Eminent Domain - Missouri's Response to Kelo
Stanley A. Leasure1
Carol J. Miller2
Kelo sparked a national controversy concerning the use of eminent domain with economic development projects, prompting legislative response in Missouri.
Introduction
The use of eminent domain to facilitate economic redevelopment projects has become controversial. This debate was brought to the forefront by the recent 2005 United States Supreme Court decision in Kelo v. City of New London,3 wherein the Court held that the use of eminent domain for economic development purposes does not violate the takings clause of the Fifth Amendment to the United States Constitution. From a practical standpoint, the Kelo decision may have left open more questions than it resolved. As Justice Stevens noted in the majority opinion: “We emphasize that nothing in our opinion precludes any State from placing further restrictions on its exercise of the takings power.”4
This holding ignited a nationwide debate over the policy issues attendant to the use of eminent domain for purposes of economic development, especially where working-class houses (in good repair) and functioning small businesses were condemned in favor of large scale redevelopment projects. At the heart of this debate is an attempt to balance private property rights against city planning and economic development priorities aimed at generating greater tax revenue and jobs.
Since the Kelo decision, state government task forces and legislative bills have reassessed the scope of permissive use of eminent domain. In this article we examine (1) the Kelo decision, (2) the extent to which Missouri case law supports a broad interpretation of “public use” inclusive of economic development, (3) the role of “blight” as a prerequisite to taking property via eminent domain in Missouri, and (4) the recommendations of the Missouri Task Force on Eminent Domain and legislative revisions to Missouri’s eminent domain laws in response to the Kelo decision.
Kelo v. City of New London
A. Background5
The City of New London, Connecticut created a redevelopment plan for a 90-acre tract of land within its jurisdiction. Under the plan, this tract was divided into seven parcels to be used for a variety of purposes, including a conference hotel and urban village, with restaurants, shopping and commercial establishments, office space, residences, a Coast Guard museum, a renovated marina and river walk, with an adjacent state park and parking support. Pfizer Company also announced its plan to build a large research facility on a site adjacent to the project area. Under Connecticut’s municipal development statute (through which authority had been delegated to the New London Development Corporation), the city authorized acquisition of the land needed for this project through private negotiation and eminent domain. The objecting parties owned property in the project area (primarily middle class residential property). The properties in question were not blighted or in poor condition. They were being condemned only because they were in the project redevelopment area.6
Landowners argued that the condemnations were in violation of the takings clause of the Fifth Amendment to the Constitution. The trial court upheld some, but not all of the takings. On appeal by both sides, the Connecticut Supreme Court ruled that all of the takings were valid since the project was for public use. Certiorari was granted by the United States Supreme Court to determine “whether a city’s decision to take property for the purpose of economic development satisfies the ‘public use’ requirement of the Fifth Amendment.”7
B. Majority Opinion
The United States Supreme Court, divided 5-4, affirmed the decision of the Connecticut Supreme Court. Justice Stevens wrote the majority opinion, joined by Justices Kennedy, Souter, Ginsburg, and Breyer.
The broad issue was whether the proposed acquisition of the property by the city qualified as a public use within the takings clause of the Fifth Amendment to the United States Constitution, which provides that “private property [shall not] be taken for public use, without just compensation.” Recognizing precedent that broadly interpreted “public use” to include “public purpose” and “public benefit,” the case turned on the narrower issue of whether the city’s economic redevelopment plan served a “public purpose” and, if so, whether that satisfied Fifth Amendment requirements.8
In equating public purpose with public use, the Court followed the precedent of Berman v. Parker9 and Hawaii Housing Authority v. Midkiff.10 In doing so, the Court (1) broadly defined the concept of public use (rejecting an “employment test” requirement that use by the general public was necessary to satisfy the public use requirement of the Fifth Amendment), and (2) followed a longstanding deference to the legislative branch of government as to what constitutes public use.11
In Berman, the Supreme Court upheld a redevelopment plan of a blighted area with substandard housing and lack of sanitary conditions in the District of Columbia, concluding that it would not second-guess the legislature in its determinations “of public needs to be served by social legislation.”12 In Midkiff, the Court unanimously upheld a state statute by which title to real estate was taken (for just compensation) from historic landowner oligopolies and transferred to new landowners to reduce the concentration of land ownership in Hawaii. The Court again gave great deference to the legislature’s determination that eliminating the social and economic evils of land oligopoly qualified as a valid public use.13
Relying on these earlier cases, the Kelo Court held that New London’s economic redevelopment plan served a public purpose and that the takings of middle class property satisfied the public use requirement of the Fifth Amendment. In affirming the takings, the Supreme Court ruled that: (1) the plan developed by the City of New London was legitimate; (2) it was designed for a public purpose because, in part, the state statute on which the condemnation action was filed authorized such actions to meet the needs of industry and business; and (3) it was carefully developed to increase jobs and the tax base.14 Giving deference to the city’s plan and determination that eminent domain was required to effectuate that plan, the Court held that economic development constituted a public purpose that could reasonably benefit the public15 and that such use was not violative of the takings clause of the Fifth Amendment to the United States Constitution.16
The Court concluded that economic development should not be distinguished from the other public purposes previously approved by the Court, such as: facilitation of mining and agricultural support; eradication of urban blight; and elimination of concentrated land ownership.17 The majority rejected the landowner’s invitation to adopt a bright line rule which would exclude economic development from the scope of public use. While recognizing that a condemnor cannot take private property from one person for the direct purpose of transferring it to another for private benefit, the majority in Kelo was not persuaded that economic development takings “blurs the boundary between public and private takings.”18
Additionally, the Court rejected the landowners’ argument that the public benefits flowing from the proposed development should be determined with “reasonable certainty.”19 The Court emphasized that in construing other sections of the Constitution, it has held that when the legislative purpose was legitimate and its means were reasonable or not irrational, the wisdom of the details of the legislative plan will not be second-guessed through judicial review. Such a limited scope of judicial review precludes the qualitative judicial review advocated by dissenting judges, and, instead, is consistent with Justice Beyer’s “purposive” approach emphasizing deference to the legislature.20
C. Dissenting Opinions
The constitutional and philosophical schism on the Supreme Court was apparent in the vigorous dissent written by Justice O’Connor (and joined by Chief Justice Rehnquist and Justices Scalia and Thomas) and in the separate dissent drafted by Justice Thomas. Dissenting justices saw two distinct limitations in the Fifth Amendment’s takings clause: public use and just compensation requirements. They viewed the public use requirement of the Fifth Amendment as a basic “limitation” on the exercise of the power of eminent domain, restricting the scope of the power by which the state may compel forfeiture of private property for public use.21
In his dissent, Justice Thomas lamented the Kelo decision as another in a line of cases nullifying the public use clause. From his perspective, the purpose of the public use clause was to permit the government to take property only when the government will own the property or the public will have a legal right to use it.22 Justice Thomas rejected the notion that the legislative judgment as to public use was entitled to any deference by the Court.23 In his conclusion, Justice Thomas espoused the originist view, stating:
When faced with a clash of constitutional principle and a line of unreasoned cases wholly divorced from the text, history, and structure of our founding document, we should not hesitate to resolve the tension in favor of the Constitution’s original meaning.24
While acknowledging that deference is to be given to the legislative branch in determining what government activities will advantage the public, Justice O’Connor concluded that if the Fifth Amendment is to retain any meaning, the judicial branch must exercise its responsibility to interpret the public use requirement.25 The dissenting justices recognized that there have been takings which the Court had characterized as public, even if the property was later to be transferred to private ownership. In those cases, Justice O’Connor emphasized that the public purpose was accomplished with the elimination of the harmful use or social evil.26 It is with this distinction that Justice O’Connor attempted to mitigate the strong legislative deference standard that she advocated in her majority decision in Midkiff.
From the perspective of the dissenting justices, the majority opinion allows the state to take private property (currently in ordinary private use) and transfer it to a new ordinary private use, as long as the new use is predicted to generate some secondary public benefit, such as taxes, jobs or aesthetics.27 Since nearly any lawful use can be said to generate some incidental benefit, the majority holding does not preclude any takings and:
The beneficiaries are likely to be those citizens with disproportionate influence and power in the political process, including large corp-orations 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.28
Public Use & Blight in Missouri
Justice William Brennan advocated that the federal Constitution provides the floor for protection of individual rights and the constitutions of the states provide the ceiling.29 The majority in Kelo emphasized that the Court’s holding only extends to the determination that the proposed condemnations in New London were consistent with public use requirements of the Fifth Amendment of the federal Constitution. Importantly, the Court pointed out that nothing in its opinion precludes a state from restricting the exercise of its takings power, either constitutionally or statutorily.30 States that wish to preclude or limit the use of eminent domain for economic development are free to do so.
In this section, the authors explore how the Missouri Constitution, statutes and court interpretations have addressed the breadth of public use, how economic development projects are facilitated and the role of blight in justifying the use of eminent domain.
A. Determination of “Public Use”
In St. Charles v. DeVault Management, the Supreme Court of Missouri identified a three-step analysis to be used in evaluating the legitimacy of a condemnation action:
[1. I]s there constitutional, statutory or ordinance authority for the exercise of eminent domain;
[2. I]s the taking for a public use;
[3. H]as the condemning authority complied with the conditions precedent to the bringing of the action. 31
The Missouri Constitution, paralleling the federal Constitution, recognizes that: “[P]rivate property shall not be taken or damaged for public use without just compensation.”32 Missouri’s Constitution, article 1, section 28 also precludes the “taking of private property for private use”33 and requires the use to be public (with limited exceptions):
That private property shall not be taken for private use with or without compensation, unless by consent of the owner, except for private ways of necessity, and except for drains and ditches across the lands of others for agricultural and sanitary purposes, in the manner prescribed by law; and that when an attempt is made to take private property for a use alleged to be public, the question whether the contemplated use be public shall be judicially determined without regard to any legislative declaration that the use is public.34
Inasmuch as the determination of what constitutes public use has been constitutionally vested in the judicial branch, Missouri case law interpreting the meaning of public use in the context of eminent domain will be examined. Using rationales similar to Kelo, Missouri cases have supported the broad public benefit approach to the determination of what constitutes public use.
In 1923, the Supreme Court of Missouri identified the two primary theories of judicial interpretation of the term “public use” in the case of Kansas City v. Liebi.35 First, the employment-occupation theory requires the public at large or its agencies to actually possess, occupy and enjoy the property to be taken. Second, the broader public advantage–public benefit theory allows takings which foster growth, new resources and productive powers of “any considerable number” of the residents to qualify as a public use. After an extensive review of the case law, the Court adopted the broader benefit view, concluding that the public character is not negated by the fact that a particular group or individual is advantaged by a public improvement.36
Subsequently, in Arata v. Monsanto Chemical Co.,37 the Supreme Court of Missouri said that it is “not necessary [for] the whole community or any large part” to benefit or use the property for the project to qualify as public use for eminent domain purposes.38 Even if “eminent domain [is] used to help a private enterprise,” as “long as the primary benefit is to the public,” the use is considered public.39 Consequently, the operation of private entities can qualify as a public use if they benefit the public.
Illustrative of this point is Phillips Pipe Line Co. v. Brandstetter.40 A pipeline company sought to condemn a right of way for the purpose of the installation of an underground pipeline. Landowners contended that since the condemning authority was a subsidiary of Phillips Petroleum Company and most of the pipeline’s business was with its parent, the proposed condemnation constituted a private rather than a public use. The court declared public use to be the equivalent of public benefit and defined the issue as whether the pipeline company was willing to accept business from the public, as opposed to a selected or limited clientele. In applying these rules, the court declared that since the condemnor carried products for companies other than its parent and held itself out as a common carrier, subject to regulation by the Interstate Commerce Commission, the contemplated use was a public one.41
The approach taken by the Missouri appellate courts with respect to the question of public use is further exemplified in the case of Kansas City v. Hon.42 The city’s position was that it wanted to acquire property to “expand the airport to its natural boundaries” and to “protect [it] from incompatible development.”43 Deciding that the acquisition was for private rather than public use, the trial court determined that the condemnation action by the City of Kansas City was illegitimate.44 The court of appeals deferred to the trial court’s finding that the tracts were sought for “future commercial, industrial-aeronautic-related development and to avoid future incompatible developments.”45 But it rejected the landowner’s contention that public use with respect to airports is limited to runways and terminals. Instead, the court noted that public purpose is to be given a broad and flexible definition and one that is “elastic, and keeps pace with changing conditions.”46 Additionally, the appellate court rejected the argument that subsequent potential use of the property by private entities (such as air cargo companies and aircraft manufacturers) precluded a finding of public purpose.47
The task of the reviewing court is to decide whether the entity or board has been delegated authority to exercise eminent domain and to determine if the purpose is for a public use. Numerous Missouri cases have held that it is not the court’s role to second guess the motive of the legislative body48 or the wisdom of its decision.49 The Hon court acknowledged that the Missouri Constitution vests in the judiciary the determination of what constitutes public use, “without regard to any legislative declaration that the use is public.”50 However, the Hon court maintained that the fact that the legislature had determined that airport uses were public was one piece of evidence to consider at the condemnation hearing.51
Missouri courts have continued to take a permissive attitude toward public use in eminent domain cases.52 “Public use” has been deemed synonymous with “public benefit,”53 thereby aligning Missouri law with the posture of the holding in Kelo. It has been determined to be a flexible, elastic concept, expanding with time.54 In J.C. Nichols Co. v. City of Kansas City,55 the Supreme Court of Missouri declared that the definition of “public use” will likely vary from case to case and “that no ‘hard and fast rule’” exists for making a determination on this issue. The determination of public use has also been characterized as a public policy issue, highly dependent on the specific facts and circumstances.56
B. Facilitating Economic Development and the Determination of “Blight”
As the Supreme Court of Missouri noted in St. Louis H. & K.C. Ry. Co. v. Hannibal Union Depot Co., “[t]he power of the state to appropriate private property to a public use is an inherent element of sovereignty.”57 The eminent domain power is not inherent to municipalities, however, which can only exercise powers delegated to them by the general assembly.58 Municipalities “must be able to point to the statute which either expressly or by necessary implication confers that right.”59 Since this power “is in derogation of the [property] right[s] of the citizen[s],” any statutory delegation of this power should be strictly construed.60
Municipalities frequently engage in a public-private partnership to foster economic redevelopment projects.61 In Missouri, various statutory approaches are available to facilitate redevelopment projects, each of which can use the power of eminent domain to take “blighted” property if approved by the city or county and the redevelopment authority. Most projects fall under one of the following statutory grants of authority.
1. Municipal Housing Land Clearance Redevelopment Law: Municipalities and counties with 75,000 or more inhabitants have Land Clearance for Redevelopment Authority (LCRA) that can exercise eminent domain and other authority subject to ordinance or resolution where areas in the community are deemed to be “blighted, or insanitary” and “the redevelopment . . . is necessary in the interest of the public health, safety, morals or welfare of the residents of such community.”62 Smaller communities can opt in with voter approval of provisions of this law.63
2. Planned Industrial Expansion Act: A Planned Industrial Expansion Authority (a public body corporate) answerable to a city council can be appointed to prepare a development plan and consider proposals from developers. Projects can involve acquiring, selling or leasing “blighted, insanitary and underdeveloped industrial areas” and clearing, remodeling, constructing or installing improvements on such land for industrial or commercial use pursuant to the plan.64
3. Urban Redevelopment Corporations Law: An Urban Redevelopment Corporation (URC) (a private entity) can be organized under general corporation laws to carry out redevelopment plans approved by a city or some counties.65
4. Tax Increment Financing (TIF) under the Real Property Tax Increment Allocation Redevelopment Act: Growing in frequency and controversy is the use of Tax Increment Financing (TIFs) for redevelopment projects.66 Notes or bonds issued by the city are used to help finance certain developer costs. Payments in lieu of taxes are made by businesses in the TIF zone to a special allocation fund that is used to pay off the notes, rather than becoming part of the general revenue of the municipality to be used for more diversified purposes. While most of the TIFs are in an urban setting, TIFs have been used in more rural sections of the state also.67
The Missouri Constitution article VI, section 21 authorizes the use of eminent domain for the elimination of blight and this has become a very controversial aspect of the public-private partnership for redevelopment in Missouri:
Laws may be enacted, and any city or county operating under a constitutional charter may enact ordinances, providing for the clearance, replanning, recon-struction, redevelopment and rehabilitation of blighted, substandard or insanitary areas [emphasis added], and for recreational and other facilities incidental or appurtenant thereto, and for taking or permitting the taking, by eminent domain, of property for such purposes, and when so taken the fee simple title of the property shall vest in the owner, who may sell or otherwise dispose of the property subject to such restrictions as may be deemed in the public interest.
The benchmark case in Missouri related to the condemnation of real property in connection with blight is the 1954 case of State ex inf. Dalton v. Land Clearance for Redevelopment Authority of Kansas City.68 A city council resolution in Kansas City declared a particular section of the city to be a blighted or insanitary area. Under the redevelopment plan, a number of buildings were to be removed and the use of the power of eminent domain was authorized. Affected landowners contended that the Municipal Housing Land Clearance for Redevelopment Authority Law69 violated Missouri’s Constitution and the 14th Amendment of the Constitution of the United States because it authorized the exercise of eminent domain authority to acquire private property for private use.70
Under the redevelopment law, private ownership of the condemned property takes place only after acquiring and clearing of the property, at which point the property is sold to a redeveloper who is required to proceed according to the redevelopment plan. In analyzing this case, the Supreme Court of Missouri considered article VI, § 21 of the Missouri Constitution in juxtaposition to article I, § 28 of the Missouri Constitution. The Supreme Court of Missouri saw its task as attempting to give effect to both provisions of the Missouri Constitution, if possible.71
The Supreme Court of Missouri held that these sections, construed together, mean that it is the role of the courts to decide whether the contemplated use of any property taken under the redevelopment law is “public.” However, the Court judicially accepts as “conclusive evidence” a legislative finding that the property is blighted or insanitary and that clearance, improvement and subsequent sale was for public use, unless it is clearly established “that the legislative finding was arbitrary [or capricious] or was induced by fraud, collusion or bad faith” (statutory grounds).72 Thus the Court, in effect, deferred to the legislature, despite the requirement in the Missouri Constitution, article I, section 28, that “the question whether the contemplated use be public shall be judicially determined without regard to any legislative declaration that the use is public.” 73 As the Court noted:
Both the statute and the undertakings of respondents pursuant thereto clearly demonstrate that the purpose in acquiring the land is to rid it of its blighted and insanitary condition and to thereafter convey it to redevelopers for conversion to useful purposes in accordance with the redevelopment plan. The great weight of authority is that there is no private grant when land is cleared for the purposes herein contemplated and is thereafter sold at a loss, but for its then fair value.74
The Court also declared that the incidental acquisition of non-blighted property within the redevelopment area was also permissible because to hold otherwise would defeat the purpose of clearance and redevelopment of the blighted areas.75
In Tierney v. Planned Industrial Expansion Authority,76 the Supreme Court of Missouri deferred to the legislative determination that blight existed, despite the owners’ argument that the concept was too broadly applied. Using a rationale similar to Kelo, the city council of Kansas City declared land “blighted” because of “economic underutilization” under the Planned Industrial Expansion Act of 1967 and established the Planned Industrial Expansion Authority (PIEA). Because “urban land is scarce” and “[i]ndustrial development is a proper public purpose,”77 broad use of blighting is permissible to obtain contiguous land blocks of sufficient size for economic redevelopment projects even if some of the property in the area is not in blighted condition.
Land taken through eminent domain must meet the definition of blight or near-blight (conservation area) or insanitary or unsanitary, depending on the authority doing the taking. Under the Planned Industrial Expansion Law (1967, 1986),78 the Municipal Housing Land Clearance for Redevelopment Law (1951, 1972),79 and the Real Property Tax Increment Allocation Redevelopment Act (1982, 1997), property can be considered blighted with either economic or social liability and the plain language of these two statutes does not require both. These three laws contain identical language, except that the word “insanitary” in the older two statutes was replaced with “unsanitary” in the Real Property Tax Increment Allocation Redevelopment Act. The Real Property Tax Increment Allocation Redevelopment Act provides that a “blighted area” is:
an area which, by reason of the predominance of defective or inadequate street layout, unsanitary or unsafe conditions, deterioration of site improvements, improper subdivision or obsolete platting, or the existence of conditions which endanger life or property by fire and other causes, or any combination of such factors, retards the provision of housing accommodations or constitutes an economic or social liability or a menace to the public health, safety, morals, or welfare in its present condition and use[.]80 (emphasis added)
In addition, a conservation area in which more than half of the structures are older than 35 years may become blighted as a result of factors such as obsolescence or dilapidation under the Real Property Tax Increment Allocation Redevelopment Act.81
The Missouri legislature has adopted a similar statutory definition of “blighted area” in § 352.020 under the Urban Redevelopment Corporation Law, with one notable difference. Where the private development corporation is involved, there must be a finding of both economic and social liabilities.
[The] portion of the city within which the legislative authority of such city determines that by reason of age, obsolescence, inadequate or outmoded design or physical deterioration have become economic and social liabilities, and that such conditions are conducive to ill health, transmission of disease, crime or inability to pay reasonable taxes.82 (emphasis added)
The Supreme Court of Missouri recently considered the above section in Centene Plaza Redevelopment Corp. v. Mint Properties,83 concluding that there must be “substantial evidence” to support the finding of both “economic and social liability” for property to be considered a blighted area under the Urban Redevelopment Corporation Law. Finding that substantial evidence of social liability was lacking, the Court did not defer to the legislative determination. In the absence of a statutory definition, the Court inferred that a “menace injurious to the public health, safety, morals and welfare” was the historical context for “social liability.”84 The determination that an economic liability existed because of the age, obsolescence, inadequate or outmoded design or physical deterioration of some of the property satisfied the economic prong of the requirement, but not the social prong.
Clayton, Missouri, was the site of the redevelopment plan in which Centene Plaza sought to redevelop its own properties and five other properties to be acquired by eminent domain if necessary. The per curiam decision concluded that it was insufficient to focus “upon the prospective benefits of redevelopment – not the current state of the properties themselves. The city’s ultimate goals for the area cannot serve as probative evidence of social liability in light of the lack of evidence concerning public health, safety, and welfare in the record. Furthermore, if evidence to support a finding of economic liability could also constitute evidence to support a finding of social liability, the plain language of section 353.020 would be defeated.”85
Prior to enactment of the eminent domain reform law in 2006, challenges to the legislative determination that an area is “blighted, substandard, or unsanitary” were based solely upon a showing that the decision was “arbitrary or capricious or induced by fraud, collusion, or bad faith.”86 The 2006 law added the requirement that the legislative determination “shall be supported by substantial evidence.”87 The prior requirements and new standard were joined by the conjunctive “and.” Concluding that the City of Clayton failed to meet either standard, the Court did not rule on the potential retroactive application of the new statutory language.88 Query whether future courts will be less apt to defer to legislative determinations of what constitutes blight in light of the addition of a substantial evidence requirement.89
The public-private partnership between municipalities and developers,90 coupled with tax increment financing (TIFs), has increasingly blurred the line between what is public use versus private development. Under the Real Property Tax Increment Allocation Act, an area must first be declared blighted with economic underutilization as a prerequisite to using TIF.91 To finance many of the costs associated with redevelopment projects, bonds or notes are often sold, with payments in lieu of taxes (PILOTS) being dedicated to a “special allocation fund” that is then used to retire the debt.92 To the extent that the assessed valuation of property within the redevelopment area has increased, taxes on the increased value are abated. Instead, the businesses make payments in lieu of taxes equal to the amount that would have been collected on the increased assessed valuation. Because these payments go into the special allocation fund, this revenue is not more generally available to support schools and other local needs. TIFs provide money up front for the developer, which is paid back with the PILOTS earmarked to such projects.93 The intertwining of the public interests (of the city in fostering urban renewal and increased revenue base) with the benefits that flow directly to private developers suggests that the public versus private dichotomy is no longer clear.94 Nevertheless, the constitutionality of the Real Property Tax Increment Allocation Redevelopment Act has been upheld against challenges that it increases a tax levy without voter approval, violates the equal protection clause, and creates impermissible indebtedness for the political subdivision.95
After the TIF commission and the governing body approve the TIF project, the local government can use eminent domain authority to acquire property that is “blighted,” “a conservation area”96 (near blight) or for an “economic development area.” Prior to legislative modification in 2006, economic development could be the sole basis for taking private property in Missouri where doing so was “in the public interest” to foster employment or discourage flight of business development to another state.97 As discussed above, rarely were these decisions second-guessed by courts.98
The poster child for an ill-fated economic redevelopment TIF project is the St. Louis area Sunset Hills project. Less than a month after Kelo, Sunset Hills aldermen awarded a private developer the right to develop a shopping mall it hoped would generate more tax revenue. The developer was delegated eminent domain power to condemn blighted property within the economic development area. The first consulting firm hired by the city did not find evidence of blight in the working-class neighborhood, so the city hired a second firm to search for evidence that would satisfy the criteria for blight under the city’s TIF ordinance.99 According to reports, the developer was unable to secure sufficient financing, could not pay the displaced homeowners the “just compensation” due them, and left in limbo many people who needed this compensation to purchase alternate housing.100 Even a recall election of aldermen and repeal of the TIF did not solve the hardship to these citizens. The “condemnation blight” stigma also made the property “practically unmarketable.”101 In response, property owners sought legislative reforms that would better protect the working class property owner from the consequences of eminent domain and abandonment of redevelopment projects. According to Professor Dale Whitman, who was a consultant during the Missouri legislative response to Kelo, “[t]here was near universal agreement that the legislature had to do, or be seen to do, something that would prevent another similar disaster.”102
Missouri’s Legislative Response to Kelo
Governor Matt Blunt appointed the Missouri Eminent Domain Task Force,103 charging the task force to study the use of eminent domain, analyze existing state and federal laws and make specific recommendations for consideration by the Missouri General Assembly, as well as to develop criteria that state and local governments could use during the eminent domain process. The task force was asked to “[d]evelop a definition of ‘public use’ that allows state and local governments to use eminent domain when there is a clear and direct public purpose while at the same time ensuring that individual property rights are preserved.”104 Final task force recommendations related to:
1. Redefining the scope of eminent domain;
2. Improving the [criteria,] procedure and process for exercising eminent domain; and
3. Providing penalties for condemning authorities that abuse the eminent domain process. 105
The task force issued its final recommendation on December 30, 2005.106
The legislative response was the passage of HB 1944107 during the 2006 Missouri legislative session. It adopted many, though not all, of the task force’s recommendations. A “Landowner’s Bill of Rights” included improved notice, process, review and penalties, as well as expanded compensation categories for “just compensation” and moving expenses – consistent with task force recommendations. These improvements constituted the most significant changes. Task force recommendations regarding mandatory mediation were not adopted.108 Remedies were not adopted to compensate property owners affected by pre-filing notices of proposed projects that were discontinued. The legislature did not adopt the task force’s recommendations to define “public use,”109 or provide a more detailed set of parameters for what constitutes blight.110
The power of eminent domain is retained for governmental entities, utility companies (municipal, public and private), rural electric cooperatives, “pipeline[s], railroad[s] [and] common carrier[s].”111 Private “urban redevelopment corporation[s]” (operating under “a redevelopment agreement with the [city or county]”) can exercise eminent domain powers.112 Although the bill does not adopt the task force’s recommendation to eliminate delegation of eminent domain authority to private developers through urban redevelopment corporations,113 the new bill does provide more oversight on their ability to exercise eminent domain. Board members of nongovernmental authorities or redevelopment corporations must be elected or appointed by one or more elected officials.114 Before these authorities can exercise eminent domain to acquire real estate, a local ordinance is required in addition to the approval by an authority to condemn lands “in the name of the state of Missouri.”115
Economic development can still be a motivation, but not the sole motivation, for exercising eminent domain authority under the new law. The legislature did not adopt a total ban on the use of eminent domain in conjunction with economic development projects, nor did it limit the exercise of eminent domain to traditional uses only (as had been recommended by the task force). Instead, a compromise approach was adopted in the new Missouri law, which provides that “[n]o condemning authority shall acquire private property through the process of eminent domain for solely economic development purposes.”116 Under the new statute, “economic development” means property used to increase the tax base, tax revenues, general economic health or employment in the political subdivision.117 “Blighted, substandard, or unsanitary conditions” and “conservation area[s]” are excluded from the definition of “economic development.”118 Presumably the intent was to negate the assumption that blight is only used when the project is solely or primarily associated with economic redevelopment. Since economic redevelopment projects are often located in areas that would traditionally be considered blighted or near-blighted conservation areas, however, reconciling this exemption with traditional assumptions concerning economic development may be difficult.
The Farm Bureau was well represented on the task force and Representative Steve Hobbs, as task force member, introduced the initial version of the eminent domain reform bill, which became law after several substitutions. Under the new law, farmland is statutorily exempt from being blighted by condemning authorities.119 No other category of land interest received a blanket exemption. Although the task force encouraged the legislature to adopt a new, narrower definition of blight to minimize historical abuses with its application, the historic breadth was otherwise retained.120
A parcel by parcel assessment of what is blighted is theoretically required with non-farmland property.121 However, if the “preponderance of the defined redevelopment area” is determined by the condemning authority to be blighted,122 then condemnation proceedings can be used against any parcel in the area.123 Consequently, the area-wide deter-mination may negate the importance of parcel by parcel approach.
Perhaps the most significant changes in Missouri law deal with the calculation of just compensation owed the property owner whose land is seized through eminent domain. Consistent with recommendations of the task force, the legislature adopted a more expansive definition of “fair market value” and added “heritage value” and “homestead taking” compensation to the calculation, along with granting moving and reestablishment expenses. “Fair market value” shall mean “the value of the property taken after considering comparable sales in the area, capitalization of income, and replacement cost less depreciation, singularly or in combination [with]. . . its highest and best use, using generally accepted appraisal practices.”124 If an appraisal value is provided by the condemning authority, it “shall be made by a state-licensed or state-certified appraiser using generally accepted appraisal practices.”125
For “all condemnation proceedings filed after December 31, 2006, just compensation shall be determined” (by commissioners126 or a jury127) by whichever of the following three methods results in the highest compensation: “(1) [a]n amount equivalent to the fair market value of such property;” (2) 125 percent of fair market value for a “homestead taking;”128 or (3) 150 percent of fair market value for a “heritage value” taking.129 Gains realized from the “involuntary conversion of property as a result of condemnation or the imminence thereof … shall be subtracted from the taxpayer’s federal adjusted gross income” for income tax purposes.”130
A homestead taking involves taking the “primary place of residence” (or the property within 300 feet thereof) “that prevents the owner from utilizing the property in substantially the same manner as it is currently being utilized.”131 Heritage value is additional value (beyond fair market value) assigned property that has been in “the same family for fifty or more years,”132 including business property where the small business employs less than 100 employees. The added value is a fixed 50 percent of fair market value. From a practical standpoint, the fixed percentage of added value may minimize the need for or opportunity to prove contrary value for the property.133 The burden of proof is on the property owner to prove to the commissioners or jury that the land qualifies as either a homestead or heritage value.134 The circuit judge determines if the homestead taking or heritage value is applicable.135 The availability of both the heritage value component and the homestead taking compensation is also limited by the requirement that the taking of the property “prevents the owner from utilizing property in substantially the same manner as it was currently being utilized on the day of the taking,”136 thus minimizing the inclusion of homestead or heritage value in connection with partial takings.
Where a partial taking is involved, landowners have the right to propose an alternative location on its property to the condemning authority within 30 days of the initial notification.137 When only a portion of the property is taken, “the difference between the fair market value of the entire property immediately prior to the taking and the fair market value of the remaining or burdened property immediately after taking”138 shall be used to determine the fair market value of the parcel taken.
Enhanced moving and reestablishment costs are provided for under the new law.139 Timely notice also shall be provided to displaced persons, including tenants, who are eligible for moving expenses.140 Most owners must surrender the property within 10 days of notice that payment of the just compensation has been made to the clerk of the circuit court, although home owners are allowed 100 days under the new statute if the home is the principal place of residence.141
A few changes also addressed easements. “Blanket easements” acquired after December 31, 2006 by condemnation or negotiation are deemed to “be void as against public policy” and cannot be enforced.142 Holders of utility easements and other right-of-way interests cannot exercise “expanded use”143 or increase the burden on the property beyond the original described use without an additional condemnation proceeding.144 If an easement (acquired after December 31, 2006) is abandoned for more than 10 years, it may be vacated by court order (if there is no showing of a good faith intention to make future use of the easement).145
The new statutory revisions attempt to make the eminent domain process more transparent and provide more extensive notice to individuals whose property may be the subject of condemnation, consistent with the task force’s recommended “Landowners Bill of Rights.”146 A new office of ombudsman in the Office of Public Counsel within the Department of Economic Development is created to assist citizens in understanding the condemnation process. The bill also requires “good faith negotiations prior to filing the condemnation petition.”147 Where negotiations have not been in good faith, the court has the power to dismiss the condemnation petition, and assess costs and attorney fees to the condemning authority as a penalty.148 Hearings are to be expedited to consider if “fraud, collusion, or bad faith” occurred in the determination that an area was “blighted, substandard, or unsanitary.”149 Furthermore, such determination also must be supported by “substantial evidence”150 under the new statute. Such a hearing may either review the trial court’s finding of blight within the condemnation action or consider the matter in a separate declaratory judgment action.151 Landowners harmed by pre-filing activities (such as diminished fair market value due to announcement of prospective plans) are not afforded an express remedy. Where redevelopment plans are abandoned after condemnation proceedings are initiated, however, each owner is entitled to “reasonable attorneys’ fees, expert expenses and costs,” plus the lesser of “actual damages … as a direct and proximate result of the pendency of the condemnation” or damages as stated in the “redevelopment plan or agreement.”152
Conclusion
It is unlikely that property rights advocates will agree with developers and city planners on the most appropriate or best use of individual parcels of land. The most that can be hoped for is a statutory system that provides some parity and clarity, while fostering good faith and fair dealings in economic development projects that contemplate use of eminent domain to acquire land. Missouri’s eminent domain statutes and condemnation proceedings have been revised in response to the Kelo decision and the recommendations of the Missouri Task Force on Eminent Domain. Economic development can no longer be the sole purpose for the use of eminent domain authority. Landowners now have increased rights to notice and explanation of the condemning process, as well as the right to propose alternatives. Perhaps the most significant change in Missouri statutes is an expanded notion of what constitutes “just compensation.” Where eminent domain authority is exercised, individuals affected are entitled to moving expenses, heritage value and homestead value where applicable, in addition to fair market value for the land taken.
Now that the basic eminent domain statute has been overhauled, the legislature should tackle the more difficult task of developing a narrower checklist for what constitutes blight and what falls within the scope of economic development. These two important concepts should be specifically addressed and clarified in the context of their relationship to eminent domain authority. If economic development projects (with a broad perception of public use) are to be highly encouraged, such encouragement should not come through the back door. Conversely, if private property preservation is to prevail over the goals of economic redevelopment, the legislature should so declare in plain and unambiguous language. Tortured interpretations of blight153 should not be used to facilitate, in a circuitous fashion, economic redevelopment projects.
The scope of circumstances necessary to declare property as blighted continues to be the subject of litigation even in the post-Kelo era. In light of Centene Plaza, “social liability” factors will have to be established by substantial evidence in addition to the economic factors for property to be blighted under the Urban Redevelopment Corporation Law. The legislature needs to define the scope of social liability factors, which currently can only be inferred in relevant statutes. Legislators also should consider whether the conjunctive requirement of “economic and social liability” should be the standard in each of the redevelopment statutes or just in the Urban Redevelopment Corporation Law.154 For consistency, as well, all statutes should use either “unsanitary” or “insanitary,” replacing the current inconsistent verbiage.
If the renewed emphasis on judicial review of local authority’s decision to blight an area is exercised, it could provide a check on decisions of condemning authorities, especially in light of the expedited procedure for declaratory judgments and interlocutory appeal of the initial finding of blight.155 While the change in statutory language requiring “substantial evidence”156 should lessen deference to legislative determination on what constitutes blight, it may not alter the historical tendency of Missouri appellate courts to defer to local authorities’ determinations of blight.157 Therefore, greater scrutiny should be imposed on the membership, creation and supervision of unelected private urban redevelopment boards, beyond the tacit local authority approval, especially given the new statutory requirement that economic redevelopment not be the sole purpose for projects utilizing eminent domain to acquire private property. To assure that projects foster public benefits rather than just serving narrower interests, public input and diversity of membership should be fostered on Land Clearance for Redevelopment Authorities and Planned Industrial Expansion Authorities. Property owners of modest means and environmentalists, in addition to developers and city planners, should have a fair opportunity to be heard and be appointed to redevelopment authorities and boards. Ultimately, good faith coupled with judicial oversight need to be the cornerstones of the foundation on which Missouri seeks to achieve a balance between economic development needs and protection of private property rights.
Footnotes
1 Stanley A. Leasure, J.D., C.P.A. (inactive) is an assistant professor of business law at Missouri State University. His 25 years of practice in Fort Smith, Arkansas, with the law firm of Daily & Woods, P.L.L.C., included numerous eminent domain cases on behalf of condemning authorities. His J.D. is from the University of Tulsa and he is a member of the Arkansas and Oklahoma bars.
2 Carol J. Miller, J.D., M.B.A., holds the rank of distinguished professor at Missouri State University, where she has taught business law and environmental law for more than 20 years. She is a contributing editor to the Real Estate Law Journal. Her J.D. and M.B.A. are from the University of Missouri-Columbia and she is a member of The Missouri Bar.
3 545 U.S. 469 (2005).
4 Id. at 489.
5 For a more in depth discussion of the facts of Kelo and the history of the purpose of the Fifth Amendment and public use, see Carol J. Miller & Stanley A. Leasure, Post-Kelo Determination of Public Use and Eminent Domain in Economic Development Under Arkansas Law, 59 Ark. L. Rev. 43 (2006).
6 Kelo, 545 U.S. 469, 486 (2005).
7 Id. at 477.
8 Id.
9 348 U.S. 26 (1954).
10 467 U.S. 229 (1984).
11 Kelo, 545 U.S. at 499-500. Such an “employment test” was deemed to be impractical in light of the ever changing needs of society.
12 Berman, 348 U.S. 26 (1954).
13 Midkiff, 467 U.S. 229, 230 (1984).
14 Kelo, 545 U.S. at 470.
15 See Timothy Niedbalski, Imminent Change: A Recommended Response for Missouri in the Wake of the Supreme Court’s Eminent Domain Decision in Kelo v. City of New London, 25 St. Louis U. Pub. L. Rev. 449, 466 (2006) (recognizing that the narrower pivotal question in Kelo was “whether the proposed economic development could reasonably benefit the public.”)
16 Kelo,545 U.S. at 472.
17 Id. at 484 (citing Strickley v. Highland Boy Gold Mining Co, 200 U.S. 527 (1906); Berman, 348 U.S. 26 (1954); Midkiff, 467 U.S. 229 (1984); Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984)).
18 Kelo, 545 U.S. at 485.
19 Id. at 470, 487.
20 Stephen G. Breyer, Active Liberty: Interpreting Our Democratic Constitution 99 (2005).
21 Kelo at 494 (O’Connor, J., dissenting).
22 Id. at 505 (Thomas, J. dissenting).
23 Id. at 494.
24 Id. at 523.
25 Id. at 497 (citing Cincinnati v. Vester, 281 U.S. 439, 446 (1930)).
26 Id. at 500 (citing Berman, 348 U.S. 26; Midkiff, 467 U.S. at 245).
27 Id. at 500.
28 Id. at 505. Drafters of the United States Constitution were devotees of John Locke, who in his Second Treatise of Civil Government 1690 (London1764) declared protection of property rights as the primary reason for creating a government, available at http://www.constitution.org/jl/2ndtr00.htm. Alexander Hamilton maintained that protecting “the security of Property” is one of the “great ob[jects] of Gov[ernment].” See 1 Records of the Federal Convention of 1789 at 302 (M. Farrand ed. 1911), as cited in Kelo, at 496 (O’Connor, J., dissenting). “Life, liberty and property” are fundamental rights that cannot be taken “without due process of law.” See Kelo at 507. In sponsoring the Fifth Amendment’s takings clause, James Madison saw the need to check the factions of wealth and influence to prevent them from misusing their influence on government authorities to the detriment of less powerful property owners. See Bernard Schwartz, The Roots of the Bill of Rights 1012, 1026-27 (1980), describing the House of Representative debates of June 1789; William Michael Treanor, The Origins and Original Significance of the Just Compensation Clause of the Fifth Amendment, 94 Yale L.J. 694, 708-13(1985); Michael J. Coughlin, Absolute Deference Leads to Unconstitutional Governance: The Need for a New Public Use Rule, 54 Cath. U. L. Rev. 1001, 1005-1007 (2005); see also James Madison, The Federalist No. 10 (1787).
29 See William J. Brennan, Jr., State Constitutions and the Protection of Individual Rights, 90 Harv. L. Rev. 489 (1977).
30 Kelo, 545 U.S. at 489.
31 City of St. Charles v. DeVault Management, 959 S.W.2d 815, 821 (Mo. App. E.D. 1997); see also City Center Redevelopment v. Foxland, Inc., 180 S.W.3d 13 (Mo. App. E.D. 2005).
32 Mo. Const. art. I, § 26.
33 Mo. Const. art. I, § 28; Mo. Const. art. I, § 26; City of Kansas City v. Hon, 972 S.W.2d 407 (Mo. App. W.D. 1998); State ex rel. Mo. Cities Water v. Hodge, 878 S.W.2d 819, 820 (Mo. banc 1994); Osage Water v. Miller County Water Authority, 950 S.W.2d 569 (Mo. App. S.D. 1997).
34 Mo. Const. art. I, § 28 (emphasis added).
35 252 S.W. 404 (Mo. banc 1923).
36 Id. at 407, 408.
37 351 S.W.2d 717 (Mo. 1961).
38 Id. at 721; see also Kansas City v. Liebi, 252 S.W. 404, 408 (Mo. banc 1923); City of Kansas City v. Kindle, 446 S.W.2d 807, 815 (Mo. 1969); State v. Perigo, 886 S.W. 2d 149 (Mo. App. S.D. 1994).
39 City of Kansas City v. Hon, 972 S.W.2d 407, 414 (Mo. App. W.D. 1998).
40 Phillips Pipe Line Co. v. Brandstetter, 263 S.W.2d 880 (Mo. App. E.D. 1954).
41 Id. at 886, 887.
42 972 S.W.2d 407.
43 Id. at 411.
44 Id. at. 409-411.
45 Id. at 411.
46 Id. at 413 (citing J.C. Nichols Co. v. City of Kansas City, 639 S.W.2d 886 (Mo. App. W.D. 1982) (internal quotations omitted)).
47 Hon, 972 S.W.2d at 411-414.
48 City of St. Louis v. Butler Co., 219 S.W.2d 372, 374 (Mo. banc 1949).
49 City of St. Louis v. Brown, 56 S.W. 298, 299 (Mo. 1900); Kansas City v. Liebi, 252 S.W. 404, 410 (Mo. 1923); State v. Weinstein, 329 S.W.2d 399, 406 (Mo. App. E.D. 1959). See also Joslin Mfg. Co. v. Providence, 262 U.S. 668, 689 (1923); Rindge Co. v. Los Angeles, 262 U.S. 700, 708 (1923).
50 Hon, 972 S.W.2d at 410 (citing Mo. Const. art. I, § 28).
51 Hon at 411.
52 See City of Kansas City v. Kindle, 446 S.W.2d 807 (Mo. 1969) (wherein the city instituted a condemnation proceeding known as “zoning with compensation” to impose development restrictions on substantially all of a residential subdivision through which a major arterial street had been constructed. The landowners contended that the single family residential use restriction, in the face of the major thoroughfare, substantially devalued (damaged) their property and caused them to be “a buffer zone” to protect other residents. The court declared that the accrual of special benefits to one group versus another group as a result of an eminent domain taking does not negate its public character). See also Smithville v. St. Luke’s Northland Hospital, 972 S.W.2d 416, 420 (Mo. App. W.D. 1998) and In re Proceedings to Grade Etc., 270 S.W.2d 863, 867 (Mo. 1954).
53 Smithville, 972 S.W.2d at 420; Phillips Pipe Line, 263 S.W.2d at 886.
54 Smithville, 972 S.W.2d at 420; Kansas City, 252 S.W. at 408; Bowen v. City of Kansas City, 233 S.W.2d 26, 32 (Mo. banc 1950).
55 639 S.W.2d 886, 890-891 (Mo. App. W.D. 1982).
56 Id. at 890-891.
57 28 S.W. 483, 485 (Mo. 1894) (emphasis added); see also Hodge, 878 S.W.2d at 820; State ex rel. City of Gower v. Gee, 573 S.W.2d 107, 109 (Mo. App. W.D. 1978).
58 See Smithville, 972 S.W.2d at 420; Hodge, 878 S.W.2d at 820;. Hon, 972 S.W.2d at 409.
59 Southwestern Bell Tel. Co. v. Newingham, 386 S.W.2d 663, 665 (Mo. App. S.D. 1965); State ex rel. Highway Comm’n v. Gordon, 36 S.W.2d 105, 106 (Mo. banc 1931).
60 Smithville, 972 S.W.2d at 420; Hodge, 878 S.W.2d at 821; Southwestern Bell, 386 S.W.2d at 665; State v. Riley, 417 S.W.2d 1, 3 (Mo. banc 1967).
61 See Housing and Community Development Act of 1974, 42 U.S.C. §§ 5301-5321 (2006).
62 Municipal Housing Land Clearance Redevelopment Law of 1951, as amended § 99.330, RSMo 2006. Also see earlier State Municipal Housing Authorities Law of 1939, §§ 99.010-99.230, RSMo 1949.
63 Section 99.320 (6), RSMo 2006.
64 Planned Industrial Expansion Act of 1967, as amended 1986, § 100.310 (15), RSMo 2006.
65 Urban Redevelopment Corporations Law of 1943, as amended § 353.020, RSMo 2006.
66 See Real Property Tax Increment Allocation Redevelopment Act of 1982, as amended, § 99.805(1), RSMo 2006 and Robert Denlow, Tax Increment Financing and Condemnation: Developers, Government Team Up Against Property Owners, 15 M.O.L.W. 1128, Oct. 1, 2001.
67 See Kathryn Buckstaff, Developers Want Bigger TIF, Springfield News-Leader, Dec. 13, 2005, 5B (reporting that the Ozark Diversified Development Company sought to acquire the land which is deemed to be blighted because of the rocky, rugged terrain and inadequate roads (not likely to be developed without tax incentives). TIFs, coupled with the power or threat of eminent domain, are being used in the Branson area to facilitate the Branson Landing and Branson Hills Plaza developments. By contractual agreement for a period of up to 23 years, half of the sales tax revenue from the new shopping area (up to $49 million) will be used to cover developer’s estimated $122 million building costs. Projections estimate that another thousand jobs will be generated by the Branson Hills Plaza project, along with $254 million annually in real estate and sales tax revenue. See also Missouri Farm Bureau Fighting for Your Rights, http://www.mofb.org/eminentdomainreform/.
68 270 S.W.2d 44 (Mo. banc 1954).
69 Section 99.330, RSMo 2006.
70 Dalton, 270 S.W.2d at 53.
71 Id. at 51-52.
72 Section 523.261, RSMo 2006 asserts the grounds on which a “legislative determination that an area is blighted, substandard, or unsanitary” under Mo. Const. art VI, § 21 can be supported. Such determination cannot be “arbitrary or capricious or induced by fraud, collusion, or bad faith.” In 2006, “and shall be supported by substantial evidence” was added as a requirement to this statutory section, but was not part of the 1954 version considered in Dalton.
73 Dalton. at 52 (citing Bradford v. Phelps County, 210 S.W.2d 996, 1000 (Mo. 1948)); see also State ex rel. U.S. Steel v. Koehr, 811 S.W.2d 385, 389 (Mo. 1991)).
74 Dalton, 270 S.W.2d at 53.
75 Id. at 53.
76 742 S.W.2d 146 (Mo. banc 1987).
77 Id. at 151.
78 Section 100.310, RSMo 2006.
79 Section 99.320, RSMo 2006.
80 Section 99.805(1), RSMo 2006.
81 Section 99.805(3), RSMo 2006.
82 Section 353.020, RSMo 2006; but see §§ 99.320(3) and 99.805(1), RSMo 2006.
83 No. SC88487, 2007 WL 1695163, 2007 Mo. LEXIS 101 (Mo. banc 2007), not final until expiration of rehearing period.
84 Centene Plaza, 2007 WL 1695163 at *1.
85 Id. at *2.
86 Id at *6.
87 Id.
88 Id. at *5.
89 See Id. at *3-6 (Stith, J, concurring) concluding that the addition of the “substantial evidence” requirement is merely the codification of existing case law and thus makes no discernable change in the standard of review and admonishing the Court for adopting a public policy definition of “social liability” in the absence of a legislative definition.
90 Community Development Block Grants (CDBG), 42 U.S.C. §§ 5301-5317 (2000) also helped foster the public-private redevelopment approach.
91Section 99.805(4), RSMo 2006 for Tax Increment Financing (TIFs).
92 See 18 Mo. Practice Series § 26.2 (Real Estate Law) (3d ed. 2006).
93 See notes 63 and 64 and accompanying text.
94 See Martin Van Der Werf, If at First You Can’t Blight Sunset Manor, Try, and Try Again, St. Louis Post-Dispatch, Sept. 29, 2005, at C1 and Peter W. Salsich, Jr., Respondent: Privatization and Democratization – Reflections on the Power of Eminent Domain, 50 St. Louis Univ. L. J. 751 (2006).
95 Tax Increment Fin. Comm’n v. J.E. Dunn Constr., 781 S.W.2d 70 (Mo. banc 1989).
96 Section 99.805(3), RSMo 2000. A conservation area is “not yet a blighted area but is detrimental to the public health, safety, morals, or welfare and may become a blighted area.”
97 Section 99.805(5), RSMo 2006.
98 For further discussion, see Dale Whitman, Eminent Domain Reform in Missouri: A Legislative Memoir, 71 Mo. L. Rev. 721,734-737 (2006).
99 See Martin Van Der Werf, If at First You Can’t Blight Sunset Manor, Try, and Try Again, St. Louis Post-Dispatch, Sept. 29, 2005, at C1.
100 Id.; see also Peter W. Salsich, Jr., Privatization and Democratization – Reflections on the Power of Eminent Domain, 50 St. Louis Univ. L. J. 751 (2006) and Lisa R. Brown, Sunset Hills: What Went Wrong?, St. Louis Bus. J., Aug. 26, 2005 available at http://www.bizjournals.com/stlouis/stories/2005/08/29/story1.html.
101 Whitman, note 67 at 757.
102 Id. at 756.
103 Members of the Missouri Eminent Domain Task Force included Gerard T. Carmody, Chris Goodson, Senator Chuck Gross, Representative Steve Hobbs, Leslie Holloway, Lewis R. Mills, Spencer R. Thomson, Howard C. Wright, and Terry M. Jarrett (chair).
104 Missouri Governor’s Exec. Order No. 05-15, June 28, 2005 available at http://www.mo.gov/mo/eminentdomain/execorder.htm.
105 For the full text of the Final Report and Recommendations of the Missouri Eminent Domain Task Force, see http://www.mo.gov/mo/eminentdomain/index.htm.
106 Id.
107 HB 1944, 93d Gen. Assem., 2d Reg. Sess. (Mo. 2006). Filed by task force member Representative Steve Hobbs and joined by 69 co-sponsors. Available at http://www.house.mo.gov/bills061/biltxt/truly/HB1944T.htm. See generally Whitman, note 67 for discussion of the evolution of legislative hearings, compromise and substitute bills, including the ultimate compromise language of the bill between competing interest groups initiated by Senator Koster.
108 Missouri Eminent Domain Task Force Final Report [discussion in Recommendation 3].
109 Missouri Eminent Domain Task Force Final Report [Recommendation 13].
110 Missouri Eminent Domain Task Force Final Report [Recommendation 16], wherein its discussion recommended that a different use providing “higher level of tax revenue or economic viability . . . shall not be a valid factor in determining blight.”
111 Section 523.262.2, RSMo 2006.
112 Section 523.262.1, RSMo 2006.
113 See Final Report and Recommendations of the Missouri Eminent Domain Task Force [discussion in Recommendation 10] (indicating that only Missouri and New York allowed private “developers to act as the condemning authority,” with § 353.110, RSMo 2006, providing that a municipality can delegate its authority to acquire land directly to an Urban Redevelopment Corporation).
114 See § 523.262.1, and §§ 99.120 and 99.460, RSMo 2006.
115 Section 238.247.1, RSMo 2006 and see Missouri Farm Bureau Fighting for Your Property Rights, http://www.mofb.org/eminentdomainreform/.
116 Section 523.271.1, RSMo 2006 (emphasis added). See also Recommendations 13 and 16 of the Final Report and Recommendations of the Missouri Eminent Domain Task Force (including this statement, but recommending that “public use” be defined to “only mean the possession, occupation, and enjoyment of the land by the general public, or by public agencies; or the use of land for the creation or functioning of public utilities or common carriers; or the acquisition of abandoned or blighted property” (with a tighter definition of blight)).
117 Section 523.271.2, RSMo 2006.
118 Section 523.271.2, RSMo 2006.
119 Section 523.286, RSMo 2006.
120 Sections 99.320.2, RSMo 2006. A “blighted area” is “an area which, by reason of the predominance of defective or inadequate street layout, insanitary or unsafe conditions, deterioration of site improvements, improper subdivision or obsolete platting, or the existence of conditions which endanger life or property by fire and other causes, or any combination of such factors, retards the provision of housing accommodations or constitutes an economic or social liability or a menace to the public health, safety, morals, or welfare in its present condition or use.”
121 Section 523.274.1, RSMo 2006.
122 Id. The original HB1944 would have required every parcel to be blighted.
123 Section 523.274, RSMo 2006, (with the proviso that eminent domain cannot be commenced more than five years after the determination “the property is blighted, substandard” or unsanitary conditions exist).
124 Section 523.001.1, RSMo 2006.
125 Section 523.253.2(2), RSMo 2006. Left out of the final version of the bill was the task force’s final report recommendation that appraisers be subject to uniform set of instructions on how to determine the value of the condemned property [Final Report and Recommendations of the Missouri Eminent Domain Task Force, Recommendation 6] and provisions in earlier provisions of the bill that such appraisal be mandatory and that the condemning authority pay for appraisals that landowners might seek.
126 See § 523.040, RSMo 2006 (requiring commissioners to determine fair market value within 45 days after their appointment).
127 Section 523.060.2, RSMo 2006.
128 A “homestead taking” involves taking “the primary place of residence” (or the property within 300 feet thereof) “that prevents the owner from utilizing the property in substantially the same manner as it is currently being utilized.” (§ 523.001(3), RSMo 2006).
129 “Heritage value” is additional value (beyond fair market value) assigned property that has been in “the same family for fifty or more years,” including business property where the small business employs “fewer than one hundred employees.” The added value is a fixed “fifty percent of fair market value.” See §§ 523.001(2) and 523.039(3), RSMo 2006. Heritage value was added largely at the impetus of the Farm Bureau to protect agricultural land that had been in a family for a substantial number of years. Earlier versions of the bill included an even more generous definition.
130 Section 143.121.6, RSMo 2006.
131Section 523.001(3), RSMo 2006.
132 Sections 523.001(2) and 523.039(3), RSMo 2006 (classify family ownership as “ownership by children, grandchildren, siblings, or nephews or nieces of the family member owning the property fifty years prior to taking,” with at least 50 percent ownership within the family line).
133 Inclusion of a fixed additional value will make this aspect of proceedings more straight forward and, practically speaking, motions in limine may seek to exclude (often emotional) testimony regarding heritage value or homestead value by stipulating that the land qualifies for the statutory enhancement.
134 Section 523.039(3), RSMo 2006.
135 Section 523.061, RSMo 2006.
136 Section 523.039(3) and § 523.001(3), RSMo 2006.
137 Section 523.265, RSMo 2006.
138 Section 523.001(1), RSMo 2006.
139 For residential property, individuals are to receive $1,000 for moving expenses or the “[a]ctual reasonable costs of relocation” (excluding the cost of replacement property). See § 523.205.6(1) and (2), RSMo 2006. Businesses that are displaced can receive $3,000 (or actual costs) for moving expenses and up to $10,000 for reestablishment costs to adapt the replacement property so it can accommodate the particular business. See § 523.205.7, RSMo 2006. Final Report and Recommendations of the Missouri Eminent Domain Task Force, Recommendation 8 advocated a more generous “relocation policy equal [to] or greater [than] the requirements of the Federal Uniform Relocation and Real Property Acquisition Policies Act of 1970, as amended.”
140 Section 523.205.6, RSMo 2006.
141 Section 523.055, RSMo 2006.
142 Section 523.282.1, RSMo 2006. Blanket easements are ones in which the instrument or order creating the easement “allows the easement holder to locate its facilities at an undefined location. . . .” See § 523.282.2, RSMo 2006.
143 “Expanded use” means “exclusion of use by the current owner of the burdened property from an area greater than the area originally described at the time of acquisition by the condemning authority.” See § 523.283.2(1).
144 Section 523.283.1, RSMo 2006.
145 Section 527.188, RSMo 2006.
146 Property owners are to be notified at least 60 days before initiating negotiations to acquire the property. Such notification shall: (1) identify the property, (2) state the purpose for which the property is being condemned, (3) explain to the landowner property owner’s rights. § 523.250.1, RSMo 2006). Such rights include the right to legal counsel at property owner’s expense, right to counteroffer and engage in negotiations, right to get a separate appraisal of just compensation, right to contest the condemnation, the right to just compensation to be determined by condemnation commissioners or a jury (§ 523.250.1(3), RSMo 2006). In addition, property owners have the right to notification regarding relocation assistance and the add-ons to fair market value. (§ 523.205.5(3), RSMo 2006). Written offers sent by certified or registered mail must be provided to the property owners at least 30 days prior to the filing of the condemnation petition and 10 days notice is required before viewing the property (with the property owner having a right to be present for such viewing) for the determination of fair market value. (§§ 523.250.2 and 523.040.2, RSMo 2006).
147 Section 523.256, RSMo 2006.
148 Section 523.256, RSMo 2006.
149 Section 523.262, RSMo 2006.
150 Id.
151 Section 523.261, RSMo 2006. This obviates former ill-fated attempts at using extraordinary writs to attempt review of authority to condemn prior to conclusion of the trial. Expediting a hearing to determine good faith is to take priority over all other cases except election issues.
152 Section 523.259, RSMo 2006. This measure was largely in response to the Sunset Hills controversy.
153 In re-examining “blight” statutes, §§ 353.020, 99.320(3) and 99.905, RSMo 2006, the legislature should address whether a narrower definition of “blight” is more appropriate. Should “blight” be limited to conditions that foster “ill-health, transmission of disease, crime” and significant safety risks? Section 353.020 RSMO 2006. Should safety considerations replace language related to age, obsolescense and outmoded design (of the current definition of blight)? Would repeated inability to pay assessed taxes be a more appropriate standard than “inability to pay reasonable taxes[?]” Section 353.020 RSMO 2006.
154 See Centene Plaza, No. SC88487, 2007 WL 1695163, 2007 Mo. LEXIS 101 (Mo. banc 2007) and see § 353.020, RSMo 2006.
155 Section 523.261, RSMo 2006.
156 Determinations of “blighted, substandard, or unsanitary” labels are not to be “arbitrary or capricious or induced by fraud, collusion, or bad faith and shall be supported by substantial evidence.” § 523.261, RSMo 2006.
157 Whitman, note 67 at 737 and 743.