Economic development from Kelo case fails

One of the worst decisions in U.S. Supreme Court history is now linked with one of the worst economic development failures in history. We should not be surprised, as “economic development” failures cover the country.

Pharmaceuticals company Pfizer has announced plans to pull out of New London, Conn., where local officials spent $75 million to destroy a middle-income neighborhood of homes and small businesses. Jobs and higher tax revenues that had been promised have not appeared, and the homes and businesses have been flattened, leaving the 90 acres looking like a desert.

Instances of such government abuse scar the country. The New London case makes news because of the scale of the abuse and the infamy it produced:

the Supreme Court’s 2005 decision in Kelo v. City of New London, in which five so-called justices spat on the Constitution they had sworn to uphold.

They ruled no one has a right to their own property if someone else wants to use it in ways that might -- might! -- generate more tax revenue or jobs. The ruling prompted most states to rework their eminent domain laws to protect property owners from the impact of the court’s decision.

“Economic development projects like these have a horrible track record, yet city officials fall for them time and again,” said Scott Bullock, an attorney with the Institute for Justice who represented plaintiffs in the Kelo case. “The city remediated the property, spending huge sums to do that, and gave the property to Pfizer for a dollar. And it gave massive tax abatements that are expiring in 2011. Pfizer will be out one year before the tax abatements are shut off and they have to pay the full bill.”

What grand economic development plans they had! The city would seize the Fort Trumbull neighborhood’s nearly 100 homes and small businesses and turn the property over to Pfizer to build condos, corporate offices, and a conference hotel next to the company’s research facility. Those developments would in turn generate jobs and tax revenue for New London.

None of the development has occurred or will occur, and the adjacent Pfizer research facility -- opened just eight years ago -- will be cleared out as well, taking 1,400 existing jobs elsewhere.

One homeowner who meant nothing to city officials was Susette Kelo, who led her neighbors in a fight to defend their homes, their freedoms, and the Constitution. That document says government may take property only for “public use” after paying “just compensation.” For most of the nation’s history, public use was understood to mean things such as public roads or utilities.

The majority of justices in the Kelo decision perversely declared private, profit-making shopping centers, industrial parks, hotels, sports stadiums, upscale housing developments and similar projects also warrant to property seizures by government. Their ruling states a “public purpose” -- not a “public use” -- is enough to justify government seizing private property.

Justice John Paul Stevens wrote in the majority opinion, “promoting economic development is a traditional and long accepted function of government.” Under his ruling, property does not have to be abandoned or blighted to be seized. The government could seize a $1 million house from its owner to give it to someone who wants to build a $3 million house.

Then-Justice Sandra Day O’Connor rightly noted in her dissent, “The beneficiaries are likely to be those citizens with disproportionate influence and power in the political process, including large corporations and development firms. As for the victims, the government now has license to transfer property from those with fewer resources to those with more. The founders cannot have intended this perverse result.”

Can anyone doubt the truth behind O’Connor’s words?

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Steve Stanek (sstanek@heartland.org ) is a research fellow at The Heartland Institute, A Chicago-based think tank that develops and promotes free-market solutions to social and economic problems.