St. Paul Minn. Property Rights - Backgrounder

 

Litigation Backgrounder

Beyond Its Authority: Eminent Domain Abuse By the St. Paul Port Authority

 

The Issue in a Nutshell

The St. Paul Port Authority is pursuing a scheme that could gut Minnesota’s popular 2006 comprehensive eminent domain reforms that protect homes, small businesses and farms from eminent domain for private gain.  In mid-September 2008, the Port Authority announced its intention to take the property of Advance Shoring Company, a successful business that has operated for generations in St. Paul, to make way for a private development project that amounts to questionable real estate speculation with $10 million in public subsidies.

Advance CEO Karen Haug and her supporters are demanding that the St. Paul City Council stop the Port Authority’s reckless and illegal condemnation of her property.  For nearly 20 years, the Port Authority has coveted the Haug family’s property at 1400 Jackson Street in St. Paul and sought to hand it over to someone else for private economic development.

Since its founding in 1960 by Haug’s father, Advance has played an instrumental role in leasing cranes, scaffolding and concrete forming equipment used in the construction and restoration of landmarks in the Twin Cities, including the Xcel Energy Center, the Cathedral of St. Paul and, currently, Regions Hospital.  As Haug has said, “You cannot look at St. Paul’s skyline without seeing the contribution that our family business has made.”

The Port Authority claims that it is taking Haug’s land to remediate contaminants.  The key thing to keep in mind, however, when it comes to the Port Authority’s trumped-up environmental claims is that Karen Haug’s property complies with all Minnesota Pollution Control Agency directives.  If her property is left alone, any minor environmental concern that may exist can be easily and cost-effectively solved with private funds, which Karen is ready to invest, rather than with millions of dollars of taxpayer money, which is what the Port Authority proposes.  The Port Authority’s environmental red herring is merely an excuse to use eminent domain to take Karen’s land for its real goal, namely, creating yet another generic ‘business center’ redevelopment project.

Minnesotans overwhelmingly support eminent domain reform; they oppose eminent domain for private gain.

Elected officials across the nation are taking property rights more seriously since the infamous Kelo ruling in 2005.  The St. Paul City Council should do likewise to protect the rightful property of their residents.  The Council should not rubberstamp this eminent domain taking and give the Port Authority private property for someone else’s private development, robbing from Peter so it can give to St. Paul.

 

Introduction

Minnesotans overwhelmingly support the state’s 2006 comprehensive eminent domain reforms that now protect homes, small businesses and farms from takings for private gain.  But just when many thought the era of abusive takings for private development was over, the St. Paul Port Authority undertook a scheme that could gut these popular protections.  The Port Authority announced its intention to take the property of Advance Shoring Company, a successful business that has operated for generations in St. Paul, to make way for a private development project that amounts to questionable real estate speculation with taxpayers’ funds. 

As the St. Paul Port Authority’s own documents make abundantly clear, the Port Authority is using environmental scare tactics and eminent domain abuse to force Karen Haug and her family company off land that houses their construction leasing business.  Keep in mind the Minnesota Pollution Control Agency (MPCA)—the agency responsible for environmental protection in the state—is not taking Karen’s property; Haug’s property complies with all the MPCA’s environmental directives.  Rather, the Port Authority is trying to take her property under a bogus environmental claim.  If her property were left alone, any minor environmental concern that may exist could easily and cost-effectively be taken care of with private funds, which is what Karen has offered, rather than with huge taxpayer expense, which is what the Port Authority seeks.

Thankfully, the St. Paul City Council still has an opportunity to stop this abuse before it starts.  At its meeting on October 15 or November 19, the City Council can reject the Port Authority’s plan and allow Karen and her company to continue to operate as one of the companies contributing to the city’s revival.

For nearly 20 years, the Port Authority has coveted Haug’s property and sought to hand it over to someone else for private economic development.  Now, under the guise of trumped-up environmental scare tactics, the Port Authority seeks to do an end-run around Minnesota’s new eminent domain law.

In September 2008, Karen joined with the Institute for Justice to challenge the forced taking of her family’s land.  On October 15, 2008, Haug, her employees, union representatives, customers and the Institute for Justice Minnesota Chapter announced their opposition to the Port Authority’s abuse of its eminent domain power to take private property, jeopardizing the very existence of Haug’s business.  At stake is the long-term viability of not only a business critical to development in St. Paul but also the statewide protections from eminent domain abuse that were passed in 2006. 

 

The Advance Companies’ Role in Building the Twin Cities

Karen Haug is the CEO and principal owner of the three companies that make up “Advance”  a family-owned St. Paul company that has served the construction industry since 1960.  In 1990, Haug and her brother took over the business from their father, who started it in 1960.

Since its beginning, Advance has played an instrumental role in the construction of many notable landmarks in the Upper Midwest, including the IDS Center, the Xcel Energy Center, the Dane County Courthouse in Madison, Wisc., and the Mount Rushmore Visitors Center near Rapid City, S.D.  Advance also assisted in the restoration of the Cathedral of St. Paul, and is currently supplying equipment to construction companies working on Regions Hospital and the Twins’ Target Field. 

Three companies comprise Advance:

  • Advance Shoring Company, which rents and sells concrete shoring and forming equipment.  Shoring and forming equipment functions as a brace and a mold, respectively, into which concrete is poured.  It provides temporary support until the concrete hardens and achieves the necessary strength to support loads.
  • Advance Equipment Company, which sells, rents and services tower cranes and material hoists, as well as sells and services concrete pumps.  It is too expensive for construction companies to own their own cranes, so they rent from companies like Advance. 
  • Advance Specialties Company, which sells concrete and masonry supplies. 

The location of their property is strategically vital to the success of Haug’s business.  Their lot is in the Arlington-Jackson industrial area and adjacent to a major freeway that connects Advance with all of the major highway arteries throughout the Twin Cities metro area.  Their convenient location close to many construction sites is essential to remaining competitive.

Another valuable feature of the current property is its convenience for Advance’s employees, some of whose families have been employed by Advance for two or three generations.  Advance has 43 employees, 19 of whom are union members.[1]  Twenty-one, or nearly half of Advance’s employees, have been with the company for more than 20 years.  If Advance were forced to move out of the community to the nearest zoning-compatible 12-acre lot, Karen’s company would lose a significant number of employees because of distance and fuel costs.  Because Advance’s workforce is skilled and experienced, losing employees would be very detrimental to its business.

The Haug family built Advance into one of the premier suppliers of construction equipment in Minnesota and the Upper Midwest.  It is the very type of employer and provider of good jobs that the St. Paul Port Authority’s central planners dream of attracting.  Moreover, the Haugs have been responsible stewards of the land who have worked proactively with the MPCA to address problems common to industrial sites in St. Paul.  Karen Haug simply wants to continue building her family’s business that her father started almost 50 years ago in St. Paul. 

 

The Property

Advance stores, sells and rents its equipment from its 12-acre site, which it has occupied since 1974.  The Port Authority’s plan calls for a taking of approximately 9.5 acres.  The remaining acreage is insufficient for Advance to continue to operate at the site.  In addition to a 7,200-square foot office building, Advance has four warehouses on the property.  Most of the equipment it leases, worth multi-millions of dollars, it stores outdoors.  Haug’s equipment is well organized and the property is clean.  Although the Port Authority originally appraised the property at $670,000,[2] its tax-assessed value in 2008 is $2,475,000. 

Prior to Advance purchasing the property in 1974, a portion of the property was used by a former owner as a dump for construction waste associated with projects throughout St. Paul.  The prior owner buried debris including wood, concrete, glass and brick on the property. 

Advance has not contributed to any of the current metal and methane conditions during its 30-plus-year ownership of the property but rather has removed five storage tanks to meet new regulatory standards.  Lead and other metals found on the property are encapsulated under several feet of clean fill under various parts of the property.  Critically important to Haug’s fight is that neither the MPCA nor any other agency requires the extraction of the lead unless the property is to be redeveloped—something Haug does not plan on doing.  Forced redevelopment, however, is the very heart of the Port Authority’s plan.

Methane, generated naturally from the site because the property sits on top of a peat bog, as well as generated from the decay of wood buried by the property’s former owner, is also common to St. Paul.  Although the levels of methane exceed the MPCA’s action levels in some parts of the site, cost-effectively addressing the methane in a safe and responsible way does not necessitate the use of eminent domain.  Karen Haug has taken every step necessary to address the methane-related problems, is seeking regulatory review by the MPCA, and will soon voluntarily install a methane monitoring system and a venting system if they are what the MPCA recommends to solve the problem once and for all.  Upon receiving that recommendation, Karen will invest approximately $50,000 to ensure that Advance continues to meet all of the MPCA’s regulations and maintains its reputation as a responsible steward of the land.

Again, Haug’s property complies with all the MPCA’s directives.  If Haug’s land is left alone, any environmental concern that exists can be easily and cost-effectively addressed with private funds, which is what Karen is prepared to use, rather than with huge taxpayer expense, which is what the Port Authority seeks.  The Port Authority’s environmental red herring is just a means to an end to take Advance’s land for the Port Authority’s real goal, namely, creating a new “business center” redevelopment project on property that rightfully belongs to the Haug family.

 

The Port Authority’s “New” Plan

The St. Paul Port Authority speculates that if they build it, private companies will come.  The Port Authority seeks to tear down Haug’s thriving businesses and replace them with two 70,000-square-foot buildings that have no prospective tenants.  To achieve its goal, the Port Authority is betting on attracting private-sector investment in excess of $12.2 million after it expends $10.1 million in taxpayer funds for a piece of property that is now appraised at between $3.25 and 3.60 million.  Not only is it unlikely that the Port Authority will find such investment for many years, given the current global banking crisis, vacancy rates in St. Paul and ample availability of light-industrial properties in the Twin Cities,[3] but there is no economic justification for the project.[4]

To make this project work, the Port Authority must kick Karen Haug and her businesses out of St. Paul and attract a yet-to-be identified multi-million-dollar private investor.  To lure such an investor, the Port Authority must expend subsidies of $10.1 million.  Only a government bureaucrat using someone else’s money—specifically the taxpayers’ money—could think this scheme makes economic sense.  Moreover, the Port Authority’s own expert admits that Advance is using the property for its “highest and best use.”[5]  This means that the Port Authority’s plan will destroy, not create, value.

The Port Authority describes its redevelopment mission as “acquiring sites too risky to develop because they are polluted and then clean them to Minnesota Pollution Control Agency standards with federal, state and local loans and grants.”  But the Advance property is not an abandoned brownfield that no one will develop.  Rather, the Port Authority is seeking to destroy a thriving business whose property complies, as noted above, with all the MPCA’s directives.  The Port Authority is acting far outside the scope of its mandate and exaggerating an environmental problem to further its real goal of “economic development”—the very thing prohibited by the legislative reforms in 2006. 

More than just exceeding its mandate, the Port Authority’s plan will give St. Paul yet another generic light-industry/distribution center and plenty of $11 per hour jobs.  By contrast, Advance plays an indispensible role in the economic development of the Twin Cities and Upper Midwest, and it pays its employees, on average, in excess of $24 per hour with full benefits.  Without its services and the hard work of its management and employees, construction companies would incur huge costs to own and maintain the equipment Advance provides, driving building costs up and handicapping development.

How ironic that the Port Authority wants to destroy a St. Paul business that has thrived by helping to literally build the Twin Cities only to make way for a government-led development project that has no tenants, requires huge amounts of public subsidies, and may have to wait years, if not decades, to absorb the current excess capacity in “business centers” for someone to move to the site. 

In reality, the St. Paul Port Authority’s efforts to take the Haug family’s property are nothing new.  Strong evidence of “pretext” (a legal term meaning something that is put forward to conceal a true purpose or object) is found in the Port Authority’s own cleanup grant applications, which contain repeated references to economic development.  For instance, in its grant application to the Metropolitan Council, the regional governing authority of the Twin Cities metropolitan area, the Port Authority specifically stated that “[t]his area has been a priority redevelopment area for the City of St. Paul and the adjacent neighborhoods for over 10 years.”  Further, the Port Authority goes on to highlight the uniqueness of the property:

There are no other industrial sites comparable to the Arlington-Jackson West Redevelopment Area in size and function in the City of St. Paul.  The site has easy access to I-35E which is critical and very desirable for our end-users.  The success of Phase I (1997) of the Arlington Business Center serves as a model and impetus for the redevelopment of the site.  The Port Authority is confident in its ability to remediate and sell the Site to end-users (with the typical outcome of large numbers of living wage jobs housed in high-performance buildings).  A Met Council TBRA grant is an important step in recycling this under-utilized property and continuing the Port Authority’s success of job creation, property tax enhancement, and urban redevelopment.  

 

Eminent Domain Abuse: An Overview

Eminent domain is the power of government to take a person’s home, farm or business.  It has been called the “despotic power,”[6] and when English law prevailed in the colonial era, there were no limits on the monarch’s power to seize private property for any purpose whatsoever, be it for the public’s use or for private gain.

Recognizing its potential for abuse, James Madison wrote an important constraint on eminent domain into the Fifth Amendment to the U.S. Constitution, which provides that private property shall not be “taken for public use without just compensation.”[7] This language constrains eminent domain in two ways.  First, the government can only take property for a genuine public use—something the public would own and use, such as a courthouse or a post office.  Second, if the government takes property for a public use, it must pay just compensation.  Most state constitutions, including Minnesota’s, contain the same or similar language to that of Madison.[8]  The order of those words is also important:  Before questions of compensation are answered, the property must first and foremost be taken for a public use.  In this way the “public use” limitation on eminent domain prevents the government from taking someone’s home or business simply to give it to someone else with more political influence for his or her own private use.  Thus, traditionally, the power of eminent domain was invoked only when the government needed land to build a public necessity.  Gradually, however, the traditional and principled constraints on eminent domain have been dismantled with tragic results.

The demise of the U.S. Constitution’s “public use” clause began with the U.S. Supreme Court’s 1954 decision in Berman v. Parker, in which Washington, D.C., used eminent domain to renew what were in those days called “slums.”[9]  Rather than rule narrowly that the city could condemn decrepit tenements that presented a genuine threat to public health, the Supreme Court instead decided that the constitutional term “public use,” which had a specific historical definition, actually means “public purpose.”  Worse yet, the Supreme Court also decided that rather than allowing independent courts of law to decide what constitutes a public purpose, those decisions would now be left to local governments—the very entities that employ eminent domain.  Thus, a vital constitutional check on government power was lost.

The erosion of the “public use” clause in the U.S. Constitution culminated in the 2005 ruling in Kelo v. City of New London, justly one of the most reviled decisions in U.S. Supreme Court history.[10]  In Kelo, the City of New London, Conn., decided to seize non-blighted homes and turn them over to another private party in the hope that the new owners would use the land in a way that would create jobs and pay higher taxes. 

The U.S. Supreme Court, by a narrow 5-4 vote, approved, ruling that even a remote hope of “public benefits,” whether those benefits are proved to be likely or not, justifies taking someone’s home or business and turning it over to another private party for that party’s private profit.  Under Kelo, a city can measure its citizens’ worth in how much they pay in taxes, meaning that a family can be uprooted, cast aside, and their home destroyed if someone richer comes along who can be taxed more heavily.  And so, just as “public use” was blurred to mean “public purpose” in Berman, in Kelo, “public purpose” was further blurred into “public benefit.”  And with each of these steps, the fundamental right to own property, which was so important to the Founders and has been essential to our liberty and prosperity, was undermined.

In her pointed dissent, Justice Sandra Day O’Connor explained the grave implications of what the majority had done:  “Nothing is to prevent the State from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory.”  In an apt description of the Port Authority’s use of eminent domain against Haug, Justice O’Connor also warned:

Any property may now be taken for the benefit of another private party, but the fallout from this decision will not be random. The beneficiaries are likely to be those citizens with disproportionate influence and power in the political process, including large corporations and development firms. As for the victims, the government now has license to transfer property from those with fewer resources to those with more.

The backlash against Kelo was swift and nearly unanimous.  Public opinion polls consistently show that more than 80 percent of Americans disapprove of using eminent domain to transfer property from one private party to another for so-called “economic development.”[11]  As of this writing, 43 states, including Minnesota, have reformed their statutes to some degree to afford property owners greater protection against the wrongful seizure of their property.[12]  Finally, two state supreme courts to have squarely considered the Kelo question unequivocally rejected the use of eminent domain for economic development, while four others have said they are likely do so in a future case.[13]

 

Minnesota’s Reforms of 2006

The shock waves that reverberated around the nation when the Supreme Court ruled in Kelo that the Constitution allowed the government to take for private economic development reached Minnesota with a sense of urgency.

The Supreme Court of Minnesota laid the groundwork for the popular backlash in Minnesota against eminent domain by issuing two infamous decisions.  First, in a 1986 case, City of Duluth v. State,[14] the state’s highest court held that the city’s condemnation of land for a private paper mill project was constitutional.  That landmark case set in motion 20 years of abusive takings, often under bogus “blight” findings.  Most notoriously, that precedent contributed to a taking by the City of Richfield, Minn. of more than 82 homes and businesses on 43 acres in 2000 for the benefit of the Best Buy Corporation.  Best Buy coveted the land, located at the intersection of two interstate highways, for a new headquarters complex.  In its second infamous decision involving eminent domain abuse, the Supreme Court upheld the Court of Appeals’ decision that Richfield’s taking, on Best Buy’s behalf, was constitutional.[15]

In response to Kelo and local court decisions, a coalition of citizens and 22 organizations, including the Institute for Justice, the NAACP, the Minnesota Auto Dealers Association, the Farm Bureau and others united to lobby the legislature for reforms to Minnesota’s eminent domain laws.

Despite the best efforts by pro-government organizations like the League of Minnesota Cities, Minnesota’s state legislature overwhelmingly passed meaningful protections for homeowners, farmers and small businesses from eminent domain abuse, which the governor signed in May of 2006.

Specifically, the comprehensive eminent domain reform passed in 2006 narrowed the scope of permissible public uses under the condemnation statute.  In Minnesota, public use now means, exclusively:

(1) the possession, occupation, ownership, and enjoyment of the land by the general public, or by public agencies;

(2) the creation or functioning of a public service corporation; or

(3) the mitigation of a blighted area, remediation of an environmentally contaminated area, reduction of abandoned property, or removal of a public nuisance.[16]

The new statute rejects Kelo’s holding that a taking done for the purpose of “economic development” is a legitimate public use, but it does allow takings for remediation of environmentally contaminated areas.  Importantly, under the statute, if the taking is for environmental remediation, the condemning authority must 1) present this evidence to a court, 2) the evidence must be demonstrated with a preponderance of the evidence that the taking is necessary, AND 3) prove that the taking is for a public use.[17]  Under the second and third parts of these requirements, the St. Paul Port Authority’s efforts to take Haug’s property must fail if the 2006 eminent domain reforms have any meaning. 

IJ-Minnesota will demonstrate that the true purpose of the Port Authority’s taking is Kelo-style economic development eminent domain abuse dressed up in environmental scare tactics designed to force Karen Haug and her company off her family’s land.  Here, the primary purpose of the project is not “environmental remediation” as the Port Authority claims.  The evidence of pretext is everywhere in this case.  The subject property has been part of a redevelopment district for almost 20 years.  Notably, Haug’s efforts to invest in systems to address the methane issue do not deter the Port Authority from its plan to take the property for its own development. 

Further, the Port Authority is only going to clean the methane-generating debris from under the new building pads, which it has to do to ensure that the new buildings sit on strong foundations.  If the true purpose of the taking were environmental cleanup, the Port Authority would clean all of the methane-generating debris, not just some of it.

The Port Authority has decided to test the scope of the new eminent domain reform law’s contamination provision within the eminent domain reform law with the goal of creating a loophole large enough to drive a cement mixer through.  It plans to take an industrial property that has a small, non-threatening and common amount and type of environmental contaminants, clean it up, and then turn it over to a private party for economic development.  In essence, the Port Authority’s plan is to do Kelo-style economic development under the pretext of environmental remediation.

The Institute for Justice believes the taking violates the state and federal constitutions.  The Minnesota Constitution provides that “[p]rivate property shall not be taken, destroyed or damaged for public use without just compensation.” Minn. Const. art. I, § 13.[18]  To take property by eminent domain in Minnesota, a condemning authority must establish that: (1) the taking is for a public use under the Fifth Amendment to the United States Constitution and Minn. Const. art. 1, § 13; and (2) the taking is necessary.[19]  IJ-MN will argue that the Port Authority’s taking fails both tests.

In order to approve a petition for condemnation, the trial court must determine the proposed taking is necessary.[20]  Here, there is no need to take the property in order to address the environmental issues.  To address the methane problem, Advance entered the state’s Voluntary Investigation and Cleanup (VIC) program on May 16, 2008.  As recommended by the MPCA, Advance retained an environmental consultant who has submitted a report to the MPCA.  Based on his findings, Advance’s consultant has recommended that the MPCA issue a “no action” letter (indicating no further action is needed).  If necessary, Advance stands ready to install a methane monitoring and venting system and has allocated approximately $50,000 to invest in these systems.  This is a relatively small amount for a company whose land alone will have a tax value of $3.3 million in 2009.  It is not necessary to take the property to solve the methane problem.

Secondly, the Institute for Justice will argue that the Port Authority’s taking should be denied because it is mere pretext for the now impermissible use of “economic development.”

Additionally, IJ-MN will argue that the time has come for Minnesota courts to catch up with the legislature, the governor and other courts around the nation and reject the holding of City of Duluth v. State.  State courts nationwide are taking property rights more seriously since the Kelo ruling.  Minnesota courts should do likewise to protect the rightful property of each Minnesotan.  Judges need to judge.  They should not rubberstamp an eminent domain taking and give the St. Paul Port Authority someone’s private property for someone else’s private development.  The time is ripe for Minnesota’s courts to once and for all reject the belief that economic development is a legitimate public use under the Minnesota Constitution.

Minnesotans overwhelmingly support eminent domain reform.  They oppose eminent domain for private gain.  If courts allow the Port Authority to take Karen Haug’s land for this private development project, it will gut the very eminent domain reforms that now protect homes, small business and farms across the North Star State. 

 

The Institute for Justice Steps Onto the Stag

The Institute for Justice has stepped up to vindicate not only Haug’s rights, but also the rights of property owners across Minnesota and the nation who are threatened by eminent domain abuse or who may be threatened in the future.  The Institute for Justice has litigated eminent domain cases from coast to coast in courts of law and in the court of public opinion, successfully preserving the rights and properties of the politically and financially disenfranchised.  Among IJ’s victories are:

  • Wells v. City of Riviera Beach—In May 2007, the Institute for Justice successfully defeated an attempt in Riviera Beach, Fla., to displace more than 5,000 residents for a massive private development project that included a yacht marina, luxury condominiums and upscale hotels. 
  • City of Norwood v. Horney—In a resounding repudiation of the U.S. Supreme Court’s decision in Kelo v. City of New London, the Ohio Supreme Court unanimously ruled in July 2006 that the city of Norwood acted unconstitutionally by taking the homes of the Institute for Justice’s clients.
  • Brody v. Village of Port Chester—In December 2005, the U.S. Court of Appeals for the Second Circuit ruled that the Village of Port Chester violated IJ client Bill Brody’s constitutional rights by condemning his property for private development without giving him notice of his one opportunity to challenge the condemnation. 
  • City of Tempe v. McGregor—In October 2005, as a result of the Institute for Justice Arizona Chapter’s legal defense, Arizona courts rejected the city of Tempe’s attempt to condemn private property for the benefit of a wealthy private developer.
  • Kelo v. City of New London—Just three years after the landmark U.S. Supreme Court ruling in Kelo v. City of New London that allowed private property to be taken for economic development, 43 states have tightened their restrictions on eminent domain.  In 2007, IJ client Susette Kelo’s little pink cottage—the home that became a national symbol of the fight against eminent domain abuse—was moved rather than allowing it to be demolished by the government’s wrecking ball.
  • Saleet v. City of Lakewood—In 2004, as a result of an IJ lawsuit representing 17 home and business owners, citizens from the city of Lakewood voted down an eminent domain abuse project that would have demolished an entire neighborhood for high-priced condominiums and an upscale mall.  Shortly afterwards, Lakewood voters rejected the bogus blight designation that applied to 93 percent of the city.
  • City of Mesa v. Bailey—In September 2003, the Arizona Court of Appeals unanimously struck down the city of Mesa’s use of eminent domain for private gain.  The city attempted to seize a small car repair shop so that a privately owned hardware store could relocate.
  • Mississippi Major Economic Impact Authority v. Lonzo Archie—IJ represented the Archie family in their successful fight to save 24 acres of property and several homes they owned since 1941.  The state tried to seize the Archie family’s private property in 2001 for the benefit of Nissan Motor Corporation, to which it had already given more than $290 million in subsidies and tax breaks and approximately 1,300 acres of land.
  • Pittsburgh Fifth and Forbes—IJ helped saved more than 120 small businesses in downtown Pittsburgh in 2000 from the mayor’s plan to abuse eminent domain.
  • Casino Reinvestment Development Authority v. Banin—In a classic David versus Goliath battle, the Institute for Justice scored a major victory for property rights in July 1998 when the New Jersey Superior Court ruled a state agency could not condemn widow Vera Coking’s home of 37 years and give it to Donald Trump for his private development. 

Defending Karen Haug is part of the Institute for Justice’s commitment to strategic litigation that will help restore judicial protection for private property rights.  The U.S. and every state constitution include property rights because they are the foundation of our independence as responsible citizens.  Indeed, for most Americans, ownership of a home or small business is the cornerstone of their efforts to provide for their families and realize their dreams.  Thus, the wrongful use of eminent domain to transfer property from one private owner to another does not simply destroy a home or business.  It very often destroys a life, one patiently built through years of hard work.

 

Litigation Team

Lee McGrath, the executive director of the Institute for Justice Minnesota Chapter, will be the Institute for Justice’s lead attorney on this case.  Under his leadership, IJ-Minnesota has launched a campaign to restore economic liberty as a basic civil right under both the Minnesota and U.S. constitutions.  McGrath was also instrumental in lobbying the Minnesota legislature to reform its eminent domain laws in 2006.

Assisting McGrath will be IJ-Minnesota’s staff attorney Jason Adkins.  Prior to joining IJ-MN in June 2008, Adkins served as a law clerk to Chief Judge Edith H. Jones of the U.S. Court of Appeals for the Fifth Circuit and Judge Christopher Dietzen of the Minnesota Court of Appeals.

Noted eminent domain attorney Howard Roston, a partner with the firm of Malkerson, Gilliland Martin, the Twin Cities’ preeminent property-owners boutique law firm, will co-counsel with IJ.  In 2001, Roston defeated the City of Apple Valley Economic Development Authority’s efforts to take property for a private project.  The representation included a two-day trial, several depositions and substantial investigation into the nature of the project and the motivations of the Apple Valley EDA.  In 2003 he defeated the City of St. Cloud Housing and Redevelopment Authority’s efforts to take property from a family and small business owner for a private project.  In addition to defeating the taking, he recovered for his clients nearly all of their attorneys’ fees and costs.

 

Conclusion

Across the nation, local governments abuse eminent domain laws in order to transfer property to private developers.  If Karen Haug’s business can be condemned under the guise of environment contamination and transferred to a private developer, then the same thing can happen to homes and small businesses throughout Minnesota.  This case is about ensuring that overreaching governments and their backers in the development industry are made to respect the clear limitations on eminent domain found in the Minnesota and U.S. constitutions and Minnesota law.

For more information, please contact either:

John Kramer
Vice President for Communications
Institute for Justice
901 North Glebe Road, Suite 900
Arlington, VA 22203-1854
Office: (703) 682-9320 ext. 205
Email: jkramer@ij.org 

or

Lee McGrath
Executive Director
Institute for Justice Minnesota Chapter
527 Marquette Avenue-Suite 1600
Minneapolis, MN 55402-1330
Office: (612) 435-3451
Cell:    (612) 963-0296
Email:  lmcgrath@ij.org

 


[1] Eight workers are members of the International Union of Operating Engineers – Local 49,

2829 Anthony Lane South, Minneapolis, MN 55418. (612) 788-9441 and 11 workers are members of the International Brotherhood of Teamsters—Local 120, 9422 Ulysses St NE Blaine, MN 55434. (763) 267-6119.

 

[2] The Port Authority used this incredibly low figure in its grant application to the Minnesota Department of Employment and Economic Development.  Later, its hand-picked appraiser valued the property at roughly $3.25 million.  The original figure represents an attempt by the Port Authority to show that the property will easily meet the statutory arithmetic to use eminent domain.  The low figure helped the Port Authority secure cleanup funds.

 

[3] The Port Authority’s ownership of such property will soon exceed 60 acres at the Globe, Griffin Wheelworks and 3M sites.  See, Port Authority’s Site Selection Search at http://www.sppa.com/site_selection.asp  See also, CB Richard Ellis The Minneapolis/St. Paul Industrial Market View 2Q 2008 showing that St. Paul’s industrial vacancy rate of 9.05% is the highest rate in the metro area available at CBRE, 7760 France Ave. S.-Ste 770, Minneapolis, MN 55435.

 

[4] Market Value Appraisal Summary Report Prepared by Patchin, Messner & Dodd (May 31, 2008) lists an appraised value for the property of between $3,250,000 and $3,600,000.  Letter from Kenneth Helvey, SRD Consulting Group, Inc. (April 2005) estimates relocation costs of $1,000,000. Application of the Port Authority of the City of St. Paul to the Minnesota Department of Employment & Economic Development. P. 3, 11-12, (May 1, 2008) lists clean up costs of $4,759,400, the cost of development in excess of the clean up costs of $13,283,000, and private sector funds of $12,233,000.  Using the lower appraisal value of $3,250,000, plus the relocation, clean-up costs, plus the development cost and less private investment, the total public subsidy is, at a minimum, $10,059,400.

 

[5] Market Value Appraisal Summary Report Prepared by Patchin, Messner & Dodd, P. 22,23, and 67. (May 31, 2008).

 

[6] Van Horne’s Lessee v. Dorrance, 2 U.S. 304, 311 (1795).

 

[7] U.S. Const. Amend. V (“nor shall private property be taken for public use, without just compensation”).

 

[8] Minn. Const. art. I, sec. 13 (“Private property shall not be taken, destroyed or damaged for public use without just compensation therefore, first paid or secured.”)

 

[9] 348 U.S. 26 (1954).

 

[10] 545 U.S. 469 (2005).

 

[11] See http://www.castlecoalition.org/resources/kelo_polls.html for links to various opinion polls.  National polls conducted by MSNBC and CNN demonstrate that 97 percent and 99 percent of those surveyed respectively opposed Kelo-style eminent domain for private gain.  See http://www.castlecoalition.org for continuously updated information on eminent domain reform.

 

[12] http://www.castlecoalition.org/pdf/publications/ report_card/states/minnesota.pdf

 

[13] City of Norwood v. Horney, 853 N.E.2d 1115 (Ohio 2006); Bd. of County Comm’rs v. Lowery, 136 P.3d 639 (Okla. 2006).

 

[14] 390 N.W.2d 757, 764 (Minn. 1986)

 

[15] See, Housing & Redev. Auth. ex rel. City of Richfield v. Walser Auto Sales, Inc., 641 N.W.2d 885, 891 (Minn.2002)

 

[16]  Minn. Stat. § 117.025, subd. 11(a) (2006).

 

[17] See Minn. Stat. § 117.075, subd. 1(b) (“If the taking is for the mitigation of a blighted area, remediation of an environmentally contaminated area, reducing abandoned property, or removing a public nuisance, then, notwithstanding any other provision of general or special law, a condemning authority must show the district court by preponderance of the evidence that the taking is necessary and for the designated public use.”). 

 

[18] The language of the Takings Clause in the Minnesota Constitution is similar to the Takings Clause in the U.S. Constitution.  Zeman v. City of Minneapolis, 552 N.W.2d 548, 551-52 (Minn. 1996).  Therefore, Minnesota courts have relied on cases interpreting the Fifth Amendment to the U.S. Constitution’s Takings Clause in interpreting the analogous clause in the Minnesota Constitution. See, e.g., Zeman, 552 N.W.2d at 552 (citing federal cases).  Minnesota courts have observed that the language of the Takings Clause of the Minnesota Constitution can be construed to provide broader protections than the Takings Clause of the U.S. Constitution, but generally have not chosen to do so.  See Wensmann Realty, Inc. v. City of Eagan, 734 N.W.2d 623, 632 n.5 (Minn. 2007); State by Humphrey v. Strom, 493 N.W.2d 554, 558 (Minn. 1992).  A recent concurring opinion signed by two justices left open the possibility the court would reconsider its takings jurisprudence, but the need to do so has largely been obviated by the 2006 eminent domain reform.  See Lundell v. Coop. Power Ass’n, 707 N.W.2d 376, 383–84 (Minn. 2006) (Anderson, J., concurring).

 

[19] City of Duluth v. State, 390 N.W.2d 757, 762-64 (Minn. 1986).

 

[20] Regents of The University of Minnesota v. Chicago Northwestern Trans. Co., 552 N.W.2d 578, 580 (Minn. Ct. App. 1996). 


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