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Government abuses eminent domain

Raymond J. Keating

February 18, 2008

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How did downtowns - or any set of buildings - ever get built on Long Island without government development plans and politicians threatening property owners with condemnation?

Well, it turns out the private sector works pretty darn well.

Entrepreneurs, businesses and property owners actually have the incentives to bargain, buy, sell and build. They earn profits by serving residential and commercial markets.

Matters go awry when government gets in the way with high taxes and costly, unnecessary regulation, including inflexible zoning. Government also needs to keep the streets clean, fill the potholes, and protect people and property.

But this Economics 101 lesson is lost on many politicians. They think that government plans lead to prosperity, and abusing eminent domain powers is crucial to development. They mistakenly believe that government violating property rights - by taking property from one private entity and handing it to another that is politically favored - is good for the economy.

Unfortunately, the U.S. Supreme Court somehow upheld such blatantly unconstitutional actions in its 2005 Kelo decision. Subsequently, assorted members of the political class have argued against measures meant to stop eminent domain abuse. Still, many states have passed positive reforms, with New York not among them. So, the abuse continues here. Consider what's going on in Riverhead.

Early this month, the town board gave Vintage Square Properties, a private developer, thumbs up to start negotiating with property owners to build a $70-million project. Newsday reported that this "would level an existing block of stores, offices and homes." A stationery store owner noted that uncertainty has stopped him from making investments to transform his store into a luncheonette. He asked: "What if they come to me two months later and say this building is coming down to dust?"

Meanwhile, Apollo Real Estate Advisors, a firm undertaking a different, $120-million downtown Riverhead project, has requested that the town condemn property it needs from four owners. On Tuesday, Newsday noted: "Riverhead Supervisor Phil Cardinale said he was excited to get Apollo's request last week and predicted that just beginning the condemnation process would encourage the current owners to sell."

Excited? Is government coercion really something to get excited over? Funny how a threat from government to take your property might encourage a sale.

Is any of this necessary? Of course not. Consider two reports recently released by the Institute for Justice. A January 2008 study found that states passing eminent domain reforms have suffered no negative economic consequences in key areas cited by reform opponents - construction jobs, building permits, property tax revenues.

Even more powerful, though, is a report titled "Development Without Eminent Domain: Foundation of Freedom Inspires Urban Growth," written by Curt Pringle, mayor of Anaheim, Calif.

Pringle details how a dramatic economic revitalization in a district called the Platinum Triangle is being accomplished "without the government violating the property rights of our residents and business owners." City officials decided not to provide public subsidies, and not to use or threaten the use of eminent domain. They have protected the property rights of landowners, made zoning requirements more flexible and relied on market forces. Permitting, environmental impact requirements and regulations have been streamlined.

"The development of private properties," Pringle said, "has been completely at the discretion of the individual property owners."

The result? Pringle reports that "the area is blossoming with more economic activity than ever imagined." He concludes that "Anaheim is flourishing and becoming a place where freedom is not just a phrase but also a practice." Pringle's report should be required reading for every elected official on Long Island and across New York State.