Mesa, AZ Eminent Domain

Introduction

The U.S. and Arizona constitutions provide that government may take private property only for public use. This power of eminent domain is often used for roads, government buildings and other public works projects. But in states and cities across the nation, government is abusing this sweeping power by taking property from one private owner and giving it to another private owner who has greater political power. Eminent domain for private use—rather than public use—is rampant, especially here in Arizona.

The Institute for Justice Arizona Chapter has taken action to halt this flagrant abuse of private property rights. The IJ Arizona Chapter represents Randy Bailey, whose brake shop is being taken by the City of Mesa to give it to a hardware store—hardly a “public” use. Through this lawsuit we hope to help protect the individual liberty of all Arizonans.

Bailey’s Case

For 31 years, the family-owned Bailey’s Brake Service has stood at the corner of Country Club Drive and Main Street in Mesa as a symbol of Arizona’s entrepreneurial spirit. The shop’s owner, Randy Bailey, purchased the business from his father in 1995 with the hopes that he would one day sell the shop and its goodwill, made up of the loyalty of hundreds of customers, to his own son. As a small business owner, Randy is a part of the economic backbone of Arizona. The U.S. Small Business Administration recently reported that small business employment represents nearly half of the overall employment in the state and as such “the small business sector is an economic engine indispensable to Arizona’s well being.”[1]

After providing Mesa with decades of tax revenue, Mesa’s citizenry with a reliable brake repair shop, and employment to several hard-working individuals, Randy Bailey’s American Dream may be stolen from him by bureaucrats who are willing to use the government’s awesome power of eminent domain to take his private property for the sole economic gain of another private business. On July 30, 2001, the City of Mesa filed a lawsuit in Superior Court to condemn Bailey’s Brake Service. Mesa plans to take the brake shop, raze it and sell the land to an already-existing local hardware store so it can relocate to a more desirable location. To make the deal even sweeter for the developer, Mesa will pick up the tab for construction permit fees, title insurance fees and most impact feesócosts that would normally be incurred by the buyer.[2]

It may sound hard to believe, but the City of Mesa has decided that it knows better than the owner himself what use should be made of Randy Bailey’s private property. If the City is successful in its current effort, Randy Bailey will not be able to afford to open up his brake shop in another location. Thus, the City is eroding its local economy by pursuing a policy of favoring one business over another and putting some small businesses out of business.

In recent years, Mesa has begun an aggressive “redevelopment” campaign, which has already resulted in a large number of families being relocated and their homes demolished for a time-share resort project that was never built because the developer’s financing fell through.[3] Thanks to Mesa’s efforts, what was once a residential neighborhood is now literally a desert wasteland.

One would think that the disastrous results of the City’s previous attempts at so-called “redevelopment” might give the City pause before engaging in other similar projects. Such thinking would be wrong. As Randy Bailey and others under the cloud of redevelopment will attest, the City’s voracious appetite for taking private property for purely private use has yet to be satisfied.[4]

There may be an explanation for the City’s meddling in redevelopment projects: In a truly outrageous turn of events, more shocking than the City’s willingness to take private property for private use is the fact that four of the seven City Council members who voted to expand the redevelopment zone to include Randy Bailey’s brake shop have personal conflicts of interest in the matter because they, or their family members, own property in the redevelopment area.[5] Perhaps not surprisingly, the decision to include Randy Bailey’s property in the redevelopment zone has the potential to increase the value of the property owned by each interested council member or such member’s family.[6] More than half of the City Council members themselves stand to personally profit from the City’s redevelopment plans.

Fortunately, the drafters of the Arizona Constitution understood the dangers inherent in the power to take private property and included in the Declaration of Rights a provision to protect the Randy Baileys of the world from government abusing this power to take private property for private gain rather than public use. The Institute for Justice Arizona Chapter is here to make sure those constitutional guarantees are enforced.

Eminent Domain and Redevelopment in Arizona

The power of the State to take private property for public use is known as “eminent domain.” This power is an inherent power of the State as a sovereign entity. Thus, the Arizona constitutional provision on eminent domain, which was copied from the State of Washington’s Constitution,[7] is not an enabling provision, but rather is a limitation on the State’s power to exercise eminent domain.[8] The Arizona Constitution reads, in part, “Private property shall not be taken for private use,” and lists several specific exceptions to this absolute prohibition.[9]The Legislature may not enlarge the power of eminent domain to include private uses not enumerated in the Constitution.[10] However, the State is permitted to delegate its eminent domain power to municipal government.[11]

In fact, the State has delegated its power to condemn private property for public use to cities and towns,[12] including the power to use eminent domain for redevelopment projects.[13] When a city or town adopts a resolution finding that a “redevelopment area” exists and that redevelopment of the area is “necessary in the interest of the public health, safety, morals or welfare of the residents of the [city],”[14] a city may then condemn property “it deems necessary for or in connection with a redevelopment project.”[15] Arizona law currently defines the term “redevelopment area”[16] so broadly that any area, no matter how upscale, could qualify as a redevelopment area.[17] Prior to 1997, when the legislature amended the redevelopment statute to allow for a finding of “redevelopment” rather than “slum,” a local government had to find that a “slum area” existed and the statutory definition for such an area was much narrower.

Whenever land is condemned as part of a redevelopment project, such land must be put to a public use.[18] The Legislature has declared all redevelopment projects to be for a public purpose,[19] but the Arizona Constitution provides that “whether [a] contemplated use be really public shall be a judicial question, and determined as such without regard to any legislative assertion that the use is public.”[20] Arizona courts have upheld the taking of historical buildings located in a slum area for preservation and lease back to a private entity as a public use,[21] and have upheld the use of eminent domain to build a civic center as a public use, even though a private, non-profit organization would run the center.[22] Therefore, the plan to subsequently develop, lease and/or sell the property to be condemned in a redevelopment area to a private individual or corporation does not necessarily invalidate the power to obtain the property by condemnation so long as the condemned land is used for a public use.

However, to make the constitutional protection meaningful, as has the Washington Supreme Court, Arizona courts should declare that any time “a private use is combined with a public use in such a way that the two cannot be separated, the right of eminent domain cannot be invoked.”[23] In a case like Randy Bailey’s, there is no mixed public and private use—the benefit is purely private. This is corporate welfare at its worst.

Who Decides What Constitutes a “Redevelopment” Area?

In 1983, when the redevelopment statute required a local government to find a slum area existed before exercising eminent domain, the Arizona Supreme Court addressed the “question of whether the determination that property is within a slum or blighted area is a legislative or judicial question.”[24] Common sense should dictate that the determination of whether an area qualifies as a “redevelopment area” should be a judicial question because it would appear that the answer dictates whether the use is public.

The property owners in that case argued “that the City is not empowered to condemn land unless it is used for a public purpose, and that if there is no [slum], redevelopment is not for a public purpose.”[25] Their argument thus rested on the premise that “the determination of the existence of ‘blight’ essentially puts in question the existence of public purpose, which is a judicial and not a legislative question.” [26] Sadly, the Court rejected this argument and held “the function of the judiciary in determining whether an area is a slum or blighted area is to review the findings of the governing body, rather than to make an original determination.”[27]

In making its decision, the Supreme Court said that “Courts ‘are required to be more than rubber stamps’,” [28] and yet it articulated the ultimate rubber stamp standard for reviewing a city’s determination that an area is a slum as defined by the legislature: “If evidence taken at the hearing before the trial court indicates that the findings of the government body have some reasonable support in the facts, even though those findings may be reasonably doubtful or fairly debatable, the findings of the governing body must be sustained.”[29] If this standard is found to apply to the broader statute defining “redevelopment” rather than “slum,” property owners will have lost a real source of protection for their constitutional rights.

It is a sad commentary when the judiciaryóthe one governmental institution designed by our Founders to be the bulwark of our libertyóerodes the protection of our rights. Unfortunately, this decision does exactly that, and places Arizona property owners at terrible risk should a municipal government declare their land is in a redevelopment area, no matter how flimsy or doubtful the evidence used to make such a declaration.

By giving cities and towns carte blanche to determine when an area qualifies as a “slum area,” it would appear on the surface that the Arizona Supreme Court essentially gave cities full authority to determine that property condemned in a redevelopment is per se taken for public use. Fortunately, the decision stopped short of such a holding because the trial court did not hold the parcel at issue was taken for a private rather than public use. The Supreme Court specifically held that “finding an area is a slum or blighted is an inquiry somewhat different from the issues of public use and necessity.”[30] Given the recent changes to the redevelopment statute granting broader authority to local government and the fact the public use issue was not decided by the Supreme Court, the time is ripe for a legal challenge to establish that local government may not act under the guise of “redevelopment” to take private property for private use.

Who Decides What Constitutes a “Public Use”?

The Institute for Justice Arizona Chapter will argue that even if the courts have abdicated much of their responsibility for proper judicial oversight of a municipality’s decision to declare the existence of a redevelopment area, the Arizona Constitution still prevents the sword of eminent domain from being wielded if the use of the seized property is private. According to the Arizona Constitution, “Whenever an attempt is made to take private property for a use alleged to be public, the question whether the contemplated use be really public shall be a judicial question, determined as such without regard to any legislative assertion that the use is public.”[31]

Property owners have a strong legal precedent to protect them from redevelopment projects that take private property for private use. The Arizona Constitution does not indulge the fiction of some jurisdictions, which permit the taking of private property as a public use on a “general welfare” or “public utility” theory when in fact such use is entirely private. [32] This could be the saving grace for private property owners in Arizona. The Arizona Supreme Court also takes seriously the constitutional mandate that the issue of whether a proposed use is truly public is a judicial decision and not a legislative decision. [33]

The Abuse of Eminent Domain is Widespread

The penchant of local government to take private property for private use is not a problem unique to Arizona. The Institute for Justice, the parent organization of the Institute for Justice Arizona Chapter, has litigated similar lawsuits nationwide. In Atlantic City, for example, the Institute for Justice represented an elderly widow, Vera Coking, who trumped Donald Trump and the State’s attempt to take her home in order to transfer the property to Trump at bargain basement prices. Trump had planned to park his limousines where Vera’s kitchen and dining room continue to stand today—safe from overreaching the public authority that attempted to take her private property for the exclusive gain of another private owner.

In New London, Connecticut, the pharmaceutical giant Pfizer built a multi-million dollar facility. The plant borders a well-established ethnic neighborhood, consisting primarily of privately owned residential and commercial structures, along a scenic stretch of waterfront property. In January 2001, the New London City Council approved a redevelopment plan for the entire Fort Trumbull neighborhood with the intent of using the power of eminent domain to acquire all of these properties to build private offices and other unspecified development projects ostensibly to “enhance” the Pfizer plant. The Institute for Justice filed a lawsuit on behalf of seven property owners in Fort Trumbull seeking a declaration that the proposed use of eminent domain to take private property to benefit a private organization or company is unconstitutional.

The Institute for Justice has also successfully fought eminent domain abuse in Pennsylvania and is currently involved in a lawsuit seeking to prevent such abuse in Mississippi, where the State seeks to take three families’ homesteads to make way for a privately owned Nissan plant. The State of Mississippi has moved ahead with that taking despite its admission that the Archie land is not necessary to the Nissan development, but instead, “What’s important is the message it would send to other companies if we are unable to do what we said we would do. If you make a promise to a company like Nissan, you have to be able to follow through.”[34]

In Arizona, other cities are taking private property for private use. In 1996, for example, the City Council declared most of downtown Scottsdale to be a “Redevelopment Area,” thus authorizing the City to use eminent domain “in connection with” any Redevelopment Project. The City has considered numerous such projects, which would require the City to obtain title to a large number of small businesses in the heart of downtown, most likely for the building of a luxury resort/hotel. These small businesses have no desire to sell. Unfortunately, being under the cloud of redevelopment for over five years has brought hard times to the businesses, which are having trouble obtaining capital for improvements. Who would want to invest in an area likely to be taken by the City and bulldozed for a resort? The redevelopment area has brought some decline to the area, though it is still an exclusive retail shopping and dining area.

Recently, the business owners petitioned the Council to lift the redevelopment designation. The Council denied the petition and “promised” not to condemn the businesses while they commissioned a study to determine what should be done with the area. This is actually the second study to be commissioned by the Council. The First Study recommended to the Council that no Redevelopment take place in the area and that with minimal street improvements and added parking the area small businesses would thrive on their own.

The City of Chandler just finalized a deal to “redevelop” six acres of land that will require about two dozen homes and several businesses to be condemned to make way for apartments, condos, and office and retail space. Many of the residents in the homes slated to be bulldozed do not speak any English and were not even aware the City had been conducting redevelopment hearings. Under the terms of the agreement, the City will spend approximately $4.3 million to acquire property by eminent domain, and then sell the property to the developer for about $1 million.
Arizonans need a clear legal precedent to halt eminent domain abuse once and for all.

The Institute for Justice Arizona Chapter’s Legal Strategy for Protecting Arizonans Private Property Rights

In City of Mesa v. Bailey, the newly created Institute for Justice Arizona Chapter will take its first stand in support of private property rights in Arizona. In its view, and under the rule of law envisioned by the Arizona Constitution, transfers of property from one private owner to another must be voluntary, not coerced through government’s eminent domain power. Money is not the issue for Randy Bailey. He does not want to negotiate compensation; he wants to stay where he is, continuing to serve the people of Mesa as his brake shop has done for 31 years.

The City has other ideas. It plans to take Randy Bailey’s brake shop for the purely private economic gain of another local hardware store whose owner simply wants the government to help it secure a better location. On October 23, 2001, the Institute for Justice Arizona Chapter filed an answer to the eminent domain complaint and counterclaim on behalf of Randy Bailey in Maricopa County Superior Court asserting that Mesa is abusing its delegated power of eminent domain because the Arizona Constitution absolutely prohibits the taking of private property for private use. The lawsuit also claims that, to the extent the Legislature has enlarged the power of eminent domain beyond the limits permitted by the Constitution, such provisions must be struck down.

One of the Institute for Justice Arizona Chapter’s primary goals is to restore Arizona’s constitutional restraints on the power of eminent domain to ensure that this awesome power is used to take private property only for public use. As is so well understood by the people of Arizona, and recently articulated recently by the U.S. Supreme Court, many of the freedoms enjoyed in America are expressed through property rights. [35]

The Arizona Constitution was designed to limit the power of the State and as such is a source of tremendous protection reserved in the people of Arizona.[36] The Arizona Constitution provides for a complete prohibition on the taking of private property for private use, with several specifically enumerated exceptions.[37] Thus, the text of the Arizona Constitution’s restraint on the power of eminent domain is strikingly different from the Fifth Amendment to the U.S. Constitution, which says, “nor shall private property be taken for public use, without just compensation.” Arizona’s protection is much more explicit.

As the Washington Supreme Court has declared, “the[se] structural differences allow courts to forbid the taking of private property for private use even in cases where the Fifth Amendment may permit such takings.” [38] Arizona courts should do the same. The Institute for Justice Arizona Chapter’s goal is to vindicate the intent of the framers of the Arizona Constitution to protect the rights of Arizonans against the rapacious appetites of local government.

The Litigation Team

The lead attorney in this case for the Institute for Justice Arizona Chapter is Clint Bolick, vice president and director of state chapter development, who successfully defended Arizona’s School Choice Tax Credit and litigates school choice nationwide. Bolick also represents parents and children in the Cleveland school choice program, the constitutionality of which will be reviewed by the U.S. Supreme Court this term. Bolick has successfully challenged excessive local government regulations. Joining Bolick is Institute for Justice Arizona Chapter Staff Attorney Timothy Keller, who, along with Bolick, is a member of the Institute’s litigation team working to vindicate Arizona citizens’ First Amendment rights by challenging the coercive funding mechanisms of the so-called “Clean Elections Act.” Dale Zeitlin, an experienced condemnation lawyer with the firm Zeitin & Zeitlin in Phoenix, serves as co-counsel in this case.

For more information contact:

John Kramer

Vice President for Communications

Institute for Justice

901 N. Glebe Road, Suite 900

Arlington, VA 22203

W: (703) 682-9320, ext. 205

The Institute for Justice is a libertarian public interest law firm. Through strategic litigation, training, communications and outreach, the Institute for Justice advances a rule of law under which individuals can control their own destinies as free and responsible members of society. It litigates to secure economic liberty, school choice, private property rights, freedom of speech and other vital individual liberties, and to restore constitutional limits on the power of government. In addition, it trains law students, lawyers and policy activists in the tactics of public interest litigation to advance individual rights. Through these activities the Institute challenges the ideology of the welfare state and illustrates and extends the benefits of freedom to those whose full enjoyment of liberty is denied by government. The Institute was founded in September 1991 by Chip Mellor and Clint Bolick.

[1] 2001 Small Business Profile: Arizona, U.S. Small Business Administration, Office of Advocacy.

[2] Paul Green, “Eminent Domain: Mesa flexes a tyrannous muscle,” East Valley Tribune, September 2, 2001.

[3] Id.

[4] The City is also taking a local auto body and paint shop in order to satisfy the needs of the same hardware store that is to be the beneficiary of Randy Bailey’s property; Paul Green, “Eminent Domain: Mesa flexes a tyrannous muscle,” East Valley Tribune, September 2, 2001; and the City is currently considering placing another residential neighborhood in a redevelopment area. Jason Emerson, “Neighbors unite to block redevelopment,” East Valley Tribune, August 23, 2001.

[5] Jason Emerson, “Downtown deal to move ahead: Mesa council vote still questioned,” East Valley Tribune, October 17, 2001.

[6] Id.

[7] Because Arizona’s constitutional provision on eminent domain was copied from the Washington Constitution, opinions from the Supreme Court of Washington are “peculiarly persuasive” to Arizona courts. Solana Land Co. v. Murphey, 69 Ariz. 117, 124, 210 P.2d 593, 597 (1949).

[8] Inspiration Consolidated Copper Co. v. New Keystone Copper Co., 16 Ariz. 257, 144 P. 277 (1914).

[9] ARIZ. CONST., art. 2, ß 17.

[10] Inspiration Consolidated Copper Co. v. Keystone Copper Co., 16 Ariz. 257, 261, 144 P.2d 277, 279 (1914).

[11] County of Maricopa v. Anderson, 81 Ariz. 339, 306 P.2d 268 (1957) (Legislature may provide for exercise of eminent domain if it is not inconsistent with the Arizona Constitution).

[12] See A.R.S. ß 12-1111, et seq. (general delegation of eminent domain power to cities and towns).

[13] See A.R.S. ß 36-1471, et seq.

[14] A.R.S. ß 36-1437.

[15] A.R.S. ß 36-1478.

[16] A.R.S. ß 36-1471(14).

[17] In act, downtown Scottsdale, including the opulent Scottsdale Fashion Square Mall, is located in a redevelopment area and a number of small business owners in the area of 6th Avenue and Stetson are threatened with condemnation so the City can build a hotel on their property. Laurie Roberts, “‘Dead Zone’ business owners want lives back,” Arizona Republic, June 1, 2001.

[18] See City of Phoenix v. Phoenix Civic Auditorium & Convention Center Association, 99 Ariz. 270, 408 P.2d 818 (1965).

[19] A.R.S. ß 36-1472.

[20] ARIZ. CONST., art. 2, ß 17.

[21] Cordova v. City of Tucson, 16 Ariz. App. 447, 449, 494 P.2d 52, 54 (1972).

[22] City of Phoenix v. Phoenix Civic Auditorium & Convention Center Association, 99 Ariz. 270, 408 P.2d 818 (1965).

[23] In re City of Seattle, 638 P.2d 549, 556 (Wash. 1981).

[24] City of Phoenix v. Superior Court, 137 Ariz. 409, 410, 671 P.2d 387, 388 (1983).

[25] Ý137 Ariz. at 410-11, 671 P.2d at 388-89.

[26] Id.

[27] Id. at 416, 671 P.2d at 394.

[28] Id. at 413, 671 P.2d at 391.

[29] Id. at 416, 671 P.2d at 394.

[30] City of Phoenix, 137 Ariz. at 412, 671 P.2d at 390.

[31] ARIZ. CONST., art. 2, ß 17.

[32] Inspiration Consolidated Copper Co. v. Keystone Copper Co., 16 Ariz. 257, 261, 144 P.2d 277, 279 (1914).

[33] City of Phoenix, 137 Ariz. at 411, 671 P.2d at 389 (disregarding legislative assertion that the use of eminent domain for redevelopment is for a public purpose).

[34] Firestone, David, “Black Landowners Hold Ground in Mississippi,” The New York Times, September 10, 2001, pg. 1.

[35] “Individual freedom finds tangible expression in property rights.” United States v. James Daniel Good, 114 S. Ct. 492, 505 (1993).

[36] Chip Mellor and Clint Bolick, The National Law Journal, September 3, 2001 (“State constitutions often contain constitutional provisions that were intended to protect private property . . . [that] are rarely invoked”).

[37] “Private shall not be taken for private use, except for private ways of necessity, and for drains, flumes, or ditches, on or across the lands of others for mining, agricultural, domestic, or sanitary purposes.” ARIZ. CONST., art. 2, ß 17. These exceptions strengthen the absolute prohibition of taking private property for private use. Manufactured Housing Communities of Washington v. Washington, 13 P.3d 183, 190 (Wash. 2000).

[38] Manufactured Housing, 13 P.3d 183, 190.