Officials in North Carolina hold differing opinions on the local implications of the U.S. Supreme Court ruling in the Kelo v. New London eminent-domain case in late June. But nearly all of the elected leaders surveyed by Carolina Journal were concerned about the potential for infringement on individual property rights.
The 5-4 court decision, which allows government agencies to seize private property from one owner and to give it to another private owner for economic development purposes, led to a grass-roots backlash across the nation. The Washington Times reported July 11 that “several state legislatures are expected to act on some kind of statutory ban before year’s end and more are expected to take action next year.”
North Carolina’s General Assembly may be one of those bodies that acts, but it is not clear how important the Democratic House and Senate leadership believe the issue to be. At CJ’s press time both chambers were deadlocked in their budget negotiations, and Senate President Pro Tempore Marc Basnight forbade any committees to meet that weren’t working on the budget.
That didn’t stop other lawmakers from investigating the state’s existing eminent-domain laws, and asking whether the court’s decision could open the doors to similar property takings in North Carolina.
“We ought to make it as difficult as possible to make it to take people’s property,” said Gaston County’s David Hoyle, one of the state Senate’s Democratic leaders. “That’s just wrong.”
The Connecticut decision
The Kelo decision addressed a situation in Connecticut in which a local economic development agency, with powers of eminent domain, sought to condemn the properties of nine owners of 15 homes in the city of New London. The agency planned to obtain the land and turn it over to a private developer, who would build offices, a hotel, and a health club. The project was expected to provide as much as $680,000 annually in tax revenues for New London’s coffers.
While many homeowners in the waterfront area voluntarily sold their homes to the agency, the Kelo plaintiffs refused. That’s when New London invoked eminent domain, and the holdouts sought legal protection under the “takings clause” of the Fifth Amendment to the Constitution.
The Fifth Amendment reads that …”(N)or shall private property be taken for public use without just compensation.”
But the Supreme Court determined that the city’s taking of the property was justified.
“Those who govern the City were not confronted with the need to remove blight…,” wrote Justice John Paul Stevens for the majority opinion, “but their determination that the area was sufficiently distressed to justify a program of economic rejuvenation is entitled to our deference.”
New London, like many northeastern towns, has suffered population losses in recent years with the increasing unemployment and the closing of a Navy facility. The projected shutdown of the nearby Groton Naval Base is expected to exacerbate the problem.
Urban redevelopment OK
Despite similar pushes for economic development by public officials in North Carolina, seizing private property appears to be overstepping proper boundaries, sources say.
“I’m as much for economic development in Forsyth County as anybody,” said State Rep. Larry Brown, a Kernersville Republican, “but I would never support what they did in Connecticut for any reason.”
“I have major concerns with (the decision)” said Gloria Whisenhunt, chairwoman of the Forsyth County Board of Commissioners and a Republican. “I think there are boards that could take advantage of it.”
Some lawmakers asked legislative staff for the Assembly to examine the potential implications of the Kelo decision in North Carolina. According to a memo issued by the legislative research team, the Supreme Court’s decision “does not give the power of condemnation for economic development to local governments. That power may only be exercised if the laws of a state permit it to be used.”
The memo cited several purposes in North Carolina law for which eminent domain is permitted. They include many of the commonly known reasons, such as for roads, parks, and utilities.
However, researchers also noted a section in the statutes that allows for eminent domain for “urban redevelopment,” most often invoked in areas that are blighted.
“But it includes areas that substantially impair the economic growth of the community, have seriously adverse effects on surrounding development, and are detrimental to…the public health, safety, morals or welfare,” the memo said. “Furthermore, it permits urban redevelopment by a city where there is a clear and present danger that these conditions will come to be in the reasonably foreseeable future.”
Researchers said the statutes authorize working with private developers in such cases.
“That’s what worries me,” said State Sen. Tom Apodaca, a Hendersonville Republican. “Especially when you get into urban planning, because they change their planning every 20 years.”
He said that he and a number of his colleagues are seeking to address the issue with a statutory fix, “right off the bat.” Then he hopes a study commission might be formed to consider whether a state constitutional amendment is necessary.
“Even if this isn’t being done in North Carolina, it may give some municipality an idea, and we need to protect private property rights,” Apodaca said.
Legislation in the works
Two state representatives, Republican Wilma Sherrill and Democrat Bruce Goforth, both of Buncombe County, were working on a bill that would exclude economic development as an excuse for private property takings. State Sen. Jim Forrester, R-Gaston, said he and State Sen. Fred Smith, R-Johnston, hoped to propose a constitutional amendment before the current session ends.
“I think you need a constitutional amendment to make sure that some liberal judges don’t interpret the law the way they want, instead of the way it’s written,” Forrester said.
In recent years North Carolina legislators have shown a propensity for passing special laws that offer large financial incentives to corporations in exchange for bringing new jobs to the state.
The highest-profile example was legislation in November that created $242 million in tax breaks for Dell Corp. to build an assembly plant in Winston-Salem. In addition, local government provided about $37 million in land and tax breaks for Dell.
Public officials interviewed for this article, who voted for the Dell incentives, said that if an eminent-domain taking was part of the deal, they would not have supported it.
“(Dell) would have to pay the price, or they’d have to find another site,” Hoyle said.
“I wouldn’t want the state to condemn land to give it to Dell,” Forrester said.
Considering that the legislature has been willing to make exceptions in the tax code for private corporations, and to allow municipal governments to raise revenue through local tax changes, making exceptions for eminent domain might be possible also, some said.
“I don’t think it’s that far-fetched, and that’s why we need to move toward a constitutional amendment,” Apodaca said.
“I think we need to approach it while it’s a front-burner issue,” he said.
Paul Chesser is associate editor of Carolina Journal.