An Underrated Threat
Free enterprise advocates - like most of us working in this industry - are rightfully concerned about the federal government’s massive encroachment into the economy via TARP, health care and other politically tinged economic initiatives. However, if you have any worry left over, save some for an equally threatening siege from the judicial arm of big government.
It stems from the U.S. Supreme Court’s Kelo v. New London decision in 2005, when the justices ruled it okay (by the narrowest 5-4 margin) for a developer in Connecticut under the rubric of eminent domain to seize some homes and private businesses to build a research campus for pharmaceutical giant Pfizer. Until then the concept of eminent domain, whereby governments can forceably acquire private property at reasonable market rates, was reserved for projects such as roads and other clearly public facilities. Kelo established the principle that the public good also was served by compelling some private properties to be gobbled up by bigger, presumably “better” private entities.
Various jurisdictions across the land have since taken their cue from Kelo and acquired private property from reluctant sellers to turn over to favored developers. One highly publicized episode occurred last November when New York State’s highest court ruled it lawful for the state to seize private land for a controversial $4.9 billion project in Brooklyn centered around a basketball arena. Making it especially contentious is that one of the major investors is not even American, but Russian.
Reverberations stretch into the sleepy suburban Chicago community of Mt. Prospect where I make my home. Our Village has given the go-ahead to a private redevelopment project that involved the purchase of several little businesses in an underutilized downtown area. (The project, like so many these days, is on indefinite hold while the builder tries to shake out financing.) Most of the area’s former business owners sold out voluntarily - or after a little prodding - but a single holdout is the cranky owner of a little bar and restaurant who has been trading newspaper barbs and lawsuits with the Village for years. Now he is being threatened with an eminent domain takeover. His business is a seedy joint that sits only a hundred yards from my condo complex. From a purely personal standpoint I would be happy to see it go, and I am generally in favor of our Village’s downtown redevelopment plan. Yet, personal preferences aside, I have a philosophical difference with the way this is being handled, which I expressed as follows in a letter published in a community newspaper.
“Legal or not, using eminent domain to benefit a preferred private developer ought to ring alarm bells in all of us. It sets the stage for local authorities to yank anyone’s home or business away because it sits on land coveted by, say, their relatives or campaign contributors.”
Similar stories are being played out in various local communities across the land. Some of you reading this might even be the beneficiaries of eminent domain initiatives to clear out blighted areas for redevelopment. If so, please set your personal business interests aside for a moment to understand the larger principle at stake here. As I noted in my letter to the editor, when a government is allowed to conspire with one private business to undermine another, the potential for mischief is enormous. Corruption aside, government officials are eminently (no pun intended) capable of making stupid decisions about economic development. Who determines that a neighborhood is “blighted” or which business is more likely to succeed? Today you’re the hammer but tomorrow you could be the nail.
Those of you who operate aging facilities in rundown warehouse districts face greater potential to be victims rather than beneficiaries of private eminent domain takeovers. How would it sit with you to be told, not asked, to sell your property at a price to be determined by public authorities?
The most discouraging thing about Kelo is that it emanates from the highest legal authority in the land, and the Supremes cling to a doctrine known as stare decisis - meaning don’t overturn things already decided. So any relief from this ruling would have to come from the legislative and executive branches of our federal government, and they have their hands full nowadays. Tackling Kelo is on nobody’s political agenda that I’m aware of.
Yet this is something our national leaders should be turning some attention to, and it’s in the interest of small business owners that they do.