Condemnation of Private Property for Economic Development: Legal Comments on the HousePassed Bill (H.R. 4128) and Bond Amendment

Publication Date: December 2005

Publisher: Library of Congress. Congressional Research Service

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Research Area: Economics

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Abstract:

On June 23, 2005, the Supreme Court handed down Kelo v. City of New London, holding that under the Fifth Amendment Takings Clause, the sovereign power of eminent domain ("condemnation") can be used to transfer private property to new private owners for the purpose of economic development. Kelo sparked a public outcry and a flurry of legislative proposals in Congress and the states to restrict the use of eminent domain.

The principal Kelo bill in Congress is H.R. 4128, the "Sensenbrenner bill," which passed the House on November 3, 2005. Its key provision prohibits states and their political subdivisions (hereinafter "states") from using eminent domain to transfer private property to other private parties for economic development -- or allowing their delegatees to do so. The prohibition applies to any fiscal year after the bill's enactment in which the state received federal economic development funds. A state that violates the prohibition is ineligible to receive federal economic development funds for two fiscal years following a judicial determination of violation -- a penalty enforceable by private right of action.

H.R. 4128 raises several legal issues. The prohibition on economic development condemnations extends not only to land taken for the explicit purpose of economic development but also to land subsequently so used. The latter coverage raises the possibility that although a parcel was initially condemned for a nonprohibited purpose, its use years later for a prohibited one would trigger the two-year cut-off of federal funds. Nor does there seem to be any proportionality requirement between the prohibited condemnations and the length and scope of the federal funds suspension. If Congress' Spending Power includes a proportionality requirement for conditions on federal funds, as the Court suggests, the absence of proportionality in some of the bill's applications may raise a constitutional issue.

Persons forced to move by a prohibited condemnation may run into a standing problem should they attempt to use the bill's right of action to impose a funds suspension. Standing requires that the remedy sought in an Article III court will redress the complained-of injury. A suspension of federal funding to the offending jurisdiction does not redress the fact that the person was made to move, unless it can be argued that the funding cut-off makes it more likely that the jurisdiction will elect to return the wrongfully condemned property.

The Bond Amendment, inserted into an FY2006 appropriations bill by Senator Bond, is now enacted law. Like H.R. 4128, it attaches a condemnation-restricting condition to federal funds, though limited to funds appropriated under the statute. The Amendment's list of acceptable and unacceptable condemnation purposes largely echoes existing case law construing the "public use" prerequisite for condemnation in the Constitution.