MemeMachineGo!

The Supremes have lately made a couple of decisions that I find terrible, the Grokster decision and this:

Cities may bulldoze people’s homes to make way for shopping malls or other private development, a divided Supreme Court ruled Thursday, giving local governments broad power to seize private property to generate tax revenue. […]

Justice John Paul Stevens, writing for the majority, said New London could pursue private development under the Fifth Amendment, which allows governments to take private property if the land is for public use, since the project the city has in mind promises to bring more jobs and revenue. […]

In dissent, O’Connor criticized the majority for abandoning the conservative principle of individual property rights and handing “disproportionate influence and power” to the well-heeled. “The specter of condemnation hangs over all property,” O’Connor wrote. “Nothing is to prevent the state from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory.”

One wag has wasted no time demonstrating O’Connor’s point.

Justice Souter’s vote in the “Kelo vs. City of New London” decision allows city governments to take land from one private owner and give it to another if the government will generate greater tax revenue or other economic benefits when the land is developed by the new owner.

On Monday June 27, Logan Darrow Clements, faxed a request to Chip Meany the code enforcement officer of the Towne of Weare, New Hampshire seeking to start the application process to build a hotel on 34 Cilley Hill Road. This is the present location of Mr. Souter’s home.

Clements, CEO of Freestar Media, LLC, points out that the City of Weare will certainly gain greater tax revenue and economic benefits with a hotel on 34 Cilley Hill Road than allowing Mr. Souter to own the land.

The proposed development, called “The Lost Liberty Hotel” will feature the “Just Desserts Café” and include a museum, open to the public, featuring a permanent exhibit on the loss of freedom in America. Instead of a Gideon’s Bible each guest will receive a free copy of Ayn Rand’s novel “Atlas Shrugged.”

There’s an interesting can of worms in California. While some states’ laws restrict their use of eminent domain to exclude the Lost Liberty Hotel scenario, this California Eminent Domain Handbook makes clear that California doesn’t.

The Fifth Amendment of the United States Constitution and Article I, Section 19 of the California Constitution allow private property to be taken by eminent domain only for a “public use.”

The term “public use” has been interpreted very broadly by the Courts. The project need not be actually open to the public to constitute a public use. Instead, generally only a public benefit is required. Elimination of blight through redevelopment projects, for example, is a public benefit which courts have held satisfies the “public use” requirement of the Federal and State Constitutions. This is true even though the property will typically be transferred to a private redeveloper and may never be open to the general public. It usually doesn’t matter if the redeveloper may be doing nothing more than building a new mall or a complex of movie theaters.

Since 1978, Proposition 13 (passed as a popular ballot initiative) has been the law in California.

Under Proposition 13, the real estate tax on a parcel of property is limited to 1% of its purchase price, forever, until the property is resold. […] Proposition 13 has benefited homeowners whose homes have appreciated in value since it was passed. Owners of commercial real estate have also benefited: if a corporation owning commercial property (such as a shopping mall) is sold or merged, but the property stays deeded to the corporation, ownership of the property can effectively change hands without triggering Proposition 13’s provision that fixes the amount of tax based on the property’s resale value. […]

Faced with the loss of revenues, California localities have taken measures such as condemning property using eminent domain, the act of government to take land property from the people, to attract large retail development. [emphasis added] The sales tax revenue generated by the “big box” retailers is more lucrative than the property tax and helped to bolster their original revenue.

Much of California has been undergoing skyrocketing real estate prices since 1978. Imagine how easy it is to make a case that a municipality could generate more revenue from seizing a 1978-appraised property and turning it over to a developer. For a start, it resets the appraised value.

And the Supremes have established the precedent that this is A-OK.