Monday, June 15, 2009

An Excellent Book on the Excesses of Takings

Jeff Benedict. Little Pink House: A True Story of Defiance and Courage. New York: Grand Central Publishing, 2009.

Pfizer wanted to build a global research and development headquarters in New London, Ct. The State of Connecticut invested $100 million to purchase the properties for the Pfizer buildings as well as for a five star hotel. Several property owners refused to sell their properties. The City of New London used eminent domain to take these properties. One homeowner threatened with eminent domain, Susette Kelo, sued to keep her home from being taken by eminent domain. Her case went to the U.S. Supreme Court where a 5 to 4 decision determined that government could take property in order to increase tax revenues.

Justice Sandra Day O’Connor argued in her dissenting opinion “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 factor.”

Sen. Arlen Specter called for Congressional review of the Supreme Court decision. He noted that the Fifth Amendment prohibits taking personal property except for a public use. He questioned whether it was public use to use taken property for private economic development in order to increase tax revenues.

Governor John Rowland wanted to conduct an urban renewal program in New London. As a Republican, Rowland sought to bypass dealing with the mostly Democratic New London city government. He turned to the state’s Economic and Community Development Department to handle the project. The Department hired lobbyist Jay Levin, a former New London Mayor and a Democrat for $196,000 to create a development proposal.

New London created a nonprofit development corporation, the New London Development Corporation (NLDC). It had been inactive in recent years. Levin moved to reactivate the NLDC with a new President who would be the Governor’s ally. Levin maneuvered to have Dr. Claire Gaudiani, President of Connecticut College, become NLDC President. He had the members of NLDC still alive revive the NLDC, saw that a registration fee to reactive it was paid, required paperwork filed with the state, and Gaudiani was elected President. Levin assured Gaudiani he’d do most of the work. Gaudiani then was unaware of the plans Rowland and Levin had for New London’s economic development.

New London Democratic Party City Chairman Tony Bascilica opposed nominating Gaudiani. Levin told Bascilica the only way Governor Rowland would provide funds to New London was through the NLDC.

Gaudiana asked George Milne, an executive at Pfizer, to join the NLDC. He agreed to, initially just for six months.

The planned site for economic development near Fort Trumbull, where Kelo’s house sat, posed environmental contamination issues. It was near a scrap metal junkyard and included a sewer treatment facility whose odor could be smelled through the neighborhood. Pfizer then was looking for additional land, but Milne said it was too costly for anyone to develop.

Pfizer, which is located next to this are, then recommended the Fort Trumbell area renovated into a state park and the scrap metal junkyard removed. Pfizer stated they would move onto the site if state government would provide assistance.

When Lloyd Beachy was elected New London’s Mayor in 1997, Gaudiana called him and presented NLDC’s ideas for economic development. Beachley realized he was being shown what was happening before he could state his ideas.

Governor Rowland offered $20 million to create Fort Trumbull State Park, purchase the Navy base on the site with state funds, give $8 million to NLDC to acquire property and pay its own operating costs, loan the City of New London $7 million to improve the sewage treatment facility, release $4.5 million in liens that the state had against the mill site, and spend up to $2 million to relocate the junkyard. In addition, the City of New London agreed to transfer the mill site, valued at $5.4 million to Pfizer for free, and to change local zoning so the area could be developed.

The local newspaper, The Day, learned Pfeizer wanted to build a facility on the mill site. Gaudiana asked the paper’s publisher to delay printing the story. The publisher refused and the story ran.

Pfizer decided to invest $300 million on the site. Governor Rowland offered $75 million in incentives in return. The state government then offered another $26 million for NLDC to purchase and demolish all the buildings in the area. Pfizer stated the development would create about 2,000 jobs.

The median annual family income of residents in the area slated for development was $21,250, among the poorest in town.

The Italian Dramatic Club (IDC), a private club, was two blocks from Kelo’s house. Aldo Valentini first received verbal assurance from Levin that IDC would not be touched. Levin then agreed to put this in writing.

Kelo was offered $68,000 for a house she has bought for $53,500. She refused. She was then offered $78,000. She refused again.

Real estate agents sent letters to property owners stating construction would begin soon and that the best offers would soon pass. The press reported how such letters were illegal. The agent claimed the NLDC has approved threatening property owners that eminent domain would be the next step.

The Downes Groups, a construction company owned by a family that contributed “heavily” to Rowland’s campaign, was hired as a consultant on the Navy property portion of the plan. This property was to be sold to the highest bidder for public construction.

New London Councilwoman Peg Curtin, a political critic of Basilica, successfully moved to have City Council give the authority for this development. A committee composed of two from City Council, two from NLDC, and two from the Governor’s Administration would develop a concept plan. Mayor Beachy was the only vote against this. (The Mayor in New London is a voting member of Council.)

Mayor Beachy, Susette Kelo, and Kathleen Mitchell formed a neighborhood group opposing the NLDC’s plans.

Tony Basilica moved to save historic buildings on the Navy property. Although Governor Rowland requested a delay, Bascilica advised the Navy to proceed with its public auction. Basilica and associates asked NLDC to agree to purchase the Navy property by August 31, 1998 using an economic development conveyance. Gaudiani did not sign and instead sent it to City Council for their advice. Jay Levin moved to get the Board members of the Corporation for Economic Development behind the Governor’s plan. Basilica was forced off the committee overseeing the Navy property. Peg Curtin replaced him Mayor Beachy was one of three who voted against removing Basilica. Days later, Milne stated that all the Navy properties should be torn down.

Governor Rowland held a press conference across from Kelo’s house announcing he would provide $15 million from state government for relocating people in that neighborhood.

The NLDC refused to comply with The Day’s requests for documents under the Freedom of Information Act (FOI). The Day sued. The NLDC argued it wasn’t a public agency that had to adhere to the FOI. The NLDC lost.

Milne, for Pfizer, sent a written request to NLDC that the Navy property be acquired and developed according to its wishes. They included a hotel as an extension of its facility, among other items. This was the most detailed Pfizer had become in stressing its wishes. The intent was to prod Governor Rowland into providing more money. Rowland was worried that some homeowners hadn’t left and was reluctant to use eminent domain. Pfizer and the NLDC wanted to start demolish structures to create an appearance that the project was proceeding in hopes of pushing the remaining owners to sell.

A Connecticut College History Professor, Fred Paxton, reviewed the NLPC plans in the NLPC office. He wasn’t allowed to have a copy. He concluded there was no need to remove the neighborhood around Fort Trumbull. He became upset that his college was participating in an effort to remove longtime residents, many of whom were elderly, porr, and with little political power, from a historic neighborhood. Paxton insisted the plan was a draft and public hearings had to be held. Gaudiani disagreed and claimed that that state government insisted the plan was final.

The Day printed columns written by Kelo and Paxton. In addition, the NLDC still hasn’t opened its records six months after it has lost its FOI case. Letters against the NLDC started streaming into the Day. Rowland demanded the NLDC comply with the FOI and saw to it that the press knew of his demand.

City Council voted 6 to 1 for the NLDC plan, with only Mayor Beachy opposing it. Soon after Council approved, the NLDC moved to begin tearing down buildings, including the house next to Kelo’s. Several NLDC members objected to Levin’s agreement with the Italian Dramatic Club. They insisted there could be no exceptions to the demolitions. Levin and NLDC reached a compromise proposal that NLDC would either build a new building or would physically move the current building to another location. Superior Court Judge Angelo Santaniello, a club member, warned that the club that NLDC would not offer the club enough money. Levin offered he could get $300,000 in Federal money. Santaniello suggested that Pfizer provide some money. Pfizer didn’t want to create a precedent. Thus, the club insisted on remaining on that location.

The Institute for Justice, which supported the rights of property owners against government takings, became interested in the NLDC situation.

Council, late into a meeting after the public witnesses had left, added an unannounced item to its agenda and approved demolishing the properties.

Meanwhile, Pfizer merged with Warner-Lambert. The merger provided it with an excess of office space and land. It no longer was searching for more land.

Once Kelo realized an exception has been made for the Italian Dramatic Club, she asked that one be made for her house and other houses that had just as much historic value as the club building. The NLDC still proceeded with eminent domain eviction of Kelo and the remaining property owners.

Connecticut law provided for objecting to the amount of a taking but not to objecting to the taking itself. The title of a property that is taken automatically goes to the local government. The Institute of Justice offered to represent Kelo for free as she met three criteria for their taking a case: a client the public could view sympathetically, outrageous facts that demanded legal justice, and an opposition the public would view as villains. The lawsuit was drafted as a narrative which was not legally necessary but was aimed for the press to read and report.

NLDC responded by sending out condemnation order telling homeowners they no longer owned their homes. The Institute realized this only made the NLDC appear even more like a villain in the public’s eye.

The lawsuit argued there was no public purpose for the taking as required by the Fifth Amendment. The suit also claimed a lack of equal protection for protecting the Italian Dramatic Club but not the others. Finally, Kelo’s property was not within the designated development area and there was no necessity that it be taken. Eight legal violations were claimed.

A Marshal attempted to serve Kelo with condemnation papers. She refused to accept them.

The Judge decided that the NLDC plan was a public use but that Kelo’s and other homes were not part of the plan and thus could not be subjected to eminent domain. Other homes, though, could be taken that were in the plan. The Institute appealed the decision.

The Connecticut Supreme Court upheld by 4 to 3 the lower court’s decision that the takings were proper and overturned the lower court’s decision that the other takings were not proper. In sun, the state court ruled all the takings were legal. A dissenting opinion argued the court had never gone this far before. The Institute for Justice attorneys believed the arguments in the dissent formed the basis for an appeal to the U.S. Supreme Court.

The U.S. Supreme Court accepts about 1% of case filed before it. It accepted the Kelo case.

Wes Horton, who argued the case for the City of New London, presumed that Justices John Paul Stevens, David Souter, Stephen Breyer, and Ruth Bader Ginsburg were likely to agree with his arguments that creating jobs and increased tax revenues would help the city provide more services for the poor. He also assumed Justices William Rehnquist, Antonin Scalia, and Clarence Thomas would favor private rights. He based his case on convincing one more Justice, either Sandra Day O’Connor or Anthony Kennedy, to agree with his arguments. He observed they were more fact-based. He chose a large sized diagram showing what the development would do. He held a moot court where he realized the weakness of his case was he couldn’t articulate where the line was that permitted private property to be taken to increase tax revenues. He realized, instead of stumbling on where the line was, that it was better to argue that government has a complete right to take public land for more revenues and jobs.. Horton knew this would not be a popular answer for the public, but he felt it would help win the case before the Supreme Court.

The U.S. Supreme Court affirmed the state Supreme Court decision by 5 to 4. Justice Stevens wrote in the majority decision “clearly, there is no basis for exempting economic development from our traditionally based understanding of public purpose”. O’Connor dissented from the decision. She wrote “the beneficiaries are likely to be those citizens with disproportionate influence and power in the political process, including large corporations and development firms. As for the victims, the government now has license to transfer property from those with fewer resources to those with more.”

Connecticut’s new Governor, Jodi Rell, denounced the Supreme Court decision. Public opinion was similarly mostly opposed to the decision. The NLDC pushed ahead and sent out eviction notices. Governor Rell created a special mediator between the NLDFC and the residents.

The New London Council voted 6 to 0 to sever ties with the NLDC. Ron Angelo, the state’s Deputy Commissioner of Economic Development, assured that the NLDC would be more responsive to the Governor’s and the public’s concerns. Council was convinced by this and then voted 6 to 0 to keep the NLDC. Governor Rell announced the two remaining residents could stay and titles to their homes were returned to them. The development could otherwise occur. The Governor’s office agreed to demands Kelo and the other remaining family, the Cristofaro family, requested. Kelo moved to what she desired, which was another house with a waterfront view. Kelo’s pink house would be moved and preserved as a historic site. The Crisofaros received $475,000, the ability to affordably return to the neighborhood when the new development was built, a historic plaque, and to save show shrubs.

In 2006, the Ohio Supreme Court unanimously issued a decision contrary to the Kelo decision on a case in takings for a proposed shopping mall. As of 2008, seven states adopted Constitutional amendments and 42 states created laws prohibiting takings for economic development. The NLDC has demolished the Fort Trumbull neighborhood but nothing, as of 2008, has been built. The development could not obtain the financing to proceed.


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