One for the Little Guy
In the seven weeks since the U.S. Supreme Court issued its decision upholding the rights of government to seize property for commercial redevelopment projects, politicians and pundits of all stripes have stumbled over each other in the rush to denounce the ruling. By giving its blessing to such practices, the critics have howled, the high court has endangered one of the citizenry's most basic constitutional rights.
"Since the Fifth Amendment is no longer interpreted to protect your private property rights from government takings, your city can now force you to sell your home at a price it determines to be fair," Minnesota State Auditor Pat Anderson wrote in a recent op-ed that appeared in several out-state newspapers. "Your only choice is to watch the bulldozers come in and to begin looking for a new home."
Such hyperventilating on the issue has been more rule than exception. In the wake of the decision, property-rights advocates nationwide have begun pushing for legislation and constitutional amendments aimed at restricting government use of eminent domain. But Anderson, along with many like-minded critics, neglects to address one fact about the Supreme Court's decision: It did little more than uphold the status quo.
Truth is, municipal governments in Minnesota have long used the power of eminent domain--and the threat of eminent domain--as a tool to spur commercial redevelopment. But while courts have been permissive in regards to the practice, they are hardly without sympathy for affected property owners.
Consider the little-known case of Kenneth Wren, a 31-year-old Bloomington native and the owner of a small concrete landscaping business. In 2000, Wren purchased his first home, a two-bedroom rambler on the 7600 block of Aldrich Avenue South in Richfield. Shortly after moving in, Wren received a postcard urging him to attend a Richfield City Council meeting. "I went there," Wren recalls, "and they were showing slides on this big screen. It was my block. But my house wasn't there anymore. Instead, there was a Walgreens."
After the meeting, Wren approached the developer who presented the plan. "He pretty much told me there was nothing I could do, but that they would give me a fair price for the house," Wren recalls. Not long afterward, the Walgreens proposal fell through. But Wren's home remained in the crosshairs as Richfield's Housing and Redevelopment Authority (HRA) looked for a new developer. For the next three years, Wren says, he was stuck in limbo. He didn't see much reason to improve his home because he didn't think he would be able to stay there much longer.
Finally, in 2003, Wren sold to a company called the Cornerstone Group, which by then had taken charge of the three-square-block redevelopment plan. (Dubbed the "Lyndale Gateway," the project consists of a mix of apartments, condos, retail, and offices, and was completed late last year). Like a lot of people who purchased homes during the real estate boom, Wren turned a profit on the sale--ultimately negotiating an $180,000 price tag on a home for which he paid just $116,000 three years earlier.
But the deal wasn't as good it sounds, Wren says. When he closed on his new home in Bloomington--comparable in size and value to the Richfield rambler--he had to scrape together an additional $15,000. Around the same time, Wren says, he heard a lawyer's advertisement on the radio, saying that "if you were forced out of your home by the government you might be entitled to relocation benefits."
So Wren contacted the advertiser, Minneapolis attorney Jon Morphew. Morphew, who specializes in the somewhat arcane area of law relating to relocation benefits, demanded that the Richfield HRA compensate his client. The agency refused and Wren sued. Both an administrative law judge and the Minnesota Court of Appeals ruled that Wren was, in fact, entitled to relocation benefits under Minnesota law.
The HRA appealed to the Minnesota Supreme Court, which, in a decision issued earlier this month, once again ruled in Wren's favor. While Wren's home had not been taken by the government, the court said, the HRA's "intertwinement" with Lyndale Gateway made it a de facto partner in the project. Additionally, the court found, the HRA failed to meet its statutory obligation to notify Wren of his right to demand relocation benefits.
"Clearly, the Minnesota Supreme Court has rejected the legal shenanigans used by governmental entities to avoid paying relocation benefits," observes Morphew, who calls the decision a victory for property rights. While the relocation benefit has not been agreed to, Morphew figures his client will likely receive between $20,000 and $30,000.
That probably won't be paid by Richfield taxpayers. Under its agreement with Lyndale Gateway, the company--not the HRA--is required to pay any relocation benefits.
But, according to Morphew, the decision could have broader impacts. In the case of Richfield, he says, it could put the city on the hook for relocation benefits for as many as 65 homeowners whose homes were razed to make way for the new Best Buy corporate campus. (That project, completed two years ago, also sparked one of Minnesota's best-known, albeit unsuccessful, challenges to eminent domain, when the Walser auto dealership sued five years ago to prevent the taking.)
Richfield City Manager and HRA director Steve Devich could not be reached for comment. Susan Naughton, a staff attorney with the Minnesota League of Cities who wrote a friend of the court brief in support of the HRA, thinks the ruling will hurt municipalities. "From our perspective, this new standard is very vague and subjective," Naughton says. "It seems that cities have two main options: They can either provide relocation benefits, which can dramatically increase the cost of redevelopment, or they can choose not to provide benefits and face the prospect of time-consuming and expensive litigation."
From Kenneth Wren's perspective, that's just fine. "I don't have any ill will towards Richfield," he says, "but I also really don't care for the way they went about things."
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