IN ITS 5-4 DECISION FOR THE CITY IN Kelo v. City of New London, the U.S. Supreme Court gave local governments and private developers the green light to go ahead with economic development projects that involve issues of eminent domain. The ruling redefined eminent domain, as permitted by the Fifth Amendment, by upholding local governments' authority to seize property for private redevelopment projects. Specifically, the court found that the city of New London, Conn., did not violate the Constitution by condemning well-kept properties to allow for the construction of a private mixed-use project.
David Snyder, a partner with Fox Rothschild and a specialist in eminent domain law, says, “What made Kelo somewhat unique is that it wasn't a blight condemnation; it was purely for economic development.”
This ruling states that private properties no longer have to be delapidated—just underused—to be considered for condemnation. Historically, such condemnations made way for projects that benefited public use—widening a road or building school. As of now, “public benefit” also includes stimulating economic development, which increases the tax base and creates new jobs.
The decision has property rights advocates, special interest groups, and even state legislatures riled up. Fearing the decision has opened the door to government abuse of power, opponents argue that so-called economic development in some cases might only benefit the private developers by further lining their pockets.
The courts allowed for one caveat: State and local governments may pass laws that limit eminent domain.