Memo To Justice John Paul Stevens, the Kibbitzer: How About Critiquing Your Own Kelo Opinion?

Check out the New York Times story about retired Justice John Paul Stevens who, unlike most of his predecessors, is happy to provide commentary on his former colleagues’ work, in speeches and statements to the press. Adam Liptak, Justice Stevens Is Off the Bench but Not Out of Opinions, N.Y. Times, May 31, 2011, at p. A14).

If you have an interest in the doings of the Magnificent Nine you may take note of an interesting theme in Justice Stevens’ remarks. For example, stresses the Times, he is critical of the court’s 8 to 1 decision in Snyder v. Phelps (that’s the one that held it to be OK under the First Amendment for a bunch of ideological/religious wackos to disrupt servicemen’s funerals by picketing and displaying signs insulting the memory of the fallen soldiers to the great distress of their families). Justice Stevens agrees with Justice Alito’s dissent that “… the First Amendment does not transform solemn occasions like funerals into free-fire zones.” Stevens also dissented, while still on the court, from the 1989 decision holding flag burning to be protected by the First Amendment.

What’s interesting to us about these two positions is that they appear to provide an insight into Justice Stevens’ thinking. He appears to draw the line at literal-minded court decisions that take constitutional law principles to their limits and beyond, and cross the line into reductio ad absurdum territory.

What makes that interesting to us here in this blog on eminent domain is that Justice Stevens was himself guilty of that very sin in his infamous 5 to 4 majority opinion in Kelo v. New London. Putting aside the very substantial argument challenging the court’s transmogrification of the constitutional phrase “public use” into “public purpose,” and thereby telescoping the regulatory state police power into the acquisitory state power of eminent domain, isn’t there a point beyond  which such language-stretching breaks down? Specifically, is a merely prognosticated financial benefit to the community, that is hoped to come via a trickle-down process from the future prosperity of redevelopers and their upscale customers, a sufficient justification for tampering with an explicit constitutional “public use” requirement? Or is it only another bit of reductio ad absurdum in judicial thinking?

What makes this point particularly intriguing to us is that shortly after the Kelo decision came down, Justice Stevens gave a speech in Las Vegas to the Nevada Bar Association, in which he confessed that  Kelo was a decision on which the court may well have taken a “mulligan,” and that had it been up to him in the first instance (i.e., making the decision whether or not to condemn Susette Kelo’s home) he may have reached a different result for reasons of economic efficiency. See Judicial Predilections, 6 Nevada L. Jour. 1 (2005).

Well, if Justice Stevens has now slipped into the role of a court critic, wouldn’t it be a good idea to revisit this subject one more time, and tell us what he really thinks about the Kelo fiasco. It would sure be interesting to learn whether the disastrous failure of the Fort Trumbull redevelopment project in New London (as well as the failures of other prominent government takings, like Berman and Midkiff), has informed his thinking. Would he admit that the majority’s uncritical worship of the city’s redevelopment plans was unwarranted? Would he recognize the merit of the priciple (adopted by the court in other, non-condemnation cases) that where the government acts in its own self-interest — and hoping to increase its own tax cash flow would surely qualify as such – a stepped-up level of judicial scrutiny is warranted? Or would he still cling to his extremist Kelo view, in spite of the fact that reality has demonstrated that those supposedly thorough city plans to which he and the majority deferred turned out not to be worth the paper they were written on? To put it another way, would he admit that he and his colleagues on the majority got snookered by reality?

To get the full Times article click here.

Afterthought: In case you are not aware of it, the New London redevelopment plan that was in issue in the 2005 Kelo case turned out to be a complete failure. The subject property, a 91-acre tract of waterfront land taken from home owners in an unoffending lower middle class neighborhood, is still sitting empty, producing no tax revenues. That caper cost the Connecticut taxpayers at least $80 million, possibly twice as much. With nothing to show for it.

Your tax money at work.

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Memorial Day Thought

It’s Memorial Day today. So take a moment to reflect on the fact that for all its warts and pimples, you live in the greatest country on earth. The reason it is so is that over the centuries of this country’s existence, so many brave men and women did their utmost and gave their lives to keep you free. And if you are a foreigner reading this, remember who saved your butt in two world wars.

Even as you are enjoying that holiday backyard barbeque, take a moment and reflect on the sacrifice of the fallen — a sacrifice that is still going on in Iraq and Afghanistan. It may be trite, but it’s true: they suffered and died to keep you free.

So if you choose to participate in any formal celebration of Memorial Day, so much the better. But even if you don’t, give it some thought. For, as the saying goes, it’s the thought that counts.

An Eminent Domain Lesson From India: Treat People Well and You Won’t Have Problems

As we never tire of observing, much of the ongoing controversy over eminent domain could be eliminated (or at least greatly diminished) if it weren’t a government policy — whether spoken or unspoken — to acquire land for public projects on the cheap by undercompensating the people whose land is taken for public projects. That this is the case, is not subject to rational dispute. The U.S. Supreme Court has conceded that even though “just compensation” payable to property owners in eminent domain is supposed to meet the “fair market value” standard, actually, the courts ignore elements of value that would be considered by parties in voluntary market transactions and certainly would be insisted on by rational voluntary sellers.

Barrels of ink have been expended by legal commentators on articles that over the years have demonstrated over and over again that the law of eminent domain (apart from being confusing and contradictory) is inherently flawed because it explicitly holds that condemnees are not to be compensated for all their demonstrable economic losses inflicted on them when they are evicted from their homes and businesses through the use of eminent domain – never mind their intangible, personal lossess that are routinely compensated in other fields of law but are deemed by judges to be “non-compensable” in eminent domain. Not because they are speculative, mind you, their existence and extent are conceded, but because historically, American judges have sided with the government in an effort to keep the cost of public projects down. The California Supreme Court, for example, has made no bones about that and has conceded explicitly that its policy is to keep the cost of eminent acquisitions down.

Of course, that does not keep the cost of public projects down. It only shifts some of their total cost from the public that should be paying for the benefits it receives, to those few who find themselves in the path of government bulldozers.

Now, along comes a story from India demonstrating that even in that poor country, a more enlightened policy can work wonders. Here is a quote from a New York Times Story:

“JIKARPUR, India — When the state of Uttar Pradesh announced plans to confiscate farmland for a toll road to the Taj Mahal, a grimly predictable plotline ensued. Protesting farmers, angry over low compensation, blocked road work. Frustration boiled into fatal clashes with the police. Then opposition politicians arrived to pillory the state government and pose for photos with farmers.

“Next, though, came something less predictable. Rather than
the usual standoff, the state’s chief minister increased payments to farmers and
offered them annuities for the next three decades. The new policy also gave
farmers stakes in residential developments being built alongside the toll road,
known as the Yamuna Expressway, and promised jobs connected to the project.

“Today, the Yamuna Expressway is again under construction,
and if some farmers are still not satisfied, the project is now regarded as a
tentative sign of progress in India’s wrenching fights over land, one of the
most serious yet seemingly intractable challenges facing the country.” Jim Yardley, A Highway in India Peromises a New Ending to an Old Story, N.Y. Times, Feb. 23, 2011.

Moral: if the public project is indeed worthwhile, if it will generate the public benefits that its proponents advance, then it is also worth paying for. And “paying” should at the very least include payment for all actual, demonstrable, economic losses inflicted by the condemnation on people whose land is taken. That seems only the decent thing to do. And, as the Indian experience demonstrates, it may also improve the process.

Lowball Watch – Pennsylvania

The Pittsburgh Tribune-Review reports that an Allegheny County trial court rejected a borough’s evidence of a $93,000 value for the taking of a 20-acre parcel for ”recreation areas and green space,” and awarded the owners $1 million, over ten times the borough’s offer. The land owners were using the subject property for selling topsoil and evidently that aspect of the property’s value (as well as the timber on it), figured in the judge’s decision.

In addition to the just compensation award, the judge awarded the owners $200,000 in attorneys fees. Interest is estimated to come to around $600,000, which is not surprising given the baronial leisure in which the borough evidently pursued this case. It took the property in 1999.

See Bobby Kerlik, Crafton Out $1.8 Million Over Land Dispute, Pittsburgh Tribune-Review, May 22, 2011. Go to here.

Lowball Watch – New Jersey

Philly.com reports that a Camden judge awarded $4.65 million to a property owner, on a condemnor’s offer of $2.8 million, later raised to $3.14 million. Claudia Vargas, Judge: Rowan Must Pay $1.6 million More for Camden Building it Acquired in ’09, May 20, 2011. For the story go to http://www.philly.com/philly/education/20110520_Judge__Rowan_must_pay__1_6_million_more_for_Camden_building_it_acquired_in__09.html

The High-Speed Rail Boondoggle (Con’t.)

Today’s editorial in the Daily News (Los Angeles) takes after the California High-Speed Rail Authority (High-Speed Rail Plan Should Slow, May 20, 2011, at p.A 14).

It rehearses the now-familiar arguments that the Authority lacks experience in building major projects, that its choice of the middle of nowhere in the Central Valley as the site for the construction of the first high-speed link is out of it, and reemphasizes that the authority’s estimated cost of $43 billion, will likely balloon to $67 billion.

Our favorite passage:

“The feds, [who] just put a rush on the project, said that their $3.6 billion allocation must be spent soon, so the authority hastily decided to build the first leg of high speed rail from Borden to Corcoran in the Central Valley. No one objected perhaps because much of the population of Corcoran is prison inmates.” (Emphasis added.)

Don’t you just love it?

Oh, we almost forgot. Those are the folks whose decision to lay out the route and take your property for it are “well-nigh conclusive.”

“Just Compensation” – 54 Years and Counting

Sometimes it’s hard to believe, but Just Compensation, our monthly report on condemnation cases has been in continuous publication for some 54 years, and volume 55 is now in publication. It was started in 1957 by a Virginia gentleman named Henry Kaltenbach. He had been working in the federal Bureau of Public Roads, and in that connection he realized that the Federal Aid Highway Act of 1956 that gave us the interstate highway network, would inspire lots of condemnation actions for the new highways. So he sat down and wrote a book on eminent domain called JUST COMPENSATION.

But as cases started coming down in large numbers his book quickly grew outdated, so he wrote a second edition called JUST COMPENSDATION REVISED. Same thing happened again, so Mr. Kaltenbach, being the smart fellow that he was, decided that keeping track of changes in the law of eminent domain was a better business opportunity than the book, so he began publishing Just Compensation as a monthly supplement to the book. Long story short, the monthly publication quickly assumed a life of its own and superceded the book. It has evolved into a monthly reporting service on eminent domain and inverse condemnation, that reports published court decisions in these fields in abstract form. It also keeps track of new books on the subject, as well as articles in professional journals.

Readers tell us that if you work in eminent domain, whether as a lawyer, or an appraiser, or a right-of-way type, Just Compensation is a handy tool for keeping up and doing legal research.

We took over publication of Just Compensation in 1974, and the rest, as they say, is history.

For more information on Just Compensation, click on that phrase in the right margin of this page, get a free sample, and if you like what you read, subscribe.

In Pursuit of the Free Lunch — The Guggenheim Fiasco

The U.S. Supreme Court has denied certiorari in the inverse condemnation case of  Guggenheim v. Goleta. That’s the in banc decision by the U.S. Court of Appeals for the 9th Circuit, holding that a “rent control” ordinance that effectively transfers the capitalized value of below-market rents that are imposed by a local rent control ordinance, from the landlord to the tenants, and allows them — not the landlord — to sell them at uncontrolled prices on the open market, is not a taking of the landlord’s property. There has been much commentary on that case, so we won’t go through the whole megillah again, except to call attention to what that case has failed to deal with, that renders the Goleta rent control scheme irrational. But first, the basic facts.

The ordinance is in a way deceptive because to the uninitiated mind it raises the question of “what’s the fuss all about?” Haven’t rent control ordinances been upheld before? Yes, they have. But as applied to a mobile home park, which is what Guggenheim did, and as disclosed by the evidence developed in this litigation, mobile home rent control has a wrinkle to it that other rent control ordinances don’t. To begin with, the “mobile homes” located in mobile home parks aren’t mobile. Once put in place on a “pad” within a mobile home park, most of them are never moved again. And since they are owned by the tenant (who rents the pad from the landlord) an interesting problem arises when a mobile home park tenant moves out. The departing tenant usually can’t take his “mobile” home with him, so he leaves it behind and sells it to the successor tenant. And here is where the fun begins.

A mobile home which is inexpensive when new, becomes very cheap when used. But the catch is that to acquire one that is in place in a rent-controlled mobile home park, carries with it the right of occupancy at  below-market, controlled rent which is a very valuable right. So the departing tenant is in a position to ask his successor tenant for a premium over and above the value of the “coach,” and that premium represents the value of the cheap occupancy. This is done through the fiction of the departing tenant purporting to sell the “coach,” as it is called, to the incoming tenant for an outlandish amount. And that overage — the sum over and above the actual market value of the used coach valued apart from the pad it sits on — is the price that the incoming tenant must pay if he wants to occupy the pad at a controlled rent. To give you an idea of the sums involved here, in the Guggenheim case, used coaches worth, say, less than $5000 if sold on the used coach market were being “sold” by the departing tenants to their successor tenants for over $100,000. Why quotation marks? Because the six-figure price was not really for the used coach — it was for the right of occupancy at low, controlled rents.

So if you stop at this point and think about it, it becomes obvious that (except for the mobile home park tenants who happened to live there when the rent-control ordinance was first enacted) the [new] tenants are not actually paying controlled rent; they are paying market rents not-so-cleverly disguised as inflated prices of the old coaches they must buy from the departing tenant if they want to live there. In other words, no rational person will pay $100,000 for an old, used coach that is worth $5000, or that may have to be scrapped. But they do. Why? Because without doing so they can’t live there. So the bottom line of all these machinations is that mobile home tenants (except the ones who lived there when the rent control ordinance was first adopted) are actually paying market rents, largely disguised as the price of that used coach.

In the Guggenheim case, the landlord argued that thus diverting the value of market-rent occupancy from him to the tenants, and allowing them to sell his rental rights to a stranger for full, uncontrolled price, was a taking of his property without compensation, because if anyone had the right to sell the right to occupy his premises, it was he, not his tenants. That is what the Guggenheim case was about, and the landlord was right as a matter of economics if not simple arithmetic. To say nothing of elemental fairness. After all, outside the loony world of takings law, people who sell other people’s property go to jail.

If you take into consideration the time factor, eventually all mobile home tenants become “new” tenants — the original ones, eventually die or move out for a varietry of reasons, and are replaced by successor-tenants. So in the end, the “rent control” ordinance does not control rents — it only disguises market rents as coach prices. Which means that the current tenants are de facto paying market rents, not cotrolled rents, even if they have to pay in the transparently disguised form of paying for the coach. The whole rent-control scheme thus becomes irrational.

As we are endlessly told, the basic purpose of rent control is to afford low-income folks the opportunity to live in decent homes at rents they can afford. Right? Isn’t that what [mobile home] rent control, is all about?

But the Guggenheim rent control ordinance was first imposed in 1979. That’s over 30 years ago. That means that most, if not all, original tenants who were the intended beneficiaries of that ordinance, have died or moved on, and the current successor tenants do not enjoy the benefit of low rents because in order to become tenants they had to pay de facto market rents thinly diguised as the price of the coach left behind by their predecessor-tenant.

So the bottom line of all this is that this supposed rent “control” does not control rents as far as the tenants are concerned. It only allows the departing tenants to rip off the landlord by pocketing a six-figure benefit of living in a rent-controlled coach, and sticking the successor tenant with the tab. After all, if low rents are what mobile home rent control otrdinances are about, then they should be available to all mobile home tenants, not just those few who happened to live in a mobile home park when the ordinance was enacted back in 1979.

So what the court actually did by upholding this bizarre scheme that in operation negates its stated purpose of providing low rents to low-income mobile home park dwellers, is to create some sort of local rump aristocracy — people who by law have the right to pay low, controlled rents, while charging their successor tenants high, market-rate rents through the subterfuge of selling them the old coach for an outlandish price, even if the coach is an old wreck that has to be scrapped.

So why it is OK for the departing tenants to gouge their successor tenants (and their landlord) under the banner of “rent control,” the Guggenheim court did not bother to explain. But the fact is that under the guise of providing low, controlled rents, the court placed its imprimatur on a scheme that facilitates the charging of high, uncontrolled rents to new mobile park tenants, while calling it “rent control.”

Oh, we almost forgot. One reason for having all those mobile home park rent control ordinances is the lament that there is  a shortage of low-cost housing, and mobile home parks fill that need. The problem is growing more acute, we are told, because people increasingly don’t build new mobile home parks. Hmm. We wonder why.

 

 

Detroit (Cont’d.)

As you probably know, in spite of a half-century history of urban renewal, Detroit, the home of the wretched Poletown case, is the basket case of American cities. More than half of its 1950s population has fled to other places, the city is dotted with vacant lots and rotting, abandoned buildings, and some of its formerly glorious civic structures have deteriorated to the point of post-apocalyptic ruin. The current Mayor has suggested in desperation that the only hope of Detroit’s survival as a city is to shrink it by demolishing thousands of structures, a process that is underway. Others have been suggesting that large swaths of Detroit be plowed under and converted to truck farms. Etc.

Now, along comes New York Mayor Michael Bloomberg with the suggestion that “congress ‘pass a law letting immigrants come in as long as they agree to go to Detroit and live there for five or 10 years, start businesses, take jobs, whatever. You would populate Detroit overnight because half the world wants to come here.’” Editorial, Wagons North! N.Y. Times, May 18, 2011, at p. A16.

We are torn. On the one hand, this suggestion virtually begs for some sarcastic observations, but on the other hand, what can one say to that loony-tunes suggestion other than just letting it stand on its own? Suffice it to say that His Bloombergship has not given proper consideration to (a) the cost of resettling tens of thousands of poverty-stricken third world immigrants (who else is likely to take him up on this deal?), and (b) the problems of enforcing that “promise” to stay put for five to ten years. Since the right to travel is constitutionally guaranteed, and alienage is not a proper basis for discrimination under the equal protection clause of the Constitution, how you gonna keep them in Detroit, after they have decided that Florida is a nicer place?

Since our field is eminent domain, not law enforcement, we don’t even want to think about the problem of involuntarily confining a large populattion of poverty-stricken third worlders to life in Detroit. Security fencing surrounding Detroit would seem to be  out, and if not that, then what? We suggest you not hold your breath waiting for Mayor Bloomberg to come up with a workable answer to that one.

 

Whither Market Values in California? (Cont’d.)

Back on April 15, 2011, we did some musing on what’s in store for California real estate values. Go to http://gideonstrumpet.info/?p=1092 Since then there has been a new dispatch. Federal mortgage insurance which has been limited to $729,750 in California for some time, stands to be reduced to a maximum of $625,500 ($417,000 in the rest of the country). Which means that a reduction in the de facto federal price support for California homes will bring about a further reduction in prices.

Naturally, this has caused complaints by California home owners contemplating selling their homes. We can’t blame them for feeling that way, but let’s get serious here folks. The idea that there should be an obligation on the part of the federal government to subsidize the purchase of three-quarter-of-a-million-dollar homes is ridiculous. And we aren’t forgetting that a million bucks  isn’t what it used to be 20 or 30 years ago. Still, that’s a lot of money, and most people outside the real estate loony-tunes la-la land rightly consider a home in that price range to be pretty spiffy, even if out here three quarters of a million gets you a dinky, 50-year old, 1600 sq.ft. house that’s remodeled if you are lucky. Oh sure, you can pay a lot less, but that will put you out in the boondocks and get you a one to two hour commute to work, as well as an ambience that comes with being surrounded by foreclosed homes.

So maybe the time is coming when California will have to join the Union and give up the idea that ordinary folks are entitled to a government subsidy so they can live in three-quarter-of-a-million-dollars homes, and that upper middle-class folks are entitled — got that? Entitled! – to live in million-dollar homes thanks to a generous Uncle Sam’s subsidy. We feel bad for those who bought their homes in the last decade and overpaid for them, and who are now facing the prospect of having to eat the green weenie. Bummer.

But you can fool around with the laws of economics for only so long, and in the end you have to recognize that there ain’t no such thing as a free lunch, and that it is increasingly difficult to justify the idea that a working stiff in, say, San Antonio who does right well by living in a $200,000 house, should have to pay taxes to subsidize the lifestyle of his counterpart in Monterey who lives in a $750,000 house. That ain’t right folks. So if Californians insist on enjoying life in expensive housing, they will have to pay its going rate.

It was all captured in a quote appearing in The Tribune (San Luis Obispo) newspaper quoting a Monterey County homeowner who is worried that now she won’t be able to “sell her house in the hills for $849,000 so she can move to Florida,” where she can probably replace it for half that price. Nice stuff if you can get it, but you shouldn’t be able to get it on Uncle Sam’s tab. See David Streitfeld, More Trouble on Home Front, The Tribune, May 11, 2011, at p. A1.