January 31, 2006
Timothy M. Sandefur, Steven Greenhut

Contents

• David Theroux, President, Independent Institute
• Steven Greenhut, Author, Abuse of Power
• Timothy Sandefur, Attorney, Pacific Legal Foundation
• Questions and Answers

David Theroux
President, The Independent Institute

Good evening ladies and gentlemen. I’m David Theroux, and I’m president and founder of the Independent Institute. I want to welcome you all to our Independent Policy Forum this evening.

Our program is entitled “Eminent Domain: Abuse of Government Power?” and we’re very pleased to feature the book The Abuse of Power by one of our speakers, Steven Greenhut. I also want to welcome all of our viewers on C-Span as well as our guests here in Oakland tonight.

For those of you who may be new to the Independent Institute, the Institute is a nonprofit, nonpartisan, non-politicized public policy research organization. We sponsor in-depth studies of major social and economic issues and we produce many books and conference and media programs based on that. We welcome you to visit our Web site at independent.org, where you’ll find information on our research, publications and so forth.

You also can find information about our quarterly journal, which is called The Independent Review. This is the copy I want to point out because the major article in it is by one of our senior fellows, Bruce Benson from Florida State University, which is a critical look at eminent domain.

Tonight’s program is one that’s resonating across the United States in a way that few issues have. A number of years ago, we produced another book, which I also want to call to your attention, which is called The Voluntary City. It was published by University of Michigan Press, and that’s this book here. And that particular book, in contrast to looking at the issue of eminent domain, discusses how market- and community-based approaches are far more effective to deal with social and especially urban problems than is command-and-control government bureaucracy.

Americans, I think almost universally, consider their home to be their castles, but last year, the U.S. Supreme Court ruled in Kelo vs. New London that anyone’s property is simply on loan from government officials, who can seize it for private economic development in what might properly be considered a system of neo-feudalism. But the use of eminent domain actually has quite a long history in the United States and before.

In the United States in 1795, for example, the U.S. Supreme Court itself described the power of eminent domain as the “despotic power,” in which essentially covetedness and theft could be legalized but constrained by the Fifth Amendment through “just compensation.” The Kelo decision, however, takes eminent domain to what I would consider new lows, and I think we’ll get an idea of that tonight.

Eminent domain has the potential to, quite frankly, destroy lives, destroy livelihoods, by uprooting people from their homes and businesspeople from their shops. Today’s small businesses and homeowners in particular, quite frankly, better beware, because if politically connected interest groups want what is yours, government officials can send in the police to confiscate your property, going through the proper procedures, that is, and your property could be your home, your business, your church, your neighborhood and other things, and then convert the area into shopping centers, condominium complexes, parking garages, highway overpasses, you name it.

And the funding for these projects is not completely, but is significantly being provided by state and federal government agencies. In June 2004, Steven Greenhut documented and warned us about this growing misuse of government power before the Kelo decision in the book Abuse of Power that I mentioned.

The practice itself of eminent domain has been around for quite a while in US history, as I mentioned. For example, most of the railroads and the nation’s highways were built by landowners having their properties condemned, given a dollar, in many cases, and told that if they didn’t like it, they could go to court.

But the Kelo decision now fully institutionalizes what the 1795 court called the despotic power, to confiscate property almost everywhere, and conceivably, from almost anyone who’s not politically connected. For example, to John Revelli, who is here tonight, I should mention, whose family has operated a tire shop near downtown Oakland for decades, the implication of this has hit home.

This past year, a group of private contractors hired by the city of Oakland, packed the contents of his small auto shop into a moving van and evicted Revelli from the property his family has legally owned since 1949. The city government, using eminent domain, seized Revelli Tire and the adjacent property, Auto House, an owner-operated small business, and evicted the longtime property owners to clear the way for a housing development under contract to private developers who would produce 1,200 apartments and condominiums and receive government subsidies of $61 million.

“John works alone. I have one technician working for me. That’s it,” said Tony Fung, who bought his 25-square-foot auto shop operation in 1993. “The cost of buying or leasing a new site is prohibitive. The money the city offered me does not cover it. I’m an immigrant from China. This has been the fulfillment of my American dream.” Fung went on to say, “I worked hard. I played by the rules, but now it’s all gone. I’ve got to start over.”

Currently in Yolo County, near Sacramento, government officials are determined to seize the property of Conaway Ranch, but according to reports in the Sacramento Bee, county officials don’t have the money to buy the land, even at the depressed prices you find in a forced sale. As a result, they’re counting on a loan of as much as $50 million from the Rumsey Band of Winton Indians, who just happen to operate a gambling casino just up the road. Meanwhile, according to a survey reported in the Davis Enterprise newspaper, 73 percent of Yolo County voters opposed the county’s use of eminent domain to seize Conaway Ranch. Yet, County Supervisor Mike McGowen told the Sacramento Bee columnist Dan Walters that, “it’s our land.” Again, the despotic power.

And these are hardly isolated incidents across the United States, as many of you may know. In response, many states are seeking to pass legislation and amendments to their state constitutions that block this unprecedented government assault on the rights of property owners. So, as I mentioned, we’re very pleased tonight to have two experts to discuss these very serious issues regarding the use of eminent domain.

Our first speaker is someone who has studied this at length, and as I mentioned, author of the book The Abuse of Power. Steven Greenhut is senior editorial writer and columnist at the Orange County Register. He has been the building and remodeling editor of Better Homes and Gardens, editorial page editor of the Lima News in Ohio. He’s also written for the Des Moines Register, and has also been a reporter and editor for a number of trade and professional newsletters and magazines in Washington, D.C. Steve received his BA in political science with a minor in journalism from George Washington University. I’m very pleased to introduce Steve Greenhut.

Audience

(applause)

Steve Greenhut
Author, Abuse of Power

Thank you. I see a pretty good crowd here, and I was wondering whether it’s the program, or the Bush speech and you’re needing an excuse to get out of the house.

Property Rights Are Human Rights

I like to start my discussions on eminent domain with an idea of what my idea of property rights is, and there’s nothing better that I’ve read than William Pitt, the former British prime minister, and his view of property rights: “The poorest man may in his cottage bid defiance to all the forces of the crown. It may be frail. Its roof may shake. The wind may blow through it. The storm may enter. The rain may enter. But the King of England cannot enter. All his forces dare not cross the threshold of the ruined tenement.”

That was, I think, a supreme view of property rights. These days, any two-bit city manager can walk into your house and give it to Costco, so it’s quite a switch.

We have a new, more enlightened view. Working for a newspaper, I’m not arguing cases in court, I’m fighting with the redevelopment officials, and basically, they’re just low-level thugs who have a vision for what they would like on your property and the power to do it. There really isn’t anything more than that.

The Constitution allowed eminent domain when there’s a public use, just compensation and due process provided. We can argue whether there should have been any allowance of eminent domain, but public use was pretty clear. It was a road or something of that sort. Just compensation was pretty obvious, and of course, due process. Those are all obvious concepts, which is probably good reason why no one follows them anymore.

But these days, Costco is a “public use”; just compensation is getting pennies on the dollar. I’ve written about cases where cities have offered the owner zero for their land. They were doing them a favor to take it off their hands. And due process, I know people who read about it in the newspaper. That’s when they find out there’s going to be a redevelopment plan on their property. So that’s the world that we’ve come to. And how did we get there?

The Eminent Domain Mentality

Well, there have been a number of things, but first I want to refer to something in my book. I’ll just read a passage here which gives a sense. First you need the right mentality, or really the wrong mentality, and there’s this mentality among redevelopment officials that it really is their property and they’re doing you a favor by allowing you to pay taxes on it and live on it. And sometimes you have to actually listen to these people and their words to understand what they’re saying, and it’s pretty horrifying.

The League of Cities, which I sometimes refer to as the League of Satan, or In League with Satan. I don’t know which one works better. But, they seem to have the template for how to take land and abuse property rights in order to redevelop. In one of their magazines in 2001—or actually, I guess it was in a conference—they had a speaker who was talking about how to make decisions on people’s property, such as eminent domain, and the speaker, she said: “the main point was to preserve your credibility, you see. And you can control your credibility by justifying, not excusing your choices.” Hmm. “Justification means that you publicly explain how your decisions reflect shared values or widespread norms.

“Four perspectives”—and really, any perspective would work: “Consequentialism, deontology, natural rights, or communitarianism. That’s you, as the government official, can use any of those four ways, those four philosophies, to determine who to force off their land and destroy their lives.”

“And one, a consequential perspective, says that an official is ethically obligated to make decisions that promote good consequences for the greatest number.” Isn’t that great?

“Deontology says that an official has unbreakable obligations, and the rights approach says that an official must make the protection of stakeholders a priority in decision making. And communitarianism obligates an official to involve families and neighborhood residents in designing solutions to community problems.”

I mean, the only one of those that even got close to a Constitutional perspective doesn’t even say property owners, it says stakeholders. And you know what stakeholders are. We fight with them all the time, the environmental folks who, if they can see your property, they’re a stakeholder, and they have every bit as much right as you, who own the property, to that property.

Anyway, that’s the perspective, and it’s not an exaggeration. I go through reams of this garbage and talk to these officials, and that’s how they think. And they don’t understand.

The Expansion of Eminent Domain

So, that’s where we are, I guess. And how did we get there? I’ll just do a few main legal cases. Tim is the legal scholar, and we’ll go over these things in more depth.

But in 1905, there was the Missouri Pacific Railway Company vs. the State of Nebraska. And back then, railroads owned the grain elevators, and railroads were regulated by the Interstate Commerce Act. The elevators were not. The farmers were complaining, probably true, that the railroads were charging excessive fees for the elevators, since they owned them and they had a monopoly there. So a Nebraska farmer’s co-op wanted the state of Nebraska to use eminent domain against the railroads who owned the elevators, so that they could jointly own it.

And the U.S. Supreme Court said no. That was a good sign, and it just gives you an idea where we were at that point. By unanimous opinion, the court ruled that the taking by a state of the private property of one person or corporation without the owner’s consent is a violation of the 14^th Amendment of the Constitution. Okay, pretty simple. As of 1905, I think that’s a pretty clear understanding.

By 1923, we had something called the Rindge Company vs. L.A. County. Here’s an interesting one: This is one of the cases where I think we started to see a slippery slope. Rindge Company owned what is now Malibu, and the government, the county, built a road through the ranch. The purpose for building the road, though, wasn’t—I mean, a road is a public use, but their purpose wasn’t to get from Point A to Point B. There was no Point B. They ran a road right through the ranch and turned it around and came back again. The point was to give the public access to the ocean views.

And the court said okay. Two of the points that they made I think resonate up to modern times in the Kelo decision. One of the key points was, it was okay because the right legislative body made the decision. So we see that over and over in eminent domain cases, and we see that in the Kelo decision. Well, who are we to argue? Sure, the courts argue all the time over what the First Amendment means, but when it comes to property rights, we just give the widest possible authority to the legislature.

Then they also said, “Public uses are not limited in the modern view”—it’s very important to have a modern view—“to matters of mere business necessity and ordinary convenience, but may extend to matters of public health, recreation and enjoyment.” So, I think what we see there is a real expansion of what “public use” means. It’s not just a road. It’s to create public enjoyment. So, that was a slippery slope.

1954, the liberal Warren court, Berman vs. Parker. This was the major case that I think set the stage for much of what we see today. It was a redevelopment in Washington, D.C., in an area that most of us would consider blighted. It was a poor area lacking basic infrastructure, but there were some owners of property, a department store owner, that was not blighted, and the court said it doesn’t matter. It’s important that we redevelop the area. Again, they referred to the legislature. If the legislature thinks it’s important, then who are we to argue?

And the reasoning in that case was wonderful because it reads more like a sociology textbook than it does anything resembling the U.S. Constitution. The experts concluded that, “If the community were to be healthy, if it were not to revert again to a blighted or slum area as though possessed of a congenital disease, the area must be planned as a whole.”

So, anyway, that’s the kind of legal reasoning that we saw in 1954. And of course, they brought up this whole idea of “planned as a whole.” Redevelopment officials you talk to all the time, they complain about piecemeal development. Hmm. Piecemeal development. In my view of the world, that’s great. I own my house, and my neighbor owns his, and the other person owns his, and that’s piecemeal development. But unless one big company planned and built it all at the same time and owns it, then that’s piecemeal development. But I’m going astray a little bit.

In 1981, in the Poletown decision, the Michigan Supreme Court said that the whole economic vitality of the Detroit region was based on the ability of General Motors to build a Cadillac assembly plant on an existing neighborhood with hundreds of homes, and they were allowed to do that. And we can see that as always, government officials usually know best. Detroit is now a vibrant and wonderful city, and GM is doing really well, and it all worked, so who are we to argue?

In 1984, we had the Midkiff decision, and that one is a strange one, because it’s Hawaii. We have a situation where very few people own the property—you have basically a Third World kind of land ownership system based on Hawaii’s history. And the legislature was trying to figure out a way to expand homeownership opportunity, so instead of selling off the half of the island that’s owned by the federal government, or deregulating, or anything that normal people would do, they decided to allow tenants to organize and steal the property of their landlords. Sandra Day O’Connor said that was okay.

That’s the world that we end up with. So what does that mean? Well, I’m not a legal scholar, but I am a journalist; I work for the Orange County Register. We go forward to 2003. It’s a really landmark year. That’s when I started writing my book, and this is a historic date. So enough. I had found that I was writing so much about these situations, one after another about people who were having their properties taken.

And when I wrote the stories, people actually didn’t believe them. Now, that happens a lot, where I’ll write something and they’ll call in and say, “You made that up.” I’m like, “Yeah. How long do you really think I’d have a job if I just made it up?”

But it’s true. These property owners were having their property taken and given to stores, and they were being offered a pittance, and the cities were treating them horribly. I mean, it was just awful.

One nice thing about the Register is we have a libertarian editorial page, so we have fair game to level the playing field a little bit, and it does make a different. I do think that’s one of the real reasons we’ve reached the point that we do, is the journalism profession is dominated by liberals who love government power and are part of what John Fund of the Wall Street Journal calls LOOT, Leaders of Our Town, and that’s always dangerous. (laughter)

I saw someone here who I knew from my days when I lived in Lima, Ohio, and the mayor there, if you didn’t go along with what he said, you are a negative, you were negative. So, anyway, I’m a negative.

Recent Pre-Kelo Takings

So I’ll share a couple of instances of what I reported on to give you an idea of what I was seeing. And it was outrageous. In the city of Garden Grove, a working class, perfectly nice city south of Anaheim, and what we have is a desire by city officials to turn a massive neighborhood of perfectly nice, ’60s tract homes, they’ll probably sell for about $700,000 now, so it’s slum housing by Orange County standards, (laughter) but it might be $600,000. They were going to get rid of those houses and build a theme park.

Of course, the officials lied to the public. They said, “Oh, no. We have no such plan.” Then a state senator got a copy of a map with “Theme Park” stamped on the neighborhood, (laughter) and that was a hint that maybe the officials were lying, and they do that all the time.

One of the things that’s worse than eminent domain that we saw happening there, that I was writing about, is that people’s lives go in limbo. If I decide that this half of the city is going to be in a redevelopment area, that means I have the right to use eminent domain any time I see fit as a government official. That means you’re not going to invest in your property anymore. It’s worse than me just taking it because, who knows, how long does it take for government officials to get their act together? I mean, how long do we have on this earth?

Garden Grove is incredible in that they’ve gone from one project after another that’s failed. And sometimes these failed projects take seven or 10 years. And once a redevelopment area, it’s really hard to make it a non-redevelopment area, so your life is on hold. And you have to disclose the fact that your property could be taken any time by eminent domain.

One newspaper did a study. The L.A. Times did a study of North Hollywood that has major redevelopment with eminent domain, compared it to a demographically identical area without it, and the demographically identical area did much better economically, development-wise, than the other one. And the answer’s obvious: The week after this plan in Garden Grove was stopped, you saw the construction trucks driving into the neighborhood. People were dying to fix up their houses.

So anyway, that’s what they tried to do. It was stopped by political pressure, and that’s usually the best way to do it instead of the courts. Lawyers are wonderful, but if you can, stop it in the political process. And we criticized it. Other newspapers and journalists criticized the process. The city council backed down.

The reason that the city had to create a redevelopment area of hundreds of homes was because they had created this massive redevelopment debt subsidizing hotels that would get the crumbs from the Disneyland resort district, so they created this fiscal mess and they used eminent domain to clear off properties for those hotels. And then they can’t sustain the level of debt, so they had to find new areas. So they said, “Aha! We need our own attraction.” That’s right. Everyone wants to go to Garden Grove. (laughter) So, they were going to create a theme park.

So anyway, that’s mainly what happened, but it was a massive—this took a year or so to play out. About a thousand people showed up at the city council meeting. The officials did finally back down.

But what they do, and they still do it today: they pick off these property owners one at a time. I knew these folks. Often they’re immigrant business owners that really don’t have the wherewithal to fight back. These folks owned a car lot on Garden Grove Boulevard, and it was a $2-million-a-year deal. They were doing quite well. And all of a sudden, they’re out of business and the city’s offering them $11,000 or something of the sort. And I’m very close to accurate, that number, because they leased it, so they basically added up the amount of the office supplies, never mind that they were taking their leasehold interest. This happens all the time.

Then the city will hire these attorneys from Newport Beach who get paid on a taxpayer dime, and these poor people who are fighting, they have to mortgage their house to fight, and then the city officials will drag it on, on and on. It’s a very mean process. So I saw that happening on a lot of little incidents of the sort. And then the cities, of course, they tell the property owners, “Oh, we’ll help you find a new place.” Right. It’s hilarious what they think is a comparable location.

The next big one I was writing about was in the city of Cypress. There, we have a place called Cottonwood Christian Center, a big evangelical congregation. And they went to the trouble of actually believing that this is a free country and that they can buy and sell property on their own. So, they followed the existing zoning. They assembled the lots. There were a bunch of parking lots near a racetrack that had been sitting there vacant for years. No one had any interest in them, so they went, they assembled the lots into one parcel, and did it the old fashioned, free-market way, and then the government said, “Wait a minute. That’s a big nice parcel. We ought to have some retail there.”

Of course, the Cypress officials were stupider than usual—and city officials can be pretty stupid, but these guys were really stupid. They actually admitted what they were doing from the dais. They said, “Well, churches don’t pay much in taxes.” Really? “And Costcos pay a lot in taxes.” So they brought Costco in to build this project.

Now, the project the city was building was in complete violation of the general plan and the zoning. The project that the church was going to do was in complete compliance with the church.

Part of the reason the church was able to survive and survive the eminent domain vote was there was an injunction given by a federal judge. It was actually a Clinton appointee, and he got it right, so that was another interesting part of the case. (laughter) He basically said that if you can take property because one owner doesn’t pay as much taxes, to maximize taxes—if that’s a justifiable use of eminent domain, then property rights don’t exist in the country anymore.

He’s right, because of course, we can always find someone who will pay more taxes than we pay. Especially in California and the world of Prop 13, I could imagine cities saying, “Well, this neighborhood, there hasn’t been much turnover in this neighborhood, so we need to obliterate the neighborhood so that we can increase the tax take.”

One of the key things that helped was something called RLUIPA, the Religious Land Use and Institutionalized Persons Act. It sounds like something dealing with crazy religious people, institutionalized, but it’s not. It’s non-discriminatory—an act that forbids local land use—discrimination of local land use by local officials. I can’t even explain it well. I know people who don’t like that law, but it certainly helped the Cottonwood Christian Center survive eminent domain.

Mainly, if something’s permitted as an office, and the only difference between the office use and the proposed religious use is that one is a religious use, then it’s discrimination, and the federal law outlawed that, and the judge passed a preliminary injunction, and then the city decided to negotiate a settlement, and now we have a Costco and Cottonwood Christian Center there. (laughter)

But all isn’t happy, because if under that kind of force, it really undermines things. But we were able to help on the Orange County Register by writing about it a great deal.

Let’s see. There are many others. 99 Cents Only vs. the City of Lancaster, where the two buildings were built at the exact same time. One was blighted and the other isn’t, and the difference is Costco was in one, 99 Cent Only store was in the other. Costco wanted the 99 Cent Only store building and said they would move to Palmdale, so the city decided to use eminent domain. That got stopped in court, so the city eventually gave Costco a public park. So, isn’t that great?

The city of Brea, the downtown there was built on eminent domain and subsidies. They eliminated the downtown and used subsidies to build a very silly downtown.

And I always ask people when I’m speaking in Orange County, “Who knows their way around downtown Anaheim?” Everyone kind of looks. This is a trick question. There is no downtown Anaheim. Thanks to eminent domain, it was eliminated in the ’70s, and then the funds dried up to build anything else there, so now you can’t really find it.

I thought this was a huge issue. You can lose everythingif a developer covets their land and has the ear of city council. It happens the same way everywhere, because we do have the American Planning Association, the League of Cities, other groups, that teach city officials how to maximize their revenues and how to create edifices that are more pleasing to the planners.

And now with new urbanism and smart growth, I’m seeing eminent domain used to promote new, livable downtowns. They want more community. The only problem is, they destroy the existing community so that they could create a new phony community built by the single developer who doesn’t ever engage in piecemeal development.

So it’s a good thing Jane Jacobs wrote about the city of Boston when she visited in the ’60s, the North End, and how all the planners were aghast. This is a terrible area. It doesn’t have big parks and it’s not on a grid system. That was the in thing then. It’s all narrow, and cramped, and there are kids playing in the streets. And of course, the planners wanted to level it, and somehow were stopped from doing it. And now that’s the kind of community that everyone wants now. The new urbanists want that everywhere, so now they’re leveling the other kind of communities to build that. So why don’t they just stop leveling things and let the market do it? But that’s a crazy idea.

I wrote my book because I saw this happening everywhere, and then lo and behold, good thing happed. The Poletown decision was reversed in, I guess a year—two years ago? And it was a great decision. It said that it was a destruction of property rights. Didn’t do a heck of a lot of good for the people who left back in ’81, but it has helped stop, in Michigan, similar abuses.

But then we have the Kelo decision, and Tim will look at Kelo and beyond, but it was a disastrous decision, of course. And yet, it has sparked an interest in an understanding of the issue now. And now when I say I wrote a book on eminent domain, I act like—“Wow, that’s really great. You must be smart.” Before it was eyes glaze over, “This is crazy, why are you wasting your time on this arcane subject?”

So there is good news in this. And that is that people are trying, state by state, locality by locality, to protect property rights. Now we’ve got a huge long way to go. I don’t think we’re anywhere near successful. But I was printing off from the Institute for Justice’s Website. They keep track of all these statewide changes—and look at this. My gosh. I ran out of printer ink.

Now Tim will go over this, but there’s a flaw in most of these: They allow blight exemption. Of course, blight is anything city officials say is blight, and the state of California has a blight exemption, so that you need to prove blight before you condemn. Well, it hasn’t stopped city officials from condemning, but still, there are at least efforts underway to do something about it. And there are local efforts. We have a whole list of local cities that are trying to do similar things.

So, that’s good. We’ve got a lot of things going on, a lot of interest. Eminent domain—it’s a hot potato. People really understand. So we have the city of Yorba Linda is trying to do one of these downtown development plans like Brea’s, like I’ve talked about. You bring in all these chain stores, and you push people out, and you create a phony downtown that architecturally, at least, looks like a downtown. And instantly residents concerned about it were able to get a referendum going and collect double the number of signatures needed to put it to a ballot. And that’s because people are aware of it. You just mention they’re going to use eminent domain—“Where do I sign up?”

And the developer even had very aggressive techniques to stop the referendum, because we know that when something goes to referendum, eminent domain always loses at the polls, or almost always. So they used blockers to try to stop people from signing. The developer had people come and block the way between the people walking to the grocery store and signing the table.

But it really matters. I nicknamed the Garden Grove mayor the Bulldozer, and it stuck, so people say, “Oh, what’s the Bulldozer doing?” (laughter) And it could only stick because people really care, fundamentally understand that property rights are an important concept.

There’s a race here for the senate in California, in central Orange County, the 34^th District senate race, and what we have is the Republicans are pushing a liberal Republican, Lynn Daucher, from Brea. She was one of the masterminds of the monstrosity up there. And I’m not that clever, so I’ve nicknamed her the Bulldozer, also. (laughter) And lo and behold, it’s sticking, too. So, it helps. People really understand what’s going on.

Now, of course, developers are fighting back. And there was a New York Times story that I have here that just talks about how upset all these developers are that eminent domain is getting a bad name. I mean, here’s this lovely story, this human interest story in the beginning of how this holdout wouldn’t sell their property, and as soon as they got eminent domain power, sure enough, they sold, and that was an example of what a great thing eminent domain is. Yeah, unless you happen to be the property owner!

So we have a lot of work to do. That’s my main point. We’ve got a ton of work to do. It’s just starting. But at least we’re not laboring in vain. People know what we’re talking about when we say eminent domain. They understand why it’s so potent, and it’s really hard to fight a battle when most of the people on your side don’t know you’re in a war, and at least now, they know.

But it’s only the beginning, and that’s what I tell people. People have called me after this referendum qualified, and they said, “All right! We won!” I’m like, no you didn’t win. You got it qualified. Now the battle starts. And that’s, I think, how we have to see it. After Kelo we got a black eye, people who believe in property rights. It’s a troubling situation. It’s a terrible decision. But at least people know what’s going on now, and people of all perspectives on the political realm.

I guess I’m not really a positive person. I’m kind of a nattering nabob, (laughter) but I take a little bit of comfort in that, and we’ll hope Tim will fill us in on what’s going on with Kelo and beyond. Thanks for having me.

David Theroux

Thank you very much, Steve. Our next speaker is Tim Sandefur. Tim is staff attorney at the Pacific Legal Foundation. He received his JD from Chapman University School of Law where he was the articles editor for Nexus, A Journal of Opinion. He has submitted numerous amicus curiae briefs at the U.S. Supreme Court and other courts around the country. His articles have appeared in The Independent Review, our journal, also in American Enterprise, The Humanist, the Washington Times and elsewhere. He is the recipient of numerous awards including the George Washington Honor Medal, the Felix Morley Journalism Competition, the Madison Maybeck Award and the Dean’s Professionalism Award. I’m delighted to introduce Tim Sandefur.

Timothy Sandefur
Attorney, The Independent Institute

Thank you. Well, first of all, I want to thank the Institute for having me out. The Bruce Benson article that you mentioned is a fantastic article on the holdout problem and why it isn’t a legitimate argument for the use of eminent domain, and I relied on it heavily in a brief that I just filed in an eminent domain case in front of the Ohio Supreme Court.

Also, I very highly recommend Steven Greenhut’s book. It’s extremely important, and to those of you don’t have it already, I very much urge you to get this book as quickly as possible.

As briefly as I can, I want to take a 400-year tour of eminent domain, and then talk about where we are now in eminent domain reform, which is not very far. Unfortunately so far, the proposals to reform the issue of eminent domain have disappointed the hopes of property-rights believers.

Eminent Domain and the Concept of Sovereignty

The concept of eminent domain is as old as government. In fact, the concept of eminent domain is more or less interchangeable with the concept of sovereignty. If you read the really old writers about this—Bynkershoek, Vatel, Grotius—they argue that eminent domain is the power that allows government to do what it does. It’s what gives it the authority to govern.

Well, in American history, there are basically two views of the nature of sovereignty, and these two views are responsible for the state of eminent domain law today. These are the Lockean and the Blackstonian views.

John Locke was an English political philosopher of the 17^th Century, and he wrote a book called The Two Treatises of Government, which was very influential among the American founders. Locke’s basic argument is that there’s no such thing as a natural right to rule. No person is naturally entitled to govern another person. We’re all created equal. We all have the equal right to run our own lives.

What that means is, if you want to rule another person, you have to ask his permission. We call that government by consent. And obviously, there are cases like children where that doesn’t apply. But when it comes to adult human beings, they basically own themselves and have the right to do with themselves what they want to, and if you want to tell them what to do with themselves, you have to ask their permission through government by consent.

Well, not only does this mean that the government has to ask you permission before it does things, it also puts limits, basic limits, on what the government can do, because you don’t have the right to consent to an injustice, right? You don’t have the right to get together with your neighbors and say, “I’m going to go beat up my hated enemy and take away his things.” You can’t consent to commit an injustice. And since you can’t consent to commit an injustice, you can’t ask the government to commit an injustice.

The way Locke puts it is this: “Government is not nor can possibly be absolutely arbitrary over the lives and fortunes of the people, for it being but the joint power of every member of the society given up to the legislature, it can be no more than those persons had in the state of nature before they entered into society and gave it to the community. Nobody can transfer to another more power than he has in himself, and nobody has the absolute arbitrary power over any other to destroy his life or take away the life or property of another.” So, you can’t ask the government to commit an injustice by stealing things from your neighbors.

This creates a basic difference between law and mere force. Law is when the government uses its coercive power to protect the rights of people in society. Arbitrary force is when the government uses its coercive power to steal things from people or beat them up in order to make a group of constituents happy.

James Madison explained this in this way. He said, “Whatever be the hypothesis of the origin of the lex majoris partis”—that is, whatever is the origin of the power of the majority to govern—“it is evident that it operates as a substitute for the will of the majority of the society for the will of the whole society, and that the sovereignty of society, as vested in and exercisable by the majority, may do anything that may be rightfully done by the unanimous concurrence of its members. The reserved rights of the individuals, of conscience, for example, in becoming parties to the original compact being beyond the legitimate reach of sovereignty whenever vested or however viewed.”

In other words, when we enter into government, there are certain things that the government is never allowed to do to us. It’s not allowed to beat us up and take our things.

He wrote in a letter to James Monroe, “There is no maxim, in my opinion, which is more liable to be misapplied, and therefore more needs elucidation, than the current one that ‘the interest of the majority is the political standard of right and wrong.’ Taking the word interest as synonymous with ultimate happiness, in which sense it is qualified with every moral ingredient, then the proposition is no doubt true. But taking it in the popular sense as referring to the immediate augmentation of property and wealth, nothing can be more false. In that sense, it would be in the interest of the majority in every community to despoil and enslave the minority of individuals.”

So in other words, morality limits what the government, even the majority, can do to us. And that’s the Lockean view.

Then there’s the Blackstonian view. William Blackstone was an 18^th century legal thinker who published some influential books about law called The Commentaries. Blackstone explains that sovereignty is not limited by natural law. He explicitly rejects what he calls the views of “Mr. Locke and other theoretical writers.”

He says that sovereignty “can do, in short, everything that is not naturally impossible.” He says that sovereignty is “supreme irresistible absolute authority.” So in his view, sovereignty is not limited by what is just or unjust. It can even take away our rights if it wants to. “Parliament has granted bills of rights,” he says, “but it could revoke those tomorrow if it wanted to.” And that is, by the way, still the law in England today.

Now, Blackstone, of course, when he published this, it kind of upset some people, and one of my favorites is Thomas Jefferson, who was horrified by the popularity of William Blackstone. And in a letter in 1826, he wrote to Madison. He says, “You’ll recollect that at the Revolution, Edward Cook was the universal elementary book of law students, and at that time, our lawyers were all Whigs. But when his black letter text and uncouth but cunning learning got out of fashion and the honeyed Mansfieldism of Blackstone became the students’ Horn book, from that moment, the profession”—lawyers—“the nursery of our Congress, began to slide into Toryism and nearly all the young brood of lawyers now are of that hue.”

So, as early as the 1820s, Jefferson was saying, Oh, no. This idea that government can do anything it wants to is gaining popularity.

Well, the difference between the Lockean and the Blackstonian views of sovereignty is well summed up in another Madison phrase, in an essay he wrote called Charters, where he said, “In Europe, charters of liberty have been granted by power. America has set the example of charters of power granted by liberty.” And that’s really the essential difference between the two views.

Now, what does this have to do with eminent domain? If the government can do anything it wants to and is not limited by natural rights, then it can steal things from some people and give it to other people whenever it wants to, and that’s why Madison, again, in Federalist 51 says, “In a society where a group can come together and despoil the minority, then the people are no more safe than they were in the state of nature before they entered into society.” Or you might as well just have anarchy in that system.

Pivotal Cases on Eminent Domain

In the 1850s, these views became centered on eminent domain law, and there’s two great cases on this that show that these two different views of sovereignty battling it out in the American courts.

One is a Pennsylvania case called Sharpless vs. Mayor of Philadelphia. This is an interesting case. The city of Philadelphia decided to take taxpayer money and invest it in a private railroad by buying railroad bonds, and that was challenged as being taking property from some people and giving it to other people simply because they had more political power, and this was unjust.

And the Pennsylvania Supreme Court took the Blackstonian sovereignty view and said that that was perfectly all right. The court explained that after the Revolution, the people of Pennsylvania had the authority to vest their government with complete power: “If the people of Pennsylvania had given all of the authority which they possess to a single person, they would have created a despotism as absolute in its control over life, liberty and property as that of the Russian autocrat.” So in other words, the people have it in their power to create a czar if they want to. Obviously not the Lockean view.

Only a couple of years after that, the California Supreme Court heard a case called Billings vs. Hall. During the Gold Rush you had a lot of people coming across the plains, and they would settle on land that they thought was just open land but was actually owned by landlords back East, and they would start mining on this property without bothering to find out if it was owned by somebody. And of course, they lived in California, so they could elect the legislature of California, whereas the Eastern landlords, they were back there. They didn’t have anything to say.

So the California legislature passed a law called the Settlers Act that says, well, if you’re a landlord, and you find out somebody’s living on your property, and you want to throw them off, you have to pay them the value of the improvements they’ve made to the land, and if you don’t, you forfeit your land to the squatter.

The California Supreme Court struck this law down: “Such legislation is repugnant to the plainest principles of morality and justice and is violative of the spirit and letter of our Constitution. It divests vested rights, attempts to take the property acquired by the honest industry of one man and confer it upon another who shows no meritorious claim in himself. It has been erroneously supposed by many”—who take the Blackstonian view—“that the legislature of a state might do any act except what is expressly prohibited by the Constitution. Whether there is any restriction upon legislative power irrespective of the Constitution is a question upon which writers have differed, but the question has been settled by an overwhelming weight of authority in this country that they spirit of free institutions is at war with the power to take the property of one man and transfer it to another.” That was a long time ago.

What happened after the 1850s and the coming of the 20^th century was a movement called the Progressive Movement. The Progressives were a group of people who believed that all those ideas of natural rights are outdated. It’s just old fashioned and we need to be modern, like you said, and modern ideas are that rights are really just permissions that are granted to people by the government, and it grants these rights to people because it’s in the interest of the majority.

One of the great expositors of this view was Oliver Wendell Holmes, who wrote a famous decision that is often cited as a root of free speech law, but actually, in the decision Abrams v. The United States, he starts it out by saying, “Persecution seems perfectly logical to me.” This is a great champion of free speech. (laughter)

He said in his famous Lochner dissent that, “government exists for people who differ on fundamental principles. A constitution is not intended to embody a particular political or economic theory,” he said. Which of course is completely wrong. No political philosopher had ever said that. Political society exists among people who share fundamental views about what is right and wrong. They might differ about the particulars, but they believe that theft is wrong, or something, and that’s how they get along. You can’t possibly have a political society among people who differ on fundamentals. But Holmes says, yes you can, that’s what society exists for.

So, interest groups get together and battle it out, and that’s what society is, and there’s no way you can have an unjust law. That’s pretty much Holmes’s view, and that was the view that the Progressives adopted.

They also adopted the idea of massive government regulation of the economy. They instituted things like the income tax, the Prohibition. They instituted all sorts of government regulation, the Federal Reserve. And Louis Brandeis, one of the great heroes of Progressivism, argued that rights of property “must be remolded from time to time to meet the changing needs of society.” So in other words, if your property is stolen from you by the government, it wasn’t stolen, it was just your rights were remolded in the interest of society. (laughter)

Well, the Progressives had their great ascendancy in the 1930s in a case called Nebbia vs. New York, which is one of my favorite cases. It had nothing to do with eminent domain, but it’s a great case because that was the case where the Supreme Court said it was Constitutional to make it illegal for poor mothers to pay less for milk to feed to their babies. New York passed a law setting a minimum price for milk. It was illegal to charge less than that for milk, and the Supreme Court said that’s perfectly okay.

And they said that was okay because they created an idea called “rational basis scrutiny,” and this is very important to understand. In Constitution law today, since the Nebbia case, if the government deprives you of your economic freedom or your private property, then that is almost always Constitutional, the court says, because in those cases, all the law needs to do is be rationally related to a legitimate government interest, which means anything goes, pretty much. If a non-drunk person could have voted for the law, it passes the rational basis test. As Clint Bolick, a hero of mine, is fond of saying, the only things we need to know about rational basis are that it doesn’t need to be rational and it doesn’t need to be the basis.

Nebbia was 1934, and that was where the Supreme Court said the government can adopt any economic policy that it wants to, almost without exception. Twenty years later, in 1954, came Berman vs. Parker, a case you heard about earlier, in which the Supreme Court unanimously said that the government can take property from one person and give it to another if it wants to in the service of a public purpose.

Over the Progressive era, the concept of public use in the Constitution became public purpose, and of course, what is a public purpose? Anything, right? All it has to do is be rationally related to a legitimate government interest. Well, what’s a legitimate government interest? Anybody in here know? Anything that it wants. Anything that it wants is a legitimate public purpose, and we know that because the Supreme Court in a 1987 case called Nolan vs. California Coastal Commission said, “Our cases have not elucidated the standards on which to determine what is a legitimate public purpose.”

Which I submit to you is a shocking statement. After 200 years of American history with the American Revolution, the Declaration of Independence, the Federalist Papers, the Civil Rights struggles, World War II, all of these things in our history, we don’t know what a legitimate government interest is? But that’s the state of things because of the Progressive movement that abandoned the principles of the American founding and adopted instead the Blackstonian notion of sovereignty that said that rights are simply permissions that can be revoked by the government whenever it wants.

That was Berman where the court said “when the government has declared what is in the interest of the public, that is well-nigh conclusive.” And again, that decision was unanimous.

Thirty years later, the Supreme Court hears the next really big eminent domain case, Midkiff, the Hawaii case, where indeed that is exactly what happened. They passed a law saying that if renters want property, they can just ask the state to condemn it from the landlord and sell it to them at bargain basement prices. Again, unanimous Supreme Court decision by Justice O’Connor, who pointed out that the Supreme Court had never struck down a condemnation of property under the public use clause, which was true.

Then of course, there was Kelo.

Justice O’Connor tried, not very convincingly, to say that this wasn’t really like Midkiff and to say that you can have the Hawaii case and this case somehow. But no, you can’t. If private property means private property, then you can’t have Midkiff, and she seems to recognize that. We should note that, since today is her last day as a Supreme Court justice, that perhaps at the end, when it was too late, she saw the light.

Kelo does show some hope, though. I think that there are four judges on the Supreme Court—were four judges, now are two judges on the Supreme Court—who recognized that the government has gone too far in the real estate business.

More on Post-Kelo Reform

Now, as for what to do about reforms. I brought along this paper here. This is “The Backlash So Far, Will Citizens Get Meaningful Eminent Domain Reform.” I think there are probably some copies up there. These are free. If there aren’t any copies out there, or for the home audience, please send me an e-mail at [email protected] and I’ll make sure that you get a copy.

In this paper, I review the laws that have passed so far in the various states. So far, four states have passed eminent domain reform into law, Alabama, Texas, Delaware and Ohio. These laws are almost completely frauds which provide absolutely no protection for private-property rights and are designed simply to make politicians look like they care.

The Alabama law says, “A municipality or county may not condemn private property for purposes of private retail, office, commercial, industrial or residential development, or primarily for enhancement of tax revenue, or for transfer to a person or nongovernmental entity or public-private partnership, corporation or other business entity, provided however, the provisions of this subsection shall not apply to the use of eminent domain based upon a finding of blight under chapters 2 and 3 of Title 24.”

If you look at chapters two and three of Title 24, it tells you what is blighted property. “Blighted property is an area including but not limited to slum areas with buildings or improvements which, by reason of dilapidation, obsolescence, overcrowding, faulty arrangement or design, lack of ventilation, light and sanitary facilities, excessive land coverage, deleterious land use, or obsolete layout, or any combination of these factors are detrimental to the safety, health, wealth, morals or welfare of the community.” So, virtually any property can be declared blighted in Alabama, and once it’s declared blighted, the new law doesn’t apply, so there’s no protection.

Texas does virtually the same thing. The Texas law says you can’t take private property to “confer a private benefit on a particular private party through the use of the property, or to take property for merely a pretext to confer a private benefit on a particular private party.”

Now let’s pause here and point out that Kelo already says that. Kelo says you can’t property for a private use. It just says everything’s a public use, see? So, if you don’t redefine public use or private use, and you simply say you can’t take private property for a private use, Justice Stevens and Breyer and Souter and Ginsburg and Kennedy will say, “Yeah, we said that in Kelo,” and they did. They said you can’t take property just to give it to a particular other person. What you have to do is take the property, declare that this is a public benefit, and then give it to the person.

So the Texas law doesn’t change anything about Kelo. Then it says, you can’t take private property for an economic development purpose unless that’s a secondary thing that just happens as a result of your taking, or you can take property unchanged if it is a slum or blighted area under chapters 373 or 374 of the Local Government Code, and so forth.

And when you look at those sections, they once again say that you can take blighted property, which is “blighted, deteriorating, undeveloped or inappropriately developed from the standpoint of sound community development and growth.”

Of course, remember that the decision about whether the property is blighted, deteriorating and so forth are made by the planning board, the redevelopment agency. And then under rational basis scrutiny, the court is going to say, “We’re not going to interfere.” That’s what the courts do—they defer on these matters.

You hear a lot of people talking about, well, the courts need to defer more and stop making laws. Well, no, they don’t. What they need to do is enforce the Constitution. They don’t need to defer. Kelo was a prime example of judicial deference.

Now, the Texas law does have one advantage, and that is that it repudiates judicial deference. It says the court will apply its independent judgment about whether a use is public, so that is an advantage, and we will give credit to Texas for that. However, we will also note that as liberal, as broad as this law was, it wasn’t broad enough for some legislators, who at the last minute amended the law to allow the Dallas Cowboys to condemn a neighborhood to build a football stadium.

The next one is Delaware. Delaware passed a law that does nothing. I will read the entire text of the law to you. “Notwithstanding any other provision of law to the contrary, the acquisition of real property through the exercise of eminent domain by an agency shall be undertaken and the property used only for the purposes of a recognized public use as described at least six months in advance of the institution of the condemnation proceedings in a certified planning document, at a public hearing, or in a published report of the acquiring agency.”

So in other words, all they have to do is tell you why they’re stealing your property six months ahead of time. Now I guess the idea is that you can get your neighbors together and go and picket. I guess that’s the idea. And that’s nice. And you know, in fact, Mr. Greenhut, in his book, he talks about the case in Lakewood, Ohio, where the city condemned a neighborhood because their definition of blight included if your house didn’t have a two-car garage, and if it didn’t have central air and heating.

60 Minutes did an exposé on this, and the reporter, Mike Wallace, interviewed the mayor and pointed out to her that her house was blighted under this definition. And the voters got together and defeated that condemnation proceeding in a referendum by a fraction of a percent of a vote. I believe it was 51 percent to 49 percent.

Everybody went around saying, “Hey, this is a great victory for private-property rights.” No, that’s not a victory for private-property rights. That may be a victory for the political process, but the idea of property rights is that your rights are not subject to majority vote. You don’t have to go around and get your neighbors to give you the permission to own your house the next day, because you own it. If you have to go around and get a rally going and get all your neighbors to go out and protest, what you have is not a right. It’s just a permission that can be revoked at any time.

It reminds me of a line from Leviathan by Thomas Hobbes, the great English defender of totalitarian government, in which he said that “in a state of nature, there can be no propriety, no mine and thine distinct, but only that is every man’s that he can get, and only for so long as he can keep it.” That’s the situation you have in Ohio.

So let me turn to the new law that was passed in Ohio. The new law in Ohio is the worst of all of the laws. The Ohio law changes nothing about eminent domain. All it does is put a one-year moratorium on redevelopment condemnations. One year. During this year, a committee of 25 people—hand-chosen by the government—will write a report about eminent domain, and they’ll hand the report over to the legislature, which isn’t obligated to do anything with this report.

The law specifically says that it will include predictable defenders of eminent domain, one person delegated by the director of development, another delegated by the director of transportation, one non-attorney representative of private-property owners, one person representing small business, a member who shall be a state-wide advocate on the issues raised in Kelo, whatever that means, and so forth. So, they’ll stack the committee with a couple defenders of property rights and an overwhelming number of people who believe in eminent domain, and there you go.

And, I forgot to mention, the moratorium applies to almost no property in Ohio, because it says it doesn’t apply to a currently ongoing redevelopment project. So, the Cincinnati Enquirer pointed out that probably there’s no property in Ohio that the moratorium will apply to at all.

So, those are the laws that have been passed so far, and that’s what we’ve got. Now one of the reasons why there’s only four is because a lot of states’ legislatures have been out of session, so maybe they’ll do some good.

California, we had three bills proposed. One was Senator Tom McClintock’s bill, which would have imposed actual protections for private-property rights, which was defeated in committee. Then there were two other bills. There was one by Senator Christine Kehoe, which would have imposed a two-year moratorium, like the Ohio one, but the moratorium would have applied only to “owner-occupied residential property,” which would have meant that small businesses were still up for grabs.

And of course, small businesses are the ones most in danger of eminent domain. There was the case of Ahmad Mesdaq down in San Diego who owned a fashionable, upscale cigar store where yuppies would go down and drink expensive coffee and smoke expensive cigars in the Gas Lamp district of San Diego, and the city took it away to build a hotel. And he said, “It’s not blighted.” And the court said, “We don’t care.” And the city said, “Well, if we don’t take it, there’ll be a hundred fewer rooms in our hotel.” Well, there’s a public use for you.

Mr. Mesdaq would receive no protection under the Kehoe bill that was still defeated by the legislature. That was too much for them.

And then, Senator Tom Torlakson proposed a state Constitutional amendment that would have prohibited the condemnation of owner-occupied residential property for private use. Now I’ve already told you that you already can’t take property for private use, and it would again have only applied to owner-occupied residential property, not businesses, or apartment, buildings or anything like that. And even that was too much for the legislature, which defeated that, also, in committee. So none of those bills advanced in the state legislature.

Right now, just a couple days ago, I was informed that Senator Kehoe has introduced a new bill that would, in her view, tighten definitions of blight. This is very important. I explained how loose the definition of blight is in these other states. California is just as bad as these other states. They can declare property blighted if it doesn’t perform well enough in the eyes of the legislature.

And once property is declared blighted, that blight designation never goes away. There was a case that I looked up where they took the person’s property 30 years after declaring it blighted. So these blight designations stay on the books and they’re very vague.

Senator Kehoe’s bill—don’t have it written down, I’m trying to remember—would say that you take property if it’s got a land layout that is inappropriate given present market conditions. So, she’s shown no real interest in protecting private-property owners.

I understand that Senator McClintock will be reintroducing the bill that he had in the legislature last time again, this time as SCA20, but I haven’t heard whether that’s been filed yet or not.

There are four bills currently with the state attorney general’s office that are collecting signatures for placement on the November ballot. Unfortunately, there’s not much money to be made in protecting private-property owners, so whether there will be enough money for signature gatherers is kind of up in the air right now.

Now Pennsylvania has passed a law through their state legislature. One went through the senate, one went through the house. It’s in conference right now, but it looks like it might pass, which is really good. It says blighted property is dangerous property. It’s property that’s going to fall down, or burn up, or kill people, and you can take that, but you can’t take it for economic development. Unfortunately, just before it passed the senate, two exceptions were passed that said you can keep doing redevelopment in Philadelphia and Pittsburgh.

Michigan passed a constitutional amendment through its legislature, so it now goes to the voters, and that’s a very good sign, and it requires public use means really public use. But that’s already the law in Michigan. Michigan has been the leader on this issue, and their state supreme court in July of 2004 said you can’t take property to build Costcos.

You know, we mention Costco very often because Costco is the nation’s leading abuser of eminent domain. Mr. Greenhut refers to them as the Darth Vader of eminent domain. You wonder how they bring you such low, low prices. It’s because they don’t pay for their real estate. (laughter)

And then there’s a bill in the Congress that looks like it will be enacted into law, which would restrict the use of federal funds for eminent domain redevelopment projects. This would be, actually, a major protection for private-property owners, because federal dollars are behind a lot of these condemnation proceedings, including the Poletown case, which was largely funded by the federal government.

Now, quickly, there are two reasons why private-property owners and believers in private-property rights are running into such difficulty in fixing the problem of eminent domain. The number one reason is what’s called the public-choice problem, and that is when the government can take property from some people and give it to other people, it becomes in the interest of everybody in society to spend their time lobbying the government to do that for them. Right?

And the way to imagine it is if there’s—what, a hundred people in this room. If I take a dollar from each of you and I can choose three of my best friends. I’ll choose Derek here, and Steven and David, and I’ll give the $100—the $1 from each of you—I’ll give it to one of them. How much are they going to spend trying to convince me to do that for them? Well, they’ll spend $100 times the one-third chance that they’ll win. They’ll spend $33. Right? How much will each of you spend in trying to convince me not to take away your dollar? Ninety-nine cents, right? Because you don’t want to spend $2 trying to talk me out of taking a dollar from you.

So there’s a huge amount of pressure for me to go ahead and steal the dollar from you, but there’s not very much pressure for me not to take the dollar from you, and that’s the problem of lobbying. It’s described brilliantly in a book by James Buchanan and Gordon Tullock called The Calculus of Consent, and that is the phenomenon of modern government. Most of what government does today, of course, is taking property from people who earn it and giving to people who don’t.

And that’s the second problem that defenders of private-property rights are facing, and that is philosophical groundwork for defending private-property rights.

I’ve gone on about these abstract ideas about Locke and Blackstone and Hobbes, but these are extremely important ideas to understand. We have a society, we have a government, whose primary mission in existence is to steal things from people who earn them and give them to people who don’t.

It’s no wonder that the Supreme Court said they can keep doing that. What were they going to do? Say that you can’t take property away from people who earn it and give it to people who don’t? Where would all those bureaucrats in DC work? So of course, they upheld this kind of redistribution.

The problem is, we have to explain to people how, when the government has the power to take money away from rich people and give it to poor people, it’s only a matter of time before the rich people figure out how to use that for themselves and start taking away property from the poor people for themselves, and that’s the situation we’ve got today.

Only by explaining to people that the only civilized principle is to leave each other alone and respect everybody else’s private-property rights and to respect the principles of the Constitution, including the public-use clause, to understand what a legitimate government interest is, only then can we really protect private-property rights in California and the nation.

Thank you very much.

David Theroux

I might just mention that, as Tim has said, the issue of property rights and the problem with eminent domain really is a fundamental problem. It’s a problem of essentially legalizing the law of the jungle as the basis of society.

I just want to mention in passing that one of the programs that we have in the summer is a summer seminar series for students, for high school and college students, called the Summer Seminars on Liberty, Economy and Society. And this year, we’ll be having two sessions. The first one will be June 26^th to 30th and the second will be August 7^th to 11^th. If you have children or if you know of young people who might be interested, I highly recommend the program. It’s one that focuses on the kind of things that Tim was just discussing and a lot more. This is no trivial question and it’s a lot of why we exist.

Questions for our speakers. How about the gentleman right here? Just wait for the microphone.

Audience Member

We heard it said after Kelo that that kind of thing couldn’t happen in California because California’s laws were different than Connecticut’s, and what would grant a taking. I was in the desert recently and the Cathedral City is popping houses and businesses along Highway 111—which is kind of like a strip from Palm Springs to Coachella—and if you say that is blighted, you could say Palm Springs to Coachella is blighted.

Anyway, we’re told that this isn’t a problem for our state, but I can see all around us that it really is.

Steve Greenhut

Well, the only point I’ll make is I was writing about all these takings, before Kelo, in California, and it’s all happening, and the same thing is happening now, and it was happening before Kelo, and you’re right. Blight is meaningless.

Timothy Sandefur

What’s going on is that the redevelopment robber barons are using that as their sound bite to fool Californians into thinking that nothing needs to be done. The fact is that it is true that property needs to declared blighted before they can condemn it under California law, but the standards of blight are so vague that virtually any property, including Mr. Mesdaq’s fashionable cigar store, can be condemned under California law.

If you go to CastleCoalition.org, there’s a fantastic report there by Dana Berliner called “Public Power, Private Gain,” which documents, just in five years—1998 to 2003—the number of condemnations for private development, and California condemned property eight times more often than Connecticut in those five years.

Now, I was testifying before the senate local government committee and I mentioned this, and John Shirey, the head of the California Redevelopment Association, objected to this and said, “Well, we’re a bigger state than Connecticut.” So that makes it right to steal people’s homes and use it for development? You know, it is simply a lie designed to fool Californians into thinking that nothing needs to be done.

Audience Member

You said that Costco uses eminent domain. How about Wal-Mart?

Steve Greenhut

Yes. Wal-Mart does. Costco is really the worst in that they seem to pride themselves on it. I’ve talked to Wal-Mart officials, one person who does development planning for Costco in Southern California, and they say, “We can’t get properties in the urbanized L.A. basin unless we use redevelopment,” which means subsidies and eminent domain. But if you type in Wal-Mart and eminent domain, you’ll find it too in Arvada, Colorado. Home Depot does it, the New York Times. Ikea. It’s bad. All the big box stores.

Timothy Sandefur

You know, there’s a passage in Mr. Greenhut’s book, which again, you should all buy, in which he documents a Costco lawyer who went to the city council of Lenexa, Kansas and was quoted as saying, “It’s not much of a neighborhood anyway.” Which reminds me of the line from the famous oral argument in the Dartmouth College vs. Woodward case, where Daniel Webster said, “Well, it’s a small college, your honor, but there are those who love it.”

David Theroux

The tradeoff you have here is that in many of these communities, of course, you’ve got so many zoning restrictions, and growth controls, and many other policies. So either it’s very tightly controlled measures, especially in an area like the San Francisco Bay Area, versus these redevelopment projects, and as I mentioned in this book The Voluntary City, we show that there is a third way which is in the interests of everyone, developers, property owners, the poor. But that’s the challenge, is to make that viable.

How about the gentleman right here?

Audience Member

You mentioned developers using the government, but there are instances where the government uses the developers, and I have in mind the Oceanside situation in which anybody who wants to develop any area into private homes must devote 10 percent of the area to low-income homes.

There is a way out. They can pay an in-lieu fee to the city government. The city government has been collecting those fees for 25 years and has amassed $20 million, and thus far has not built one unit of low-income housing.

Steve Greenhut

Well, it’s true, and on the Register editorial page, we’re always defending developers when they want to build their own property and not have their property ripped off. But that doesn’t make it okay for them to turn around and lobby the government to rip off other property owners. So yeah, you’re right. This is California: We can spend the next three years in this room documenting the way the property rights are eroded and destroyed, but it still doesn’t make what we’re talking about any different.

Audience Member

I wasn’t trying to excuse it.

Steve Greenhut

No, I know you’re not. I’m just saying—

Audience Member

This is a devil’s coalition here.

Timothy Sandefur

That’s exactly the right word.

Which is the greater villain?

They’re all villains.

Timothy Sandefur

That’s exactly—that’s exactly right. You know, Dwight Eisenhower warned us about the military-industrial complex, and what we have today is a Costco, Wal-Mart, Ikea, Home Depot government developer complex which sees neighborhoods as artworks for them to sculpt into what they think is beautiful—and your homes and your businesses are the raw materials that they’re going to use in making that sculpture. The developer goes to the city council and says, “Condemn this neighborhood and give it to us, and we’ll build a store and we’ll get rich, and you politicians will look like visionaries because there’s this new shopping area, and the only people who suffer are the property owners, and who cares about them?”

David Theroux

This is why the idea of natural law is so key to the whole issue and why scholars going back to Aquinas and Grotius and Locke, and others emphasized it because it is the plumb line.

How about the lady right there?

Steve Greenhut

They’re looters from Ayn Rand’s novels is what they are.

Timothy Sandefur

That’s right.

There are four initiatives before the Attorney General now. They’ll be released next week. Does anybody know anything about any of them, and what might be the easiest to get on the ballot and to get approved?

Timothy Sandefur

There are four. One of them is kind of a ghost initiative. Nobody seems to know where it came from. I haven’t read it all the way through. I hear that it’s got some traps in it. The three that I do know about, one of them is by the San Jose—Californians for Redevelopment Reform. It’s an excellent proposal from a property-rights perspective. It was based on language from the Institute for Justice.

And there is a measure that was drafted by attorneys from the Howard Jarvis Taxpayers Association, which is also very protective of private-property rights. What’s unique about it is that it would also affect some—not very many, but some—regulatory takings, which is when government comes and passes a law that deprives you of the value of your property but lets you keep owning it.

And then there’s a bill that was written by Senator McClintock, which is also up for the ballot, and that one simply prohibits the use of eminent domain if the government doesn’t keep hold of the property. So in other words, if the government wants to open up its own retail establishment, it can, but it would have to create one of those. But essentially what it does is it prohibits the government from transferring any property to a private developer.

So the McClintock one and the Howard Jarvis one, as far as I’ve heard, are probably the most likely to get on the ballot, but they need to get enough signatures.

David Theroux

How about the lady right here?

If we have three or four initiatives on the ballot, are people going to be confused, and how do we winnow these down to one good one and get everybody behind it?

Timothy Sandefur

That’s y’all’s job. My job is to defend them in court, but your job is to pass these things.

Audience Member

Do you see any of them that actually might make a difference? You’ve already talked about a few, but there are many others.

Timothy Sandefur

I have not kept track of all of them. I know that there’s one, for example, that would imply some good protections, but only for agricultural property and things like that. And so I haven’t followed all of them. And some of the provisions are actually to expand the power of redevelopment agencies. Those kinds of things can get passed through the legislature.

But the ones that I know of that are most protective for private-property rights are the two McClintock bills. One of them is on the Attorney General’s Web site, and one of them is the one that he’s going to reintroduce, I’m told, into the state legislature, and then the Howard Jarvis Taxpayers Association bill, which is on the Attorney General’s Website.

Steve Greenhut

The best one is, this being California, the best one is accidental. Richard Alarcon—he’s far to the left. He had a bill to require that anyone who takes government funding on these redevelopment projects pay union wages, and it passed. It’s law now, and it works. I know an attorney who, he calls up the folks who are considering using eminent domain and redevelopment and says, “You know you’re going to have to pay union wages on everything, and we’ll sue to make sure,” and all of a sudden that balances it. (laughter) But so, it’s useful, but I’m now a big fan of Richard Alarcon. Just kidding. (laughter)

You both have talked at great length about the public-use clause of the Fifth Amendment. I was wondering if you could talk a little bit more about the just-compensation clause and how the courts have defined it, and perhaps more importantly, when they defined just-compensation in the eminent domain process.

Steve Greenhut

I’ll just say on, what I see happening is people are not made whole. And what’ll typically happen is the city will offer well below the known market value, or they engage in growth capture. Just as an area’s about to boom, they call it blighted and then they pay the person based on the old market rate and then give it to the developer who gets to reap all the gain.

But what’ll happen typically is, let’s say I’m offered $500,000 for a property I believe to be worth $1 million. I go to court. I get—and usually juries are good about that—I’ll get the million dollars, but then 30 percent of the difference between the $500,000 and the million goes to my attorney, and there’s nothing wrong with attorneys—

Timothy Sandefur

Thank you.

Steve Greenhut

—but there’s something wrong with the law that doesn’t allow me to be made whole, because you’re not allowed to pay more than the million, because that would be a gift of public funds, so these people are not made whole, anywhere near whole.

Timothy Sandefur

That’s true. Just compensation is a complicated area of the law that I’m not a specialist in. I do know that there was an attorney who testified before the state legislature, in fact, the same day that you were there, Mr. Revelli. Was it Karen Forstrom? And she explained that she makes her living off of these cases because the city offers such a lowball figure that when she goes to court and wins, she can live off the 3 percent or whatever it is of the difference between the just compensation they offered and the actual just compensation. And that’s enough to pay her bills.

And in some states, things like business goodwill are not compensated, you know, the idea being that you’re paid for what the government has taken from you, not for what the government gets or something. But, yes, they certainly give lowball figures.

I’ll give one more example. In Visalia, there’s a case going on right now where the city has condemned a theater to sell to another theater company. And what happened there was, the theater company that wants to purchase the property, one of their employees got an appraisal of the property without the owner’s consent, and it was some lowball figure that the owner disputes. And then this guy got elected to the city council, and now he’s using that appraisal as the just-compensation figure now that he’s on the city council.

Steve Greenhut

And even states like California that allow the payment of goodwill, lo and behold, the city officials never think there’s any goodwill in the business, so it’s pointless. But Florida does require payment of attorney’s fees, so something like that is—

Timothy Sandefur

That’s in the McClintock bill, the ballot initiative bill.

Steven Greenhut

That would be a huge help, anyway.

I think it’s interesting just to find out if you can ever own a home. (laughter) Did you ever look at what it takes to get a building permit? Maurice Johansen once had a big billboard up in Vacaville. It said, “Welfare is hard to get as a building permit.” We’ve got school fees, traffic mitigation fees, permit fees, green building requirements. You’ve got 10 percent, 20 percent of the cost of your construction just in paperwork.

Timothy Sandefur

That’s exactly right. The largest factor is permission.

Audience Member

I run a small office of 300 square feet. They want me to redo the parking lot’s handicap space. “There’s a little ramp part that interferes with where the car tire might go. We think you should redo that.”

These are the ridiculous costs of compliances that are worse than the taxes in our country.

Steve Greenhut

In one site in Orange County, there was a rut caused—this a true story—by construction equipment which proceeded to fill up from the rain, and that became a wetland. (laughter)

Timothy Sandefur

Which means it’s subject to federal control as well as state control.

You still pay the property taxes, yet you can’t use your property. Tim Sandefur, I forgot it, but I’m writing a check for $200 to your wonderful organization. They are the best. They help people like you wouldn’t know. I write a little something to them every year, and this year it’s going to $200. The Pacific Legal Foundation is a real standup outfit, and this Independent Institute seems to be right behind them, so thank you.

Timothy Sandefur

Thank you very much. We really depend on people like you. Thank you.

David Theroux

How about this gentleman right here.

Audience Member

Well, I feel very strongly about this as well, and I think property rights are so critically essential, but there’s some things that I’m a little confused about. It seems a little bit like a whose-ox-is-getting-gored kind of an issue throughout history, and I think that, for example, California, when you look at California history, California history is a poster child of eminent domain.

And reference was made earlier to squatters who were taking away the property of those who owned that property rightfully, and with my knowledge of the history of how that occurred, it’s a little confusing because those people who owned it fair and square had stolen it fair and square from the Mexicans who had stolen it fair and square from the Indians. And so how does that fit into this?

Timothy Sandefur

It’s handled by a legal principle called the bona fide purchaser. It’s more complicated than it’s worth getting into, but under the Treaty of Guadalupe Hidalgo, the federal government recognized land grants from the Mexican government, so it’s not necessarily true that the Californians stole it from the Mexican government. It may be true that the Mexican government stole it, but there’s—

They stole it from the landowners. They stole it from those who had the land grants.

Timothy Sandefur

Yeah. It may be true that the Mexican government stole the property, and Mexican land law was extremely complicated, and very vague, and badly written, but in any case, over the passage of time, that principle has simply gone away.

David Theroux

Also, it gets back to what Tim was saying earlier about the Lockean idea, which as I said, goes back earlier in history. I mean, the basic concept of property rights boils down to the idea of transforming unused, unowned land or other property, and then exchanging that with people. There are basically two ways of obtaining wealth or property, and one is by transforming and exchanging it, or by seizing what others have transformed and exchanged. And so, that principle as essentially the principle of natural law, is the principle that the founders were talking about.

So, in these historic questions, and these are important issues, and there are many different interesting cases. For example, on the border of Texas at the turn of the 20^th Century, there were some interesting cases about people whose land was taken by the state of Texas, and they actually had the deeds that were presented to the court, but the court simply threw them out because of this whole idea of sovereignty.

Timothy Sandefur

Let me just add to that, Locke actually says it’s okay to take property through eminent domain if it’s not being used, and I think it’s very funny that now we take property in order to let it sit there and have nothing done with it.

We’ve heard a lot about the response within the legislature to try to reform eminent domain in response to Kelo, but I’m curious about the next step, the next frontier within the courts, primarily work done by groups like Pacific Legal Foundation, Institute for Justice. Are they targeting a specific set of facts that they can hopefully get to the Supreme Court to give them an opportunity to further refine the law or better refine it in the wake of Kelo, or have they largely abandoned that based on Kelo and just limited themselves to the legislatures?

Timothy Sandefur

Well, we certainly haven’t abandoned it. There’re two routes that we’re taking right now. One of them is litigation in the state courts. Even the Kelo case itself recognizes that state courts can limit eminent domain more than the federal courts have, and the Michigan Supreme Court has already done that, and there are some favorable decisions in Arizona and in Washington state.

I believe that the California Constitution already prohibits the private use of eminent domain. Unfortunately, that theory has never even been tried in a California court, so we’ll see.

And then, of course, we’re still litigating in federal courts. I just filed a brief in a Texas case in which a redevelopment agency is condemning a shrimp company in Freeport, Texas. In that case, there’s a clear, private beneficiary from eminent domain.

And the Kelo case is kind of wishy-washy on this. It says, well, there’s no obvious, particular beneficiary from this condemnation in this case, so therefore, it’s a little different, and so we’re going to try and push that and point out that here’s a case where you do have a clear beneficiary, a multimillionaire named H. Walker Royal, an heir to an oil fortune, who is running the development company that is seizing this property.

Steve Greenhut

Don’t forget some local ways of fighting it. I mean, in California, if you get two members of any city council who are opposed to eminent domain, you can stop it. You don’t need a majority. You stop it dead in its tracks.

And the city of Anaheim is doing something interesting. They’re changing zoning, making it easier for property owners. They’re deregulating. And it’s an alternative to redevelopment. They’re saying you can do what you want with your property and we’re not going to use eminent domain, and by changing the zoning, we’re adding value to it, and that’s a good template for other cities to follow, so there are some templates to follow in the local level from a political standpoint.

And that helps. I’m not saying we don’t need legal action, but it’s certainly something that can be done while you wait for the things to wind through the courts.

Timothy Sandefur

And really, I think the most important thing of all is philosophical change, and education, and understanding these principles, and that means teaching these things to your kids and reading things like Mr. Greenhut’s book or Richard Pipe’s book, Property and Freedom, or The Noblest Triumph by Tom Bethel, and other excellent private-property rights books, and teaching these things to your neighbors and your friends, and spreading the word about these things, and telling people that it’s not right to take somebody’s property and give it to a Costco, and it’s not right to take a rich person’s property and give it to a poor person either.

David Theroux

So that, I’m afraid, that’ll have to be our last comment. I want to thank our speakers for joining with us.

(applause)

David Theroux

I want to thank Steve Greenhut in particular for his great book called Abuse of Power, and there are copies for those of you who don’t have copies. I’m sure he’d be delighted to autograph them for you.

I want to thank you all for joining with us and for our viewers from C-Span. We’re delighted that we had a chance to have you join with us for what’s a very important issue, and we look forward to your joining with us the next time. Thank you and good night.