Opinions on Hathcock, Pro & Con
Status of Pinnacle Aeropark Development
John E. Mogk, Michigan Court Should Allow Cities to Gather Scattered Land for Economic Development (Op-Ed), Detroit News, July 13, 2005, at 14A
Spin doctors have cast the recent U.S. Supreme Court ruling permitting the use of eminent domain to foster economic development as allowing local governments to “grab” or “seize” land from one landowner for another’s private benefit.
In fact, the decision would have benefited Michigan cities. It would have let them strengthen their economies by getting land for development opportunities as long as it is for fair compensation and improves the community. But the federal court ruling allowed a faulty Michigan court decision to take precedence in this state, so cities will continue to struggle to improve economic growth.
In Kelo v. City of New London ruling, the U.S. Supreme Court confirmed that under the Fifth Amendment to the U.S. Constitution, local governments may use eminent domain to strengthen their economies. They must meet three conditions. Its use must be authorized by the state legislature, must serve a public purpose and provide no more than an incidental benefit to private interests, as determined by the courts. Courts have consistently struck down eminent domain when private benefits have been found to be more than incidental.
The rules were similar in Michigan since the state Supreme Court’s holding in the 1981 Poletown case. However, the Michigan court last year overruled Poletown in Hathcock v. County of Wayne, in an unprecedented holding that the Michigan Constitution does not allow eminent domain to be used in Michigan to “alleviate unemployment and revitalize the economic base of the community.”
Since municipalities in Michigan must comply with both the federal and state constitutions, the Hathcock decision remains a serious blow to the future economic health and prosperity of Detroit and other Michigan communities. As a result, Hathcock undermines the competitiveness of Michigan with many other states.
Eminent domain does not deprive owners of a fair hearing and just compensation for their property. Compensation is determined by the value of the property’s “highest and best” use and not its current use, often resulting in payments being made to property owners exceeding what a normal market sale would bring.
Eminent domain has also not been used to target the poor, as many critics like to claim. Downtown projects, for example, throughout the country have taken parcels from holdout speculators or well-financed investors to complete economic development projects that benefit the community.
No one has argued that the 19 defendants in Hathcock owning land next to Detroit Metropolitan Airport were impoverished.
In fact, eminent domain has financially benefited many working-class owners in the past. In Poletown, a neighborhood built without a building code prior to World War I and experiencing the spread of blight, property owners received on average more than 200 percent of fair market value for their homes, including the price of their home and a $15,000 federal grant to purchase another, along with relocation expenses.
Most other neighborhoods built during the same period in Detroit are decimated today, with property owners having suffered the near total collapse of their home values during the past two decades.
Beginning in 1954 with the Supreme Court’s holding in Berman v. Parker -- allowing slums in Washington, D.C., to be cleared and privately redeveloped through the use of eminent domain -- the overwhelming majority of state legislatures have authorized local governments to use eminent domain to foster economic development, when the public purpose standard and private benefit limitation are met.
Detroit and other cities large and small have used eminent domain during the past half-century to restructure their economic bases. Without it, many of the city’s downtown projects, major industrial developments and large neighborhood initiatives could not have been accomplished.
Detroit will be shackled in rebuilding its economy without the use of eminent domain. Vacant land now spreads across the city in tens of thousands of small, disconnected lots and parcels. The total area is estimated to exceed 50 square miles.
Large tracts are needed for the city to restructure itself for the 21st century. Purchasing thousands of lots individually or working around homes remaining on the city’s urban prairies is not a practical option for rebuilding Detroit.
Since the state Legislature defines the purpose for which eminent domain may be used and the courts assure that public benefits are predominant, the unstated issue in the eminent domain debate is the public’s trust in these two branches of government to perform their roles.
The U.S. Supreme Court has expressed its trust, but the Michigan Supreme Court has not. Instead, it has legislated its will upon the people and communities of Michigan -- to their detriment.
Ilya Somin, Poletown Decision Did Not Create Desired Benefits; New Ruling Protects Weak from Government Abuses (Op-Ed), Detroit News, Aug. 8, 2004, at 13A
The Michigan Supreme Court has overruled one of the worst judicial decisions of modern times. In County of Wayne v. Hathcock, the court reversed the infamous 1981 Poletown decision that allowed Detroit to use the power of eminent domain to take and bulldoze an entire neighborhood so General Motors could build a new factory. As a result of Poletown, more than 4,200 people lost their homes, 600 businesses and 16 churches were destroyed, and a historic community -- known as Poletown after its large Polish-American population -- was wiped out.
Poletown set a dangerous precedent for similar abuses of government power in Michigan and elsewhere. The court’s unanimous decision to overrule it is a major victory for the constitutional rights of all property owners. Hathcock restores the traditional principle that government may not, except under unusual circumstances, take private property for the purpose of giving it to other private individuals or corporations.
Under most state constitutions, including Michigan’s, government may only take private property for a “public use.” Originally, this restriction was interpreted to allow condemnation of property only to carry out necessary functions of government, such as to build public roads. The public use test traditionally forbade most takings that transferred private property to other private hands. Courts rightly reasoned that the power to condemn property should not be abused to enable the wealthy and politically influential to appropriate their neighbors’ property for their own benefit.
Poletown undermined this safeguard. It permitted the condemnation of property for transfer to private hands, so long as the action created a public benefit by “bolster[ing] the economy.” As the Hathcock opinion explains, Poletown’s “economic benefit” rationale “would validate practically any exercise of the power of eminent domain on behalf of a private entity.” The court notes that Poletown rendered “one’s ownership of private property ... forever subject to the government’s determination that another private party would put one’s land to better use.” Therefore, property rights were “perpetually threatened by the expansion plans of any large [business]."
Homeowners and nonprofit property owners were particularly vulnerable to condemnations justified under Poletown. Because they make little or no profit from their property, it could always be argued that a large for-profit business would use their land in a more economically productive way.
Ironically, condemnations that transfer property to private businesses usually don’t even provide the economic benefits their advocates promise. General Motors and Detroit Mayor Coleman Young promised that the new factory would create more than 6,000 jobs. In reality, the plant employed less than half that many workers; possibly, more jobs were lost from the destruction of Poletown than were created by the factory.
This result is typical. The political power of the interests that benefit from a taking is a much stronger influence on government decision-making than the economic benefits they might create. Governments are much more likely to condemn the property of the poor or politically weak than that of the wealthy.
And if a business really can use a property more efficiently than its current owners do, it will usually be able to buy it on the open market. Nearly every factory, office building and shopping mall in this country was built without resort to the power of eminent domain. Cities have other tools to further economic development, including economic incentives and regulatory reform. Most important, current owners can develop their own property without fear of losing it.
Hathcock is not a perfect decision, and it will not eliminate eminent domain abuses. Nonetheless, it is a major step forward in the battle to protect constitutional property rights.
Joel Kurth, County Vows to Move on Tech Park; Wayne Co. Says It Has Enough Land to Keep Business Project Alive, Despite Court Ruling, Detroit News, Aug. 3, 2004, at 1C
ROMULUS -- Rebuked by the state Supreme Court, Wayne County officials vow to resurrect stalled plans to turn 1,300 acres of wetlands near Detroit Metropolitan Airport into a business and technology park.
County lawyers probably won’t appeal a landmark decision released Friday ruling the county can’t use eminent domain to seize less than 50 privately owned acres eyed for the Pinnacle Aeropark.
Money disputes with about a dozen property owners delayed the project that originally included a hotel, shopping center, golf course and office buildings that supposedly would create 30,000 jobs and generate $350 million a year in taxes.
County officials may scale back designs but pledge to move forward -- even if it means building around the holdouts.
“We have enough contiguous land to proceed,” said Turkia Mullin, a county real estate attorney. “If their prices remain outrageous, we’ll just continue without them. They won’t stand in our way."
Pinnacle is the highest-profile project impacted by the court’s reversal of its own 1981 Poletown decision, but the ruling could have ripple effects that take years to sort out.
Governments now can’t force private owners to sell their land for other private projects. Taking land for public works such as parks, streets or the public good is still legal.
Urban advocates say condemnation is a rarely used but vital tool to assemble land for big projects, such as auto plants or industrial parks. Others disagree on its effectiveness and say it’s run amok in Michigan.
The state ranked fourth nationwide in the number of condemnations from 1998 to 2002, and Detroit ranked first among cities, according to the Institute for Justice, which filed a brief opposing Wayne County in the Pinnacle case.
In recent years, former Detroit Mayor Dennis Archer’s administration took land to build Comerica Park and Ford Field. He also threatened condemnation for a failed plan to acquire acres of riverfront land for casinos.
Elsewhere, Novi is locked in a legal fight to seize land for a road some claim would benefit only a few people. Dearborn threatened to redevelop the closed Jacobson’s store.
Friday’s ruling may impact efforts to build a third span between Detroit and Windsor. Two of the three private plans involve at least some use of public land.
Sharon Banks, spokeswoman for Wayne County Executive Robert Ficano, said the “absolutely devastating” decision would put Michigan at a competitive disadvantage nationwide.
“The whole idea of trying to revitalize a metro area by taking property and selling it to the highest bidder is pretty much out the door,” said Jerry Pesick, a Southfield land lawyer who cheered the decision.
Azzam Elder, Wayne County’s top attorney, said he may lobby Gov. Jennifer Granholm and Detroit Mayor Kwame Kilpatrick to sponsor an effort to change the Michigan Constitution to allow condemnation for private projects.
That appears unlikely.
Detroit no longer uses condemnation, said Howard Hughey, Kilpatrick’s spokesman. Neither does Michigan, said Paul Krepps, spokesman for the Michigan Economic Development Corp.
“It may be that this (decision) has very little impact on the state,” said Liz Boyd, Granholm’s spokeswoman.
Just as the Poletown case spurred states such as California and Texas to follow Michigan’s lead, Friday’s decision could prompt states nationwide to scale back land laws, Pesick said.
“People may be right. This may have an adverse impact on older communities, but the fact of the matter is, the Constitution is what it is. It trumps all,” Pesick said.
Alan Ackerman, a Troy attorney who represented land owners in the fight over Pinnacle, said the ruling wouldn’t have a wide impact because “no one has goofed around with civil liberties like Wayne County."
He said county attorneys testified in court the Pinnacle project would collapse without his clients’ parcels. Ackerman blamed the fight on Ficano’s predecessor, Edward McNamara, who stepped down Dec. 31, 2002.
“Why should government be able to force people out of their private property?” Ackerman said. “Why should government be an acquiring agent for private industry? ... People are griping now because they realized they did something wrong."
Neither Ackerman nor the county would discuss specifics. In one case, the county offered $75,000 an acre for land, while property owners demanded $350,000, Elder said.
R.J. King, Pinnacle Aeropark to Get Off the Ground, Detroit News, Oct. 6, 2004, at 1B
ROMULUS - Wayne County Executive Robert Ficano plans to raise $7.5 million in mostly public funds to jump-start the development of a long-delayed business and technology park south of Detroit Metropolitan Airport.
The proposed Pinnacle Aeropark has been on hold since 1999 by legal challenges, limited financing and no master design plan. In August, the Michigan Supreme Court ruled Wayne County couldn’t use eminent domain to seize roughly 50 acres of privately owned land for the 1,300-acre park.
The county began acquiring land for the project in 1999 and has spent $34 million so far to purchase the majority of the acreage it needs. Ficano said Tuesday that the county will avoid the private land and begin work next year on the first phase of the park, a 150-acre parcel near Interstate 275 and Eureka in Romulus.
“We are now in a global economy that requires immediate action,” said Ficano during Tuesday’s annual Airport World Conference at Detroit Metro, which drew more than 100 airport executives. “As soon as we start building the roads, sewer and water for Pinnacle, we’ll begin marketing the property."
Ficano hopes to draw a major automotive supplier, corporate headquarters or light manufacturer to Pinnacle to help boost the region’s economy and add more jobs. “If we can land a well-known company, other companies will follow,” he said.
The money for Pinnacle’s initial infrastructure will likely come from public sources, said Mulugetta Birru, Wayne County’s executive director of economic development. He plans to apply for up to $3.5 million from state development officials and another $3 million from the U.S. Department of Commerce.
“If we have the federal funds, plus $1 million in county funds, we believe the state economic development agencies will help out with the rest,” Birru said. “We should start construction on the water and sewer next year and have it ready in mid-2006."
Once the county sells some of the land for Pinnacle, it plans to complete the remaining infrastructure work with the proceeds, Birru said.
Tim Keyes, Romulus’ economic development manager, said he’s pleased the county is pushing forward. “We need to draw more jobs to our city, and the Pinnacle land has been tied up for more than five years now,” he said.
In related matters, the Wayne County Airport Authority is asking its architectural team to design three separate plans for the new North Terminal that it can present next year to airlines that now use Detroit Metro’s Smith Terminal. The authority, which operates Detroit Metro, plans to build a $428 million North Terminal to replace the antiquated Smith Terminal.
“We want to give the other airlines a chance to look at some design concepts and then select a final plan,” said Lester Robinson, the airport authority’s CEO. “Our goal is to have the terminal open in 2008 with up to 29 gates, and we have demand for 25 gates right now."
Eight airlines now operate from the Smith Terminal, including American Airlines, Spirit Airlines and America West. Northwest Airlines and its affiliates fly out of the McNamara Terminal and handle about 80 percent of the daily passenger traffic at Detroit Metro, which a record 3.3 million travelers used in July.
Robinson said the airport’s former Davey Terminal, which Northwest vacated when it moved to the McNamara Terminal, would likely be torn down next year to make way for the new North Terminal.
“We need to have the site inspected and to check to see if anything can be renovated, but we should be able to start demolition next year,” he said.
Robinson also plans to keep construction costs down to $275 per square foot for the North Terminal project. Some estimates put construction costs at more than $300 per square foot, but Robinson said the costs must be lower to meet the proposed building budget.
A new federal inspection services facility, now in use in the airport’s Berry Terminal to screen international passengers who don’t fly into the McNamara Terminal, may be set up in the North Terminal.
“We’d like the North Terminal to be as passenger-friendly as possible,” Robinson said.