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Taking Land for Economic Development

A city negotiated with property owners to acquire a strip of land and some temporary easements for the purpose of installing a deceleration lane for traffic that would access a new development. Included in that development was a building to be occupied by a well-known national retailer of consumer goods. After initial negotiations to acquire the real property failed, the city filed a petition in state court to condemn the property.

The owner of the property subject to being taken tried to capitalize on the fact that the state legislature had recently subjected the power of eminent domain to a new additional limitation. In 2006, after the U.S. Supreme Court had determined in a controversial ruling that the transfer of land to a third party for the purpose of furthering a city’s economic development plan was a sufficiently public use to permit the constitutional exercise of eminent domain, the legislature passed a new law to prohibit the use of eminent domain “if the taking is primarily for an economic development purpose.”

The property owner argued that the deceleration lane primarily served the economic development purpose of providing vehicles access to the nearby retailer. He reasoned further that the addition of the deceleration lane would ultimately cause the expansion of the city’s property and sales tax bases by providing the retailer’s customers easier access to the retailer’s parking lot.

A state appellate court upheld the taking. Although the collateral consequences of the addition of a deceleration lane might include some enhancement to economic development, the primary purpose of the new lane clearly was the same as for any other road project– simply to promote traffic safety and the efficient flow of traffic on the city’s streets. The court acknowledged that many permissible uses of eminent domain provide collateral benefits to private industry. When land is acquired by eminent domain for a public building, such as a school, nearby convenience stores or restaurants may also benefit. Using eminent domain to install utilities likewise can be beneficial to surrounding businesses. There are countless other instances where the exercise of eminent domain indirectly enhances economic development, but such situations do not come within the newly enacted prohibitions on the use of condemnation by the government, because such takings do not have as their primary purpose the stimulation of economic development.

Four reasons offered by the court for upholding the condemnation provide some criteria for gauging whether any other such challenges by property owners have a chance of succeeding on a similar theory: First, the city did not take the property primarily for the “use” of a commercial enterprise in any traditional sense. The city will be the owner of title to the land, and the primary users will be members of the public at large.

Second, the city’s acquisition of the real property did not serve the primary purpose of increasing tax revenue because the actual land acquired will not contain any entity that will generate sales or property taxes.

Third, the city’s acquisition of the land was not primarily serving the purpose of increasing employment. Construction of the deceleration lane will require the temporary use of labor, but the purpose of a deceleration lane is unrelated to the creation of additional jobs, as opposed to traffic control.

Finally, the use of the property cannot be construed as primarily related to general economic conditions, because there was no evidence that this affected the city’s determination to exercise its eminent domain powers. The decisionmaking body, the city’s engineering department, acquired the property at issue to allow traffic to proceed in an orderly and efficient fashion and to limit the potential collisions as a result of cars decelerating on the right-of-way. There also was no evidence that the nearby retailer in some way used economic pressure to convince the city to install the deceleration lane.

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