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					 Future of Eminent Domain in Texas after Kelo v City of New London

   • .nor shall privateproperty be takenfor public use withoutjust compensation.”

                                             —US. Constitution, Amendment V

             property shall be taken, damaged or destroyedfor or applied to public use without
 No person ‘~s~
 adequate compensation being made, unless by the consent ofsuch person; and, when taken,
 exceptfor the use ofthe State, such compensation shall befirst made, or secured by a deposit

                                             --Texas Constitution, Section 17

By S.G, Johndroe, III

And Brian McCabe
The United States Supreme Court on June 23 issued its opinion in Kelo v. City of New London,
Connecticut. Under the opinion, the decision to use eminent domain authority for economic
development is left to local officials, and those officials are authorized to determine whether
using that authority serves a “public use.”

Since 1954, the Supreme Court has held that locally elected leaders have the authority to decide
how to use eminent domain to best serve their communities. The Kelo opinion is a continuation
of that view. It simply conflnns what cities have known all along: under the Fifth Amendment to
the U.S. Constitution, economic development can be as much a “public use” as a road, bridge, or
water tower.

 In Kelo, the City of New London, Connecticut, faced with the closing of a naval base and
 resultant ill effects on the City’s economy, condemned houses and apartments in order to build a
 new development that, hopefully, will revitalize the City’s downtown area. Upon acquiring and
 demolishing the private residences and apartments, the City of New London (through its
 privately owned development corporation) will enter into ground leases of the condemned
 properties to private developers for $1 per year who will construct a new residential area with
 limited retail and office space as well as a hotel and conference center. The new development is
 expected to generate significant property tax revenue to the City and create hundreds of new

Kelo began when the City, after unsuccessfully negotiating to purchase homesites and apartment
buildings from property owners, filed condemnation suits to acquire their properties for the new
development. It should be noted that many of the residences condemned by the City had been the
homes of the same families for decades.

 The condemned property owners fought the condemnation by the City, arguing that
 condemnation for “economic development” purposes violates the constitutional requirement that
 private property can only be condemned for a public purpose, not for a development corporation
 that will turn the condemned property over to private investors, and sought injunctive relief to
 prohibit the City and its development corporation from taking their homes and apartments. The
 Connecticut state trial court refused to stop the condemnation, concluding that the condemnation
 was for a public purpose and, therefore, constitutional. The Supreme Court of Connecticut
 affirmed the trial court, holding that condemnation for economic development in this case was
 primarily intended to benefit the public interest, rather than the private entities that would pay $1
 per year in ground leases for their new hotel, offices, and apartments to be located on the
 condemned properties.

Upholding the decision by the Supreme Court of Connecticut, the high court supported New
London’s determination “that the area at issue was sufficiently distressed to justify a program of
economic rejuvenation.”

In an opinion written by Justice John Paul Stevens, the court ruled that the New London project
was constitutionally permissible and brushed aside property owners’ arguments that economic
development does not qualify as a public use in eminentdomain cases.

“Clearly, there is no basis for exempting economic development from our traditionally broad
understanding of public purpose,” Stevens wrote.

“As with other exercises in urban planning and development, the city is trying to coordinate a
variety of commercial, residential and recreational land uses, with the hope that they will form a
whole greater than the sum of its parts,” Stevens wrote. “Because that plan unquestionably serves
a public purpose, the takings challenged here satisfy the Fifth Amendment.”

Joining in the majority were Justices Anthony Kennedy, David Souter, Ruth Bader Ginsburg and
Stephen Breyer. The dissenters were Chief Justice William Rehnquist and Justices Sandra Day
O’Connor, Antonin Scalia and Clarence Thomas

The Texas “Public Use Clause”

The Texas Constitution has a Public Use Clause very similar to its federal counterpart, and
Chapter 21 of the Texas Property Code regulating eminent domain contains the same reference
to public use as contained in both constitutions. However, other parts of Texas law appear to
alter the definition of public use much like the Supreme Court has.

History of the Texas Public Use Clause

The Texas Congress in 1839 created a commission to select and obtain, by purchase or
condemnation, a site for the permanent location of the seat of government ‘at some point between
the rivers Trinidad (Trinity) and Colorado and above the old San Antonio Road.’
Under that law, approximately 1 1/2 leagues were to be surveyed, divided into town lots,
advertised for sale, and sold to the highest bidder, provided that ‘before the sale of said lots (the
agents of the Republic) shall set apart a sufficient number of the most eligible (lots) for a capitol,
Arsenal, Magazine, University,’ et cetera. The site selected is, of course, now a part ofthe City of

Those early condemnation proceedings occurred at Bastrop. Thereafter a dispute arose between
persons owning rights under a patent previously issued and located on this site and those holding
under the purchasers at the condemnation sale. The question ofpublic use was raised. It was held
in Smith v. Taylor2 that those purchasing under the condemnation proceedings held good title.

 The opinion in that case was written in 1871, just a few years prior to the debates in the Texas
 Constitutional Convention of 1875 leading to our present Constitution of 1876. The wording of
 the Constitution of the Republic of Texas was that “No person’s (shall be) taken or
 applied to public use, unless by consent of himself      ...without just compensation          The
                                                                                            ....‘   ~

wording was only slightly changed in the first constitution of the State of Texas in 1845. ~ The
 same provision was brought forward in the Constitutions of 1861, 1866, and 1869. ~ So the
 Constitutional Convention of 1875 had before [160 Tex. 47] it the language of the previous
constitutions and the interpretation of the court in Smith v. Taylor. The reports of the debates in
the Constitutional Convention are not full. But from the records available to us, the debates
centered around these changes: (1) the insertion of the words ‘damaged or destroyed for’ between
‘taken * * * or applied for’ public use’; and the addition of the clause that when taken, except for
the use of the State, the compensation should be first made or secured. 6No reference is made to
any discontent over the condemnation of private land for the seat of the government with sale of
lots to the highest bidder to private individuals. The provision regarding ‘public use’ was
readopted, as far as this question is concerned, in the present Constitution of 1876.

Who can exercise the power of Eminent Domain in Texas?

Chapter 21, indicates that governmental entities with the power of eminent domain are the state,
a political subdivision of the state, or an irrigation, water, water improvement, or waterpower
control district “created by law.” Chapter 21 provides for the filing of condemnation petition by
corporations; the United States; and the state, a political subdivision of the state, or an irrigation,
water, water improvement, or waterpower control district “created by law.” However, only
entities falling in the latter categories are excepted from the requirement that the amount of
damages or cost awarded to the property owner be paid or deposited with the court and that a
bond securing further costs be executed in order to take possession of the property pending
further litigation. The state, a county, a municipal corporation, or irrigation or water districts are
not required to make deposit or execute bond).

Certain Texas statutes permit the power of eminent domain to be utilized for economic
development. For example, The Development Corporation Act of 1979 allows cities to create
economic development corporations that can exercise eminent domain powers for public
purposes, including “the promotion and development ofnew and expanded business enterprises.”
 The Texas Urban Renewal Law allows cities to exercise eminent domain for “urban renewal
 activities” such as “slum clearance, redevelopment, rehabilitation, and conservation activities”
 and then sell or lease the land to private investors.

Public Use

Historically speaking, three different interpretations of “public use” can be discerned. The most
restrictive interpretation requires that the government actually hold title to the property after the
condemnation. The nextmost- restrictive definition is that public use means “use by the public.”
Under this definition, public title to the property is irrelevant; what is decisive is whether the
property is accessible as a matter of right to the public. The third and broadest definition is that
public use means public benefit or advantage. Under this conception, neither title to the property
after condemnation, nor access to the property by the general public, is necessary. Instead,
property can be taken for any objective that the legislature rationally determines to be a sufficient
public justification. This seems to be the definition of the Public Use Clause adopted by the
Supreme Court in the Kelo case.

In the case of Arlington v. Golddust Twins, the Fifth Circuit (which includes Texas) focused on
the Texas Constitution (Article 1, Section 17). The issue before the court in Arlington was not
the “taking” element but the “public use” mandate. Under the Texas Constitution, any
governmental taking (condemnation) ofprivate property must be for a public good or benefit. In
Arlington, the district court held that the city of Arlington could not condemn a leasehold near
the Texas Rangers’ ballpark because the city failed to establish that the taking was for public
parking. Evidence showed that the city had a preexisting agreement with the Rangers to swap the
condemned parcel for other land that the Rangers owned in the area. The Rangers allegedly
intended to erect office buildings on the property afterthe exchange.

The circuit court reversed the district court, upholding the condemnation. The fact that the
leasehold was condemned for one purpose but used for another was not fatal. As long as the
ultimate use of the property is for a public purpose also, the condemnation will be upheld.
However, the circuit court never scrutinized how the Rangers ultimately would use the land after
the exchange. Instead, it focused on the current use of the land and the definition of “public use.”
Evidence presented at trial revealed how the land swap fit into an overall master agreement be-
tween the Rangers and the city. According to the Rangers, the inclusion of the land swap was
“essential” to the agreement. Also, a lease agreement between the Rangers and the City obligated
the Rangers to continue providing adequate public parking for the ballpark facilities, even if the
parcel was converted to other uses.

Thus, the circuit court concluded that this use satisfied the public-use requirement. Currently, the
parcel provides public parking. And, even if the current use changes, the public is guaranteed
adequate parking by the lease agreement. The court observed that the exchange was an essential
part of the ballpark project from its inception. The Arlington court properly drew on prior case
law. The land swap at the ballpark was an integral part of a larger public project. The circuit
court also reaffirmed the principle that a municipality’s exercise of the power of eminent domain
is a legislative act and is binding on the courts unless it is manifestly wrong or unreasonable.
The power of eminent domain delegated by the constitution resides in the legislature, and the
legislature may grant the authority to exercise that power to governmental and non-governmental
entities so long as the exercise is for a public use. Under the “use by the public” approach
adopted by Texas courts, “property can only be taken when ‘there results to the public some
definite right or use in the business or undertaking to which the property is devoted. Case law
reiterates this rule, invalidating condemnation solely for private benefit.. A more recent case
involved a public utility condemning an easement for a private landowner. A proposed lake
would render part of the landowner’s property inaccessible. To offset the company’s large land
payment the utility condemned a roadway to the potentially landlocked area. The owner of the
property crossed by the easement contended that the action was solely to provide private access.
The appellate court agreed. The utility company could condemn the easement to relocate a public
but not a private road.

These decisions give much-needed judicial support to private collaboration on public projects.
Governmental entities will not undertake projects such as airports, stadiums and navigational
facilities without cooperation with private enterprise.

Since 1954, the Supreme Court has held that locally elected leaders have the authority to decide
how to use eminent domain to best serve their communities. The Kelo opinion is a continuation
of that view. It simply confirms what cities have known all along: under the Fifth Amendment to
the U.S. Constitution, economic development can be as much a “public use” as a road, bridge, or
water tower.

 The Texas Municipal League has written that in the aftermath of the opinion many news reports
have been misleading and inflammatory. Some articles stated or implied that the court had, with
 its decision, created a new municipal authority where none had previously existed. Other reports
characterized the opinion as “broadening” or “expanding” the authority of government to
condemn property for economic development purposes. Many newspaper reports have led their
readers to believe that cities would use this “new” authority to “seize” property, “bulldoze”
homes, and “grab” everything that stands in the way of increased tax revenue. News articles and
popular banter regarding the case usually paint a picture of a little old woman’s home being
bulldozed to make way for a huge corporation’s project. In reality, the case is about community
leaders trying to save the economic viability of their city and its residents. In fact, the opinion
does no such thing. The court merely rejected a challenge to existing authority.

Now that the United States Supreme Court has affirmed the Connecticut Supreme Court’s
determination that condemnation for economic development purposes is a constitutional exercise
of the power of eminent domain, the homeowners and businesses should start making plans now
to retain the best attorneys and appraisers they can find in order to seek fair compensation for
their properties.

‘Laws ofthe Republic 1839, p. 165; 2 Laws of Texas 165.

2   1870-1871, 34 Tex. 589, cited with approval in Travis County v. Trogden, 1895, 88 Tex. 302, 31 S.W. 358 (byJustice
Denman). The case is cited here to show what was before the Constitutional Convention of 1875.

    Section 13, Declaration of Rights, Constitution ofthe Republic, 1836. Emphasis throughout is ours

~‘Section   14 of Art. 1:   “~ *   *   No person’s property shall be taken, or applied to public use, without adequate compensation being
made, unless by the consent ofsuch person
    Section 14, Art. 1, without change, of each constitution
    McKay, Debates in the Constitutional Convention of 1875, p. 237, The University ofTexas, 1930.

S. G. Johndroe, IIIis Chairman ofthe General Litigation Section at Cantey & Hanger, L.L.P.
Brian McCabe is a partner in the Austin office and head ofthe Public Law
and Finance Department.


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