering. So much so that it needed to expand. Yonkers offered Otis a suitable site, but Otis declined, insisting on a parcel adjacent to its plant, owned by some other folks, including one William T. Morris, Jr. The city redevelopment agency proceeded to take Morris’ parcel but it didn’t bother with the procedural niceties; it attended to those after the fact, after its deal with Otis was all done. In spite of Morris’ protestations that his property was not blighted and that this was a purely private deal pursued to placate Otis, not a constitutionally required public use, the New York Courts went along with Yonkers and ordered Morris’ land taken, and – adding insult to injury – charged him with wanting to “wreak some sort of vengeance on the city” by asserting his rights.

            And so Otis got Morris’ land for a song – it cost the city some $14 million to acquire that land but it sold it to Otis for $1.392 million. What a deal! But it didn’t last. Elevator technology moved forward and the kind of elevator equipment Otis made in Yonkers gradually became obsolete. So Otis’ parent company, United Technologies, shut down the Yonkers plant, leaving the city holding the bag. So guess who now wanted to “wreak vengeance”? The New York Times quoted the Mayor of Yonkers as saying “We want to make U.T.C. a bad household word . . . to make U.T.C. known as the company that raped Yonkers.” “Raped”? Goodness, gracious. And here we thought that Yonkers entered into its deal with Otis voluntarily. If the term “rape” can have any application to this situation, it more accurately describes Yonkers’ conduct toward Morris.

         Undeterred by such trivia, Yonkers sued Otis in federal court, demanding justice. Yessireebob, Justice! Strangely enough, that’s just what it got. The federal courts ruled that in the Yonkers-Otis agreement, Otis made no promises to stay in Yonkers for any particular period of time, that there was no implied contract and no estoppel. On top of that, the federal trial court imposed a fine of $5000 on Yonkers as sanctions because of its unjustified charge that Otis had acted fraudulently. You can read all about it in Yonkers v. Oris Elevator Co., 844 F.2d 42 (2d Cir. 1988). A good read, that. Though we can’t say that the good guys won, at least the bad guys got it in the chops. In this imperfect world, you don’t get many of those, so when one comes along you have to cherish it.   

            There is no indication in the public record, or at least none that we can find, that anyone shed a tear for Mr. Morris or at least reminded us lately of the outrageous injustice inflicted on him by the City of Yonkers and the New York Courts. So the task of recognition of his good fight falls to us. So here is to your good health, Mr. Morris, or to your memory, as the case may be. A tumbler of Macallen’s best will be raised  on high this evening and a toast will be duly drunk to William T. Morris, Jr., a citizen of Yonkers, New York, a man of principle who stood up for what’s right, even if he did not prevail. 

    

           


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