By Larry Jones
November 21, 2005

By a huge majority, the House approved H.R. 4128, the Property Rights Protection Act on November 3 by a vote of 376 – 38. Under the bill, state and local governments that receive federal economic development assistance would be prohibited from using eminent domain to take private property for purposes of promoting economic development. If a city or state violates this prohibition, it will be ineligible for federal economic development funds for two years. However, eligibility could be restored by returning any real property taken for economic development, and by replacing or repairing any property damaged as a result of the violation.

Both houses of Congress moved quickly to pass legislation in response to widespread public opposition to the Supreme Court’s decision in Kelo v. City of New London, in which the Court affirmed the city’s use of eminent domain in taking private property for economic development. At issue was whether economic development, which creates jobs for local residents as well as increases tax revenues for the city, can be deemed a “public use” as required under the Fifth Amendment Takings Clause. The Supreme Court in a 5 – 4 decision last June ruled that economic development serves a public use and therefore the city was justified in using eminent domain.

Reacting to a huge public outcry, most members of Congress disagreed with the Court’s decision. As a result congressional leaders from both major parties agreed to move expeditiously to pass legislation restricting state ad local use of eminent domain. The Senate on October 20 passed H.R. 3058, the 2006 Appropriations bill for Transportation, Treasury and Housing and Urban Development. This legislation includes language prohibiting state and local use of federal funds for economic development that primarily benefits private entities. The Senate bill also calls for a study on the nationwide use of eminent domain within 12 months. While the Senate bill leaves the door open for state and local use of eminent domain for economic development projects as long as they do not “primarily benefit private entities,” the House approved a much more restrictive bill.

The House measure would prohibit state and local use of eminent domain to take private property for economic development if they receive any federal economic development funds. Unlike the Senate bill which prohibits the use of federal funds to support state or local economic development that primarily benefits private entities, the House bill prohibits state and local use of eminent domain for economic development if any federal economic assistance is received, regardless of whether it is used in connection with an economic development project. Assuming that most state and local governments receive some form of economic development assistance, under the House bill they would be prohibited form using eminent domain to take property for economic development.

During floor action on the H. R. 4128, an amendment offered by Representatives Gary Miller (CA) and Eddie Bernice Johnson (TX), which would allow the use of eminent domain for redevelopment of brownfields sites, was approved. Another amendment offered by Representative Michael Turner (OH) on behalf of state and local governments that would have made an exception for state and local governments to use eminent domain to take private property that presents a threat to public health and safety (such as dilapidation, obsolescence, overcrowding and brownfields) was defeated by a vote of 56 – 357.

Representative Jerrold Nadler (NY) also introduced an amendment that would have eliminated the two year penalty in the bill but allowed property owners to seek injunctive relief. It too was defeated by a vote of 63 – 355. Representative Mel Watt (NC) argued that eminent domain and economic development are areas best addressed at the local and state levels, and offered an amendment to change the bill to a measure simply expressing a “sense of Congress” declaring disapproval of the Kelo decision. His amendment was also defeated by a vote of 44 – 371.

Representative Robert Scott (VA) also expressed concerns about the bill, pointing out how it poorly defines economic development as private, for profit projects or those intended to increase tax revenue, the tax base or jobs. He explained that under the House version of the bill if eminent domain is used to take property to build a stadium financed by taxpayers and owned by a city, but leased to a privately owned baseball team, it would be legitimate, but if it is built and owned by private investors it would be in violation of the bill. “Congressional attempts to define when eminent domain is reasonable and when it is not will cause more problems than they are intended to solve,” he said.

Although there is strong support for enacting legislation in response to the Supreme Court’s Kelo decision, it is unclear at this time if the House and Senate will be able to work out a compromise between the different versions of the bill before Congress adjourns for the year.