Detroit – Then and Now


After:


       What you are looking at are the fruits of urban redevelopment as practiced by a city that pioneered it, and has consistently pursued it for several decades, at times for the avowed benefit of General Motors and Chrysler.

Reed Hunter, R.I.P.

Though few have noted it, our profession lost a friend when M. Reed Hunter died in Salt Lake City on November 11, 2009, at the age of 77. Reed was a dear friend, and a first-rate appellate lawyer. You haven’t lived, professionally speaking, if you haven’t read one of his briefs. They stood out among the all too often dreary output of appellate lawyers discussing appraisal testimony and such, like a shining beacon on a misty night. They were more literature than briefing, and they read as if no lawyer’s hand had touched them.

Reed was a genuine gentleman and scholar, an individual of wit (in both meanings of that word), and a dinner companion par excellence. Those of us in the often hard-boiled world of eminent domain practitioners will miss his gentlemanly demeanor and its influence on us that inevitably improved our spirits along with our work.

We will not see the likes of him again. We shall miss him greatly.

For the text of his obituary that appeared in the Salt Lake Tribune, click on the link below.

http://www.legacy.com/obituaries/saltlaketribune/obituary-print.aspx?n=milton-reed-hunter&pid=135938204  

Sad But Dependable News for the Bald — The New York Court of Appeals Rules for the City in the Atlantic Yards Case

         On October 13th we blogged on the subject of the New York Court of Appeals hearing oral arguments in Goldstein v. N.Y. State Urban Development Corp., the state court counterpart of Goldstein v. Pataki, the case challenging the legality of condemnation for the Atlantic Yards project in Brooklyn. We didn’t expect a whole lot and, sure enough, the court more or less rubbe-stamped the taking, invoking the familiar tune that the decision of what constitutes “public use” within the meaning of the Takings Clause of the Constitution, is for the legislature, not the courts which retain only a largely symbolic (and virtually never exercised) power to review the legislative determination that the proposed use is public. Here is what we said on the eve of the New York Court of Appeals oral argument in Goldstein:

“This is supposed to be a big deal — a chance for New York’s highest court to reform the unspeakable state of New York’s right-to-take law, under which anything and everything for which the city wants to take private property is judicially rubber-stamped as a “public use.” Possibly, the New York Court of Appeals may come to its senses, or regain its moral compass and hold that whatever Bruce Ratner’s Atlantic Yards mega-development may be, isn’t a public use. But we aren’t holding our breath. We hope to be pleasantly surprised, but we don’t expect much from the judiciary that in the past deemed the best land in Manhattan, located on Central Park South, to be “blighted” because Robert Moses wanted it for some fershluggener project of his. Still, hope springs eternal, and like Charlie Brown who every year hopes that Lucy will hold the football for him, and that he will be able to kick it, and not wind up on his little keester when she snatches the ball away at the last moment, your faithful servant is willing to be pleasantly surprised, though he isn’t counting on it. See http://gideonstrumpet.info/?p+311

         Now the opinion has come down and it matches our low expectations.

         So maybe it’s time to take the court at its word, and if this is indeed a matter best left to the democratic process, perhaps it’s time for the people to bestir themselves and exercise their rights by voting out of office those who would wield the power of eminent domain in this irresponsible fashion, and that should include judges who neither see, nor hear, nor speak evil as they merrily rubber-stamp whatever excesses the other two branches of government want to indulge in under the banner of eminent domain.

Another Connecticut Eminent Domain Calamity – This Time It’s Bridgeport

         New London, Connecticut, has received so much publicity on account of the Kelo fiasco, that it displaced from public consciousness another such calamity that took place in Connecticut, but from which the local movers and shakers have failed to draw an obvious lesson.

         We came across a speech delivered on November 13, 2008, at the University of Connecticut School of Business, Commercial Real Estate Conference, entitled What Government Isn’t, A Commercial Developer, by Robert Poliner, Connecticut State Ombudsman for Property Rights. You can find the entire text of Mr. Poliner’s remarks at  www.ct.gov/pro. Scroll down the home page to Points of Interest UConn Business School Commercial Real Estate Conference November, 2008. For now, we quote here the pertinent part of his speech that in a concise fashion, tells the story of failed redevelopment in Bridgeport Connecticut.

I want to discuss a case involving the taking of a waterfront property in 2000 by the City of Bridgeport Redevelopment Agency as an example of what public agencies caught in a financial bind do when original plans have failed to produce intended results.  After many years of searching for a developer, the agency decided that it needed to include a marina and five other non-blighted waterfront properties in its Steel Point project to entice more developer interest in the area.  The area had become more blighted and less livable since the inception of the project.  Costs, both real and opportunity, were increasing and taxpayers were not earning a return, i.e., receiving increased tax revenues or other promised public benefits.

 

Steel Point consists of approximately 50 acres.  The Pequonnock Yacht Club sits on two acres at the tip of the peninsula.  The club’s buildings and docks are in good condition and there is ample parking.  At the time of the taking, the remaining upland acreage of the redevelopment area was generally considered in blighted condition. 

Pequonnock is a workingman’s club.  Dues are about $300 per year. Members with boats pay an additional $18.50 per foot for a slip.  In addition they have to contribute a minimum of 10 hours a year working at the club or pay another $200.  The club started in 1906 and has about 240 members.  Members of the public are allowed to enter the premises to purchase food and drink as long as a member signs them in.

The redevelopment plan for Steel Point was adopted in 1970.  The plan went through many revisions over the years and it wasn’t until the eighth revision in 1998, 28 years later, that the waterfront properties were included.  The court found that the developer and the City concluded that the scope of the project and the need for private financial support made it necessary to acquire all of the waterfront properties including the marina property.

Shortly after the plan was revised for the eighth time, the club was acquired by eminent domain.  Pequonnock was able to show a trial judge that it had tried to negotiate with the City in an attempt to integrate its facility into the redevelopment plan.  The club was ready to invest in improving its property but the City rejected its proposals.  The City needed to acquire the club’s waterfront property to be able to convey it to its preferred developer.  The club searched for a new location but could find none.  After the evidence was heard by the court and before a decision was made, the developer for whom the plan had been revised withdrew or was dismissed from the project.  Still the City would not consider integrating the club’s marina into its redevelopment plan. 

The trial judge ordered the city to reconvey the property to the club.  On appeal the Supreme Court concluded that the City acted unreasonably when it failed to consider or even discuss integration of the club’s property into the redevelopment plan and had failed to establish that the taking by eminent domain was therefore necessary and essential to the redevelopment plan.  [See Pequonnock Yacht Club v. City of Bridgeport, 790 A.2d 1178 (Conn. 2002)]

Fast forward to the spring of 2007.  The City approached the club again indicating it could remain as a tenant but not as an owner.  The City offered significantly more money than it had before.  Members who kept boats at the marina would be given plenty of time to relocate them to other marinas.  The club agreed to sell.  I spoke with the club’s attorney to see why the club sold and didn’t stand its ground again.  He said in view of the Kelo decision and the fact that the City had met its burden of offering to integrate the marina into the redevelopment plan albeit as a tenant and not as an owner, he felt as did the officers and directors of the club that selling the property made the most sense.  He said the club members were tired of litigating with the City.

The second piece of news in 2007 was the City entered into an agreement with a new developer who, the Connecticut Post reported, would build 3,500 luxury condos with water views, stores, restaurants, a hotel, offices, a theater, a conference center, a boardwalk and a new 350 slip marina and yacht club.  The developer’s estimate of the project cost was 1.5 billion dollars.  The City would sell the entire Steel Point tract to the developer for just about the same amount it paid the club for its parcel.  Now I’m sure many of you are saying what’s wrong with that.  The city gets a real sprucing up and everyone knows Bridgeport needs more revenue.  The problem is where’s the accounting of the public dollars spent and still being spent over 38 years and of the tax revenues not levied or collected while waiting for the development to be built.  Where’s the housing for the lower and middle income families who were dispossessed and where are the store fronts at affordable rents for the small businesses that were forced to move?  Where is the respect for private ownership of property and where is the line that separates what private citizens can comfortably call their own from what government officials can and will take if they are not restrained from doing so?          

In the name of doing good, cleaning up a run down area and bringing in new, bigger and more valuable buildings all of which provide needed additional revenue to the city, the rights of private citizens to peaceably enjoy their properties, their recreation and their neighborhood friends were sacrificed.

Today the Steel Point project is on hold as the developer and the city try to find buyers for more than $100 million in bonds to pay for roads and infrastructure the repayment of which is to come from property taxes generated by the development.  While potential investors evaluate the risks of the development succeeding, the plan as described in that Connecticut Post article hangs in the balance.  So where are Bridgeport and State of Connecticut taxpayers to look for return on their investment?  I don’t know.  But I do know that in the future municipalities and state agencies have to do a much better job of evaluating economic risks before committing millions of taxpayers’ dollars to development projects.  Government can not carry out its lawful purposes trying to be what it is not, a commercial real estate developer.

Those Tight-Fisted, Flinty-Eyed Guardians of the Public Fisc Are at it Again

          If this headline sounds sarcastic, it is meant to be. When you practice eminent domain law in California, you get accustomed to condemnors lamenting in court that — gee, golly, Your Honor — if you let those crafty condemnees recover just compensation for all their demonstrable, incontestably suffered economic losses, the civilized world as we know it, will surely come to an end. The California Supreme Court once took the position — and never retreated from it — that it is its duty to keep condemnation awards down, because otherwise an “embargo” on public projects will have to be declared, don’t you know. Unfortunately, we see this sort of government frugality only when it comes to paying just compensation to condemnees, not when it comes to wasting public funds on misbegotten projects that never see the light of day.

         Case in point, a little squib, artfully hidden on page A8 of the Los Angels Times of November 19, 2009. It reports that the city of Placentia in Orange County has settled its controversy with the California DOT (affectionately known hereabouts as CalTrans), whereby the city will pony up $5.5 million to settle a $36-million claim by CalTrans, being as the city — according to the Los Angeles Times — misspent the latter amount in state funds to finance a now-defunct rail corridor project. A local small city trying to build a railroad? Yep.

          According to the Times, the proposed $650-million OnTrac project “was shelved in 2006 after failing to receive federal funding.” Its design included “sinking five miles of railroad tracks into a concrete trench,” that “dragged the city deep into debt and forced officials to cut services and sell parkland to recoup the losses.”

         The grabber in this story is that the city will have to borrow money to pay CalTrans, but — not to worry, folks — eventually the city will repay the money lent to it by the Orange County Transportation Authority, from the city’s share of funds generated by “Measure M,” authorizing a countywide sales tax to fund transportation projects, as well as state highway funds.

           So transportation funds that should be used in part to compensate people whose property is taken for public transportation, will go to pay for the city’s fiasco. No fear of an “embargo” here.

Follow up. We evidently missed this gem on first reading, but the Los Angeles Times also explains that the city feels it was victimized by CalTrans because CalTrans did not stop it from spending all that money. No, we are not making this up. Here is what the L.A. Times reports:

“City officials contended that Caltrans was at least partly to blame because it approved work orders, disbursed state money to the city and neglected its oversight responsibilities. They suggested that the city was more victim than perpetrator.”

          Bottom line: assuming a modicum of skill and integrity in CalTrans’ estimate of what the city owed it, good ol’ CalTrans left some $30.5 million of your money on the table.

          Don’t you just love it?

Winston-Salem, North Carolina — Meet New London, Connecticut

         The recently announced departure of Pfizer pharmaceuticals from New London, Connecticut, has stirred up an enormous controversy that is still reverberating across the blogosphere. In case you were vacationing in outer space and didn’t catch it, about ten years ago, the Pfizer pharmaceutical company was a force in motivating New London Connecticut, to condemn and raze a 91-acre lower middle class residential neighborhood for redevelopment that would serve the well educated, well paid Pfizer employees working at its nearby,  $300 million research center. The Supreme Court gave this caper its blessing in Kelo v. New London in 2005.

            Now, Pfizer is saying ta-ta. It has announced that it is shutting down that research facility and moving out of town. It leaves behind some seriously pissed-off Connecticut and New London municipal folks who blew $80 to $100 million on the Kelo caper with nothing to show for it, except maybe a mountain of bad publicity and ill will directed at it and the courts that approved this fiasco — which, in our book, is a case of just deserts. We blogged about that at http://gideonstrumpet.info/?p=324 .

          It now turns out that, though overshadowed by the New London debacle, the same thing is happening in Winston-Salem, North Carolina. There the state committed $318 million to induce Dell computers to build a new desktop computer plant that — so it was said — would generate 8000 local jobs. That was in 2005. It never came close — 1500 jobs was more like it, and several hundred workers have been laid off. But who’s counting?

          Now, it turns out that with customer demand for desktops in decline (in favor of laptops) Dell is shutting down its Winston-Salem  plant and leaving town. Unlike the schmucks in New London, the North Carolina folks negotiated a deal with Dell, that requires a return (or clawback, to use a fancy new word) of at least some of the advanced funds.  So much for the myth of the canny New England Yankees. What that clawed-back figure will be is at best unclear at this point, but it appears that North Carolina DOT spent $9.3 million improving roads serving the Dell plant, and the state popped another $3.6 million to train workers for Dell, all in non-refundable funds. Plus another $1.3 million to screen job seekers at the Dell facility. Altogether some $18 million in public money will not be repaid.

          Dell, we learn, promises to pay back whatever it owes, but what it owes is unclear and falls short of the state’s total expenditures.

         The silver lining of this debacle is that North Carolina did not use eminent domain to force people out of their homes in order to acquire land for Dell, as did New London. At least, that’s our understanding. But the moral is clear: the government entity that would generate money by subsidizing wealthy private enterprises that by rights should be paying their own cost of doing business, is asking for it when the market turns south and the promises of a bigger economic pie turn into pie in the sky.

You Just Can’t Make This Up: Pfizer to Leave New London, Leaving the City Holding the Bag

         Latest dispatches from New London inform us that Pfizer, Inc., the giant pharmaceutical company that established its $300 million research facility in New London, Connecticut, is pulling out of New London. You may recall that the presence of that Pfizer facility  in that community became the lynchpin of New London’s justification for the misbegotten redevelopment project that gave us the wretched Kelo case. That was the case in which the U.S. Supreme Court held that — notwithstanding the Fifth Amendment’s “public use” limitation on property takings — private property (in this case a well-maintained, unoffending lower middle-class neighborhood) could be taken by eminent domain in order to raze the homes, and give their vacant sites to a redeveloper for the construction of privately-owned upscale shops and condos that would — so went the theory — serve the needs of the well-paid, well-educated Pfizer work force.

         Now, not only is there no redevelopment project, but it also appears that there won’t be any such upscale workforce in the immediate area — Pfizer is moving its research center employees to Groton, Connecticut, leaving behind . . . What? The news available so far give no indication as to what is to be done with the huge research center that is about to be shut down. Here it is.

 

Stay tuned on that one.

For the full story see Lee Howard, Pfizer To Close New London Headquarters, The Day, November 9, 2009.

Postscript. In earlier blogs we used the figure of $80 million as the amount of money wasted by the State of Connecticut and the city of New London on this fiasco. We have since then come across a report that this total was more like $130 million by the State alone. See Fort Trumbull Must Be an Open Book, The Day, June 28, 2008.

Follow up. One of the criticisms of redevelopment as practiced, is that it’s a zero sum game — if one community attracts a redeveloper, that means that others won’t because there are only so many discretionary dollars in an area, so that if they are spent here they won’t be spent there. Here is a case in point. The Day reports that New London City Officials “Disheartened”  by Pfizer Closure (Nov. 9, 2009) since Pfizer is New London’s largest taxpayer. Evidently, not any more. The moral here would appear to be that he who lives by redevelopment, dies by it when the redeveloper moves on to greener pastures. And this is hardly the first time this has happened. Yonkers, New York, learned that the hard way a while back when it blew millions to condemn private land for Otis Elevator company which a few years later shut down its Yonkers plan and moved out of town, leaving the city holding the bag. 

This illustrates dramatically that all the BS about how a company’s move into a redevelopment area is a part of “public use” is indeed BS. These companies are out to make a profit, not to revirtalize New London or any other place. They do what they do because they find it profitable, but the moment profits end, they move on if they can. People who nevertheless go on about how these deals serve a “public purpose” or pursue “public use” are insulting our intelligence. And that includes judges who buy into this stuff. 

In the meantime, the Mayor of Groton is quoted as saying that Pfizer’s decision to move its research facility to Groton is “fantastic news.”

Second follow up. Remember all those confident predictions while Kelo was before the Supreme Court, about all those new jobs that were coming? It now turns out, according to the Hartford Courant (Pfizer to Close New London Headquarters, Courant.com, November 9, 2009)  that instead, Pfizer’s move will “result in staff reductions” although no specific numbers have been revealed at this time. And it isn’t the recession. According to the Courant, this is an effect of the consolidation of Pfizer and Wyeth (another pharmaceutical company) that Pfizer merged with.

For some further details on the Pfizer-Wyeth merger, its impact on employment at Pfizer’s 20 research sites (including the New London facility), and the impact on employment figures at Pfizer and elsewhere in the drug industry, see Jonathan D. Rockoff, Pfizer Shuts Six R&D Sites After Takeover, Wall St. Jour., Nov. 10, 2009, at p. B3.

And speaking of the Wall Street Journal, don’t miss today’s editorial, Pfizer and Kelo’s Ghost Town,  Wall St. Jour., Nov. 11, 2009, at p. A20. To that, you can add the lengthy article by Patrick McGeehan, Pfizer to Leave City That Won Land-Use Suit, New York Times, Nov. 13, 2009, at p. A1, from which we learn that for all that BS about higher taxes, the deal between New London and Pfizer requires the latter to pay taxes on only 20% of its research center’s value, up until 2011 by which time Pfizer will have said ta-ta and left the community, taking 1400 jobs with it, and leaving New London holding the bag.

          Your tax money at work.

Lowball Watch – $8.9 Million Offer, $11.4 Million Verdict

          The Olympian (Tacoma Business Displaced by Rail Line Gets $2.6M,”  November 8, 2009), reports that after the Sound Transit offered Star Ice and Fuel company of Tacoma, Washington, $8.9 million for its ice plant, the case went to trial and a jury awarded an additional $2.5 million. This story is at www.theolympian.com/northwest/v-pring/story1029615.html

No Viagra Here, Folks

          It appears that when you go to Google and type in www.gideonstrumpet.info you get the link all right, as well as access to our posts, but you also get some SOB’s pitch peddling Viagra. That isn’t us, folks. We are trying to get that fixed, but in the meantime please disregard it. Many thanks for your patience.