Virginia's Localities Currently Don't Have The Authority

Published on: 7/05/2005

May a local government condemn property to make way for private economic development as part of a revitalization plan? According to the United States Supreme Court, it can.

In a 5-4 decision issued June 23, 2005, the U.S. Supreme Court validated a Connecticut city's plan to condemn property as part of redevelopment of a "distressed" area. The Court ruled that boosting local economic growth serves a valid public purpose and is a public use, permitted by the Fifth Amendment "Public use Clause" of the United States Constitution that outweighs the property rights of homeowners. The case, Kelo v. City of New London, involved a working class residential neighborhood in New London, Connecticut, which the city proposed to condemn to make way for a riverfront hotel, health club and offices, and certain attendant public uses. The development was part of the city's comprehensive economic development plan and intended to benefit the entire city through revitalization, increased tax revenues, employment and other economic development opportunities. Several residents of the neighborhood claimed that the condemnation of their property, even though they would be compensated, was an unjustified and illegal taking.

In March, 2004, the Connecticut Supreme Court agreed with New London that the promise of additional tax revenue justified the use of condemnation under Connecticut law. Last week's ruling from the United States Supreme Court upheld that decision. The U.S. Supreme Court refused to adopt a bright line test urged by the landowners that economic development does not qualify as a public use. The Court emphasized in its ruling that it did not preclude a State from placing further restrictions on local use of the takings power.

So what does this case mean for local governments in Virginia? There may be no immediate impact on localities. Because localities in the Commonwealth have only those powers expressly given by the General Assembly or implicit therein, one must look to Virginia law first. So the question becomes can Virginia local governments condemn old neighborhoods or obsolete commercial districts to make way for shopping malls, hotels and new office buildings? Currently, local governments have the authority to establish housing authorities which can condemn blighted property and make such land available to private enterprise or public agencies. However, there is no express grant of authority from the General Assembly for a Virginia county, city or town to generally acquire property for economic development purposes. Thus, the question whether local economic development would otherwise constitute a legitimate "public use" for condemnation purposes under the Constitution of Virginia or the United States Constitution is irrelevant if localities are not authorized to acquire property for economic development in the first place.

Irrespective of whether the power exists in Virginia law to condemn for economic development purposes and transfer land from some private owners to different private owners, localities must consider the significant policy implications of doing so even when acting through a redevelopment and housing authority. Currently, Virginia localities must take significant steps before initiating a condemnation and they understand that there are substantial costs and commitments of public money and public credibility to do so. Therefore, we think it unlikely that the U.S. Supreme Court's recognition that these public policy decisions can be made at a local level will lead to a rush by Virginia localities to use such power even if authorized under State law.

In addition, Kelo has sparked an outcry from numerous legislators concerned about property rights who we understand are preparing to introduce legislation to limit or overturn the decision.




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