Exercising Eminent Domain for Economic Development in New York by Alex Racketa

Introduction

The law of eminent domain in New York is an area characterized by its lack of clarity.   How cities and municipal corporations operate within the limitation imposed by the phrase “public use” is a particularly complicated area.  Recently, they have begun to assert a more expansive interpretation of this phrase, following the national trend of broadly reading the U.S. Constitution in cases like Berman v. Parker and Kelo v. City of New London.[1] However, the U.S. Constitution is only one constraint on the eminent domain power.  The New York Constitution functions as a separate limit.[2] However, rather than explicitly rule on the independent vitality of restrictions in the New York Constitution, the Court of Appeals has repeatedly reserved judgment on the issue.  This has left open the question of whether New York recognizes the economic development as a public use, as the Supreme Court has declared the U.S. Constitution permits.[3] Because the Court of Appeals has not ruled on this point, significant confusion has resulted.  Any independent limitation on the eminent domain power retained in the state constitution has essentially been rendered meaningless.  This uncertainty is itself damaging to private property interests within the state.

The Case for Not Recognizing Eminent Domain Under the New York Constitution

Apart from normative arguments that economic development should not be a public use because of the effect this will have on property rights, there are strong arguments that New York in fact does not consider it a public use under the current constitution.

In many “public use” cases, the question is whether or not the land seized was substandard, based on a clause inserted in the New York Constitution which authorizes this exercise of the eminent domain power.[4] If the land is substandard, the taking can be considered valid based on the explicit constitutional grant of authority.  However, if the land is not substandard, the taking must be for public use in the classic sense, which would equate to recognition of economic development as a permissible public use.

The Court of Appeals seems to implicitly recognize that the New York Constitution protects property owners from eminent domain takings solely for economic development purposes.  The court has repeatedly referred to a “hypothetical case” where the conditions could not possibly be called substandard and where eminent domain could not be exercised.[5] As the dissent in the recent Goldstein v. New York  State Urban Development Corp. noted, this at least implies that economic development may not be properly considered a public use under the New York Constitution.[6]

There is also persuasive evidence that the state legislature did not, as recently as 1967, consider economic development a permissible public use.  In that year, a proposed constitution included an amendment which expressly allowed for eminent domain takings for economic development purposes.[7] This proposed constitution did not garner enough popular votes to pass, and the governing constitution is still the one adopted by convention in 1938, which makes no mention of economic development.

The Consequences of this Recalcitrance

The silence by the Court of Appeals as to whether economic development is a permissible public use has resulted in a confusing body of case law in this area.  The Court of Appeals has often declared land which is not clearly substandard to be blighted, and so has avoided the problem in many cases where this factual finding is questionable.  This appears to be due to a combination of several factors.

The Court of Appeals has not closely scrutinized agency and municipal court factual findings.  Instead, the court has exercised a very deferential attitude toward these bodies, often with language similar to “entitled to great respect.”[8] This has greatly contributed to allowing takings based on a finding that the land was substandard when the factual issue was in fact in dispute.[9]

Also contributing to this problem is the fact that studies to determine the substandard status of the land may have been produced under questionable circumstances.  The court has noted that when they are commissioned and paid for by real estate developers, and blight or substandard conditions are not mentioned until after the initial plan for the project has been proposed, the veracity of these reports is seriously called into question.[10]

The result of these policies, and expansive language used in the holdings of several cases,[11] has been to allow lower court to explicitly recognize economic development as a permissible public use.[12] This is inconsistent with at least the spirit, and perhaps the express intent, of the Court of Appeals in its search for a “hypothetical case” where the eminent domain power cannot be exercised properly.

Eminent Domain Going Forward

The lack of clarity in eminent domain law in New York has a simple solution.  The Court of Appeals, at any time, can find its hypothetical case to declare that the New York Constitution is more protective than the U.S. Constitution.  However, failing this, several alternative safeguards can be put in place which can do much to move towards adequately safeguarding private property.  Instead of placing the burden on property owners to show that a blight study’s finding were baseless, instead, a court could recognize based on constitutional principles that basic rights should be protected by presumptions in favor of individual rightsholders.[13] The court could also find a way to deal with problems of pretext in the findings by ignoring blight studies which are clearly only done to justify a taking which is primarily for private economic development.[14]

The future for economic development takings in New York is uncertain.  On the one hand, the court has left the door open to declaring economic development not a valid public use under the New York Constitution, but on the other hand, the court’s unwillingness to closely monitor public use does not reflect a strong probability of this happening.  It seems for the foreseeable future, the Court of Appeals will simply continue vainly searching for its “hypothetical case.”