RealClearPolitics - Commentary - How Eminent Domain Ran Amok by Carla T. Main

It didn’t take urban planners long to catch on to the potential laid out in Berman. Just seven years after Berman, Jane Jacobs, in the seminal The Death and Life of Great American Cities (Random House, 1961), was already cautioning about what she saw as the overuse of eminent domain and questioning its basic fairness. The ensuing four decades have borne out her thesis. As she noted in her brief to the Supreme Court in Kelo, after the Berman decision, eminent domain was used liberally to reshape American cities, with a disproportionate impact on black Americans — so much so that some ruefully came to call urban renewal “Negro Removal” (a phrase that can be traced to James Baldwin).11

The Berman case, and the vigorous workout that eminent domain was getting in the American landscape, was a turning point in the expansion of the public use doctrine. Given Justice Douglas’s sweeping language in Berman, it seemed only a matter of time until the criteria for the use of eminent domain would expand beyond slum removal. If blight, why not beauty? If beauty, why not bounty?

The unlikely focus of an early experiment in a quest for such bounty from the fountain of eminent domain took place in a gritty neighborhood of Detroit, the first great experiment in a large-scale economic development taking.

Poletown, Michigan, was a place that, by all rights, never should have made it onto any historian’s map. It was just a working-class neighborhood of Detroit, about half white (Polish Catholic) and half black, composed of single-family homes, churches, schools, and businesses. Its residents were working-class people who had jobs in nearby factories and quietly went about the business of pursuing the American dream. Yet Poletown has acquired a kind of infamy in legal and social science circles, forever equated with the idea of government folly, gross waste, and a what-were-they-thinking sort of horror. It was not destroyed on the grounds of blight, like so many neighborhoods taken in the post-Berman years, for Poletown was not blighted. It was reduced to rubble because those in positions of power were of a single mind, and they believed its sacrifice was necessary in a desperate bid for the survival of the city as a whole. Poletown was a living, breathing neighborhood that more than 3,000 people called home — before the city leveled it by bulldozer to make way for a factory.

In 1980, Detroit was in dire straits. Deep in the throes of the rust belt era and weighed down by an 18.3 percent unemployment rate, Detroit was willing to grasp at just about any straw that General Motors was willing to throw its way. gm had a plant in the Detroit vicinity that was getting old and needed to be retooled. Rather than retool it, which would have been very expensive, in fall 1980 gm proposed to the city to build a new plant, one that would provide 6,000 jobs. All Detroit had to do was provide the land. And not just any land: It had to have 500 contiguous acres and be accessible by highway and rail, cleaned of any toxic waste, leveled of any structures, and suitably cheap. The deal had to be ready to close mighty quick. Tax abatements were demanded, too. Absent these terms, gm would take its business and its 6,000 jobs elsewhere.

Like an ugly duckling asked to the prom by the captain of the football team, the city fell over itself in its effort to accommodate gm. After surveying the possibilities, the Poletown neighborhood was fixed upon because of its configuration and proximity to transportation. The city did not see the thousands of people who lived, went to school, owned businesses, and worshipped in churches there as an insurmountable impediment. They would be cleared out — fast. In addition, the Detroit City Council granted gm a 12-year, 50 percent tax abatement for the new plant.

Naturally, gm required clear title to the entire, contiguous parcel, with no hangers-on, recalcitrant sellers, or other troublemakers. The contract between the city and gm required the city to deliver title by May 1, 1981, according to Alan Ackerman, a Michigan attorney who represented business owners in certain aspects of the Poletown litigations. That was an extraordinarily short period of time in which to assemble such a large parcel of land free and clear of title encumbrances. There is only one way to acquire so much land from so many people so quickly: through the coercive power of eminent domain. The city filed suit against the homeowners and business owners on November 24, 1980, to acquire title by court order. There were 144 businesses taken in condemnation by the city, as well as 1,500 homes, two schools, a hospital, 16 churches, and an abandoned concrete factory (that element of the project alone cost a fortune in demolition expenses). In all, some 3,400 people were uprooted and relocated.

One might expect that factions would have emerged among the powerful in Detroit, yet, recalled Ackerman, “There was a sense of inevitability about the whole thing. . . . You had massive pillars of the community” such as the archdiocese, the mayor, the United Auto Workers, Governor Bill Milliken, and gm “all supporting something.”

But was this really a tale, as the Poletown mythology would have it, of a mighty corportion steamrolling over a distressed city? Coleman Young, Detroit’s first black mayor, was not a man to be trifled with. Young had come up the hard way and had stood up time and again to some of the biggest bullies America had to offer. Consider his confrontation early in his public life during a session before the House Un-American Activities Committee, which investigated him in connection with his role as a labor organizer in the automobile industry. Young mocked the committee members, refused to answer their questions and famously corrected the way Frank Tavenner, the committee’s counsel, pronounced the word Negro (“It’s Negro, not nigra.”)12 In essence, Young told the committee to bugger off. They took no further action against him.

When Young took office in 1973, Detroit was a city in transition. There was nearly a 50–50 balance of white and black citizens, with blacks gaining in population and white flight diminishing the tax base. Young was faced with a rising crime rate, a double-digit unemployment rate, and the general economic decline of the rust belt. Yet he showed himself to be a savvy player, ahead of his time in his ability to partner with the private sector in development projects, finding ways to attract businesses and keep them in Detroit. Indeed, according to Wilbur C. Rich’s hagiography, it was Young who approached gm with the idea of building a new plant within the city limits — not the other way around.13

Young also knew his way around Washington; his contacts established during the Carter administration would prove invaluable during the Poletown crisis in 1980. When push came to shove, Young was able to rustle up a then-extraordinary sum of $138 million in hud loans and grants to help cover Detroit’s costs for the project. It’s reasonable to posit that in Young’s view, GM was not the barbarian at the gate, but rather the savior of jobs — indeed, the savior of the city itself, a city with an increasing black constituency.

Before committing to the deal, the Detroit Community Economic Development Department conducted a cost-benefit analysis to determine whether the project was worthwhile for the city. No matter how favorably they projected the benefits, once discounted to present value, the projections showed that Detroit would still lose money.14 And even in 1980, gm was making noises about future automation of some jobs. Yet to refuse the deal was politically untenable, as gm had made clear it would take its business elsewhere.

This left Young, a shrewd politician, with what to his mind may not have been a terribly difficult choice. Obviously, many whites in Poletown, and blacks too, would have to lose their homes. But since the 1950s, large numbers of people, most of them minorities, had been dislocated in massive urban renewal projects all over the United States. And the dirty little secret of urban renewal, no doubt well-known to many black Americans at that time, was that the black populations removed from blighted areas seldom, if ever, subsequently returned to their old neighborhoods following “renewal.” Indeed, in the case of the neighborhood in northwest Washington, D.C., that had been the subject of the famous Berman decision, according to the Jacobs brief submitted in Kelo, “only 310 of the 5900 new residences constructed after the condemnations were classified as affordable to the displaced residents of the area, and within a few years the neighborhood became majority white.”

This time, neither the black nor the white residents would be relocated in vain: 6,000 jobs would be created. Or so gm led Mayor Young and the city of Detroit to believe.

Between October 8, 1980, when gm made its formal offer by letter to acquire the site, and the decision of the Michigan Supreme Court on March 13, 1981, holding that the taking was lawful, Poletown was in chaos. The homes of many had already succumbed to the wrecking ball. Fires were rampant night after night, and scavengers combed through empty houses at will. Parents feared for their children’s safety as the piles of abandoned and bulldozed debris lay right next to occupied houses. It would not be long before civil resistance efforts began. Activists occupied a church until the last moment before bulldozers destroyed it.

Unlike the subjects of many large-scale blight takings that had occurred in the past, many of the white residents of Poletown were not going quietly into the night. A small grassroots contingent of residents emerged, led by local Roman Catholic priests, who organized a “necessity challenge” to the condemnation of Poletown — that is, they brought a legal challenge to the right of the city to take the land in the first place. The necessity challenge — which became the famous lawsuit known as Poletown Neighborhood Council v. City of Detroit — soon expanded into an all-out citywide rumble. The priests found themselves going toe-to-toe not only against city hall, but against their own diocese. Residents reported feeling betrayed by their local government, by the Catholic Church (which sided with the government), by the uaw, and by gm.

The Michigan Supreme Court put the parties to the necessity challenge on an accelerated briefing schedule. An examination of copies of the file-stamped original briefs shows that the court had the reply brief in hand less than a month before rendering its opinion on May 13, 1981. Given time for oral arguments, it is likely the court made and wrote its decision in about two weeks. Such complex matters of state constitutional law are typically disposed of over a judicial term. Looking back, it is a measure of the desperation that all of the rust belt must have felt and the thrall in which gm must have held even the highest court in Michigan. The court wrote the landmark decision so hastily that Judge Ryan submitted his now widely quoted dissent several days later; in it, he admonished the majority for acting too quickly on so grave a matter.

Given the sense of inevitability in the air at the time, the majority of the residents and businesses did not join in the necessity challenge. Many businesses did, however, challenge the amounts the city offered them. The valuation challenges proved difficult and bitter, not least because of mistakes the city made in its haste. From a shoe repair shop to a hospital, Detroit fought dozens of such mini-suits and ended up paying hundreds of millions more in compensation than it had planned. Surprisingly, despite the image of Poletown as working-class and run-down, there was substantial value in the 500-acre community. Ackerman, for example, represented a barrel company and an oil distributor. “The city offered $350,000 for the oil distribution company,” he recalled. At trial, the company got $5 million. Estimates differ on how much the Poletown taking finally ended up costing Detroit (or more accurately, federal taxpayers, the state of Michigan, and Detroit, in that order), but the consensus from a variety of sources is in the range of $300 million. gm snapped up the site for a mere $8 million.15

Clearly, the ugly duckling’s date with the football captain didn’t turn out well. Cost overruns are not unusual when governments involve themselves in real estate transactions. Unanticipated costs also plagued New London, Connecticut, the site of the Kelo case. There, the damage has been protracted political bitterness as well as financial strain.

But what about all those gm jobs? In the end, after the bulldozers were through, gm built its Cadillac assembly plant, but it seldom operated at the double-shift, 6,000-job capacity the company and city had advertised. It sputtered along, providing about 3,000 jobs at its peak. The city had no recourse, having entered into a purely one-sided deal; gm had council-approved, long-term tax abatements and no obligations to employ anyone.

Like a lab rat that learns it will get a treat if it bangs its head enough times against the feeder, the Detroit elders soon repeated the Poletown scenario and quickly made a similar deal with Chrysler. Indeed, in the decades that followed, the city demanded, again and again, that land development projects be ginned up by the use of eminent domain.

Not surprisingly, the intoxicating blend of hud monies, cheap land for the asking, public-private partnerships, state funding, and other goodies that typically go with economic development takings put a gleam in the eye of municipal legislatures all over the country after Poletown. The social cost of Poletown, and its rather anemic fiscal results, did nothing to dissuade other states from jumping on the bandwagon. Today, economic development takings go on in California, Connecticut, New York, Kansas, Louisiana, Maryland, Minnesota, and North Dakota. In Florida, such takings occur through a “blight” loophole.

Those in Michigan who had been mainlining economic development takings in Michigan for 20 years had to go cold turkey in the summer of 2004. A decision called County of Wayne v. Hathcock16 reversed Poletown. Hathcock relied on the case law available at the time the 1963 Michigan constitution was ratified to divine the drafters’ original intent. The court concluded that the public in 1963 could never have understood “public use” to mean the taking of private property for unfettered enjoyment by other private owners for the sole purpose of raising tax revenue or generating jobs. The court found that, much like the nineteenth-century cases discussed above, property could be taken and given to other private entities only if there was absolute necessity (such as railroad tracks) or an operation that guaranteed continued public monitoring (such as a waterworks). A third exception was a circumstance in which the very act of condemning the land served a public purpose, such as eliminating a slum — a circumstance not present in Hathcock, which involved razing a residential area near an airport in order to create a business and technology park.

Exactly how did things stand, then, when the Kelo case came before the Supreme Court for argument in February 2005, and how did the Institute for Justice (IJ) formulate its strategy on appeal?

On a federal level, the court’s primary references would be Berman and a 1984 case called Hawaii Housing Authority v. Midkiff.17 Justice O’Connor, writing for a unanimous court, held in Midkiff that a Hawaii statute authorizing the condemnation of private parcels of land for sale to long-time lessees — against the lessors’ wishes — was a constitutional exercise of the takings clause. The court reasoned that the statute was rationally related to a public purpose because the sales were done to break up vast land oligopolies. The public benefit of eliminating the “economic evils of a land oligopoly” was sufficient to pass Fifth Amendment muster.

On the state level, some continued to allow economic development takings, and others didn’t. Connecticut fell into the former camp; its state Supreme Court had decided in March 2004 that the takings in New London were constitutional. Four months later, Hathcock rocked the takings world. The Michigan decision was completely at odds with Connecticut’s. While it is not the role of the U.S. Supreme Court to resolve conflicts in state law (and the Kelo case went up on a federal constitutional issue), the dichotomy helped to put the takings clause on the national radar screen. Suddenly, the public use clause seemed up for grabs. If the Supreme Court nixed economic development takings on federal constitutional grounds, then many states would have to follow Michigan’s path. If Kelo went the other way, then states that hadn’t made up their minds about such takings might decide to walk in Connecticut’s footsteps.

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11 According to Jacobs, between 1949 and 1963, 60 percent of all families displaced by urban renewal condemnations were nonwhite, and of the 5,012 persons displaced in the Berman taking, 97.5 percent were black. See the Jacobs brief submitted in Kelo. See also the NAACP brief submitted in Kelo.

12 Wilbur C. Rich, Coleman Young and Detroit Politics: From Social Activist to Power Broker (Wayne State University Press, 1989), 72.

13 Rich, 182.

14 David Fasenfast, “Community Politics and Urban Redevelopment: Poletown, Detroit, and General Motors,” Urban Affairs Quarterly, 22:1 (September 1986).

15 Poletown Neighborhood Council v. Detroit, 410 Mich. 616, 655 (1981).

16 County of Wayne v. Hathcock, 471 Mich. 445 (2004).

17 Hawaii Housing Authority v. Midkiff, 467 U.S. 229 (1984).