The changing nature of eminent domain

There were two important stories today about things that are very likely going to alter the fundamental way that Louisiana has historically dealt with eminent domain. The first one I read was in Gambit, and talked about the prospect that Louisiana voters would be asked to alter how eminent domain payouts are figured in the narrow case of land seized for hurricane defense projects. Money quote:

Sen. Reggie Dupre leans in close, waving his finger over the aide’s notebook: “Tell them we want a constitutional amendment on the ballot that would allow the state to take private land for hurricane-protection projects, and we pay only fair market value for it.”

Dupre, who has been involved with most of the constitutional amendments related to natural waterways over the past five years, says he would base his new proposal on the 2003 model — only this time, it would apply to hurricane-protection projects, such as levees, seawalls and floodgates.

In short, such a proposal could translate into fewer dollars for landowners standing in the way of hurricane-protection projects. Legally, the measure would alter the way courts are allowed to compute the value of lands that are seized.

The “2003 model’ refers to the last alteration of eminent domain in Louisiana, in which fair market value was adopted as the standard for figuring payouts for coastal restoration projects.

My initial reaction is to reject such proposals, because the concept of private property is such a vital plank in our democracy. But one quote from the article gives me pause.

“This is a major concern,” [Newman Trowbridge, Jr., a Lafayette-based attorney and general counsel to the Louisiana Landowners Association] says of the proposal, which is still in its conceptual stage. “Hurricane protection levees are often placed in areas that are economically developable. In a lot of instances, this is very valuable land that could be income-producing for the owner.”

I tend to agree, with a caveat: without the hurricane protection levees, this isn’t very valuable land. So where do you draw the line? No matter where that line is, someone is going to get screwed, and, under the current situation, someone is going to enjoy a nice windfall on otherwise worthless property.

The problem with the current system is this: property owners in marginal areas have an incentive to be willing victims in order to collect that windfall. Whereas, in a scenario that lacks an artificially large payout, the locations of hurricane protection systems are likely to be based on logic and not political pull, which means that fewer landowners will likely ultimately be screwed by potential graft.

With a very narrow focus, I’m inclined to agree that a change resulting in lower payouts for seized land is probably more beneficial to Southeast Louisiana than it is harmful to landowners who will lose land that likely would remain worthless otherwise. Which isn’t to say that those landowners could not be compensated with other land seized by default within the confines of the levee system. Because there will surely be properties that are defaulted on that the state will seize. Which brings me to the next article.

The ever-so-Louisiana-loving White House has decided that it will NOT support the Baker plan. I know, what a shocker. The administration that dismissed a comprehensive coastal restoration project and rejected a fair revision of oil and gas payouts to Louisiana (which, ironically enough, were negotiated by politicians for their own gain way back when — remember my cynical comment about trying to collect that windfall and screwing other landowners above?) raises their middle finger in the general direction of New Orleans yet again.

The article explains how the failure of the Baker bill might impact the New Orleans area and why there might be property within the hurricane protection system with which to compensate landowners whose property is seized in the improvement of that system. Here’s the money quote:

But to accomplish the dual goals of creating population density and safer redevelopment of some low-lying parts of the city, a buyout of some property owners is seen as inevitable. A voluntary buyout program is viewed as needed to help homeowners who are willing to move to higher ground but otherwise will be forced to renovate their flooded properties where they sit, or walk away and face foreclosure, due to the limits of their flood insurance payouts.

Sadly, I think that the misery quotient in the metro area still has room to climb before it begins to drop. A failure to revise eminent domain payouts for hurricane protection systems, coupled with an administration that is happy to pay lip service to the value of the City and people of the region while lighting flaming bags of poo at their doorsteps, is going to seriously hinder the recovery and protection efforts.

21 Comments so far

  1. Jack Ware (unregistered) on January 25th, 2006 @ 10:04 am

    I don’t understand how the city/state – whatever – can seize land from people who are actually living there, yet they can’t do anything about all the blighted properties that have been littering the city for decades? Could something be worked out where blighted properties are seized, rehabed like Robert Downey, jr., and offered as, at least partial compensation, for property seized for levee construction. Seems like a two bird with one stone thing to me. Though, now that property values are so high (which I believe is temporary), the owners of those blighted properties might be enclined to pay the past due property taxes and do something with the property. It would be an excellent time to tear down a blighted property, stack the shit by the curb, and let the city haul it off.


  2. Laurie (unregistered) on January 25th, 2006 @ 3:43 pm

    It’s all about protecting the port and their oil interest.

    There is a fault line running parallel to the Gulf of Mexico from southern Louisiana into Texas.

    You can bet your bottom dollar the Hydrologist know all about it.

    Where do you think their petroleum pipe lines are?

    It shakes we lose everything!

    For those of you not listening Georgia on the continental shelf recently had an earthquake.

    I don’t know about you, but when it shakes where the land masses

    broke away excess pressure is put on the tectonic plates.

    There are twelve major fault zones in the south.

    When Arkansas stared to shake a decade ago the plates are moving under our feet now, not later.

    Shut down the bloody rigs!

    I’m sure Mexico would be interested in the Gulf’s getting screwed over!

    Laurie


  3. Aaron (unregistered) on January 25th, 2006 @ 4:01 pm

    Ok, sorry to be the one to break with the pattern of mindless ranting, but here’s the actual legal basis for the current eminent domain law. There is a constitutional provision called the “takings clause” which allows the government to take private property so long as they compensate the individual they take the property from. For years, this was a very strictly interpreted provision where the courts didn’t allow any takings unless they were dire for public safety or the like (demolishing buildings which posed a risk, etc.). Last year’s United States Supreme Court however had a case called Kelo. In Kelo the court approved a city’s right to take a woman’s private property so that they could sell the property to a condominium investment company because the city would receive greater profit, in the way of increased tax revenue and a boost to the economy because of businesses which would move in to the condo and the additional people who would live there – a revitalization of the community. As a result of Kelo, public takings doctrine has shifted radically and people are not aware of just how far it could be interpreted. But it seems today that so long as the community realizes a greater benefit by the taking, it’s implicity allowed.

    In the current case, the property would be taken because of a need to protect the public – something the takings clause would have probably have allowed BEFORE Kelo, let alone after. The quick and short of things is that there’s not going to be any chance that any property owners would be able to successfully defend against their property being taken if it is indeed needed to strengthen the levee system.


  4. Joe B. (unregistered) on January 25th, 2006 @ 4:34 pm

    Oh, no doubt that the property could be taken before Kelo. Hurricane protection would be considered a compelling reason for exercising eminent domain. What the propsed (or soon to be proposed) change will do is alter the way that the court is able to figure out compensation for land taken for hurricane protection projects. Landowners will be compensated, but only for the present fair market value of any land seized.

    Kelo is what has a group of people in the Ninth Ward up in arms, although I haven’t seen them make the connection anyplace. They’re a socialist organization, and therefore immediately suspicious (to me, anyway). That said, after going through their website it’s obvious that they are doing some good work even if I disagree with their philosophy. (Hey, I’m trying to be less cynical.) Anyway, a couple of weeks ago they were all up in arms over the bulldozing of property. Which is fine, I mean, I don’t think the city should be bulldozing property when residents haven’t had a chance to respond or challenge that decision.

    But they concocted this crazy (to me, anyway) story about the government trying to seize the Ninth Ward and give it to developers. I thought that was out of line. You’ve got plenty of people who haven’t been able to get back yet and you’re throwing them into a panic with overly dramatic conspiracy claims.

    Kelo is the key to those fears having any validity. Because Kelo says that public interest now extends to tax revenues. People are so pissed about Kelo that there is a group that has proposed taking Justice Souter’s property in Vermont or New Hampshire or wherever and turning it into Lost Liberty Hotel in retaliation for the Kelo decision. Which I think is a brilliant idea. I doubt that they’ll pull it off, but it’s the kind of inventive response that points out how stupid that decision was.


  5. Joe B. (unregistered) on January 25th, 2006 @ 4:38 pm

    Laurie, I thought for sure your post would be about the “Dutch Solution.”


  6. Laurie (unregistered) on January 25th, 2006 @ 5:16 pm

    Thanks for the Laugh!

    Just don’t let them blindly get away with it.

    As long as we follow blindly they are happy.

    Laurie


  7. Markus (unregistered) on January 25th, 2006 @ 6:59 pm

    Christopher Hallowell talks about this a bit is in excellent book Holding Back the Sea. I remember from the time I was writing in the area on this subject, and was reminded by Hallowell, that the whole concept of how worth is calculated is what the LLA had in mind in opposition to coastal projects. They wanted to future value of their land, as they saw it. That’s the important bit above in Newman Trowbridge, Jr.’s remarks.


  8. NO_Doc (unregistered) on January 25th, 2006 @ 9:42 pm

    Well, in my humble opinion the landowners of the property near the levees should be bought out at the value they paid plus any cash for substantial renovations, plus perhaps 7% compounded interest. That way, if you look at the land as an investment, they did OK with it. The fact that someone paid 85 thousand for a property on the Lakefront 25 years ago should not mean they walk away with 350 thousand since the city needs their property to create a levee that will save billions of dollars of property from flooding. If your want to argue that buying land is a form of investment, remember that investments carry risks. In the case of eminent domain, it means you should get a decent price for the property not a king’s ransom. And at this point in the Katrina story, if my house was needed for someone or something I would just say give me what I paid for it as long as it helped the city to rebuild and rebuild correctly.

    On a side note, I heard today that the Iberville housing project was in the process of being reopened and that some residents had returned. Anyone else heard anything about this? The press/HANO/City Hall seem very quiet if this is the case.


  9. Tom Jefferson (unregistered) on January 26th, 2006 @ 7:10 am

    Have any of you read the Constitution of the US?

    Although the Supreme Court has ruled in what may seem to be an “anti-private property” manner in the New London, Connecticut “Kelo” case (which involves an entire neighborhood in New London, not a single property owner), the Court has left it up to the States to legislate the appropriate reasons for “takings”, which could effectively halt seizure by the government for economic reasons, as in the “Kelo” case.

    I’m positive that taking land to build levees is an absolute eminent domain right of the government – it’s just the matter of “just compensation” that has to be worked out. “Fair Market Value” is what takes place between a willing buyer and seller, and is the basis for every real estate transaction!


  10. Joe B. (unregistered) on January 26th, 2006 @ 9:12 am

    Actually, not lately, no, Tom. I’m having trouble making out parts of it that are covered in shit from where Congress, the Supreme Court, the Justice Dept., and GWB’s administration (who most assuredly has NEVER read the Constitution) have been using it to wipe their collective asses.

    OK, I’m done with the not-so-sarcastic rant.

    It’s true that states “could” narrow the appropriate reasons for takings, but it’s difficult to deny that what the SC has done is alter the landscape in the opposite direction. Prior to Kelo, a compelling reason for takings did not include the ability to mandate a de facto transaction between two private landowners. While states could, on a state-by-state basis, tailor their own constitutions and laws to provide property owners with greater protection, not all will do so. It’s a net loss for private property ownership.

    I do agree with your remarks about fair market value, however. And there is (and has been) no question that building levees does constitute a legitimate use of eminent domain by the government. I think no_doc is off base suggesting that fair market value is too much compensation for some properties. IN fact, if land takings will save billions of dollars in property from flooding, those protected property owners should be MORE willing to pay fair market value than otherwise. Cutting out calculations of future value seems like a fair compromise to me.


  11. NO_Doc (unregistered) on January 26th, 2006 @ 9:11 pm

    Hmmm…off-base, eh?? Let’s see if I can steal home…..

    Specifically dealing with Katrina and the massive devastation therefrom, I think it makes sense that the property that needs to be seized should be valued at its post-Katrina level if we are going to use current market value as the standard. I thought my idea whould at least assure that no one lost money in the seizure, which very well may happen using post-Katrina values. I do think this disaster was of such enormous magnitude that it merits rules of its own. I would agree that if, let’s say, someone from Jefferson Parish government was to notice that if the parish bought the house on the northeast corner of Bonnabel and I-10 and turned it into a right turn only lane onto northbound Bonnabel that it could substantially reduce the traffic there and stop it from backing up onto I-10 and creating problems there (HINT! HINT!). The owner, being a good Metry-ite, immediately counters the parish’s fair offer with “You ain’t gettin’ my propa-TAY ‘cept over mah dead body!!”. The parish government then by nothing less than divine intervention manages to find the balls to declare eminent domain. In that case, I do agree that the current market value of the house should be used. But in the case of the levee repairs and improvements, where dozens if not hundreds of tracts of private land are likely to be involved, I do not think we are going to get enough money to square up with everyone at their pre-Katrina levels. I can also think of a few reasons why post-Katrina value would make sense, the most obvious being that without adequate levee protection, the value of the property they are now sitting on is going to be zilch, especially after the national flood insurance program declares them uninsurable or starts a 20 year rate hike on their flood premiums.

    And *future* value??? LOL!!! NO ONE knows what anything’s future value is going to be right now. Wait, here is an idea..you might as well also calculate in future inflation, so that you can pay less since you are paying 2030 prices in 2006 dollars! Everyone knows that a 1970 dollar was worth so much more than a 2006 dollar….hmmm. Maybe we DO want future value after all!!


  12. Joe B. (unregistered) on January 27th, 2006 @ 2:02 am

    I see what you’re saying, and I want to clarify that I’m talking pre-K market value, not post, when I use the term “fair market value.”

    And there’s a couple of reasons why:

    1) For the government to assert its right to eminent domain under normal circumstances, it makes sense to pay fair market value. People shouldn’t be unnecessarily penalized. That is to say, they should be able to take their payment from the state and be able to make a lateral move in the housing market. Which isn’t exactly possible in a city like New Orleans.

    2) After seizing however much land they might take in the various areas of the city to bolster levee protection, there will be less land in Orleans Parish (because we’re talking about a finite, pre-determined amount of land). Therefore, the value of the land remaining for (re)development will automatically increase due to simple market pressures. Obviously this is different post-K, but considering that the need for improvements is so immediate and that the amount of time for the market to level itself back out is likely very much longer, the most reasonable standard to use is pre-K value. Whether that’s based on your last tax filing or adjusted according to market data (comps, I guess) from the quarter before the storm probably won’t make much different. I’m assuming that there are enough affected properties in New Orleans that pre-K value could still secure a lateral move even in a wildly uncertain market.

    Going back to the “of the people, by the people, for the people” theme, I don’t think that we have any more legitimate right to not pay fair market value than we do to compel what amounts to a taxpayer to taxpayer property transaction (Kelo). It’s too arbitrary, in the long run it negatively affects all property owners indirectly because of the precedent.

    Yes, future value is rather absurd. I think maybe we’re talking about undeveloped land and developed land and treating them as the same scenario. With already developed land, the problem with a non-pre-K market price formula of any sort is that you can’t impose that method of property valuation on the entire real estate market, not even within a pre-defined area like Orleans Parish. If you could, then it would be fair. I believe there are also too many questions about the immediate (18-24 months) real estate market to base takings on the present (18-24 months) market. I think we should err on the side of caution and aim to make sure that nobody gets screwed in the first place. Even if it costs us more money.

    Now, when you look at someone whose property is seized, and they haven’t done anything to it since the storm, and they’ve collected insurance, then it’s probably fair to separate the value of the lot from the dwelling. In those cases, the state can save money. And if it is their intention to seize properties, then they should make that intention known to those homeowners ASAP.


  13. MAI (unregistered) on January 27th, 2006 @ 8:21 am

    Sounds like you need a response from a real estate appraiser familiar with the procedures used in establishing “fair market value” in eminent domain cases.


  14. NO_Doc (unregistered) on January 27th, 2006 @ 8:26 am

    At the Gentily Civic Improvement Assn. meeting on Jan. 7th, Ms. Susan Ingram of the Corps of Engineers gave out the website http://www.mvn.usace.army.mil/. If you click the link to Task Force Guardian, they are posting dates with meetings when they are discussing things like eminent domain. Also, at the same meeting Fred Young from the Corps said that most property owners who were likely to be affected had either been contacted or the Corps was actively looking for them.

    I guess it boils down to the fact that I can live with some people not getting pre-K value for their homes because the land is going to be used to greatly benefit the entire community. As long as those people are compensated enough to be able to buy other property and rebuild a similar house, it sounds fair to me. Hell, perhaps the Corps can even build them their new house given the trouble getting reliable contractors at the moment. Should save everyone some money.


  15. Joe B. (unregistered) on January 27th, 2006 @ 9:24 am

    “Hell, perhaps the Corps can even build them their new house given the trouble getting reliable contractors at the moment. Should save everyone some money.”

    LOL. Will Eustis Engineering and Modjeski and Masters be signing off on those construction documents?

    “I guess it boils down to the fact that I can live with some people not getting pre-K value for their homes because the land is going to be used to greatly benefit the entire community.”

    But, like I said, that is all the more reason that the entire community should be willing to make sure that people with affected properties are compensated properly. If the market were actually stable we could take a stab at figuring out the expected incremental increase of all properties and compare it to fair market value for the taken properties. I think we’d find that the difference across all factors (property value, insurance savings, ect.) greatly favors the state. If so, why not err on the side of generous?

    There’s nothing noble about sacrifice (deliberately accepting a lesser value for a greater one), and something distinctly distasteful about forced sacrifice.


  16. Joe B. (unregistered) on January 27th, 2006 @ 12:54 pm

    Here’s a press release from the Institute for Justice with some Kelo-inspired banking news:

    BB&T Respects Property Rights, Won’t Fund Eminent Domain Abuse

    Money quote:

    In a press release issued today by the bank, BB&T Chairman and Chief Executive Officer John Allison, said, “The idea that a citizen’s property can be taken by the government solely for private use is extremely misguided, in fact it’s just plain wrong. One of the most basic rights of every citizen is to keep what they own. As an institution dedicated to helping our clients achieve economic success and financial security, we won’t help any entity or company that would undermine that mission and threaten the hard-earned American dream of property ownership.”


  17. NO_Doc (unregistered) on January 29th, 2006 @ 3:10 pm

    OK, OK I give up….let ’em have pre-K value!!LOL

    Honestly, I wish we could afford to give everyone whose house was in Orleans, Plaquemens, St. Bernard or the areas of Jefferson and St. Tammany that got wiped out 150% of pre-K value, so they could elevate their homes out of the flood plain. Problem is, I just don’t see the money as being there. If the Baker bill does make it through despite W’s objections, Baker himself envisioned it not costing more than 30 billion. If you figure that 200,000 homes were lost, that means an average value of $150,000 paid out of the LRC per homeowner. While some properties will get less (i.e. those that flood insurance covered the entire cost on, or that were never worth that much to begin with), many Lakeview residents lost 3-4x that even after they settled with all their insurances and FEMA. And, yes, the discussion is about eminent domain – but would you buy out 4 Lakeshore properties for 1 million dollars each for a levee and pumping station when you know damn well it means that there will not be money enough to pay 25 Lakeview residents what they need to settle with their mortgage compaies? I know it sounds like I am comparing apples to oranges, but the bottom line is that we are only going to get X number of dollars to rebuild everything with. I guess I just want to be sure everyone is taken care of before we start letting people walk with major capital gains from expropriated property.

    Ooops. Sorry. Forgot I had surrendered. Anyway, there is no two ways about it that Kelo is bad legal precident. I can look at the blighted properties in Uptown, the Garden District and other places in town and see where it would be good for the community to be able to seize these types of property. But that as long as Kelo exists we are not truely ‘the home of the free’. It is more like ‘the home of the person who has not yet found out his home is not his as the local government wants to sell his home to a contractor who paid the politicians off so he can get the home for half price’.


  18. Laurie (unregistered) on January 29th, 2006 @ 5:48 pm

    Will some one please explain to me how New Orlean’s is not considered a flood zone?

    I live in a flood zone in St. Charles parish where flood insurance is mandatory.

    Flood insurance is Not expensive $144 per annum.

    I am confused on this part of the issue.

    Laurie


  19. BDD (unregistered) on January 30th, 2006 @ 7:58 am

    its not a flood zone its a swimming pool.


  20. Laurie (unregistered) on February 1st, 2006 @ 2:04 am

    Actually, it’s all reclaimed swampland.

    It was trying to perform its function, to absorb to saturation then adsorb.

    Laurie


  21. Laurie (unregistered) on February 6th, 2006 @ 4:54 pm

    The algae growing in the gunk would have dried up an’ died!

    If sod had been thrown over the new soil it would have broken down into extremely fertile “blackjack” folks!

    But, no!

    What did we did we do?

    We dug up the new soil which increased the height of the city from the Gulf.

    Things functioned the way they were supposed to, and we dug it up an’ threw it away.

    Now we complain about the height of the city.

    Why didn’t we sod it?

    I hadn’t found the board yet I couldn’t have said anything, ‘xcept to bitch at the people ’round here!

    Laurie



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