[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
EMINENT DOMAIN: ARE OHIO
HOMEOWNERS AT RISK?
=======================================================================
FIELD HEARING
BEFORE THE
SUBCOMMITTEE ON
HOUSING AND COMMUNITY OPPORTUNITY
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
AUGUST 18, 2005
__________
Printed for the use of the Committee on Financial Services
Serial No. 109-52
U.S. GOVERNMENT PRINTING OFFICE
29-943 WASHINGTON : 2006
_____________________________________________________________________________
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HOUSE COMMITTEE ON FINANCIAL SERVICES
MICHAEL G. OXLEY, Ohio, Chairman
JAMES A. LEACH, Iowa BARNEY FRANK, Massachusetts
RICHARD H. BAKER, Louisiana PAUL E. KANJORSKI, Pennsylvania
DEBORAH PRYCE, Ohio MAXINE WATERS, California
SPENCER BACHUS, Alabama CAROLYN B. MALONEY, New York
MICHAEL N. CASTLE, Delaware LUIS V. GUTIERREZ, Illinois
EDWARD R. ROYCE, California NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma MELVIN L. WATT, North Carolina
ROBERT W. NEY, Ohio GARY L. ACKERMAN, New York
SUE W. KELLY, New York, Vice Chair DARLENE HOOLEY, Oregon
RON PAUL, Texas JULIA CARSON, Indiana
PAUL E. GILLMOR, Ohio BRAD SHERMAN, California
JIM RYUN, Kansas GREGORY W. MEEKS, New York
STEVEN C. LaTOURETTE, Ohio BARBARA LEE, California
DONALD A. MANZULLO, Illinois DENNIS MOORE, Kansas
WALTER B. JONES, Jr., North MICHAEL E. CAPUANO, Massachusetts
Carolina HAROLD E. FORD, Jr., Tennessee
JUDY BIGGERT, Illinois RUBEN HINOJOSA, Texas
CHRISTOPHER SHAYS, Connecticut JOSEPH CROWLEY, New York
VITO FOSSELLA, New York WM. LACY CLAY, Missouri
GARY G. MILLER, California STEVE ISRAEL, New York
PATRICK J. TIBERI, Ohio CAROLYN McCARTHY, New York
MARK R. KENNEDY, Minnesota JOE BACA, California
TOM FEENEY, Florida JIM MATHESON, Utah
JEB HENSARLING, Texas STEPHEN F. LYNCH, Massachusetts
SCOTT GARRETT, New Jersey BRAD MILLER, North Carolina
GINNY BROWN-WAITE, Florida DAVID SCOTT, Georgia
J. GRESHAM BARRETT, South Carolina ARTUR DAVIS, Alabama
KATHERINE HARRIS, Florida AL GREEN, Texas
RICK RENZI, Arizona EMANUEL CLEAVER, Missouri
JIM GERLACH, Pennsylvania MELISSA L. BEAN, Illinois
STEVAN PEARCE, New Mexico DEBBIE WASSERMAN SCHULTZ, Florida
RANDY NEUGEBAUER, Texas GWEN MOORE, Wisconsin,
TOM PRICE, Georgia
MICHAEL G. FITZPATRICK, BERNARD SANDERS, Vermont
Pennsylvania
GEOFF DAVIS, Kentucky
PATRICK T. McHENRY, North Carolina
CAMPBELL, JOHN, California
Robert U. Foster, III, Staff Director
Subcommittee on Housing and Community Opportunity
ROBERT W. NEY, Ohio, Chairman
GARY G. MILLER, California, Vice MAXINE WATERS, California
Chairman NYDIA M. VELAZQUEZ, New York
RICHARD H. BAKER, Louisiana JULIA CARSON, Indiana
WALTER B. JONES, Jr., North BARBARA LEE, California
Carolina MICHAEL E. CAPUANO, Massachusetts
CHRISTOPHER SHAYS, Connecticut BERNARD SANDERS, Vermont
PATRICK J. TIBERI, Ohio STEPHEN F. LYNCH, Massachusetts
GINNY BROWN-WAITE, Florida BRAD MILLER, North Carolina
KATHERINE HARRIS, Florida DAVID SCOTT, Georgia
RICK RENZI, Arizona ARTUR DAVIS, Alabama
STEVAN, PEARCE, New Mexico EMANUEL CLEAVER, Missouri
RANDY NEUGEBAUER, Texas AL GREEN, Texas
MICHAEL G. FITZPATRICK, BARNEY FRANK, Massachusetts
Pennsylvania
GEOFF DAVIS, Kentucky
CAMPBELL, JOHN, California
MICHAEL G. OXLEY, Ohio
C O N T E N T S
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Page
Hearing held on:
August 18, 2005--Morning Session............................. 1
August 18, 2005--Afternoon Session........................... 25
Appendix:
August 18, 2005.............................................. 49
WITNESSES
Thursday, August 18, 2005--Morning Session--Hebron
Bubb, Timothy E., Commissioner, Licking County Board of
Commissioners.................................................. 3
Gibbs, Hon. Bob, State Representative, 97th House District, Ohio
House of Representatives....................................... 9
Grendell, Sen. Timothy J., 18th District, Ohio State Senate...... 5
Mason, Hon. Clifford L., Mayor, Village of Hebron, Ohio.......... 11
Nutt, Steven, Director of Strategic Development, Citywide
Development Corporation........................................ 14
Platt, Richard J., Executive Director, Heath-Newark-Licking
County Port Authority.......................................... 12
Thursday, August 18, 2005--Afternoon Session--Chillicothe
Carey, Sen. John, 17th District, Ohio State Senate............... 27
Evans, Hon. Clyde, State Representative.......................... 35
Finkle, Jeffrey A., President and CEO, International Economic
Development Council............................................ 31
Grendell, Sen. Timothy J., 18th District, Ohio State Senate...... 28
Smith, Dona, Executive Vice President, Ross County Community
Improvement Corporation........................................ 34
APPENDIX
Prepared statements:
Ney, Hon. Bob--Morning....................................... 50
Ney, Hon. Bob--Afternoon..................................... 52
Bubb, Timothy E.............................................. 54
Carey, Sen. John............................................. 58
Finkle, Jeffrey A............................................ 60
Gibbs, Hon. Bob.............................................. 69
Grendell, Sen. Timothy J..................................... 73
Mason, Hon. Clifford L....................................... 86
Nutt, Steven................................................. 88
Platt, Richard J............................................. 97
Schlichter, Hon. John........................................ 102
Smith, Dona.................................................. 106
Additional Material Submitted for the Record
Ney, Hon. Bob:
Letter from the Jackson County Commissioners................. 108
EMINENT DOMAIN: ARE OHIO
HOMEOWNERS AT RISK?
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Thursday, August 18, 2005
U.S. House of Representatives,
Subcommittee on Housing and
Community Opportunity,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 9:10 a.m., in
the Council Chambers, Village of Hebron Administration
Building, 934 West Main Street, Hebron, Ohio, Hon. Bob Ney
[chairman of the subcommittee] presiding.
Present: Representative Ney.
Chairman Ney. The meeting will come to order. I want to
thank everybody for coming here. Jeff Riley, who works for the
ranking member, Barney Frank from Massachusetts, is on his way.
My name is Bob Ney, I am the chairman of the subcommittee.
We have had hearings in Washington D.C., on this issue. Mike
Oxley from Ohio is Chairman of the full Financial Services
Committee and he sends his regards. All members of the
committee were notified today of the hearing, from across the
United States. So, everything today, we will take for the
record. It will be an official hearing and without objection,
the record will be open for 30 days in case people have things
they want to add or delete.
Before we start, I thought if we could, because we have
other elected officials; if we just want to start over here. We
will start with you, Grant, why don't you stand up and show the
elected officials that are here.
Mr. Dougherty. Grant Dougherty, County Commissioner,
Coshocton County.
Ms. Phelps. Good morning, everyone, Marcia Phelps, Licking
County Commissioner. Thank you.
Mr. Smith. Good morning, Doug Smith, Licking County
Commissioner.
Mr. Moore. Good morning, Bob Moore, Morgan County
Commissioner.
Mr. Gaine. Dean Gaine, Morgan County Commissioner.
Chairman Ney. Thank you. And I want to especially thank
Mayor Clifford Mason, who is the Mayor of Hebron. The council
chambers we are using today, I want to thank the Council and
special thanks to Mike McFarland also, for Mike's assistance.
After the hearing I will have some--as a resident of
Licking County--some complaints about roads and different
things that I will talk to you about later.
(Laughter.)
On our first panel Tim Bubb was elected commissioner on the
Licking County Board of Commissioners in November 2004.
Previously Commissioner Bubb served as a Newark City treasurer
for 3 years. Tim Bubb was raised in Newark and graduated with
honors from Newark High School in 1970, and from Ohio
University in 1974 with a degree in communications.
State Senator Tim Grendell represents the 18th District in
the Ohio Senate. He just took office this past January. Senator
Grendell is from Chesterland. Prior to his election he was an
attorney and has been active on this issue that we are having a
hearing on today, in the legislature.
State Representative Bob Gibbs is serving his second term
in the Ohio House of Representatives, representing the 97th
District. State Representative Gibbs is from Lakeville. Before
his election to the State House he was a small business owner.
Clifford Mason, of course, is the Mayor of the Village of
Hebron, and again we thank you for your and the staff's time
and attention and for helping us with this hearing.
Rick Platt is the executive director of the Heath-Newark-
Licking County Port Authority, a position he has held since
August 2002. The Port Authority owns the Central Ohio Aerospace
and Technology Center, which encompasses the property of the
former Newark Air Force Base and is the 18th largest industrial
park in central Ohio. Mr. Platt has experience from over 18
years in economic development in government working on a
portfolio of projects totaling more than $750 million in
capital investment, that has created or retained over 7,000
jobs. We knew him in eastern Ohio, Jefferson County, where he
did a lot of work.
And last but not least, is Steve Nutt. He is a director of
strategic development for the Citywide Development Corporation
located in Dayton.
I just have a brief statement for the record.
The Subcommittee on Housing and Community Opportunity meets
in a unique setting today for its second field hearing of the
109th Congress. Today, I will be holding two hearings, one in
the 18th Congressional District here of course. And the other
will be down in Chillicothe, Ohio, to discuss the Supreme
Court's recent ruling in the case of Kelo v. the City of New
London, and the serious implications this ruling could have on
low income housing, family farms, and rural Ohio. And, of
course, the Nation in general.
The last of the U.S. Constitution's Fifth Amendment
liberties provides that ``no private property be taken for
public use, without just compensation.'' Under this provision,
government entities may invoke their power of eminent domain,
or right of condemnation, to remove property from private
ownership for public use. On June 23, 2005, the United States
Supreme Court held in Kelo v. the City of New London, that the
city's condemnation of private property, which was part of the
city's redevelopment plan aimed at invigorating a depressed
economy, was a ``public use'' satisfying the United States
Constitution--even though the property might be turned over to
private developers. The majority opinion was grounded on recent
Supreme Court decisions holding that ``public use'' must be
read broadly to mean for a public purpose. The dissenters,
however, argued that even a broad reading of ``public use''
does not extend to private-to-private transfers solely to
improve the city's tax base and create jobs.
While the Supreme Court's decision does authorize
governments to exercise greater eminent domain powers, the
effect of Kelo on Ohio homeowners will depend upon Federal,
State, and local laws deeming what land is appropriate for
condemnation. It is important that, as stewards of the public's
tax dollars, we strike the appropriate balance needed between
the government's power to condemn land for ``public use'' and
to maintain the rights of citizens who wish to retain their
private property. Although the Court's decision allows for a
broader sense of private-to-private transfer, eminent domain is
still limited by local and State regulations and statutes.
Long ago, Sir William Blackstone in his Commentaries on the
Law of England wrote that ``the law of the land postpones even
public necessity to the sacred and inviolable rights of private
property.'' Our founding fathers embodied that principle while
drafting the United States Constitution, allowing the
government to take property not for ``public necessity'' but
instead for ``public use.'' Defying this understanding, the
Court through its recent Kelo decision replaces the ``public
use'' clause with a ``public purposes'' clause.
And the rest of my statement will be put into the record.
We do want to hear from you and this will be taken back to
Washington. And as we go across the county, we will seek
comments to see where this will balance out at the end of the
day.
So we will start with you, Commissioner. Thank you.
STATEMENT OF COMMISSIONER TIMOTHY E. BUBB, LICKING COUNTY BOARD
OF COMMISSIONERS
Mr. Bubb. Good morning Congressman Ney, fellow panelists,
elected officials, staff and others. Thank you for this
opportunity to speak briefly on some of the past uses by State
and local governments of eminent domain for public projects
here in Licking County, Ohio. And also, Congressman, thank you
for bringing this committee of the House of Representatives on
this important issue to the grassroots level on the western
side of your House District, Licking County. We appreciate the
opportunity.
Congressman, I do share your concern resulting from the
Supreme Court's June decision titled Kelo v. the City of New
London. I believe most Americans who have read the split
decision are concerned that the private property protections
afforded in the takings clause of the Fifth Amendment could be
placed at risk. Specifically that their homes, land, or even
small businesses could be at risk for taking for something
other than a clearly public purpose.
I think it is safe to say here in Ohio, and across the
Nation, that States are responding by considering amended laws
or even constitutional amendments to prevent or restrict
eminent domain powers for private development.
While my term as a county commissioner here in Licking
County began just this past January, my recollection is that
the authority of eminent domain locally has been used only for
public purposes. Specifically I think of a number of major
highway projects in my lifetime including the development of
Interstate 70 through the county in the late 1950's; the
development of the Newark Expressway beginning in the late
1950's and continuing through the 1990's for both Ohio Routes
16 and 79, that did involve the taking of land, with the
resulting compensations and in some cases litigation over
appraisal considerations and the amounts of compensation.
Currently the redevelopment of State Route 161, which is an
11-mile stretch from New Albany reaching to Granville, includes
a number of takings to accommodate the widening, the
realignment of that important roadway. The construction of
phase one is set for 2006.
While there have been and will continue to be some
disagreement over some of the specifics and amounts of
compensation in the takings of some of the parcels involved, I
do not believe there is any questions that these highway
projects represented and represent needed public improvements.
At the Licking County level, the two instances in my mind
that involved eminent domain were the construction of the new
Licking County Justice Center on Newark's near east side in the
1980's and also in that era the development of the Buckeye Lake
Sewer Project. And I believe these were both clearly public
projects with no private involvement. It should be noted in the
case of the Justice Center that this public project also served
to redevelop a blighted area near downtown Newark. Again, I am
not aware of any use of eminent domain to assist a private
development project here. However, this county office/jail
project was in many ways similar to some of the urban renewal
projects seen in other parts of the country.
Congressman, while I have heard of both Federal and State
legislation to address this concern, I would simply say to you
that I would agree with the prevailing thought, simply do not
move too quickly. I would certainly endorse the idea of a 1- or
2-year moratorium on the so-called private project eminent
domain which would ease fears and I think prevent any
additional private property takings. While I believe this has
the potential to be a slippery slope, I would suggest that
legislation could be crafted to allow a process for certain
exceptions. In other words ``never say never.''
An outright ban on any takings for other than public
purpose would make it very difficult, if not impossible, to
ever redevelop the inner-city urban areas of Ohio and in many
States. I could see a situation where redevelopment of a major
industrial site and job creation, possibly in a ``brownfield''
area of an urban region could be nearly unattainable without
some tools of eminent domain, possibly for access, a rail spur,
or even port access.
Again, such power in support of a public-private or private
development certainly would have to have thorough public review
to ensure that it is used sparingly and in an appropriate way.
One way to evaluate such use of takings could be a regional
review by a broad-based panel using as its guide local and
regional land use plans and zoning districts.
Congressman Ney, the preservation of green space and
maintaining a healthy blend of land uses is a front burner
issue for all of us here in Licking County. We are seeing a
substantial relocation of residents from Franklin County into
counties such as Licking and our neighboring counties such as
Delaware and Fairfield. And while we welcome growth, we are
also concerned about the rapid loss of easily developed
farmland and woodlands to those looking to site new
subdivisions for residential housing and commercial projects as
well.
I believe for our central Ohio region to remain healthy
that some tools, such as eminent domain, may need to be
available to allow for limited specific public-private
redevelopment projects in the older cities. Such redevelopment
has the potential to take some of the pressure off of the rural
unincorporated areas in terms of growth. Without some relief in
this area, I believe it will be impossible for county and
township governments to keep up with the unfettered growth, and
the resulting demand for infrastructure and public services in
these large unincorporated areas.
So, maybe it is possible to view Kelo v. the City of New
London as the Court's way of spurring this discussion as to
when eminent domain possibly could be a consideration for other
than strictly public applications. It is possible that this is
a discussion the framers never could have conceived.
Congressman, I do thank you for the opportunity to speak to
your subcommittee today and offer my thoughts, and again I
appreciate you being here today.
[The prepared statement of Mr. Bubb can be found on page 54
of the appendix.]
Chairman Ney. Thank you, Commissioner. Senator.
STATEMENT OF STATE SENATOR TIMOTHY J. GRENDELL, 18TH DISTRICT,
OHIO STATE SENATE
Mr. Grendell. Thank you Congressman Ney, good morning. Good
morning to all the public officials here. It is a beautiful
building and thank you, Congressman Ney, for bringing Congress
to Ohio and providing us an opportunity to testify before the
subcommittee on an important constitutional property rights
issue.
In addition to the Fifth Amendment language that you stated
Congressman, the Ohio Constitution even is more explicit. It
says that ``Private property shall ever be held inviolate . . .
where private property shall be taken for public use a
compensation therefor shall first be made in money, or secured
by a deposit.''
The U.S. Supreme Court's recent decision permitting the
government sanctioned transfer of private property from a
private citizen to a private developer has struck a
constitutional nerve throughout the country. While the use of
eminent domain for roads and utilities has long been
recognized, the government taking and transferring of a well-
maintained parcel of real property from one private owner to
another private owner is fundamentally un-American. Trampling
on one individual's property rights for the speculative,
collective good through a future development smacks of
socialism. The Ohio legislature can and should take immediate
action to protect Ohio's private property rights from the
intrusive impact of the Supreme Court's ruling.
Our Founding Fathers believed that private property
ownership, as defined under common law, pre-existed government.
They further believed that government, whether Federal or
State, served as the contractual agent for the people and,
unlike the English monarchy, was not a sovereign. Thus,
protecting private property ownership rights against
unwarranted governmental appropriation motivated the inclusion
of the takings clause in the Fifth Amendment of the U.S.
Constitution and various State constitutions, including Ohio's.
Of course, by including the takings clause, the framers of the
Bill of Rights also recognized the need for a limited public
use exception to the sanctity of private right--private
property rights, provided that the property owner was justly
compensated.
The takings clause buttressed the Founding Fathers' respect
for private property rights in two ways: private property can
only be taken for public use; and such taking can only occur if
the property owner is adequately compensated. The takings
clause in the Fifth Amendment was intended to protect private
property owners from arbitrary governmental power.
The drafters of the Ohio Constitution emulated the Federal
constitution recognition of private property rights in Article
I, Section 19, which declares that private property rights are
inviolate and permits appropriation of private property in Ohio
only for public use.
For approximately 175 years, eminent domain was employed by
government for obvious public uses such as roads, canals,
railroads, military bases, fire stations, schools and parks.
Then eminent domain became a tool for urban revitalizationists
who invoked government taking powers to acquire blighted or
deteriorated private property, often for private redevelopment
as urban renewal projects. Courts upheld such actions, finding
that eliminating blight was a legitimate public purpose. In
hindsight, these cases started takings law down a dangerous and
slippery slope.
On June 23, 2005, in Kelo v. the City of New London, the
U.S. Supreme Court, by a narrow five to four decision, issued
one of the most controversial rulings in history. The majority
of the Supreme Court expanded far beyond the traditional,
limited view of eminent domain powers by holding that non-
blighted private property can be taken, against the will of the
property owners, by a governmental authority for ultimate
ownership by another private entity, in the name of economic
development.
The majority of the Justices found that the City of New
London, Connecticut, did not violate the Fifth Amendment by
taking several unblighted residential properties clearing the
way for a private office complex. The majority concluded that
the economic benefits of such new development to the city, new
jobs and increased taxes, satisfied the constitutional public
use prerequisite to an eminent domain action.
Justice Sandra Day O'Connor and three other justices
disagreed with the majority's more broadly defined concept of
public purpose or pubic use. In her vigorous dissent, Justice
O'Connor chastised the majority for abandoning the 2-century
old principle of preventing the government from acting beyond
its authority, warning that ``nothing is to prevent the State
from replacing any Motel 6 with a Ritz Carlton, any home with a
shopping mall and any farm with a factory.''
To some, Kelo is the natural extension of the urban renewal
eliminate blight cases where economic benefit equals public
use. To others, Kelo is an affront to the fundamental
protection of private property ownership guaranteed by the
Fifth Amendment. A review of our Founding Fathers' early
writings supports the conclusion that Kelo is an affront to
property rights. It is doubtful that Thomas Jefferson ever
envisioned a government right to take his home, Monticello, and
give it to a private developer for an office complex or a big
box super center.
Thankfully, the Supreme Court noted that the Kelo decision
does not prevent States from adopting a more protective
approach to private property rights. At least 34 States have
initiated legislative efforts to negate the impact of Kelo.
Presently, Ohio law governing eminent domain neither
contemplates nor adequately protects private property owners
should unblighted private property be taken by eminent domain
under the banner of economic development. Courts have almost
uniformly acceded to the government's determination that a
public necessity exists justifying the take. At least in the
urban renewal cases, the taking authority had to obtain a
blight study before it could proceed with the eminent domain.
We have had two controversies involving that in Ohio; one,
the Lakewood case where there was a question of the validity of
the blight study which held that merely having a detached
garage and one bathroom constituted a blight if you were within
the boundaries of that particular take area, which was ironic
because the mayor of the city who did not live in the take area
had a home with one bathroom and a detached garage, which
apparently was blighted but not taken.
After Kelo, government officials merely need to conclude
that the taking of property from one private owner to transfer
to another private owner will be more economically beneficial
to the public. But such economic socialism may not constitute
public use.
Eminent domain procedures under Ohio law do not properly
address the private-to-private taking permitted by Kelo.
Currently, under chapter 163, the private property owner bears
a substantial burden with respect to establishing the value of
the property to be taken. And in fact, is required to go first
before the jury, which is an oddity in civil litigation in
Ohio, and is usually limited to presenting evidence of the
value based on the property's current zoning. This could lead
to a substantial inequity in a Kelo taking situation. For
example, the owner of a house on one acre zoned residential
worth a maximum of $150,000, in most cases, would be limited to
offering evidence of that value. Should the acre be taken by
eminent domain and subsequently transferred to a developer of a
commercial complex, the ultimate value of that property could
be $250,000 to $300,000. Such governmentally induced inequity
cannot be condoned or considered just compensation.
Additionally, the property owner has to absorb their own
attorney's fees and expert costs, even though the private
developer will get the benefit of that take.
Ohio must take action to protect Ohio's property rights
after Kelo. To that end, I, along with State Senator Kimberly
Zurz, Gary Cates, and 23 other Ohio State Senators have
sponsored Senate Bill 167 in the Ohio Senate. This legislation
provides for a temporary statewide moratorium on governmental
taking of unblighted private property for economic development
by another private party. The moratorium would be in force
until December 31, 2006, and would affect both State and local
governmental projects involving eminent domain proceedings. In
addition, Senate Bill 167 forms a legislative Task Force to
conduct a comprehensive review of Ohio's eminent domain laws
and procedures.
The task force, comprised of 24 individuals, will include
representation from a broad set of interested parties,
including property rights groups, State and local government,
agriculture, commercial and residential real estate and the
Legislature. The task force will conduct a comprehensive review
of Ohio's eminent domain law and procedures and make
recommendations as to the statutory or constitutional actions
needed to protect private property rights in Ohio in light of
Kelo. The task force report will be due in the spring of 2006,
giving the legislature time to take action on its
recommendations in the current term.
Senate Bill 167 protects Ohioans' property rights in the
short term, while providing a thoughtful and comprehensive
approach toward a permanent change in Ohio's eminent domain
law. While eminent domain can be an important tool for State
and local government when employed for legitimate public uses,
the governmental powers should not be abused or exploited. To
make way for new developments simply because such developments
will generate more jobs and taxes or for some other speculative
public good at the expense of a private property owner is
fundamentally un-American.
Under Article I, Section 19, of the Ohio Constitution,
``private property rights are inviolate.'' And despite the Kelo
ruling and its overly expansive notion of eminent domain,
``inviolate'', in Ohio, still means inviolate.
States have numerous options in response to Kelo. These
options range from taking no action and letting the courts
grapple with the problem to adoption of a State constitutional
amendment prohibiting the taking of all private property or
unbilighted private property that would ultimately be
transferred by another property owner to a private property
owner. In between, State law can be changed to redefine public
use, but such statutory action could be circumvented by a
municipality's home rule powers. Such home rule concern can be
avoided by way of a State constitutional amendment. States also
should reexamine their definition of blight and deteriorated
properties to prevent future circumvention of any Kelo
responsive changes in the law through the abuse of those terms.
Finally, if a total prohibition against the taking of
unblighted private property is not adopted, State procedures
for determining just compensation for property taken should be
changed to allow the current private property owner to offer
evidence demonstrating the value of the property based on its
proposed future development after the take.
Swift action is needed to protect Ohioans' private property
rights after Kelo. Senate Bill 167 will provide immediate
relief, while proposing the appropriate long-term solution.
This approach will protect Ohio private property rights now and
in the future.
Congressman, thank you very much for the chance to address
you today.
[The prepared statement of Mr. Grendell can be found on
page 73 of the appendix.]
Chairman Ney. Thank you, Senator, for your testimony.
Representative Gibbs.
STATEMENT OF HON. BOB GIBBS, STATE REPRESENTATIVE, 97TH
DISTRICT, OHIO HOUSE OF REPRESENTATIVES
Mr. Gibbs. Thank you, Congressman Ney, and welcome.
Appreciate the opportunity to come and testify. I will try to
paraphrase some of my testimony because it is very similar to
Senator Grendell's testimony.
Just as a side note, one of the reasons why I wanted to get
involved in this issue is because of my past. A few years ago,
I was president of the Ohio Farm Bureau and I have seen takings
by government agencies, regulatory type takings, which is a
similar issue to this. Not exactly the same, but I can see the
impact it does to private business and families and that is why
I got concerned and concerned about private property rights.
As you know, the Supreme Court decision in Kelo, the 5-4
decision, allows for eminent domain takings from the private
sector for development. It provides for a wide range of
discretion to State and local governments to decide how eminent
domain powers should be employed in their jurisdiction. I
believe that this decision opens a flood gate for eminent
domain abuse. I and other members of the General Assembly
realized this early on and we think that it is imperative that
legislative action be taken immediately to ensure fair and
uniform enforcement of eminent domain powers and protect
private property rights in our State.
Eminent domain has been a necessary tool to provide public
infrastructure projects for public good. However, the Kelo
decision allows for eminent domain proceedings for private
sector development that ultimately enhances the tax base,
making the argument it is for the public good because of
increased tax revenues. This argument is appalling, essentially
the government is saying revenues to a taxing jurisdiction are
paramount to private property rights. This contradicts the
founding principles this Nation was founded upon.
Currently, Ohio law provides for eminent domain authority
to be used to eliminate slums and blighted neighborhoods. A
strong case can be made with this provision and the current law
that the Kelo type provision is not necessary, but only opens
the door for eminent domain abuse. The Kelo decision will take
our free market system out of private development projects.
And it was just a couple of weeks ago I received a
correspondence from a citizen in northeast Ohio, he stated that
a large insurance company up there made an offer to the local
land owners to buy their property to expand their office
complex. And the landowners denied the request and I do not
know if they do not want to sell or if it might be the free
market system working here. But according to his
correspondence, they have now pursued the local jurisdiction,
since the Kelo decision, to pursue the use of the eminent
domain. So that is the future concern for me that you are
taking the free market system out of the process.
Of course under the current system, you know, the judicial
system and the juries will decide what compensation will be. I
asked a question here when the private property remains in the
private sector, you know, what is the basis for compensation.
Since Kelo takes out the free and open competitive market, who
determines what the property rights are.
Also, as stated, I have been working with Senator Grendell
and others and as Senator Grendell stated, he has introduced
the Senate Bill with the moratorium. I am introducing the
identical companion legislation in the House. We had a little
bit of a paper snafu, and it should be introduced today, along
with about 30 some co-sponsors, a very bipartisan support. As
Senator Grendell stated, it would put a moratorium on until
December 31, 2006. And the study task force and I think we
probably are looking at a constitutional amendment here in
Ohio, next November to address this situation.
However, I do want to caution that we need to be careful.
We were working on this project or this issue with the Jobs for
Ohio issue. There are a lot of complex issues and a lot of
nuances and some questions came up between the attorneys and
the government leadership here in Ohio. And that is why we need
this task force to look at all the complexities and make sure
that we do not something that is going to cause more problems
in the future. And I would also caution at the Federal level
not to have a knee jerk reaction, because I think most people
can see that Kelo is a problem, the decision is a problem and
raises some concerns, but then we do not want to do some things
with eminent domain that causes some problems on the other side
of it.
As stated, there was the Lakewood case Senator Grendell
talked about. Also in Norwood, Ohio, there was a similar case
and in that case, my understanding is it was declared an
emergency so a referendum could not take place as opposed to in
Lakewood where the citizens overturned the eminent domain
proceedings. And the Court of Appeals in Hamilton County upheld
the lower court's decision saying that the city council amended
their laws and had a plan in place and they ruled
unconstitutional and I had the opportunity to meet the person
whose land was taken, and I think it goes against all our
principles of government here in the United States.
As I stated it is also an opinion of this working group
that we have put together, an ad hoc group that Senator
Grendell put together of many stakeholders that we should not
rush into this and that is why a moratorium makes a lot of
sense and I am happy to sponsor that in the House.
I do feel strongly that an eminent domain authority should
be used judiciously and only for public infrastructure projects
and common carrier easements in question.
I think also we need to address in Ohio the definition of
blighted neighborhoods so that it is closely defined so we
protect the private property owners' rights. And we also, need
to strengthen those rights. I think Senator Grendell alluded to
it a little bit, you know, property owners do not have much--
they have to hire their own legal counsel and the costs
associated with challenging eminent domain action for public
use grounds and we need to probably strengthen those
protections for the private property owners when they are in
eminent domain proceedings.
So, again, I want to thank the Congressman for having the
hearing and the opportunity to talk here. I would be happy to
answer any questions you have. Thank you.
[The prepared statement of Mr. Gibbs can be found on page
69 of the appendix.]
Chairman Ney. Thank you, Representative. Mayor.
STATEMENT OF HON. CLIFFORD L. MASON, MAYOR, VILLAGE OF HEBRON,
OHIO
Mr. Mason. Honorable Chairman Ney, committee members,
fellow elected officials, and guests.
Thank you for allowing me the opportunity to address the
committee this morning. As Mayor of the Village of Hebron, I
would like to welcome everyone to our community for this
important event.
The Fifth Amendment to the Constitution of the United
States allows for the government taking of private property for
the public good through the application of due process and fair
compensation. Clearly, many of the roads, utility
infrastructure, schools, flood control reservoirs, and numerous
other projects that improve the quality of life for all would
not be possible if it were not for this law.
I believe that while the eminent domain process can yield
great benefit for communities, it can also inflict significant
hardship on private property owners who have their own vision
for their property. The property owners have a right to that
vision and the government should be hesitant to impose a
different vision. The need to strike a balance between the
public good and the property rights of the individual should
always be uppermost in the minds of elected officials.
It seems to me that the taking of private property from one
private individual and giving it or selling it to another
private individual or business is unlikely to be what the
framers of the Fifth Amendment had in mind. When the taking is
done solely to enhance the revenue stream for the government by
expanding the tax base, I believe it is beyond the boundaries
of expectation of the electorate.
There is no question that any of our homes would produce
more jobs and taxes if they were turned into an office building
site, and every small business would produce more jobs and
taxes if it were torn down and a Lowe's or Wal-Mart were
constructed. If that's the definition of public good to be
used, then everything we own as individuals is in jeopardy as
soon as some private business delivers their plan or vision to
the local council.
Our country has always supported a strong system of
protecting private property rights. I believe that the process
of eminent domain is a necessary tool for the betterment of our
communities and public safety and health, and should continue.
As with many laws, the interpretation of this one seems to have
expanded beyond what most Americans would consider common
sense. I am one of those Americans.
I support the efforts of your committee to investigate what
may appear to some as abuses of the eminent domain process. I
also would encourage our representatives at all levels that any
restriction of the process be approached with great caution.
This is a law that has helped provide an American
infrastructure that is the envy of most of the world. It will
continue to be needed as we move forward as an innovative and
progressive society.
Those of us who have the privilege of serving our
communities simply cannot forget that we have a responsibility
to protect and defend the rights of the private individual as
we strive to improve the quality of life for all.
Thank you for this opportunity to share these comments.
[The prepared statement of Mayor Mason can be found on page
86 of the appendix.]
Chairman Ney. Thank you, Mayor. Mr. Platt.
STATEMENT OF RICHARD J. PLATT, EXECUTIVE DIRECTOR, HEATH-
NEWARK-LICKING COUNTY PORT AUTHORITY
Mr. Platt. Good morning. I appreciate the opportunity to
offer testimony. I will paraphrase my written remarks. I thank
you, Chairman Ney, for listening to your constituents and for
conducting this hearing outside of Washington. Eminent domain
is a local issue and it is entirely appropriate that these
hearings be conducted in the seat of a local government.
My remarks today are based on my past professional
experiences and observations over the last 18 years in economic
development and government. My current employer, the Port
Authority, has not exercised eminent domain powers and has no
current plans to exercise those powers.
My experience, though, tells me--and it is my personal
opinion--that the Supreme Court got it right. My contention is
that local governments can, and should, be trusted to continue
to have power to use eminent domain for economic development
and other public purposes.
Many want to portray this decision in Kelo as a battle of
big business winning while mom and pop are losing. However, I
fear legislation aimed at countering Kelo might actually end up
with unintended consequences.
My thinking comes from observations on several sides of
this issue. In 1999, while serving as the head of a public/
private economic development group in Steubenville, Ohio, my
employer earned this Pittsburgh Post-Gazette headline.
``Alliance 2000 to Heinz: You've Got a Friend in Ohio.''
Jefferson County, Ohio, a suburb of Pittsburgh stood to
gain a baby food and soup plant expansion by Heinz if the City
of Pittsburgh could not successfully acquire properties
adjacent to the existing inner city Heinz plant. Heinz had
proposed a $40 million expansion and desired to stay in
Pittsburgh but was hemmed in by surrounding built-out
properties.
Though eminent domain was not ultimately used in this
Pittsburgh case, it was central to the discussions aimed at
keeping Heinz, its jobs, and its economic impact in the inner
city. The possible condemnation of properties was enough to get
negotiators to the table and make it possible for Pittsburgh to
gain the expansion and retain this legacy business in their
city.
The unintended consequence of tying the hands of urban
areas is continued flight of businesses and people to greener
pastures in the suburbs. Had the local government officials in
Pittsburgh found themselves unable to consider using eminent
domain powers in this case, it is quite possible Heinz would
have gone to a suburban site west of Steubenville.
The big business in this case, Heinz, would not have lost.
Their costs were not much greater relocating the whole plant to
Steubenville. The losers would have been the hundreds of moms
and pops who would have lost their jobs in Pittsburgh.
Do not think suburban communities are lining up to suggest
the end to eminent domain for economic development though.
Steubenville faces eminent domain issues itself. The south end
of town, once a thriving ethnic neighborhood with a flourishing
mix of industrial, retail, and housing development, is
dilapidated. Overgrown vacant lots, absentee landlords, and
economic despair are the only things flourishing in the south
end now.
But, replace the name Steubenville with the name of many of
our large and medium size cities around Ohio and the Nation and
the same exact story could be told. The only way for most of
these cities to turn this dire economic situation around is
through government-led land assembly aimed at attracting
private, capital investment.
Some years ago, the city crafted a redevelopment plan that
called for assembling dozens of parcels into four distinct
sites. During that planning process, there were strategy
discussions of using eminent domain powers as a last resort to
acquire vacant properties.
Eminent domain powers are a critical part of any
redevelopment plan. It is necessary to assemble land, clean it
up and get the area's property values pointing in a positive
direction before there is any hope of inviting the private
sector in to turn it around.
It is quite possible in this case that eminent domain never
has to be used. The mere ability to use it though, is enough to
tilt the balance in the favor of redevelopment. Restrict
eminent domain powers to just building a new government
building or new highways in places like Steubenville, Ohio, and
you might as well write off neighborhoods like the south end
forever.
Again, unintended consequences and really the reverse of
protecting mom and pop could result.
The national discourse on this issue has been so strong
that I fear a pendulum-like swing of public policy could bring
us to restrictions on eminent domain powers so great that a
single individual could be empowered to stop a project expected
to impact hundreds of families. Local governments will have
their hands tied. In an era of global competition for the
economic benefits of private capital investment we need to give
a long, hard look to anything that ties our hands and local
officials' hands more than our global competitors.
Every time we look at public policy measures that could
tend to make the job of those who are tasked with attracting
economic development more difficult, we need to ask the
question: Will this legislation make it easier to bring new
jobs and new investments to the United States? In the
Pittsburgh case, the Heinz case, there is a point where it gets
easier to do your expansions outside of the borders of the
United States. That is the time that we need to be concerned
about our country.
There exist today eminent domain policies and practices
that allow us to compete but are not displacing mom and pop for
big business. Thomas Jefferson was right. Government is best
which is closest to the people.
The International Economic Development Council publishes
what it calls guiding principles for land assembly and economic
development. Those principles are in my testimony. These
principles make sense. Eminent domain should always be a last
resort and the local community should carefully review, in a
public forum, the benefits of redevelopment versus displacement
of occupied homes and businesses.
Additionally, the Federal Government already properly
restricts the power of eminent domain. When Federal funds are
used, relocation of individuals is greatly protected.
The rhetoric following the June Supreme Court decision
continues to be strong. We need a cooling-off period, and we
need to explore with great care the potential consequences of
restricting eminent domain powers.
Again, Mr. Chairman, thank you for the opportunity to share
my personal thoughts and experiences.
[The prepared statement of Mr. Platt can be found on page
97 of the appendix.]
Chairman Ney. Thank you. Mr. Nutt.
STATEMENT OF STEVEN NUTT, DIRECTOR OF STRATEGIC DEVELOPMENT,
CITYWIDE DEVELOPMENT CORPORATION
Mr. Nutt. Good morning, Chairman Ney. I thank you for the
opportunity to be with you today. I appreciate the opportunity
to share the experiences of economic development professionals
with you. And I hope that our experiences will help you and
your colleagues as you review eminent domain.
Eminent domain is an economic development tool which allows
local communities to acquire and assemble land for new
development projects. It generates new jobs, new investments,
and taxes. For example, Dayton is a landlocked community
without space for businesses to grow. As a result, those
businesses often choose to locate outside the city. Without
eminent domain as one of our tools that we use in economic
development, we do not have the ability to create the space
that is necessary for those companies to grow.
I can tell you that, in the City of Dayton, we use eminent
domain very judiciously; in fact, we have not used it for the
purposes of turning a property over for private development in
the last 10 years.
The Ohio legislation--the proposed legislation of the Ohio
General Assembly--would prohibit the use of eminent domain for
economic development. Ohio law as it exists now keeps the
economic health of the communities in the hands of local
leaders who are not out to destroy communities but rather who
work for the best interest of their communities at large.
Unduly constraining eminent domain would eliminate an
entire category of projects from the redevelopment tool box of
local officials. And it, in fact, would thwart job creation and
job retention, particularly in landlocked communities like
Dayton. This would mean that no municipalities in Ohio could
use eminent domain to carry out an economic development
project. One person could veto the redevelopment of the entire
distressed community. This would have the practical effect of
making such properties virtually impossible.
State or Federal bills prohibiting the use of eminent
domain for economic development are job killing pieces of
legislation. Though 167 comes in response to the Supreme
Court's decision in the case of Kelo v. the City of New London,
the Supreme Court's case affirms eminent domain as an important
tool for local government and leaves eminent domain where it
should be; in the hands of the States and localities. The
Supreme Court 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 highly unlikely that the Supreme Court's decision
will result in city officials exercising eminent domain
randomly or without a balanced consideration. They will come to
use eminent domain as they have in the vast majority of cases,
judicially and in the light of day.
Judicious use of eminent domain is critical to the economic
growth and development of cities and towns throughout the
country. Assembling land for redevelopment helps to revitalize
local economies, create much needed jobs and generate revenues
that enable cities to provide essential services to their
customers.
Many of our urban communities were developed in the late
1800's and the early 1900's. These cities have small lot sizes
and were developed in an era of horse and buggy. It is very
difficult to redevelop in these communities without the ability
to assemble land. Big box retailers, shopping malls, new office
buildings, etc., often choose to locate in greenfields and
suburbs where large parcels of land are available, especially
if they are not available in the city. We have a number of
industrial customers for example, that need to expand and
without having those types of land assemblies available for
them, they will move to a suburb and hurt the City of Dayton's
income tax base.
Each time those development decisions are made, the tax
base and jobs are going to those other places. There is no
question that eminent domain is a power that like any other
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.
Few government or elected officials are willing to risk
their position and political stability in pursuit of a project
that is overwhelmingly opposed by the community.
In another check on abuse, the Fifth Amendment requires
that anyone whose property is taken for public use be fairly
compensated. And in practice, most takings are compensated
generously. Local officials use eminent domain to achieve the
greater good when holdout landowners think their property is
worth far more than ever could be achieved. If governments have
to wait for holdouts, communities will see jobs and market
opportunities disappear.
At a time when so many of our businesses and communities
are being confronted with intense competition from oversees and
areas of our cities and rural areas are in decline, Congress
should be expanding its efforts to solve the problems of
economic deterioration, not imposing restrictions on community
growth.
I thank you again for the opportunity to speak to you today
and I would be happy to answer any question you have.
[The prepared statement of Mr. Nutt can be found on page 88
of the appendix.]
Chairman Ney. Thank you, Mr. Nutt.
Mr. Riley is here, he works for the ranking member Barney
Frank with the committee, and he may have some questions.
I want to go to the legislators for a second. So your bill
would have a moratorium in place and then you would have a task
force that comes back with recommendations. Would those
recommendations--would they be making recommendations of how to
carry out the Supreme Court's decision with restrictions or how
would you envision that they would--not what they are going to
decide, but is their task to find out how to do this
considering Supreme Court's decision stands?
Mr. Grendell. Congressman Ney, first of all if I may
clarify an issue. The legislation that Representative Gibbs and
I have proposed does not prohibit the use of eminent domain for
economic development. It restricts for a 17-month period the
taking of unblighted, in other words, well-maintained, not your
usual urban renewal situation property, to go from one private
owner to another. And the task force charge is sort of
unlimited, on one end they can recommend doing nothing and
letting this process continue under Kelo and sort of work its
way through some judicial interpretations that may fall from
that under Ohio's Constitution. At the other end could be a
constitutional amendment that could either prohibit all private
taking that ends up in private use or private taking of
unblighted, or maybe just say taking of occupied personal
residences that are unblighted. There is a lot of variety at
that end. And in between the task force is going to look at
totally overhauling Ohio's eminent domain procedures as to how
we determine compensation. There may be a different form of
compensation calculation for one that is going to end up in
private use versus for a road or a public use, based on what I
alluded to in my testimony, the potential increase of value
that the taking will add to the property itself. We are not
going to tie the hands of the task force. They will be able to
go from one end of that spectrum to the other and make their
recommendations.
And the only other thing that we are asking the task force
to do is re-look at this definition of the words ``blight'' and
``deterioration''. Because to the extent there has been any
abuse of eminent domain power in Ohio, it has been the Norwood
and the Lakewood situations, particularly the Lakewood
situation, where arguably the concept of blight was taken to
its farthest extreme to try to justify the take. And we do not
want people to circumvent whatever we do to address Kelo by
being clever in how they define blight.
But the task force will have that entire area to look at,
Congressman. We are not going to try to tie their hands or give
them a predisposed conclusion.
Chairman Ney. So there would be a moratorium in effect and
then they can come back and they will have whatever
recommendations?
Mr. Grendell. Correct, they are--the way the statute now
reads or the legislation reads is that by April they have to
come back with a report. That report could be anywhere along
that line of potential recommendations. There are some who hope
there will be a constitutional amendment. There are some who
hope that there will be nothing, and there are some, I think,
who hope it will fall somewhere between. The task force will be
able to look at all those and make a report by April and then
the legislature will have to make a decision how it wants to
address the Kelo situation.
What we did not want to have happen in the interim is to
have people get what I refer to as ``Kelo-ized'', that, you
know, while we are studying the problem people who may want to
expand the use of eminent domain rush out and use it before we
can find a final State approach to the situation. That's why
the moratorium we felt was important, again, for unblighted
property, the traditional Kelo situation, where your property
is perfectly habitable, perfectly valuable but it is now going
to be taken not for a road or a fire station, but to go to some
private development.
Mr. Gibbs. Congressman, I would just like to, you know,
imply that this moratorium only applies to the Kelo type
takings and the blighted definition. It does not apply to
public infrastructure projects, like roads that most people are
accustomed to under eminent domain. I think a precursor of what
this task force might look like is the working group that has
been working on this--it is an ad hoc working group because
around that table there are about 30-some people, the
stakeholders are involved, there are developers. There are the
people who have had eminent domain, Lakewood, Norwood,
legislators and--so I think that as Senator Grendell states,
that task force is going to be wholly encompassing the whole
picture and there will be economic development people obviously
on that task force. So all sides will be heard and I think that
is the best part of our governmental process, is when that
process works that way, we will come up with a solution that
will work and protect private property rights. But also not
hinder economic development in a detrimental way.
Chairman Ney. Mr. Nutt, you had said that it has not been
used for 10 years in Dayton, why was that?
Mr. Nutt. It has not been used in a situation where we have
turned the property over to a private developer for
development. A couple of reasons for that, one being that
eminent domain takes a lot of time; it is very expensive.
Another reason being that in the City of Dayton, we have a more
restrictive definition of slum and blight than the State
definition. So it is much more difficult for us to use eminent
domain in those cases.
Chairman Ney. So Dayton passed--approximately when did
Dayton pass the more restrictive laws, do you know?
Mr. Nutt. Congressman, I am not sure. I can find out for
you.
Chairman Ney. I am curious, if you could find out.
Somebody's answer dealt with it, but once a property is
condemned and the area developed, the land value rises. Does
that play a role in the compensation, do you know, of eminent
domain use, Senator?
Mr. Grendell. Congressman, having defended on behalf of
property owners numerous eminent domain actions, and having
been on the other side representing some governmental
authorities, generally speaking, the Ohio law deals with the
property as of its value on the day of the take, which means
the way it is zoned and the way that it is used on the day of
the take. The appraisals that are offered both by the
governmental taking authority and the private individual,
generally speaking, reflect one's view of that property. They
can be widely disparate as one who is more generous on how they
apply appraisal practices to the other. But generally speaking,
you are tied with the value and the use at the take.
That has proven to be a problem. We have attempted in some
cases to try to show the increased value, because we have had
some situations where the property has been taken from blight
and turned into a private development. Most times the probate
court has not been overly generous to the property owner and
allowed that expanded--what they refer to speculative--evidence
of its future value. And so as a rule, in my experience, it has
not allowed a lot of evidence of that future prospective value
post-take. And that has been the problem.
And as I said in my testimony, that is where the person
with the residential property will lose value to a private
individual who will convert that to a Wal-Mart store, for
example, where the price is substantially greater. Yet in most
cases, they are not going to get that testimony in front of the
jury. Albeit, the big argument in takings cases is to at least
try to appeal to the sympathy of the jurors that they are a
fellow property owner, like the rest of us. And that they
should be generous to the person who owns the land. The
converse is a good governmental attorney would argue that it is
taxpayers' money we are dealing with to try to get the jurors
who are all taxpayers not to be that overly generous.
Chairman Ney. The ones that I have seen or been involved
with has been for public use. And I know when I was in the
State Senate we could not give buildings away, government
buildings away to people, you know, and the people that wanted
to use one of them up near Cleveland one time and they would
say--what is that big place?
Mr. Grendell. Rehab center on Conquest.
Chairman Ney. Yes, and we were arguing about that, somebody
said well, it is worth $6 million. Nobody would have bought it
for a dollar, because you had to go in and there was asbestos
and the whole nine yards. So in a lot of cases that I have
seen--a prison in Belmont County, where they came in and took
one parcel of land for public use. That land really usually
does not rise in value, because if the prison shuts down who is
going buy it, you know. We have a situation like that down in
Hawking County area.
So, that is one whole concept for the public. The private
is a different world, because, you know, instantly that can
easily escalate a price. Has there been any--would there have
to be rules set up? Let us say nothing happens and the Supreme
Court decision stands and somebody comes in and their small
business is taken and there is a strip mall developed. Could
there be rules or local laws maybe, or county, that would come
into effect that that person would have a right to be in that
strip mall, as a small business owner that was--whose property
was taken. Do you think it would get to that point if nothing
changes with this decision? That maybe local governments would
have to get to that point of getting it all the way down to
that level or would it be just broad open?
Mr. Platt. In Steubenville, on the South End, I mean, to
get a 4-acre parcel together you had to take about 40 parcels
to do it. And so, yeah, there would be times where you would
look on a map and say that makes sense, we would love to if we
could keep some businesses in the location and maybe attract a
multi-tenant building to be developed on that property. So that
is something that you would try, but again, I think if you do
not have eminent domain capability in that case you will never
get anybody to the table to even have it be a part of the
dialogue.
Mr. Grendell. Congressman, I mean, there was a comment
before about negotiating and that is very true. In a lot of the
cases in the negotiations--Representative Gibbs called free
market system, which is very true. In the free market
discussion in an eminent domain case it is not unusual to
negotiate yourself a cash amount and space in the new center.
That is part of the negotiating process. I would not like to
see us get to the point where government dictates that a
landlord is required to take anybody as a tenant and would
prefer to address increasing the compensation for the person
who is being displaced before I want government dictating who
should be tenants in shopping centers. That is taking
government a different path that could be dangerous.
Mr. Gibbs. I wanted to address I think, a little bit, the
previous question about the economic compensation and deciding
that. You know, notwithstanding the increased tax revenue, let
us set that aside and, you know, eminent domain for public good
for a road, you know, society benefits from that road, and so
that is the economic benefit. But when it stays in the private
sector and notwithstanding the tax base increase, the only
economic benefit is to a sole beneficiary, you know, the person
that owns that and I think that goes to the root of the Kelo
problem. You know, the economic benefit under what normally we
would think as eminent domain, you know, the whole community
benefits and when only a sole--only one beneficiary of that
economic benefit, I think that is the problem that we have.
And like I said in my testimony, how do you decide what the
compensation is. What it was worth yesterday, today, or what
the speculative value is. And when it is only--when only
Senator Grendell is going to benefit when he does economic
development and not the community, then that is where they use
the argument about the economic tax base. I think that is a
flawed argument, because it goes against the constitutional
principle.
Chairman Ney. I wonder if the local elected officials--the
legislation the legislators have, would that be considered a
cooling off period that you both have mentioned about not
moving too fast, any opinions on that legislation?
Mr. Bubb. My opinion is that I agree with this point, that
maybe sort of ``de-Kelolizing'' the whole process. Maybe taking
it out of the frenzy sort of part of the argument that all of a
sudden people are very fearful of their private property that
is not blighted being taken. Kind of putting that into a more
introspective process, I think, is very valuable. I do not
think that people really need to be worried about this, and I
think that the moratorium would guarantee that and it would
allow for that thoughtful discussion. So that we, again, as I
said, never say never, but leave ourselves the option to do
thoughtful things that might really make a big differences in
some areas that are blighted.
Mr. Mason. I would certainly support the moratorium to give
time for the committee to discuss that and see what is in the
best interest of the parties.
Chairman Ney. One thing I wanted to mention, the community
development block grant, which the Financial Services Committee
and our subcommittee, as authorizers, we are involved with
that.
Recently, I did not support taking the CDBG over into the
Commerce Department, because during the hearings it came out
that Commerce would completely undo all the rules and create
all new rules on CDBG. So you can imagine California fighting
New York versus Ohio versus West Virginia, etc. You would have
one huge battle out there. We would not recognize CDBG probably
after it came out of there. So we fought, you know, a pretty
good battle to keep CDBG intact as it is.
But the one thing that we did is we authored legislation.
Maxine Waters is our ranking member of the subcommittee, and
Congressman Waters and I and Congressman Bachus and I do not
know if we have any other co-sponsors yet? Do we?
Mr. Riley. Not on the legislation.
Chairman Ney. We just introduced it and this is kind of one
of the first pieces dealing with the Supreme Court decision.
But I wanted to mention this. It would prevent CDBG funds from
being used for this eminent domain under Kelo decisions. So in
other words, we are not restricting the State, but if a local
government would attempt to somehow use CDBG funds, we then
would restrict those funds to not be used under the new Supreme
Court decision.
I think one of the rationales behind trying to make this
move is that we have had enough of a battle and if all of a
sudden CDBG funds are used to take somebody's farm or whatever,
for a store, you know, a business, you would have an outcry
that CDBG needs to be altered and changed. So that is the one
thing that we have done.
And one question that I guess I have asked all of you and I
think I might know the answer to this, you know, because we do
not know what to do yet in the Federal Government and maybe we
should not do anything right now. Maybe the States should act.
If the Federal Government did anything, what would you see--a
national moratorium would that work? The only thing that I am
afraid with the Federal Government getting into this, although
I do not like the Supreme Court decision, I am afraid that at
the end of the day if we actually passed law, we would put
eminent domain under the EPA or something.
[Laughter.]
And then hire 25,000 people and our entire lives would be
upside down across the county. That is a fear I have. How would
you regulate eminent domain?
Mr. Gibbs. Congressman, I have been giving that a lot of
thought and I think I concur with you. I am concerned about the
Federal Government taking an action here, because, you know, I
have seen in my past capacities how things are handled
differently in different States. And the State constitutions
are not identical. We have some questions that came up here in
Ohio, you know, we have universities that have eminent domain
authority and they also have non-profit foundations. And the
question is does that foundation have eminent domain authority?
I do not know the answer to that. And so, there is probably
some difference between States and the current Constitution and
regulations in Federal law to preempt some of that and cause
some problems in local jurisdictions that we do not anticipate.
So I think from the outset, from here it is better
addressed by individual States and see how we work through
this. It is kind of like the sales tax issue. The States are
trying to work through that because for Federal legislation to
address that issue with all the complexities between the
different States, it creates a myriad of problems. So, I think
you are probably right, let us wait to see what the States can
work up and see if there is any commonality.
Mr. Grendell. Congressman, I am a big Tenth Amendment fan
and I certainly hope that we have not reserved the power of the
property takings to the Federal Government somewhere else.
While the Constitution protects the compensation clause, I
think the Supreme Court got one thing right in Kelo, it is that
States need to address this issue to protect the private
property rights. We have taken the part of your legislation in
the legislation that Representative Gibbs and I did. Our carrot
and stick to any community that might think that their home
rule power circumvents Senate Bill 167, is they will lose their
funding if they implement any violation of the moratorium. And
so, we borrowed that from the Congressional language and we
thank you for that. Because we felt that we needed some sort of
back stop in case home rule came around the corner.
But we do commend the thought that Federal money should not
contribute to the problem. And so, where you are heading is the
right direction although, we would ask that Congress look at
this issue, because there is this balance that needs to be
struck. There is this issue of unblighted private property that
somebody is living in should not just be taken because somebody
decides they want a Wal-Mart store versus there is a role for
eminent domain in the area of our blighted urban areas that we
do not want to lose that ability.
And so, I think the thing we all can agree up here is that
while we want to address this issue, we do not want to go so
far over that the law of unintended consequences has a negative
impact long-term on Ohio. And that is why we think the
moratorium which Commissioner Bubb, I think, correctly said
will give us a cooling-off period so that we can look at this
in a rational long term solution that protects private property
rights, but also understands the need for still having eminent
domain in the right circumstances.
We do not have a solution there but that is where we should
go. And we hope that whatever Congress is going to do will also
reflect long term that there might be a time when that eminent
domain does have a right play in the blighted situation that it
does not have in the unblighted situation.
Chairman Ney. Like I said, we were trying to do that so
that the CDBG funds, there would not be some outrageous case
where they were used. Then people would come through the back
door saying well you have got to change it now and the CDBG is
going in working in the right way. The--I think your approach
eases some fears because what is happening to Members of
Congress, you know, 435 people, I am sure they are hearing it
when they are back home, there is in the letters that we are
getting and the immediate phone calls a fear out there that,
you know, a few very, very wealthy people are going to start to
seize what they want and have a lot of influence and get
property and take farms. So there is a a lot of the unknown. So
maybe the moratorium makes sense to give at least a little bit
more calmer atmosphere until we can find out what to do.
Questions?
Mr. Riley. I have a question on behalf of Mr. Frank and Ms.
Waters. Mr. Frank and Ms. Waters, like Mr. Ney, are strong
housing advocates. They have a concern for renters. Are there
any examples of what has happened to renters that are in, you
know, affordable housing units. Is there any consideration
taken for them when the property is taken?
Mr. Nutt. I am not the definitive source on that particular
topic, but I do think that we pay relocation for renters as
well.
Mr. Riley. You pay for relocation of renters?
Mr. Nutt. Yes.
Mr. Grendell. Under Ohio law, the renter, if a lease is in
effect, does have some rights vis-a-vis their leasehold
interest, because you are taking not only the fee interest of
the property owner, the landlord, you are taking the leasehold
interest of the tenant. There are provisions, some provisions
for making an accommendation. This situation actually is part
of like the Norwood situation. More of the property involved
there was rental property rather than occupied property. At
least the ones that are in controversy. But there are some
protections in place.
I think again, going back to that concept that if we are
throwing somebody out of a perfectly good place, we need to be
more attentive to what that does value wise. Because the
tenant's value there would be different than the tenant whose
value may be in a less valuable property. So the concept
applies both to the owner and the tenant at some point.
Chairman Ney. Any other statement that you have?
Mr. Grendell. I want to thank you very much, Congressman
Ney, and the committee. This is great to have Congress come to
Ohio; I mean that on behalf of my constituents. And on behalf
of, I think, everybody in Ohio, it is nice to see this kind of
activity right here in our State and we truly appreciate it.
Chairman Ney. Thank you. I actually introduced a bill--
moratoriums tend to work. I did it in Ohio years ago on an
emergency, the board reconstituted you know, stopped the rules
until they could get going. But I was thinking one of the
concepts we ought to carry out is to require Federal agencies
such as used to be called HCFA, CMS, that makes all these rules
as we sit here and speak, require them to go out and do their
hearings around the country versus doing the hearings in
Washington. And you know, you cannot--500-600 people cannot get
to D.C., but 500-600 people could get into an auditorium.
So, I appreciate your comments. It is important what we are
doing, and we are going down like I said to Ross County. I
appreciate all your time in this because this gives us a good
way to officially go back for the record and to give some
thought to what has happened here.
And I am sure that other Members will be coming in and, you
know, after the recess we will be having future hearings. But I
wanted to just show some of the ideas of how you approached the
hearing in Ohio, which I think is a good local approach.
I want to thank all of you for your time and again, the
Mayor for hosting us, and the Village of Hebron, thank you very
much.
The record will remain open for 30 days. Some Members may
have additional questions. Or some Members of the House
reviewing the transcripts may want to ask you some questions,
so without objection it will be open for Members to submit
questions for the record.
And thank you all again for your time.
[Whereupon, at 10:15 a.m., the Subcommittee was adjourned.]
EMINENT DOMAIN: ARE OHIO
HOMEOWNERS AT RISK?
----------
Thursday, August 18, 2005
U.S. House of Representatives,
Subcommittee on Housing and
Community Opportunity,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 2:00 p.m., in
the Ohio University-Bennett Hall Auditorium, 101 University
Drive, Chillicothe, Ohio, Hon. Bob Ney [chairman of the
subcommittee] presiding.
Present: Representative Ney.
Chairman Ney. I want to thank everyone for coming today.
The Subcommittee on Housing and Community Opportunity meets in
a unique setting today, for its second of two field hearings in
the 18th Congressional District to discuss the Supreme Court's
recent ruling in the case of Kelo v. the City of New London and
the serious implications this ruling could have on low-income
housing, family farms, and rural Ohio.
With us today is Jeff Riley, who works for the Ranking
Member of the Financial Services Committee, Barney Frank of
Massachusetts. The Chairman of our Committee is Mike Oxley of
Ohio, and I am the Chairman of the Subcommittee. Our Ranking
Member of the Subcommittee is Maxine Waters of California, and
Tallman Johnson also is here today. I want the two of you to
introduce yourselves.
Mr. Kangas. I am Paul Kangas, I work on the committee for
Chairman Mike Oxley.
Mr. Scardena. My name is Frank Scardena and I work for
Chairman Ney.
Chairman Ney. And these are the fine staff who put the bits
and pieces and nuts and bolts together.
The last of the U.S. Constitution's Fifth Amendment
liberties provides that no private property be taken for public
use without just compensation. Under this provision, government
entities may invoke the power of eminent domain or right of
condemnation to remove property from private ownership for
public use.
On June 23, 2005, the United States Supreme Court held in
Kelo v. the City of New London, that the city's condemnation of
private property which was part of the city's redevelopment
plan aimed at invigorating a depressed economy, was a public
use, satisfying the United States Constitution, even though the
property might be turned over to private developers. The
majority opinion was grounded on the recent Supreme Court's
decisions holding the public use must be read broadly to mean
for a public purpose.
The dissenters, however, argued that even a broad reading
of public use does not extend to private-to-private transfers,
solely to improve the city's tax base and to create jobs.
In the other hearing, we heard again from elected officials
and people involved in development. There is a bill, a piece of
legislation authored by Maxine Waters, myself, and Spence
Bachus of Alabama in a narrow area, it takes the community
development block grant funds and if they are used by a
community under the new Supreme Court ruling, we will pull
those funds. And one of the reasons we did this, community
development block grant has been under the gun and under fire
and we kept it where it is at versus the Department of
Commerce. And we felt if those funds were used--several
reasons, but if those funds were used, it really may not be
real supportive of the fund and lead to controversy that could
hurt CDBG. Or on top of it, we just felt those funds should not
really be part of private-to-private use.
I have another statement I am going to just put in for the
record because I want to start with the witnesses; we want to
hear what you have to say.
And again, we have our hearings in Washington D.C., we do
go throughout the country, Democrats and Republicans on the
committee, and it is a pleasure to be here. And bringing
government here locally and the subcommittee is, I think, a
good thing to do. So we really look forward to seeing you.
And today, we have State Senator John Carey, who represents
the 17th District in the Ohio State Senate, having taken office
in January 2003. Previously, Senator Carey served as a state
representative and before that as the Mayor of Wellston.
On his way is State Senator Tim Grendell, he represents the
18th District in the Ohio Senate. He took office just this past
January. Senator Grendell is from Chesterland, and prior to his
election he was an attorney.
Jeff Finkle is the president and CEO of the International
Economic Development Council located in Washington, D.C. The
Council is a non-profit organization dedicated to helping
economic developers do their job more effectively and thereby
creating more high quality jobs, developing more vibrant
communities and generally improving the community's quality of
life. He also graduated from Ohio University and is originally
from Licking County.
Dona Smith has been the executive vice president of the
Ross County Community Improvement Corporation for 15-and-a-half
years. During that time she has been involved with major
industries for expansion projects, worked with new business
development bringing new jobs into Ross County, and worked the
city and county for infrastructure improvements such as roads,
gas lines, water and sewer lines, some of which utilized
Federal and State grants.
And also with us is our State Representative Clyde Evans,
who has done a wonderful job working with Senator Carey for our
region and has excelled in a lot of areas including education,
being of the education background that he was prior to his
arrival in the legislature.
And with that I want to thank you. And we will start with
Senator Carey.
STATEMENT OF STATE SENATOR JOHN CAREY, 17TH DISTRICT, OHIO
STATE SENATE
Mr. Carey. Chairman Ney and the members of the
subcommittee, thank you for allowing me the privilege of
testifying before you today here in Chillicothe. It is nice to
see our officials from Washington. Congressman, we see you
quite often, but we are glad to meet the staff of other
Members. And we appreciate you taking the time to let us have
our voices heard.
Let me start by saying that as a former Mayor, I vehemently
oppose the use of eminent domain to take unblighted, private
property for the sole purpose of passing that property to a
developer for private development. While I can understand how
the promise of increased revenue and jobs could make this
option palatable for some officials, I feel the safety and
security that our constituents feel in their own home is more
important. In fact, when I was Mayor, I did not use eminent
domain at all but I certainly understand that it is sometimes
needed for road, sewer, or water improvements. And I believe
that is where eminent domain powers should stop.
As I am sure is the case across the country, the Ohio
Legislature has had to act quickly in the recent Kelo decision
by the U.S. Supreme Court. Just 2 weeks ago Senator Grendell,
whom you will hear from today, introduced Senate Bill 167,
which I will outline later in my testimony. Considering this
bill has been co-sponsored by 26 of the remaining 32 senators,
including myself, I think it is safe to say that this issue has
resonated here in Ohio and that something will be done about
it.
In addition to Senate Bill 167, the issue of expanded
eminent domain powers came up during the recent deliberations
on House Joint Resolution 2, which will be Issue 1 on the
ballot this November. House Joint Resolution 2 would authorize
$1.35 billion for public infrastructure, $500 million for
research and development, and $150 million for shovel-ready
sites. Due to the fact that Issue 1, if passed by the voters,
would go to the Ohio Constitution, the legislature did not get
specific in terms of language in HJR 2 but I believe there is
an understanding that none of the $500 million for research and
development and the $150 million for shovel-ready sites will be
used for eminent domain. This will be addressed in the
implementation language, if approved by the voters.
Senate Bill 167, of which the sponsor now is sitting beside
me, creates a moratorium on the use of eminent domain by the
State or any political subdivision of the State to take without
the owner's consent, private property that is in an unblighted
are when the primary purpose is for economic development that
will ultimately result in the property being owned by another
private person. This moratorium would last until December 31,
2006, while a 25 member legislative task force, with a wide
range of interested parties represented, conducts research and
provides recommendations to the General Assembly on how to best
update Ohio's eminent domain statutes by April 1, 2006.
While I am not generally the biggest proponent of
legislative study task forces, I believe in this case this is
the right approach to take. I believe the worst thing the Ohio
Legislature can do is rush this process. While I think most
legislators in Ohio do not want to see unblighted, private land
taken for private development, it is also important that we do
not make the problem worse by rushing legislation through
before all the possible ramifications are known. Having a
moratorium in place until we can receive recommendations from
the task force will allow Ohio to protect property owners while
the legislature comes up with a more permanent solution to this
problem.
That is a brief outline of how the Ohio Legislature has
responded to the Kelo decision to this date. I am sure this
topic will remain in the spotlight for the near future and
other proposals will be made. But I think it is safe to say
that here in Ohio the idea of taking unblighted private
property through eminent domain for private development has not
been received well. I would be happy to answer any questions
you may have.
Mr. Chairman and members of the subcommittee, this
concludes my testimony. Again, thank you for the opportunity to
testify here today. I would be happy to answer any questions.
[The prepared statement of Senator Carey can be found on
page 58 of the appendix.]
Chairman Ney. Thank you, Senator Carey. I appreciate your
attendance here. And we read your bio. Senator Grendell is
here, he was also up in Hebron, Ohio. We sure appreciate the
drive and time that you took for this important issue.
STATEMENT OF STATE SENATOR TIMOTHY J. GRENDELL, 18TH DISTRICT,
OHIO STATE SENATE
Mr. Grendell. Thank you, Congressman Ney, good afternoon to
the local officials and guests. And thank you, Congressman Ney,
for bringing Congress to Ohio. I think this is a wonderful
thing to do, to give folks in Ohio an opportunity to speak to
their Congressman without having to travel all the way to D.C.,
for this opportunity.
I am going to echo and paraphrase some of my written
testimony, because I am going to echo my good friend Senator
John Carey's thoughts. And one thing I want to do is to thank
him, in the process of doing the ballot initiative for jobs in
Ohio, working with Senator Carey and Senator Harris, we did
address language to protect private--unblighted private
property for the Kelo effect. And I think that was an important
first step.
Like the Fifth Amendment, the Ohio Constitution in Article
I, Section 19, provides that private property shall be held
inviolate and shall not be taken for public use without proper
compensation. The U.S. Supreme Court's recent decision
permitting the government sanctioned transfer of private
property from a private citizen to a private developer has
struck a Constitutional nerve throughout the country.
While the use of eminent domain for roads and utilities has
long been recognized, the governmental taking of a well
maintained parcel of real property from one private owner to
another private owner is fundamentally un-American.
Our Founding Fathers believed that private property
ownership as defined under common law pre-existed government.
They further believed that government, whether Federal or
State, served as the contractual aid for the people and unlike
the English monarchy was not the sovereign. Thus, protecting
private property ownership rights against unwanted governmental
appropriations motivated the inclusion of the takings clause in
the Fifth Amendment. Of course they included the takings clause
and in including the takings clause the framers of the Bill of
Rights also recognized the need for a limited public use
exception to the sanctity of private property, provided that
the private property owner was justly compensated.
The drafters of the Ohio Constitution included similar
language. For approximately 175 years, eminent domain was
employed by governments for obvious public uses, such as roads,
canals, railroads, military bases, fire stations, schools, and
parks. Then eminent domain became a tool for urban
revitalizationists to invoke government's takings power to
acquire blighted or deteriorated private properties, often for
private redevelopment as urban renewal projects. Courts have
upheld such actions finding that eliminating blight was a
legitimate public purpose. But in hindsight, those cases
started the takings law down a different slope.
On June 23, 2005, the Kelo case expanded the definition for
public use or public purpose for the first time to look at non-
blighted private property. The majority of the Justices found
that New London, Connecticut, did not violate the Fifth
Amendment by reaching that conclusion.
Justice Sandra Day O'Connor and three other justices
disagreed with the majority's broadly defined concept of public
use and in her vigorous dissent, Justice O'Connor chastised the
majority for abandoning the 2-century old principle of
preventing the government from acting beyond its authority,
warning that there is nothing to prevent the State from
replacing a Motel 6 with a Ritz Carlton, or any home with a
shopping mall, or any farm with a factory.
To some, Kelo is the natural extension of the urban renewal
eliminate blight concept of economic benefit equals public use.
To others Kelo is an affront to the fundamental protection of
private property ownership guaranteed by the Fifth Amendment. A
review of our Founding Fathers' early writing supports that
latter position. It is doubtful that Thomas Jefferson ever
envisioned a governmental right to take his home, Monticello,
and give it to a private developer for an office complex or a
big box super center.
Thankfully, the Supreme Court, the U.S. Supreme Court,
noted that the Kelo decision does not prevent States from
adopting a more protective approach to private property rights.
And 34 States have initiated such legislation.
Under Ohio eminent domain law, however, as it is currently
on the books it neither contemplates nor adequately protects
private property owners should unblighted private property be
taken by eminent domain under the banner of economic
development. Courts have almost uniformly acceded to the
government's determination that a public necessity exists,
justifying the take.
At least in the urban renewal cases, the taking authority
had to obtain a blight study, determining that the property in
the area was blighted before it could proceed with the eminent
domain.
After Kelo, government officials merely need to conclude
that the taking of the property from one private owner to
transfer to another private owner will be more economically
beneficial for the public. Eminent domain procedures under Ohio
law, however, do not properly address this private-to-private
taking as permitted by Kelo. Currently the private property
owner bears a substantial burden with respect to establishing
the value of the property to be taken and is usually limited to
presenting evidence of value based on the property's current
zoning.
This could lead to a substantial inequity in the Kelo
taking situation. For example, the owner of a house on one acre
zoned residential worth a maximum of $150,000, in most cases
would be limited to offering evidence of that value. Should
that acre be taken by eminent domain and subsequently
transferred to a developer of a commercial complex, the
ultimate value of that property could be $250- or $300,000.
Such governmentally induced inequity cannot be condoned or be
considered just compensation.
As Senator Carey mentioned, myself, Senator Carey, Senator
Zurz, Senate Cates and 22 others have introduced Senate Bill
167 in Ohio which would place a moratorium on the taking of
unblighted or Kelo type taking of private property. This
legislation provides for a temporary statewide moratorium to
the end of December of next year and forms a task force with 24
individuals from a broad set of interested parties including
property rights groups, State and local government,
agriculture, commercial and residential real estate, and the
legislature. The goal is to do a comprehensive review of Ohio's
eminent domain law, particularly looking at the impacts of the
private-to-private taking allowed by Kelo and also look at the
definition of blight and deterioration to see where Ohio law
needs to change to protect private property rights in light of
the Kelo decision.
The task force report will be due in spring of 2006, which
will give the legislature time to take the necessary actions
whether they are statutory or constitutional to address the
issue.
Senate Bill 167 protects Ohioans' private property rights
in the short term, while providing a thoughtful and
comprehensive approach towards a permanent change in Ohio's
eminent domain law. While eminent domain can be an important
tool for State and local government when employed for
legitimate public uses, that governmental power should not be
abused or exploited.
Under Article I, Section 19 of the Ohio Constitution,
private property rights are inviolate. And regardless of what
the U.S. Supreme Court's notion of eminent domain is we must
strive to make sure that it stays inviolate in Ohio.
In conclusion, States have numerous options in response to
Kelo. These options range from taking no action and letting the
courts grapple with the problem as to where Kelo hits in a
State-by-State base to adopting a State constitutional
amendment prohibiting the taking of all private property or all
unblighted private property that will ultimately be owned by
another private property owner.
In between, State law can be change to redefine public use,
but such a statutory action can be circumvented by a
municipality's home rule powers. Such home rule concern can be
avoided by way of a constitutional amendment. States also
should re-examine their definition of blight and deteriorated
properties to prevent circumvention of the Kelo responsive
changes by the legislature. If a total prohibition against
unblighted properties is not adopted, State procedures for
determining just compensation for private takings should be
changed to allow the current private property owner to offer
evidence demonstrating the value of the property based on the
proposed future development after the take. Since there will
not be public ownership but the private ownership, that would
only be equitable.
Swift action is needed to protect Ohioans' private property
rights. Senate Bill 167 will provide a balance by giving
immediate relief on unblighted property owners concerned about
a taking, while proposing the appropriate long term solution to
still protect the State's economic well being. This approach
will not only protect private property owners rights now but
also in the future.
Congressman, thank you very much. I will be glad to answer
any questions.
Chairman Ney. Thank you, Senator. Mr. Finkle.
[The prepared statement of Senator Grendell can be found on
page 73]
STATEMENT OF JEFFREY A. FINKLE, PRESIDENT AND CEO,
INTERNATIONAL ECONOMIC DEVELOPMENT COUNCIL, WASHINGTON, D.C.
Mr. Finkle. Congressman Ney, thank you very much for giving
me the opportunity to speak before you today. I have submitted
formal comments and so what I am here to say is just some
subset of those comments.
I appreciate the opportunity to talk about the issue of
Kelo in the context of economic development, the role of
communities as they try to create, retain, expand jobs, develop
a tax base, and enhance wealth in the communities where they
work.
As you know, I represent economic developers from across
the country and I work for the International Economic
Development Council. We have 4,000 members who each and every
day are trying to improve the quality of life for people in the
communities where they live and work.
I have worked in the field of economic development for over
25 years. Five years working for the U.S. Department of Housing
and Urban Development working on the community development
block grant program, of which your legislation in fact,
attempts to change.
To digress for a second as I talk about the issues around
Kelo and eminent domain, I would point out that the statutory
challenge for the Congress, particularly in light of the
community development block grant program, you have set out the
block grant program, you have set out the block grant program
to meet three pressing urgent needs of communities. One, to
meet the needs of low and moderate income people. Two, to meet
a pressing local need and third to eliminate the slum and
blight. To limit the use of CDBG dollars and not allow it to be
used for dealing with the elimination of slum and blight in
fact, would jeopardize one of the three tenets of the community
block grant program.
Congressman, as you noted, you were in my home county this
morning, which I understand you are becoming a Licking Countian
as well. And it is wonderful to be at a branch campus of Ohio
University where I graduated in 1976 and have remained a part
of the Ohio University family serving on the Institute of Local
Government Administration and Rural Development Board for some
time.
So what is it that we are talking about? We are talking
about the Kelo decision which affirms economic development as
an important tool for local governments and leaves eminent
domain where it should be--in the hands of State and local
governments. The Supreme Court decision did not change
anything, and that is one of the concerns that I have had, is I
have listened to people talk about the Kelo decision. There was
absolutely no changes from what the practice of using eminent
domain has been for many years. What it did was it gave the
Institute for Justice, a libertarian think tank law firm, an
opportunity to espouse the issue of property rights and use
that bully pulpit in a very loud way to scare the heck out of
all of us.
At the end of the day, most communities do not use eminent
domain for the taking of owner-occupied homes. They do not go
out and take viable businesses from people. For the most part
when they use eminent domain, they use it to take--for the
elimination of slum and blight.
In fact, only 11 States have statutory language or
constitutional languages similar to what Connecticut has. As
they propose the use of eminent domain for economic development
purposes in New London, Connecticut.
It is very unlikely that as a result of the Kelo decision
that we would have much change in terms of how eminent domain
is used across the country. I have been to Congresswoman
Water's district and have met city council members there after
the actions that were taken in south central L.A. As I talked
to city council members in Los Angeles, they refer to the issue
of eminent domain as there was a desperate need for grocery
stores in south central L.A., and they specifically said we
would not take homeowner-occupied housing. And so, this is not
a radical change from a position many communities have taken.
In fact when Senator Carey was Mayor, you know, he kind of had
a personal guidepost in terms of how he would use eminent
domain and I hear that constantly as I travel around the
country.
But judicious use of eminent domain is critical to the
economic growth and development of cities and towns throughout
the country. Assembling land for redevelopment helps to
revitalize local economies, create much needed jobs and
generates 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 communities.
Many of our urban communities were developed in the late
1800's and early 1900's. Those cities have small lot sizes and
were developed in an era of horse and buggy. It is often
difficult to redevelop these communities without the ability to
assemble land. Big box retailers, shopping malls, and new
office buildings often choose to locate in greenfields and
suburbs because of the lot sizes that we are dealing in our
urbanize centers. Each time these development decisions are
made, the tax base and jobs are also going to those places.
Let me give you some examples of where eminent domain has
been used. In Columbus, there is a famous chocolate company
called Anthony Thomas Chocolates, which is located or used to
be located on West Broad Street in Columbus. Eminent domain was
used to allow that facility to remain located on West Broad
Street for many years. They needed to expand, most of their
employees were poor, most of them walked to work. And as a
result when they needed to expand, the City of Columbus demised
an alley behind the business and relocated the alley taking in
a homeowner-occupied home in order to maintain those jobs in
what is referred to as the hilltop district in Columbus, one of
the lowest income neighborhoods in the City of Columbus.
When BMW wanted to locate a facility in South Carolina, the
State of South Carolina used their powers of eminent domain to
create a site for BMW to locate in South Carolina. The same was
true in Toledo, Ohio, when the Jeep plant went into an
urbanized area of Toledo. The city used eminent domain to allow
the Jeep plant to go forward. When the City of New York, tried
to clean up Times Square, they used the power of eminent domain
to take New York City's ugliest place with strip joints and
massage parlors and various pornographic venders in what was
Times Square. And they used the power of eminent domain to
revitalize Times Square. It is now a family friendly area with
Disney stores in the Times Square area.
The City Center Mall in downtown Columbus, when the City of
Columbus tried to ready that site for Toddman to take that
project over. The city used eminent domain to acquire that
site, as the City of Indianapolis did when they prepared their
downtown mall as well.
I worry about places like my hometown of Newark, Ohio. We
all know where the Owens Corning fiberglass plant would be--
currently is. What would happen if the city fathers and mothers
were told we have to remain in this place but we also need to
expand and we have no sellers on our borders. What is the City
of Newark going to do? Are they merely going to say we can do
nothing any longer, and we understand that if we cannot do
anything, you are going to have to shut your doors and hundreds
of people that live in Licking County would loss their jobs.
This puts central cities--the judicious use of eminent domain
allows places like Newark, Columbus, Cleveland, Cincinnati,
etc., to have the ability to expand jobs in their current
locations.
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. Many of us watched 60 Minutes as the
people just east of downtown Cleveland tried to use eminent
domain and came up with a silly definition of what eminent
domain is. I am here to report that no member of that city
council nor the Mayor survives at this point as a result of the
public outrage for the eminent domain and the potential takings
there.
We obviously have checks on the use of eminent domain, as
the court requires just compensation when it is taking. But I
worry about a rule of unintended consequences assuming that
each and every homeowner can be a developer and can take what
might be a value of $150,000 and magically turn it into
$250,000 if we take a presumed appraisal in terms of what its
future use might be.
Unduly constraining eminent domain would work job creation
by eliminating an entire category of projects from the
redevelopment tool box of local officials.
Should Congress act to prohibit the use of eminent domain
for economic development purposes, the economies of many
Congressional districts might suffer. No municipalities in
America could use eminent domain to carry out an economical
project. One person can veto the redevelopment of the entire
distressed community. This would have the practical effect of
making such projects virtually impossible. At a time when so
many of our businesses and communities are being confronted
with intense competition from the global economies and areas of
our cities and rural areas are declined, Congress should be
expanding its efforts to solve the problems of economic
deterioration, not imposing restrictions on community growth.
Thank you, for allowing me to have the opportunity to
testify before you today. And I look forward to answering any
questions.
Chairman Ney. Thank you. Ms. Smith.
[The prepared statement of Mr. Finkle can be found on page
60 of the appendix.]
STATEMENT OF DONA SMITH, EXECUTIVE VICE PRESIDENT, ROSS COUNTY
COMMUNITY IMPROVEMENT CORPORATION, CHILLICOTHE, OHIO
Ms. Smith. Congressman Ney, thank you very much. And we
appreciate you bringing part of the Federal Government to
Ohio's first capital. We look forward to seeing you any time.
The Ross County Community Improvement Corporation, the CIC,
is a private non-profit economic development agency. The CIC
has been involved in economic development on a full time basis
for the past 20 years. During those years we have worked to
develop industrial parks, located sites for business growth,
and worked to bring many jobs into the Ross County area.
We have also looked at and worked on smart growth
initiative. This would be a development plan for the entire
county, locating areas that would be appropriate for future
developments such as housing, commercial and industrial growth.
These types of plans, developed by broad based community
members, provide directions on developments within communities
and supported by citizens and elected officials.
The recent ruling by the U.S. Supreme Court concerning
eminent domain has brought forth many questions and concerns
not only to local citizens, but also to elected officials and
economic development professionals. It jeopardizes the efforts
of economic development professionals and severely puts these
efforts at risk. The goals of development are to bring
increased investment and job opportunities to local area.
However, there needs to be trust and understanding within
communities to assure that everyone is protected.
Eminent domain has been available to local governments in
Ohio for the taking of land for public purpose or for necessary
purposes. Landowners are to be justly compensated. Public
purpose and necessity are not intended for profit-making.
Giving local governments a much broader power to take property
for the purpose of generating more tax revenue opens up a
potential Pandora's Box.
Our public officials need to be protected. Most of Ohio has
been experiencing the pressures of lower tax revenues, higher
cost of services, and the loss of jobs. Economic development
has become very competitive with many thousands of economic
development organizations across the State competing for
projects, investments, and jobs. Allowing local governments to
take land for economic development purposes puts undue pressure
on these elected officials. These pressures could come from
different directions: like developers who offer jobs and
increases tax revenues; property owners who feel that they
could hold out for higher dollars if eminent domain is used;
and lengthy legal battles.
Recently I have seen recall elections brought about by just
a few disgruntled citizens over frivolous things. Ohio law
allows recall petitions to be presented with a very small
number of signatures and without just cause. This can severely
affect communities as they can become fragmented and
disorganized. These communities will suffer significant
setbacks, creating a lack of vitality and economic growth.
Our Constitution was written to protect citizens and
government. The ruling by the U.S. Supreme Court, to give
government more powers of eminent domain, could lead to more
irate citizens recalling government officials. We could create
a revolving door of elected officials with the end result being
qualified people will not seek offices due to the fears of
association with public service.
Congressman Ney, we thank you for your interest in hearing
how your constituents view the eminent domain ruling. We hope
our U.S. Congress protects the rights of landowners and
protects our elected officials who are facing increasing
scrutiny and financial pressures.
Thank you.
Chairman Ney. Thank you very much. Representative Evans.
[The prepared statement of Ms. Smith can be found on page
106 of the appendix.]
STATEMENT OF CLYDE EVANS, STATE REPRESENTATIVE
Mr. Evans. Thank you very much, Congressman. I just want to
take a couple of moments to thank you for the diligent and
efficient work that you and your staff have done to service my
clients in the 87th House District when we have been able to
work with you on issues for them. And also, many times that you
have come into my district to talk with people about problems
and issues that we have had there.
I guess to save time, I am going to be very much like my
youngest daughter--when my three daughters were young, the
first would say well I am going to do this and the second one
would say well I will too, and the third would say me too.
Basically, I agree very much with most everything that has been
presented here.
Senator Grendell, when he asked for legislators who would
like to join the group that he put together to study this
issue, I joined and met with him. And when, he called for co-
sponsors I co-sponsored the bill. I think that it is very
important that these issues be left to the States, to each of
them to study on their own. And to make a thorough study of
blighted areas and decisions that would be best for the public
as a whole.
There has been much testimony to indicate that good can
come from eminent domain if it can provide jobs for poor people
in blighted areas and areas of social decay. But this is a very
tricky area and that is why I very readily joined with Senator
Grendell in asking for a moratorium to give us a chance to
study in more detail the definition of blighted areas and some
other kind of legal terms that we need to take a look at over
the next year or so. I think it is a mistake when some of these
issues come up and the newspapers of course give them a lot of
hype that we jump in very quickly and try to make quick
decisions in an emotional state.
So therefore, basically again, I guess my main emphasis
would be let us take some time and study this issue and make
sure that we made the right decisions, during this period of
moratorium.
Thank you.
Chairman Ney. I want to thank all of you for your testimony
today. And also, the elected officials for your public service
that has been many long hours helping people.
I had a question, Mr. Finkle. What do you think of the
actual bill, the moratorium? I know where you are at on the
Supreme Court case. What do you think about the moratorium
approach in itself?
Mr. Finkle. Well, I think that is a far better approach
than what we have seen in Alabama and Texas. In both Alabama
and Texas, they have done what I would refer to as a rush to
judgment. In Alabama, the Governor has already signed a new law
that bans eminent domain. And the Governor has a bill in Texas
on their desk. The interesting thing is, they are chock full of
what one might refer to as pork barrel because they excluded a
great number of different types of projects that were coming
up.
As we all know, in Texas, there in Dallas, they are getting
ready to build a new sports stadium. And they planned to use
eminent domain, that is excluded in the Texas statute. And as
many of us know, when President Bush was the owner of the Texas
Rangers, they used eminent domain to acquire the site for the
current Texas Ranger stadium.
But it is always good to see the pragmatism that is found
in my home State and that moratorium seems to make a lot more
sense when you are sitting back and saying, you know, there are
a lot of potential good uses that we need eminent domain for.
And you do not want to have what would be a rule of unattended
consequences, you rush out there and you do something and then
you find that you really messed things up.
Chairman Ney. I had a question about--anyone can answer
this that has been involved with eminent domain. Most of the
cases, as I was telling Senator Grendell, we have all have
served in the legislature, try to give them--when you do public
private taking for public use, those buildings that you have,
you practically cannot give them away when they get old. Nobody
wants them and usually somebody gets them off of the State and
then has to spend a lot of money for them.
The issue arose today too, about taking private property
for private use and all of a sudden that piece of property that
was worth $50,000 escalates into, you know, a $400,000 to
$500,000 piece because the private entity is building something
there. So, did the person really get value out of the taking?
Anybody like to comment on that?
Mr. Finkle. Congressman, I happened to be on a radio
station the other day. This was a call-in show in Indiana on
this issue of eminent domain. And the water resource people in
the greater Indianapolis area took land 25 years ago. And over
the next 25 years they finally determined that they had more
land than they needed. And in the meantime, the value of that
land had increased over the time period. They sold off some of
the land that they needed and they built million dollar homes
on it. Now one of the families whose farms that had been taken
for--and this was clearly a public use. This was not under what
would have been a Kelo decision type property.
Some of the farmer families were saying well, we should get
the appreciated value. One, they did not have a water resource
when they had the land there in the first place. Second, 25
years had transpired. At what point, do you determine an
appropriate appraisal of that property and at what point can
you say what their action was actually caused the appreciation
in value?
Now, I am not one to argue that maybe there ought to be a
standard that says if you are taking land for an economic
development purpose just compensation is 150 percent of value.
But to leave it open ended that person has somehow to be given
equity in that project or that the enhancement that a
developer, a bank, a builder, a construction company, put into
the property, envisioning the concept and taking the market
risk should be shared with the property owner seems to be a
stretch in what would be considered an appraisal process. Give
them a greater value just compensation, but do not have people
as part of a deal.
Chairman Ney. Do you ever consider--and I will move on to
the Senator. Is there ever consideration, there is a family
farm, maybe it is not worth so much per acre, but it has been
in the family 125 years, is there any considerations given for
that?
Mr. Finkle. Clearly, emotional value is attached to a great
deal of the properties that we are talking about. And I do not
know how an appraiser deals with emotional value as they
appraise property. But typically what happens to hold-outs and
somebody who has emotional value attached to a property, a
hold-out is generally going to get more money than somebody who
sells early. And so, they are going to get a greater value
because they are the ones that are going to take a community
closer to court as the community is trying to gather that
property for whatever purposes they are going to take it for.
Chairman Ney. Senator Grendell.
Mr. Grendell. Thank you, Congressman Ney. Let me answer the
second one first, the emotional value issue. Right now in Ohio
law, if you are the landowner you have two ways of trying to
establish value. First of all, under Ohio law, the owner always
gets to testify as to their opinion if it is privately owned.
Corporate does not have the same. But if you are a farmer, you
have the right to stand up there and say my farm is worth this
to me. It has been in my family 100 years and you need to hope
the jury hears that loud and strong and ultimately the jury
makes the decision. But the court has to let the owner give
their view of the value under Ohio law.
The second form of evidence the owner can propose is some
sort of expert, an appraiser who gives a value. But as I
mentioned this morning, one of the problems with Ohio law on
that value, and this is where that concept of Kelo runs afoul
of private-to-private versus Ohio law. Right now, the valuation
is based on the value of the property as of the date of the
take. And it is what it is zoned at the date of the take. And
many courts will not allow you to have an appraiser who comes
in and says--and it is not magical, residential property is
worth less than commercial, farm land is worth less than
commercial and industrial. I mean, that is just the way it
works in the real world. And your appraiser has to say it is
based on the residential zoning or based on the farm land.
And the farm acreage may be $3,000 an acre. A Wal-Mart is
not $3,000 an acre. The house may be $50,000 an acre, I have
represented Wal-Mart, I have been involved in eminent domains
all over northeast Ohio, I will tell you there is no magic to
this valuation. It is pretty well established in any mark of
what commercial land is worth versus residential and versus
farm land. And more importantly in many cases, the developers
will know because he is going to lease based on the valuation
that he places on the property, based on his total project.
That number is not necessarily going, if he is trying to set
his rents with a high end retailer, is not going to represent
the lowest value he can put on an acreage, it is going to
represent the highest value.
All we are suggesting is that when you take private
property for a true public use, a fire station or a road, the
value is not going to appreciate. In fact, I think you are
correct, Congressman Ney, the value tends to get flattened or
depreciate because there is not a whole lot of market out there
for used government buildings these days.
But when it goes to a private development, I believe that
the landowner should be entitled to offer expert evidence as to
what the ultimate value of what that land will be in that newly
increased developed use. When you are taking unblighted
property from somebody, because that person is literally
contributing some equity that they are not getting compensated
for to the good of a project that is ultimately going to held
by a private owner. I think that is why it is important we have
the moratorium so we can study that issue, see how in Ohio we
can best protect property owners on that issue. And maybe it
has to deal with how we value it, bonus value, the fact that in
Ohio that you have to pay your own attorney's fees if you are
the property owner. Where the government usually is using
taxpayers' money. Maybe we should change the law so that not
only do you not get some bonus in the value, but if it is a
private-to-private take, should that be where the legislature
ends up, that legal fees and expert cost get reimbursed to the
private property owner as part of trying to stabilize the
equities of that situation.
Chairman Ney. This question is for the legislators, are you
hearing a lot via letters or phone calls from constituents or
farm groups on this issue, I was curious?
Mr. Evans. I have received very few, but in talking with
people in my district, of course they are very concerned and I
think a lot of people do not understand the Supreme Court's
decision and how it relates. Once I talk them a little bit, and
explain a little bit to them, they understand a little more.
But they still of course are very, very much concerned about
taking anyone's private property and they very well should be.
I have not had a lot of correspondence coming to my office
about it, but there is concern.
Mr. Carey. Congressman, I have had some contact and
especially since we are in Appalachia today, private property
rights are a very strong sentiment in Appalachia. Even in
traditional zoning that we see in cities and towns, it is very
hard to accomplish in the Appalachian part of the State. So,
the idea that some one can come in and take their land for
private enterprise would be not welcome in this part of the
State.
Mr. Grendell. Congressman Ney, I put together with the
blessing of Senator Harris, the president of the Ohio Senate, a
working group. In fact, Representative Evans is on the working
group and we have had calls, letters, e-mails, and interesting
enough, we have had people come and show up at the working
group meetings, citizens who have had problems with the
Lakewood take, west of Cleveland, people from Norwood who have
concerns about the Norwood situation, as well as
representatives of the Farm Bureau and several other citizen
groups who certainly do think that we need to at least review
the situation and do what we have to do to protect the private
property rights that are now subject to the Kelo decision.
Chairman Ney. On the CDBG, I wanted to mention, I mentioned
earlier, but as you know, it is designed to serve families at
the very low-income level and try to get them up into self-
sufficiency. So it tries to protect them so they continue to
serve those families most in need. That was again one of the
theories of not allowing those to be used for this purpose,
because they are an intended fund. But Mr. Finkle, you had
mentioned the third provision though that CDBG--I was trying to
follow that?
Mr. Finkle. Yes, as you may remember, I was the Deputy
Assistant Secretary in charge of the CDBG program during the
Reagan Administration. There are three fundamental legs to the
CDBG program. And those are meeting the needs of low and
moderate income people, meeting a pressing, urgent need, and
the elimination of slum and blight.
Admittedly the majority of the funds used by the CDBG
program are meeting the needs of low and moderate income. But
the CDBG program, in both in its original construct, its
legislative intent, its current use, allowed for meeting a
pressing urgent need. Say for instance a small community loses
its water system after a major flood. That is an allowable use
of CDBG dollars for meeting a pressing urgent need. But the
last part, the elimination of slum and blight, anticipates the
government using CDBG to take down dilapidated buildings,
sometimes occupied buildings, sometimes commercial properties
that are a blighting influence on the community.
When the community takes those buildings, they are often
going to turn them over in some type of redevelopment plan, in
some type of allowing another private sector user to take those
properties and reuse them in some way.
Chairman Ney. What is the definition of blight, because
Senator Grendell had an interesting--what was the one car
attached?
Mr. Grendell. Congressman Ney, up in Lakewood, Ohio. in a
desire to try to take an area where they wanted to eliminate
some apartment buildings, the developer had a grander scheme.
And to get to that scheme, you have to take out several blocks
of occupied primary residences that were not in any, what you
or I would call, blighted condition.
They got some experts to come up with the concept that
within this geographic area blight was having a detached garage
and one bathroom. The problem with that, as the mayor of the
city found out when she was on 60 Minutes, is when they
confronted her with that, she did not live within that
geographic area that they wanted to develop, but she indeed
lived in another part of the city in Lakewood with a detached
garage and one bathroom.
And so, that is probably the most egregious case of abuse
of the definition of blight that I have ever seen and certainly
the most egregious in Ohio. And while it is true that the folks
ultimately undid that by going to referendum, there are some
problems with that as the ultimate solution. Those people had
to spend a lot of money--they did get some outside help--but
they also had to hire lawyers, while the city continued to use
taxpayer dollars to pursue their development plan. I do not
think Ohio citizens should have to pay twice to defend their
homestead.
And so I think we do have to take a look at the definition
of blight as part of what we are doing here. And with Kelo, you
do not even have to get to blight. That is the concern. With
Kelo, those councilmen no longer have to even go through the
facade of a one bathroom, one car detached garage. They can
just claim it is good for the city because it is going to
generate jobs and taxpayer dollars and get past that issue and
just start taking those homes.
I do think there is a real legitimate concern that we need
to find that line. And there is a line that I think hopefully
with the moratorium we will be able to find between true
economic needs and true use of eminent domain for public
purpose, real public purpose, versus what I refer to as
economic socialism, that we just decided to tear down some
houses because we want a Wal-Mart store. I just think that is
un-American.
Mr. Finkle. Congressman, to answer your question--the
Federal Government has blight definitions that Lakewood would
not fall under. I would agree with the Senator that Lakewood
was an abuse of the process. But those homes would not meet the
blight definition the Federal Government has laid out for CDBG
use. It is a much, much tougher standard. You and I both know
Washington D.C. and we both know Columbus very well. When we
saw blight, we would know it is blight.
Chairman Ney. The national standard on CDBG is set for
blight?
Mr. Finkle. That is correct and I do not have that
definition or standard memorized unfortunately.
Chairman Ney. Do you think there ought to be a national
standard on--
Mr. Finkle. No, for the purposes of the way eminent domain
is carried out across the country now, the Federal Government
has left that up to the States to decide. So, I would not
encourage the Congress to set a national standard, but rather
leave it to the States to allow them to make the decision as to
how they want eminent domain to be used within their specific
States. That is how it is currently done. There are, as I
indicated in my testimony, 11 States that have statutes similar
to Connecticut. If they choose to change it, even in the
decision by the Supreme Court, they said essentially that this
was an issue for the State to grapple with.
Chairman Ney. I wanted to ask Dona Smith, you have been in
the development arena a long time, did you ever have any
situations where it was going to be a hairy issue of taking
somebody's property? Was it re-thought to do it another way, or
was this ever approached?
Ms. Smith. We have never really been involved in any
eminent domain situations. As I see it, if a developer--you
know, I work with a lot of developers who have offered ``X''
amount of dollars for a property, but have also said if we
develop that site and sell it, you know, the property owners
will share in the wealth in the future. I think there are ways
that you can work with, rather then taking it just by eminent
domain. I think there are ways you can work. If developers are
upright and forthcoming, they should be able to. And as you
said, when they rent it they use a high value, well if the
person could share in some of that income, based on both the
value of the land, I mean that is one way of looking at it. We
have to make it safe. But no, we really have not been involved
in anything to that point, but we are getting close.
Chairman Ney. Because I thought you took an interesting
point of view, for somebody involved with the CIC.
Ms. Smith. Yes, I look at it this way. We have to protect
people from--our government, you know, in Ohio, we are just
seeing people recalled and stuff like that. And this is just
another opportunity for disgruntled people to say, you know, a
few hundred signatures and you are out of here if you do not.
It is costly, you know, things like that. So, I think there are
other ways, there are other things to look at down the road as
to what this could mean. There is too much pressure right now.
We have to figure out how we can all work together.
Chairman Ney. A question I had, people have mentioned 34
States are moving to enact laws. Let us say that in ``X''
amount of States, it is up to the States and let us say, you
know, 45 States enact some type of law, like the one you have,
the legislators, or something effective, Texas or whatever. And
there are a handful of States that do not enact that type of
law, would that be a situation more prone for developers to go
to those States that have not enacted that law or would it be
insignificant thinking towards that? Anybody speculate?
Ms. Smith. My personal opinion, I would think, you know,
not everybody has to be in a certain location, but certain
people have to be in a certain location. So, if ABC company has
to be in Texas because that is where their customers or their
suppliers are and Texas does not have a law it is probably, you
know, or they do have a law, they are probably not going to go
next door.
I do not, economic development is not fair anywhere, I mean
it is a shot in the dark and it is the luck of the draw so, I
do not see it affecting--now I may be wrong and you probably
have a better handle on it, Jeff.
Mr. Finkle. Where I think the issues are going to be the
greatest, I see the issue as being somewhat black and white.
The places which are experiencing a great deal of growth are
going to be the places where if they enact this type of
legislation, there is nothing going to be felt because they are
growing like crazy anyhow. So, California, Arizona, Texas,
Alabama, and Florida are still experiencing a great deal of job
growth. They are still getting a great deal of population
growth and they are experiencing revenue increases. And as a
result, they can pass darn near anything to limit growth, to
limit economic development, and it would not hurt them.
Places like New York, Pennsylvania, Ohio, Rhode Island,
Connecticut, places that are stagnant both in economic growth,
and in population growth, and in tax revenue are going to put
themselves--any time that they limit one of their economic
development tools, they put themselves at an inherent
competitive disadvantage.
Now, I am not saying that you will loss a major factory if
you limit eminent domain. I am not going to say--I do not know
where that particular facility might want to go. But the more
restrictions you put that limit your ability to grow either in
place in a business retention or the ability to attract and
acquire land, it is going to put a community at a disadvantage.
I do want to step back though from this issue and say, in
many cases, and fortunately I have heard from all three of the
members of the legislature that they have been very careful in
saying non-blighted versus blighted property. Because a lot of
Ohio has a fair amount of blight in it. And particularly in our
central urban centers. But often times the impetus for these
redevelopment project is a community looking at a blighted
neighborhood or a distressed inner city downtown and they say
we need to clean this up and we need to prepare for some future
use of an area of land. So that the community uses their
eminent domain power. They ultimately do turn that land over to
a private sector developer for a mall, for a new industrial
plant, for an inner city grocery store, which is missing in
many communities across the country.
So it seems to me, at least the discussion that I have
heard today, at least positions Ohio in the right ways when
they make the difference between blighted and non-blighted
properties.
Mr. Grendell. Congressman Ney, if I may, in those five
States, two things will happen; you will have opportunists who
will show up because they think they have a benefit that they
might get land cheaper if they can convince the local
government to do an eminent domain. And you will have some
people who specialize in maybe urban redevelopment who will see
an opportunity in States that do not take any action about
Kelo, because there are folks who do make specialties out of
these sort of urban projects. Ultimately though, the market is
going to drive the issue. It those States are not attracting
business, this is not going to do much to attract business in
those States.
And I do appreciate Mr. Finkle's comment. I mean one of the
things that I am very cognizant of, I know Senator Carey,
Representative Evans, is that we know if we go off the cliff
too quickly the unintended consequences are going to be very
difficult to deal with, especially when you start talking about
constitutional changes. And that is why we do recognize there
is a role for eminent domain particularly when you are talking
about true blight. But there is also a role not to let eminent
domain take away people's private property rights when there
really is not a blighted situation, a true Kelo situation, and
the struggle we have the next couple of months is to try to
clarify how you identify and define that parameter. And I do
not have that answer today. That is why we think we need the
moratorium to calm everybody's concerns about Kelo while we
work on the bigger issue and come up with an ultimate solution.
Chairman Ney. We have had a lot--I said this earlier up in
Hebron, we have had a lot of inquiries into the Congress in
offices, we have had them in the urban areas and the rural
areas. Also, in the urban areas I talked to my colleagues that
represent cities and there is also a feeling that maybe the
cities can do this a lot quicker then we could. After all we
are in small communities. You do something, you take somebody's
land or family farm, or something, or try to do it for a
landfill, you have got to live here and you know just about
everybody in these communities. When you are in a large city of
a million people, things could maybe be done and not as much
emotion would be there.
So, I have heard from the urban legislators too, you know,
the concern on that. With the volume of inquiries that we have
had, we had also thought about some type of national language
on it, settled on after discussions on the small niche with
CDBG because that I think is our role on the subcommittee, to
do something with those funds. But after listening earlier and
today, and you know, I said this up in Hebron, if the Federal
Government tried to come in--and I am worried about the Supreme
Court decision, I think we have to watch it. I think the
purposes that you all are doing are pretty balanced. I think it
is something to be watched and to be concerned about, and
people's property rights is something I feel very strong about.
But if the Federal Government were to try to set up
something to define blight, and I used the EPA as an example,
and create the United States Department of Eminent Domain in
our 12,000 or 16,000 people and have everybody's life, you
know, a nightmare. That fact would be worst then having the
Supreme Court decision. So I think we have got to be very
careful on a generic broad--personally I think on generic broad
Federal approach. But I think it is of great concern. Jeff?
Mr. Riley. Yes, sir, I would just repeat what I stated this
morning, Mr. Frank and Ms. Waters, the ranking members of the
Housing Subcommittee and the Full Committee are concerned about
renters. Particularly the poor when it comes to government
takings and I guess it was just Senator Grendell answered the
question this morning, I guess that is provided for in the
legislation.
Mr. Grendell. As I mentioned this morning, under Ohio law,
when you go to take, you take both the fee, the ownership
interest and if somebody has a leasehold interest you are
taking their lease, too. And you have to make provisions for
dealing with that in the process. But it is probably more so
again with this valuation issue that we have to look at, that
we are going to have to include that we will include looking at
the tenants' rights as well as the landlords' rights as we get
this task force going, hopefully in September if all goes well.
Mr. Carey. If I could add to that, I mean the issue that
eminent domain ultimately goes to is the hold out. And
oftentimes you are--I mean in the case in Norwood, you had
about 90 to 100 individual landowners and there were only about
seven or eight holdouts. That was about similar in the New
London case. So, there are people who are emotionally attached
to their homes. They do not think enough money has been put on
the table or they are trying to get rich quick and be the
ultimate key parcel that, you know, is the trigger to allow the
project to go forward.
What I think the real issue in my mind regarding tenants is
that I would worry that as somebody is trying to acquire
property that you end up having a slumlord who wants to be the
holdout. And that they are, one, using as an interim use their
housing parcels and at the same time being a slumlord just
waiting for the time that somebody is going to take their land.
If they use eminent domain maybe the benefit ought to go to the
person who is a renter, not necessarily to that slumlord who is
ultimately trying to be that key parcel and hoping just to get
rich quick in the process of holding up other community
projects that are necessary.
Mr. Riley. Do you know if any of those 11 State statutes
expressly provide for renters?
Mr. Carey. I do not know.
Chairman Ney. I wonder if we could find that out. That
raises another issue that I want to ask about. You know, there
is sort of the bartering process. Because you have mentioned,
and rightfully so, there is always maybe one person holds out,
other people go along. With the new Supreme Court decision
codifying being able to take property, does it not kind of
change the scope of things because now you can come in and it
is not a public use, but people know that their property can be
taken after all by eminent domain? Does that cause a little bit
more of a psychological problem on the part of the people with
the property? I am not talking about low income, I am just
taking about property? They feel at the mercy of--
Mr. Finkle. If we go back to my testimony, and my testimony
is that Kelo changed nothing. And that if we go back to the
early 1980's and you go to Detroit and what General Motors did
with Poletown, which was a project we founded in the Reagan
Administration, we funded the Poletown or the General Motors
plant in inner city Detroit. They used eminent domain for
turning over a project to other private sector uses, General
Motors.
The Kelo case only affirms what State law or State
constitutions currently allows. If the State constitution does
not allow an economic development taking which most do not, it
does not somehow grant those States new powers. It only grants
them what they already have under their State constitution or
their State statute. If they prohibit it, it is still
prohibited. It was not dealing with what is already covered by
various States.
Now, I have heard the argument that you make Congressman,
that in fact, somebody feels less power, but I guarantee you
their attorney would not feel more inhibited now that the Kelo
case has been settled.
Mr. Grendell. Congressman, I am going beg to differ with
Mr. Finkle on this one issue. The Kelo decision did change
something. And I am going to give you two examples. Three years
ago, I represented an owner of an 1950's motel on Morane Avenue
in Fairview Park, Ohio. Fairview Park decided that those motels
which they loved in the 1950's and 1960's because it is close
to the Cleveland Airport, they no longer liked in the 21st
century, because it became of a sub par tenancy than the
traditional motel. They wanted to eliminate these motels and
put in some tax generating offices, because everybody wants
that income tax dollars from offices. There was nothing wrong
with this motel, this motel was about 70 percent occupied,
albeit some of them were more permanent occupants than in the
past. But the city went out and got a blight study. Based on
the age of the motel and the nature of some of the occupants
they claimed the property was blighted. Under Kelo they would
not have to take that step. They would just say, it is going to
generate jobs, forget the blight study.
The reason why the blight study was important is in Ohio
law, when you do an eminent domain case there are two
procedures, two steps. The first step is as the landowner you
can challenge the public necessity. You have a right to
challenge--except it is takings for roads, you have the right
to challenge the public necessity. That is decided only by the
probate judge who hears your case. And you have a hearing on
that and we presented three days of hearings on this issue with
this motel. And when it became clear that the issue of whether
this was blighted was a little murky, the ante went up and we
settled the case quite favorably to our client.
Under Kelo, that event never would have happened. They
would have said it is going to generate jobs, they would have
had somebody show up with the number of jobs that office
building was going to generate and the taxes that it was going
to generate versus the transient nature of a motel. We would
have no negotiating. The judge would have dropped the gavel and
said, public use because of Kelo. And that would have been the
end of the story.
We would have then gone to the second step in Ohio. Which
is the jury decision of the value of the property taken. Well,
needless to say most of these cases settle, because a good
eminent domain lawyer will position his case to try to up the
valuation, because the juries are sometimes, you know, seen as
a gamble. Sometimes you go because you have no choice, but
often you are trying to get a certainty before you get to that
phase of the litigation.
Kelo would have changed that and now changes that whole
situation. You no longer have a blight study issue that you can
debate whether the take is a valid taking, before you even get
the valuation.
Second in my district, and Representative Gibbs raised it
this morning, we do have a 9-acre parcel that is located
between two parcels which are occupied by Progressive
Insurance, the largest employer in my Senate district, with
about 21,000 employees. Progressive wants to expand their
campus and connect the two parcels.
Prior to the Kelo decision, they did not have a chance to
buy the 9 acres in between. They attempted to purchase it but
they could not take it because there is nothing blighted. There
is nothing on it and the last I checked, trees and grass still
do not constitute blight.
Now, the Village of Mayfield Heights has started the
eminent proceedings based on Kelo to take the 9 acre parcel of
land to ultimately transfer to Progressive, to keep Progressive
happy. Which is something that I also want to see done, to keep
them in the district, which is important, but they are taking
advantage of Kelo that they did not have an opportunity to do
90 days ago.
Now, I have to say in that case, they also offered the
property owner $3 million, which in my opinion was a
substantial offer for the property in question.
Mr. Finkle. If I can, Congressman, they could have done
this before Kelo. Kelo merely at best confirmed what they could
have already done prior to the Kelo decision.
Mr. Grendell. Well, the lawyers would disagree with that.
Chairman Ney. Do you have any other observations or
anything that you want to say?
[No response.]
Chairman Ney. If not, I really do appreciate your time.
Mr. Grendell. Congressman, if I can just add one thing from
this morning. You had talked about the Federal, and I mentioned
this morning, I am not a big fan of getting the Federal
Government involved in this, because I think it is a Tenth
Amendment issue. However, if there is a desire of Congress to
look at something, I would like to leave you with a thought--42
United States Code 1983, sometimes known as the Civil Rights
Act, prohibits the violation of a civil right under color of
law. If you are looking at a way that the Federal Government
could take a position to influence this process, it would be
that the violation of a private property owner's right, by
taking his property for ultimate transfer to another private
property owner would be considered a valid cause of action
under 42 USC 1983, which would allow that landowner access to
Federal courts to argue over the validity of the taking, which
removes it from the politics of the local situation and
enhances their property rights and chances in the Federal
forum.
Chairman Ney. That is not a bad idea.
(Laughter.)
I thank you for that observation, that is great.
Again, I want to thank all of you for your time, your
opinions, I think it is a good hearing. We will be able to take
this back to Washington and we will be able to, you know,
definitely share with our colleagues and see what they are
hearing from across the country.
And also, without objection, the statements by State
Representative Clyde Evans, Jackson County Commissioner Ed
Armstrong, and State Rep John Schlichter, who had called and
could not make it today, will be placed in the record. Again I
thank you for your time and your attention to this issue.
With that, the committee is recessed.
[Whereupon, at 3:25 p.m., the subcommittee was adjourned.]
A P P E N D I X
August 18, 2005
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