Sunday, May 13, 2007

Public's domain

Acting on 'public purpose,' government can snatch private property

Fred Davis' quarter-acre lot at 205 Looney was appraised at $16,200, according to Shelby County Assessor Rita Clark's Web site. Davis bought the lot, site of a fire-gutted apartment building, in 1989 for $53,000.

The Commercial Appeal [link]
By Amos Maki

Fred Davis, owner of Fred Davis Insurance Agency, bought a small lot on Looney Street in the Uptown neighborhood in 1989.

Davis, a former longtime city councilman, thought the property would make a good investment and that he might eventually develop it.

But he may never get the chance, because the Memphis Housing Authority and the Division of Housing and Community Development have notified Davis that they want to buy his property.

If Davis doesn't voluntarily sell, MHA could use "as a last and final resort" its power of eminent domain to acquire the property.

"If I decide that I want to develop it, I ought to have the option to do it," said Davis. "If they said this was for a fire station or library or the general public good, I can deal with that."

While different in some respects, Davis' case has echoes of Kelo vs City of New London, Conn., where the U.S. Supreme Court decided that local governments may force property owners to sell and make way for private economic development when officials decide it would benefit the public. In Kelo, the public benefit was additional tax revenue generated by new developments.

Governments have long purchased private property for the construction of roads, bridges, dams, sewer lines and other public projects. If owners are unwilling to sell, governments turn to eminent domain.

But the Kelo case touched off a nationwide debate about how and when eminent domain should be used, with dozens of states passing laws to make it more difficult for municipalities to exercise eminent domain.

"The Kelo decision was actually one of the best things that ever happened to the national property rights movement, as it clearly imprinted the precarious nature of private property rights in the public consciousness and has inspired significant reforms nationwide," said Leonard Gilroy, a senior policy analyst at the Reason Foundation, in a statement.

In Tennessee, a bill passed last year placed new restrictions on eminent domain but still allows its use for public purposes, industrial parks and limited private uses.

"It was a bit of a compromise," said Kevin Walsh, a principal with the law firm of Harris Shelton Hanover Walsh PLLC. "It was an attempt to calm some fears people had from Kelo, and I don't know that it truly accomplishes it."

One main provision of Tennessee's legislation requires local governments to certify the "public purpose and necessity" of seizing land.

The law also said indirect public benefits coming from private development -- such as new tax revenue in the Kelo case -- did not qualify as a "public purpose."

The legislation also gives property owners more time -- 30 days instead of five -- to challenge a finding of "public purpose."

Importantly in Davis' case, the legislation said housing authority or community development agencies could acquire property to "implement an urban renewal or redevelopment plan in a blighted area."

That is the main difference between the Kelo and Uptown eminent domain cases.

"If you look at Kelo, there was never any indication by the condemning authority of blight," said Walsh.

The Memphis City Council and Shelby County Commission declared the Uptown area blighted, allowing MHA to use eminent domain. In other words, the use of eminent domain in Uptown is to remove blight while the use in New London was to create more tax revenue by removing existing homes and residents to make way for more expensive developments.

MHA initiates the proceedings and buys the properties through its land bank. Then the city's development partners -- Belz Enterprises and Henry Turley Co., master developers of Uptown -- are paid fees to develop the property.

Davis' Uptown property is at the corner of Fourth and Looney. Surrounded by Uptown homes on the south and east, and well-kept existing homes on the north, with a mix of older and newer homes to the west, the vacant site has some tall grass. But Davis said it is hardly "blighted."

"I've paid my taxes and I keep it up," he said. "I pay somebody to come over here and mow the grass."

Robert Lipscomb, the city's chief financial officer, director and CFO of HCD and executive director of MHA, said the city has always used eminent domain as a tool of last resort and that there is a delicate balancing act of property owners' rights.

On the one hand, Lipscomb said, the city wants to preserve the property rights and investments of owners like Davis.

But on the other hand, the city is trying to bring more investment to the Uptown neighborhood. That investment could be halted or slowed by vacant lots strewn with grass, weeds or junk, Lipscomb said.

Eminent domain has been used, or threatened, in several Downtown projects, including FedExForum, AutoZone Park, the National Civil Rights Museum and in the airport buyout area.

With eminent domain, the government offers "just compensation" for the property and then takes the land. In MHA's case, the agency offers owners the appraised value of the property.

Davis' quarter-acre lot was appraised at $16,200, according to Shelby County Assessor Rita Clark's Web site.

While Davis said he has no current plans to develop the property, which he bought in 1989 for $53,000, he said he might one day decide to build something on the site, formerly home to a six-unit apartment building gutted by a fire.

And Davis believes the lot could bring a higher price on the market, especially since Uptown is in the midst of a remarkable transformation.

"There are two kinds of values to property, appraised and market," he said. "Appraised is a hell of a lot different from market value."

Gene Pearson, director of the graduate program in city and regional planning at the University of Memphis, said that while sometimes controversial, eminent domain is an important tool for cities.

"It's probably the only way redevelopment can take place in a timely fashion," Pearson said. "Clearly, most cities see areas that have declined and they make a judgment call as to what is in the best interest of the city and property owners may not see it that way.

"It's always subject to definition and there is always going to be debate."

If the city moves forward with eminent domain, Davis said the debate would almost certainly continue.

"I would have to get some legal advice on the best way to respond," he said.

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