[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



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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

                              ----------                              
                                                                   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?

                              ----------                              


                       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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