the willingness of the Court of Appeals to accept a case unanimously dismissed at the appellate division suggests that the court recognizes it needs to at least clarify whether the state constitution restricts eminent domain more than does the federal constitution. (On Monday, I'll have a preview of the legal arguments.)(See: Friday, October 09, 2009, Beyond the eminent domain case, other lawsuits looming against ESDC and MTA, but can they have any impact?)
Cautiously phrased and using the phrase “at least” it is correct to say that one of the issues is (emphasis supplied) “whether the state constitution restricts eminent domain more than does the federal constitution.” But another question, just as much before the court, is whether it wants to find that the state constitution restricts eminent domain less than the federal constitution.
How Low Can You Go? Embarrassing If the Court of Appeals Approves a State Standard for the Prevention of ED Abuse Lower than the Federal One
The U.S. Supreme Court doesn’t hear every case appealed to it: It considers only a fraction, and it didn’t grant certiori when the Atlantic Yards eminent domain case was appealed to it. Nevertheless, it is pretty clear that whenever a case with the kind of eminent domain abusive fact pattern present in the Atlantic Yards case finally reaches the Supreme Court, the court will find that the takings violate the US. Constitution. For more on why this would be so, see: First Monday in October: An Open Letter to Sonia Sotomayor about Noticing an Eminent Reality (Tuesday, October 6, 2009).
How embarrassing it would then be for the Court of Appeals, New York State’s highest court, to have decided that New York State has a significantly lower standard than the federal constitution when it comes to preventing eminent domain abuse!
Ignorance Won’t Be Bliss
And, indeed, this a situation where our courts and public officials can’t count on `ignorance being bliss’: Pronouncements on exactly how extensively New York State-style eminent domain abuse violates the federal constitution may come relatively soon. The legal challenge to Columbia University’s use of eminent domain to take over a swath of acres in West Harlem pursuant to a multi-decade plan that would give them sole rights to develop the area is working its way up the appellate ladder. It is a case that could wind up before the Supreme Court. (See: Friday, May 22, 2009, In Columbia eminent domain case, some skeptical judges, AY echoes, and signs of emerging strategy for community resistance.)
Lack of Fundamental Due Process: New York’s Biased Environment
New York State’s style of eminent domain is violative of what should be the fundamental constitutional protections against takings, in part because the takings of property from one private owner to favor another occur in a totally biased environment. Basic, essential due process rights are denied New York property owners, including the right to a fair fact-finding forum where government determinations can be tested with the check and balance of an adversarial process. This is covered in the just-released report of The Institute for Justice (October 2009), Building Empires, Destroying Homes: Eminent Domain Abuse in New York.
Insulated from Checks and Balances, ED Becomes a Tool For Monopoly Development
Perhaps the more important abuse in New York is the way that state officials, thus insulated from due process checks and balances, have perverted the purpose of eminent domain, essentially selling this public tool to private entities. Two cases in point: Atlantic Yards and Columbia’s Expansion. Eminent domain is now used as a tool by private entities to eliminate competition and establish monopolies. Perhaps, by definition, eminent domain can be considered a tool that at its core surmounts the normal competition of the free marketplace, but Forest City Ratner and Columbia have taken the suppression of competition to the furthest possible extremes.
Maximizing the preclusion of competition, eminent domain as practiced in the Atlantic Yards and the Columbia expansion environments is an absolutely no-bid proposition. Justice Kennedy’s pivotal opinion in the Kelo case (the U.S. Supreme Court’s most recent pronouncement on eminent domain), establishes precepts that eminent domain can’t involve “impermissible favoritism” or “picking out a particular transferee beforehand,” Yet Atlantic Yards and Columbia dare to violate this by establishing their no-bid mega-monopolies at the get-go, center-staging them as the very essence of their schemes. The 22-acre Atlantic Yards site actually abuts a not terribly successful development already owned by the same owner, expanding the monopoly to some thirty or more acres. Verifying that the public purpose for establishing this monopoly is pretextual, the public agencies are providing no cost benefit analysis and the calculations that have been done (not by those agencies) for the Atlantic Yards basketball arena, the only part of the megadevelopment that may actually be built, shows that the arena is, conservatively, a $220 million net loss for the public.
Proof Positive That Private Monopoly Purpose Is Paramount
Did we say that nothing except the net-loss-for-the-public arena may be built? That brings us to some other recent events that show clearly how establishing and protecting the Forest City Ratner monopoly is the paramount (and most immutable?) goal of the Atlantic Yards plan.
Forest City Ratner has been having financial problems. It may not survive, being substantially more likely to go under in this economic climate. The Atlantic Yards megadevelopment is one of only two deals FCR is currently looking at doing. Realizing that FCR could not, with any actual assurance, do the entire 22-acre project, the MTA and ESDC signed onto a new strategy evolved so FCR would still be able to effect and maintain its monopoly. The megadevelopment was recast as a multi-parcel project “approved” by the MTA on June 25, 2009 and thereafter by ESDC’s board. The 40% portion of the site comprised of the MTA’s property (being given to the developer for a significantly discounted price) was divided up into six separate parcels on which FCR was, without corresponding obligation, thereby enabled to have an exclusive long-term option. (See: Tuesday, June 23, 2009, Thoughts on the MTA’s Finance Committee Meeting Wherein Atlantic Yards Was Considered as an “Information Item”.)
No matter that the divided parcels over which Forest City Ratner would now exercise monopolistic control could instead now more easily than ever have been put out to bid before other developers. No matter that the recast mega-monopoly was now so quintessentially different that it needed to be rebid as a result. (Of course, it wasn’t.) The exclusive option over a 25-year period allows FCR to keep competitors completely at bay, providing no public benefit. In fact, Forest City Ratner’s monopolistic gain is very definitely to the detriment of the community which it correspondingly blights.
Institute of Justice Report: Kelo Is Bad- - Yes But
There are those, the Institute of Justice included, who will tell you that the Supreme Court’s Kelo case permitting eminent domain for economic development is so tragically flawed that states must enter the breach to make corrections. That is a fair argument and likely right, and the Institute’s report on New York State eminent domain notes that most states have done precisely that: “Since the U.S. Supreme Court’s infamous Kelo decision in 2005, 43 states have changed their laws through the legislative process to increase protections for property owners against the abuse of eminent domain.” It also notes that New York State, which it says is “perhaps the worst state in the nation when it comes to eminent domain abuse” is “unfortunately” NOT one of those states.
Catalogue of Abuses: Nailing Bad Policy
The catalogue of New York State eminent domain abuses in the Institute of Justice’s report marshals persuasive evidence for the proposition that New York State ought to restrict eminent domain more than it does and more than Kelo might on its own. Among other things it provides support for this as good economic policy by referring to another of its recent reports concerning New York development: The Truth About Times Square (April 21, 2009), by “William J. Stern, former chairman and chief executive of New York State’s Urban Development Corporation. —the agency tasked with orchestrating Times Square’s revival.” The New York State’s Urban Development Corporation, also known as the “Empire State Development Corporation” (or “ESDC”) its current d.b.a. (“doing business as”) name is also, if you will, “the agency tasked with orchestrating” the Atlantic Yards Project. The William Stern report, as described by the Institute “tells the story of government incompetence and eminent domain abuse in The Truth About Times Square.”
Excerpted in the Institute’s new October report are quotes from Stern, these among others:
“Our extravagant plans actually retarded development for decades. The changes in Times Square occurred despite government, not because of it.”Another eminent domain absurdity prominently featured in the Institute's October report is a Haverstraw case:
“Eminent domain was not needed in Times Square,” continued Stern. “In fact, it delayed the development, added tremendous cost, and was unfair and inefficient. There was no shortage of developers willing to acquire property the old-fashioned way—through the private market.”
In 49 WB, LLC v. Village of Haverstraw, the Appellate Division of the Supreme Court of New York invalidated the village’s attempt to condemn property to create affordable housing, based on the commonsense observation that the village’s plan would actually have destroyed more affordable housing than it would create.Court of Appeals Could and Should Fix Kelo, But Doesn’t Have To (Still a New York Standard More Lax than Kelo Would be an Embarrassment)
The Institute’s report is filled with reasons why New York State ought to restrict eminent domain more than it does and more than Kelo potentially might on its own. Where the Institute’s report could be stronger is in pointing out the New York state abuses that go far beyond what Kelo would tolerate, applying the precepts of Justice Kennedy's opinion essential to that case’s holding. Though the Court of Appeals has the power, it is not necessarily incumbent upon the court to fix Kelo in all the respects that Kelo might be bad policy (though in the Haverstraw case, the lower court saw fit to take corrective action). On the other hand, as we indicated at the outset of this post, the Court of Appeals stands to embarrass itself terrifically if, in the Atlantic Yards case it gives effect to a state standard that is substantially more lax than what the federal Kelo case would prescribe to protect against eminent domain abuse.
Kelo-intolerable NY Trespasses Discerned in Institute’s Report
Though not precisely identified as such, abuses that go beyond what Kelo should permit are discernable in the Institute’s report. The report says, “In the absence of meaningful judicial supervision, state agencies and local governments have run rampant.” It makes mention of how self-identified developers driving deals may spark eminent domain condemnations impermissibly preceding any public codifications of the projects that are to materialize: “After a private business or developer identifies the parcels of land it wants to acquire and city agencies approve a `redevelopment project,’ the city attempts to confiscate these private properties and transfer them to the developer.” (Emphasis supplied) In a near-final section of the report it also advises property owners that “Constitutional Challenges” are one way of legally protecting themselves, among them challenging takings with “Primarily private benefit,” or which are “Pretextual” which goes along with asserting that there is “No public use/purpose.” The report also includes sections about Atlantic Yards and Columbia. which certainly involve all manner of developer-driven abuses.
Back to Kelo Basics: the Intolerable Developer-initiated, Developer-driven, No-bid Mega-monopolies of New York
Nevertheless, the Institute’s report could be stronger in describing the New York abuses of developer-initiated, developer-driven eminent domain. It does not go as deeply as it could into the connection between eminent domain (especially developer-driven eminent domain), the pursuit of monopoly and elimination of competition, all of which links directly to the origins and no-bid characteristics of Atlantic Yards and the Columbia expansion. We remind everyone again this kind of pre-selection of (eminent domain-driving) developers is warned against by Kennedy’s Kelo opinion precepts.
For Better or Worse?
Yes, as Atlantic Yards Report observed in its post today, the Court of Appeals in the case it will hear this coming Wednesday could actually decide that “the state constitution restricts eminent domain more than does the federal constitution.” The court has that power and if it exercised it, it would improve the state of affairs in New York immeasurably. That would be a good result. But could the court actually approve the use of eminent domain for Forest City Ratner’s self-originated, perpetual, megadevelopment, mega-monopoly? We suppose that technically the court could so decide, but if it did we would face the embarrassment of being not only as the Institute of Justice has written “perhaps the worst state in the nation when it comes to eminent domain abuse” but also of being a state where the highest court has applied a standard for protection against eminent domain that is far more lax than under Kelo.