Not so fast: Guiding Principles for Economic Development, Eminent Domain and Local Planning

• July 20, 2005

Testimony for Illinois Senate State Government Committee Hearing July 20, 2005

By Scott Goldstein, Vice President of Policy and Planning, Metropolitan Planning Council

The Kelo v. City of New London U.S. Supreme Court decision of June 23, 2005 has brought focus to the issues of economic development, planning and the public good. In upholding the City of New London ’s action to acquire property as a part of implementing an economic development plan, the Court affirmed precedent for economic development as a public good, even if, as in the Kelo case, it was for the purpose of facilitating private economic redevelopment.

The Metropolitan Planning Council (MPC) believes economic redevelopment is an important public policy, especially for areas in dire need of jobs and/or tax resources to support local schools and local government. In the Kelo case, the City of New London acted on the basis of an economic development plan, not in an arbitrary way, to take a private owner’s property.

In 2002, the Illinois Supreme Court ruled in Southwestern Illinois Development Authority v. National City Environmental L.L.C. (SWIDA) that the municipal corporation, to promote economic development, had gone too far by using its “quick-take” authority to acquire property located adjacent to a racetrack so the track could expand its surface parking. The Court found that the added parking furthered “purely private purposes.” Thus, there are already limitations in Illinois governing the extent to which economic development will be considered a public purpose as the basis for a public taking. In Illinois , TIF statutes allow both home rule and non-home rule communities to initiate takings that are consistent with TIF plans for blighted areas, including requiring those plans to identify parcels for redevelopment.

Guiding Principles

In the aftermath of the Kelo Supreme Court decision, there will undoubtedly be much discussion regarding the appropriate and careful use of eminent domain for economic development in Illinois . Before rushing to judgment, MPC offers the following principles for consideration by elected officials, policymakers and the public:

1. The Kelo decision reaffirms the importance of planning as a first step toward making sound, unbiased local development decisions.

The decision puts great emphasis on the public purpose test and the fact that the city had developed an economic development plan as a basis for the action to be a public purpose. As stated in the decision, “The City has carefully formulated an economic development plan that it believes will provide appreciable benefits to the community, including – but by no means limited to – new jobs and increased tax revenue. As with other exercises in urban planning and development, the City is endeavoring to coordinate a variety of commercial, residential, and recreational uses of land, with the hope that they will form a whole greater than the sum of its parts.”

By developing and implementing a plan, the Supreme Court found that the community’s judgment to acquire the property as a public good should not be second-guessed by the courts. This upholds long-standing precedent that communities that undertake high quality planning efforts in advance of their actions are much less vulnerable to court intervention. Good planning processes include vibrant public involvement and a high degree of local accountability. If the community deems the local government has overstepped its boundaries, local elected officials would be the first to feel the consequences from their voters.

2.  Economic development is an important public policy to strengthen local communities, especially in support of revitalization.

Particularly in distressed communities, the responsibility for improving economic development opportunities rests with both the public and private sectors. Over the years, there has been a trend toward greater use of partnerships between the two sectors, which can be a positive, fiscally conservative approach to creating jobs and attracting economic investment. As the Supreme Court recognized, “Promoting economic development is a traditional and long accepted function of local government.” (p 14) The harsh fact is there are far fewer tools available to communities in Illinois to support economic development in distressed areas. Eminent domain is expensive and time-consuming, but may be necessary to further a public good – from facilitating a transit station improvement project to revitalizing a distressed Main Street . How it is done, and the extent to which policymakers reach out to community members, are all a critical part of a fair, inclusive public process. Communities can face tough decisions, including the cost of no action that can lead to further decline of a blighted area of a community, loss of jobs and vital resources for schools and local government.

3. Private property rights must be upheld and balanced with the public good.

Eminent domain is used sparingly today – on projects that could not happen without the necessary land. Eminent domain powers in Illinois have long-established rules of determining fair market compensation. Due to concerns over private property rights, the expense of acquiring the property, time, and legal consulting and staff expenses, the tool is used as a last resort to enable a project benefiting the public good to move forward. This can and should continue.

4. The state should offer guidance on local planning standards, but should not usurp local authority by reviewing each eminent domain case.

The importance the Kelo decision places on planning, as a precursor to government action, raises the question of whether all Illinois communities have the resources to undertake a high quality planning process. In 2002, MPC was instrumental in working with the Illinois General Assembly to pass the Local Planning Technical Assistance Act (Public Act 92-0768). The Act defined – for the first time in Illinois – the basic elements that all comprehensive plans should address at the local level. These elements include land use, transportation, community facilities (schools, parks, water and sewer), telecommunications infrastructure, housing (including affordable and special needs housing and taking into account the housing needs of a larger region), economic development, natural resources, and public participation. While many communities have followed these guidelines, not all communities have the resources to initiate a plan or to update their plans according to the guidelines. The state should ensure there is funding available so that communities can undertake proper, high quality planning that includes a vibrant public participation mechanism.

Recommendations for Next Steps

The Kelo decision reaffirms precedent, allowing local governments to pursue the implementation of plans, including those motivated byeconomic development. Kelo provides a test – that the community has an economic development plan in place – and state law was clear that economic development was a legitimate public purpose.

Further study should be undertaken to determine if any improvements should be made to the eminent domain process in Illinois . MPC cautions against any major changes in public policy without adequate study, public participation and deliberation.

The state has a responsibility to improve the level and quality of planning being done by local communities. It can do this by fully implementing and funding the Local Planning Technical Assistance Act and ensuring all communities have adequate resources to undertake high quality plans before they attempt any actions such as public takings or rezoning. The state should also consider undertaking a thorough study of all issues related to eminent domain prior to any major changes that may have unintended consequences of jeopardizing projects that have long been planned and are moving forward at this time.

Local communities should proceed very cautiously with the use of eminent domain, and only when it is consistent with their plans. By having robust public participation processes at the front-end of a planning initiative, municipalities and counties can establish strong public support for projects that are undertaken for the public good. And, communities should continue to use the power sparingly and only when necessary on specific projects in which there is a clear expectation and sound market-based input that the project will result in an economically-sound reuse of the property. In order to meet the challenges facing local communities, the U.S. Supreme Court reaffirmed the right of local communities to exercise the use of eminent domain in concert with a plan that had been adopted by the community with local participation.

MPC on Twitter

Follow us on Twitter »