Private Property Panic

Regardless of what the law says, however, there is more to the issue, both in theory and practice, than a portrait of property owners as “helpless victims of predatory governments eager to condemn their homes [or businesses] solely to reward rich developers,” as a Star Tribune editorial stated in urging legislative caution. Even some Minnesota developers agree, as did the Star Tribune, that the existing rules needed to be tightened. But almost nobody, including Johnson and the Minnesota auto dealers, argues that eminent domain takings for private developments should be outlawed altogether.

“What gets lost in the backlash against Kelo is that this is really a philosophical question about power,” says Steve Quam, an attorney with Fredrikson & Byron, P.A., a Minneapolis law firm. “At what level of government do you want decisions made about the exercise of power—the state level or the city level? And how much of a role do you want the courts to play?”

Land-Grabbing Cities?

The eagerness of government entities in Minnesota to use or abuse their power of eminent domain at the behest of private developers is a subject of debate. Property-rights advocates say that cities threaten condemnation routinely in such cases. Far from it, developers counter. Gary Lally, senior vice president of development for Hoyt Properties, Inc., a Minneapolis commercial developer, says that in his 22 years at Hoyt, “I can’t remember a single project where we’ve asked a city to use eminent domain. We’ve developed over 10 million square feet of property, but we’d never go to a landowner and say, ‘If you don’t sell to us, we’ll have the city condemn you.’” Lally concedes that this doesn’t mean cities don’t threaten condemnation on their own initiative. But he insists they do so rarely, and only as a last resort.

Like Lally, building contractor Steven Faber argued against a need for change in the old Minnesota law. “Cities have had this power for years and years,” says Faber, a principal with commercial contractor KM Building Company of Minneapolis. “There’s not a city official you’ll ever talk to who says they want to use it.” Where, he asks, are all the rampant abuses that the new law is meant to remedy?

Representative Johnson says a 2005 poll of members of the Minnesota League of Cities found that only 5 percent had exercised the power of eminent domain in connection with private projects in the past five years. But he points out that the threat of condemnation can be as effective as the actual exercise, and almost certainly is far more common. According to attorney Coyle, whose firm has represented property owners, developers, and cities, the threat is “used a lot in trying to gain negotiating leverage” with holdout owners. “We just don’t hear about it,” he says. “These things don’t go to court very often.”