On November 16, 2005, Governor Taft signed into law Senate Bill 167 (S.B. 167), which imposes a moratorium until December 31, 2006 on the use of eminent domain by the state or local government to take property not located within a blighted area for the primary purpose of economic development. Because the state’s authority to interfere with municipalities’ exercise of their right to appropriate private property is in question, S.B. 167 also limits state funding to any municipality that does use its eminent domain authority to take private property in violation of the moratorium.
The moratorium is a measured reaction to the U. S. Supreme Court’s decision earlier this summer in the case of Kelo v. City of New London. In a 5-4 decision, the court held that the Fifth Amendment of the United States Constitution does not limit the City of New London, Connecticut’s exercise of its eminent domain power to appropriate non-blighted private property in furtherance of the city’s comprehensive, integrated economic development plan. The issue arose because the Fifth Amendment prohibits the taking of private property “for public use, without just compensation.” Susette Kelo and other owners of homes standing in the way of the city’s waterfront development plan argued that “public use” does not include the seizure of private homes for use as office buildings and a parking lot in order to grow a city’s tax base.
Ms. Kelo and the other property owners faced an uphill battle in court because the U. S. Supreme Court already had expanded the meaning of “public use” to include any “public purpose.” Thus, “public use” does not necessarily mean “used by the public.” Indeed, approximately 50 years ago the court held that private property could be appropriated and then transferred directly to private developers in order to accomplish the public purpose of eliminating blight. The Ohio Supreme Court made similar findings in the 1950s and 1960s under the Ohio Constitution, which provides that private property is “subservient to the public welfare,” and allowed urban redevelopment projects in Cincinnati and Cleveland to go forward. However, the Kelo decision eliminates, under the United States Constitution, the minimal protection afforded property owners by a requirement that a city first find their properties are located in a blighted area.
Thus, S.B. 167 seeks to maintain the status quo in Ohio by maintaining government’s authority to take parcels in blighted areas for economic development, but prohibiting the appropriation of parcels in non-blighted areas for the primary purpose of economic development. These types of takings are not unknown in Ohio. In fact, the Ohio Supreme Court currently is considering an appeal by homeowners in Norwood, Ohio, which raises many of the same questions posed by the Kelo decision. These homeowners are fighting the appropriation of their homes to allow construction of retail and office space in their place. The city’s exercise of its eminent domain powers occurred only after a private developer failed to acquire these parcels through private negotiation and sought the city’s assistance. Norwood acted pursuant to a city ordinance allowing the appropriation of property that is in danger of deteriorating into a blighted area, but is not yet blighted. The parties argued their respective positions to the Ohio Supreme Court in September, and a decision is expected in the next few months.
The moratorium put in place by S.B. 167 is intended to give Ohio’s decision makers time to consider whether Ohio’s laws should be changed to respond to the issues raised by the Kelo and Norwood court cases. S.B. 167 creates the Legislative Task Force to Study Eminent Domain and Its Use and Application in the State. The task force will consist of 25 appointed members representing a multitude of varied interests, including local governments, licensed realtors, labor, private property owners, small businesses and the home building, agricultural, commercial real estate and planning industries. This task force is charged with studying the use of eminent domain in Ohio, how the Kelo decision affects Ohio law governing the use eminent domain in the state, and the overall impact of state laws governing the use of eminent domain on economic development, residents and local governments in Ohio. The task force must submit to the General Assembly by April 1, 2006 a report of its findings and recommendations concerning the use of eminent domain in Ohio. By August 1, 2006, the task force must report its recommendations regarding the updating of Ohio’s law regarding eminent domain. Presumably, the General Assembly then will act on the task force’s recommendations prior to the expiration of the moratorium at the end of 2006.
Companies or individuals with an interest in private/public economic development partnerships should be aware that the reports issued by the Task Force may result in a permanent alteration of the rules under which those partnerships assemble parcels for redevelopment. Other states already have amended their laws to restrict economic development efforts, and Ohio may do the same. In addition to prohibiting the appropriation of non-blighted properties, Ohio could tighten the definition of “blighted” in an attempt to lend support to homeowners living in older urban areas. Although well intended, such efforts could harm redevelopment efforts in Ohio.
If you have any questions or concerns about this update, please call your regular contact at Calfee or Virginia (GiGi) Benjamin at 216.622.8367, vbenjamin@calfee.com, or Leah Pappas at 614.621.7007, lpappas@calfee.com.
