Daily Development for Wednesday, April 10, 2002

By: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
prandolph@cctr.umkc.edu

EMINENT DOMAIN; POWER TO CONDEMN; "PUBLIC PURPOSE" DOCTRINE:

Illinois high court concludes that condemnation of land for purposes of acquisition of profit making private auto racing track violates federal Due Process Clause, despite compliance with statutory "industrial development" process, because of lack of public purpose.

The Southwestern Illinois Development Authority v. National City Environmental, 2002 WL 501593 (Ill. 4/04/02)

The Authority (SWIDA) was formed pursuant to legislative authority to "assist in the development, construction and acquisition of industrial, commercial, housing or residential projects" within certain counties in Illinois. It was vested with borrowing authority and condemnation power. It specifically was authorized to assist both "for profit" and "not- for-profit" entities. Significantly, the types of facilities within its legislative mandate included racetracks and parking facilities.

Earlier, with the assistance of SWIDA, a private entity had established an auto racing track in the area. That track had been wildly successful, and had spawned the development of hotels and restaurants in the area.

These facilities used up land that had originally been used for parking. Further, the increased popularity of NASCAR racing had led to proposals to increase significantly the size of the racetrack. Together, these two developments indicated that a great deal more parking was going to be needed.

SWIDA undertook a study in which it considered the benefits to the public that would result from its participation in the development of a parking facility for the racetrack. Traffic engineers indicated that the racetrack has already created major traffic difficulties, and expansion without the development of new parking capacity would be disastrous.Other testimony was heard concerning the massive economic and employment benefits that the race track had brought, and the improvement in these impacts if the race track were expanded and the additional parking provided.

The race track and the SWEDA study identified a 148 acre parcel, then owned by National City Environmental (NCE) as the optimal location for the parking facilities. The race track had negotiated with NCE to acquire this parcel, but could not reach agreement. SWIDA elected to use its eminent domain authority to acquire the property and sell it to the race track, issuing revenue bonds to carry out the project. The bonds were "moral obligations" of the State.

SWEDA instituted a "quick take" proceeding to implement condemnation of the parcel. NCE asked for a stay of proceedings while the question of the constitutional validity of the taking was fully resolved. The trial court denied all NCE's motions in this regard. NCE appealed to the Illinois court of appeals, which reversed, finding that the taking was not constitutionally permitted. The Illinois Supreme Court, on first hearing, reversed the court of appeals, but on rehearing changed its mind and affirmed that decision, with two judges dissenting.

Of perhaps greatest interest is the fact that the court did not base its opinion upon a limitation on "private benefit" condemnation in the Illinois state constitution - perhaps there is not such language - common in many other states. Rather, the court went straight to the Due Process Clause of the United States Constitution, finding that there was a limitation on the police power of the state that prohibited it from exercising condemnation authority whenever it identified a "public benefit." Almost all private, profit making commercial activity, it argued, is of some benefit to the public. Rather, it concluded that the eminent domain power could only be carried out to implement a "public purpose." It acknowledged that some benefit to public activities might accrue from the provision of land to private parties, and that use of eminent domain for these activities was acceptable. For instance, earlier Illinois case had upheld the condemnation of land to construct sewer facilities to assist a restaurant and gas station adjacent to and serving patrons of a public toll road. This situation, the court maintained, is quite distinct from simply providing ground to a private enterprise to use for profit making activities.

The court concluded that the arguments that traffic benefits would accrue from location of the parking facility on the NCE parcel showed that there would be a "public benefit," but did not establish that there was a "public purpose" being served, because both the race track and the parking facility were to be privately operated for private profit. It noted that in 1927 the Illinois Supreme Court had rejected a proposed condemnation of land on which to locate a railroad spur track and warehouse serving private interests as an inappropriate exercise of eminent domain authority. It viewed that case as closely analogous to the case at hand, but acknowledged that there is no hard and fast rule for ascertaining when a government taking fails the "public purpose" test:

"We do not require a bright-line test to find that this taking bestows a purely private benefit and lacks a showing of a supporting legislative purpose. As was the case [in the railroad terminal case], members of the public are not the primary intended beneficiaries of this taking. . . . This condemnation clearly was intended to assist [the racetrack] in accomplishing their goals in a swift, economical, and profitable manner.

Entities such as SWIDA must always be mindful of expediency, cost efficiency, and profitability while accepting the legislature's charge to promote development within their defined parameters. However, these goals must not be allowed to overshadow the constitutional principles that lie at the heart of the power with which SWIDA and similar entities have been entrusted. As Justice Kuehn stated in dissent in the appellate court, "If property ownership is to remain what our forefathers intended it to be, if it is to remain a part of the liberty we cherish, the economic by-products of a private capitalist's ability to develop land cannot justify a surrender of ownership to eminent domain."

Having said this, the court then noted that SWEDA had not undertaken a thorough investigation of the need for parking facilities located on the precise 148 acre parcel in question. Further, the race track was not without options in providing parking, although the "open field" parking on this acreage would be far less expensive than the option of constructing a parking garage on existing race track property.

The dissenters restated the facts, emphasizing the costs and difficulties of providing alternative parking, but not otherwise stating facts that to the editor are substantively different or that should have affected the outcome in the case.

A more important aspect of the dissenting opinion, however, was its departure from the majority's view of the legal principles involved. It notes that the leading U.S. Supreme Court cases, Hawaii Housing Authority v Midkiff, 104 S.Ct. 2321 (1984) and Berman v. Parker, 73 S.Ct. 98 (1954), both in fact upheld the takings in question in those cases, although they set forth standards by which such takings were to be measured. Berman involved urban renewal program for the District of Columbia, where ultimately private interests would acquired the property following a public exercise of eminent domain. Midkiff involved an elaborate land redistribution scheme in Hawaii designed to break down the vast leaseholdings in Hawaii so that poorer Hawaiians could acquire land for housing and farming.

The dissenters noted that Illinois had earlier even approved eminent domain to facilitate the construction of a railroad terminal, thus narrowing the reach of the railroad opinion relied upon by the majority. It stressed the U.S. Supreme Court opinion in Midkiff that the power of eminent domain is "coterminous with the police power," and concluded that the primary determinant of the public purpose to be served by a particular eminent domain proceeding ought to be with the legislature. No argument had been made here that the legislative guidelines had not been followed.

Comment 1: For a case of such enormous potential significance, there is a remarkable paucity of analysis or policy discussion. Basically, the majority says " I know it when I see it," and the dissent declaims: "Oh no, you don't."

Perhaps this case will simply go into history's dustbin as another fact specific determination that tells us little about the great constitutional issues that it addresses.

Comment 2: But when the editor listens to drumbeats around the land, he hears increasing complaints about civic abuse of the eminent domain authority to generate quickly downtown economic development by turning out old property owners and bringing in new redevelopers full of creativity and promises. Perhaps the Illinois court has seen just enough of these redevelopment projects fail to meet their goals, after the land has been taken, to make the court more cynical about the public judgment and more protective about the private interests being destroyed.

Newly popular NASCAR racing, with its need for specially designed facilities with enormous capacity, certainly tests the limits of the public's acceptance of these methods. In a recent flap in Wyandotte County, Kansas, the county supported by eminent domain the development of a track that seats over 150,000 people on (rather infrequent) race days. That development appears to have generated some of the predicted results, as new hotels and other commercial facilities are springing up on private land surrounding the track. But to what extent is subsidizing motor racing a "public function?"

Comment 3: One of the things the editor finds most puzzling is its analysis of the process by which SWEDA determined to act as "broker" to acquire the land for the race track. It suggests that SWEDA's analysis of the race track's options was inadequate. What would have been "adequate?" The race track's interests always were going to be its own profitability. What difference would it have made if the race track would make 15% higher profits or quadruple profits? One would think that the question should be whether SWEDA ought to be supporting the racetrack profit making activities at all.

Readers are urged to respond, comment, and argue with the daily development or the editor's comments about it.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1‑6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Maria Tabor at the ABA. (312) 988 5590 or mtabor@staff.abanet.org

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