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Steven Malanga
Public Benefit?
The Supreme Court’s Kelo decision is a lose-lose proposition.
1 July 2005

The city of Boston couldn’t accumulate enough land to build a gleaming new, $800 million convention center it wanted on the south side of town. So the city government used its powers of eminent domain to snatch some 20 properties from private owners to provide space for the center, justifying the seizure on the grounds that the new center would boost the local economy. Today, the recently opened Boston center sits idle much of the time. First year bookings and attendance are only one-sixth of what the city projected. Taxpayers now find themselves on the hook not only for the center’s construction cost but also for its operating deficit.

Defenders of private property rights went ballistic over the Supreme Court’s Kelo decision earlier this month endorsing the government’s power to seize private land for the sake of economic development, transforming the Constitution’s public “use” justification for eminent domain (building new roads, for instance) into an open-ended public “benefit” one, such as economic development. Government, the court pronounced, can legitimately use eminent domain if it believes it will “provide appreciable benefits to the community, including—but by no means limited to—new jobs and increased tax revenue.” The court thus gave federal constitutional authority to a form of property taking that local governments like Boston have been already—and increasingly—using in recent years.

Kelo’s distortion of the meaning of the Fifth Amendment’s “takings” clause is troubling enough. What makes the decision even more infuriating is that the public benefit promised by urban economic development programs rarely materializes—in fact, such initiatives often become tax eaters—a public burden rather than a public benefit. Throughout the country, cities have liberally used eminent domain to take land in order to build publicly subsidized mega-projects that have wasted tax dollars and distorted the private marketplace. Regrettably, the Supreme Court’s decision is already encouraging local governments to advance yet more such plans.

The Boston facility is only the latest in a long line of convention centers that governments have built or expanded by bulldozing over private property rights, with little or no economic gain to show for it. Dozens of new centers have opened over the last decade, creating a nationwide glut in convention space. In San Francisco, to take another example, the city engineered a $191 million expansion of the Moscone Center in part by taking land on which stood an office building and several restaurants. The center’s expanded wing opened in 2003, but faced with competition from other cities and a national drop in convention attendance, it has flopped. In fact, visitor spending in the city, projected to rise with the Moscone addition, actually fell several billion dollars that year. Some 40 more projects now in the pipeline will only worsen the convention-center glut, a recent Brookings Institution study concluded.

As one after another economic development scheme fails, politicians often wind up throwing good tax money after bad, and eminent domain encourages that bad habit. For instance, governments have rushed to “fix” their convention center mistakes with other nearby development that theoretically will boost the centers—which themselves were supposed to be the economic engines.

Officials in upstate New York, for instance, used eminent domain to take private property away from an unwilling owner in order to build a planned subsidized hotel in downtown Syracuse, which they say will boost the city’s flagging convention center—originally built to boost the hotel industry. In Pittsburgh, meanwhile, the city’s redevelopment authority used the threat of eminent domain to persuade holdouts to sell their land to build an African-American cultural center next to the city’s struggling convention center, ostensibly to lure more tourists to the Steel City. Officials never explained why tourists would be any more likely than conventioneers to head to Pittsburgh.

Politicians often justify such projects with consultant studies purporting to show big potential economic gains. Writing for the majority in Kelo, Justice John Paul Stevens seemed suitably impressed, pointing out that the city of New London, Connecticut, whose use of eminent domain was at the heart of the case, had carefully studied the proposed public development project and believed it could offer a big economic payoff.

But the track record of government-sponsored economic studies supporting the construction of stadiums and convention centers is dismal. Urban policy expert Heywood Sanders of the University of Texas at San Antonio analyzed more than 30 studies supporting convention center construction and found them “consistently flawed and misleading.” They offer “no real basis for public investment and serve to bias public decision making and choice,” Sanders observed. The notion that such “studies” can help justify property seizures is outrageous. Unfortunately, an entire industry of consultants has emerged to churn them out.

The Supreme Court decision will only fuel this lamentable trend and enable more unwise schemes. In California the legislature now is considering a bill that would set up an authority to build sports and entertainment facilities. The bill would give eminent domain powers to the authority. In Memphis, the court’s decision has spurred a public authority to consider using eminent domain to take land for riverfront development. In Texas, the ruling has cleared the way for the city of Arlington to take private land to assemble a site for a new stadium for the Dallas Cowboys, despite 11 solid academic studies showing that stadiums provide almost no economic benefit—except to lucky team owners. The court decision, in other words, represents a home run, or a touchdown, depending on your preferences, for the purveyors of state capitalism. It’s not just property owners, but taxpayers, who will be losers.

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More by Steven Malanga:
Welcome to the Jungle
Trolling for Dollars
March Labor Madness
More . . .
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