Sunday, June 26

Supreme Court Decision - Kelo v City of New London – It’s not over yet

Just like so many others, I am as dismayed by the Supreme Court decision permitting local governments to seize homes simply because someone is willing to pay more property taxes for the land.

Like most things, this is not a simple issue. For starters, these local governments have money problems and these land developments will increase tax revenue, and theoretically solve the revenue issue, and if it does not, they can always seize more homes and replace them with more condos. (None of this addresses the real problem of poor city management.)

Just because the Supreme Court says that this type of activity is allowable, does not make it right. It also does not mean that this is the end of the story, or the lawsuits. First, the Supreme Court mentioned that states can enact laws to prevent this type of use of eminent domain and some already have these laws. That must mean that there are other ways to solve local government funding problems.

None of the stories mentioned why these cities did not simply raise property taxes. That would be a more fair way to solve the problem. If the entire city is suffering from a funding crisis, so the entire city should chip in. There has been some attempt to claim that these areas are blighted, but that is clearly not the case in the New London case, as well other areas that were mentioned in the news coverage over the weekend showcasing other areas where the same type of abuse was occurring.

If the homeowners cannot afford the new taxes, well then they can sell, but this is more fair than telling an entire neighborhood to either sell or they will be evicted.

Also, I do not see any attempt to move these people’s houses. It is not the houses the city and the developers want, it is the property. Most of those being affected refuse to move because of their attachment not only to the land, but also to their house. So why not force the developers to move the houses. They are taking the land, no point in taking everything away. This brings us to the issue of “Fair Compensation” and I bet this will be the subject of the next round of lawsuits. It is here that I believe the courts can look to the Maritime world for some guidance.

In a ship voyage, there are a number of ‘stakeholders’ namely the ship and cargo owners. According to ‘General Average’ all of the stakeholders will proportionally share in the loss when a part of the ship or cargo is sacrificed (thrown over the side or somehow destroyed) in order to save the ship and the remaining cargo. To be fair, those whose cargo was saved, and the owner of the ship are required to compensate those who suffered the loss.

Now lets say that a city is a ship. And lets further say that each homeowner is a stakeholder. In these economic eminent domain cases, the city is sacrificing some of the stakeholders to save the ship. The problem is that the other stakeholders are not compensating those who suffered the loss. Sure they are being compensated, but given a choice, these homeowners would have preferred to stay put. That’s why they are forced out. Now perhaps they did not think the compensation was enough. After all fair compensation does not mean market value. Regardless, the community benefits from their forced sacrifice.

When a ship sacrifices cargo, the ship manages to stay afloat. All the owners are assessed a proportional loss. In these economic eminent domain cases, the other stakeholders currently win added revenues and those whose homes have been sacrificed suffer a complete loss. Applying a sort of General Average law on cities might prevent future abuse of this type of action or make it much more costly to those who benefit and provide much more generous compensation to those who are forced out. If these actions bring in millions more in revenue, it is due to the sacrifices of these few, and perhaps they are due a portion of this new revenue. After all, it is there sacrifice that makes it possible.
Wizbang - Eminent Domain - It's The New Black.
Finland for Thought - "Surprise surprise… it’s the left-wing justice members. Scumbags."

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