Saturday, November 28, 2009

Another blow to private property rights

Last week during the news lull of the Thanksgiving holiday, New York's highest court ruled that it is lawful for the state to seize private land for use by private developers.  From the Wall Street Journal:
New York judges served up what basketball fans call a facial on Tuesday, when an appellate court ruled that the state may seize homes and small businesses in Brooklyn for the benefit of a private developer and the New Jersey Nets. The decision represents a backward step for the effort to protect property rights at the state level since the Supreme Court's 2005 decision in Kelo v. New London.

The case, Goldstein v. New York State Urban Development Corporation, dealt with plans by developer Forest City Ratner to build a new arena for the Nets as well as snazzy apartments and offices on land currently occupied by homes and businesses. To make way for the sports complex, the state declared the property "blighted" and used its power of eminent domain to hand it to the developer.

Such unabashed takings have an unfortunate history in New York state, where the political class has a habit of using its powers on behalf of well-connected private interests. Caught under the wheels are average citizens whose only recourse is to try to defend their property rights in court.
The New York Times has this:
The project’s opponents had argued that eminent domain on behalf of the private developer, Bruce C. Ratner, was improper and unconstitutional. They vowed to continue their battle, but there was no question that a cloud of uncertainty that has hung over Atlantic Yards for more than a year had lifted.

Mr. Ratner called the court’s ruling a “light-switch” kind of decision for the long-stalled project. “I look at this as the last major hurdle; now we can proceed as we’ve wanted to for the last three years,” he said on Tuesday. “The courts have made it clear that this project represents a significant public benefit for the people of Brooklyn and the entire city.”

Mr. Ratner plans to begin selling tax-free bonds next month to finance the development’s cornerstone project: an 18,000-seat basketball arena for the New Jersey Nets at Flatbush and Atlantic Avenues near downtown.
Yes, you read that right.  Ratner will be partially financing the private venture on government-seized land with a tax-exempt bond issue, placing the basketball arena on equal cost of capital footing with public road projects, school construction, public utility projects and ...well you get the picture.

The 60-page decision, which can be read here, hinged on the determination that the Atlanta Yards real estate in question was blighted.  The Atlantic Yards Report blog uses a quote by libertarian law professor Ilya Somin to expose the shaky foundation of this decision:
To get around this problem, the Court held that “blight” alleviation is not limited to “‘slums’ as that term was formerly applied, and that, among other things, economic underdevelopment and stagnation are also threats to the public sufficient to make their removal cognizable as a public purpose” (pp. 15–16, quoting a 1975 decision).

Obviously, virtually any area occasionally suffers from “economic underdevelopment” or “stagnation” and therefore could potentially be condemned under this rationale. Moreover, even under this expansive definition of blight, the decision states that courts can only strike down a condemnation if “there is no room for reasonable difference of opinion as to whether an area is blighted.” With respect to any neighborhood, there is nearly always “room for reasonable difference of opinion” as to whether the area is “underdeveloped” relative to some possible alternative uses of the land in question. Defining blight this broadly and then deferring to the government’s determination of whether such “blight” actually exists effectively reads the public use restriction out of the state constitution. (emphasis mine)
The public use restriction of the New York eminent domain statute is easily circumvented by the determination that the real estate in question is "blighted" and therefore presents a hazard or nuisance to the public.

If this flimsy justification for government seizure of private property becomes the uncontested law of the land, we can certainly expect exponential increases in such seizures during times of economic recession, high residential and commercial foreclosure rates, and high unemployment.  Like we have now.

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