[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]


 
                 PROTECTING PROPERTY RIGHTS AFTER KELO

=======================================================================

                                HEARING

                               before the

                            SUBCOMMITTEE ON
                COMMERCE, TRADE, AND CONSUMER PROTECTION

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 19, 2005

                               __________

                           Serial No. 109-55

                               __________

      Printed for the use of the Committee on Energy and Commerce


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house

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                    ------------------------------  
                    COMMITTEE ON ENERGY AND COMMERCE

                      JOE BARTON, Texas, Chairman

RALPH M. HALL, Texas                 JOHN D. DINGELL, Michigan
MICHAEL BILIRAKIS, Florida             Ranking Member
  Vice Chairman                      HENRY A. WAXMAN, California
FRED UPTON, Michigan                 EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida               RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio                EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia                 FRANK PALLONE, Jr., New Jersey
ED WHITFIELD, Kentucky               SHERROD BROWN, Ohio
CHARLIE NORWOOD, Georgia             BART GORDON, Tennessee
BARBARA CUBIN, Wyoming               BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
HEATHER WILSON, New Mexico           BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona             ELIOT L. ENGEL, New York
CHARLES W. ``CHIP'' PICKERING,       ALBERT R. WYNN, Maryland
Mississippi, Vice Chairman           GENE GREEN, Texas
VITO FOSSELLA, New York              TED STRICKLAND, Ohio
ROY BLUNT, Missouri                  DIANA DeGETTE, Colorado
STEVE BUYER, Indiana                 LOIS CAPPS, California
GEORGE RADANOVICH, California        MIKE DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire       TOM ALLEN, Maine
JOSEPH R. PITTS, Pennsylvania        JIM DAVIS, Florida
MARY BONO, California                JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon                  HILDA L. SOLIS, California
LEE TERRY, Nebraska                  CHARLES A. GONZALEZ, Texas
MIKE FERGUSON, New Jersey            JAY INSLEE, Washington
MIKE ROGERS, Michigan                TAMMY BALDWIN, Wisconsin
C.L. ``BUTCH'' OTTER, Idaho          MIKE ROSS, Arkansas
SUE MYRICK, North Carolina
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
MARSHA BLACKBURN, Tennessee

                      Bud Albright, Staff Director

        David Cavicke, Deputy Staff Director and General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

        Subcommittee on Commerce, Trade, and Consumer Protection

                    CLIFF STEARNS, Florida, Chairman

FRED UPTON, Michigan                 JAN SCHAKOWSKY, Illinois
NATHAN DEAL, Georgia                   Ranking Member
BARBARA CUBIN, Wyoming               MIKE ROSS, Arkansas
GEORGE RADANOVICH, California        EDWARD J. MARKEY, Massachusetts
CHARLES F. BASS, New Hampshire       EDOLPHUS TOWNS, New York
JOSEPH R. PITTS, Pennsylvania        SHERROD BROWN, Ohio
MARY BONO, California                BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska                  GENE GREEN, Texas
MIKE FERGUSON, New Jersey            TED STRICKLAND, Ohio
MIKE ROGERS, Michigan                DIANA DeGETTE, Colorado
C.L. ``BUTCH'' OTTER, Idaho          JIM DAVIS, Florida
SUE MYRICK, North Carolina           CHARLES A. GONZALEZ, Texas
TIM MURPHY, Pennsylvania             TAMMY BALDWIN, Wisconsin
MARSHA BLACKBURN, Tennessee          JOHN D. DINGELL, Michigan,
JOE BARTON, Texas,                     (Ex Officio)
  (Ex Officio)

                                  (ii)




                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Anderson, Steven D., Castle Coalition Coordinator, Institute 
      for Justice................................................    11
    DeLong, James V., Senior Fellow and Director, Progress and 
      Freedom Foundation.........................................    27
    Finkle, Jeffery, President and CEO, International Economic 
      Development Council........................................    21
    Ramsey, Michael D., Professor of Law, University of San Diego 
      Law School.................................................     7
    Shelton, Hilary O., Director, NAACP, Washington Bureau.......    17

                                 (iii)

  


                 PROTECTING PROPERTY RIGHTS AFTER KELO

                              ----------                              


                      WEDNESDAY, OCTOBER 19, 2005

              House of Representatives,    
              Committee on Energy and Commerce,    
                           Subcommittee on Commerce, Trade,
                                   and Consumer Protection,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:05 p.m., in 
room 2123 of the Rayburn House Office Building, Hon. Cliff 
Stearns [chairman] presiding.
    Members present: Representatives Stearns, Bass, Otter, 
Blackburn, Schakowsky, and Green.
    Staff present: Brian McCullough, majority professional 
staff; David Cavicke, general counsel; Chris Leahy, policy 
coordinator; Will Carty, majority professional staff; Andy 
Black, deputy policy staff director; Lisa Miller, deputy 
communications director; Shannon Jacquot, majority counsel; 
Jonathon Cordone, minority counsel; Jonathon Brater, staff 
assistant; Chris Treanor, staff assistant; and Billy Harvard, 
clerk.
    Mr. Stearns. Good afternoon. The subcommittee will come to 
order. Let me say first of all, to my colleagues, I welcome 
this opportunity, and I think all of us should in Congress, to 
learn more about one of the most important Supreme Court 
decisions in recent memory. Kelo v. the city of New London is a 
decision that has implications for every commercial interest in 
the country. Kelo also challenges widely held notions about the 
nature of private property and the power of the government to 
take that property, albeit with due compensation, in the name 
of economic progress. The economic and social implications of 
the Supreme Court's current ``economic development'' analysis, 
applied in Kelo and somehow derived from the Fifth Amendment's 
Takings Clause, I think should concern all consumers in the 
private property marketplace.
    I must also confess, like many Americans, this decision has 
made me think about any commercial property that I have or even 
a home. You know, developers' eyes could be looking at it an 
saying, you know, I think I could use that for a new golf 
course, a coffee shop, or a movie house. I have nothing against 
any of those things, in fact, many of us can't live without 
them, but the economic relationship to my community and its tax 
base takes on new significance in light of Kelo. And this is 
not just another not-in-my-backyard knee-jerk reaction. To 
many, Kelo represents the ability of a powerful economic 
interest to not only take the backyard, but also the house, the 
garage, and the whole darn neighborhood if the economics 
applies. And this is wrong and it is a great concern to me and 
others here in Congress, and that is why today's hearing is an 
essential step in trying to unpack Kelo's legal rationale, what 
it means for our neighborhoods, our communities, and our 
society.
    Historically, the condemnation of private property through 
the Fifth Amendment power of eminent domain has followed a 
continuum. In the 19th Century, the Supreme Court generally 
regarded the concept of public use as synonymous with public 
purpose. In other words, after a condemnation, the property had 
to be government-owned or, in the case of an exclusively 
private transfer, had to involve a private party allowing some 
sort of public access to the property, similar to the railroads 
and public utilities common carrier duties. But as private 
property development continued around the country during the 
20th Century, the court began to reject the notion that public 
use always means public purpose. In fact, a notion of public 
use in eminent domain causes--in cases involving private 
transfers evolved into an economic benefit analysis regardless 
of whether the public actually had physical access. A 
collective economic development benefit analysis began to trump 
the traditional public purpose and function test.
    Over the last 30 years, the eminent domain battle has been 
waged over whether an economic development benefit constitutes 
a public use. Many contend, including Mrs. Kelo, that 
developers, to advance their project in the name of 
redevelopment of blighted or economically underperforming 
areas, have simply co-opted the so-called economic development 
test. The problem is that one man's blight is another man's 
bliss. The additional challenge is then how the government is 
going to equitably and accurately reflect intangibles, like 
what makes a house a home, in an antiseptic economic analysis. 
And don't forget that these hard-fought local battles can just, 
can just get as political as they do in the great body here in 
Congress. Unfortunately, more times than not, the Nation's Mrs. 
Kelos, with their modest but blissful slice of the world, lose 
out to big money and redevelopment issues. That is a very scary 
proposition for the vast majority of Americans who, like Mrs. 
Kelo, want to live freely in communities they know and love 
without fear of being removed in favor of so-called progress. 
That concern is even more urgent for our fellow Americans 
living in economically depressed areas.
    While Kelo might be just another step down the continuum 
that started with the Supreme Court of the 1890's, 1890's, I 
hope it is the beginning of the end for the proposition that if 
your private--if your private land or property is not being put 
to its best economic use, you are vulnerable. No American 
should have to relent to a private party under the guise of 
government and give up his home or business. I doubt if many of 
us would sell our homes if given twice the value. But after 
Kelo, the sad truth is that the use of eminent domain to take 
private property and give it directly to another private party 
is the de facto standard. At this point, it is only the 
Congress and the States that can stop the erosion and work to 
reestablish the original intent of the Fifth Amendment Takings 
Clause to protect Americans from government action, not subject 
them to government-sponsored unfair bargaining sweetheart deals 
in the name of the greater good.
    I would like to thank our distinguished panel of witnesses 
for joining us this afternoon, and I look forward to their 
testimony.
    [The prepared statement of Hon. Cliff Stearns follows:]

  Prepared Statement of Hon. Cliff Stearns, Chairman, Subcommittee on 
                Commerce, Trade, and Consumer Protection

    Good afternoon. I welcome this opportunity to learn more about one 
of the most important Supreme Court decisions in recent memory. Kelo v. 
City of New London is a decision that has implications for every 
commercial interest in the country. Kelo also challenges widely held 
notions about the nature of private property and the power of the 
government to ``take'' that property, albeit with due compensation, in 
the name of economic progress. The economic and social implications of 
the Supreme Court's current ``economic development'' analysis, applied 
in Kelo and somehow derived from the Fifth Amendment's ``takings'' 
clause, should concern all consumers in the private property 
marketplace.
    I also must confess, like many Americans, this decision has made me 
think about my own little piece of the world that perhaps might, in 
developers' eyes, make an enticing site for a new golf course, a coffee 
shop, or a movie house. I have nothing against any of those things, in 
fact, many of us can't live without them, but their economic 
relationship to my community and its tax base takes on new significance 
in light of Kelo. And this is not just another ``Not-In-My-BackYard'' 
knee jerk reaction. To many, Kelo represents the ability of powerful 
economic interests to not only take the backyard, but also the house, 
the garage, and the whole darn neighborhood if the economics warrant 
it. This is wrong and of great concern. And that is why today's hearing 
is an essential step in trying to unpack Kelo's legal rationale and 
what it means for our neighborhoods, our communities, and our society.
    Historically, the condemnation of private property through the 
Fifth Amendment power of eminent domain has followed a continuum. In 
the 19th century, the Supreme Court generally regarded the concept of 
``public use'' as synonymous with ``public purpose.'' In other words, 
after a condemnation, the property had to be government-owned or, in 
the case of an exclusively private transfer, had to involve a private 
party allowing some sort of public access to the property, similar to 
the railroads and public utilities common carrier duties. But as 
property development continued around the country during the 20th 
century, the Court began to reject the notion that ``public use'' 
always meant ``public purpose.'' In fact, the notion of ``public use'' 
in eminent domain cases involving private transfers evolved into an 
economic benefit analysis regardless of whether the public actually had 
physical access. A collective economic development benefit analysis 
began to trump actual the traditional public purpose and function test.
    Over the last thirty years, the eminent domain battle has been 
waged over whether an economic development benefit constitutes a 
``public use.'' Many contend, including Mrs. Kelo, that developers to 
advance their projects in the name of ``redevelopment'' of blighted or 
economically underperforming areas have simply co-opted the so-called 
``economic development'' test. The problem is that one man's blight is 
another man's bliss. The additional challenge is then how the 
government is going to equitably and accurately reflect intangibles, 
like what makes a house a home, in an antiseptic economic analysis. And 
don't forget that these hard-fought local battles can get just as 
political as they do in this great body. Unfortunately, more times than 
not, the nation's Mrs. Kelos, with their modest but blissful slice of 
the world, lose out to big money and redevelopment plans. That is a 
very scary proposition for the vast majority of Americans who, like 
Mrs. Kelo, want to live freely in communities they know and love 
without fear of being removed in favor of so-called progress. That 
concern is even more urgent for our fellow Americans living in 
economically depressed areas.
    While Kelo might be just another step down the continuum that 
started with the Supreme Court of the 1890s, I hope it is the beginning 
of the end for the proposition that if your private land or property is 
not being put to its best economic use you are vulnerable. No American 
should have to relent to a private party under the guise of government 
and give up his home or business. I doubt many of use would sell our 
homes if given twice the value. But after Kelo, the sad truth is that 
the use of eminent domain to take private property and give it directly 
to another private party is the de facto standard. At this point, it is 
only the Congress and the states that can stop the erosion and work to 
reestablish the original intent of the Fifth Amendment takings clause 
to protect Americans from governmental action, not subject them to 
government-sponsored unfair bargaining and sweetheart deals in the name 
of the greater good.
    I would like to thank our distinguished panel of witness for 
joining us this afternoon. We look forward to your testimony. Thank 
you.

    Mr. Stearns. And with that, I will give the opening 
statement to the ranking member, Ms. Schakowsky.
    Ms. Schakowsky. Thank you, Mr. Chairman. I, too, want to 
welcome our panel, and I want to extend a special welcome to 
Mr. Shelton, whose work and his organization I respect so much. 
Thank you for holding this hearing to discuss the Supreme 
Court's recent decision in Kelo v. New London, and potential 
congressional responses.
    The Kelo decision issued June 23, 2005, held that economic 
development can be a public use under the Fifth Amendment's 
taking clause. Essentially, the court held that a private 
developer may take homes and put the property on which they sit 
to public use, as long as the development plan would provide 
some benefits to the community, such as creating new jobs or 
increasing tax revenues. The court decision approving the 
government's taking of private property for commercial 
development has been met with strong disapproval by the 
American public. According to a Wall Street Journal/NBC News 
poll, ``in the wake of the court's eminent domain decision, 
Americans, overall, cite private property rights as the current 
legal issue they care most about.'' And according to an 
American Survey poll conducted in July among 800 registered 
voters nationwide, ``public support for limited the power of 
eminent domain is robust and cuts across demographic and 
partisan groups; 60 of self-identified Democrats, 74 percent of 
Independents, and 70 percent of Republicans support limits.''
    Indeed, in response to this decision, legislators in 35 
States, including Illinois, are considering changes to eminent 
domain laws to prevent the taking of private land for private 
development, because they argue, the Kelo decision went too far 
in taking private property; however, local governments, 
including my hometown, the city of Evanston, Illinois, stand by 
the Kelo decision, citing that Federal law should not constrain 
their ability to decide when to use the power of eminent domain 
for the benefit of their communities. Few would question that 
there is a legitimate role for eminent domain. It is allowed by 
the Constitution, provided the condemnation is for a public 
use, and it is a vital and necessary tool for local government 
that must find for public uses such as roads and schools and 
public utilities. Because of the potential harm and good that 
will result from the Kelo decision, I believe we need to 
thoroughly examine all consequences of the decision, and 
whether further congressional action is needed. This is a 
serious issue and a timely debate, beyond a simple resolution 
of disapproval that we passed, and this debate is necessary.
    In the aftermath of Hurricane Katrina and Hurricane Rita, 
the Gulf Coast will be the center of a colossal rebuilding 
effort, costing an estimated $200 billion. We may see an 
increased use of eminent domain and the Takings Clause to 
rebuild blighted and flood-devastated areas. What we learned 
from Katrina is not just the failure of government to respond 
to a natural catastrophe, but the failure to respond to people 
living without opportunity and in poverty. It will be a shame 
if we fail once again to protect the poor and vulnerable, which 
could happen if eminent domain is abused by government 
officials as a way to provide favors to selected businesses.
    Today, we will hear from the NAACP about how the history of 
eminent domain shows that the poor minority neighborhoods are 
specifically targeted, and minorities and elderly are 
disproportionately displaced when takings occur. I am concerned 
about how eminent domain invariably diminishes lower-cost 
housing and replaces it with either businesses or higher-cost 
housing. This reduces the supply of affordable housing in the 
area and drives up prices, making it more and more difficult 
for the underprivileged racial and ethnic minorities and the 
elderly to live in the neighborhoods they call home. 
Additionally, we need to discuss whether compensation in 
eminent domain cases is fair, especially if those who are 
displaced are unable to find comparable housing they can 
afford.
    Even Justice John Paul Stevens, who wrote the Kelo decision 
for the five justice majority, has said publicly, he has 
concerns about the results of Kelo. Justice Stevens recently 
told the Clark County, Nevada, Bar Association that if he were 
a legislator instead of a judge, he would have opposed the 
results of his own ruling by working to change current law. 
Justice Sandra Day O'Connor and the other dissenting justices 
also raised serious concerns with the case and claimed that, 
pursuant to the decision, ``nothing is to prevent the State 
from replacing any Motel 6 with a Ritz, any home with a 
shopping mall, or any farm with a factory.'' Specifically, 
Justice O'Connor states that ``the government now has the 
license to transfer property from those with fewer resources to 
those with more.'' Considering the broad implications of the 
Kelo decision, I really look forward to hearing from the 
witnesses today, about how eminent domain can be used to help 
or hurt the property rights and well-being of the public, 
especially those who may vulnerable to the abuses of eminent 
domain. Thank you, Mr. Chairman.
    Mr. Stearns. I thank my colleague. The gentleman from 
Texas, Mr. Green.
    Mr. Green. Thank you, Mr. Chairman. And I have a full 
statement I would like to place into the record.
    Mr. Stearns. By unanimous consent, so ordered.
    [The prepared statement of Hon. Gene Green follows:]

  Prepared Statement of Hon. Gene Green, a Representative in Congress 
                        from the State of Texas

    Thank you, Chairman Stearns and Ranking Member Schakowsky for 
holding this hearing today.
    The issue we face today is a complicated one. The use of eminent 
domain varies greatly by region, and there are various view points on 
this issue on both sides of the aisle.
    In Texas, we place a strong value on the right to own property.
    The decision in Kelo vs. City of New London has weakened citizens 
of their constitutional right to own property.
    The premise of eminent domain under the Takings Clause of the Fifth 
Amendment is to protect the rights of property owners.
    It states, ``Private Property can not be taken for public use 
without just compensation.''
    Over time, this premise has been tested in the courts and 
gradually, the definition of what constitutes public use has been 
expanded to include the economic development of areas in need of 
revitalization.
    I'm afraid the Supreme Court's ruling in Kelo v. New London may 
have opened the door for ``public use'' to be interpreted as ``private 
gain'' in some cases. This was not the intention of the 5th Amendment.
    In the past, local governments have been able to acquire property 
from private owners under a more strict definition of ``public use'' 
such as to build highways, schools, parks, or to eliminate property 
that endangers the public.
    I believe the spirit of the law is absent when the government 
condemns or purchases private property through eminent domain then 
sells it to another private owner.
    The Kelo decision tips the scales in favor of the right of 
government to execute economic development plans than it does in 
protecting the rights of property owners.
    I strongly support economic development. Enterprise zones have been 
effective in revitalizing neighborhoods with input from the citizens 
that live there. Local governments often use tax incentives to entice 
businesses to locate in their area.
    I believe that eminent domain can be used to achieve outstanding 
results and boost local economies, but it has to be done responsibly.
    When local governments can use eminent domain to take away private 
property and turn it over to developers in order to benefit from higher 
tax revenues, the spirit of the 5th Amendment is broken.
    Clearly, the Consitution calls for ``just compensation'' when 
eminent domain is used. We must examine what this means, because often, 
a person who has lived in a home or run their own business for all 
their lives will say that fair market value is not just compensation at 
all.
    It is difficult to argue that there is just compensation when your 
home is taken away so that a strip mall can be built in its place.
    In Texas, the state legislature has already taken action to protect 
property owners by enacting a law prohibiting the local government or 
private entities from taking property through eminent domain for 
private benefit or economic development purposes.
    I hope this hearing will give us a place from which we can craft 
solid solutions that will protect the rights of property owners and 
preserve the ability if local governments to use eminent domain for the 
public good.
    Thank you Mr. Chairman, I yield back the balance of my time.

    Mr. Green. I think that we have heard so far, there is 
bipartisan concern on the Kelo case v. the city of New London, 
and I think the issue was, we have always had the right for 
governments to take property for public use, highways, schools, 
parks, things like that, but when you actually take it and then 
sell it to a private sector person for the economic 
development, that is where I think it crosses the line. We do 
have, historically, railroads have the right of eminent domain 
as of private property and frankly, I guess, that was from two 
centuries ago, now, but I think that is what the concern is 
about this. And I am glad that Congress is actually taking--
making an effort to do it. I know, in the State of Texas, our 
legislature actually has already changed the law because of the 
Supreme Court case, and that is where most eminent domain laws 
come from, on the State level, anyway. But I am glad to see 
local governments and State governments are responding. And if 
we can, on our Federal level, I am glad to be able to do it. 
And, Mr. Chairman, again, I ask that my full statement be 
placed in the record.
    Mr. Stearns. And I thank my colleague. If there are no more 
opening statements, we will move to the panel.
    We have Professor Michael Ramsey, Professor of Law, the 
University of San Diego Law School; we have Mr. Steven 
Anderson, Castle Coalition Coordination, the Institute for 
Justice; Mr. Hilary O. Shelton is direction of the NAACP in the 
Washington Bureau; Mr. Jeff Finkle, President and CEO of 
International Economic Development Council; and last we have 
Mr. James B. DeLong, Senior Fellow and Director of the 
IPCentral Information Progress and Freedom Foundation.
    And with that, we welcome all of you. And Professor Ramsey, 
we will start with your opening statement. And if you can, just 
pull the mike close to you and make sure it is on. And I think 
you can get it a little closer to you. There you go, there you 
go. Good.

 STATEMENTS OF MICHAEL D. RAMSEY, PROFESSOR OF LAW, UNIVERSITY 
 OF SAN DIEGO LAW SCHOOL; STEVEN D. ANDERSON, CASTLE COALITION 
    COORDINATOR, INSTITUTE FOR JUSTICE; HILARY O. SHELTON, 
 DIRECTOR, NAACP, WASHINGTON BUREAU; JEFFERY FINKLE, PRESIDENT 
AND CEO, INTERNATIONAL ECONOMIC DEVELOPMENT COUNCIL; AND JAMES 
V. DELONG, SENIOR FELLOW AND DIRECTOR, IPCENTRAL.INFO, PROGRESS 
                     AND FREEDOM FOUNDATION

    Mr. Ramsey. Thank you very much. I thank you very much for 
having me here to express my views on this case. I wanted to 
address Kelo from the perspective of constitutional law, and I 
have two fairly simply points. The first is that the decision 
was wrongly decided. And the second is that Congress has power 
to substantially correct it, if it so chooses.
    The Fifth Amendment states that private property cannot be 
taken for public us without just compensation. The clear 
negative implication from that is, that any taking must be for 
``public use,'' which has historically been understood to mean 
a direct benefit to the public. Normally, as we have heard 
already, this is understood to mean either actual use by the 
public, that is, property open to the public, use by the 
government on behalf of the public, or use by a common carrier, 
such as a railroad, with a legal obligation to serve the 
public. Kelo, in contrast, allowed taking of private homes to 
make way for a private economic development, much of which, at 
least, would not be open to the public at all. The benefit to 
the public was wholly indirect. Different private use of the 
property, it was said, would lead to higher taxes and more jobs 
and thus a benefit to the community indirectly.
    The court reached its result by rewriting the 
Constitution's language. The court--and it did not make any 
bones about what it was doing. It rejected ``use by the public 
as the proper definition of public use.'' Instead, it found, 
``the diverse and always evolving needs of society'' require it 
to ``embrace the broader and more natural interpretation of 
public use'' as ``public purpose,'' then applied the public 
purpose requirement to give substantial, indeed, I would say, 
essentially complete deference to the city to determine what 
would constitute a public purpose. If any conceivable benefit 
to the public could be imagined, the court said, then the city 
could go forward with the condemnation. As a result, as Justice 
O'Connor said in dissent, ``the specter of condemnation hangs 
over all property.'' Or, if I could put it in my own words, if 
you do not use your property to the satisfaction of the 
government, then the government can take it away and give it to 
someone else who will use it as they think would be better.
    Now, I find the court's decision to be deeply corrosive of 
constitutional rights, because, if the court believes that a 
right stated in the Constitution's text can be eliminated, 
rewritten, as in effect they did in Kelo, to serve the 
``diverse and always evolving needs of society,'' meaning the 
needs of the government, then we effectively have no 
constitutional rights, beyond what five members of the court 
think is appropriate to place on government at any particular 
time. That is contrary to the way we understand the written 
Constitution to operate; to be written limitations upon the 
power of government to act against the people.
    So finally, let me turn to what Congress is empowered to do 
about this, if it so chooses. Congress cannot directly overrule 
the Supreme Court, as the Supreme Court held in the Boerne v. 
Flores case, with respect to the Religious Freedom Restoration 
Act some years ago. However, Congress can use its spending 
power to limit the use of Federal money in projects that rely 
on private takings, or perhaps under current law, to limit the 
use of Federal money by any State and local entity that uses 
private takings in that project or elsewhere. This is on the 
authority of the case of South Dakota v. Dole from the 1980's. 
Further, Congress can use its commerce power to prohibit 
private takings in projects that operate in interstate 
commerce. Under current law, the definition of Congress' 
interstate commerce power is quite broad, particularly, as held 
in the most recent case of Raich v. Gonzales just this term. 
And many, if not most, projects that could use private takings, 
in the way Kelo imagined, could, I think, also be limited by 
Congress' interstate commerce power.
    In conclusion, the combination of spending power and 
interstate commerce power will likely give Congress the ability 
to constitutionally correct the court's error and restore the 
property rights guaranteed by the Constitution. Thank you.
    [The prepared statement of Michael D. Ramsey follows:]

 Prepared Statement of Michael D. Ramsey, Professor of Law, University 
                        of San Diego Law School

    I thank the Committee for the opportunity to express my views of 
the protection of private property rights after the Supreme Court's 
decision in Kelo v. City of New London. My views are, in sum, as 
follows.
    (1) The plain text of the Constitution, and its undisputed 
historical understanding, is that the government's power to take 
private property by eminent domain is limited by the Fifth Amendment to 
situations in which the property will be put to ``public use.'' This 
means situations in which the property will be used by the government 
itself to fulfill one of the traditional public functions of 
government, such as providing a park or a highway, or situations in 
which the property is operated by a ``common carrier,'' such as a 
railroad, with an obligation to serve the public.
    (2) In Kelo v. City of New London, the U.S. Supreme Court greatly 
reduced this protection for private property. It ruled that the City 
could seize and demolish private homes to make way for private office 
buildings and other private development that the City believed would 
increase its tax revenues and create new jobs, even though the land 
would be privately owed and not open to the public.
    (3) The Court did not pretend to base its conclusion upon the text 
and historical understanding of the Constitution. Instead, it said that 
the evolving modern needs of society required that it substitute the 
phrase ``public purpose'' for the Constitution's phrase ``public 
use''--so that the government could seize private land any time that 
seizure would facilitate ``economic development.'' As Justice O'Connor 
pointed out in dissent, this effectively removes all constitutional 
limits on the eminent domain power.
    (4) The Kelo decision is an attack, not only upon private property 
rights, but upon the whole idea of constitutional rights. If a right 
written into the text of the Constitution can be altered by five 
members of the Supreme Court simply because they believe that the 
evolving modern needs of government require it to give way, then we 
have no fixed rights, but only those rights the Court is willing to 
accept at any given time.
    (5) Congress can remedy the Court's error in several ways. It 
cannot directly overrule the Court. However, it can, for example, use 
its spending power to insist that no federal money be spent in any 
project that takes private property for private use. It can use its 
commerce power to prohibit the operation in interstate commerce of any 
project that take private property for private use. Using these powers, 
it can largely restore the rights denied in Kelo.

         I. THE CONSTITUTION'S PROTECTION FOR PRIVATE PROPERTY

    The plain text of the Constitution, and its undisputed historical 
understanding, is that the government's power to take private property 
by eminent domain is limited to situations in which the property will 
be put to ``public use.'' The Fifth Amendment, made applicable to 
states and local governments by the Fourteenth Amendment, provides: 
``[N]or shall private property be taken for public use, without just 
compensation.'' The most obvious meaning of this provision is that if 
the government wants to take private property for ``public use,'' it 
must pay ``just compensation''--thus assuring that the public a whole, 
not just the property owner, bears the cost.
    Although the text does not say so in exactly these words, the clear 
and undisputed indication is that private property may not be taken, 
other than for ``public use,'' under any circumstances. Otherwise, the 
clause would be incoherent: it would mean that the government could 
take private property for private use without paying any compensation 
at all. No court or commentator reads the clause in that way. Rather, 
everyone agrees that the Fifth Amendment, as historically understood, 
imposes two restrictions on the eminent domain power: the property must 
be taken ``for public use'' and the government must pay ``just 
compensation.''
    The question here, then, is the meaning of ``public use.'' As a 
historical matter, that phrase meant exactly what it appears to mean. 
Most obviously, it refers to situations in which the property will be 
used by the government itself to fulfill one of the traditional public 
functions of government, such as providing a park or a highway. 
Additionally, it may refer to situations in which the property will be 
operated by a ``common carrier,'' such as a railroad, with an 
obligation to serve the public. It emphatically did not include 
situations in which the government transferred property from one 
private owner to another. Under no possible meaning of the phrase could 
that be considered taking land ``for public use.''

             II. THE DECISION IN KELO V. CITY OF NEW LONDON

    In Kelo v. City of New London, 125 S.Ct. 2655 (2005), the U.S. 
Supreme Court greatly reduced the Fifth Amendment's protection for 
private property. It ruled that the City could take private homes to 
make way for private office buildings and other private development 
that the City believed would increase its tax revenues and create new 
jobs, even though, after the taking, the land would be privately owed 
and not open to the public. As the Court explained: ``The City has 
carefully formulated an economic development plan that it believes will 
provide appreciable benefits to the community, including--but by no 
means limited to--new jobs and increased tax revenue.'' (at p. 2665). 
In particular, the Court concluded, the plaintiffs' private homes could 
be seized and demolished, and replaced by private ``research and office 
space'' that would ``complement'' an adjacent facility planned by 
Pfizer, Inc., the multinational pharmaceuticals company. (at. p. 2659; 
dissent at p. 2671-72).
    The Court specifically held that ``promoting economic development'' 
qualifies as a ``public use'' of property under the Fifth Amendment. As 
it concluded, ``[p]romoting economic development is a traditional and 
long accepted function of government,'' and ``the City's interest in 
the economic benefits to be derived from the development'' on the land 
taken from the plaintiffs--by which the Court principally meant 
increased tax revenue from the expected new commercial use--had enough 
of a ``public character'' to satisfy the Amendment. (p. 2665).
    The Court added that it would not second-guess the City's 
determination that the re-development would, in fact, boost economic 
development and hence tax revenues. As Justice Kennedy acknowledged in 
concurrence, the Court would uphold a taking ``as long as it is 
rationally related to a conceivable public purpose'' (p. 2669). Under 
this very low standard, it is hard to imagine any seizure of private 
property being unconstitutional under the ``public use'' requirement. 
As Justice O'Connor stated in dissent,
          Under the banner of economic development, all private 
        property is now vulnerable to being taken and transferred to 
        another private owner, so long as it might be upgraded--i.e., 
        given to an owner who will use it in a way that the legislature 
        deems more beneficial . . .
          [The Court] holds that the sovereign may take private 
        property currently put to ordinary private use, and give it 
        over for new, ordinary private use, so long as the new use is 
        predicted to generate some secondary benefit for the public--
        such as increased tax revenue, more jobs, maybe even aesthetic 
        pleasure. But nearly any lawful use of real private property 
        can be said to generate some incidental benefits to the public. 
        Thus, if predicted (or even guaranteed) positive side effects 
        are enough to render transfer from one private party to another 
        constitutional, then the words ``for public use'' do not 
        realistically exclude any takings, and thus do not exert any 
        constraint on the eminent domain power. (pp. 2671, 2675)

                 III. THE BASIS OF THE COURT'S DECISION

    The Kelo Court did not pretend to base its conclusion upon the 
words and historical understanding of the Constitution. Instead, it 
effectively admitted that it was re-writing the key phrase in the Fifth 
Amendment to produce what it thought was a better outcome. According to 
the Court, modern needs required it to substitute the phrase ``public 
purpose'' for the Constitution's phrase ``public use.'' This would 
allow the government to seize private land and transfer it to other 
private parties any time that such transfer would facilitate ``economic 
development,'' even though neither the government nor the public would 
end up owning or using the land.
    Indeed, in a move of Orwellian proportions, the Court specifically 
rejected `` `use by the public' as the proper definition of public 
use.'' (p. 2663). Instead, it declared that ``the diverse and always 
evolving needs of society'' required it to ``embrace[] the broader and 
more natural interpretation of public use as `public purpose.' '' (at 
p. 2663).
    Only this re-definition allowed the Court to reach its conclusion 
that ``economic development'' in the sense of (supposedly) higher tax 
revenues satisfied the Fifth Amendment. It is at least plausible to 
say, as the Court did, that the New London development plan has a 
``public purpose,'' but no possible stretch of language would allow one 
to say that the City's plan allowed ``public use'' of the property.
    The Court purported to be following prior precedent in reaching 
these conclusions. It is true that at least two prior decisions had 
allowed a transfer of property from one private owner to another, 
without any guarantee of public use. Hawaii Housing Authority v. 
Midkiff, 467 U.S. 229 (1984); Berman v. Parker, 348 U.S. 26 (1954). 
These decision were themselves in some tension with the plain language 
of the Constitution, and illustrate the danger of bending 
constitutional rules even for the best of purposes. But as Justice 
O'Connor pointed out in her Kelo dissent (p. 2674-75), Midkiff and 
Berman only created a limited exception to the general rule of ``public 
use.'' In both cases, prior to the taking the property had been used in 
a way that was harmful to the public interest. Kelo abandoned any such 
limitation. No one argued that there was anything injurious about the 
plaintiffs' use of their property in Kelo (these are ``well-maintained 
homes'') (p. 2675). Instead, Kelo allows seizure whenever the 
government thinks some better use (not a non-injurious use) could be 
made of the property. As Justice O'Connor concluded, this effectively 
eliminates any constitutional limit on the eminent domain power.

                  IV. THE EFFECT ON CONSTITUTIONAL LAW

    The Kelo decision is an attack, not only upon private property 
rights, but upon the whole idea of constitutional rights. If a right 
written into the text of the Constitution can be eliminated by five 
members of the Supreme Court simply because they believe that ``the 
diverse and always evolving needs of society'' require it to give way, 
then we have no fixed rights, nor, for that matter, any fixed structure 
of government. Everything depends upon what the Court thinks most 
useful at any particular moment.
    Such an approach is contrary to the basic function of a written 
Constitution. The reason a phrase such as ``public use'' is written 
into the Constitution is so that it--and not some other standard, such 
as ``public purpose''--is the measure of our rights. This approach is 
also contrary to the basic function of a constitutional court. As 
Alexander Hamilton argued in Federalist 78, ``A constitution is, in 
fact, and must be regarded by the judges as, a fundamental law''; thus 
he referred to ``that inflexible and uniform adherence to the rights of 
the Constitution, and of individuals, which we perceive to be 
indispensable in the courts of justice.'' Just as courts exceed their 
authority by inventing new limits on government that do not exist in 
the written Constitution, they shirk their duty when they fail to 
enforce rights that do exist in the written Constitution.

          V. HOW CONGRESS MAY RESTORE PRIVATE PROPERTY RIGHTS

    Congress can remedy the Court's attack upon property rights in 
several ways. It cannot directly overrule the Court on a matter of 
constitutional law. In parallel circumstances, the Supreme Court held 
that Congress lacked power to overturn a constitutional holding by 
statute, even though Congress sincerely believed that the Court had 
failed to enforce individual rights guaranteed by the plain text of the 
Constitution. Boerne v. Flores, 521 U.S. 507 (1997) (invalidating part 
of the Religious Freedom Restoration Act, which sought to correct the 
Court's perceived misinterpretation of the First Amendment's Free 
Exercise Clause).
    However, Congress has a number of constitutional options available. 
First, it can declare that, with respect to the exercise of eminent 
domain power by the U.S. government, the constitutional rule of 
``public use'' remains in force. There is precedent for this approach: 
the Religious Freedom Restoration Act directed that federal laws would 
remain subject to the constitutional rule of the Free Exercise Clause, 
as Congress understood it, despite the Court's contrary holding. No one 
doubts that this part of the Act is constitutional, and remains in 
effect: Congress can always limit the scope of federal action.
    Congress also has several options for limiting the scope of state 
and local government exercise of eminent domain power. Under current 
law, Congress may use its spending power to insist that no federal 
money be spent in any state or local project that takes private 
property for private use. South Dakota v. Dole, 438 U.S. 203 (1987). If 
the limitation is strictly linked to state and local projects that 
themselves use federal money, the limitation would not be at all 
constitutionally problematic; even the dissenting opinion in South 
Dakota would uphold such a provision. A more aggressive approach would 
ban any state or local entity that takes private property for private 
use from receiving any federal money for any redevelopment project (or, 
even more controversially, from receiving any federal money for any 
purpose). The less direct the link between the federal money and the 
state or local taking, the more constitutionally-suspect the law would 
become.
    Finally, under current law, Congress can use its commerce power to 
prohibit any project that takes private property for private use, if 
the project operates in or substantially affects interstate commerce. 
Because current law defines Congress' interstate commerce power quite 
broadly, Gonzales v. Raich, 125 S.Ct. 2195 (2005), this would likely 
reach most ``economic development'' projects such as the one proposed 
in New London. Even under the dissent's view in Raich, a key element 
was that the activity in that case was non-economic, and thus (said the 
dissent) beyond Congress' power. Here, the economic elements would be 
much greater, and thus the argument for Congress' power would be 
correspondingly stronger. It is worth noting, though, that this broad 
reading of Congress' interstate commerce power (that is, that it 
reaches all economic activity) remains controversial in some circles, 
and it is possible that some (though probably not many) redevelopment 
project could be considered so localized as to be beyond Congress' 
power.

    Mr. Stearns. I thank the gentleman. Mr. Anderson.

                 STATEMENT OF STEVEN D. ANDERSON

    Mr. Anderson. Thank you, Chairman Stearns and Ranking 
Member Schakowsky for the opportunity to testify today about 
Kelo v. New London. The subcommittee is to be commended for 
examining this issue and this misuse of government power. I 
work for the Institute for Justice, the nonprofit law firm that 
represented the plaintiffs in the New London case. It is a law 
firm that is dedicated to defending the individual rights of 
individuals and protecting the basic notions of a free society.
    I personally work with homeowners and small business owners 
around the country to fight eminent domain for private 
development. In the wake of the Kelo case, we have launched our 
Hands Off My Home campaign, which is a initiative, an 
aggressive initiative, to effect real change at the Federal, 
State, and local level, and it is that desire to do that that 
brings me here today.
    In Kelo, a narrow majority of the Supreme Court decided 
that under the United States Constitution, property could 
indeed be taken for another use that would potentially generate 
more jobs and taxes, as long as the project was pursuant to a 
development plan. The Kelo case was, unfortunately, the final 
signal that the United States Constitution, at least according 
the Supreme Court, provides no protection for private property 
rights for any American. Indeed, the court ruled that it is 
okay to use the power of eminent domain when there is a mere 
possibility that something else could make more money than the 
homes or small businesses that currently occupy the land. It is 
no wonder, then, as the ranking member mentioned, that Justice 
O'Connor remarked in her dissent that the specter of 
condemnation hangs over all property.
    Because of this threat, there has been a considerable 
public outcry against this closely divided decision. 
Overwhelming majorities in every poll I have seen have 
overwhelming said the Kelo decision was wrong. Several bills 
have been introduced in the House and Senate, which shows that 
there is bipartisan support against the abuse of eminent 
domain. Eminent domain in the early days of this Republic was 
called the despotic power, because it is the power to force 
citizens from their homes and small businesses. Because the 
founders were acutely aware of this power, the Fifth Amendment 
provides a simple restriction: nor shall private property be 
taken for public use without just compensation.
    As the chairman mentioned, historically, with very few 
exceptions, the power of eminent domain was used for things 
that the public actually used, schools, courthouses, roads, and 
post offices. Over the last 50 years, particularly after Berman 
v. Parker in a 1954 Supreme Court decision, the meaning of 
public use has expanded to include ordinary private uses, like 
condominiums and big-box stores. After Berman v. Parker, the 
Supreme Court effectively opened a Pandora's Box and now 
properties are routinely taken pursuant to redevelopment 
statutes when there is absolutely nothing wrong with them, 
except that some well-heeled developer covets them and the 
government hopes to increase its tax revenue.
    We did a study from 1998 to 2002 that showed there were 
more than 10,000 actual or threatened condemnations around this 
country for private use. This number was reached in counting 
properties that were mentioned in the local news report, and 
because of this, it is a gross underestimation. In Connecticut, 
for instance, we only found 31 examples, but Connecticut also 
keeps track of its economic development condemnations and they 
found 543.
    Now that the Supreme Court has actually sanctioned the 
abuse of eminent domain in Kelo, the floodgates to abuse have 
further been thrown open. Home and business owners have every 
reason to be very, very worried. Despite the fact that so many 
abuses were already occurring, since the decision, local 
governments have become further emboldened to take property for 
private development. For instance, in Freeport, Texas, just 
hours after the Kelo case came down, officials in Freeport 
began legal filings to take away two waterfront businesses to 
hand over to another. In Sunset Hills, Missouri, a couple of 
weeks after the Kelo ruling, Sunset Hills officials voted to 
allow the combination of 85 homes and small businesses for a 
shopping center. In Oakland, California, John Revelli's tire 
shop that he has owned since 1949 was taken. What Revelli said 
to the paper was, we thought we would win, but the Supreme 
Court took away my last chance.
    Courts are already using the decision to reject challenges 
by owners to the taking of their property for other private 
parties. On July 6, 2005, a court in St. Louis, Missouri relied 
on Kelo in reluctantly upholding the taking of a home for a 
shopping mall. The judge commented, the United States Supreme 
Court has denied the Alamo reinforcements. Perhaps the people 
will clip the wings of eminent domain in Missouri, but today in 
Missouri it soars and devours.
    Of course, Federal agencies take property for public uses, 
like military installations, Federal parks, Federal buildings. 
These are all legitimate uses of the Fifth Amendment of the 
Constitution. While agencies themselves generally do not take 
property and transfer the private properties, they certainly do 
fund them. Thus, Federal money does currently support the abuse 
of eminent domain for private commercial development. A few 
examples include New London, Connecticut. Two million dollars 
in funds from the Economic Development Authority were used for 
that project. In St. Louis, Missouri, 200 units of housing, 
including some owned by a local ministry, were taken pursuant 
to Housing and Urban Development block grants. St. Luke's 
Pentecostal Church was taken from the congregation, who is now 
relegated to the basement that they owned before, based on HUD 
funds. HUD was involved in the Toledo, Ohio expansion of a 
Daimler-Chrysler Jeep manufacturing plant. Ardmore, 
Pennsylvania, there is a transit, part of a project in Ardmore, 
Pennsylvania, but it also involves a retail and residential 
development.
    The Kelo decision cries out for congressional action. Even 
Justice Stevens, as a ranking member, suggested--stated in a 
recent speech that he believes eminent domain for economic 
development is bad policy. Congress and this subcommittee are 
to be commended for their efforts to provide protections that 
the court itself has denied.
    As the professor mentioned, Congress has the power to deny 
Federal funding to projects that use eminent domain for private 
commercial development, and to deny Federal economic funding to 
government entities that abuse eminent domain in this way. 
Congress may restrict Federal funding under the case of South 
Dakota v. Dole. One of the most important requirements, though, 
is that there be a relationship between the Federal interests 
and the funded program, and that Congress be clear about the 
conditions under which Federal funds will be restricted. The 
purpose of Federal funds is to aid States in their various 
development projects. If Congress chooses to only fund projects 
or agencies that conduct development without using eminent 
domain to transfer property to private developers, it may 
certainly do so. Development is not the problem. It occurs 
every day across the country without eminent domain and will 
continue to do so. A very recent example is in Scottsdale, 
Arizona, where they continue to lift free development area 
designations, and as a result of that, a billion dollars in 
development funds have poured into that city.
    Mr. Stearns. Can I have you sum up pretty soon?
    Mr. Anderson. Sure. Eminent domain sounds like an abstract 
issue, but it affects real people. Real people lose the homes 
they love and watch as they are replaced with condominiums. 
Real people lose the businesses they count on to put food on 
the table and watch as they are replaced with shopping malls. 
And all this happens because localities find condominiums and 
malls preferable to modest homes and small businesses. Federal 
law currently allows the expending of Federal funds to support 
condemnations for the development of private developers. By 
doing so, it encourages this abuse nationwide. Using eminent 
domain so that another richer, better connected person may live 
on the land you used to own, tells Americans that their hopes, 
dreams and hard work do not matter as much as money and 
political influence. The use of eminent domain for private 
development has no place in a country built on traditions of 
independence, hard work, and the protection of property rights.
    Again, I thank this--opportunity to testify.
    [The prepared statement of Steven D. Anderson follows:]

Prepared Statement of Steven D. Anderson, Castle Coalition Coordinator, 
                         Institute for Justice

    Thank you for the opportunity to testify regarding eminent domain 
abuse, an issue that's finally getting significant national attention 
as a result of the U.S. Supreme Court's dreadful decision in Kelo v. 
City of New London. This subcommittee is to be commended for responding 
to the American people by examining this misuse of government power.
    My name is Steven Anderson and I am the Coordinator of the Castle 
Coalition, a project of the Institute for Justice. The Castle Coalition 
is a nationwide network of grassroots activists committed to ending 
eminent domain abuse through outreach and activism. The Institute for 
Justice is a non-profit public interest law firm dedicated to defending 
the fundamental rights of individuals and protecting the basic notions 
of a free society. One of the Institute for Justice's core issues is 
private property rights and we are the nation's leading critic of and 
legal advocate against the abuse of eminent domain laws. To this end, 
we represented the homeowners in the Kelo case and publish Public 
Power, Private Gain, a report about the use of eminent domain for 
private development throughout the United States, which is available 
online at www.castlecoalition.org/report.
    I personally work with home and business owners throughout the 
country to combat eminent domain for private development. In the wake 
of the Kelo decision, we launched our Hands Off My Home campaign, an 
aggressive and focused initiative to effect real change at the federal, 
state and local level. It is that desire that brings me here today.
    In Kelo, a narrow majority of the Court decided that, under the 
U.S. Constitution, property could indeed be taken for another use that 
would potentially generate more taxes and more jobs, as long as the 
project was pursuant to a development plan. The Kelo case was the final 
signal that the U.S. Constitution, according to the Court, simply 
provides no protection for the private property rights of Americans. 
Indeed, the Court ruled that it's okay to use the power of eminent 
domain when there's the mere possibility that something else could make 
more money than the homes or small businesses that currently occupy the 
land. It's no wonder, then, that the decision caused Justice O'Connor 
to remark in her dissent: ``The specter of condemnation hangs over all 
property. Nothing is to prevent the State from replacing any Motel 6 
with a Ritz-Carlton, any home with a shopping center, or any farm with 
a factory.''
    Because of this threat, there has been a considerable public outcry 
against this closely divided decision. Overwhelming majorities in every 
major poll taken after the Kelo decision have condemned the result. 
Several bills have been introduced in both the House and Senate to 
combat the abuse of eminent domain, with significant bipartisan 
support.

    THE USE OF EMINENT DOMAIN FOR PRIVATE DEVELOPMENT HAS BECOME A 
  NATIONWIDE PROBLEM, AND THE COURT'S DECISION IS ALREADY ENCOURAGING 
                             FURTHER ABUSE

    Eminent domain, called the ``despotic power'' in the early days of 
this country, is the power to force citizens from their homes and small 
businesses. Because the Founders were conscious of the possibility of 
abuse, the Fifth Amendment provides a very simple restriction: ``[N]or 
shall private property be taken for public use, without just 
compensation.''
    Historically, with very few limited exceptions, the power of 
eminent domain was used for things the public actually owned and used--
schools, courthouses, post offices and the like. Over the past 50 
years, however, the meaning of public use has expanded to include 
ordinary private uses like condominiums and big-box stores. The 
expansion of the public use doctrine began with the urban renewal 
movement of the 1950s. In order to remove so-called ``slum'' 
neighborhoods, cities were authorized to use the power of eminent 
domain. This ``solution,'' which critics and proponents alike consider 
a dismal failure, was given ultimate approval by the Supreme Court in 
Berman v. Parker. The Court ruled that the removal of blight was a 
public ``purpose,'' despite the fact that the word ``purpose'' appears 
nowhere in the text of the Constitution and government already 
possessed the power to remove blighted properties through public 
nuisance law. By effectively changing the wording of the Fifth 
Amendment, the Court opened a Pandora's box, and now properties are 
routinely taken pursuant to redevelopment statutes when there's 
absolutely nothing wrong with them, except that some well-heeled 
developer covets them and the government hopes to increase its tax 
revenue.
    The use of eminent domain for private development is widespread. We 
documented more than 10,000 properties either seized or threatened with 
condemnation for private development in the five-year period between 
1998 and 2002. Because this number was reached by counting properties 
listed in news articles and cases, it grossly underestimates the number 
of condemnations and threatened condemnations. Indeed, in Connecticut, 
the only state that actually keeps separate track of redevelopment 
condemnations, we found 31, while the true number of condemnations was 
543. Now that the Supreme Court has actually sanctioned this abuse in 
Kelo, the floodgates to further abuse have been thrown open. Home and 
business owners have every reason to be very, very worried.
    Despite the fact that so many abuses were already occurring, since 
the Kelo decision, local governments have become further emboldened to 
take property for private development. For example:

 Freeport, Texas Hours after the Kelo decision, officials in Freeport 
        began legal filings to seize some waterfront businesses (two 
        seafood companies) to make way for others (an $8 million 
        private boat marina).
 Sunset Hills, Mo. On July 12, less than three weeks after the Kelo 
        ruling, Sunset Hills officials voted to allow the condemnation 
        of 85 homes and small businesses for a shopping center and 
        office complex.
 Oakland, Calif. A week after the Supreme Court's ruling, Oakland city 
        officials used eminent domain to evict John Revelli from the 
        downtown tire shop his family has owned since 1949. Revelli and 
        a neighboring business owner had refused to sell their property 
        to make way for a new housing development. Said Revelli of his 
        fight with the City, ``We thought we'd win, but the Supreme 
        Court took away my last chance.''
 Ridgefield, Conn. The city of Ridgefield is proceeding with a plan to 
        take 154 acres of vacant land through eminent domain. The 
        property owner plans to build apartments on the land, but the 
        city has decided it prefers corporate office space. The case is 
        currently before a federal court, where the property owner has 
        asked for an injunction to halt the eminent domain proceedings. 
        Ridgefield officials directly cite the Kelo decision in support of
        their actions.
    Courts are already using the decision to reject challenges by 
owners to the taking of their property for other private parties. On 
July 26, 2005, a court in Missouri relied on Kelo in reluctantly 
upholding the taking of a home for a shopping mall. As the judge 
commented, ``The United States Supreme Court has denied 
the Alamo reinforcements. Perhaps the people will clip the wings of 
eminent domain in Missouri, but today in Missouri it soars and 
devours.'' On August 19, 2005, a court in Florida, without similar 
reluctance, relied on Kelo in upholding the condemnation of several 
boardwalk businesses for a newer, more expensive boardwalk development.

     FEDERAL FUNDS CURRENTLY SUPPORT EMINENT DOMAIN FOR PRIVATE USE

    Of course, federal agencies take property for public uses, like 
military installations, federal parks, and federal buildings, which is 
legitimate under the requirements of the Fifth Amendment. While these 
agencies themselves generally do not take property and transfer it to 
private parties, in the states many projects using eminent domain for 
economic development receive some federal funding. Thus, federal money 
does currently support the use of eminent domain for private commercial 
development. A few recent examples include:

 New London, Conn. This was the case that was the subject of the 
        Supreme Court's Kelo decision. Fifteen homes are being taken 
        for a private development project that is planned to include a 
        hotel, upscale condominiums, and office space. The project received 
        $2 million in funds from the federal Economic Development Authority.
 St. Louis, Mo. In 2003 and 2004, the Garden District Commission and 
        the McRee Town Redevelopment Corp. demolished six square blocks 
        of buildings, including approximately 200 units of housing, 
        some run by local non-profits. The older housing will be 
        replaced by luxury housing. The project received at least $3 
        million in Housing and Urban Development (HUD) funds, and may 
        have received another $3 million in block grant funds as well.
 New Cassel, New York. St. Luke's Pentecostal Church had been saving 
        for more than a decade to purchase property and move out of the 
        rented basement where it held services. It bought a piece of 
        property to build a permanent home for the congregation. The 
        property was condemned by the North Hempstead Community 
        Development Agency, which administers funding from HUD, for the 
        purpose of private retail development. As of 2005, nothing has 
        been built on the property, and St. Luke's is still operating 
        out of a rented basement.
 Toledo, Ohio. In 1999, Toledo condemned 83 homes and 16 businesses to 
        make room for expansion of a DaimlerChrysler Jeep manufacturing 
        plant. Even though the homes were well maintained, Toledo 
        declared the area to be ``blighted.'' A $28.8 million loan from 
        HUD was secured to pay for some parts of the project. The plant 
        ultimately employed far fewer people than the number Toledo 
        expected.
 Ardmore, Pa. The Ardmore Transit Center Project has some actual 
        transportation purposes. However, Lower Merion Township 
        officials are also planning to remove several historic local 
        businesses, many with apartments on the upper floors, so that 
        it can be replaced with mall stores and upscale apartments. The 
        project receives $6 million in federal funding, which went to 
        the Southeastern Pennsylvania Transit Authority. This is an 
        ongoing project in 2005.

CONGRESS CAN AND SHOULD TAKE STEPS TO ENSURE THAT FEDERAL FUNDS DO NOT 
                  SUPPORT THE ABUSE OF EMINENT DOMAIN

    The Kelo decision cries out for Congressional action. Even Justice Stevens, the author of the opinion, stated in a recent speech that he 
believes eminent domain for economic development is bad policy and hopes 
that the country will find a political solution. Congress and this 
subcommittee are all to be commended for their efforts to provide 
protections that the Court itself has denied.
    Congress has the power to deny federal funding to projects that use 
eminent domain for private commercial development and to deny federal 
economic development funding to government entities that abuse eminent 
domain in this way.
    Congress may restrict federal funding under the Spending Clause. 
The Supreme Court has laid out the test for any conditions that 
Congress places on the receipt of federal money in South Dakota v. 
Dole. The most important requirements are that there be a relationship 
between the federal interest and the funded program and that Congress 
be clear about the conditions under which federal funds will be 
restricted. The purpose of the federal funds is to aid states and 
cities in various development projects. If Congress chooses to only 
fund projects or agencies that conduct development without using 
eminent domain to transfer property to private developers, it may 
certainly do so.
    Development is not the problem--it occurs everyday across the 
country without eminent domain and will continue to do so. But 
developers everywhere need to be told that they can only obtain 
property through private negotiation, not public force.

THIS HOUSE IS CURRENTLY CONSIDERING SEVERAL GOOD APPROACHES TO CURBING 
                 THE ABUSE OF EMINENT DOMAIN NATIONWIDE

    H.B. 3405 achieves a vitally important goal. Americans throughout 
the country have expressed their dismay at the Kelo
     ruling, and this bill would provide desperately needed reform. 
First and foremost, it states in no uncertain terms that state and 
local governments will lose economic development funding if they take 
someone's home or business for private commercial development. H.R. 
3135 similarly restricts the use of eminent domain where federal funds 
are involved and provides for a common sense approach to the use of 
eminent domain by allowing it only for historic public uses or to cure 
harmful effects. H.R. 3315 prohibits the use of Housing and Urban 
Development funds where property is transferred from one private owner 
to another for commercial or economic development. H.R. 3083 and H.R. 
3087 explicitly provide that the term ``public use'' does not include 
economic development and applies to exercises of eminent domain through 
federal power or funding.
    These are appropriate responses. Congress provides significant 
funding throughout the country for economic development. Currently, 
that money is being used in projects that take property from one person 
and give it to another. Or it is being used in a way that gives a 
locality more money to spend on projects that take people's homes and 
businesses for economic development. If Congress wishes to ensure that 
federal money will not support the misuse of eminent domain, 
terminating economic development funds is the best approach.
    Moreover, like H. Res. 340, passed shortly after the Kelo
     decision and condemning the result, and H.J. Res. 60, a proposed 
constitutional amendment limiting private-to-private transfers except 
for public transportation purposes, all these bills represent a strong 
statement that this awesome government power should not be abused. Each 
is aimed at a commendable goal--restoring the faith of the American 
people in their ability to build, own and keep their homes and small 
businesses. Many states are presently studying the issue and 
considering legislative language, and they will most certainly look to 
any bill passed by Congress as an example. The bills also specifically 
tell state and local government entities what funds they risk losing. I 
suggest, however, the bills be amended to spell out even more 
explicitly under what conditions local government will forfeit federal 
economic development funding. I would also make sure to provide 
definitions that are as unambiguous as possible. Specificity and 
clarity are the most important requirements of any law that potentially 
restricts federal funding.

                               CONCLUSION

    Eminent domain sounds like an abstract issue, but it affects real 
people. Real people lose the homes they love and watch as they are 
replaced with condominiums. Real people lose the businesses they count 
on to put food on the table and watch as they are replaced with 
shopping malls. And all this happens because localities find condos and 
malls preferable to modest homes and small businesses. Federal law 
currently allows expending federal funds to support condemnations for 
the benefit of private developers. By doing so, it encourages this 
abuse nationwide. Using eminent domain so that another, richer, better-
connected person may live or work on the land you used to own tells 
Americans that their hopes, dreams and hard work do not matter as much 
as money and political influence. The use of eminent domain for private 
development has no place in a country built on traditions of 
independence, hard work, and the protection of property rights.
    Again, thank you for the opportunity to testify before this 
committee.

    Mr. Stearns. Now, Mr. Shelton, welcome.

                 STATEMENT OF HILARY O. SHELTON

    Mr. Shelton. Thank you very much, Chairman Stearns, Ranking 
Member Schakowsky, a good friend to the NAACP, ladies and 
gentlemen of the panel, for inviting me here today to talk 
about property rights in a post-Kelo world. And you mentioned, 
my name is Hilary Shelton and I am director of the NAACP's 
Washington Bureau, our Nation's oldest and largest and most 
widely recognized grassroots-based civil rights organization.
    Given our Nation's sorry history of racism, bigotry, and a 
basic disregard on the part of too many elected and appointed 
officials of concerns and the rights of racial and ethnic 
minority Americans, it should come as no surprise the NAACP was 
very disappointed by the Kelo decision.
    Racial and ethnic minorities are not just affected more 
often by the exercise of eminent domain power, but we are 
almost always affected differently and more profoundly. The 
expansion of eminent domain to allow the government or its 
designees to take property simply by asserting that it can put 
the property to a higher use will systematically sanction 
transfers from those with less resources to those with more. 
The history of eminent domain is rife with the abuse of 
specifically targeting racial and ethnic minorities and poor 
neighborhoods. Indeed, the displacement of African-Americans in 
urban renewal projects are so intertwined that urban renewal 
was often referred to as black removal. The vast disparities of 
African-Americans and other racial and ethnic minorities that 
have been removed from their due to eminent domain actions are 
well documented. For your information, I have included examples 
of these documented disparities in my written testimony.
    The motives behind the disparities are varied. They include 
segregation and maintaining the insulation--the isolation of 
poor minority and otherwise outcast populations. Furthermore, 
condemnations in low-income or predominantly minority 
neighborhoods are often easier to accomplish because these 
groups are less likely, or are often unable, to contest the 
action either politically or in our Nation's courts.
    Last, municipalities often look to areas with low property 
values when deciding where to pursue redevelopment projects 
because it costs the condemning authority less, and thus the 
State and local governments gain more financially when they 
replace areas of low property values with those with higher 
property values. Thus, even if you dismiss all the motivations 
allowing municipalities to pursue eminent domain for private 
development, as was upheld in the Supreme Court case of Kelo, 
will clearly have disparate impact on African-Americans and 
other racial and ethnic minorities in our country. Not only are 
African-Americans and other racial and ethnic minorities more 
likely to be subjected, or subject to the eminent domain, but 
the negative impact of these takings of these women, men, and 
families is much greater.
    First, the term just compensation, when used in eminent 
domain cases, is almost always a misnomer. The fact that a 
particular property is identified or designated for economic 
development almost certainly means that the markets are 
currently undervaluing that property, or that the property has 
some trapped valued that the market has not yet recognized.
    Moreover, when an area is taken for economic development, 
low-income families are driven out of their communities and 
find that they cannot afford to live in revitalized 
neighborhoods. The remaining affordable housing in the area is 
almost certain to become less so.
    Furthermore, the extent that such an exercise of takings 
power is more likely to occur in areas with significant racial 
and ethnic minority populations, and even assuming a proper 
motive on the part of the government, the effect will likely be 
to upset organized--likely to upset organized minority 
communities. This dispersion both eliminates established 
communities' support mechanisms, and has a deleterious effect 
on these groups' ability to exercise the little political power 
they may have established.
    In conclusion, allow me to reiterate that by allowing pure 
economic development motives to constitute public use for 
eminent domain purposes, State and local governments will now 
infringe on the property rights of those with less economic and 
political power with more regularity. And as I have testified 
today, these groups, low-income Americans, and a disparate 
number of African-Americans and other racial and ethnic 
minority Americans, are the least able to bear this burden. As 
I have discussed in my testimony, too many of our communities, 
the minority, the elderly, the low-income, have witnessed an 
abuse of eminent domain powers. Given this history of abuse, it 
is the hope of the NAACP that all legislative responses to Kelo 
to be sensitive to that.
    As this Congress advances these policies and works with the 
various interests to do so, we need to ensure that certain 
segments of our population that have long been voiceless in the 
takings issue have a voice. We need to understand how it has 
been easy to exploit these communities by exposing eminent 
domain, not only in the pursuit of economic development, but 
also in the name of addressing blight. Historically and today, 
it has been too easy to characterize minority, elderly and low-
income communities as blighted for eminent domain purposes and 
subject them to the will of the government. If the legislative 
purposes contain language that could potentially exclude these 
communities from protections against eminent domain abuses, we 
have failed in our responsibility to serve and to give a voice 
to these constituencies. These communities should be afforded 
the same right of protection that all homeowners, business 
owners, and other property owners will be afforded in a Federal 
policy response to Kelo.
    Additionally, in considering the interest of our 
communities, we raise a broader concern regarding the use of 
eminent domain for any purpose, including those purposes 
traditionally viewed as public purposes, such as highways, 
utilities, and waste disposal. Even these more traditional uses 
of eminent domain have disproportionately burdened those 
communities with the least political power, the poor, 
minorities, and working class families. Furthermore, it is not 
only our owners that suffer, but our renters, whether they be 
residents or small businesses, who are provided no protection 
and pay a heavy, uncompensated price when eminent domain is 
imposed. For these reasons, as the majority in Kelo suggest, 
there must be a sufficient process of protection for minority 
communities regardless of the purpose of however beneficial to 
the public. The process must be open and the participation of 
the communities needs to be guaranteed. This is the voice that 
our communities deserve.
    Thank you again, Chairman Stearns and Ranking Member 
Schakowsky and members of the committee for allowing me to 
testify before you today about the NAACP's position on eminent 
domain and the post-Kelo landscape. The NAACP stands ready to 
work the Congress and State and local municipalities to develop 
legislation to end eminent domain abuse while focusing on real 
community development concerns, like building safe, clean and 
affordable housing in established communities, with good 
schools, an effective health care system, small business 
development, and a significant, available living wage job pool.
    [The prepared statement of Hilary O. Shelton follows:]

  Prepared Statement of Hilary O. Shelton, Director, NAACP Washington 
                                 Bureau

    Thank you, Chairman Stearns, Ranking Member Schakowski and ladies 
and gentlemen of the panel for inviting me here today to talk about 
property rights in a post-Kelo world.
    My name is Hilary Shelton and I am the Director of the Washington 
Bureau for the National Association for the Advancement of Colored 
People, our Nation's oldest, largest and most widely recognized civil 
rights organization. We currently have more than 2,200 units in every 
state in our country.
    Given our Nation's sorry history of racism, bigotry, and a basic 
disregard on the part of too many elected and appointed officials to 
the concerns and rights of racial and ethnic minority Americans, it 
should come as no surprise that the NAACP was very disappointed by the 
Kelo decision. In fact, we were one of several groups to file an Amicus 
Brief with the Supreme Court in support of the New London, Connecticut 
homeowners.1
---------------------------------------------------------------------------
    \1\ The NAACP would like to offer our sincere gratitude and 
appreciation to the law firm of Bondurant, Mixson & Elmore, LLP, of 
Atlanta, Georgia, for their invaluable assistance in preparing the 
brief.
---------------------------------------------------------------------------
    Racial and ethnic minorities are not just affected more often by 
the exercise of eminent domain power, but we are almost always affected 
differently and more profoundly. The expansion of eminent domain to 
allow the government or its designee to take property simply by 
asserting that it can put the property to a higher use will 
systemically sanction transfers from those with less resources to those 
with more.
    The history of eminent domain is rife with abuse specifically 
targeting racial and ethnic minority and poor neighborhoods. Indeed, 
the displacement of African Americans and urban renewal projects are so 
intertwined that ``urban renewal'' was often referred to as ``Black 
Removal.'' The vast disparities of African Americans or other racial or 
ethnic minorities that have been removed from their homes due to 
eminent domain actions are well documented.
    A 2004 study estimated that 1,600 African American neighborhoods 
were destroyed by municipal projects in Los Angeles 2. In 
San Jose, California, 95% of the properties targeted for economic 
redevelopment are Hispanic or Asian-owned, despite the fact that only 
30% of businesses in that area are owned by racial or ethnic minorities 
3. In Mt. Holly Township, New Jersey, officials have 
targeted for economic redevelopment a neighborhood in which the 
percentage of African American residents, 44%, is twice that of the 
entire township and nearly triple that of Burlington County. Lastly, 
according to a 1989 study 90% of the 10,000 families displaced by 
highway projects in Baltimore were African Americans 4. For 
the committee's information, I am attaching to this testimony a 
document that outlines some of the higher-profile current eminent 
domain cases involving African Americans.
---------------------------------------------------------------------------
    \2\ Mindy Thompson Fullilove, Root Shock: How Tearing Up City 
Neighborhoods Hurts America, and What We Can Do About It, p.17
    \3\ Derek Werner: Note: The Public Use Clause, Common Sense and 
Takings, pp 335-350), 2001
    \4\ Bernard J. Frieden & Lynn B. Sagalyn, Downtown, Inc.: How 
America Rebuilds Cities, p.29
---------------------------------------------------------------------------
    The motives behind the disparities are varied. Many of the studies 
I mentioned in the previous paragraph contend that the goal of many of 
these displacements is to segregate and maintain the isolation of poor, 
minority and otherwise outcast populations. Furthermore, condemnations 
in low-income or predominantly minority neighborhoods are often easier 
to accomplish because these groups are less likely, or often unable, to 
contest the action either politically or in our Nation's courts.
    Lastly, municipalities often look for areas with low property 
values when deciding where to pursue redevelopment projects because it 
costs the condemning authority less and thus the state or local 
government gains more, financially, when they replace areas of low 
property values with those with higher property values. Thus, even if 
you dismiss all other motivations, allowing municipalities to pursue 
eminent domain for private development as was upheld by the US Supreme 
Court in Kelo will clearly have a disparate impact on African Americans 
and other racial and ethnic minorities in our country.
    As I said at the beginning of my testimony, not only are African 
Americans and other racial and ethnic minorities more likely to be 
subject to eminent domain, but the negative impact of these takings on 
these men, women and families is much greater.
    First, the term ``just compensation'', when used in eminent domain 
cases, is almost always a misnomer. The fact that a particular property 
is identified and designated for ``economic development'' almost 
certainly means that the market is currently undervaluing that property 
or that the property has some ``trapped'' value that the market is not 
yet recognizing.
    Moreover, when an area is taken for ``economic development,'' low-
income families are driven out of their communities and find that they 
cannot afford to live in the ``revitalized'' neighborhoods; the 
remaining ``affordable'' housing in the area is almost certain to 
become less so. When the goal is to increase the area's tax base, it 
only makes sense that the previous low-income residents will not be 
able to remain in the area. This is borne out not only by common sense, 
but also by statistics: one study for the mid-1980's showed that 86% of 
those relocated by an exercise of the eminent domain power were paying 
more rent at their new residences, with the median rent almost doubling 
5.
---------------------------------------------------------------------------
    \5\ Herbert J. Gans, The Urban Villagers: Group and Class in the 
life of Italian Americans, p.380
---------------------------------------------------------------------------
    Furthermore, to the extent that such exercise of the takings power 
is more likely to occur in areas with significant racial and ethnic 
minority populations, and even assuming a proper motive on the part of 
the government, the effect will likely be to upset organized minority 
communities. This dispersion both eliminates, or at the very least 
drastically undermines, established community support mechanisms and 
has a deleterious effect on these groups' ability to exercise what 
little political power they may have established. In fact, the very 
threat of such takings will also hinder the development of stronger 
ethnic and racial minority communities. The incentive to invest in 
one's community, financially and otherwise, directly correlates with 
confidence in one's ability to realize the fruits of such efforts. By 
broadening the permissible uses of eminent domain in a way that is not 
limited by specific criteria, many minority neighborhoods will be at 
increased risk of having property taken. Individuals in those areas 
will thus have even less incentive to engage in community-building and 
improvement for fear that such efforts will be wasted.
    In conclusion, allow me to reiterate the concerns of the NAACP that 
the Kelo decision will prove to be especially harmful to African 
Americans and other racial and ethnic minority Americans. By allowing 
pure economic development motives to constitute public use for eminent 
domain purposes, state and local governments will now infringe on the 
property rights of those with less economic and political power with 
more regularity. And, as I have testified today, these groups, low-
income Americans, and a disparate number of African Americans and other 
racial and ethnic minority Americans, are the least able to bear this 
burden.
    Thank you again, Chairman Stearns, Ranking Member Schkowski and 
members of the subcommittee, for allowing me to testify before you 
today about the NAACP position on eminent domain and the post-Kelo 
landscape. The NAACP stands ready to work with the Congress and state 
and local municipalities to develop legislation to end eminent domain 
abuse while focusing on real community development concerns like 
building safe, clean and affordable housing in established communities 
with good schools, an effective health care system, small business 
development and a significant available living wage job pool.

    Mr. Stearns. Thank you. Mr. Finkle, you are next and your 
comments are welcome.

                   STATEMENT OF JEFFERY FINKLE

    Mr. Finkle. Good afternoon, Chairman Stearns, Ranking 
Minority Schakowsky, subcommittee members, and fellow 
panelists. Thank you for the opportunity to be with you today. 
We hope that hearing about our experiences are helpful as you 
and your colleagues review the rights of State and local 
officials to regulate and exercise eminent domain. My name is 
Jeff Finkle and I serve as the president and CEO of the 
International Economic Development Council. IEDC is the premier 
membership organization dedicated to economic development. Like 
you and your colleagues, our 4,000 members work every day to 
create high quality jobs, development vibrant communities, and 
improve the quality of life in their communities.
    From IEDC's perspective, eminent domain is an economic 
development tool that allows local communities to assemble land 
for redevelopment projects that generate jobs, investment and 
tax base. We agree with the Supreme Court's decision in Kelo v. 
New London. It affirms eminent domain as an important tool for 
local governments, and leaves eminent domain decisions where 
they should be, in the hands of States and localities. The 
Supreme Court decision did not in any way expand the power of 
eminent domain; rather, the court simply upheld the 
longstanding inclusion of economic development as a public use.
    Eminent domain has succeeded in improving the economies of 
urban, suburban, and rural communities. For example, the city 
of Newport, Kentucky voted to condemn several properties to 
create Newport on the Levee, an entertainment complex that now 
attracts three million visitors a year and generating hundreds 
of jobs. This is a complete transformation of a community that 
once had a terrible reputation for poverty, blight, and crime.
    As many inner city residents know, missing essential 
services, such as local grocery stores, have been provided 
after land has been assembled using eminent domain. There is no 
question that eminent domain is a power that, like any 
government power, must be used prudently, and there are many 
built-in checks. Once such check is the public nature of the 
takings process. A few government or elected officials are 
willing to risk their position in pursuit of a project 
overwhelmingly opposed by their community.
    Communities impacted by Hurricanes Katrina and Rita are of 
special concern to us as well. While IEDC members in the region 
are grateful for the Federal Government's support of economic 
and infrastructure redevelopment, Gulf Coast communities 
impacted by the hurricanes will face incredibly complicated 
redevelopment challenges. In order to redevelop devastated 
communities, States and localities will first need to raze 
crumbling homes and businesses. We are concerned that proposed 
congressional legislation limiting the use of Federal funds 
from eminent domain would allow one holdout to stop the 
redevelopment of an entire distressed area. This would have the 
practical effect of thwarting the ability of communities with 
demolished, ruined infrastructure and begin redevelopment 
plans, further distressing an already devastated area. 
Traditional uses of eminent domain for elimination of slums and 
blights needs to be preserved.
    Should Congress act to prohibit the use of eminent domain 
for economic development purposes, the economies of many 
communities will, in fact, suffer. In fact, the Department of 
Defense has pit two cities against one another to protect an 
airfield and the subsequent jobs. Will it be Virginia Beach or 
will it be Cecil Field in Jacksonville, Florida, where, one, 
the Department of Defense needs 900 homes torn down in one 
community, or 27 homes acquired using eminent domain in another 
community? At a time when so many of our businesses and 
communities are being confronted with intense competition from 
the global economy, and areas of our cities and regional rural 
areas is in decline, Congress should be expanding its efforts 
to solve the problems of economic deterioration, not imposing 
restrictions on community growth and development.
    Thank you again for the opportunity to speak to you today. 
I am happy to answer questions you might have.
    [The prepared statement of Jeffery Finkle follows:]

Prepared Statement of Jeffery Finkle, President and CEO, International 
                      Economic Development Council

    Chairman Stearns, Ranking Member Schakowsky, and Subcommittee 
members, thank you for the opportunity to appear before you today. I am 
honored to be here and to discuss the experiences of economic 
development professionals. We hope our experiences can be an important 
source of information as Congress reviews the rights of local officials 
to exercise eminent domain in an effort to protect the economic health 
and vitality of their communities.
    My name is Jeff Finkle, and I am the President and CEO of the 
International Economic Development Council (IEDC.) IEDC is the premier 
membership organization dedicated to helping economic development 
professionals create high-quality jobs, develop vibrant communities and 
improve the quality of life in their regions. You and your colleagues 
here in Congress work with our members each and every day to create 
economically vibrant communities in your districts back home. IEDC 
provides information to its members on the appropriate use of eminent 
domain through two publications we have included at the end of our 
testimony.
    Before I begin my formal comments, I'd like to tell you about my 
experience in our profession. I have been in the economic development 
field for nearly 25 years and am the former U.S. Department of Housing 
and Urban Development (HUD) Deputy Assistant Secretary of Community 
Planning and Development during the Reagan Administration. In that 
role, I was HUD's Deputy Assistant Secretary in charge of the Urban 
Development Action Grant Program (UDAG), the Community Development 
Block Grant Program (CDBG), and the Housing Rehabilitation program from 
1981-1986. Since then I have been leading our professional association 
as our members build vibrant local economies.
    For our profession, eminent domain is an economic development tool 
that allows local communities to acquire and assemble land for new 
development projects that generate new jobs, investment and taxes. The 
Supreme Court's 5-4 decision in Kelo v. New London leaves eminent 
domain in the hands of states and affirms eminent domain as an 
important tool for local governments in the redevelopment and 
revitalization of economically distressed areas.
    The court stated in its opinion that the pursuit of economic 
development is a ``public use'' within the meaning of the Fifth 
Amendment's Takings Clause. The New London economic development project 
at issue in the case is similar to projects across the country aimed at 
revitalizing depressed communities.
    It is IEDC's understanding, based on conversations with attorneys 
familiar with the decision, that the Supreme Court decision did not in 
any way expand the power of eminent domain. Rather, the Court simply 
upheld the long-standing inclusion of economic development as a 
``public use.''
    It is therefore unlikely that the Supreme Court's decision will 
result in city officials exercising eminent domain randomly or without 
balanced consideration. The Court's decision affirmed years of 
interpretations allowing the use of eminent domain to redevelop our 
nations' communities and to protect our local economies.
    Judiciously used eminent domain is critical to the economic growth 
and development of cities and towns throughout the country. Assembling 
land for redevelopment can be an important element in the process of 
revitalizing local economies, creating much-needed jobs, and generating 
revenues that enable cities to provide essential services. When used 
prudently and in the sunshine of public scrutiny, eminent domain helps 
achieve a greater public good that benefits the entire community.
    There are many examples of the public benefit of the judicious use 
of eminent domain. One example of can be seen in the return of retail 
to our urban cores. Eminent domain has been crucial in encouraging 
retailers, particularly anchor tenant supermarkets, to locate in the 
heart of inner cities rather than on the periphery where they have 
traditionally positioned themselves. A combination of educational 
efforts, land assembly, and economic development incentives are 
encouraging the supermarkets that abandoned inner cities in the 1970s 
to return.
    For example, South Los Angeles, CA, a densely populated urban area 
that is critically underserved by retail, will soon have a vibrant 
shopping area thanks to the successful employment of eminent domain. 
The Slauson Central Shopping Center will be the first retail shopping 
center in the community in over 20 years. The supermarket-anchored 
shopping center will include a state-of-the-art grocery store along 
with small shop space, two freestanding commercial areas and a 
community Educational Training Center. The project will create 
approximately 150 new permanent jobs in the community and will bring 
grocery services close to thousands of low-income residents.
    Successful redevelopment projects facilitated by eminent domain are 
proving that there are underserved populations/markets, and that 
perceived or actual higher costs of doing business in inner cities can 
be absorbed by sales volume. Without the ability to exercise the power 
of eminent domain for redevelopment purposes, the public would be 
unable to support many inner-city retail projects, and those 
neighborhoods would continue to decline.
    Eminent domain has also strengthened suburban economies. In the 
early 1990's the city of Lakewood, CO was a Denver suburb at an 
economic crossroads due to a struggling shopping mall. Then, the 
Lakewood Reinvestment Authority and a developer decided to redevelop 
the mall into a mixed-use town center. The result is Belmar, 22 city 
blocks of stores, entertainment, office space, and residences that have 
emerged as the symbolic heart of the community and center of Denver's 
Metro West Side.
    Eminent domain has also helped our struggling rural communities. In 
March 2002, Shawnee County, Kansas exercised its power of eminent 
domain to acquire the last few remaining parcels of a 432-acre site 
intended in part for a new Target Corporation distribution center. 
Although two property owners fought the condemnation proceedings 
primarily on the grounds that the distribution center did not satisfy a 
``public use,'' the Kansas Supreme Court ultimately ruled that the 
taking of private property for industrial and economic development was 
in fact a valid public purpose. The $80 million, 1.3 million square-
foot warehouse distribution center opened in June 2004 to the tune of 
over 600 new jobs, with the expectation of adding an additional 400 
jobs within the next three years.
    Whether you represent an urban, suburban or rural area, the use of 
eminent domain is never the first choice of any community. The eminent 
domain process is time consuming and expensive; it is therefore the 
last resort pursued during a land assembly process. Many local 
authorities rarely exercise their power of eminent domain, particularly 
when it deals with occupied housing. Public officials who do use 
eminent domain comply with existing rules protecting individual 
property owners, and they have the ultimate accountability to the 
citizens and voters.
    There is no question that eminent domain is a power that, like any 
government power, must be used prudently, and there are many built in 
checks. One such check is the public nature of the takings process. 
Probing questions should be raised about any complex undertaking 
financed by taxpayers, and nothing in local government attracts more 
scrutiny or more criticism than eminent domain.
    In their majority opinion in Kelo, the Supreme Court refers 
favorably to New London's long engagement in an open and comprehensive 
planning process. There are many other examples of public officials 
engaging their constituents. When Lakewood, CO began the process of 
redeveloping their failing mall, the city underwent an extensive public 
process that over the course of one year established a citizens 
advisory committee and invited members of the community to comment on 
potential redevelopment options.
    Each of your states and localities legislates the use of eminent 
domain, and a public purpose or benefit needs to be clearly 
demonstrated. Authorities that abuse this privilege risk creating 
volatile political situations. Few government or elected officials are 
willing to risk their position and political stability in pursuit of a 
project overwhelmingly opposed by the community.
    In another check on abuse, the Fifth Amendment requires that anyone 
whose property is taken for a public use be fairly compensated, and in 
practice, most takings are compensated generously. In case after case, 
the majority of property owners willingly accept just compensation for 
their property. According to our research, some are compensated as much 
as 25% above market value for their property. Just compensation allows 
property owners to relocate with an equal or improved quality of life.
    Critics of the Kelo decision have said that it authorizes seizing 
the property of one person merely to give it to another. While it is 
true that once the public entity acquires title to the property, it is 
conveyed to a developer or end user to carry out the project, the 
public sector intervenes so that the private sector can bring much 
needed investment to a distressed area. Government agencies are not and 
should not be in the private real estate development business; 
therefore, the assembled land is typically leased or sold to the 
private sector for redevelopment. As a matter of policy, cities should 
not be in the long-discredited practice of building redevelopment 
projects; rather they should facilitate the use of private capital and 
private management to achieve the same end.
    The use of eminent domain has evolved over the years from a 
``bulldozer'' technique to today's careful surgical approach. In the 
1960s the federal government gave cities resources under the Urban 
Renewal Act to plow down hundreds of acres of land and thousands of 
homes and commercial buildings. That left many cities with land vacant 
for years. This policy has since been attacked by many as an 
inefficient use of resources. Today, economic development professionals 
wait until there is a specific market opportunity before we use eminent 
domain to acquire distressed properties. If your district's officials 
have to wait for land assembly holdouts, your communities will see jobs 
and market opportunities disappear.
    In closing, I would like to comment on pending eminent domain 
legislation. In response to the Kelo decision, Congress is offering 
legislation that would prohibit the use of federal funds for economic 
development projects that involve the exercise of eminent domain. 
Should Congress act to prohibit the use of eminent domain for economic 
development purposes, the economies of many Congressional districts 
will suffer. No municipality in America could use eminent domain to 
carry out an economic development project.
    Communities impacted by hurricanes Katrina and Rita are of special 
concern to us all. While IEDC members in the region are grateful for 
the billions of dollars the federal government has pledged to support 
economic and infrastructure redevelopment, gulf coast communities 
impacted by the hurricanes will face incredibly complicated and 
expensive redevelopment challenges. In order to redevelop devastated 
communities, states and localities will first need to raze crumbling 
homes and businesses.
    We are very concerned that proposed Congressional legislation 
limiting the use of federal funds for eminent domain would allow one 
landowner to veto the redevelopment of an entire distressed area. This 
would have the practical effect of thwarting the ability of communities 
to demolish ruined infrastructure and begin successful redevelopment 
plans, further distressing an already devastated area.
    In IEDC's opinion, Congress should not preempt or displace existing 
state and municipal laws that govern the local application of eminent 
domain. The Supreme Court's decision keeps the economic health of 
communities in the hands of local leaders who are not out to destroy 
communities, but rather who work for the best interests of their 
communities at large. State or federal bills prohibiting the use of 
eminent domain for economic development are job-killing pieces of 
legislation.
    Assembling land for redevelopment helps revitalize local economies, 
create much-needed jobs, and generate revenues that enable your 
communities to provide essential services. Exemplified by New London, 
eminent domain is used to breathe new life and give new hope to 
residents.
    Thank you again for the opportunity to speak with you today.

                   EMINENT DOMAIN GUIDING PRINCIPLES

1. When a public agency engages in land assembly, the process should be 
        open to community stakeholders such as residents and local 
        businesses.
2. Eminent domain should be employed as a last resort in the land 
        assembly process and only when a property owner, after 
        attempted negotiations, refuses to sell at a fair market value. 
        To protect landowners, independent appraisals should be 
        conducted.
3. All reasonable efforts should be made to avoid taking occupied 
        residences and active businesses. A community must carefully 
        weigh the benefits of redevelopment against the hardship 
        associated with displacement.
4. When eminent domain is used in the taking of occupied property, 
        relocation costs should be covered for the property owner. This 
        may also include providing assistance to homeowners in finding 
        a new home.
5. Before initiating the eminent domain process, municipalities should 
        carefully review the legal parameters of the process as 
        provided in their local charter. The process should be fully 
        documented and completely transparent.
6. States that only allow the use of eminent domain for blighted land 
        and property need to establish a clear definition of blight. 
        This will reduce ambiguity for municipalities initiating the 
        eminent domain process. Municipalities should establish a 
        standardized approach in land assembly and eminent domain to 
        provide consistent expectations amongst stakeholders.

                    Eminent Domain: Myth vs. Reality

    Myth 1: Eminent domain is a quick and low cost means of acquiring 
land.
    Reality: Eminent domain is more expensive and time consuming than 
the traditional method of land acquisition through negotiated purchase. 
Land acquired through eminent domain is often acquired at a price above 
fair market value. Unfortunately, the related legal fees frequently 
nullify any sales price premium benefits for the landowner. The 
acquiring agency is often affected even more by the premium price and 
legal costs associated with eminent domain.
    Myth 2: Eminent domain is typically used as the first option in the 
land assembly process.
    Reality: The eminent domain process is time consuming and 
expensive; it is therefore the last resort pursued during a land 
assembly process. Many local authorities rarely exercise their power of 
eminent domain.
    Myth 3: State and local authorities promote urban redevelopment for 
the sole purpose of increasing the tax base.
    Reality: Eminent domain is an important tool in revitalizing 
declining areas. Redevelopment projects remove blight, create jobs, and 
increase private investment in an area. Tax base growth is only one 
potential benefit.
    Myth 4: The use of eminent domain violates private property rights.
    Reality: Local and state authorities have the constitutional power 
to acquire property through eminent domain on the condition of just 
compensation.
    Myth 5: Eminent domain is a government tool used to strip 
individuals of their private property rights.
    Reality: Each state legislates its use of eminent domain. A public 
purpose or benefit generally needs to be clearly demonstrated. 
Authorities that abuse this privilege risk creating volatile political 
situations. Few government or elected officials are willing to risk 
their position and political stability in pursuit of a project 
overwhelmingly opposed by the community.
    Myth 6: Local authorities and private developers undertake land 
assembly and eminent domain without involving the community.
    Reality: Most local governments or redevelopment agencies 
incorporate community participation early on in a redevelopment 
initiative. There are many cases that demonstrate successful 
collaboration between community, private sector, and government 
representatives in the revitalization of distressed areas.
    Myth 7: The government employs eminent domain to take property from 
one owner and give it to another owner that is financially or 
politically stronger. State and local governments use eminent domain as 
part of corporate incentive packages that benefit specific businesses.
    Reality: Eminent domain is part of the land assembly process for 
redevelopment with the intent to remove blight and/or create jobs and/
or create housing. The public sector intervenes so that the private 
sector can bring in much needed investment in a distressed area. 
Government agencies are not in the private real estate development 
business, therefore, the assembled land is typically leased or sold to 
the private sector for redevelopment. Often the prices and terms of the 
deals are very favorable because 1) the location and characteristics of 
the property are otherwise very unfavorable, and/or 2) the private 
party can create or retain much-needed jobs.
    Myth 8: The flexible definition of blight facilitates the state's 
power in repossessing land.
    Reality: Each state has its own definition of blight. Some have a 
strict test for blight, requiring physical or economic decline. Others 
have a more flexible definition. A few states do not have a blight 
requirement as a condition of eminent domain, but require that the 
project lead to job creation. There have been some highly publicized 
cases of local governments who have abused the blight designation to 
justify government repossession of land. These negative cases highlight 
the need for states to clarify their intentions and incorporate 
community involvement in defining eminent domain regulations.
    Myth 9: The public money spent on assembling land for private use 
is tax money that will forever be lost to the community.
    Reality: Initial public money invested is recaptured through 
increased tax revenue generated by the increase in property values and 
retail sales. In a well-planned project, the return on investment 
usually exceeds the initial cost. Furthermore, the benefits of 
redevelopment go beyond tax recovery to include job creation and area 
revitalization.
    Myth 10: Land assembly and condemnation activities position a 
municipality as a real estate broker and developer in what has 
traditionally been private land deals. The free market can and will 
allow for redevelopment of older areas without any government 
intervention.
    Reality: In many cases, a large, blighted area is comprised of 
numerous small properties. Private developers are reluctant to spend 
the time and money necessary to acquire each property with no assurance 
that they will ever assemble a large enough site to develop. Without 
land assembly assistance in urban areas, developers are likely to 
choose large tracts of undeveloped land on the suburban/city fringe. 
Such actions promote sprawl. Urban land assembly curtails sprawl and 
encourages smart growth.
    Myth 11: Eminent Domain is an unnecessary tool for economic 
development.
    Reality: Eminent domain is an important tool for economic 
development. Eminent domain gives communities a last resort option to 
help ensure that significant development opportunities are not hindered 
when reluctant landowners refuse to negotiate fair sale of their 
property. Without this valuable tool, local economic development 
professionals would not be able to sufficiently assemble land for 
beneficial redevelopment and public gain.

    Mr. Stearns. Thank you. Mr. DeLong?

                  STATEMENT OF JAMES V. DELONG

    Mr. DeLong. Thank you, Mr. Chairman. I also realize that my 
biography left out a very important fact, which is that I am 
graduate of Evanston Township High School, but it has been more 
years than I like to admit, I must say. I appreciate being here 
today to talk about one of my favorite topics, which is the 
importance of property rights.
    I spent about 10 years working on what you would call dirt 
property, involving with Endangered Species Act and 
environmental issues and other property rights issues. I 
actually wrote a book about it 10 years ago. The last few years 
I have been with the Progress and Freedom Foundation here in 
D.C., which is a think tank that is devoted to fostering public 
awareness of the crucial nature of property rights and markets. 
And as the director of its Center for the Study of Digital 
Property, which is also called ``IBCentral.Info,'' I spend my 
time on intellectual property issues.
    Now, I wrote two papers for PFF, connecting Kelo to other 
issues of property rights, especially intellectual property, 
one called ``One Degree of Separation, Kelo and H.R. 1201,'' 
and the other called ``Intellectual Property, the Endangered 
Species Act and the Property Rights Alliance,'' and I would 
like to submit those for the record and have those including in 
the hearing record, if I could.
    Mr. Stearns. By unanimous consent, so ordered.
    [The papers are retained in subcommittee files.]
    Mr. DeLong. Thank you. Now, I have also, of course, 
submitted my written testimony and one-pager, and I won't waste 
your time recounting that. But I would like to take my time 
just to emphasize two basic general points here.
    The first is that everyone, including me, uses the term 
property rights. And in fact, his is a shorthand, but it is not 
quite correct, because it tends to put them at a subordinate 
level. As the Supreme Court noted in 1972 in Lynch v. Household 
Finance, property does not have rights; rather, each person in 
the United States has a personal right to own and use property. 
And this right is every bit as important as the other great 
rights in our society, such as freedom of speech or religion. 
And the late Chief Justice Rehnquist, speaking in Dole a decade 
ago, commented, we see no reason why the Takings Clause of the 
Fifth Amendment, as much a part of the Bill of Rights as the 
First Amendment or Fourth Amendment, should be relegated to the 
status of a poor relation.
    Speaking for myself, I regard my right to own and use 
property as somewhat more important than my right to engage in 
nude dancing. And others may disagree, but property rights are 
a crucial issue for many people, as they are showing in 
response to Kelo.
    Now second, the situation in Kelo is not an isolated 
incident, in a sense that it is simply the latest example of 
the casualness of government at all levels, including, most 
emphatically, the Federal level, is now treating this 
individual right to property. Now, in Napoleonic times, England 
staffed its navy through impressment. If they could catch you 
in a seaport town and you had anything to do with the sea, you 
were now a sailor, and everybody said all right. The 
Confederate States of America, I might add, also financed its 
war largely through impressment of property, just took it, and 
we all know what happened to them.
    But in the U.S., governments tend to follow the same 
policy, not just for redeveloping cities or finding locations 
for big-box stores or, in fact, I think, as has been noted, the 
owners may get compensated, but certainly not at any level that 
anyone would consider adequate or just. But for protecting 
endangered species or wetlands or historic structures or 
securing open space, it is impressing property through 
regulation. The use of impressment is not limited to real 
estate or to dirt property, it is applied to intellectual 
property, where Congress enacts compulsory licensing statutes, 
or redefines various uses as fair, to the behest of special 
constituencies, or because of special purposes it regards as 
important. Impressment is being used in telecommunications. You 
know, TelReg, under the 1996 telecom act, was an appropriation 
of telecom property. And the cable companies are now protesting 
mightily that the extension must carry provisions into HDTV is 
an impressment of their property. And the roster of examples 
could continue.
    And I think, from the point of view of an organization 
devoted to the idea that free markets will indeed work things 
out, this governmental itch for central planning, especially 
when combined with a need to reward supporters and 
constituents, can be a devastating combination.
    So my conclusion, further to, what is general? It is not--
the committee doesn't not need to, or should not focus entirely 
on enacting particular laws to put a band-aid on the Kelo 
problem. What is needed is leadership in a general 
reorientation of governments to restore respect for the 
personal right to property as one of the great bulwarks of 
individual freedom and economic progress. And my second 
recommendation is more specific, and that is, the key in most 
of these areas I think is compensation; and that is, that if 
the governments are forced to pay adequate compensation, then 
the incentive structures will tend to fall into line, and the 
incentives to take the property through impressment will, of 
course, be reduced. But I would recommend focusing on that 
dimension of the issue in all of these contexts. Thank you.
    [The prepared statement of James V. DeLong follows:]
Prepared Statement of James V. DeLong, Senior Fellow & Director, Center 
    for the Study of Digital Property, Progress & Freedom Foundation
    It is a pleasure to be here today to discuss the implications of 
the Supreme Court decision in Kelo v. New London,1 a case 
which has triggered a Katrina-like deluge of reaction and criticism.
---------------------------------------------------------------------------
    \1\ 125 S. Ct. 2655 (2005).
---------------------------------------------------------------------------
    I have four points to make to the Committee today. Let me state 
them, then go back and elaborate on each.

(1) Given the existing case law, the decision in Kelo was not a 
        surprise.
(2) As property rights horror stories go, Kelo is second-rank. Ms. Kelo 
        got paid for her property; there are uncounted numbers of 
        regulatory takings for which no compensation is paid.
(3) The strong public reaction of antipathy to the result in Kelo was a 
        surprise--a pleasant and, hopefully, productive one.
(4) One's understanding of the implications of Kelo is enriched by 
        viewing it in a more general context that includes rights to 
        intangible and intellectual property as well as to real estate.
    These points are taken up in order.
(1) Given the existing case law, the decision in Kelo was not a 
        surprise.
    To recapitulate the basic issues, a clause of the Fifth Amendment 
to the U. S. Constitution says ``nor shall private property be taken 
for public use, without just compensation.'' The phrase ``public use'' 
has always been regarded as a limitation on governmental power to take 
property; that is, it has been assumed by judges and scholars that 
government has no power to take property for private use--to take from 
A to give to B--even if compensation is paid.2
---------------------------------------------------------------------------
    \2\ The Supreme Court cases usually cited for the ``no transfers 
from A to B'' are collected in H. Christopher Bartolomucci, Statement 
on H.R. 3405 Before the Committee on Agriculture, U. S. House of 
Representatives, Sept. 7, 2005. Most of these are from the 19th or 
early 20th centuries, and the validity of such pre-New Deal 
constitutional precedents is dubious, to say the least, but they are 
still quoted by the Court in dicta so apparently they remain valid in 
the collective minds of the Justices.
---------------------------------------------------------------------------
    So, the question in Kelo was whether some houses could be condemned 
by the city pursuant to a redevelopment plan for a part of New London 
even if the houses could in no way be classified as public nuisances or 
part of a blighted area, and even if the use to which the land was to 
be devoted involved transfer to a private developer.
    A five-member majority of the Supreme Court upheld the validity of 
the city's action, emphasizing the fact that it was part of an overall 
redevelopment plan, not an individualized action, and that the city's 
conclusion that the overall public weal would be served by the plan was 
not unreasonable.
    The most surprising thing about this conclusion was that it was by 
a 5 to 4 vote; ahead of time, I had thought that under the existing 
case law this result would be reached far more decisively.
    In 1997, I published a book entitled Property Matters: How Property 
Rights Are Under Assault--And Why You Should Care (Free Press, 1997). 
It is still in-print and available on Amazon, but if you seek 
illumination on this point of the meaning of ``public use,'' you are 
out of luck. The reason is that the Supreme Court cases, stretching 
back over at least half a century, appeared to make the public use 
requirement a dead letter--if the government exercising condemnatory 
powers decided the use was public, that was conclusive.
    As the Supreme Court summed it up in 1992, in NRPC v. Boston & 
Maine Corp.: 3
---------------------------------------------------------------------------
    \3\ 503 U.S. 407, 422 (1992). There were dissents in the case, but 
not from this language.
---------------------------------------------------------------------------
        We have held that the public use requirement of the Takings 
        Clause is coterminous with the regulatory power, and that the 
        Court will not strike down a condemnation on the basis that it 
        lacks a public use so long as the taking ``is rationally 
        related to a conceivable public purpose.''
    The power granted government by such a test is almost total. As 
Justice Scalia has pointed out, and Justice O'Connor reiterated in 
Kelo, a rational basis test should be renamed ``the stupid staffer'' 
test--any legislative or executive branch staffer who cannot dream up a 
chain of logic that meets it, no matter how outrageous the government 
action, is too dumb to hold his or her job.4
---------------------------------------------------------------------------
    \4\ Kelo, 125 S. Ct. 2655, 2671, 2675 (2005) (O'Connor, J. 
dissenting); Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 
1025-1026, n.12
---------------------------------------------------------------------------
    If Boston & Maine was not sufficient to establish that the ``public 
use'' requirement was a paper tiger, then Lingle v. 
Chevron,5 decided a mere month before Kelo, should have 
finished the job. In some prior cases, the Court had indicated that 
assessing a claim that a regulatory taking had occurred--a regulation 
so intrusive that it should be treated as a ``taking'' under the Fifth 
Amendment even though title did not pass--it would look at whether the 
regulation ``substantially advance[d] legitimate state interests.'' In 
Lingle, it repudiated the applicability of this test to a takings 
claim. The logical conclusion to be drawn was that for takings of any 
sort, the Court was getting itself out of the business of assessing the 
legitimacy of the purpose of the exercise of power.
---------------------------------------------------------------------------
    \5\ 125 S.Ct. 2074 (2005).
---------------------------------------------------------------------------
    In Kelo, the four dissenters retreated considerably from such total 
deference. Even the majority went to some pains to justify the 
rationality of the city's action, focusing on its status as part of an 
overall plan rather than a random regulatory act.
    In sum, on this issue of the meaning of ``public use,'' Kelo 
contains a significant verbal retreat from the sweeping deference to 
governmental action exhibited in the prior cases. It indicates some 
degree of judicial uneasiness with what the courts have wrought. The 
retreat may be no more than verbal, since the majority of the Court 
seemed willing to accept as a ``public use'' anything that claims an 
economic development rationale, including higher tax production. As 
Justice O'Connor said, it is difficult to see how any competent staffer 
could fail to pass this test, but it is possible that a future case 
will erect some substantive structural limitations on this verbal 
foundation.
    It is instructive to compare Kelo with the recent decision of the 
Michigan Supreme Court in County of Wayne v. Hathcock, which reversed 
the famous, and infamous, 1981 Poletown decision.6
---------------------------------------------------------------------------
    \6\ County of Wayne v. Hathcock, 471 Mich. 445, 684 N.W. 2d 765 
(Mich. Sup. Ct. 2004); Poletown Neighborhood Council v. Detroit, 410 
Mich. 616, 304 N.W. 2d 455 (Mich. Sup. Ct. 1981).
---------------------------------------------------------------------------
    In Poletown, the Michigan Supreme Court had allowed the destruction 
of a vibrant ethnic community to clear land for an auto assembly plant. 
The decision applied a test similar to that used by the majority in 
Kelo: that the ``public use'' requirement allowed a project designed to 
``alleviat[e] unemployment and revitalize[e] the economic base of the 
community.'' In overruling this decision, Hathcock repudiated this 
test, and said that a transfer of property from one private party to 
another meets the public use requirement under only three conditions:

(1) ``The project generates public benefits whose very existence 
        depends on the use of land that can be assembled only by the 
        coordination of the central government.'' This applies 
        primarily to infrastructure projects--roads, railroads, 
        pipelines--which present particularly acute hold-out problems.
(2) Situations in which the private entity remains accountable to the 
        public, and (possibly--it is a bit unclear) the property 
        remains available for use by the public. Again, infrastructure 
        is the prime example. (This may actually be an add-on to the 
        first point--this, too, is a bit unclear.)
(3) Clearing a blighted area, if the clearance is the primary purpose 
        and the transfer is incidental.
    The Hathcock standards most emphatically do not include wholesale 
condemnation of land for the purpose of letting a developer erect an 
``office park,'' or ``tech center,'' or any other buzzword de jour. The 
court noted: 7
---------------------------------------------------------------------------
    \7\ 684 N.W. 2d at 783-84.

          [T]he landscape of our country is flecked with shopping 
        centers, office parks, clusters of hotels, and centers of 
        entertainment and commerce. We do not believe . . . that these 
        constellations required the exercise of eminent domain or any 
        other form of collective public action for their formation.
    However, it is not clear that the Michigan Supreme Court would 
refuse to uphold the use of eminent domain to take unblighted property 
within a generally-rundown area, and it is entirely possible that it 
would have decided Kelo the same way as the U.S. Supreme Court, albeit 
after applying a different test. In Kelo, New London was ``not 
confronted with the need to remove blight in the Fort Trumbull area, 
but [its] determination that the area was sufficiently distressed to 
justify a program of economic rejuvenation is entitled to our 
deference.'' 8
---------------------------------------------------------------------------
    \8\ 125 S. Ct. at 2665-66.
---------------------------------------------------------------------------
(2) As property rights horror stories go, Kelo is second-rank. Ms. Kelo 
        got paid for her property; there are uncounted numbers of 
        regulatory takings for which no compensation is paid.
    As the above mention of Lingle indicates, the outcome in Kelo was 
also foreshadowed by the trend of the Court's decisions in cases 
involving ``regulatory takings,'' situations in which government does 
not take title, but regulates the use of property significantly, often 
appropriating not just the juice but the pulp, and leaving the 
landowner the worthless rind.
    Indeed, Susette Kelo was not treated as badly as many other people. 
She at least got paid for her property.9 Uncounted others 
have lost most or even all of their rights via regulatory takings with 
no recompense whatsoever. As long as a government avoids actual 
physical seizure, and as long as it avoids a complete destruction of 
economic value, it can inflict huge losses on property owners. It can, 
in essence, seize their property for public or private benefit with no 
payment whatsoever. 10
---------------------------------------------------------------------------
    \9\ However, newspaper accounts over the summer said that the New 
London Redevelopment Authority is taking the position that the 
compensation due Ms. Kelo should be set at the property's value as of 
the original notice of taking five years ago (apparently without 
interest), and that she should also pay rent for the time she occupied 
the house during the litigation, with the rent adjusted upward to 
reflect the inflation in property values. The accounts were not 
terribly clear, however.
    \10\ James V. DeLong, Property Matters: How Property Rights Are 
Under Assault--And Why You Should Care (New York: 1997), passim.
---------------------------------------------------------------------------
    Perhaps Ms. Kelo should be grateful that New London did not zone 
her land to make it into an open space, or declare it an endangered 
species habitat, or find a wetlands plant, or classify her house is a 
historic structure that cannot be changed and must be maintained at the 
expense of the owner (no ``demolition by neglect''), or decide that 
building on a lot she bought years ago would cause unacceptable runoff 
into the Atlantic Ocean. Any of these could result in a de facto taking 
without compensation.
    If Ms. Kelo owned an apartment building, it could be made subject 
to rent control, which would transfer most of the value to the tenants. 
If she owned a small business, it could be subjected to price controls. 
If she wanted to change the use of a commercial structure, she could be 
forced to pay exorbitant ``impact fees.''
    If Ms. Kelo lived in the western United States, where the Federal 
government owns more than half the land, and in theory holds it in 
trust as a commons to which the people of the area are to have 
reasonable access, she would find her access rights squeezed away, year 
by year and right by right, by a hostility to the all productive uses 
of the land, ranging from lumbering to mineral extraction to ranching 
to farming. The result has been destruction of large numbers of 
psychologically and economically rewarding jobs, along with the 
communities and ways of life that depended on them. She would not be 
losing a legally-recognized property right; but the principle of 
reasonable access to the Federal commons was one of the basic bargains 
of western settlement.
    (Here it is necessary to put in an aside. There is no conflict 
between reasonable environmental protection and viable natural-
resource-dependent industries and communities. For example, I once saw 
the great East Texas Oil Field, and it was mostly cows, grazing among 
an occasional pump. There is a conflict between these industries and 
environmental protection as a fundamentalist religion, which maintains 
the view that any productive use of the earth represents a criminal 
rape of the planet.)
    The list of possible regulatory exactions is exceedingly long. And 
if Ms. Kelo tried to protest any of these exactions in court, she would 
run into a hedgerow of delaying tactics and arcane legal doctrines 
about ``exhaustion of remedies'' and ``ripeness'' cynically deployed to 
exhaust her psychologically and financially, and prevent effective 
enforcement of the few rights that she possessed.
    As constitutional scholar Roger Pilon said recently before the 
House Committee on Agriculture: 11
---------------------------------------------------------------------------
    \11\ Roger Pilon, Statement Before the House Committee on 
Agriculture on Strengthening the Ownership of Private Property Act of 
2005, U. S. House of Representatives, Sept. 7, 2005, p. 4.
---------------------------------------------------------------------------
          [In the] classic regulatory takings case, of course, the 
        government takes uses, thereby reducing the value of the 
        property, sometimes drastically, but refuses to pay the owner 
        for his losses because the title, reduced in value, remains 
        with the owner. Such abuses today are rampant as governments at 
        all levels try to provide the public with all manner of 
        amenities, especially environmental amenities, ``off budget.'' 
        There is an old-fashioned word for that practice: it is 
        ``theft,'' and no amount of rationalization about ``good 
        reasons'' will change the practice's essential character.
    The Supreme Court has occasionally nullified a particularly 
outlandish regulatory taking, but for the most part it has acquiesced 
in serious erosion of the principle that private property should not be 
taken without just compensation, even when the purpose of the 
government action is to produce a public benefit rather than to avoid 
some noxicity caused by the landowner.
    The Court regularly states, but then ignores, the lodestar 
principle that the Takings Clause of the Fifth Amendment is ``designed 
to bar Government from forcing some people alone to bear burdens which, 
in all fairness and justice, should be borne by the public as a 
whole.'' 12
---------------------------------------------------------------------------
    \12\ Armstrong v. United States, 364 U.S. 40, 49 (1960).
---------------------------------------------------------------------------
(3) The strong public reaction of antipathy to the result in Kelo was a 
        surprise--a pleasant and, hopefully, productive one.
    On the other hand, the strong public reaction to Kelo has indeed 
been a surprise, and a pleasant one. It is also a bit of a mystery. 
None of the prior cases or the exactions by governments that triggered 
them roused serious interest from the public, the media, or the 
Congress, despite the tantrums that some of us threw. Books on the 
topic had little impact.13 OpEd editors yawned. I cannot 
remember the last time Congress held serious hearings on the issue. If 
any did occur, they received no press attention.
---------------------------------------------------------------------------
    \13\ The classic work is Richard Epstein, Takings: Private Property 
and the Power of Eminent Domain (Cambridge: 1985). Two excellent works 
that came out about the same time as my book, Property Matters: How 
Property Rights Are Under Assault--And Why You Should Care (New York: 
1997), were Richard Pipes, Property and Freedom: The Story of How 
Through the Centuries Private Ownership Has Promoted Liberty and the 
Rule of Law (New York: 1999), and Tom Bethell, The Noblest Triumph: 
Property and Prosperity Through the Ages (New York: 1998).
    The definitive legal treatise is Steven J. Eagle, Regulatory 
Takings (3d ed.)(New York: 2005), and a useful look at the cases is 
Bernard H. Siegan, Property and Freedom: The Constitution, the Courts, 
and Land Use Regulation (New Brunswick: 1997).
---------------------------------------------------------------------------
    Explanations as to why Kelo hit the collective nerve can be only 
speculation, of course, but I think three main factors are involved.
    The first is the nakedness of the city's assertion of its right and 
intent to engage in massive central planning, and to exercise unlimited 
power in pursuit of its vision. This power existed in law, but the 
demonstration of its reality shocked most people, who were unaware of 
the extent to which their legislatures have endorsed, and courts have 
upheld, an ideology of central planning that dominates municipal 
government.
    Oh, everyone knew that cities have master plans and all that sort 
of thing--newspapers are always yapping about them--but no one took 
these seriously. People assumed that these plans are a glorified name 
for zoning, of which everyone approves, at least in theory. Zoning 
keeps the heavy industry away from the houses, ensures that commercial 
enterprises are located on the main roads, and in general protects 
property values.
    Thus the idea that the New London or any other city could choose to 
remake its map by fiat was a surprise to most people. The public had 
assumed that city action, such as zoning, was designed as an adjunct of 
a regime that depends on and defends private property rights. It was 
not contemplated that city action would supplant the private sector.
    A second major factor is that the abuse of eminent domain, by which 
I mean the taking from A to give to B, has become exceedingly common. 
Dana Berliner of the Institute for Justice reported on this in a report 
on Public Power, Private Gain: in the five years 1998-2002, there were 
over 10,000 documented cases of filed or threatened condemnations 
designed to benefit private parties. And this figure covers only the 
instances that reached the newspapers; the actual total could be 10 or 
20 times as great.14
---------------------------------------------------------------------------
    \14\ Dana Berliner, Power, Private Gain: A Five Year State-By-State 
Report Examining the Abuse of Eminent Domain. Castle Coalition (April 
2003), p. 2. To get some idea of the relationship between reported and 
actual cases, Berliner checked the numbers for Connecticut, the only 
state that keeps systematic track of such cases. During the 5-year 
period, Connecticut courts recorded 543 redevelopment condemnations 
whereas only 31 were reported in the newspapers. [http://
www.castlecoalition.org/report/pdf/ED--report.pdf]
---------------------------------------------------------------------------
    There may have been a pause in the pace of such actions while Kelo 
was pending, but now, with their power to issue the takings equivalent 
of lettres de cachet reaffirmed by the Supreme Court, localities are 
making up for the lost time.15
---------------------------------------------------------------------------
    \15\ Dana Berliner, Statement Before the Committee on Agriculture, 
U. S. House of Representatives, Sept. 7, 2005.
---------------------------------------------------------------------------
    At some point, such activity reaches a level where everyone knows 
someone who has been affected. Then, the possibility ceases to be an 
abstract misfortune that threatens someone far away and becomes a 
personal threat. We may have reached such a tipping point. I certainly 
hope so.
    A third major factor is the growing distrust of government's 
competence and good faith as a central planner and real estate 
developer. No one believes that the asserted unlimited authority to 
remake the urban terrain will be exercised in some spirit of abstract 
pro bono publico. Real estate development, in most times and most 
places, is and always has been a sinkhole of corruption and special 
influence.16 The public knows this full well. But the public 
thought that it was protected from the direct effects of these dreary 
realities. Now it has learned that it is not. If someone with influence 
decides he wants your property, he can take it, through your local city 
council.
---------------------------------------------------------------------------
    \16\ See Richard Babcock, The Zoning Game (Univ. of Wisconsin 
Press: 1966).
---------------------------------------------------------------------------
    The most recent issue of Reason describes such a scenario. A state 
agency, acting in concert with a developer and a large corporation, 
used eminent domain to seize land needed for a new 52-story corporate 
headquarters. No effort to purchase the land was made, but, under cover 
of the need to eliminate ``blight,'' 11 buildings were seized and 55 
businesses evicted, including ``a trade school, a student housing unit, 
a Donna Karan outlet, and several mom-and-pop stores.'' The property 
was bought at a bargain price, and if the legal settlements with the 
original owners and tenants exceed it, the state agency will be on the 
hook. In addition, the city and state offered the corporation $26 
million in tax breaks for the project.17
---------------------------------------------------------------------------
    \17\ Matt Welch, ``Why the New York Times Loves Eminent Domain,'' 
Reason (Oct. 2005), p. 18 [http://www.reason.com/0510/co.mw.why.shtml]
---------------------------------------------------------------------------
    The corporation was the New York Times, which, not surprisingly, 
quite liked the Kelo decision. According to Reason:
          [T]the Times, in an editorial entitled ``The Limits of 
        Property Rights,'' let out a lusty cheer. Kelo, the paper 
        declared, is ``a welcome vindication of cities' ability to act 
        in the public interest'' and ``a setback to the `property 
        rights' movement, which is trying to block government from 
        imposing reasonable zoning and environmental regulations.''
    Dana Berliner's Public Power, Private Gain is full of similar 
tales, and Professor Jonathan Turley recently summarized more examples 
of takings that have been upheld by courts as legitimate ``public 
uses.'' Included are condemnations of: 18
---------------------------------------------------------------------------
    \18\ Prof. Jonathan Turley, ``Eminent Domain and the Supreme 
Court's Public Use Doctrine,'' Statement on H.R. 3405 Before the 
Committee on Agriculture, U. S. House of Representatives, Sept. 7, 2005

Property of six different private owners of lots in Manhattan to allow 
        the New York Times to expand and to construct a more valuable 
        array of condos and galleries.
Property next to Donald Trump's casino so that he could have a waiting 
        station for limousines. (This was ultimately overturned)
A lease held by a company in a shopping center in Syracuse to allow the 
        owner to redevelop the property free of its obligations under 
        the leasehold.
Property in Kansas for the sole purpose of attracting a new and more 
        promising business to the area.
Minneapolis property held by one business to give to another to 
        develop, despite the interest of the original owner in 
        developing the property in a similar fashion.
A Walgreens drug store in Cincinnati to build a Nordstrom department 
        store, which then required condemnation of a CVS pharmacy to 
        relocate the Walgreens, which then required condemnation of 
        other businesses to relocate the CVS. (The deal then fell 
        apart, and as of 2003 the Nordstrom's site was a parking lot.)
A parking lot in Shreveport to give it to another business for use as a 
        parking lot.
    Granted, the dispossessed owners are supposed to be compensated, 
but this will not pay for moving, or for disrupting their lives. And 
compensation is often inadequate on any scale.
    There is a broader point to be made here. It would be incorrect to 
classify the Founders of this nation as cynics. But they were indeed 
realists, and they did not trust government. It is not that government 
officials are any worse than anybody else--it is that they are no 
better. Officials are tempted by offers of political support, and 
sometime by outright corruption.
    The Founders did not have the vocabulary of ``public choice'' and 
``rent seeking'' that characterizes contemporary discussions of 
political theory,19 but they certainly understood the basic 
concepts. The Federalist Papers are a long meditation on the 
implications of public choice theory for practical government.
---------------------------------------------------------------------------
    \19\ See, e.g., Fred S. McChesney, Money for Nothing: Politicians, 
Rent Extraction, and Political Extortion (Harvard Univ. Press: 1997).
---------------------------------------------------------------------------
    And even the most upright of public officials are vulnerable to the 
potent seductions of power. The idea ``we can remake this city!'' can 
be irresistible.
    Of course, such efforts rarely work. Cities are organisms, not 
machines, and they evolve and grow. For the most part, rigid plans are 
never implemented. And even when the plans are executed, we usually 
regret it. It turns out that one decade's urban planning fad is the 
next decade's candidate for demolition. And in the meantime private 
initiative is paralyzed by the dithering that accompanies broad land-
use initiatives.
    Part of the genius of the Founders was their recognition that 
government is simply one part of that entirety that we call a 
civilization or a culture. It is important that government officials 
recognize this, and recognize that it is not their job to be 
responsible for everything, and it is not true that nothing good can 
happen that they do not direct. Quite the contrary; their job is to 
establish the conditions that make it make it possible for the other 
institutions of society to function. (Or, to phrase this more 
negatively, their job is to avoid making it impossible for other 
institutions to function.)
    Hence, as the Fifth Amendment provides, government officials are to 
have the power to acquire property needed for public uses, but it is 
not necessary for government to take on itself the responsibility for 
``shopping centers, office parks, clusters of hotels, and centers of 
entertainment and commerce,'' in the words of the Michigan Supreme 
Court.
    The perspective represents not just the view of the Founders, but 
the contemporary good sense of the American people, ``90% of [whom, 
according to polls] disapprove of the kind of seizures allowed by 
Kelo.'' 20
---------------------------------------------------------------------------
    \20\ The Economist, Hands Off Our Homes, Aug. 20, 2005.
---------------------------------------------------------------------------
    In other words, the American people think that the virtues of the 
free market and its invisible hand attach to land use as well as to 
other economic activities. The people are content with the idea that 
government does not bear total responsibility for urban perfection, and 
that for the most part we will, rightly, let our urban spaces grow 
organically.
    But one place that has not gotten the word about this is the 
Supreme Court. The Justices are still back in the New Deal era, or 
perhaps even the Progressive Era, when the idea that the government is 
responsible for everything, and hence must PLAN, came to dominate 
political theory. The governmental Platonic Guardians depicted in 
Supreme Court opinions bear little resemblance to the officials of 
Richard Babcock's books on zoning, or to the decision-makers in 
situations cited by Dana Berliner, or with the common sense of the 
American people.
    A Lexis search of Supreme Court opinions for the phrases ``public 
choice'' and ``rent seeking'' produced zero results. This result is 
quite extraordinary. Two concepts that are fundamental to any realistic 
analysis of government, its problems, and its control are absent from 
authoritative legal thought. Of course the Supreme Court's treatment of 
Takings has become incoherent hash--it is impossible to analyze 
something adequately if one has barred oneself from using the 
intellectual tools required to deal with it in a serious way. On this 
issue, there is a wide gap between the perceptions of the Court and 
those of the people--with the latter having by far the more 
sophisticated understanding of applied political science.
(4) One's understanding of the implications of Kelo is enriched by 
        viewing it in a more general context that includes rights to 
        intangible and intellectual property as well as to real estate.
    There is, I think, a final reason that Kelo has struck the nerve of 
the American people--the growing attention commanded by issues 
involving intellectual property.
    During the past five years or so, the nature and importance of 
intellectual property--the debate over the level of hegemony that 
should properly be exercised over the creations of the mind--has 
received a tremendous amount of attention, in the media and in the 
venues in which national attitudes are truly determined: conversations 
in car pools, at parties, and around office water coolers.
    Economic value in the contemporary world has become far more 
dependent on the creations of the mind than on bricks and mortar or the 
real estate on which they stand, and several high-profile controversies 
have driven this point home--for example, the Microsoft antitrust case, 
P2P file-sharing, reimportation of pharmaceuticals, the telecom bust 
(which resulted largely from the confusion over property rights created 
by the implementation of the 1996 Telecommunications Act).21 
The whole computer/high tech industry depends on intellectual property 
rights in the form of the patents and copyrights without which no firm 
could attract investment capital.
---------------------------------------------------------------------------
    \21\ One can argue with some cogency that telecom networks should 
be classified as physical rather than intellectual property. But the 
whole industry is so dependent on technological innovation, from the 
technologies for making optic fiber to the software that runs the 
network, that it seems reasonable to include this area in the list. It 
also serves to make the point that tangible and intangible property, 
and property rights, are becoming inextricably mixed.
---------------------------------------------------------------------------
    I think the increased prominence of intellectual property is 
causing people to refocus on property rights in general, and to realize 
that any trend of events that undermines the security of all property 
is not good.
    About four years ago, I attended a panel session in which 
representatives of the entertainment industry, mostly from Los Angeles, 
expressed concern about the rise of unauthorized file sharing of music, 
and bemoaned the lack of respect for property rights shown by the 
sharers.
    During the question period, I said to the panelists: ``Look, there 
has not been an uncompensated taking of real estate in the last 20 
years that you entertainment industry people have not endorsed, as long 
as it could be justified in the name of endangered species protection, 
or wetlands, or open space.22 You have taught a generation 
of young people to hold property rights in contempt, and now you object 
that they are practicing exactly what you preached.''
---------------------------------------------------------------------------
    \22\ Actually, this was not completely true. Some in the 
entertainment industry have objected strenuously to having public 
access rights of way created across their Malibu beachfront properties.
---------------------------------------------------------------------------
    For the most part, the reaction was blank looks. What could the one 
possibly have to do with the other?
    That reaction has changed. Now, there is general agreement that 
property rights must be treated on a continuum, that the basic 
philosophical principles supporting property rights as an institution 
are constant across both tangible and intangible property, and that an 
attack on one kind of property cannot be quarantined from an attack on 
all.
    The list of amici supporting the importance of the intellectual 
property rights in the recent Grokster case contains not just the 
Progress & Freedom Foundation, but the Defenders of Property Rights, 
represented by former Solicitor General Theodore B. Olson. DPR has long 
been one of the staunchest defenders of rights in physical property.
    The most recent evidence of this evolution of attitudes is the 
creation of a group called The Property Rights Alliance,23 
which is bringing together a Noah's Ark of property rights interests--
inventors concerned with patents; content industries concerned with 
file-sharing; cable companies concerned with must-carry rules; land-
rights groups devoted to maintaining access to the commons of the 
public lands; land-owners whose property has been taken by the 
Endangered Species Act; victims of rent control; and so on.
---------------------------------------------------------------------------
    \23\ http://www.propertyrightsalliance.org/
---------------------------------------------------------------------------
    By no means do the members of this alliance hold any unified 
positions, and in some cases they are quite opposed. But for those of 
us who have long regarded property rights as a crucial block in the 
structure of political freedom and economic progress--the ``guardian of 
every other right'' 24--it is tremendously encouraging to 
see this disparate collection of interests debating the issues in terms 
of ``what is the pro-property rights position?''
---------------------------------------------------------------------------
    \24\ ``The right of property is the guardian of every other right, 
and to deprive a people of this, is in fact to deprive them of their 
liberty.'' Arthur Lee, An Appeal to the Justice and Interests of the 
People of Great Britain, in the Present Dispute with America, 4th ed. 
(New York: 1775), p. 14 (Quoted in John W. Ely, The Guardian of Every 
Other Right, (New York 1992), p. 26).
---------------------------------------------------------------------------
    In consequence, you in the Congress can expect to hear an 
increasing number of arguments phrased in terms of their impact on 
property rights. To take one example, H.R. 1201, Digital Media 
Consumers' Rights Act of 2005, which is pending before this committee, 
raises profound issues of property rights. In effect, it redefines the 
rights of creators and consumers by fiat, both prospectively and 
retroactively. And, just as Kelo uses the concept of public benefit as 
an all-purpose excuse for unlimited governmental power, H.R.1201 uses 
the concept of fair use to justify a massive redefinition of 
intellectual property rights. 25
---------------------------------------------------------------------------
    \25\ James V. DeLong, One Degree of Separation: Kelo & H.R. 1201, 
Progress & Freedom Foundation Progress Snapshot Release 1.7 August 
2005. [http://www.pff.org/issues-pubs/ps/ps1.7kelo.html]
---------------------------------------------------------------------------

                               CONCLUSION

    In Lynch v. Household Finance Corp.,26 the lower court 
ruled that a particular statute served only to protect ``personal'' 
rights, not ``property'' rights. The Supreme Court rejected this 
distinction:
---------------------------------------------------------------------------
    \26\ 405 U.S. 538, 552 (1972) .
---------------------------------------------------------------------------
          [T]he dichotomy between personal liberties and property 
        rights is a false one. Property does not have rights. People 
        have rights. The right to enjoy property without unlawful 
        deprivation, no less than the right to speak or the right to 
        travel, is in truth a ``personal'' right, whether the 
        ``property'' in question be a welfare check, a home, or a 
        savings account. In fact, a fundamental interdependence exists 
        between the personal right to liberty and the personal right in 
        property. Neither could have meaning without the other. That 
        rights in property are basic civil rights has long been 
        recognized. J. Locke, Of Civil Government 82-85 (1924); J. 
        Adams, A Defence of the Constitutions of Government of the 
        United States of America, in F. Coker, Democracy, Liberty, and 
        Property 121-132 (1942); 1 W. Blackstone, Commentaries * 138-
        140 [emphasis added].
    Unfortunately, the Supreme Court seems to have forgotten these 
principles. As in Kelo, on questions of the personal right to own and 
use property it accords almost total deference to governmental 
authority, deference certainly not accorded in other areas of 
constitutional protection.
    However, as the reaction to Kelo shows, and fortunately for the 
health of the republic, the people of the nation have not forgotten the 
principle expressed in Lynch. Now it is up to the Congress to show that 
it, too, remembers,

    Mr. Stearns. I thank the gentleman. I will start with the 
questioning.
    And, Professor Ramsey, it just occurred to me, with this 
case, the Supreme Court--that you could have a case where the 
government decides they want to take something for intellectual 
property rights. If the government has decided, under the Kelo 
case, they can take private property for a better economic use 
and let the local governments do it, couldn't you extend that 
same reasoning to intellectual property rights, the government 
could take over intellectual property rights?
    Mr. Ramsey. I see no reason, based on Kelo, that they could 
not.
    Mr. Stearns. I mean, isn't there--I mean, intellectual 
property is intellectual property, and personal property is 
personal property. And I mean, I think this is something that 
we have to--I am just curious what your opinion is on this, a 
little more nuanced question and ask you a little bit of a 
hypothetical here, but it just occurred to myself and the 
staff, why not intellectual property, if the Supreme Court 
thinks personal property is okay?
    Mr. Ramsey. Well, my job is to ask people hypothetical 
questions, so I guess it is only fair that I get to answer one. 
It is an excellent question and I think the answer is, I don't 
see anything in Kelo that would prevent it. Obviously, as you 
say, the facts in Kelo are quite different, and so perhaps a 
differently inclined court could come up with some factual 
distinction that would allow it to decide differently.
    But the fundamental underpinning of Kelo is that if the 
government decides that the property can be used to a better 
economic benefit in the hands of a different person, and 
therefore indirect benefits will go down to the public through 
greater employment or greater tax revenues to the government 
entity, then that is a sufficient public purpose to justify the 
use of the eminent domain power, and I don't see any reason why 
that would be limited to taking real property. It seems like 
the same argument could be made for intellectual property. So I 
don't see--I think that the extension could be done quite 
easily.
    Mr. Stearns. Okay. Now, Mr. Finkle, you are in sort of the 
spot here defending the decision and I understand that, so we 
are all going to come to you a little bit. Recently in an 
article that was published in the Washington Times, concerning 
the flow to this Riviera Beach community, they want to take 
over a whole section of the beach because they said the beach 
is one of the nicest beaches in all of Florida, and they want 
to put in a mega-port for yachts and high-end housing, retail, 
office space, a multi-level garage for boats, a 96,000 square 
foot aquarium and manmade lagoon, and that all sounds good.
    And so what they need to do is displace about 6,000 local 
residents to do it, and most of these people are making less 
than $19,000 a year. The mayor, I believe it was, went on to 
say, people with large yachts need a place to keep them and 
service them. So obviously, you can't agree with that; that if 
you are making the argument, because it is more aesthetically 
pleasing, then I can take your house, that is just a spurious 
argument as opposed to one economically. Because if you are 
saying it is economically you make more money, then there is a 
conflict of interest when the city or town comes in and says 
okay, Mr. Stearns, we are going to take your little property 
here and we are going to make a mega-yacht pier, you are not 
going to reimburse me for the value of the property later one, 
you are giving me what the value is right there in my piece of 
property, which is, you know, unattended and probably 
dilapidated. So there is a conflict of interest, and there is a 
fact that you are taking a property cheap and selling it a high 
price. Don't all those things bother you a bit?
    Mr. Finkle. Mr. Chairman, I am not prepared to sit here and 
defend every public officials' prognosis about what should 
happen.
    Mr. Stearns. You are not defending a place for mega-yachts, 
then?
    Mr. Finkle. And the removing of 6,000 people from their 
homes. I don't know the situation in Riviera Beach, but I will 
tell you, there are lots of examples where an important factory 
to a community, if it could expand, could employ another 
hundred people in some rural community, where you--if you don't 
figure out a way to expand them in place, they may leave the 
community all together. There are places where we need to 
redevelop, that--where eminent domain is an important tool to 
allow redevelopment to go further. Now, I can't sit here and 
say that what the mayor is proposing to do on Riviera Beach 
makes sense or not. But moving 6,000 people seems to be a 
little strong on the imagination.
    Mr. Stearns. Yes. Well, my time has expired. Ms. 
Schakowsky.
    Ms. Schakowsky. Am I hearing right, that Mr. Anderson and 
Mr. DeLong, and maybe others of you except for Mr. Finkle, and 
I don't think Mr. Shelton, either, I don't know, would say that 
the Takings Clause itself is an abuse of power in some way, 
that if you could you would remove the Takings Clause?
    Mr. Anderson. We recognize that the Takings Clause has a 
public use component to it, and we are not opposed to takings 
for public use when there is just compensation. Our problem is, 
that when it goes beyond public use, and to kind of piggyback 
on the intellectual property question, what is happened is the 
court has defined it so much differently than it what it 
actually says. It went from public use to public purpose in 
Berman v. Parker, despite the fact that that doesn't protect--
--
    Ms. Schakowsky. And so by public use, you mean used by the 
public, as Professor Ramsey was describing?
    Mr. Anderson. Correct. And even if you have--and then, from 
then, it went from public purpose to public benefit. Now it 
really doesn't mean anything anymore.
    Ms. Schakowsky. Okay, okay. All right. And, Mr. DeLong?
    Mr. DeLong. No, I concur. I mean, obviously, we need public 
facilities of all sorts. And certainly, as the Nation developed 
industrially, it turned out that you needed things, like lots 
of network industries, you know, and the power of public 
domain.
    Ms. Schakowsky. So then let me go to a specific that Mr. 
Finkle raised. We are all facing the situation now in the Gulf 
area.
    Mr. Anderson. Yes.
    Ms. Schakowsky. And he described a situation where one 
holdout could stop Gulf, the Gulf Coast redevelopment. I would 
like comments on that. Let me ask Mr. Shelton about that first, 
and then the others as well.
    Mr. Shelton. Well, there, of course, are deep concerns 
about what is happening in the Gulf Coast now, in other words, 
when you have a circumstance, like a hurricane hitting, how do 
we determine which property is actually blighted at this point, 
and which property actually needs to be rebuilt, and what kind 
of powers those who are now being--having to deal with the new 
blighted situation, that will have to negotiate and making sure 
that they can protect their own property rights in those cases. 
And certainly, even beyond that, Congresswoman, when we talk 
about those who are renting and now going to be displaced into 
other areas, what kind of rights these Americans have as well.
    Ms. Schakowsky. Okay. Anybody else want to comment?
    Mr. DeLong. Yes, I would place--that is exactly the problem 
or the reason, the intractability of that and of the holdout 
problem, or the transaction cost problem, is exactly why I 
would place far more emphasis on the compensation side.
    Ms. Schakowsky. Right.
    Mr. DeLong. And like Mr. Shelton's point.
    Ms. Schakowsky. Right. And I appreciated that. You know, 
Mr. Shelton, you point out, in the real world, because of all 
of the inequities when it come so to lower income or people of 
color that are built in, it is kind of hard to have a 
discussion about this decision separate from those kinds of 
realities. But I am wondering, if we were to focus on this 
issue of just compensation in a real way, or I also want to get 
to, doesn't Kelo--some of you gave examples of individual cases 
that could happen. But doesn't it set up a process, a total 
planning process, that, were everybody fully invested in that 
and all voices were really heard, would that be sufficient 
protection? Now I am going to shut up and let all of you 
answer. And, Mr. Finkle, you said you don't see this decision 
as expanding the power of eminent domain. I hear different 
views and I wanted that more fully explored as well. So, Mr. 
Shelton, you wanted to comment.
    Mr. Shelton. What I was going to say, as we talk about the 
real life, real world scenario, you are really talking about 
moving entire communities, communities that have become 
interdependent, particularly if you are a community that is of 
color, and more specifically a community that is quite port. 
Many of the things that we take for granted, for instance, in 
being able to pay for babysitting, or being able to pay to own 
a car to drive where you need to go, become things that are 
quite different under these scenarios. If we look at the 
hurricane victims in New Orleans, we are talking about a 
community that has almost a 35 percent unemployment rate, where 
50 percent of the population actually rent the homes that they 
live in. So we are talking about the interdependency of a 
community, we are talking about now uprooting relationships 
between the person one side of the street who baby sits for the 
person on the other side of the street in exchange for picking 
up extra groceries for them, and now having to create these new 
scenarios or new support mechanisms for these poor Americans.
    Mr. Finkle. Yes. You covered a lot of issues. Let me answer 
in three ways. First, you know, we are actually--on Monday I am 
going to Baton Rouge to actually work on some of the Katrina 
relief issues, or the redevelopment issues, dealing with what 
the Gulf States are having to deal with. One of the things that 
hit me instantly after the hurricane hit is, if those 
communities did not have the ability to use eminent domain as 
they start to rebuild some of these communities that were 
completely destroyed, that you would have development looking 
like, and the analogy I have been using is a hockey player's 
teeth, you would have a home rebuilt and then you would have 
one not. And you would have another home rebuilt and two not. 
And unless there was a way to come across with a redevelopment 
that you could implement, then some of the places, like the 9th 
Ward in New Orleans, which we are all learning about, would be 
very difficult to redevelop, or the parish immediately next to 
it.
    Second, the question was, you know, if you have a 
redevelopment plan where the people have participated in that 
plan, there was a lot of communication and a lot of public 
discussion, couldn't you go forward with a plan after that, 
whether it is in the Gulf States or not? I would point out, in 
two of the cases which the Institute for Justice have shown a 
great deal of interest, both Norwood, Ohio and New London, 
Connecticut, there was redevelopment plans that had lots of 
public hearings, lots of public participation, and the vast 
majority of people in those neighborhoods actually were willing 
to sell and it was the holdouts that we ended up--that we are 
talking about today. So those would be the couple of points.
    Oh, then finally the question was, what did the Supreme 
Court do? Economic development practices, or eminent domain 
with economic development, has been going on for quite some 
time. The Supreme Court just upheld what communities have been 
doing across the country up until this point.
    Mr. DeLong. I think one point that should be made, and that 
is, I think, with Mr. Anderson, am far less enamored of the 
idea of massive redevelopment planning and centralized planning 
and such. In accord with our basic view in most other areas, we 
tend to think that if you get your property rights right and 
then let your markets work, that you will get redevelopment. 
You know, we are getting redevelopment all over Washington 
without massive plans, whereas, Pennsylvania Avenue sat for 
what, 20 years? And you do get extraordinary situations like 
Katrina, but I think, to a larger extent, we sort of rely far 
less on government and far more on sort of the genius of the 
civilization, and on people knowing that they have property 
rights, and they will then invest and prosper. Cities are 
organisms rather than machines.
    Mr. Otter [pesiding]. All right, the chair will now go to 
the gentleman from New Hampshire, Mr. Bass. Five minutes.
    Mr. Bass. Thank you, Mr. Chairman. My home State of New 
Hampshire is considering a change in definition to its 
constitution that would define eminent domain or limit eminent 
domain to projects having public use--excuse me, public purpose 
versus public use. Now, as you know, the U.S. Constitution uses 
the term public use. I was wondering if any member of the 
panel, perhaps starting with Professor Ramsey, would wish to 
comment on that change and what it might imply, substitution of 
the word purpose for use after public.
    Mr. Ramsey. Well, that is a very interesting question, 
because in my view that is exactly what the Supreme Court of 
the United States already did for us in the Kelo case, and it 
is one of the reasons that Kelo troubles me so much as the 
constitutional matter, because I don't think the Supreme Court 
is entitled to rewrite rights in that way. The people of New 
Hampshire are, of course, are entitled to do that in their 
State constitution for State law purposes. My opinion as to 
what that would do, it is difficult to say, of course, as a 
matter of State law, but I think that it likely would bring 
State law in parallel with what the Kelo court said in Kelo was 
permitted under Federal law. So I would view it as substantial 
widening of State eminent domain power.
    Mr. Bass. Any other members of the panel wish to comment on 
that?
    Mr. Anderson. I would also say that it would decrease any 
protection. As we all know, the United States Constitution 
provides the baseline rights, and the States are free to 
provide even more than that, but to the extent that the New 
Hampshire citizens want to lower the rights that they have 
under the New Hampshire Constitution to what has been provided 
under Kelo, then I think that they are in big trouble.
    Mr. Finkle. If I could, I would add that I would be 
concerned for any State that put any damper on their ability to 
use eminent domain at some point in the future. I fear for 
places like Texas and Alabama that have already rushed and 
passed State legislation to put a limit without considering the 
issues of blight and redevelopment that they may need. And 
places like Birmingham in Alabama will need to do redevelopment 
from time to time, and are they going to allow an occasional 
holdout to keep a blighted area stay blighted because they have 
put some type of cap on their ability or hindered their ability 
to redevelopment at some point in the future.
    Mr. Anderson. I would say--point out that both Alabama and 
Texas do have exemptions for blight removal.
    Mr. Bass. Are there alternatives to eminent domain 
proceedings to achieve the same objective of acquiring property 
for public use?
    Mr. Finkle. I mean, clearly, from the municipal, from the 
economic development point of view, eminent domain is the 
choice of last resort.
    Mr. Bass. Yes.
    Mr. Finkle. In the deals that I am aware of, and I am 
familiar with lots of them around the country, you typically 
try to get the private sector to either--the government, if it 
is doing a redevelopment plan, you try to get them to do the 
deals through negotiated sale. You try to make offers and you 
try to get that done in the private sector. And there just are 
situations where you end up having a holdout. That is why 
eminent domain has been useful in allowing for redevelopment of 
a number of areas around the country.
    Mr. Bass. Mr. Chairman, I have no further questions.
    Mr. Otter. The chair recognizes that the gentleman yields 
back, and the chair would recognize Congresswoman Blackburn.
    Ms. Blackburn. Thank you, Mr. Chairman. I want to thank all 
of you for taking the time to be with us today and we really do 
appreciate this. And I will tell you, quite honestly, I am from 
Tennessee and have heard a lot from my constituents about Kelo 
and their concerns about this and the Supreme Court taking 
property.
    And in Tennessee, we talk about it in terms of also of 
intellectual property. And I will tell you what, Mr. Finkle, if 
you were out of Nashville, I think right now we would be 
writing a country music song about you saying, if the mind can 
achieve and conceive and believe, the government can take. And 
unfortunately, I feel like that that is the opinion that you 
have. It concerns me, sir, that you choose to refer to private 
property owners as holdouts. By and large, sir, they are 
American citizens who have worked hard, have earned some money, 
have put together a little piece of the pie that they turn into 
their American dream and their nest egg, and they are choosing 
to protect that. So what you see as being a grand plan of 
redevelopment, I would very respectfully disagree with you and 
say I see it as massive government intervention and planning.
    And so on that, we are going to have to disagree, but I go 
want to come to you for some questioning, if we may, sir. You 
say in your testimony that government agencies should not be in 
the real estate development business, but then you turned 
around and you keep talking about underdeveloped areas and 
areas that look like, unfortunately, I think you used the term 
hockey player's teeth. Some of my Nashville Predators might not 
appreciate that term. But you are putting--talking about 
putting government in the real estate business with 
redevelopment, because government has decided that an area is 
underdeveloped. So should not the private sector and the 
property owners and not the government or the economic 
professionals determine what is the best use of that land? So 
where are you going to come down on this?
    Mr. Finkle. Let me respond in a couple ways. First----
    Ms. Blackburn. You can do without a song, right?
    Mr. Finkle. You know, I thought you had a good start of the 
song, too, but I think the rest of my family would be most 
impressed, even if it had a little snide remark to it, that my 
name in a song would be interesting.
    At the end of the day, what we have done national is, we 
have set up cities, in many cases, to fail. And we have set up 
tax schemes that require cities to hold onto what jobs they 
can, grow jobs where they can, and build tax base where they 
can. And we pit their suburban community against a central 
city, or a suburban community against another suburban 
community, in the way that they have to pay for fire services, 
police services, sanitation services, Meals on Wheels, homeless 
shelters, is to generate taxes and jobs in the territory, the 
land that is within their municipal boundaries.
    With that, and with property taxes being one of the largest 
parts of their tax base, they have to be cognizant as to where 
they can get the highest and best use out of their taxes. So 
government should not be in the development business. That is 
what the private sector is for. But the government does need to 
think about, how do you expand jobs in the community? That is 
where your taxes are going to come from, if you have--and 
listening to Mr. Shelton's testimony, he talked about, how do 
we provide living wages to people in communities? We need to 
think about, where are those places that we can put businesses, 
how can those businesses grow, and where is it possible to grow 
them?
    Ms. Blackburn. So in essence, what you are telling me is 
that you favor a centralized elitist approach to this and not a 
local government-community involvement?
    Mr. Finkle. No, that is not what I said.
    Ms. Blackburn. That is not what you are saying?
    Mr. Finkle. No. What I am saying is--and we have been 
talking about redevelopment plans somewhat during this hearing 
so far. You know, when a redevelopment plan is proposed for an 
area, you are involving the private sector, the lenders. You 
are involving neighborhood residents in helping to think about 
what those future plans are for an area.
    Ms. Blackburn. Well, my time is expired, but I will 
respectfully say to you that I am delighted that we have had 
this hearing, and I appreciate the debate from you all, and I 
would continue to err on the side of allowing the local 
communities and private property owners to work together to 
decide how they want to use what is there for the city's use, 
and private property owners, what they want to do with their 
own property, but thank you very much.
    Mr. Otter. The gentlelady's time has expired. The chair 
would now recognize himself for 5 minutes. And I would begin by 
asking unanimous consent that the opening statement which I did 
not make be put in the record without objection.
    Now, I am going to go along with everybody else, Mr. 
Finkle, and probably pick on you because, you know, in Idaho, 
we have one of the most liberal eminent domain laws in the 
Nation, and we didn't know that until Kelo. Kelo was for us in 
this generation, I think, the Boston Massacre. We have been on 
a slippery slope on private property rights, whether it is 
intellectual, and I see no difference between creative genius 
and dirt, I see none whatsoever; in fact, I think one supports 
the other. But when I took a look at Kelo, and when it first 
came about, suddenly people started talking about private 
property; suddenly there was a recognition that our 
Constitution will not survive in a country that doesn't believe 
in private property rights and hold that sacred, as well as all 
the rest of the amendments.
    But let first off go to the blight question, and there is 
always a problem in the declaration of eminent domain. We have 
got a lot of problems with that and we have got to clean that 
up. But as I said, in Idaho, we have got one of the most 
liberal ones, because nobody would ever think of taking away, 
no public official would ever think of approaching anybody on 
eminent domain, unless it was for a highway, or unless it was 
for some very purpose that government needs to use it, not just 
benefit by it, and that is the big difference that I think 
Professor Ramsey mentioned but hadn't really spoken to. The 
Constitution, I think, meant for public use, and the Supreme 
Court interpreted it as public benefit. Well, there is a lot of 
public benefit that we can get out of using somebody else's 
property. We have been doing that for years with the Endangered 
Species Act and the Wetlands Act and lots of others.
    And by the way, while I am on the subject of the problems 
that we have got in the Gulf, and I am certainly sympathetic 
with those problems, but we do have planning and zoning laws, 
and those are--will take care of most of that, No. 1. We do 
have--in the 9th Ward, we do also have flood plain laws and 
floodway laws, and there is a lot of places in Idaho, and we 
are 2800 feet above sea level, that we can't build because it 
is too close to a river and in 500 years there might be a 
flood. We have them in every State, and most of those are 
endowed some kind of Federal official sanction. So you know, I 
think I am thankful for the Kelo decision, because I think it 
really brings to the forefront how far afield that we have 
actually gone.
    But in declaring an eminent domain, why wouldn't we give, 
or what would be wrong, then, with giving the property owner 
who is going to lose the use of his property as a result of 
this action, why don't you say, okay. Well, you can either take 
the money or half the money, and you take a share in this 
development that is going to happen as a result of investing 
your property right into this new development. We are going to 
give you the option. What would be wrong with that?
    Mr. Finkle. Mr. Chairman, I was asked that question when I 
testified before Congress in the Congressman Hayes' committee 
when he had a field hearing in Ohio, and I guess my trite 
answer back at that particular point in time was, would the 
person be willing to take part of the loss if the project lost 
money as well? And I would think somebody would want just 
compensation. And you know, I think the issue that many of us 
struggle with over this issue is, maybe we should be talking 
about just compensation as opposed to, you know, whether you 
can use eminent domain? Is it 150 percent of value that 
somebody should get? Is it 125 percent of value? Is it 200 
percent of value when you use eminent domain for an economic 
development purpose? If you start giving somebody a share of 
the upside, what if there is no upside, and then you have put 
that person in worse shape as opposed to coming up with the 
solution that you thought was going to make them rich.
    Mr. Otter. Well, I believe that there is a basic concept 
that is probably more important than even the private property 
rights and the Fifth Amendment, and that is personal 
responsibility. If you want to make the choice and take the 
risk, be bold, be daring. That is the risk that you take. It 
happens every day in this country and that is what has built 
this country.
    Mr. Finkle. But as Mr. Shelton said, too often these are 
located in distressed communities. We are talking with people 
that may not be as educated because they are in poverty. They 
may not have made it through high school, and you are putting 
them in a Catch 22, you know, the great riches or the ability 
to have a home somewhere else that is equal to or better than 
what they currently have.
    Mr. Otter. My time has expired, and if the committee wants, 
we will have a second go around. But I would only mention to 
you that the last great effort we had in that direction was 
called urban renewal.
    Mr. Finkle. Yes.
    Mr. Otter. And in Boise, Idaho, we still have holes in the 
ground that were left from all the buildings they tore down and 
never rebuilt. So I would now recognize Ms. Schakowsky for 5 
minutes.
    Ms. Schakowsky. Thank you, Mr. Chairman.
    I would assume, Mr. Shelton, that the issues of just 
compensation existed before the Kelo decision, even when 
something was for a clearly defined public use. And I am just 
wondering if you think there is any way to write a law or to 
focus on this issue of just compensation that would take into 
account more equitably the renters you are talking about, or if 
any others think, Mr. DeLong, since you suggested it, whether 
or not we actually could do that.
    Mr. DeLong. I would think the human disruption cost seem to 
me----
    Ms. Schakowsky. Let me get Mr. Shelton and then----
    Mr. DeLong. Oh, I am sorry.
    Ms. Schakowsky. Okay, go ahead.
    Mr. Shelton. I believe that the short answer is yes. I 
think there is a possibility of doing just that, but it is 
going to require a number of things being taken into 
consideration. No. 1, usually when we are talking about just 
compensation, you are looking at what the property is worth 
just in the context of the way things are then and there.
    Ms. Schakowsky. Right.
    Mr. Shelton. But also, any negotiation requires there to be 
power on each side to be able to negotiate. If the options are, 
you can sell it to us at this price, I was going take it 
anyway, which has a tendency to be exactly what we experience 
in most communities.
    Ms. Schakowsky. Yes.
    Mr. Shelton. You have taken away the power of that person 
to actually negotiate what is just and then being compensated.
    Ms. Schakowsky. And you are suggesting, again, in the real 
world, that these are not empowered communities or individuals 
to begin with.
    Mr. Shelton. Absolutely. And finding tools to actually 
empower the community so they can make decisions along these 
lines so they can actually actively negotiate the deal to 
provide the just compensation, is one that we would have to 
find a way to work out.
    Ms. Schakowsky. Mr. DeLong?
    Mr. DeLong. Yes. There are indeed a lot of sticky issues, 
but I think this would be an excellent start. I think this has 
been a problem for years, and that is, that people will tend to 
get strictly the real estate value and they don't get the real, 
the value of the loss, whether it is the human disruption or 
whether it is the loss of a going concern value of a business.
    Ms. Schakowsky. Yes.
    Mr. DeLong. And it does seem to that this is an area where 
the courts have been a bit remiss, and where Congress might 
really--should really look at this is as a possible way of 
solving the problem without getting into all these issues about 
just what is public use and what is not.
    Ms. Schakowsky. Mr. Otter raised the issue of zoning laws, 
et cetera, and, Mr. Finkle, you were shaking your head, that 
those are not applicable here or not sufficient to address 
this.
    Mr. Finkle. Thank you. It was specifically in relationship 
to the question of the 9th Ward in New Orleans, that unless 
there is an overall redevelopment effort as you are acquiring 
the land, and I don't--I guess I am going back to--I don't see 
us being able to redevelop those neighborhoods without, you 
know, some abuse, if you want to call it abuse, of property 
rights, grabbing the land in some way and redevelop, and then 
pay people for the value of it or give them a new home at the 
end of the process, whether it is on their plot of land or not 
in the future. I don't see that as planning or zoning laws 
actually helping to resolve that. It becomes an equity trade, 
so to speak, as you start the redevelopment process. As you 
rebuild some of the homes, whether it is in the 9th Ward or 
whether it is elsewhere in New Orleans, how do you give it back 
to them after you have taken it? And if you decide that it is 
in flood zone and you are not going to rebuild, you still have 
a compensation question, it seems to me, as you have prevented 
them from going back and using their property rights at all.
    Ms. Schakowsky. Well, you have the compensation question in 
any case, right?
    Mr. Finkle. Absolutely.
    Ms. Schakowsky. And you know, we had, after a big flood on 
the Mississippi River in 1993, a whole town that was moved off 
the flood plain onto higher ground. I don't know if these were 
all the questions that were involved, but I am certain that 
people were compensated to help do that.
    Mr. Finkle. Yes. I do know that some of the delegation from 
North Dakota have had one hearing on this question, and did 
raise this whole issue of what do you do, because they had 
their river flow out its banks and then ended up having to 
acquire some of the land, whether they were houses that were 
once used, and there became an issue of eminent domain, and 
they were particularly concerned about how do you address those 
issues if you started to limit the Federal Government's 
financial participation if you use eminent domain, and they 
were saying that it is not practical.
    Ms. Schakowsky. Thank you.
    Mr. Otter. The chair would recognize Mr. Bass. Ms. 
Blackburn?
    Ms. Blackburn. Thank you, Mr. Chairman. I do have just a 
couple of other things.
    Going back, Mr. Finkle, you just--you are going to feel 
like you have just had a day of it, aren't you?
    Mr. Finkle. I am beginning to believe that you and I are 
going to be real friends before the day is over.
    Ms. Blackburn. Absolutely. The same song, second verse, how 
is that? We will have at it.
    Let us talk about the redevelopment again, because in 
reading your testimony, I will have to tell you, it just 
intrigues me to see your point of view. It is different from 
my. You and I don't share the same philosophical underpinning, 
I would assume. And as I said previously, I feel like you go 
for the centralized approach; I would go for the local control 
approach. Listening to you, I feel like that you believe, in 
order for someone to be educated enough to know what the value 
of their property is, they have got to have a Harvard degree. I 
went to Mississippi State University, which is Cal College to a 
lot of folks, and I think it had served me just fine. I 
appreciate a good plot of dirt, and I think a lot of my 
constituents from Nashville to Memphis to Clarksville, 
Tennessee appreciate a good plot of dirt, too.
    So let us talk for just a minute, because you state that 
eminent domain facilitates redevelopment projects, because the 
public would be unable to support many inner city projects. And 
if they are not able to support it, then are we--you mentioned 
earlier that you thought tax schemes and the way we organize 
cities many times set up cities to fail. So if you are going to 
practice eminent domain to facilitate redevelopment into areas 
that could not support redevelopment, would that not be the 
same thing, are you not creating an artificial market, are 
trying to therefore create an artificial market through 
acquiring the properties in local communities that you have 
organized for their development, but it is an underserved 
population or an area that cannot support it. So again, I turn 
the question back around to you. Are you not setting them up to 
fail?
    Mr. Finkle. I would agree with most of what you said and 
disagree with your conclusion. At the end of the day, what we 
are doing with economic development, either through your State 
Department of Economic Development in the State of Tennessee or 
in the city of Nashville's Economic Development Department, is, 
we are engaging in some type of intervention technique to help 
create jobs, sustain tax base, and enhance the wealth of the 
people that live in that local community. Is it an intervention 
technique? It is. That is what the Economic Development 
Administration is all about. That is what the CDBG Program is 
all about. That is what many of the Federal tools are all about 
that we use. It is to support places that are having a 
difficult time in one way or the other. CDBG Program is 
specifically used for low and moderate income neighborhoods, 
and there are very specific definitions around it, but is to 
prop up those neighborhoods. So yes, I would agree with you. 
Now, once those investments have been made, you are hoping that 
that hasn't set them up to fail in the future.
    Ms. Blackburn. Okay. I thank you for that. I think the 
difference, then, is that when we look at these programs when I 
served in the State senate in Tennessee or here at the Federal 
level, we don't take action unless the local community comes to 
us with a request. And what you are saying is, you should 
override that and take action in place of their making a 
request.
    Ms. Schakowsky. Would the gentlewoman yield?
    Ms. Blackburn. Sure.
    Ms. Schakowsky. In the case Kelo, though, we weren't 
talking about the local----
    Ms. Blackburn. Oh, I am aware of that. I am aware of that. 
I am referring back to part of his testimony.
    Ms. Schakowsky. Okay.
    Ms. Blackburn. But thank you.
    Mr. Finkle. We elect local officials to think about the 
future for their communities. And you know, most of them do so 
at a public request, and they understand where their areas of 
opportunities are within their communities, and that is why 
local officials are put in positions to lead, and that is what 
we hope that they do.
    Ms. Blackburn. We certainly do, and we thank you for your 
time.
    Mr. Otter. The chair would recognize himself for the second 
round.
    I wanted to get back on how we make local decisions about 
the kind of development or the kind of planning and zoning, the 
kind of neighborhoods we are going to have. Don't we do a lot 
of that actually with planning and zoning laws and taxation? 
Mr. Finkle.
    Mr. Finkle. Is that a question? Yes.
    Mr. Otter. Yes, that is a question.
    Mr. Finkle. Of course, we do it with planning laws, zoning 
laws. And you know, one of the additional tools that the 
communities use is enterprise zones, and we provide tax 
incentives for businesses to locate in particular places, or we 
reduce taxes across the board, either at the State level or the 
local level, to support local enterprise.
    Mr. Otter. Yes. Professor Ramsey, do you see an opportunity 
in the Kelo decision for one level of government to actually 
supercede the use of another level of government's land? For 
instance, at the State level in Idaho, we may want to see 
something developed in one of the little cities or counties, 
and decide through eminent domain to actually take the 
government land away from the government. Actually, I think Mr. 
Finkle is the one that generated this thought to me, is that 
the State might decide that they have got a better use, a 
higher economic purpose, and thus a better return in jobs and 
everything else, to establish perhaps a Yucca Mountain site 
someplace where they have--where the government already owns 
the land, only it is just the wrong level of government. Could 
the government of the State of Idaho supercede the government 
of, say, a county in Idaho and say, we are going to take this 
land away from you through eminent domain and use it?
    Mr. Ramsey. Well, you really should be a law professor 
because you ask the most excellent hypotheticals. Let me see 
what I can do with that one.
    My answer to that, I think, and it may not be satisfying to 
you, is that I think that would be a question of Idaho State 
law. I think the Kelo decision actually would not go to that at 
all, because I don't think that the local government, you know, 
locality in Idaho would have a constitutional right to 
property. The eminent domain clause goes to the taking of 
private property.
    Mr. Otter. I understand. And not only that, the county is a 
creation of the State.
    Mr. Ramsey. Exactly.
    Mr. Otter. Let us go one further. Because the Federal 
Government is the creation of the States, and this is really 
where I was headed, would it then be an opportunity for the 
State to say, well, there is 35 million acres of Federal land 
in Idaho, and we would like to build a dam on some of that 
land. And so we are going to--because you are a creature of the 
States and not vice versa, we are now going to take this land 
and do with it what we want, let us say.
    Mr. Ramsey. I think that would not be constitutional, 
although, again, it would not come out of the Kelo----
    Mr. Otter. Because of the supremacy law?
    Mr. Ramsey. Exactly. Because of the supremacy clause and 
because of Federal immunity against State interference, I think 
that the State would not be constitutionally entitled to do 
that. And if it were, there is certainly no doubt that Congress 
could direct the State to stay well clear, and I actually 
assume Congress has implicitly done that in authorizing the use 
of the Federal land that is going forward right now. So I think 
the State could not interfere with the Federal land.
    Mr. Otter. I understand. I have no further questions. Did 
you have any? This meeting is now over.
    [Whereupon, at 3:35 p.m., the subcommittee was adjourned.]

                                 
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