NOVEMBER 11, 2009
The Supreme Court's 2005 decision in Kelo v. City of New London stands as one of the worst in recent years, handing local governments carte blanche to seize private property in the name of economic development. Now, four years after that decision gave Susette Kelo's land to private developers for a project including a hotel and offices intended to enhance Pfizer Inc.'s nearby corporate facility, the pharmaceutical giant has announced it will close its research and development headquarters in New London, Connecticut.
The aftermath of Kelo is the latest example of the futility of using eminent domain as corporate welfare. While Ms. Kelo and her neighbors lost their homes, the city and the state spent some $78 million to bulldoze private property for high-end condos and other "desirable" elements. Instead, the wrecked and condemned neighborhood still stands vacant, without any of the touted tax benefits or job creation.
That's especially galling because the five Supreme Court Justices cited the development plan as a major factor in rationalizing their Kelo decision. Justice Anthony Kennedy called the plan "comprehensive," while Justice John Paul Stevens insisted that "The city has carefully formulated a development plan that it believes will provide appreciable benefits to the community, including, but not limited to, new jobs and increased tax revenue." So much for that.
Kelo's silver lining has been that it transformed eminent domain from an arcane government power into a major concern of voters who suddenly wonder if their own homes are at risk. According to the Institute for Justice, which represented Susette Kelo, 43 states have since passed laws that place limits and safeguards on eminent domain, giving property owners greater security in their homes. State courts have also held local development projects to a higher standard than what prevailed against the condemned neighborhood in New London.
If there is a lesson from Connecticut's misfortune, it is that economic development that relies on the strong arm of government will never be the kind to create sustainable growth.