The Environmental & Land Use Law Bulletin covers significant environmental and land use trends and developments in a summary format. Links to the full stories are included in the topic headings below. If you have any comments or suggestions for this newsletter, please contact the editors, Charles F. Helsten at 815-490-4906, Richard Porter at 815-490-4920 or Harvey M. Sheldon at 312-704-3504.
In This Issue:
Kelo Decision by U.S. Supreme Court Calls into Question the Illinois Supreme Court Decision Restricting the Use of Eminent Domain for Economic Development
On June 23, 2005 the United States Supreme Court in Kelo v. City of New London, Connecticut, No. 04-108, declared that a Connecticut municipality's exercise of eminent domain in furtherance of its comprehensive economic development plan was constitutional, notwithstanding the fact that the property at issue was not "blighted" and the municipality had no intention of making the condemned property subsequently available for use by the general public. The decision offers a far more expansive interpretation of eminent domain than that set forth by the Illinois Supreme Court in Southwestern Illinois Development Authority v. National City Environmental, 199 Ill. 2d 225 (2002), and calls into question the future precedential effect of SWIDA in Illinois.
Kelo v. City of New London, Connecticut, United States Supreme Court, No. 04-108, decided June 23, 2005
After decades of economic decline, the City of New London, Connecticut was designated a "distressed municipality" by a Connecticut state agency in 1990. Six years later, the Federal Government closed its Naval Undersea Warfare Center, which had been a major employer of local residents. By 1998 the City's unemployment rate had soared to twice that of the State, even as its population dwindled to its lowest rate since 1920. Hoping to revitalize the community, the State authorized issuance of $15.35 million in bonds to support the planning and development activities of the New London Development Corporation (NLDC) and the creation of a new state park. A month later, in February 1998, Pfizer Inc. announced it would build a $300 million dollar research facility in New London.
The "economic, environmental and social ramifications" of the NLDC plans were reviewed by the State, and the project was deemed consistent with state and municipal development policies by the Connecticut Office of Planning and Management. The plan envisioned construction of a waterfront conference hotel surrounded by restaurants and shopping, development of commercial and recreational marinas, a pedestrian riverwalk, 80 new residences, an office center, and a new U.S. Coast Guard Museum, and was expected to create jobs, generate increased tax revenues, maximize waterfront recreation opportunities and generally build momentum for the revitalization of the downtown area. The plan eventually received final approval from the City Council. The NLDC was granted authority to purchase property, or if necessary to use eminent domain to acquire property in the City's name. Although the majority of owners were amenable to selling, nine owners held out and refused to negotiate. Their properties were subsequently condemned, notwithstanding the fact that none of the properties at issue were "blighted."
The landowners sought a restraining order from the New London Superior Court, which was granted in part with respect to some of their parcels, but on appeal the Connecticut Supreme Court reversed, holding that the City's economic development plan was intended to revitalize the local economy, not to serve the interests of any private entity. The Connecticut Supreme Court accordingly held all the proposed takings to be valid, citing Connecticut's municipal development statute which expressly provides that land taken in furtherance of an economic development project is taken for a "public use" and in the "public interest." The U.S. Supreme Court granted certiorari to determine whether a city's decision to take property for the purpose of economic development satisfies the "public use" requirement of the Fifth Amendment.
Writing for the majority, Justice Stevens observed that although the City's economic development plan was not intended to open the condemned land to use by the general public, the Supreme Court had "long ago rejected any literal requirement" that condemned property be made available for use by the public in favor of using "broader and more natural interpretation of public use” to mean "public purpose" - an interpretation said to have been in effect since at least 1896. Moreover, the Court pointed to its longstanding policy of deferring to local government and courts to discern whether local needs demand the use of eminent domain to effectuate planning decisions. The Court went on to observe that where, as here, a state immediately transfers ownership of condemned property to private individuals, the taking is not necessarily transformed into an impermissible private taking since "it is only the taking's purpose, and not its mechanics…that matters."
With respect to the City of New London's exercise of eminent domain, the Court found that: 1) the City's "determination that the area was sufficiently distressed to justify a program of economic rejuvenation" was entitled to deference; 2) the City thoroughly deliberated its economic development plan, which was comprehensive in character and served a public purpose; and 3) the City's plan was in accord with a State statute authorizing the use of eminent domain to promote economic development. The Court therefore concluded that the condemnation of the landowners' property satisfied the public use requirements of the Fifth Amendment.
Although the landowners argued that economic development cannot qualify as a public use, the Court flatly refused to adopt that bright line rule, observing there is no basis for categorically exempting economic development from "public use," inasmuch as promotion of economic development has long been accepted as a function of government, as evidenced by the use of eminent domain to transform blighted urban areas, to break up Hawaii's land oligopoly, and to facilitate agriculture and mining in regions dependent on such activities. Rejecting the argument in Justice O'Connor's dissent that this decision would allow a city to transfer property from one individual to another purely to enable a higher use and thereby generate greater tax revenues, the Court countered that this case does not involve a "one-to-one transfer of property," and was executed within "the confines of an integrated development plan." The Court acknowledged that although private parties sometimes derive an economic benefit in these situations, an incidental private benefit does not serve to negate the underlying "public purpose." Finally, in addressing the argument that a taking requires "reasonable certainty" that public benefits will actually accrue from the proposed plan, the Court refused to second-guess the determinations of local governments as to the efficacy of a given plan.
Justice Stevens concluded the majority opinion by sharply delineating the limits of the ruling, stating emphatically that:
[N]othing in our opinion precludes any state from placing further restrictions on its exercise of the takings power. Indeed, many states already impose "public use" requirements that are stricter than the federal baseline. …This Court's authority…extends only to determining whether the City's proposed condemnations are for a "public use" within the meaning of the Fifth Amendment to the Federal Constitution.
Southwestern Illinois Development Authority v. National City Environmental
The limiting language at the conclusion of the Kelo majority opinion raises questions about the decision's impact in Illinois, where in 2002 the Illinois Supreme Court came to a seemingly opposite conclusion in Southwestern Illinois Development Authority v. National City Environmental, 199 Ill. 2d 225 (2002); cert. denied, 537 U.S. 880 (2002), a case which held that the Southwestern Illinois Developmental Authority (SWIDA) exceeded its authority when it condemned property in order to allow a racetrack to construct additional parking on an adjoining parcel. SWIDA had argued that its exercise of eminent domain was appropriate because the parking was needed to improve public safety, enhance tax revenues, and improve overall economic conditions in the region. The Illinois Supreme Court rejected the assertion that SWIDA's condemnation of land had been for public use, as required by the Fifth Amendment to the United States Constitution and by Article I, § 15 of the Illinois Constitution.
The Court declared that an essential distinction exists between the terms "public purpose" and "public use," ultimately holding that to be constitutional, a taking must result in the public receiving the right to use or enjoy the condemned property. Because the property condemned by SWIDA was seized from one private owner and immediately transferred to another private owner (the racetrack) with the result that the public received only a conditional right to use the property (upon paying entrance fees to the owner), the Court concluded the transfer constituted an impermissible private taking designed to realize private profits for the track's owners. This conclusion was bolstered by evidence that the track's owners had investigated alternative options for expanding the track's parking, but decided the alternatives would prove too costly.
Although both SWIDA and Kelo involve condemnations for the ostensible purpose of furthering economic development, there are important differences between the facts in SWIDA and those in Kelo, not the least of which is the fact that in Kelo, the condemnation resulted from a carefully constructed, detailed project that was comprehensive in scope and involved the transfer of numerous parcels, whereas the transfer in SWIDA involved a hurried, "emergency" condemnation of a single tract of land. In addition, the U.S. Supreme Court in Kelo could look to a state statute that expressly provides economic development is a form of "public use." No similar Illinois statute was cited in SWIDA.
Nevertheless, the analysis and legal reasoning of the Illinois Supreme Court in SWIDA is clearly at odds with that articulated by the U.S. Supreme Court in Kelo, particularly with respect to the Illinois Court's declaration that public use and public purpose are distinctly different concepts (whereas the U.S. Supreme Court refers to the two terms as effectively equal). Further, the Illinois Courts held that to be constitutionally permissible, a taking must result in the public acquiring a right to make a use of the subject property post-condemnation (in contrast to the U.S. Supreme Court's holding that it had long ago rejected " any literal requirement that condemned property be put into use for the general public").
Notably, Justice Freeman, writing for the dissent in SWIDA, argued (with seeming prescience) that the majority had misstated and misapplied the holdings in the very cases that would form the core of the U.S. Supreme Court's discussion in Kelo, including Hawaii Housing Authority v. Midkiff, 467 U.S. 229 (1984) and Berman v. Parker, 348 U.S. 26 (1954). Moreover, the dissent in SWIDA points out that the enabling legislation for the Southwest Illinois Development Authority provides that the Authority's purpose is to promote and facilitate economic progress and development, and confers upon the Authority the power of eminent domain in furtherance of that purpose. (720 ILCS 520/5; 720 ILCS 520/8(b))
The U.S. Supreme Court's announcement that states are not precluded from placing further restrictions on the exercise of the takings power raises the question of whether Illinois law offers greater protection to landowners facing condemnation than does the U.S. Constitution. When interpreting the State Constitution, the Illinois Supreme Court is not bound to follow the U.S. Supreme Court's interpretation of federal constitutional law, and may construe provisions of the Illinois Constitution to provide more expansive protections than the comparable federal constitutional provisions. See e.g. People v. Mitchell, 165 Ill.2d 211 (1995). Moreover, the Seventh Circuit has observed that the takings clause of the Illinois Constitution clearly provides greater protection than its federal counterpart, due to the additional protection it affords against governmental "damage" to private property. International College of Surgeons v. City of Chicago, 153 F.3d 356 (7th Cir. 1998). Thus it is clear that the Illinois Supreme Court can declare that SWIDA controls on the basis that Article I, § 15 of the Illinois Constitution provides greater protections than its federal counterpart. But since the decision in SWIDA reflects an intertwining interpretation of both state and federal takings clauses, until the Court actually makes that declaration there will be simply a powerful argument that SWIDA trumps Kelo in Illinois. The only other hope for clarification rests with the Illinois legislature. State Senator Steven Rauschenberger of Elgin has announced plans to introduce a bill during the fall veto sesstion that will require General Assembly approval for any condemnation designed to effectuate economic development projects.
Another "Public Purpose" Wrinkle
In Kelo, the majority held that it is the purpose behind governmental action that determines whether it violates the Fifth Amendment Takings Clause. At first blush, this position seems at odds with the Court's holding just a month earlier in Lingle v. Chevron, in which it held that a lower court's determination that government action did not substantially advance a legitimate public interest was not a sufficient basis for finding that the action violated the Takings Clause. Notwithstanding that seemingly incongruous assertion, and despite the further interesting fact that the Lingle opinion was authored by Kelo dissenter Justice O'Connor, there is no substantive conflict between Kelo and Lingle, (although Lingle makes some significant changes to the rubric of takings analysis).
Lingle v. Chevron, United States Supreme Court, No. 04-163, decided May 23, 2005
In Lingle, Chevron alleged that a Hawaii statute placing caps on the rents charged by oil companies for their service stations violated the Fifth Amendment Takings Clause. The District Court agreed, based on its finding that the challenged statute did not substantially advance the legislature's ostensible public purpose of lowering gas prices for consumers. Although the Ninth Circuit affirmed, the Supreme Court reversed, holding that the lower courts erred by failing to make the requisite threshold determination that the action constituted a "taking" before proceeding on to the question of whether the alleged taking was a proper exercise of governmental authority.
The Supreme Court observed that Hawaii's statutory cap on rents did not involve a seizure of property, and did not deprive Chevron of all economically beneficial use of the subject property. The Court further observed that both parties stipulated that in response to the caps, Chevron would simply raise its gas prices to make up the difference in revenues. Thus, the only feasible theory on which the statute might be found to constitute a taking would be if it was found to be a regulatory taking. In such cases, Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978) provides the relevant factors to be considered. Those factors include the regulation's economic impact on the claimant, the extent to which it interferes with distinct investment-backed expectations, and the character of the government action. Ultimately, the Lingle Court explained, a determination of whether there has been a regulatory taking turns on the severity of the burden the government conduct is found to impose upon private property rights. Because no such inquiry was undertaken in Lingle, the lower courts erred in relying on the "substantially advances" test to justify the determination that the statute violated the Fifth Amendment Takings Clause.
The Court acknowledged that "confusion" had understandably arisen over the years due to courts' repeated reliance on "imprecise language" used in Agins v. City of Tiburon, 447 U.S. 255, a zoning case in which the Court held that government regulation of private property "effects a taking if it does not substantially advance legitimate state interests." The Court took pains to distinguish Agins, pointing out that the opinion in Agins includes an intertwined due process and takings analysis. Consequently, it explained, the "substantially advances" test in Agins was never intended to act as a stand-alone determinant of whether a taking has occurred, despite a number of decisions in which it has been used in just that manner in the ensuing years.
Although Lingle fine-tunes the format for takings analysis by declaring that the "public purpose" question must take a back seat to a preliminary inquiry into whether the challenged action constitutes a taking, the public purpose element nevertheless remains a critical component of the analysis, and will doubtless continue to spawn challenges to regulations impacting land use.
This newsletter has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. |