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Saturday, June 25, 2005

Eminent Domain: Random Thoughts

Urban renewal or big business boondoggle?

The Supreme Court in Kelo v. City of New London has ruled that local governments have essentially unlimited rights to confiscate private property, so long as such action is declared to be for a public purpose.

That decision prompts a couple of random observations.

First, most controversial eminent domain cases have involved some sort of urban renewal project.  Not too many of those projects have been successful over the decades.  Utica, New York, comes to mind, as an example.  A Utica resident once said that seemingly the only industry in Utica is urban planning, a process that has been repeated without great success for decades by every new city administration. 

Cities like Utica and New London, Connecticut, the subject of the Supreme Court decision, are in trouble, not because of lack of urban planning, but because of high taxes, excessive regulation, and a generally anti-business, socialistic public policy.  What they need is fewer labor unions and fewer liberal-socialist citizens who have become addicted to massive, and ferociously expensive, public welfare programs that run the gamut from money thrown unaccountably down the rat hole of public education (read teachers’ union perks), to mandatory, all-inclusive insurance benefits to workers.  In short, ongoing operating costs are just as important in determining business locations as their land costs.

New London is a good example.  If it were truly the best location for Pfizer’s new office buildings, New London would not have to subsidize Pfizer’s investment by acting as the company’s real estate acquisition agent.  Pfizer would simply use real estate brokers in the time-tested fashion to assemble a suitable block of properties at fair market values.  People who preferred not to sell would not be compelled to do so.  If Pfizer found New London sufficiently attractive without indirect city subsidies, it would simply raise the prices it paid for land to sufficiently high enough levels to persuade local homeowners to sell.

Additional factors are things like crime rates in the neighborhood and transportation.  There is a reason why major businesses prefer Wall Street and mid-town Manhattan to Harlem and the South Bronx for office locations.  There is a reason why manufacturing and distribution facilities are more likely to be found on the outskirts of cities alongside major highways.  Many older cities have industrial area locations that require trucks to make numerous and costly stops at traffic lights and in heavy traffic to move from plants and warehouses to major highways.  A more historically based use of eminent domain would be acquiring properties to build better highway access for all businesses between major highways and industrial locations.

Second, urban planning itself is inescapably a socialistic process to the extent it goes beyond highway access, better traffic patterns using one-way streets, wider streets, and crime prevention.  Planning writ large is the European Union, run by socialistic bureaucrats in Brussels. 

City planning became a fetish in the Progressive era in the early decades of the 20th century.  Ironically, accepted doctrine then was that manufacturing plants needed to be multi-story affairs in densely populated areas, within walking distance of workers or with access to streetcar lines.  In other words, the best socialistic minds of the era designed what is one of the biggest deterrents for business location today.  One of the great success stories of the post-World War II era is Houston, Texas, which is notable for having no zoning restrictions.  The market establishes land prices, thus land uses.  Most importantly, Texas is a business-friendly state, compared to Connecticut or New York.

Residents of New York, Connecticut, Massachusetts, and other Eastern socialistic states complain that they send more tax dollars to Washington than come back as benefit programs.  The way to deal with that is not to pay subsidies to companies like Pfizer by acquiring land for them, but to stop electing people like Teddy Kennedy and Christopher Dodd.

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