The U.S. Supreme Court ruled on June 23, 2005, in Kelo v. New London (545 U.S. 469) that the "public use" provision of the "takings clause" of the 5th Amendment of the U.S. Constitution permits the use of eminent domain for economic development purposes that provide a public benefit.
The case involved an economic development plan for the City of New London, Conn., which has been in economic decline for many decades. In 1996, the U.S. Navy closed its Undersea Warfare Center, causing the loss of over 1,500 jobs. In 1998, Pfizer, Inc., a large pharmaceutical company, announced plans to build a large research facility in New London on a site adjacent to the Fort Trumbull neighborhood. This neighborhood has been characterized as one with a high vacancy rate for nonresidential buildings, old buildings in poor shape, and with fewer than half of the residential properties in average or better condition (although the homes of the petitioners in this case did not fall into these categories).
The nonprofit New London Development Corporation (NLDC) was formed to help the city plan for economic development. After the Pfizer announcement, the city council authorized NLDC to formulate an economic development plan for 90 acres in Fort Trumbull. The plan's stated goals were to “create a development that would complement the facility that Pfizer was planning to build, create jobs, increase tax and other revenues, encourage public access to and use of the city’s waterfront, and eventually to build momentum for the revitalization of the rest of the city, including its downtown area."
Most people in Fort Trumbull sold their property to NLDC, but seven did not (the voluntary sales comprised 100 of the 115 properties in the neighborhood). These landowners held 15 properties in two parcels of land being considered for development. They filed suit claiming that the use of eminent domain as contemplated by the plan violated the state and federal constitutions.
The state trial court ruled in favor of the property owners as to one parcel and in favor of NLDC with respect to the other parcel. Both sides appealed to the Connecticut Supreme Court, which ruled in favor of the NLDC on both parcels. The court held that the economic development projects created and implemented pursuant to the state's eminent domain statute possess the "public" economic benefits of creating new jobs, increasing tax and other revenues, and contributing to urban revitalization, thereby satisfying the public use clauses of the state and federal constitutions. The property owners appealed to the U.S. Supreme Court.
U.S. Supreme Court Decision
The 5-4 decision recognized at the outset that the U.S. Constitution prohibits a "taking" whose "sole purpose" is to transfer one person's private property to another private person, even if just compensation is paid. It emphasized, however, that this was not the issue before the court. Rather, "The disposition of this case therefore turns on the question whether the City’s development plan serves a "public purpose." The decision went on to stipulate that "Without exception, our cases have defined that concept broadly, reflecting our longstanding policy of deference to legislative judgments in this field." In writing for the majority, Justice Stevens noted, in fact, that "To effectuate this plan, the City has invoked a state statute that specifically authorizes the use of eminent domain to promote economic development."
The court determined that New London's economic development plan served a "public purpose" under the "public use" provision of the constitution. Justice Stevens noted that, "Those who govern the City were not confronted with the need to remove blight in the Fort Trumbull area, but their determination that the area was sufficiently distressed to justify a program of economic rejuvenation is entitled to our deference. 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." Justice Stevens went on to write that, "Given the comprehensive character of the plan, the thorough deliberation that preceded its adoption, and the limited scope of our review, it is appropriate for us, as it was in Berman [v. Parker, 348 U.S. 26 (1954)], to resolve the challenges of the individual owners, not on a piecemeal basis, but rather in light of the entire plan. Because that plan unquestionably serves a public purpose, the takings challenged here satisfy the public use requirement of the Fifth Amendment."
In response to the contention of the petitioners that "using eminent domain for economic development impermissibly blurs the boundary between public and private takings," the court stated that, "Again, our cases foreclose this objection. Quite simply, the government’s pursuit of a public purpose will often benefit individual private parties."
In closing, the court did not preempt additional state action: "We emphasize that nothing 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. Some of these requirements have been established as a matter of state constitutional law, while others are expressed in state eminent domain statutes that carefully limit the grounds upon which takings may be exercised."