Gideons Trumpet

A little while ago we had occasion to comment on the economic disaster unfolding in Los Angeles where the school district is in the process of spending some $578 million on a high school on land taken by eminent domain in the mid-Wilshire area. See our take on that at www.gideonstrumpet.info/?p=469  

By way of follow-up, check out an op-ed in today’s Wall Street Journal, Sep. 4-5, 2010, at p. A13, Allysia Finley, Broke — and Building the Most Expensive School in U.S. History.

It turns out that this school is only one of several similar capers of the Los Angles Unified School District that is running a $640 million deficit, and fails to graduate about one-half of its students.

As we never tire of saying: Your tax money at work.

The Minnesota Supreme Court has just handed down an opinion dealing with the often muddled area of valuation of contaminated property that is taken by eminent domain.  

The basic problem seems deceptively simple: you take the value of the property, deduct from it the cost of remediation, and – voila! – there is its contaminated value. Unfortunately doing it that way doesn’t work. For one thing, the cost of remediation is not reflected dollar-for-dollar in the value of the property. The cost of decontamination may or may not be fully reflected in the market value of the property’s post-remediation condition, and the post-decontamination market value of the property may not be all that different than it was in the before condition.

Also, since valuation involves consideration of comparable sales, it is likely that at least some of the comparables are also contaminated, and if so, that means that the market has already considered and discounted the cost of decontamination in arriving at the sales price. So deducting the cost of decontamination, would amount to a double whammy on the owner: first, the fair market value of his property arrived at in the eminent domain valuation process (i.e., what an informed  buyer would pay for it in a voluntary transaction) would already reflect the diminution in value caused by its contaminated condition, and then, second, he would be charged again, in the form of a deduction for decontamination costs.  

Then there is the problem of determining the cost of decontamination – a process that can range from minimal compliance with environmental laws to an all-out “Cadillac” approach that would achieve the highest degree of decontamination.  

So the Minnesota Supreme Court took the efficient approach of holding that contaminated property should be valued as if uncontaminated, because the cost of decontamination is taken care of in other proceedings under various environmental laws.   

The case is Moorehead Economic Devevelopment Authority v. Anda, Nos. A07-1918 and A07-1930. To read the whole opinion go to http://www.mncourts.gov/opinions/sc/current/OPA071918-0902.pdf

The Spring 2010 issue of the ABA publication Urban Lawyer, contains two worthwhile articles.

First, Urban Redevelopment Policy, Judicial Deference to Unaccountable Agencies, and Reality in Brooklyn’s Atlantic Yards Project, 42 Urb. L. 287 (Spring 2010), by Amy Lavine (of whom more presently) and Norman Oder. Mr. Oder is a journalist and the author of the comprehensive blog http://AtlanticYardsReport.com which he has run since 2006, and which is probably the most  accessible source of detailed information about the Atlantic Yards project and the associated litigation. A good read, that.

Second, the prolific Amy Lavine is at it again in Urban Renewal and the Story of  Berman v. Parker, 42 Urb. L. 423 (Spring 2010). Ms. Lavine is a staff attorney at the Government Law Center at Albany Law School. This article presents the reader with a detailed history of another notorious redevelopment project — the Southwest Washington, D.C., redevelopment that gave rise to the wretched Berman v. Parker case in which “Wild Bill” Douglas drove a truck through what was then left of the Public Use Clause of the Fifth Amendment. This article provided us with a touch of nostalgia because in the early 1960s, your faithful servant lived in one of those modernistic townhouses built as part of that project, that are depicted on p. 463.

We found of special interest the factual tidbit that though the Southwest redevelopment project was sold to the Supreme Court as an effort to uplift the poor slum dwellers who — so went the plan — would be provided with low-cost housing renting at $17 per month per room, in fact, after the court approved the plan and allowed the eminent domain takings to proceed, that provision of the plan was dropped. Ten years later, the Wall Street Journal reported that rents in the new, redeveloped Southwest were so high that they inspired a rent strike by affluent tenants.

We recommend both articles.

The North West Herald (McHenry County, Illinois) reports that the village of Lake in the Hills has settled its eminent domain action against a local owner, to acquire about three-quarters of an acre of land for for the local airport.

The village’s offer was $430,000. The settlement (which includes the value of the taken land, plus severance damages, plus relocation expenses, plus an avigation easement limiting construction on the remainder property) is $780,000.

Sarah Sutcheck, Settlement Reached in LITH Airport Lawsuit, North West Herald, Aug. 24, 2010. http://www.nwherald.com/articles/2010/08/23/r_af1sz5vrqf2t3h0qzge30a/index.xml

We quote without comment from a Los Angeles Daily News front page story:

“After spending more than $154 million for a system of locking turnstiles and electronic payment cards for the county transit system, officials are discovering that at least a third of the money may have been wasted because they can’t use the new devices  as planned.” Troy Anderson, Daily News, Aug. 22, 2010, at p. A1.

And why would they install locking electronic turnstiles now, when the subway has been in operation for years? Answer: because the numbskulls who designed that system made it an “honor system” — passegers were on their honor to buy tickets, but if they didn’t no one would stop them from becoming literal free riders by just walking in, sittting down, and going to their destination, with an estimated annual loss to MTA of $13 million. So the MTA folks had to institute roving patrols to check passengers’ tickets on moving subway trains. But that cost money too, so they decided to put in those electronic turnstiles that don’t work and can’t be used.

Your tax money at work.

To get the whole Daily News story go to http://www.dailynews.com/transportation/ci_15847509

Welcome to California where the supreme court says that in eminent domain cases we can’t pay just compensation to condemnees for all their economic losses because if we do an “embargo”  on public projects will have to be declared. That would mean that the MTA wouldn’t be able to waste gazillions of the taxpayers’ dollars on turnstiles that don’t work.

And did we mention the recent news that the Los Angeles school district is completing a new Taj Mahal of a high school for over a half-billion dollars? That’s for one high school. Not bad for a school system that fails to graduate half its students.

Like we said: your tax money at work.

Here is the latest on developments in the plans for construction of a high-speedd rail network. From today’s Wall Street Journal, Josh Mitchell, High-Speed-Rail Costs Irk States, Aug. 21-22, 2010, at p. A3. We quote:

“Some states that participated in the Obama adminstration’s plans for building high-speed-rail networks are now balking at those projects, halting or scaling back developments because the federal government won’t foot the bill.”

The problem is that after the initial federal allocation of $8 billion, states submitted applications for funds totalling $102 billion. So what else is new? But before providing more money the feds want the recipient states to pay for 20% of the cost. So guess what? Once the realization that the high-speed raill “free lunch” wasn’t all free sunk in, state applications dropped abruptly from $102 billion to $8.5 billion. And so it goes. 

From today’s column by Jonah Goldberg, Making a Mess of a Mosque, Los Angeles Times, August 17, 2010, at p. A13:

“[T]he Big Apple is a Hieronymus Bosch hellscape for landlords and developers. Rent control, historic preservation, zoning, environmental impact, community protests, union delays — not to mention plain old red tape and corruption — often enough tools to stop any project before it starts (ground zero is still a gaping hole and everyone wanted that land to be developed fast.)”

No comment appears necessary, except to note that Mr. Goldberg evidently forgot eminent domain abuses that in New York have been elevated to the level of an art form.

A while back we noted the big-time announcement in Florida. It began with President Clinton announcing an $8 billion plan in 2000 to restore the Everglades. The state of Florida announced in 2008 that it was going to do its share by acquiring 187,000 acres of land for a cool $1.75 billion (that’s “billion” – with a “b”), eliminating the sugar plantations in that area, so that the surface water could flow naturally toward the sea. This, went the prognostication, would restore the “river of grass,” as the Everglades is sometimes called by nature lovers, to its natural condition. It was to be, in Florida Governor Charlie Crist’s words, the new “holy grail.”

But it didn’t work out that way. In a familiar reenactment of a Kabuki-like process that is all too familiar to those of us acquainted with government land acquisition practices, it turned out that – in the words of the New York Times – “the governor and the [South Florida Water Management D]istrict repeatedly underestimated the purchase’s financial and environmental complications, leading to costly suspension of projects with more immediate benefits, and to the alienation of potential partners.”. . . “[L]ittle thought seemed to have been given to affordability. . .” Damien Cave, For the Everglades, a Dream Loses Much of Its Grandeur, N.Y. Times, August 13, 2010, at p. A15.

Surprise, surprise! 

So the grandiose project started shrinking. First change came in the form of plan to reduce the scope of the acquisition to only 180,000 acres at a cost of $1.34 billion. That didn’t work out either, for local political reasons, says the Times.

So in 2009, facing “dwindling tax revenues” a third deal was announced: an acquisition of only 72,800 acres at a cost of $536 million. Whether this shrunken deal will work out is still uncertain; it has its critics too. 

So what’s the moral of it all? For one thing, here is a reaffirmation of the eternal verity that there ain’t no such thing as a free lunch. As Justice Oliver Wendell Holmes put it eighty years ago in Pennsylvania Coal Company v. Mahon, the public, the same as private individuals, is entitled only to what it pays for. Second, if there is one thing you can bet the farm on, it is that when the government announces the projected cost of a project, particularly one involving land acquisition, the actual price tag will turn out to be much higher. Back in the 1950s, a California Highway Commissioner wrote an article in which he revealed that actual land acquisition costs ran consistently some 30% higher than the  highway planners’ projected figures. Evidently, that much hasn’t changed.

The Orange County Register reports that the city of Laguna Woods took by eminent domain the privately-owned building which it has been leasing as the City Hall. The city offered $3.65 million, but after trial the jury returned a verdict of $6.43 million. Claire Webb, Laguna Woods Must Pay $6.4 Million to Take City Hall, Aug. 11, 2010.

Albert Einstein once defined insanity as doing the same thing over and over again but expecting a different result each time. Case in point: Wayne State University professor John Mogk has written an op-ed in the Detroit Free Press (Detroit Still Needs Eminent Domain, Freep.com, August 5, 2010) proposing the antic notion that what Detroit needs is widespread use of eminent domain to acquire all that vacant land sitting there, land that has been abandoned en masse by its erstwhile population that sensibly moved elsewhere, and then assemble it into large manufacturing plant sites.

Never mind that recent history of Detroit is a history of doing just that, only to fail dismally. Never mind also, that this proposal passes in silence over the likely cost of such a caper. Who is going to pay for it? Detroit is broke and has had to shut down schools and parks lately. 

Just to remind you, it was Detroit that in the 1980s used (or more accurately abused) the power of eminent domain in the notorious Poletown case. There, it blew $200,000,000 to condemn 400 acres of urban land in order to turn it over to General Motors for a new Cadillac plant. This caper displaced 1200 households, 100 businesses, 16 churches, and a major hospital. GM got the site for $6,500,000. What a deal! It also got a 50% tax abatement that enabled it to save $5.4million annually over a period of 12 years. And yet, Professor Mogk calls that urban and civic disaster an “industrial jewel.” So did it at least work? Don’t be silly. The projected 6000 jobs never materialized, and most of the time GM did not even manage to employ half that number at the Poletown plant. And as we need not remind you, in the long run GM went bankrupt.  

And of course, what’s good for General Motors is good for Chrysler which got a similar deal from the city in the Vavro case. And you know how much good that did. Chrysler too went bankrupt, and is having problems even now, so that its continued viability is something less than a sure bet. 

What Detroit did accomplish with its use of eminent domain was to give rise to decisional law taking it to task for abusing its powers, and deliberately creating blight so it would have an excuse to condemn the subject land for a pittance. See Foster v. City of Detroit, 254 F.Supp. 655, affirmed, 405 F.2d 128 (1968), and In re Urban Renewal, Elmwood Park, 136 N.W.2d 896 (1965).

But it appears that in spite of these urban calamities, the lesson has not been learned, even though Detroit’s decades-long use of eminent domain to redevelop itself has produced an urban disaster of unprecedented proportions – those folks out there are now seriously discussing the plowing under of what’s left of much of the city and devoting the vacant land to truck farming. No, we are not making this up. See Susan Saulny, Razing the City to Save the City, N.Y. Times, June 21, 2010, at p. A16. 

To appreciate the devastation that the city’s past policies (including its frequent use of eminent domain for redevelopment) have brought upon Detroit, see the October 5, 2009, cover story in TIME magazine (Daniel Okrent, Notown, at p. 26. And don’t miss the pictures of the post-apocalyptic cityscape of what is left of today’s Detroit. See http://www.time.com/time/photogallery/0,29307,1864272_1810098,00.html

They say that a picture is worth a thousand words, so do take a look at those pictures and see for yourself. Is that where you would want to move yourself or your business?

Follow up. We just came across another article by Catherine J. LaCroix, Urban Agriculture and Other Green Uses: Remaking the Shrinking City, 42 Urban Lawyer 225 (Spring 2010). It promotes the idea of converting “shrinking cities” into agriculturally productive areas. Does that mean that Professor LaCroix will engage in an intellectual duel with Professor Mogk over which use should be chosen? We can’t wait.