Eminent Domain and Pie In the Sky

You remember the Kelo case, don’t you? But do you remember the details of the city of New London plans that were the raison d’etre for the taking of the homes of Susette Kelo and her neighbors?

What persuaded the U.S. Supreme Court to go along with New London’s supposedly sound redevelopment plans was that the earlier coming of Pfizer pharmaceutical company to New London presented the city with an opportunity to use the redevelopment process to kick out the inhabitants of Susette Kelo’s lower middle-class neighborhood, raze it to the ground and build upscale shops and condos that would cater to Pfizer’s upscale professional employees, thus bringing prosperity and higher taxes to the city.

But, as we are sure you know by now, those plans weren’t worth anything. The redevelopment project never got off the ground, upwards of $80 million in public funds was wasted, and Pfizer announced that, instead of bringing jobs to New London it was shutting down its local research facility and moving out of town, taking some 1400 jobs elsewhere. This is old news.

But now we learn from CNNMoney.com (May 18, 2010) that Pfizer is in the midst of more massive layoffs. “Pharmaceutical giant Pfizer said Tuesday that it will reduce its staff by another 6,000 jobs and shut down eight factories in its ongoing mission to cut costs in the wake of its merger with Wyeth.” Etc.

So the moral here is that economic urban redevelopment may use the government as its strong-arm land acquisition agent, but in the end it is no more than a private, not public, entrepreneurial activity that involves all the familiar risks and pitfalls of entrepreneurship — including business failures. So a municipality that engages in such activities not only abuses the rights of the displaced property owners but also those of the taxpayers.  As Associate Justice of the California Court of Appeal, Macklin Fleming, once put it:

“The promoters of such [redevelopment] projects promise that in time everyone will benefit, taxpayers, government entities, other property owners, bondholders; all will profit from increased development of property and increased future assessments on the tax rolls, for with the baking of a bigger pie bigger shares will come to all. But the landscape is littered with speculative real estate developments whose profits turned into pie in the sky;…” Regus v. City of Baldwin Park, 70 Cal.App.3d 968, 982 (1977)

You can find the CNN story at http://money.cnn.com/2010/05/18/news/companies/pfizer_job_cuts/index.htm