Ohio Public Law Update; US Supreme Court Upholds City's Use of Eminent Domain for Economic Development

    View Authors July 2005
    In Kelo v. New London, decided on June 23, 2005, the United States Supreme Court in a 5-4 decision determined that a city's decision to take property by eminent domain for the purpose of economic development did not violate the Takings Clause of the Fifth Amendment of the U.S. Constitution.

    The City of New London, Connecticut, a "distressed municipality," engaged in an extensive research and economic development planning process in order to revitalize the City, bring in jobs and generally improve conditions for its citizens. The City Council then approved a comprehensive, integrated economic development plan and began acquiring property in the Fort Trumbull area of the City for development by private entities. Some property owners (whose property was not blighted) in that area refused to sell and the City commenced eminent domain proceedings. Those owners appealed to the Supreme Court, claiming that the City's eminent domain action violated the Fifth Amendment of the U.S. Constitution.

    Writing for the majority, Justice Stevens examined the project's broad ramifications and focused on the large-scale consequences of the development plan to reinvigorate the City's economy. The Court also gave deference to the City Council's decision-making process for the benefit of its citizens. The majority determined that "in light of the entire plan," it "unquestionably serves a public purpose" and therefore did not constitute a taking in violation of the Fifth Amendment.

    In his concurrence, Justice Kennedy detailed several important factors in his decision to join the majority, including that the City's taking was not pre-textual; that is, there was no hidden intention by the City to take property from one individual to give it to another private party solely for their private benefit. Under the facts presented, Kennedy determined that this taking for economic development would favorably impact the general public and help to reinvigorate the City's economy. Kennedy also noted several additional factors, including, among others, the City's concern regarding the current economic climate in the City, the fact that the City solicited developers, and the "substantial commitment of public funds by the State to the development project."

    The majority recognized that its decision may result in hardship for the owners who are forced to relocate as a result of the taking and noted that its decision was made under the federal Constitution, and that "nothing in our opinion precludes any State from placing further restrictions on its exercise of the takings power." In some states under their own state constitutions and state laws, this case may have been decided differently. For instance, the Court cited to a case in Michigan in which the Michigan Supreme Court limited the scope of proposed takings to those deemed "necessary" while also falling within one of three objectives listed in that state's statute. Likewise, California by statute has determined that a city may take property via eminent domain for an economic development purpose only if that property is located in a blighted area.

    Four justices vigorously dissented, viewing the majority's decision as blurring the line between public and private use. Justice O'Connor wrote that the majority's decision was at odds with a basic presumption of the Fifth Amendment that an individual's private property cannot be taken by another private party under the auspice of "public use." In contrast to previous Supreme Court decisions, in which governmental takings resulted in a direct and concrete public benefit (such as eliminating blight), in this case the City did not argue that the owners' property was the source of any "social harm." O'Connor argued that the aftermath of the decision would be that resources will likely be shifted from lower and middle-class individuals to "those citizens with disproportional influence and power in the political process, including large corporations and development firms."

    Although the Ohio Supreme Court has determined in State ex rel. Bruestle v. Rich (159 Ohio St. 13 (1953)) that a city has the authority under the Ohio Constitution to use eminent domain powers in an urban renewal area to eliminate slum and blighted conditions and prevent the recurrence of those conditions, it has not addressed a city's use of those powers for economic development purposes.