Take My Home Tonight

8/10/2019 Take My Home Tonight

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Yale University

Take My Home Tonight: The Ethics, Politics and Economics of Public

Use after Kelo

Senior EssayDepartment of Ethics, Politics and Economics

Advisor: Professor Susan Rose-AckermanSecondary Reader: Professor Henry Smith

By Tom Lehman

April 10, 2006



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INTRODUCTION

In August of 2005, the Supreme Court handed down Kelo v. New London

(“ Kelo” )1, a 5-4 decision which continued the doctrine of judicial deference to state

determinations of the appropriateness of eminent domain under the public use

provision of the Fifth Amendment. The Court‟s ruling was unsurprising to the legal

cognoscenti. Since it ruled in 19542 that Congress could constitutionally use eminent

domain to condemn a non-blighted piece of property even if it would later be sold to a

private developer, the Supreme Court has been reluctant to second-guess the decisions

of state and federal legislatures to use eminent domain. In Kelo’s most immediate

predecessor, Hawaii Housing Authority v. Midkiff (decided in 1984), Justice Sandra

Day O‟Connor wrote for a unanimous Court that a legislature‟s determination that there

exist “substantial reasons” for exercising eminent domain was enough to satisfy the

Supreme Court that the taking would serve a public use.3 Yet in Kelo she seemed to have

changed her mind—penning a biting dissent accusing the majority of treating the public

use provision as mere “hortatory fluff.”4 In 1984 it seemed as if the doctrine was entirely

settled, and so what is first surprising about Kelo was just how close the decision was.

The second surprise Kelo brought was the public outcry that accompanied

O‟Connor‟s change of heart. Fomented in part by efforts on behalf of the Castle

Coalition, a spin off of the Institute for Justice, the aggressive“libertarian public interest

law firm”

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who represented Ms. Kelo, bills to curb so-called “eminent domain abuse”

1 545 U.S. ___ (2005)2 348 U.S. 26 (1954)3 467 U.S. 229 (1984)4 Kelo v. New London 5 <http://www.ij.org/profile/index.html>



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have been proposed in 47 state legislatures6. In November of 2005, the U.S. House of

Representatives passed the Private Property Rights Protection Act of 2005, a bill that

prohibits states from using federal money to finance projects that employ eminent

domain to promote economic development.7 While it is unclear which of the more

drastic reforms will remain once the dust settles, reform of some kind will almost

certainly take place.

In this essay I will examine the new questions that both of these surprises raise.

First, as a matter of constitutional law, I will ask whether Kelo was decided correctly. It

seems possible that the Supreme Court would be willing to reexamine its public use

jurisprudence, a possibility that seemed unlikely after Midkiff —should the Supreme

Court do so? Is the theory upon which Kelo is predicated, rational basis review on the

public use question, tenable? Furthermore, what should the Constitution say about the

public use issue in particular and about eminent domain in general? If given the

opportunity, would we want to rewrite the Fifth Amendment?

Second, going beyond the constitutional issue, there is the question of what, if

any, legislative and administrative response to Kelo is appropriate. In the second part of

this essay I will examine what reforms state and federal governments should take

assuming Kelo stands.

ITHE CONSTITUTIONAL ISSUE

6 <http://www.castlecoalition.org/legislation/> (a list of pending state legislation)7 < http://thomas.loc.gov/cgi-bin/query/z?c109:h4128.eh:>



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Broadly speaking, the takings issue can be framed as a question of permissible

state means.8 The Constitution makes certain state goals off limits, for example the

government is prohibited from establishing a state religion. But the Fifth Amendment

also restricts the methods by which the state may achieve permissible goals. There are

three methods available to the state: the police power, eminent domain, and voluntary

market exchange. The state employs its police power when it enacts uncompensated

nonconsensual regulations. The power of eminent domain is similar to the police power

in that it is nonconsensual, but different in that the state must compensate. Finally,

market exchanges are both voluntary and compensated. Fully resolving the takings issue

involves answering two related questions: First, how should the state decide which

means to employ to achieve a particular goal, and second, when the state uses an

improper means for achieving a particular goal, in which cases should the remedy lie

with the Courts rather than with the ballot box.

These are difficult questions. It is easy to give examples of state goals that clearly

should be accomplished by specific means, but it is often difficult to offer explanations.

For example, suppose the state wants to prohibit liquor stores from selling alcohol on

Sundays. This is a paradigmatic example of a goal that can be permissibly accomplished

with the police power. Liquor store owners are clearly political losers in this situation,

but it seems wrong to require that the state compensate them for their lost profits. It is

even more absurd to ask that the state bargain with every liquor store owner, offering to

pay them to close shop on Sunday.

8 Thomas W. Merrill, The Economics of Public Use. 72 CORN. L. REV. 61 (1986)



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Why do we feel that the police power alone is an appropriate method for

accomplishing this goal? The liquor store example becomes even murkier when we

examine the economics of the situation. In this case, the legislature feels that there is

some surplus to be realized, in the form of health or morality, by closing liquor stores on

Sunday. There is also a cost—market transactions for which there is a surplus (i.e.,

people buying alcohol because they value it more than its production cost) will not take

place.9 Presumably the state acts to close liquor stores because it feels the benefits

outweigh the costs. But in this situation it is acceptable to force consumers and liquor

store owners to bear the full burden of state action. Compare this example to a

paradigmatic market transaction: The state wants a well-educated liquor store owner to

work as a public school teacher instead. Clearly here there is a benefit as well—the liquor

store owner‟s value as a school teacher, and also cost—his value as a liquor store owner.

However, even if the cost outweighed the benefit, we would be unwilling to allow the

state to conscript him as a school teacher.10

Fortunately, the Constitution simplifies the situation by both asserting that the

proper boundaries between the three means are judicially enforceable and by providing

principles by which judges can evaluate which means are appropriate in which

situations. The Fifth Amendment states that “takings” (whatever those are) require “just

9 It should be clear at the outset that whether physical property is involved is irrelevant. One can just aseasily cast the cost of this and other regulations in terms of its effect on property values. In this case,liquor stores are less profitable under the regulation and therefore the price of a liquor store will decrease.10 We do, however, allow the state to conscript people into the army and jury duty. In addition, if the stateimprisons someone for a crime he did not commit only to acquit him twenty years later it does not have tocompensate him for the inconvenience. These ambiguous cases should make the problem of appropriatemeans seem even more urgent.



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compensation;”11 meaning that the concept of a “taking” demarcates the border between

regulations and eminent domain. Furthermore, takings must be for “public use,”

implying that “public use” (whatever that is) demarcates the boundary between eminent

domain and the market. Overall, the Constitution paints a picture that looks like this:

States may use their police power so long as the regulation in question is not a taking. If

it is a taking, the state may proceed only by eminent domain. The state may use eminent

domain so long as the taking is for public use. If the taking is for private use, the state

must employ the market.

However, this simplistic view of the takings issue does not shed much light on

how the Supreme Court should enforce the public use provision. In fact, there are three

major problems the Court must resolve before it can effectively apply the Fifth

Amendment.

First, it is not entirely clear from the phrase “nor shall private property be taken

for public use without just compensation” that the Constitution offers “public use” as the

relevant factor in a taking‟s justifiability. There are three plausible ways to read this

construction.12 First, as mentioned above, the construction could mean that the

amendment requires takings be for public use. Second, it might mean that public use is

the condition for compensation—i.e., the state does not have to compensate when it uses

eminent domain for private purposes.13 Finally, “taken for public use” might simply be

an anachronistic synonym for “eminent domain.” Under this reading, the Constitution

offers no prescriptive boundary between voluntary transactions and eminent domain.

11 U.S. CONST. amend. V. The Supreme Court has held that the takings clause applies to states through thedue process clause of the Fourteenth Amendment. See, e.g., Penn Cent. Transp. Co. v. New York City, 438U.S. 104, 122 (1978)12 Dana, David, and Thomas Merrill. Property: Takings. New York: Foundation Press, 200213 See also, Jed Rubenfeld, Usings. 102 YALE L. JOURNAL. 1077 (1993)



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Perhaps the best reading is the first; but even if we agree that the phrase“nor

shall private property be taken for public use without just compensation” requires that

takings be for public use, the question arises: what constitutes a public use? If“public

use” means literal use by any member of the public, many uncontroversial projects for

which the state employs eminent domain, such as army bases and toxic waste dumps,

would be rendered unconstitutional.14 Suppose, on the other hand, that the Court

interpreted the provision to mean that the state may use eminent domain only to

provide pure public goods.15 Doing so might allow for a broader class of projects for

which eminent domain could be used, but it is unclear how Courts could determine what

constituted a public good. There are very few goods that are entirely non-excludable,

and if the Court only allowed eminent domain to be used to provide for these goods, the

analysis would be extremely restrictive. On the other hand, if the Court defined a public

good as any activity which generated a positive externality, the analysis would be

extremely broad. Finally, there is again the problem that many traditional uses of

eminent domain provide for goods that are entirely excludable (canals, airports,

highways, etc).16 Thus, it is unclear from the constitutional text exactly how the Court

should proceed.

Even assuming the Court could sort out these interpretational difficulties, it will

still be left with the Fifth Amendment‟s third and deepest problem: The Fifth

Amendment conditions eminent domain‟s permissibility on the use to which the

14 William Fischel, The Political Economy of Public Use in Poletown: How Federal Grants Encourage Excessive Use of Eminent Domain (February 2005). Available at SSRN:<http://ssrn.com/abstract=645402>15 Epstein, Richard. Takings: Private Property and the Power of Eminent Domain. Cambridge, Mass.:Harvard University Press, 1985.16 Fischel, The Political Economy of Public Use in Poletown: How Federal Grants Encourage ExcessiveUse of Eminent Domain



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resource the state wants to acquire will be put. This is fundamentally problematic

because whether the state can justifiably use eminent domain to obtain a particular

resource is unrelated to the resource‟s intended use. To understand why this is so, it is

important to first consider the normative properties of the market and the justification

for circumventing it with eminent domain.

Market exchanges are voluntary, and therefore mutually beneficial. Because of

this, markets tend to allocate goods to those who value them most. If the government

cannot afford to purchase your house, generally this means that the government values

it less than you do, and therefore the government should not own it. Every exercise of

eminent domain therefore risks transferring ownership of a good from someone who

values it more to someone who values it less. If markets always functioned efficiently,

goods would flow to their highest valued use through voluntary transactions. Of course,

markets do not always function efficiently. Specifically, when there is a greater cost to a

market transaction than there is a benefit to either party, the transaction will not take

place, even if it would be efficient if it did. The state needs eminent domain for

situations in which transaction costs make market exchange prohibitively costly.

Transaction costs are not an issue when the government faces a “thick”

market17—a market where there are many sellers of a given resource. If one seller balks

or holds out for an excessive price, the state can simply turn to another. Things change,

however, when the state faces a “thin” market—the extreme case being when there is

only one potential seller. Such a seller has a monopoly power and can hold out for a

price far in excess of his opportunity cost (that is, the best price the seller could get for

17 I borrow this terminology from Merrill, Economics of Public Use



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the resource in any other application). If the state must rely on thin markets, bargaining

may break down, or the government (and ultimately the taxpayers) may have to pay an

exorbitant price for the resource.

Hold outs are particularly problematic when the state must assemble a large plot

of land sequentially from many small parcels. If the state must use the market in this

situation, it faces the risk that the last seller will hold out for an exorbitant price. If the

state foresees this possibility, or even the risk of this possibility, it will not be able to

afford any of the parcels because it knows it might have to devote so many resources to

acquiring the final one.

For example, suppose building a certain highway is worth $10 to motorists, but

requires building on the land of three individuals, each of whom values his land at $1.

Clearly it is socially efficient for the highway to be built. However, once the state has

purchased the first two parcels of land, the third owner will hold out for $9.99, knowing

that unless the state purchases his land, it forfeits the $10 surplus the highway

generates. Therefore, before beginning the project, the state anticipates spending at

least $11.99 ($1 + $1 + $9.99) on a highway worth only $10, so it will not undertake the

project in the first place.

Given this justification for eminent domain, the intended use of the condemned

property is irrelevant to the justifiability of the taking. If transaction costs prevent a

piece of land from being used most efficiently, eminent domain can be used to increase

wealth, regardless of whether the land‟s highest valued use is as a public park or the

parking lot of a manufacturing plant. Therefore, even if we put aside the interpretational

difficulties the public use provision raises, so long as it requires that the courts enforce



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some restriction on eminent domain based on the intended use of the resource in

question, the Fifth Amendment requires the Court to apply an irrelevant standard.

This final problem reveals just how unhelpful JusticeO‟Connor‟s Kelo dissent18 is

in spelling out a principled test for public use. Connecticut has gone too far in Kelo, she

argues, but, contra Thomas, “„public ownership‟ and „use-by-the-public‟ are sometimes

too constricting and impractical ways to define the scope of the Public UseClause.”19

O‟Connor does not wish to overrule Berman or Midkiff , but instead seeks to distinguish

them from Kelo. The principle behind these two cases, that “in certain circumstances

and to meet certain exigencies, takings that serve a public purpose also satisfy the

Constitution even if the property is destined for subsequent privateuse,”20 is still sound.

However, Justice O‟Connor judges the “extraordinary precondemnation use of the

targeted property”21 in Berman and Midkiff to be the reason eminent domain was

permissible in those cases. If the precondemnation use of the targeted property is

inflicting an affirmative harm upon society, eliminating this harmful use though

eminent domain itself achieves a public use. However, as the Justice argues, the

petitioner‟s homes in Kelo were not causing affirmative social harm, and thus taking

them was unconstitutional.

But the state‟s justification for using eminent domain in Berman and Midkiff did

not turn solely on whether the precondemnation use of the land was harmful, but also

on whether using the market to shift the land to its optimal use would be too costly.

Likewise, in Kelo it is silly to argue that because SusetteKelo‟s home was not

18 The following criticism does not apply to Thomas‟ dissent which does not treat Berman and Midkiff as valid precedent. As we will soon see, Thomas‟ position is at least internally consistent.19 Kelo v. New London 20 Ibid. (O‟Connor in Dissent)21 Ibid.



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affirmatively harming society, eminent domain was not justified. If the state is

warranted in using eminent domain to alleviate social harms, why must the social harms

stem directly from the precondemnation use of the property? SusetteKelo‟s home itself

was not a nuisance, but the transaction costs inherent in assembling a large parcel of

land that included hers certainly were. Why is the state justified in using eminent

domain to alleviate one nuisance and not the other? For example, suppose that Susette

Kelo owned a factory which produced $500 worth of pollution damage. If this were the

case, the state could use eminent domain to take it underO‟Connor‟s test because of its

noxious precondemnation use. But, suppose the parcel of land New London actually

took is worth $1000 with a condominium and only $500 as a residential neighborhood.

If the state can use eminent domain to shift the use of the land to a more efficient one, it

will realize a surplus of $500. From a functional perspective, how is preventing a harm

of $500 (as the state does in the first case) any different from realizing a benefit of $500

(as the state does in the second case)? IfO‟Connor is willing to examine whether a

taking itself alleviates a social harm in determining whether it constitutes a public use,

she should be willing to look beyond the harms associated with a particular

precondemnation use of a piece of property to the harms associated with the thickness

of the market for the piece of property (which is unfortunately out of itsowner‟s

control.)22

22 This would be somewhat of a novel move precedent-wise, considering that transaction costs play noexplicit role in the public use tests Berman and Midkiff describe. However, Midkiff ‟s broadly wordedtest—the requirement that an “exercise of the eminent domain power [be] rationally related to aconceivable public purpose”—seems to allow eminent domain to be used to circumvent transaction costsso long as this role is considered a reasonable one for the state. In any event, the introduction of the“extraordinary precondemnation use of the land” as a relevant factor in public use adjudication is entirelynovel.



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O‟Connor‟s unconvincing argument aside, there are circumstances that tend to

make eminent domain more costly and therefore less attractive. If these contingencies

are causally related to the intended use of the property, or even highly correlated with

the intended use of the property, perhaps the public use criterion could serve as a vital

proxy for those factors that actually make eminent domain inappropriate.

In The Economics of Public Use Thomas Merrill proposes three factors which

complicate the transaction cost based justification for eminent domain and therefore

weigh against its use: subjective value loss, the incentivization of market bypass and

rent-seeking.23 Subjective value loss is the loss of consumer surplus associated with

condemning someone‟s property when his private value is greater than theproperty‟s

opportunity cost. When condemned property has high subjective value, it becomes

unclear whether a person is refusing to sell because he is attempting to extract a

monopoly rent or whether he truly values his land at more than its market value (or

both). In the former case, we would want the state to proceed with eminent domain,

whereas in the latter we would want the state to be more cautious, or at least offer more

compensation. While condemning property with a high subjective value is tricky

business, it has little to do with the public use issue. There is no reason to think that the

state is more likely to undercompensate when land is being taken for one use rather

than another.24

However, both the market bypass issue and the rent-seeking issue are related to

the intended use of the condemned land. The market bypass issue refers to the

23 Merrill, The Economics of Public Use 24 See also, Nicole Garnett, The Neglected Political Economy of Eminent Domain. MICH. L. REV.,Forthcoming Available at SSRN: <http://ssrn.com/abstract=875412>



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assemble the site, perhaps GM would have found a suitable location elsewhere which it

could have acquired through the market. Put another way, perhaps allowing

municipalities to use eminent domain in order to entice companies to develop there

creates artificial bilateral monopoly situations. If eminent domain were not available,

private parties would have a greater incentive to find a location where they would be

able to purchase land in a thick market.

However, disallowing private takings is a bad proxy for decreasing the incidence

of market bypass. First, it is not clear that market solutions will always exist, especially

when building a plant requires assembling a large tract of land and there are not many

suitable locations. In this scenario, wherever the company chooses to build it will

probably face a thin market. Furthermore, the market bypass argument in favor of

limiting private takings assumes that when cities compete for companies they are

merely jockeying along the pareto frontier for bigger pieces of a fixed pie. This might not

always be the case. In Poletown, perhaps the spillover effects associated with GM

staying in Detroit were greater than they would have been had it located the plant at a

different site. Furthermore, perhaps these greater spillover effects are directly

associated with the plant being located where the market for a large tract of land is thin,

as is the case in a metropolitan area. Finally, limiting private takings to avoid market

bypass would also entail limiting them in situations in which market bypass is not

implicated. In these situations the limitation would bring about the welfare loss

associated with the barriers to thin market exchange which could no longer be

overcome.



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It has also been proposed that the public use restriction is a good way to limit

rent seeking.28 When the state is allowed to delegate the use of eminent domain to a

private party, the party gets the entire surplus associated with the taking. Because of

this, private parties have the incentive to lobby for the power to use eminent domain,

and in doing so waste resources. However, similar arguments rebut this proposal. First

of all, it is not clear that eminent domain is a relatively attractive target for rent

seeking.29 As William Fischel puts it, “[c]onferring tax breaks and regulatory favors are

far cheaper ways of paying off one‟s friends and relatives than going through the

complex, costly, and embarrassingly visible route of acquiring property by eminent

domain and giving it to one‟s political allies.”30 Furthermore, the rent-seeking associated

with private takings might not have entirely negative efficiency consequences.

Encouraging private parties to find higher valued uses for land by promising them the

surplus could be economically efficient in the same way that encouraging entrepreneurs

to invent valuable products by promising them a monopoly via patent is. Also, even if

eminent domain were restricted to public goods, rent seeking would not be eliminated

entirely because “the equal availability of public goods … does not guarantee that all will

equally value [them].”31 Finally, parallel to the market bypass situation, there is the

problem that a blanket limitation on private takings intended to curb rent seeking also

limits its use in cases of legitimate thin markets.

28 Epstein, Takings: Private Property and the Power of Eminent Domain29 See, e.g., Merrill, The Economics of Public Use and Fischel, The Political Economy of Public Use in

Poletown: How Federal Grants Encourage Excessive Use of Eminent Domain (both arguing thateminent domain is not a comparatively attractive target for rent seeking)30 Fischel, The Political Economy of Public Use in Poletown: How Federal Grants Encourage ExcessiveUse of Eminent Domain 31 Merrill, The Economics of Public Use



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Both of the above proposals illustrate the complexity of the choice of means

question and how the public use criterion is of little use in resolving it. Sometimes, for a

variety of reasons, takings that benefit a private party will be a good idea, sometimes

not. Likewise, takings for public goods can be wise or unwise.32 It seems as if the public

use issue is entirely orthogonal to the justifiability of the taking. However, despite this

fact, we have outlined some factors that are relevant in determining the justifiability of a

particular exercise of eminent domain: welfare gains due to circumventing barriers to

exchange versus welfare losses associated with subjective value loss, incentive for

market bypass, and rent-seeking. Perhaps the Court should evaluate these relevant

factors directly, rather than doing so through the lens of public use.

Merrill proposes that the courts do just this. He argues that courts should enforce

the procedural components of eminent domain in order that it would be prohibitively

costly to use in anything but a thin market situation. Furthermore, courts should

“closely scrutinize” takings when one of the three relevant caveats are present, and

perhaps strike them down as failing the public use test in extreme cases.33

I believe Merrill‟s proposal, while attractive, is untenable. To his credit, he

anticipates two possible objections. The first is based on the language of the clause. The

Fifth Amendment refers to “public use.” It does not mention “transaction costs,”

“market bypass,” or “subjective value.” Second, one might argue, as Justice Douglas did

in Berman, that once an end is within the authority of a state (or in that case Congress),

the state ought to have plenary power to choose the means by which to attain it. Both of

32 For example, while the state can certainly use eminent domain to provide the land to build a highway when transaction costs are high, it should use the market to buy the cement.33 Merrill, The Economics of Public Use, 85



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these objections are dispositive, and they both hint at a deeper contradiction inherent in

juridical oversight of takings. I will examine them in reverse order.

Merrill raises a valid rebuttal to Douglas‟ argument: If the choice of means

between eminent domain and the market is entirely that of Congress, why does the

Court insist on policing the boundary between regulation and eminent domain so

vigorously? “If judicial scrutiny of a legislature‟s decision to use its police power rather

than eminent domain is warranted, then should not Courts also review a legislature‟s

decision to use eminent domain rather than voluntarynegotiations?”34 asks Merrill. The

clause bids the Court to oversee both boundaries, why ought it decline the invitation in

the case of the eminent domain/market boundary and accept it in the case of the

regulation/eminent domain boundary when the two seem analogous? However, it is not

clear that the Court‟s regulatory takings doctrine is an argument in favor of a more

active public use doctrine. Merrill‟s proposal that the Court should make its takings

doctrine more consistent could take two forms. On the one hand, the Court could be

more active policing the eminent domain/market boundary, but on the other, the Court

could get out of the business of policing the regulation/eminent domain boundary. This

is not an entirely ridiculous proposal. Just because the Court has policed this boundary

vigorously in the past35 does not mean it has done a good job. Regulatory takings

jurisprudence might be “elaborate and well-established,”36 but this does not mean it is

justifiable or even consistent.

34 Ibid., 7235 See, e.g., Penn Cent Transp. Co. V. New York City, 438 U.S. 104, 124-25 (1978) (application of city ‟slandmark law is not a compensable taking) and Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 415-16(1922) (mining regulation is a taking of coal company ‟s property)36 Merrill, The Economics of Public Use, 72



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Any glance at the regulatory takings doctrine or literature shows that proposing it

as a model for a reinvigorated public use jurisprudence is a tough sell. Not only has the

Supreme Court been reluctant to provide anything approaching a bright-line definition

for when the state must compensate, but it seems to be proud of thead hoc nature of its

takings jurisprudence.37 38 Nor have scholars been able to make much sense of the

regulatory takings problem. In fact, it seems to be standard practice when writing an

article on regulatory takings to open with some statement to the effect that, while

takings law is important and well known, few bodies of law are so frustrating, resistant

to analytical efforts, and in such doctrinal disarray.39 Are unpredictability and

incoherence what we have to look forward to after acceptingMerrill‟s proposal?

Not necessarily. Perhaps the regulation/eminent domain boundary is

intrinsically harder to police than the eminent domain/market boundary. While the

transaction cost based explanation for the necessity of eminent domain is universally

accepted, scholars have not agreed on a sole justification for compensating

37 Susan Rose-Ackerman, Against Ad Hocery. 88 COLUM. L. REV. 1697 (1988)38 See, e.g., Penn Cent Transp. Co. V. New York City, 438 U.S. 104, 124-25 (1978), Kaiser Aetna v. United

States, 444 US 164, 175 (1979) (requiring that Congress pay compensation when requiring landowner toallow public access to dredged pond), Keystone Bituminous Coal Assn. v. DeBenedictis, 480 U.S. 470(1987) (prohibition on coal mining that is intended to advance public interests in health, environment,and fiscal integrity does not have to be compensated), Loretto v. Teleprompter Manhattan CATV Corp. 458 US 419 (1982) (physical invasion, no matter how small, is a taking per se).39 See, e.g., Glynn Lunney, A Critical Reexamination of the Takings Jurisprudence, 90 MICH. L. REV .1892 (1992) (“Despite agreement as to both the purpose of the compensation requirement … the Courthas had considerable trouble resolving specific cases before it.”), Daniel Farber, Economic Analysis and

Just Compensation, 12 INT'L REV. L. & ECON. 125 (1992) (“Courts and commentators confesspuzzlement about when a government regulation has “gone too far” and become a taking”), Andrea L.

Peterson, The Takings Clause: In Search of Underlying Principles, CAL. L. REV., vol. 77 (1989) (“it isdifficult to imagine a body of case law in greater doctrinal and conceptual disarray ”), Saul Levmore, JustCompensation and Just Politics, 22 CONN. L. REV. 285 (1990) (“Perhaps no area of law is as well-knownand as little understood as takings law.”), Daniel Farber, Public Choice and Just Compensation, 9 CONST.COMM. 279 (1992) (“ Yet there is no consensus today about takings law —only a general belief that thetakings problem is difficult and that takings doctrine is a mess.”), Saul Levmore, Takings, Torts, and

Special Interests, 77 VIRGINIA L. REV. 1333 (1991) (“One of the most frustrating areas of law is thatoccupied by the question of compensation for private parties who are burdened by their government‟sactions.”)



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comdemnees.40 Some scholars argue that compensation turns on insurance, some on

cost internalization, and some on fairness. Nor has the Court been any more diligent.

Perhaps the closest the Court has come to describing a theory of compensation was in

the oft-cited Armstrong v. United States, decided in 1960, in which the Court wrote that

the Fifth Amendment was “designed to bar government from forcing some people alone

to bear public burdens which, in all fairness and justice, should be borne by the public as

a whole.”41 However, the Court has said little since Armstrong to defend how its largely

ad hoc doctrine comports with this overarching rationale. While it is possible the

regulatory takings question is simply a more difficult one, this is not the reason for its

doctrinal confusion. The regulatory takings doctrine is incoherent because both the

Court and commentators have adopted a backwards interpretation of the just

compensation clause. Merrill invites the Court to engage in a similarly backwards

interpretation of the public use provision, and so invites more incoherence.

When I say the regulatory takings doctrine is backwards, what I mean is this: The

Constitution mandates that “takings” trigger compensation— but what constitutes a

“taking?” Takings are those state actions that abridge some pre-specified bundle of

property rights, probably something like “full use and enjoyment.” While the concept is

vague, the Constitution spells out a fairly clear role for Courts: to determine, in marginal

cases, whether a taking has occurred—that is whether a particular bundle of property

rights have been abridged. However, as the Court and commentators alike have

recognized, this is a problematic role. For while those who drafted the Amendment

40 Merrill, Dana, Property: Takings41 Armstrong v. United States, 364 US 40 (1960)



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probably had an “ordinary observer”42 conception of property, as “scientific

policymakers” we have since realized that there is nothing special about any particular

bundle of property rights. Whatever the justification for compensation, there is no

meaningful distinction between the confiscation of the particular bundle of property

rights that amounts to a taking (whatever we agree that bundle happens to be) and the

confiscation of another bundle of property rights that (merely) amounts to a regulation.

Regardless of which rights are rendered valueless, compensation should be triggered by

extrinsic factors related to the confiscation of any property rights, or so the modern law

and economics line goes.

Given this fact, the Court first determines whether, based upon a predefined set

of factors,43 a regulation ought to be compensable. If the regulation ought to be

compensable, the Court goes ahead and labels it a taking, which, according to the Fifth

Amendment, requires state compensation. But the purpose of the compensation

provision of the Fifth Amendment is to answer the question of where the boundary

between regulation and eminent domain lies, not to pose the question to the courts. The

Court‟s job is purely a descriptive one—to determine whether a particular case fits the

Constitution‟s test for compensation, not to apply its own standard and invoke the Fifth

Amendment post hoc. Our Constitution states that takings require compensation. If the

Court could interpret a “taking” to be whatever it liked, the Fifth Amendment‟s

prescription would be empty.

42 Ackerman, Bruce. Private Property and the Constitution. New Haven: Yale University Press, 1977.43 Physical invasion and complete loss of economic viability both trigger compensation unless theproperty owner is causing a nuisance.



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Of course criticizing a particular interpretation of the constitutional text begs the

question of what the appropriate method of constitutional interpretation is. I do not

mean to suggest that what the Fifth Amendment proscribes can be robotically

enumerated by merely reading the text or somehow divining original intent of its

framers. In fact, I see no textual guidance as to how the Court should determine the

bundle of rights which needs to be forfeited for a state action to constitute a taking, and

so in resolving this question the Court must use extra-textual analysis in marginal cases.

The text is clear enough, however, to preclude an interpretation of“taken” that is

infinitely capacious. The Court cannot merely use the compensation clause to require

states to compensate whenever it deems necessary without completely ignoring the

word “taken.” However, if explicitly ignoring the word is illegitimate, surely it is

illegitimate to define the word so that it includes only and exactly those regulations the

Court happens to think should be compensated.

Consider the following example: Some commentators44 have argued that

compensation for eminent domain is important for its insurance function. Perhaps the

state should compensate when it takes property in order to provide insurance against

policies that render a large portion of someone‟s assets valueless, thereby exposing

many people to a large risk. This is certainly a plausible normative factor that would

weigh in favor of compensation in certain cases, but it would be illegitimate for the

Supreme Court to adopt it. This is because such a test would require the Court to

examine the monetary loss the policy inflicts upon the property owner relative to his

overall wealth. In extreme cases, this would involve dubbing the same policy a taking

44 See, e.g., Dana and Merrill, Property: Takings; Susan Rose-Ackerman, Against Ad Hocery



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when my home is devalued and a (mere) regulation when BillGates‟ is. But this is

absurd. Whether or not the policy is a taking cannot depend on who is affected.

Merrill proposes that a similarly backwards interpretational strategy be used on

the public use provision of the Fifth Amendment. UnderMerrill‟s proposed

interpretation, the Court would determine, based on an independent criteria (something

like economic efficiency in this case), whether the state may justifiably proceed by

eminent domain or whether it should use the market instead. If the state ought to use

the market based on the Court‟s extra-constitutional reasoning, the Court would label

the taking violative of the public use provision and strike it down. We now return to the

first to Merrill‟s argument: The public use provision clearly intends the end for which a

taking is intended to be the deciding factor on its permissibility in the same way that the

compensation provision intends that the bundle of rights a regulation infringes be the

deciding factor in whether the state must compensate. If we as a society believe that

these factors are morally irrelevant, we should amend the Constitution formally rather

than by judicial fiat.

However, the takings standard and the public use standard are morally irrelevant

only if one adopts a utilitarian framework. On the public use issue in particular, when I

have argued above that the intended use of the property is irrelevant to the justifiability

of a taking, what I really meant was that the intended use is irrelevant so long as one

believes that wealth maximization is a permissible goal for the state to have (or if one

believes the state may define its own goals). Takings for private use are not by their

nature inconsistent with wealth maximization.

Likewise, from the perspective of wealth maximization, there is no reason to

judge one particular bundle of property rights to be sacred and to require compensation



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when the state destroys it. However, it is certainly the case that our non-utilitarian lay

conception of property considers certain rights, such as the right to exclude, to be

somehow more fundamental than others. While the “scientific policymaker” view of

property has made the economic/utilitarian view of the takings issue the predominant

one, there is little reason to believe that the takings clause exists to further economic

efficiency. In fact, it is a rather absurd notion that the framers and ratifiers supported

the public use provision because (e.g.) they anticipated it would curb rent-seeking. What

is more likely is that the takings clause exists as a limitation on the steps the state may

take to further economic efficiency, or more broadly, a limitation on the sorts of goals

the state can pursue in certain situations.

From this perspective, the Court‟s backwards interpretational strategy seems

even more illegitimate. The Court can reason that a proposed restriction is irrelevant in

furthering a particular goal, for example that the public use restriction is irrelevant in

promoting total wealth, but on what grounds could the Court conclude that the public

use provision does not have independent moral relevance—i.e. that a taking for private

use is not itself a moral wrong? This is not an idle question, considering that many

constitutional provisions seem to proscribe state action based on factors that are

orthogonal to utility (wealth) maximization.45 For example, depending on a host of

empirical facts about the effects of deterrence, it is possible that a punishment that was

concededly cruel and unusual would increase overall utility. Yet no one would argue that

the cruel and unusual punishment clause solicits the Court to balance the disutility to

the criminal against the societal utility associated with crime prevention and to call only

45 Rubenfeld makes this point in Usings



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those punishments which were not on balance utility maximizing “cruel and unusual.”

The Fifth Amendment, like the Eighth, bars utilitarian calculus in certain situations.

If this is so, and we accept that utilitarian calculus is appropriate in adjudicating

the question of permissible state means, would it be correct to solve the legitimacy

problem by amending the Fifth Amendment to explicitly permit the Court to engage in

such calculus?

Even if we accept that the question of permissible state means should be

answered according to the rubric of wealth maximization, it is not at all clear that the

Court should be the institution doing the calculation. Amending the Fifth Amendment

to allow the Court to do so would assign it a role it is uniquely unsuited to fill.

Presumably if the state decides eminent domain is necessary, it has already determined

that the benefits outweigh the costs. In our democracy, cost-benefit analyses are

rightfully made by legislatures who have superior fact-finding abilities and greater

democratic accountability. Merrill himself admits that it would be problematic for the

Court to explicitly adopt a cost-benefit approach to public use given our commitment to

democratic accountability;46 yet it is not clear how his analysis fares any better. For

example, Merrill proposes that Courts provide a “trump card” for comdemnees faced

with large subjective losses in the form of a higher probability that the project will be

enjoined as failing the public use requirement. The idea is to induce the government to

increase its settlement offer and thereby offset the subjective losses. However, in order

for this trump card to have any meaning, there must be a real risk of judicial

intervention. And if there are cases in which judges will strike down uses of eminent

46 Merrill, The Economics of Public Use, 73



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domain due to high subjective losses, then there will be cases in which judges will

substitute their opinion of the relative costs and benefits of the project for that of the

legislature.

Once again, the parallel to the regulatory takings issue is instructive. Even if the

Court were content in assuming that the “taking” label had itself no moral force and that

compensation turned on independent factors, it is not clear how the Court could deduce

and apply those factors. Professor Rose-Ackerman attempts to spell out the relevant

factors in her article, Against Ad Hocery,47 and does an admirable job. Her proposal,

however, in addition to producing some very counter-intuitive results,48 asks that

Supreme Court justices act as if they were economists employed by an administrative

agency. It is no insult to the justices to declare that they are not the best government

officials to weigh, for example, the effect compensation has on efficiency in its capacity

as insurance against its effect on investment incentives. Considerations like these are

surely pertinent, but in the end Rose- Ackerman‟s thoroughness reveals the futility of the

entire project, at least insofar as she endeavors to spell out how the Supreme Court

should enforce the Constitution. Her proposal, as any complete effort like it would

necessarily be, is a “thoroughly pragmatic, complex, expertly informed and hammered-

out concoction of theoretical analysis, empirical knowledge and educatedguess.”49 Both

the way it is derived and the way it must be enforced are essentially non-judicial in

nature. Similarly, any complete proposal for how the Courts should enforce the

47 88 Colum. L. Rev. 1697 (1988)48 For example, requiring compensation when the state uses property unaltered and forbiddingcompensation when the state destroys property.49 Frank Michelman, A Reply to Susan Rose-Ackerman. COLUMBIA L. REV. 88(8) 1712 (1988).



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boundary between eminent domain and the market would be essentially legislative or

administrative in character, and therefore inappropriate for judicial application.

Thus, it seems as if courts must choose between enforcing an arbitrary restriction

on state power, enforcing a sound restriction on state power for which they have no

constitutional mandate and no institutional capacity, and repealing a constitutional

amendment by judicial fiat. Frankly it is unclear which of these alternatives is least bad.

This leaves the option of repeal. But outside of legal theory fantasyland, repealing the

takings clause does not have even the hint of political feasibility. Far too much reliance

has been built upon the expectation of a constitutional takings doctrine. What then

should the Courts do? To the extent that it uncoupled doctrine from constitutional text,

Berman was probably wrongly decided, and perhaps if it had gone the other way the

concomitant efficiency losses would have brought about constitutional change.

However, at this point reliance on Berman is too great to overturn it in the name of

legitimacy —particularly given that Berman interprets the constitution as it “should”

read. Given that Berman must stand (and all dissenters but Thomas agree it should), the

Court should adopt an interpretational strategy consistent with Berman‟s ruling. The

majority was correct that the result in Berman dictated the result in Kelo and the Kelo

dissenters should be careful not to adoptO‟Connor‟s empty precondemnation nuisance

test.

So while in some sense judicial conservatives are correct in bemoaning the

Court‟s abdication of one of its constitutional responsibilities, they should take some

small comfort that it was brought upon only by the doctrinal and textual problems the

public use issue raises, and is merely the least-worst last resort. However, I submit that

judicial conservatives should not worry that “[n]othing is to prevent the State from



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replacing any Motel 6 with a Ritz-Carlton.”50 Even in the short period since Kelo was

decided, state legislatures have been hard at work ensuring that neither this nor

anything else in the dissent‟s parade of horribles comes to fruition.

IITHE LEGISLATIVE B ACKLASH

Given that we cannot and ought not rely on the courts to police the boundary between

the market and eminent domain,51 we are left with the state and federal legislatures. In

this section I will analyze proposed state and federal eminent domain reforms in an

attempt to determine which reform strategy is best.

One cannot overstate the popular backlash to Kelo. While only eleven states have

put eminent domain reforms on the law books since Kelo, 52 bills or constitutional

amendments have been proposed in every state except Arkansas, Nevada, and North

Carolina.53 54 In Tennessee alone, more than fifty reforms have been proposed, though

many of them are redundant.55 Various federal bills have also been proposed, most of

them restricting the use of federal funds for state economic redevelopment projects that

50 Kelo v. New London 51 We ought not rely on the Courts to police the boundary between the police power and eminent domaineither. Unfortunately, the Court has decided to police this boundary and has therefore preempted anylegislative solutions that might be more efficient.52 Alabama, Delaware, Idaho, Indiana, Kentucky, Michigan, Ohio, South Dakota, Texas, Utah, and

Wisconsin. See <http://www.castlecoalition.org/legislation/passed/index.html> (updating passed stateand federal eminent domain legislation.) Also, see Appendix.

53 See <http://maps.castlecoalition.org/legislation.html> (updating proposed state eminent domainlegislation)54 But see <http://www.arkleg.state.ar.us/isp/2005/pdfs/ISP-2005-102.pdf> (requesting the ArkansasHouse and Senate committees on agriculture, forestry, and economic development study Arkansas lawconcerning condemnation of private property for economic development to determine whether changes to

Arkansas law or the Arkansas constitution are necessary.)55 See, e.g., 2005 TN H.B. 2683 <http://www.legislature.state.tn.us/bills/currentga/BILL/HB2682.pdf>and 2005 TN S.B. 2599 <http://www.legislature.state.tn.us/bills/currentga/BILL/SB2599.pdf> (bothprohibiting the use of eminent domain for economic development)



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use eminent domain.56 The state proposals vary in scope and effect. Some, like South

Dakota‟s, are extreme; proscribing the use of eminent domain to acquire property“[f]or

transfer to any private person, nongovernmental entity, or other public-private business

entity.”57 Others are largely symbolic, either urging Congress to propose an amendment

overturning Kelo58 or merely promising an intention “to enact laws relating to eminent

domain.”59 Considering the proposed reforms as a whole, it seems that there will be

substantive reform instituted at the federal level, as well as in almost every state—the

question is what form this reform should take. I will consider state-level reforms first.

II-ASTATE R EFORM

Broadly speaking, all proposals at the state level fall into one of three categories:

substantive reform, procedural reform, and compensation reform.60 Substantive reforms

put teeth into the public use provisions of the state and federal constitution by

restricting the use of eminent domain for projects that directly benefit a private party.

Compensation reforms increase the compensation available to condemnees, sometimes

requiring more money only when a taking is for economic development. 61 Finally,

procedural reforms deal with the process by which eminent domain is initiated, and the

56 See, e.g., S. 1704 <http://frwebgate.access.gpo.gov/cgi- bin/getdoc.cgi?dbname=109_cong_bills&docid=f:s1704is.txt.pdf> and HR 3135<http://thomas.loc.gov/cgi-bin/query/z?c109:H.R.3135.IH:> (both prohibiting the use of federal fundsfor the taking of property by eminent domain for economic development)57 2006 SD H.B. 1080 <http://legis.state.sd.us/sessions/2006/bills/HB1080enr.htm>

58 See, e.g., 2006 KY H.C.R. 24 <http://www.lrc.ky.gov/record/06RS/HC24.htm>, 2005 NH H.J.R. 25<http://www.genCourt.state.nh.us/legislation/2006/hjr0025.html>, and 2005 RI H.B. 6636<http://www.rilin.state.ri.us/Billtext/BillText05/SenateText05/S1237.pdf>59 2006 FL S.B. 134 <http://www.flsenate.gov/data/session/2006/Senate/bills/billtext/pdf/s2404.pdf>60 I first became aware of this trichotomy at the Yale Federalist Society ‟s debate between professorsGarnett and Merrill. A transcript is available at<http://www.yalefedsoc.org/archives/2005/09/garnett_v_merri.html>, an audio recording at<http://www.yalefedsoc.org/archives/2005/09/podcast_garnett.html>61 See, e.g., 2005 RI S.B. 2771 <http://www.rilin.state.ri.us/Billtext/BillText06/SenateText06/S2771.pdf>



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manner in which compensation and public use claims are challenged and litigated. I will

consider each type of reform separately.

SUBSTANTIVE LIMITATIONS

The most obvious legislative response to Kelo is to prohibit takings for economic

development. In fact, Justice Stevens basically invites such reform, emphasizing that

nothing in the Kelo ruling “precludes any State from placing further restrictions on its

exercise of the takings power.”62 States have acceptedStevens‟ call—a substantive

limitation of some kind has been proposed in almost every state in which any eminent

domain reform is being considered. In this section I will consider the proposed

substantive limitations on eminent domain, and recommend what, if any, substantive

limitations states should enact.

Most substantive limitations are very similar, prohibiting the state to use eminent

domain (and therefore requiring that it use the market) for “economic development,”

“urban renewal,” or more broadly for any project whose goal is “increased tax

revenue.”63 While blunt statutory language has more emotional salience, it is also more

likely to lead to economic inefficiency.64 Given that the economic justifiability for a

taking has little to do with the intended use of the land, statutes that prohibit takings on

this ground are likely to stymie efficient uses of eminent domain. Of course, economic

62 Kelo v. New London 63 See, e.g., 2005 AK H.B. 317<http://www.legis.state.ak.us/basis/get_bill_text.asp?hsid=HB0317A&session=24>, 2005 CA S.C.A. 20

<http://www.leginfo.ca.gov/pub/bill/sen/sb_0001-0050/sca_20_bill_20060111_introduced.html>, and2006 FL S.J.R. 626 <http://www.flsenate.gov/cgi-

bin/view_page.pl?Tab=session&Submenu=1&FT=D&File=sb0626.html&Directory=session/2006/Senate/bills/billtext/html/>64 It remains to be seen what interpretational difficulties accompany blanket prohibitions on eminentdomain for economic development. As Fischel reminds us “almost all projects that employ eminentdomain are for economic development … New roads, municipal buildings, and parks are as much a part ofeconomic development and redevelopment as shopping centers and manufacturing facilities.” (Fischel2005, 19)



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efficiency is not the primary motivation for these statutes. However, assuming that

economic efficiency is at least part of the story —that a great enough efficiency gain can

justify a taking for economic development—reforms should balance non-economic

factors against the efficiency losses attendant to substantive limitations.

This raises the question: if not the promotion of economic efficiency, what do

substantive limitations hope to accomplish? As I have argued above, there are good

economic reasons to be particularly suspect of private takings—namely the efficiency

losses associated with rent seeking and the incentive for market bypass. Nevertheless,

Rent seeking and market bypass are poor reasons to enact substantive limitations on

eminent domain. If a state wanted to curb either practice, it should target the problem

directly, perhaps by making eminent domain proceedings more costly or visible, rather

than attacking a broad class of takings that is merely correlated with rent seeking or

market bypass. Because economic considerations are better targeted directly,

substantive limitations are useful only for reasons that are not efficiency based. This

makes sense—most opposition to private takings revolves around the intuition that it is

“just wrong.” In the infamous Poletown case, many condemnees asserted that they

would not mind being displaced for a legitimate public work like a highway.65 “The

economist who would impatiently exclaim, „but you‟ve lost your home in either case!‟”66

misses the point. There are extra dignitary losses triggered by private takings that go

beyond the loss of consumer surplus. Substantive limitations should target these

dignitary losses as explicitly as possible.

65 Information Factory, Poletown Lives! [videorecording] (1983).66 Fischel, The Political Economy of Public Use in Poletown: How Federal Grants Encourage ExcessiveUse of Eminent Domain



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Nicole Garnett provides a useful outline of the sort of dignitary costs that private

takings trigger.67 First, the mere possibility of private takings generates collective

anxieties that “[t]he specter of condemnation hangs over allproperty.”68 Second, owners

may perceive private takings as an insult—“tantamount to a government declaration

that their property would be put to a more socially beneficial use by someoneelse.”69

Finally, the fact that a private party gains the entire surplus from eminent domain raises

two concerns. First, private takings fail to generate in-kind compensation. Owners

displaced for (say) a highway can at least take advantage of the highway once it is

constructed; the same is not true for a manufacturing plant or a high-end condominium.

Even if the taking promises economic revitalization, the displaced condemnees will

usually have relocated and thus will be unable to benefit from the prosperity. Second,

the mere fact that a condemnee‟s sacrifice creates a large windfall for a private entity

causes additional dignitary harms to the condemnee. Any substantive limitation on

eminent domain should balance non-economic harms that private takings bring about

with the efficiency losses associated with their restriction.

Balancing these dignitary costs against economic efficiency is a difficult task, and

depending on how “insulting” private takings are, it may be impossible. At the very least,

states should attempt to not specifically target economically efficient takings. In

particular, proposals that disallow takings on the sole basis of their stated motive being

increased tax revenue are ill-advised. In most cases, increasing the tax base of a parcel of

land corresponds with an increase in value of the parcel, meaning that reconfiguring

67 Garnett, The Neglected Political Economy of Eminent Domain.68 Kelo v. New London (O‟Connor in dissent)69 Garnett, The Neglected Political Economy of Eminent Domain.



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ownership via eminent domain has resulted in a higher valued use for the land. Unless

dignitary costs are so high that they preclude any transfer to a private party, singling out

economically efficient takings is a bad way to reduce dignitary costs. An extreme

example of this is Colorado‟s Senate Bill 78, proposed by senator Tom Wiens.70 This bill

prohibits the use of eminent domain by a private corporation for the purpose of

acquiring right of way for a private toll road or highway. This bill tailors its substantive

restriction to the precise situation in which eminent domain is useful: land assembly. If

passed, this bill would be a de facto prohibition on private toll roads, since assembling

the land required without eminent domain would be far too costly. Unless private toll

roads themselves cause dignitary harms, this is an economic disaster.

Similarly, Hawaii‟s Senate Bill 3191 specifically targets takings that are

economically efficient. The bill prohibits the use of eminent domain to take private

property for transfer to a private entity that “had earlier expressed an interest in

developing the condemnedproperty.”71 Depending on what “expressed an interest”

means, this could be considered a measure to prevent market bypass. If a private party

had been considering the property for development, it should have acted rather than

waiting for eminent domain to become available. However, if procedural safeguards are

sufficient, the fact that a private developer has been considering developing a piece of

property but has not acted yet probably means that transaction costs prevented the

developer from doing so. This bill punishes those developers who express an interest by

trying and failing to buy the property on the market, as contrasted with developers who

70 2006 CO S.B. 78<http://www.leg.state.co.us/clics2006a/csl.nsf/fsbillcont3/1DCD8996AC225F53872570820070756A?open&file=078_01.pdf>71 2005 HI S.B. 3191 <http://www.capitol.hawaii.gov/sessioncurrent/bills/SB3191_SD1_.pdf>



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were not interested in a particular piece of land but were enticed by astate‟s promise to

condemn it as in the Poletown case.

Like the proposed bills discussed above, South Dakota‟s law goes too far. Limiting

the transfer of any land acquired by eminent domain to a private party assuages the

dignitary harm associated with a private party gaining control ofone‟s land, but ignores

the mitigating circumstance in which the private party acts as a common carrier.

How might a state tailor a statute to address dignitary harms without being

unduly economically inefficient? First, it must answer the question of how important

such dignitary harms are. While it is possible to conclude that any private taking

engenders dignitary harms too great to be overcome by economic efficiency, this is

probably not the case. If the state is overly concerned by the dignitary harms that are

raised by any private takings, it should at least narrowly tailor statutes to those

situations in which dignitary harms are likely to be the highest. First and foremost, any

statute that enacts a substantive limitation should include an exception for when the

owner consents to the proposed use of his land.72 Just compensation might not be

enough to alleviate dignitary harm in all cases, but in cases where it is, the state should

allow the project to progress. Second, states should consider that the sort of property

being taken is an important factor in assessing dignitary costs. Dignitary harm is likely

to be greater in the case of an owner occupied residence, and so, if a state is committed

72 California‟s S.C.A. 20 has such an exception <http://www.leginfo.ca.gov/pub/bill/sen/sb_0001-0050/sca_20_bill_20060111_introduced.html>



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to substantive reform, it should probably restrict the reform to those properties that are

owner occupied.73

While determining the precise magnitude of the dignitary costs associated with

the private nature of a taking is difficult, mitigating the dignitary losses associated with

lack of in-kind benefits and the fairness issue associated with one party gaining the

entire surplus is easier. To a certain extent, the question of in-kind benefits is a purely

one of adequate compensation. If a homeowner is able to use the highway his home was

taken to provide, he is simply receiving additional non-monetary compensation when

the state takes his house. If the homeowner were not able to enjoy the fruits of eminent

domain, theoretically the state could make him whole by simply offering him more

money. However, this is problematic because it is difficult and costly to assess the

appropriate monetary equivalent of an in-kind benefit. In addition, being “left out”

generates non-economic costs as well. Given this, a plausible strategy for mitigating the

harms coupled with the loss of in-kind benefits associated with private takings would be

to require that the homes or businesses of condemnees be integrated into the planned

development. New York‟s Assembly Bill 9117 does just this by requiring that developers

“initially seek to lease not less than fifteen percent of the gross retail space available to

community based businesses, with special preference given to local businesses displaced

as a result of the developmentproject.”74

Likewise, the state could require that the surplus associated with eminent domain

be more fairly distributed without unduly restricting efficient takings. The most obvious

73 See, e.g., 2005 CA A.B. 1162 <http://www.leginfo.ca.gov/pub/bill/sen/sb_0001-0050/sca_12_bill_20050815_amended_sen.html> and 2005 AK H.B. 318<http://www.legis.state.ak.us/PDF/24/Bills/HB0318A.PDF>74 2005 NY A.B. 9117 <http://assembly.state.ny.us/leg/?bn=A09117&sh=t>



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way to accomplish this is to require that potential condemnors somehow show that their

proposed development project will have sufficient economic spillover effects. While

efficiency merely requires that land be put to its highest valued use, fairness concerns

can legitimately preclude takings that, while wealth maximizing, result in an unfair

distribution. The New York statute also provides a fairly stringent requirement for the

distribution of the surplus of a private taking. Not only must developers make a plan

available to the public which details how the development will provide the community

immediately affected by the project with a net increase of employment, but also, if these

employment gains are not realized, the developer must consent to placing ten percent of

the annual profit from the project into a work force development fund.75 This is a fairly

extreme provision, and it comes with efficiency losses in the form of increased

administrative costs and the deterring of projects that, while wealth maximizing, are not

profitable enough to risk such a requirement. However, unlike provisions that outright

prohibit takings for economic development, New York‟s statute makes it clear in which

cases and to what extent efficiency can be sacrificed for fairness.

GREATER COMPENSATION

The compensation question is perhaps the most important issue eminent domain

raises. This is because, at least theoretically, compensating owners at their true reserve

price eliminates the subjective losses that ordinarily plague eminent domain. While

monetary compensation might not be the whole story in the case of takings that impose

particular dignitary harms, getting compensation right would go a long way towards

making eminent domain more justifiable. Proposed reforms that raise compensation

75 Ibid.



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levels are fairly simple— basically changing the baseline level of compensation from

market value to some multiple thereof. Some provisions provide for increased

compensation in the case of private takings, which makes sense if one believes that

demoralization costs are likely to be higher in these cases. However, regardless of who is

doing the taking, states should make an effort to compensate homeowners fully.

Before a state even considers raising compensation above fair market value, it

should ensure that it is compensating condemnees as fully as possible for readily

measurable losses. At minimum states should provide relocation assistance for

displaced homeowners. In addition to this, though it presents measurement problems,

some proposed reforms wisely provide for compensation for lost goodwill on behalf of

business owners.76 To the extent this can be quantified, this is also a good idea.

Beyond readily quantifiable losses, most proposals to extend compensation

beyond fair market value take the form of a fixed bonus or multiplier, ranging from 120

percent to 300 percent of market value.77 However, fixed bonuses are a questionable

solution. Just as there is no reason to believe market value is adequate, there is no

compelling reason to believe that any fixed bonus will do better. Fixed bonuses decrease

the likelihood of undercompensation, but because they do not even attempt to get at the

actual reserve price of the home owner, there is no guarantee that they do a better job on

the whole. Furthermore, fixed bonus schemes are likely to increase the incidence of

76 See, e.g., 2006 MD S.B. 3 <http://mlis.state.md.us/2006rs/bills/sb/sb0003f.pdf>77 See, e.g., 2006 CO H.B. 1208 <http://www.leg.state.co.us/clics2006a/csl.nsf/fsbillcont3/3DA8EA364016371F8725709D00562885?Open&file=1208_01.pdf> (requiring additional compensation of 25-100 percent of fair market value to beawarded by jury to condemnees), 2005 KS S.B. 446 <http://www.kslegislature.org/bills/2006/446.pdf>(takings for economic development require payment of 125 percent of fair market value), and 2005 NHH.B. 1554 <http://www.gencourt.state.nh.us/legislation/2006/hb1554.html> (requiring compensation to

be at least 3 times the highest value for the property in the past ten years.)



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overcompensation, which is problematic as well. Overcompensation distorts investment

incentives by giving property owners motivation to get their property condemned. Also,

as some scholars argue, 78 overcompensation could stymie political resistance to

inefficient projects.79 For these reasons I think that fixed bonuses are poor ways to make

compensation more just.

One alternative to fair market value or a fixed bonus scheme is self-assessment.

The idea is simple: owners alone know their true reserve prices, and so they alone

should be consulted in order to determine compensation levels. The problem is

designing a scheme that keeps owners from over-assessing. While no such scheme has

been proposed outside academia, I think the idea is promising enough to be of practical

use. Recently, professors Bell and Parchomovsky have come up with a self-assessment

scheme for use in eminent domain compensation.80 They propose that a potential

condemnee name his price and the government choose whether or not to purchase the

land at the given price. If the government chooses not to take, the property cannot be

sold for less than the declared price for 70 years without paying the difference to the

government. Furthermore, the self-assessed price will become the benchmark for the

owner‟s property tax liability. These dual burdens hope to limit the incentive to over-

assess.

78 Garnett, The Neglected Political Economy of Eminent Domain. 79 I find this argument unconvincing. If a private entity is willing to pay an exorbitant price for a parcel ofland, this is reason to believe that the party anticipates an equally large surplus, and therefore the change

of ownership is efficient. While larger compensation in isolation could be problematic for politicalresistance to inefficient projects, the fact that companies are willing to pay very high compensation meansthat the project is that much less likely to be inefficient. Of course the situation changes if the condemnoris not using his own money. In particular, when a local government is financing a taking through a non-fungible federal gift, it does not have to consider the opportunity cost of its actions and therefore theefficiency of the taking. See part II-B for more on this problem.80 Bell, Abraham and Parchomovsky, Gideon, "Bargaining for Takings Compensation" (September 16,2005). Bar Ilan Univ. Pub Law Working Paper No. 13-05 Available at SSRN:<http://ssrn.com/abstract=806164>



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While property owners need incentive to not over-assess, it is not clear that the

tax and inalienability burdens are the best way to accomplish this. Regardless of the

penalty for over-assessment, rational property owners will still make their assessments

strategically in light of the probability of a taking. In the case of the proposal outlined

above, they will compare the expected gains of compensation above reserve (taking into

account the probability the government will not take) with the expected cost of

increased tax liability for above-market value and the restriction on alienability (taking

into account the probability the government will take) when deciding whether to over-

assess. This means that strategic considerations might lead to over-assessment,

especially when it appears that the probability of the taking is very high. In the extreme

case—the purchase of the final contiguous plot of land needed for a highway —the

scheme might break down altogether. If the land owner knows the government needs

his land very badly he will grossly over-assess because he knows the probability that he

will have to pay any penalty is virtually zero.

The only way to combat this problem is to force property owners to self-assess

when they are under relative uncertainty as to the probability of a taking. In practice this

means forcing self-assessment to occur before the government is even contemplating

the use of eminent domain. One promising metric of self-assessment is insurance, a

concept originally proposed by Saul Levmore in the context of tort compensation.81

Homeowners insure their homes against destruction and pay premiums on the

insurance. Perhaps the level of insurance should be the baseline for compensation. If an

owner has no idea about the probability of a taking, and he does not want to pay

81 Saul Levmore, Self-Assessed Valuation Systems for Tort and Other Law, 68 VA. L. REV. 771 (1982).



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excessive premiums, he is likely to insure his home at its true value. Levmore was

dismissive of the possibility of insurance as a metric of self-assessment in the case of

property damage because he thought most insured property was fungible and therefore

devoid of the idiosyncratic value that makes assessment difficult in the first place. This

objection might be true in the case of a fire that partially damages a house—a

homeowner is unlikely to value one tenth of his home at above market value. However,

when considering insuring himself against an earthquake that destroys his entire home,

a homeowner is likely to take his subjective value into account. After all, losingone‟s

home to the state and losing one‟s home to an earthquake leaves one in a similar

position.

Now, some aspects of the insurance proposal are clearly unworkable. Most

prominently, when the state takes your land, it takes more than just your house. It is

possible to insure against the loss of one‟s home, but no insurance exists for the value of

one‟s ocean view, one‟s neighbors, or one‟s community. In addition to destroying his

house, when the state forces a homeowner to move it forces him to bear additional costs

against which he cannot insure. Furthermore, even if insurance is available for a

particular piece of property, it is doubtful that any insurance company would be willing

to insure surplus subjective value. This is because the ability to insure property for an

arbitrary amount of money makes moral hazard more likely. The more compensation

Kurt expects to receive when his house burns down, the greater incentive there is for

Kurt to burn it down himself. Even if there were specialized takings insurance—Kurt

surely cannot use eminent domain on himself —Kurt could coordinate with whatever

government official is responsible for the decision. Because of the above limitations, it is

probably the case that a homeowner‟s insurance policy would be most useful as a piece



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of evidence that establishes a minimum for compensation and saves on administrative

costs.

PROCEDURAL R EFORMS

Reforming the process by which property is taken serves three purposes. First

and foremost, procedural requirements make eminent domain more costly —in the case

of private takings, they increase the cost to developers. Eminent domain ought to be

costly relative to market transactions to ensure that it is used only in thin markets when

transaction costs are prohibitively high.82 In the case of private takings, a high “due

process tax” is particularly beneficial because private parties are more sensitive to

financial incentives than are government actors. Second, procedural requirements make

eminent domain a more visible process, thereby exposing rent-seeking behavior and

making inefficient and unfair takings politically costly and embarrassing. Finally, a

process that is perceived as more fair helps to curb demoralization costs. A landowner‟s

dignity is likely to be hurt less if he perceives that his home was taken only after a

searching inquiry into the relative costs and benefits. Because better process promotes

both economic efficiency and fairness, procedural changes represent some of the most

promising eminent domain reforms.

A variety of proposed bills lay out extra hurdles for developers who wish to have

eminent domain exercised on their behalf. One promising idea is the requirement that

the developer come up with a comprehensive plan for the project, detailing exactly how

the project will promote economic prosperity, and why eminent domain is required to

proceed with the project. While a development having sufficient spillover effects is a

82 Merrill, The Economics of Public Use. However, eminent domain should not be so costly that there area significant number of thin markets in which it is still too expensive.



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matter of fairness and not efficiency, requiring developers to devise such a plan raises

process costs and therefore might increase efficiency. Requiring developers to explain

why eminent domain is necessary is an even better requirement. In addition to making

the process more expensive, this also requires developers to come up with good reasons

why market transactions are too costly. Proposals that require developers to present

comprehensive plans to communities are fairly common.83 One of the better proposals is

Rhode Island‟s Senate Bill 2771,84 which requires the condemnor to present the benefits

of the proposed project along with alternatives in a public hearing at a location

proximate to the property in question. The condemnor is also required to create a

“homeowner impact statement,” which assesses the harms to the affected condemnees

who will lose their homes and compares such harms with the expected community

benefits. The statute further requires that the report be made widely available and the

condemnor pay 150 percent of fair market value to the condemnees. This bill is an

excellent example of good procedural reform because it promotes the three goods

associated with process. It makes eminent domain more costly, more visible, and helps

ameliorate dignitary harms.

Maryland‟s Senate Bill 385 imposes a similar requirement, with the additional

restriction that the government must make a finding showing that the development plan

could not have been carried out by private developers alone through market

83 See, e.g., 2005 KS S.B. 446 <http://www.kslegislature.org/bills/2006/446.pdf> (requires an economicdevelopment project plan and public hearings before condemning private property for economicdevelopment), 2005 NY S.B. 5946 <http://assembly.state.ny.us/leg/?bn=S05946&sh=t> (requires aneconomic development plan when eminent domain is to be used to acquire residential properties for thepurpose of economic development), and 2005 NY A.B. 9050<http://assembly.state.ny.us/leg/?bn=A09050&sh=t> (requires an economic development plan and ahousing relocation plan when eminent domain is used for economic development)84 2005 RI S.B. 2771 <http://www.rilin.state.ri.us/Billtext/BillText06/SenateText06/S2771.pdf>85 2006 MD S.B. 3 <http://mlis.state.md.us/2006rs/bills/sb/sb0003f.pdf>



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transactions, and that reasonable efforts were taken to include existing businesses in the

plan.

Procedural requirements can also promote efficiency after the decision to use

eminent domain has been made. In particular, procedural reforms relating to how much

compensation is paid and how the figure is determined both raise the cost of eminent

domain and ensure more accurate findings. At the very minimum, the state should

require proposed developers to make good-faith negotiation efforts with potential

condemnees. If such negotiations fail, the state should require developers to provide the

landowner with the appraisal and other evidence it will use to determine its measure of

just compensation. Giving landowners more information makes it less costly for them to

determine whether the compensation they have been offered is inadequate, and lowers

the cost of challenging it in court. This in turn would give condemnors incentive to offer

more compensation.

In addition to providing condemnees with information regarding the

determination of the level of compensation, states could increase the accuracy of

compensation by requiring developers to pay for the litigation costs of those who seek to

challenge their compensation. Different proposed measures provide for this to different

extents. For example, Arizona‟s House Bill 2064 requires that in economic development

cases Courts must award all costs, jury fees, andattourneys‟ fees to condemnees,86

whereas other proposed measures only award fees to successful claimants.87 Imposing

86 2005 AZ H.B. 2064 <http://www.azleg.state.az.us/legtext/47leg/2r/bills/hb2064p%2Ehtm>87 See, e.g., MN H.B. 2846<http://www.revisor.leg.state.mn.us/bin/bldbill.php?bill=H2846.2.html&session=ls84>



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such costs on condemnors increases efficiency by making compensation more accurate

and by increasing the expected cost of eminent domain.

II-B

FEDERAL SOLUTIONS

In addition to state-level reform, both houses of Congress have reacted to Kelo.

While several bills have been proposed,88 they are all similar to the only provision that

has made it into law, H.R. 3058. H.R. 3058 is an appropriations bill, but it addresses the

Kelo issue by providing that “No [federal] funds … may be used to support any Federal,

State, or local projects that seek to use the power of eminent domain, unless eminent

domain is employed only for a public use.”89 The question is then, is substantive reform

in the shape of withheld federal dollars a good idea?

The first thing to consider about these federal statutes is how they differ from

substantive restrictions on the state level. While state substantive restrictions curb

eminent domain absolutely, federal substantive restrictions merely curb the way it may

be funded. We have learned that curbing eminent domain based on substantive

restrictions is probably not a good idea, but perhaps the use of federal money raises new

issues.

Professor Fischel advocates this position. He argues that when local governments

are given “non-fungible” gifts as Detroit was in the Poletown case, they do not take as

much care in deciding whether eminent domain is a good idea. If local governments are

using their own money, or are at least using federal money which could be used for a

different purpose, they will be more responsible in evaluating the costs and benefits of a

88 See <http://castlecoalition.org/legislation/federal/index.html> (a list of proposed federal legislation)89 <http://frwebgate.access.gpo.gov/cgi-

bin/getdoc.cgi?dbname=109_cong_bills&docid=f:h3058enr.txt.pdf>



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taking.90 Had the federal government given Detroit $200 million with no strings

attached, Fischel argues, “[t]he Poletown residents, the school district, the parks

advocates, the taxpayers, and may other claimants on public funds would have argued

for a piece of the action, and it would have been very strange for the auto plant to have

prevailed.”91

Perhaps local governments are more careless with non-fungible gifts, but what

does this have to do with public use? That is, if local governments act negligently when

they use federal funds to finance eminent domain, why not restrict all federal funding of

eminent domain rather than just federal funding of eminent domain employed for

economic development? Fischel believes that non-fungible federal gifts can be more

justifiably used to finance more“traditional” exercises of eminent domain like highways

and railroads. He argues that this is because such exercises provide “extraterritorial

spillover effects” among multiple local governments, and therefore would be under-

produced if any particular local government had to finance them unilaterally.92 But as

we have seen, traditional uses for eminent domain hardly capture all and only those

uses that provide extraterritorial spillover effects. This is why the proposed federal

statues are poor solutions—they are too blunt. Traditional categories of eminent domain

have little economic merit, and therefore it makes little sense to enact a federal statutory

regime that places them at normative front and center. If the goal is to reduce the

distortionary effects federal funds have on local decisions, and the only means available

is outright prohibition, we should restrict not only the federal funding of“non-

90 Fischel, The Political Economy of Public Use in Poletown: How Federal Grants Encourage ExcessiveUse of Eminent Domain, 2791 Ibid.92 Ibid, 21



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traditional” uses of eminent domain, but also the federal funding of all local projects

that have no extraterritorial spillover effects.

The proposed federal solutions then are overbroad. To the extent that they target

a real problem, they do so imprecisely. HoweverFischel‟s policy proposal is more subtle

than those that have actually been floated in Congress. Instead of an outright ban,

Fischel proposes a two stage test. The first stage would sort projects into traditional and

non-traditional uses for eminent domain. If a project was labeled “non-traditional,” the

state would not be prohibited from carrying it out, but would rather be forced to

explicitly justify the use of eminent domain by showing that even if the gift were

fungible, the state would still go through with the taking.

Fischel‟s proposal is an improvement, but we can still do better by avoiding the

traditional/non-traditional dichotomy altogether. WhileFischel‟s proposal might

remedy the under-inclusiveness of the class of traditional uses for eminent domain by

allowing the state to talk its way into a non-traditional taking, it does nothing for the

fact that the class of traditional uses for eminent domain is simultaneouslyover-

inclusive. That is, there are some public uses for eminent domain that do not have

extraterritorial spillover effects, and the state should therefore have to justify using non-

fungible gifts on these projects as well. However,Fischel‟s proposal would not require

the state to justify using a non-fungible gift on a traditional use of eminent domain that

did not provide extraterritorial spillover effects.93 For example, suppose a city wanted to

93 Fischel seems to anticipate this problem by adding the qualification that traditional uses of eminentdomain must involve “ beneficial, regional spillover effects and have need for particular locations andcontiguous land assembly.” However, this qualification contradicts his reason for resorting to tradition inthe first place. Fischel turns to tradition to save on the administrative costs of “inquiring into the fiscalmerits of every single program.” But once he qualifies the notion of tradition to include a specific notion ofeconomic efficiency, he loses the simplicity and ease of application he desires.



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use a non-fungible federal gift to purchase a site for a new park. Suppose that several

sites were available, and that the park was small enough that no land assembly was

required. In this case, we would want the state to have a very good explanation as to why

it needed eminent domain, but Fischel‟s test would not require the state to defend its

decision.

There are two possible ways to improveFischel‟s solution: Either have courts

determine which takings will have spillover effects directly and force the states to defend

those that will not, or simply force states to defend the use eminent domain whenever it

is funded by a non-fungible gift. Because we cannot rely on judges to be good

economists, I believe we should target fiscal negligence through the second option and

require states to justify eminent domain whenever it is financed by a non-fungible

federal gift. Broad procedural change like this would require states to do more

explaining than they would have to do under Fischel‟s plan, but in the cases in which

substantial spillover effects are present, explanations would be simple and

administrative costs would be low.

IIICONCLUSION

The eminent domain reform a state ought to make depends on thestate‟s goals.

Economic efficiency is certainly the starting point, and procedural reforms that make

eminent domain costly and visible are a must. However, as we have seen, economic

efficiency is rarely the whole story. When the state has a different goal in mind, such as

fairness, it should choose the reform that promotes the goal with as little sacrifice to

efficiency as possible. At a minimum this will mean not specifically proscribing efficient



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uses of eminent domain like land assembly, or those uses which look ex ante as if they

will generate a surplus that will be reflected in a larger tax base. Instead, the state

should enforce procedural safeguards that help distribute the surplus of eminent

domain, rather than destroying the surplus in the name of equality. If the state feels that

some exercises of eminent domain violate fairness per se, regardless of the distribution

of the surplus, the state should target such substantive limitations at only those pieces of

property that are likely to be affected, like owner occupied residences. Finally, states

should not be overzealous in enacting compensation reforms which target a real

problem but overcompensate. While states should certainly compensate for any

reasonably measurable losses, as measurement costs increase, states should think

carefully before moving to a fixed bonus scheme that disregards the true reserve price of

the owner. If the state still feels as if it is undercompensating even as measurement costs

rise to prohibitive levels, a self-assessment scheme could be helpful, though it might be

politically unfeasible.

Congress must also react to Kelo. If it wishes to restrict the use of federal funds

for private takings to discourage them, all the caveats I raised above apply. However, as

Fischel argues, there is reason to be more scrutinizing of a particular use of eminent

domain when the funding is not raised locally. If this is the concern behind federal

statutes, then they address a real problem separate from the issue of whether private

takings are independently justifiable. However, federal statutes should target this

problem as directly as possible, and in my estimation this means ignoring the intended

use of the condemned property and requiring extra process whenever states receive

(non-fungible) money for eminent domain from without.



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It is difficult to predict where eminent domain law will end up after the fervor

surrounding Kelo dies. Perhaps the relative fortunes of the several states will show the

more moderate, process-based approach that I have advocated to be correct. On the

other hand, perhaps the more extreme states have distributions of property and moral

outlooks such that they will never regret their decisions. Either way, it is fortunate that

Kelo was decided the way it was in order that this grand experiment could begin.



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Appendix of Cited State Legislation94

Alaska

2005 AK H.B. 317

http://www.legis.state.ak.us/basis/get_bill_text.asp?hsid=HB0317A&session=24

Prohibits the exercise of eminent domain by the state for the purpose of economicdevelopment; repeals the authority of the Alaska Housing Finance Corporation underthe Slum Clearance and Redevelopment Act to exercise the power of eminent domainand to acquire real property by eminent domain.

Status: Introduced and sent to House Committees on the Judiciary and Finance January9, 2006.

2005 AK H.B. 318

http://www.legis.state.ak.us/PDF/24/Bills/HB0318A.PDF

Limits the power of eminent domain for economic development purposes; prohibits amunicipality from using eminent domain to acquire the primary residence of a landowner for the use of a recreational facility or project.

Status: Passed House February 17, 2006. Sent to Senate Committees on the Judiciaryand Finance February 22, 2006.

Arizona

2005 AZ H.B. 2064

http://www.azleg.state.az.us/legtext/47leg/2r/bills/hb2064p%2Ehtm

“In an action of condemnation of property for economic development or ultimatetransfer to a private entity, the Court shall award all costs, jury fees and attorney fees tothe defendant regardless of the outcome of the action.”

Sponsored by: State Representative Chuck Gray

Status: Introduced.

California

2005 CA S.C.A. 20

http://www.leginfo.ca.gov/pub/bill/sen/sb_0001-0050/sca_20_bill_20060111_introduced.html

Provides that private property may be taken or damaged only for a stated public use andnot without the consent of the owner for purposes of economic development, increasingtax revenue, or any other private use. Provides that if the property ceases to be used forthe stated public use, the former owner would have the right to reacquire the propertyfor its fair market value.

94 See also note 53 supra.

http://www.legis.state.ak.us/basis/get_bill_text.asp?hsid=hb0317a&session=24


http://www.legis.state.ak.us/pdf/24/bills/hb0318a.pdf


http://www.azleg.state.az.us/legtext/47leg/2r/bills/hb2064p%252ehtm












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Sponsored by: State Senator Tom McClintock.

Status: Introduced January 11, 2006. Sent to Senate Committees on the Judiciary andElections, Reapportionment and Constitutional Amendments January 19, 2006.

2005 CA A.B. 1162http://www.leginfo.ca.gov/pub/bill/asm/ab_1151-1200/ab_1162_bill_20050902_amended_sen.html

Prohibits a public entity from exercising the power of eminent domain to acquire owner-occupied residential real property for private use.

Sponsored by: Mullin and Salinas

Status: Amended and re-referred to Senate Committee on Rules September 6, 2005.

Colorado

2006 CO S.B. 78

http://www.leg.state.co.us/clics2006a/csl.nsf/fsbillcont3/1DCD8996AC225F53872570820070756A?open&file=078_01.pdf

Prohibits the exercise of the power of eminent domain by a private corporation tocondemn the private property of another person or entity for the purpose of acquiringrights-of-way for a private toll road or private toll highway.

Sponsored by: State Senator Tom Wiens

Status: Passed Senate January 31, 2006. Passed House March 14, 2006. Sent toGovernor March 24, 2006.

Florida

2006 FL S.B. 134

http://www.flsenate.gov/cgi- bin/view_page.pl?Tab=session&Submenu=1&FT=D&File=sb0134.html&Directory=session/2006/Senate/bills/billtext/html/

States that “the Legislature intends to revise laws relating to eminent domain.”

Status: Sent to committees October 26, 2005.

2006 FL S.J.R. 626

http://www.flsenate.gov/cgi- bin/view_page.pl?Tab=session&Submenu=1&FT=D&File=sb0626.html&Directory=ses

sion/2006/Senate/bills/billtext/html/ Proposes a constitutional amendment stating that the taking of private property throughexercise of eminent domain does not constitute public purpose when the primarypurpose is economic development or to benefit particular class of identifiableindividuals.

http://www.leginfo.ca.gov/pub/bill/asm/ab_1151-1200/ab_1162_bill_20050902_amended_sen.html



http://www.leg.state.co.us/clics2006a/csl.nsf/fsbillcont3/1dcd8996ac225f53872570820070756a?open&file=078_01.pdf



http://www.flsenate.gov/cgi-bin/view_page.pl?tab=session&submenu=1&ft=d&file=sb0134.html&directory=session/2006/senate/bills/billtext/html/




















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Status: Prefiled November 7, 2005. Sent to Senate Committees on Community Affairs,Commerce and Consumer Services, Judiciary, and Rules and Calendar December 14,2005.

Hawaii

2005 HI S.B. 3191http://www.capitol.hawaii.gov/sessioncurrent/bills/SB3191_SD1_.pdf

Prohibits use of the power of eminent domain to take private property and transfer it toa private entity that had previously expressed interest in purchasing the same propertyfor development purposes or other private use.

Sponsored by: State Senator J. Kalani English

Status: Passed Senate March 7, 2006. Sent to House Committee on Water, Land andOcean Resources.

Kansas2005 KS S.B. 446

http://www.kslegislature.org/bills/2006/446.pdf

Takings for economic development require payment of 125% of fair market value.Condemning authority must present a plan showing (1) the project will benefit thecommunity as a whole economically and (2) the size and scope are reasonable. Everyonein the area gets a copy, and it’s printed in a local newspaper. Eminent domain is onlyauthorized if developer, after good faith negotiations, could not purchase the land. 2/3 vote of governing body required to proceed after the public hearing.

Sponsored by: Committee on the Judiciary

Status: Introduced January 25, 2006. Sent to Senate Committee on the Judiciary.

Kentucky

2006 KY H.C.R. 24

http://www.lrc.ky.gov/record/06RS/HC24.htm

Urges the Congress of the United States to pass and present to the states for approval aconstitutional amendment to protect the rights and security of citizens in their privateproperty from governmental takings for the promotion of private economicdevelopment.

Sponsored by: State Representative Scott Brinkman

Status: Introduced January 3, 2006, and sent to House Committee on Judiciary.

Maryland

2006 MD S.B. 3

http://mlis.state.md.us/2006rs/bills/sb/sb0003f.pdf

http://www.capitol.hawaii.gov/sessioncurrent/bills/sb3191_sd1_.pdf




http://www.lrc.ky.gov/record/06rs/hc24.htm










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Provides for compensation for lost goodwill. Requires government to make a finding when condemning businesses for economic development. Government has to show thatit will have substantial public benefits. Also has to show that the development plan couldnot have been carried out by private developers and condemnation is necessary and

reasonable efforts were taken to include the existing business in the plan.

Sponsored by: State Senator Andrew Harris

Status: Introduced January 11, 2006. Sent to Senate Committee on JudicialProceedings.

Minnesota

2005 MN H.B. 2846

http://www.revisor.leg.state.mn.us/bin/bldbill.php?bill=H2846.2.html&session=ls84

If compensation is ruled 20% higher than state’s offer, plaintiff gets attorney ’s fees.

Likewise if court rules it’s not for a public use. Businesses compensated for lost good will.

Sponsored by: State Representative Jeff Johnson

Status: To House Committee on Civil Law and Elections March 1, 2006. Passed asamended. Rereferred to House Committee on Public Safety Policy and Finance. Passedas amended. Rereferred to House Committee on Local Government March 8, 2006.Passed as amended. Passed as amended from House Committee on Agriculture andRural Development. Passed as amended from House Committee on Transportation andFinance. Rereferred to House Committee on Ways and Means March 27, 2006.

New Hampshire

2005 NH H.J.R. 25

http://www.gencourt.state.nh.us/legislation/2006/hjr0025.html

Encourages the United States Congress to propose an amendment to the Constitutionoverruling Kelo.

Sponsored by: State Representatives Daniel Itse and Kathleen Souza

Status: Introduced January 4, 2006, and sent to House Committee on State and FederalRelations and Veterans Affairs.

2005 NH H.B. 1554

http://www.gencourt.state.nh.us/legislation/2006/hb1554.html Changes baseline for compensation from appraisal to 300% of appraisal.

Sponsored by: State Representative Richard Kennedy

Status: Introduced January 4, 2006, and sent to House Committee on the Judiciary.Recommended for interim study February 16, 2006.

New York

http://www.revisor.leg.state.mn.us/bin/bldbill.php?bill=h2846.2.html&session=ls84




http://www.gencourt.state.nh.us/legislation/2006/hb1554.html







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2005 NY A.B. 9117

http://assembly.state.ny.us/leg/?bn=A09117&sh=t

Requires an urban redevelopment plan when eminent domain is used for economicdevelopment.

If the development project fails to produce a net increase in employment, the developershall place 10% of the annual profit from the project into a work force development fundto be established by the department of labor for a period of not less than five years.

In addition to fair market value compensation, the state shall require not less than 15%of the annual profit from such development be placed in a designated accountestablished by the state comptroller to be dispersed at the discretion of the comptrollerfor a period of ten years to a class of homeowners and a class of commercial owners.

Sponsored by: Assemblyman Roger Green

Status: Sent to Assembly Committee on the Judiciary January 4, 2006.

2005 NY S.B. 5946

http://assembly.state.ny.us/leg/?bn=S05946&sh=t

Requires the preparation of a comprehensive economic development plan for the use ofeminent domain when the primary purpose is economic development and certainresidential premises are to be acquired, and requires municipal approval of the exerciseof eminent domain power in such cases. Also creates a temporary state commission toconsider further eminent domain reforms.

Sponsored by: State Senator John Flanagan

Status: Introduced August 12, 2005, and sent to Senate Committee on Finance.

2005 NY A.B. 9050

http://assembly.state.ny.us/leg/?bn=A09050&sh=t Requires compensation of 125% of market value when eminent domain is used foreconomic development; requires the condemnor to prepare a comprehensive economicdevelopment plan and a housing relocation plan in such cases.

Sponsored by: Assembly Committee on Rules.

Status: Sent to Assembly Committee on the Judiciary August 12, 2005.

Rhode Island

2005 RI H.B. 6636

http://dirac.rilin.state.ri.us/BillStatus/WebClass1.ASP?WCI=BillStatus&WCE=ifrmBill

Status&WCU

Urges the United States Congress to take immediate action to amend the Constitution inorder to more fully protect and guarantee private property rights and to nullify the Kelodecision.

Sponsored by: State Representative Victor Moffitt

2005 RI S.B. 2771

http://assembly.state.ny.us/leg/?bn=a09117&sh=t


http://assembly.state.ny.us/leg/?bn=s05946&sh=t




http://dirac.rilin.state.ri.us/billstatus/webclass1.asp?wci=billstatus&wce=ifrmbillstatus&wcu










Tom Lehman

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Tom Lehman

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References

Abraham Bell and Gideon Parchomovsky, "Bargaining for Takings Compensation"

(September 16, 2005). Bar Ilan Univ. Pub Law Working Paper No. 13-05

Available at SSRN: <http://ssrn.com/abstract=806164>

Ackerman, Bruce. Private Property and the Constitution. New Haven: Yale University

Press, 1977.

Dana, David, and Thomas Merrill. Property: Takings. New York: Foundation Press,

2002

Epstein, Richard. Takings : Private Property and the Power of Eminent Domain.

Cambridge, Mass.: Harvard University Press, 1985.

Farber, Dana. Economic Analysis and Just Compensation, 12 INT'L REV. L. & ECON.

125 (1992)

_______, Public Choice and Just Compensation, 9 CONST. COMM. 279 (1992)

Fischel, William. The Political Economy of Public Use in Poletown: How Federal

Grants Encourage Excessive Use of Eminent Domain (February 2005). Available

at SSRN: http://ssrn.com/abstract=645402

_______. Regulatory Takings: Law, Economics, and Politics. Cambridge, Mass.:

Harvard University Press, 1998.

Garnett, Nicole. The Neglected Political Economy of Eminent Domain. MICH. L. REV.,

Forthcoming Available at SSRN: http://ssrn.com/abstract=875412

Jones, Bryan D., The Sustaining Hand: Community Leadership and Corporate Power.

2nd, Rev ed. Lawrence: University Press of Kansas, 1993.

Levmore, Saul. Just Compensation and Just Politics, 22 CONN. L. REV. 285 (1990)

http://ssrn.com/abstract=645402










Tom Lehman

_______, Takings, Torts, and Special Interests, 77 VIRGINIA L. REV. 1333 (1991)

_______, Self-Assessed Valuation Systems for Tort and Other Law, 68 VA. L. REV.

771 (1982).

Lunney, Glynn. A Critical Reexamination of the Takings Jurisprudence, 90 MICH. L.

REV . 1892 (1992)

Merrill, Thomas. The Economics of Public Use. 72 CORN. L. REV. 61 (1986)

Michelman, Frank. A Reply to Susan Rose-Ackerman. COLUMBIA L. REV. 88(8) 1712

(1988).

_______, Property, Utility, and Fairness: Comments on the Ethical Foundations of

‘Just Compensation’ Law, 80 Harvard Law Review 1165, 1214 (1967)

Peterson, Andrea. The Takings Clause: In Search of Underlying Principles, CAL. L.

REV., vol. 77 (1989)

Rose-Ackerman, Susan. Against Ad Hocery. 88 COLUM. L. REV. 1697 (1988)

_________. Rethinking the Progressive Agenda. New York: Free Press, 1992.

Rubenfeld, Jed. Usings. 102 YALE L. JOURNAL. 1077 (1993)

Take My Home Tonight

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