N.Y., learn from New London: It offers a critical cautionary tale on the use of eminent domain
BY Richard Lipsky
Monday, November 30th 2009
There were two major developments in the use of eminent domain this month. Now the question is which of the two will be more influential in determining the future use of this controversial power in New York.
The first landmark was the shocking decision that the Pfizer drug company was abandoning New London, Conn., taking 1,400 jobs with it. This came just over five years after the pharmaceutical giant was being hailed as the linchpin of a new economic development project that would revitalize the financially strapped town. In that effort, Pfizer and New London were aided and abetted by the use of eminent domain to force evictions of home owners and small businesses, including one named "Kelo," who unsuccessfully fought them all the way up to the Supreme Court.
As a result of the deal's collapse this month, the city is now not only stuck with a huge vacant parcel, but a $78 million bill for all of its wasted efforts.
The second development was last week's 6-to-1 ruling by New York State's highest court throwing out a lawsuit against the Atlantic Yards development and strengthening the state's hand to condemn swaths of land as blight and initiate eminent domain proceedings here. This will likely pave the way for the start of that long delayed mega-project - and more broadly, city and state officials will no doubt be emboldened, taking the court decision as their cue to employ the power ever more aggressively.
Rather than running with their court-blessed authority to condemn and take property, Mayor Bloomberg and Gov. Paterson should instead be looking to the Pfizer-Kelo mess. It offers a much more relevant real-world warning on the dangers of zealous use of the eminent domain authority. The New London fiasco serves as a cautionary tale, particularly in regards to the expansive and massively expensive project over at Willets Point, in Queens.
At Willets Point, the city is reserving the right, and gives every indication that it will employ the use of, eminent domain to relocate hundreds of businesses and workers. Friday, a federal court ruled for the city's proposed project and against those businesses, saying that their rights are not being violated.
But just because the city can use eminent domain doesn't mean it should - and under close scrutiny, the economic promises of the city simply do not add up.
In order to successfully advance a 9 million-square-foot retail and housing development in that disparaged community, the city will have to - on spec - spend hundreds of millions, if not billions of dollars, to prepare the land. Just to buy all of the property owners out will cost, based on the Economic Development Corp.'s public disclosure of existing sales that have already been negotiated, close to $700 million. And this is all before the cost of providing necessary infrastructure to the area, including sidewalks and sewers, that the city has neglected to provide for well over 80 years.
In addition, it's estimated that the provision of adequate transportation into this peninsula - with an additional estimated 80,000 vehicle trips including 2,500 truck trips entering or leaving Willets Point every weekday - will run into the billions of dollars.
The city is very good at touting the collateral benefits of many of its large retail development projects, but it is understandably reticent about highlighting what can be seen as the collateral damages. Given the Pfizer debacle, in which New London's big promises and massive investments went up in smoke, it is crucial that Bloomberg and his economic development team now give a full and detailed accounting of all the predevelopment costs that will have to be absorbed even before a developer is selected.
The further lesson of New London and Kelo is that a locality needs to be scrupulous before it embarks on utilizing the eminent domain tool. Property rights should not be relegated to a constitutional sidecar. The real brunt of such decisions is borne by business owners whose property will be taken, albeit with compensation, and others who will be displaced.
With the prospect of tax hikes and service cuts hanging over the heads of New Yorkers, now is not the time for the kind of risky investment that cost our Connecticut cousins millions of dollars.
The city needs to take a step back on Willets Point, fully examine the costs as well as the benefits, and ask the simple question: Can we afford this kind of publicly subsidized real estate speculation in the current economic climate? In the aftermath of New London, the answer should be a resounding "no."
Richard Lipsky is a lobbyist representing clients who are fighting the Willets Point development.