The Current Issue
For most of her 36 years in Atlantic City, Vera
Coking, an elderly widow, ran a tidy little boarding house just off the
Boardwalk. She convinced her husband to buy the property because she loved the
house, the beach and Atlantic City. There, long before gambling was legalized
and towering casinos rose up around her, she greeted guests from around the
world with one of the six languages she speaks. She raised three children in
the house, and one daughter still lives with her.
Retired now, the house is her only residence and
only asset. But if tycoon Donald Trump has his way, a New Jersey government
agency will use its power of eminent domain to condemn Vera's property, take it
away from her at a bargain-basement price, then transfer the ownership to Trump
for a fraction of the market value. Trump then plans to park limousines where
Vera's bedroom, kitchen and dining room now stand. In short, New Jersey will
take from one private owner and transfer that property to another private owner
for his exclusive gain.
Unfortunately, Vera Coking is not alone in this
battle. Other private property owners in Atlantic City and nationwide find
their property rights under attack from unethical marriages of convenience
between developers, local governments and state agencies. The result is an
erosion of a fundamental constitutional right. And the legal
landscape-especially at the federal level-is stacked against the land holders.
On December 13, 1996, the Institute for Justice
joined Vera's attorney, Glenn Zeitz, in asking the New Jersey Supreme Court to
reverse an appellate decision allowing the condemnation of Vera's property and
to hold that the condemnation violated the New Jersey and federal
Constitutions
Eminent Domain: How It Works, How It Is Abused
Unlike most developers, Donald Trump doesn't
have to negotiate with a private owner when he wants to buy a piece of property
because a governmental agency-the Casino Reinvestment Development Authority or
CRDA-will get it for him at a fraction of the market value, even if the current
owner refuses to sell. Here is how the process works.
After a developer identifies the parcels of land
he wants to acquire and a city planning board approves a casino project, CRDA
attempts to confiscate these properties using a process called "eminent
domain," which allows the government to condemn properties "for
public use." Increasingly, though, CRDA and other government entities
exercise the power of eminent domain to take property from one private person
and give it to another. At the same time, governments give less and less
consideration to the necessity of taking property and also ignore the personal
loss to the individuals being evicted. Most courts have declined to put limits
on the exercise of eminent domain. For a local government and state agencies,
all the benefits weigh in favor of using eminent domain.
The New Jersey and federal Constitutions state
that "private property shall not be taken for public use without just
compensation." This constitutional provision imposes two limits on the
taking of private property: first, that the use must be public, and second,
that just compensation must be paid. If private property could be taken for any
use at all, the term "public" would not have been included.
Originally, eminent domain was a power that
allowed the government to construct public works, like roads and aqueducts.
Government was limited to taking only that property necessary for the public
use. Gradually, though, government has come to ignore these limits. Now, local
governments will take property and give it to a private person for their
economic profit. Anything that a government might be allowed to do at
all-storage, planting flowers-it can condemn property in order to do. And it
does not need to show that it actually needs the property in question.
This erosion of the doctrine of eminent domain
has led to predictably appalling results. In 1981, Detroit destroyed Poletown,
the last racially integrated neighborhood in the city, and gave the property to
General Motors to build a plant. The closely-knit, historic community could not
be replaced, and the plant did not live up to its promise of bringing economic
prosperity to the city. Likewise, when the city of Oakland decided that it
didn't want the Raiders football team to move to Los Angeles, it tried to
exercise eminent domain, take ownership of the team and force them to stay.
Now New Jersey has decided that large casino
hotels are the road to prosperity for Atlantic City. Any homes or small
businesses that happen to be in the way will be demolished. The Trump project
is only one of several such instances. In another, CRDA has begun the process
to take a small motel from Joseph and Gilda Ann Rutigliano, who have run it for
the last 30 years, and give the property to the Tropicana Hotel across the
street for parking. There are already three parking lots, one owned by
Tropicana and two owned by the Rutiglianos, but CRDA doesn't have to consider
that no additional parking lots are needed. Another proposed project will
remove an historic block of houses, owned and occupied by African-Americans,
and build a tunnel from one street up to a new casino.
In essence, Trump and other casino developers in
Atlantic City shop for properties they want and CRDA does the buying for them
at fire-sale prices.
A particularly interesting fact about the Trump
development is that, although he claims he wants the land for a park-a
so-called public use-nothing would stop him from removing the park and
constructing another casino. If the proposed "public use" exists for
a single day, the developer has satisfied his end of the agreement and the land
is his to do with as he pleases without further consideration of the
"public's" use.
Coveting Thy Neighbor's Goods
The prime location of Vera Coking's three-story
house has attracted unwelcome interest before. In 1983, Bob Guccione tried to
purchase the property for $1 million to construct a casino. Vera didn't sell,
so Guccione built a steel and concrete structure all around (even over) her
home. When Guccione's project failed, the land and its structural skeleton was
purchased by Trump and razed. In the process of removing the frame, demolition
crews started a fire on her rooftop, broke windows, removed her fire escape,
and nearly destroyed the entire third story of her home by dropping concrete
blocks through the roof. Now dwarfed by the giant 22-story Trump Plaza, Vera's
little home certainly stands in disrepair, but through no fault of her own.
(Coking has since filed a lawsuit against the demolition company seeking compensation
so she can repair the damage.)
On May 6, 1994, Vera Coking received a letter
from CRDA stating that her property had been "appraised" at only
$251,250 (nearly $750,000 less than her earlier offer). CRDA offered her that
amount to acquire the property and notified her that she would have 30 days to
accept or CRDA would institute suit in the Superior Court "to acquire your
property through CRDA's power of eminent domain." In a May 24, 1994,
letter, CRDA Executive Director Nicholas Amato stated in capital letters,
"You may be required to move within 90 days after you receive this notice.
If you remain in possession of the property after that time, CRDA may be able
to have you and your belongings removed by the sheriff." On July 28, 1994,
Susan Ney, Director of Housing Development for CRDA "instructed CRDA's
counsel to commence condemnation proceedings in the Superior Court of New
Jersey."
Vera Coking opposed the condemnation in court,
and while the case was pending, Trump continued with construction. The Trump
Plaza Hotel and Casino was completed; grass was put down on one side of Vera's
property and parking lots operate on the other sides. The only part of the
project left is razing Vera's house and two other buildings on the block. The
final project included a new casino (even though Trump's original plan did
not.) In March 1995, the Atlantic County Superior Court ruled that CRDA could
not fund projects with new casino space and, because CRDA couldn't fund the
project, it also couldn't condemn Coking's and her neighbors' properties. On
November 13, 1996, however, the Appellate Division reversed this decision and
stated that the condemnation should go forward.
Vera Coking and her neighbors, who have been
similarly mistreated, cannot believe the government can throw them out of their
homes and businesses in order to give the property to Trump. Vera Coking
explains, "This is my home. This is my castle."
Vincent Sabatini lives on the same block as
Vera. He and his wife own and operate Sabatini's Italian Restaurant, a family
business that put four kids through school. When asked about CRDA's offer of
$700,000 for their property-a figure that wouldn't even cover the cost of legal
fees and starting up a new restaurant-he exclaimed, "I've been here for 32
years, and they want to give it to Trump. I don't want their money. If they
left me alone, I'd be happy and sell a few spaghettis."
Peter Banin and his brother own the third
building on Vera's block. A few months after they paid $500,000 to purchase the
building for a gold shop, CRDA offered them $174,000 and told them to take the
money and leave the property. A Russian immigrant, Banin says, "I knew
they could do this in Russia, but not here. I would understand if they needed
it for an airport runway, but for a casino?"
Litigation Strategy
The Institute for Justice is committed to a
program of litigation that will help restore judicial protection of private
property rights-the basic rights of every American to responsibly use and enjoy
their property. As the Supreme Court recently stated, "Individual freedom
finds tangible expression in property rights." The choices a person makes
concerning her home or business are among the most personal and important
decisions she will ever make. When government exercises eminent domain, it can
take someone's home or livelihood, exacting enormous personal costs. The
Institute is especially concerned with the way that government actions affect
those who have relatively limited economic means to defend themselves against
such outrages.
CRDA's attempts to take these properties violate
the New Jersey and U.S. Constitutions. First, taking property from one person
to give to another is not a "public" purpose.
"The necessity that the use shall be public excludes the idea that the property may be taken . . . and ultimately conveyed and appropriated to a private use."
Atlantic City won't own the limousine lot or
grassy area; Trump will, and he can convert them into whatever he wants once
this project is completed. Nothing can stop Trump from turning around the day
after the park is completed to tear it up and build another casino.
Second, condemning these properties is totally
unnecessary. Under New Jersey law, government may not take more property than
it needs for the public use. Even the CRDA enabling statute states that it can
exercise eminent domain only when property is "necessary" for project
completion and "required" for a public purpose. N.J.S.A. 5:12-182(b).
Because the casino and hotel project were successfully completed without these
properties, they manifestly are not necessary.
Third, New Jersey has unconstitutionally
delegated its condemnation power to private parties. The New Jersey legislature
delegated the power to CRDA. CRDA then defers to casinos that apply for funding
to determine which private homes and businesses will be torn down. It must get
approval from the casino before issuing a notice of condemnation. If the casino
decides it doesn't want that property, CRDA won't condemn it.
Finally, these condemnations are an unreasonable
and abusive use of government power. Over the last ten years, New Jersey courts
have begun to recognize that local governments can and do misuse their power
over people's property. Atlantic City wants to take Vera Coking's home of 36
years, the Sabatinis' 32 year-old business, and the Banins' thriving jewelry
and gold business and give them to Trump to install a place for limousines to
wait for high-rolling patrons at the casino and a large lawn that few will ever
use. It's hard to come up with a more frivolous use of the power of eminent
domain.
The U.S. Supreme Court also has begun to notice
some of the abuses of local governments. In a series of cases, the Court
declared that the actions of local governments constituted takings. In each of
the cases, the local government argued that it had not "taken" the
property and so did not owe compensation. Before these cases, courts strayed
from the text and read the Constitution in a way that maximized government
power. The Court has not considered a major eminent domain case since its
infamous decision in Hawaii Housing Authority v. Midkiff, in which the it
approved a large-scale transfer of land by Hawaii from property owners to
property lessors. However, "Midkiff embodies the lavish deference to
governmental regulation of property rights from which the Court has
retreated" in the last ten years.
This case asks the New Jersey Supreme Court to
read three important words of its Constitution-the requirement that a taking be
"for public use"-and force local governments to comply. Until there
is a ruling that returns substantive meaning to these words, government
entities will continue to try to take property for any reason at all.
The appellate decision was the most egregious
decision expanding eminent domain that a New Jersey court has yet constructed.
The New Jersey Appellate Division treated the finding of public use as a
foregone conclusion. It did not describe the home and businesses being taken,
gave no consideration to the fact that the property would be privately owned,
did not examine whether the taking was necessary, and did not weigh the costs
of the taking against the benefits. If this condemnation ultimately proceeds,
it is hard to see any constitutional limitation at all on the exercise of
eminent domain.
Conclusion
If private property may be condemned and given
to another private individual for private profit, and if the determination of
which properties are to be condemned may be delegated to the person benefiting
from the condemnation, and if the public purpose of the condemnation project
may not be reviewed by the courts, and if the question of the necessity of the
condemnation may be delegated to the beneficiary and may not be reviewed by the
courts, then are there any limits on the exercise of this government power? In
a system that does not require a governing body to weigh the necessity of the
condemnation against the harm to be done, this type of analysis will not take
place. Without accountability or constitutional constraints, all the incentives
promote aggressive, unbridled use of the eminent domain power, regardless of
the impact on innocent property owners. It is time to shift the balance away
from government power and back to its citizens.
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