Eminent Domain Reform — Selling a Mess of Pottage in Virginia

The Good Book teaches that men are ever ready to sell their birthright for a mess of pottage, which is another way of saying that they will thoughtlessly sacrifice important principles on which their society rests for the sake of a short-term economic gain. Case in point: Virginia, where the legislature is in the process of amending the state Constitution to tighten limitations on the promiscuous use of eminent domain. The proposed constitutional amendment provides  “That the General assembly shall pass no law whereby private property, the right to which is fundamental, shall be damaged or taken except for public use.” The law further explains that a taking is not deemed a “public use” if the primary use is for private gain, private enterprise, increasing jobs, increasing tax revenue, or economic development, except for the elimination of a public nuisance existing on the property.” Sounds reasonable to us.

The U.S. Constitution’s Fifth Amendment, which is binding on the states via the 14th Amendment under the “selective incorporation” doctrine, requires that takings of private property be for a “public use.” True, the U.S. Supreme Court has interpreted that phrase in an  Orwellian fashion, and has substituted all sorts of stuff — like public advantage, publis purpose, public benefit or public welfare — for the straightforward constitutional term “public use.” You can find a useful discussion of that problem in Ellen Frankel’s book PROPERTY RIGHTS AND EMINENT DOMAIN (Transaction Books 1987) at pp. 92-93.

It all culminated in the wretched 2005 Kelo case where a SCOTUS majority blandly approved the taking of an unoffending lower middle class residential community supposedly for redevelopment in the form of upscale shops, condos and a five-star hotel that would cater to well paid employees of the nearby Pfizer pharmaceutical company, and thereby — so it was said — increase public and private cash flow to the community. But this was wishful thinking. The Kelo-style redevelopment proved to be a disaster. The chosen redeveloper could not even get financing (and that was before the 2008 recession) and the project never got off the ground after wasting over $100 million in public funds. The Pfizer company whose wellbeing was supposedly the economic lynchpin of that redevelopment project, has since closed up its New London facility, and moved out of town, taking some 1400 jobs with it. Today, the site of New London’s Kelo project, where the homes of Susette Kelo and her neighbors once stood, is a dump used to dispose of hurricane debris, producing no revenue.

In light of that object lesson — and there are others like it — many states have decided to tighten up their eminent domain laws in order to prevent the occurrence of this sort of thing within their borders. Virginia is one of them. Naturally, you would expect that condemnors would oppose reform. Redevelopment has been a bonanza to them — a source of unaccountable power and money, even if in practice it often fails and  impoverishes the communities engaged in it, wasting fortunes in the process. In California, things reached such a state that the legislature finally had enough, and abolished redevelopment in that state. Virginia, by contrast, only wants to tighten up limitations on the use of eminent domain for redevelopment and “economic development,” make sure that the constitutional term “public use” is not being distorted and misused for private gain, and the property owners whose land is taken are more justly compensated, instead of receiving only partial compensation as they do now.

But the bad guys are resisting reform, which is hardly surprising. What is surprising, however, is who has joined forces with them. The Washington Business Journal reports that “a coalition of Norther Virginia chambers of commerce has launched a campaign to oppose proposed amendments to the state constitution limiting use of eminent domain.” Michael Neibauer, Morthern Virginia Chambers Oppose Eminent Domain Bill, Wash. Business Jour., January 18, 2012, click here. On its face, this makes no sense, does it? Why would business people who you would think are committed to security of private property which is their lifeblood, support a legal regime that would enable their more politically powerful competitors to enlist the power of government to take their propery from them? Remember that eminent domain requires payment of “just compensation,” but in Virginia that includes only the fair market value of the real estate — the soil, and the structures which stand on it. There is no compensation for loss of business goodwill — which can be quite valuable — and no compensation for other business and incidental but demonstrable economic losses inflicted by eminent domain.

So why would these chamber of commerce types support the uncompensated destruction of their businesses so that other businesses can be built by their competitors on their former land? The answer is that they think that they will benefit from the eminent domain regime they support at the expense of others. To paraphrase Winston Churchill, they want to feed others to the crocodile in the hope that it will eat them last. But it doesn’t work that way. If permitted, sooner of later businesses will feel the sting of eminent domain. But at the moment they don’t care because they think (or more accurately, hope) that in the short run they will benefit from the misfortune of their fellows whose homes, farms and businesses fall prey to redevelopment. We shall see if they sing another tune when the government decides to take their property and destroy their businesses without compensation.We hope that Virginians will see through this sort of unabashed rent seeking by greedy, selfish  people out to enrich themselves at the expense of their neighbors.

Virginians might also do well to remember the efforts of a determined lady named Nancy McCord who for years led an exemplary fight against eminent domain abuses in Virginia. It is tragic that she isn’t here to see the progress being made in reforming the law of eminent domain, and to lead the good fight for rectification of these injustices. But make no mistake, she planted the seeds of that reform with her untiring efforts to bring a modicum of justice to her fellow Virginians.