Bar News - October 20, 2006
Municipal Law: Eminent Domain Amendment Won’t Impact Existing Law
By: Haden P. Gerrish
On Election Day, Nov. 7, voters will decide whether to amend the New Hampshire Constitution to insert Part I, Article 12-a, a new provision designed to impose additional limitations on the taking of private property by eminent domain.
The amendment, CACR 30, provides:
[Art.] 12-a [Power to Take Property Limited.] No part of a person’s property shall be taken by eminent domain and transferred, directly or indirectly, to another person if the taking is for the purpose of private development or other private use of the property.
If approved by two-thirds of those voting on the proposal, the amendment will become law when the Governor proclaims its adoption.
The amendment is clearly a legislative response to the US Supreme Court’s decision last year in Kelo v. City of New London, 125 S.Ct. 2655 (2005). As set forth in the voter’s guide approved by the House Judiciary Committee, “the United States Supreme Court has recently defined ‘public use’ to permit the government to take private property for the purpose of promoting economic development through the resale of the property to private parties.”
According to the voter’s guide, “[w]hile preserving those rights already stated in the Constitution, this amendment will, in addition, expressly prohibit the government from taking a person’s property for either private development or any other private use of the property.”
The question is: if approved, what impact—if any—will the amendment have on the existing law of eminent domain in New Hampshire?
In Kelo, the United States Supreme Court upheld the taking of land by the City of New London, Conn., for the purpose of carrying out a comprehensive economic development plan designed to revitalize the city’s economy, notwithstanding that the city planned to lease or transfer some of the condemned parcels to private entities.
In its decision, the US Supreme Court reiterated the longstanding rule that a municipality is prohibited under the Fifth Amendment from taking land for the purpose of conferring a private benefit on a private party. Similarly, a municipality may not take property under the pretext of a public purpose if the actual purpose is to bestow a private benefit. A threshold issue in any eminent domain case, therefore, is whether the purpose of the condemnation is to confer a private benefit on a private party. See Rodgers Development Company v. Town of Tilton, 147 N.H. 57, 62 (2001); Merrill v. City of Manchester, 127 N.H. 234, 237 (1985) (if the “true benefits of the project will accrue only to its private sponsors and participants,” the use of eminent domain is unconstitutional).
In Kelo, the court noted that the exercise of eminent domain to transfer property from one private party to another, however, is permissible under the Fifth Amendment if the purpose of the taking is the future use by the public, such as the taking of land for a railroad. See, generally, Rockingham County Light & Power Co. v. Hobbs, 72 N.H. 531 (1904) (enumerating various public uses for which land may be taken and transferred to a private entity). Under this reasoning, if the proposed condemnation contemplates a future use by the public, it may be upheld under the Fifth Amendment even though the condemnation involves a transfer to a private entity.
In Kelo, the Supreme Court observed that it has long interpreted the public use requirement under the Fifth Amendment in a broad sense to mean a “public purpose” and that disposition of the New London case turned on whether the city’s economic development plan served such a public purpose, even though the city planned to lease or transfer land to private entities. Finding that the comprehensive character of New London’s economic development plan met the public purpose requirement notwithstanding that it also benefited private parties, the US Supreme Court upheld the condemnation under the Fifth Amendment.
The Court, however, emphasized that nothing in its opinion would preclude a state from imposing stricter standards for condemnation than those required by the US Constitution. In fact, New Hampshire courts have long interpreted the state Constitution in a manner that affords greater protection to private landowners than that required by the US Supreme Court in Kelo.
The New Hampshire Constitution
Part I, Article 12, of the New Hampshire Constitution provides that the power of eminent domain may be exercised only if the property taken is “applied to public uses.” Whether a particular condemnation proposal involves land to be “applied to public uses” is a question of law for the courts. Rodgers Development Company, 147 N.H. 57, 62 (2001); Merrill, 127 N.H. 234, 236 (1985). To determine whether the proposed condemnation meets the public use requirement, the court must first consider whether the condemnation will primarily benefit private persons or private uses, or whether it will serve a public purpose sufficient to justify the expenditure of public funds. Merrill, 127 N.H. 234, 236 (1985).
Assuming a municipality can demonstrate a public purpose for a proposed taking, the court must next balance the public benefits against the burdens and social costs on all affected property owners, in order to ascertain whether there is a probable net benefit to the public if the taking occurs for the intended purpose. Petition of Bianco, 143 N.H. 83, 86 (1998); Appeal of City of Keene, 141 N.H. 797, 802 (1997). The net benefit analysis involves an assessment of “the benefits of the proposed project and the benefits of the eradication of any harmful characteristics of the property in its present form, reduced by the social costs of the loss of the property in its present form.” Merrill, 127 N.H. 234, 237 (1985). This second prong adds an additional level of protection to private property owners, in addition to the requirement of a public purpose.
In sum, under current law, the New Hampshire Constitution limits the exercise of eminent domain to circumstances in which the municipality (or the state) can demonstrate: (1) a public purpose; and (2) a probable net benefit to the public after balancing the public benefits against the burdens and social costs on all property owners affected by the proposed taking. E.g., Petition of Bianco, 143 N.H. 83, 86 (1998; Appeal of City of Keene, 141 N.H. 797, 802 (1997); Appeal of Cheney, 130 N.H. 589, 595 (1988). The remaining question is whether the constitutional amendment will afford any additional protection for private property owners.
Potential Impact of Amendment
By its terms, the proposed constitutional amendment, CACR 30, prohibits the exercise of eminent domain in circumstances in which private property will be transferred “directly or indirectly” to another person, if the purpose of the taking is for “private development or other private use of the property.” Stated conversely, the amendment allows the exercise of eminent domain only in instances in which the purpose of the taking is for public development or public use of the property. In other words, the amendment appears to underline the first prong of the two-part test, i.e., whether the proposed condemnation serves a public purpose. Presumably, the amendment would permit a transfer to another person if the taking is for a public use, as opposed to “private development or other private use of the property.” See Velishka v. City of Nashua, 99 N.H. 161 (1954); Rockingham County Light & Power Co., 72 N.H. 531 (1904).
With or without passage of the constitutional amendment, the issue remains the same: whether the purpose of the proposed taking constitutes a “public use” of the property or whether it involves “private development or private use of the property.” Ultimately, this determination is a question of law for the courts. E.g., Rodgers Development Company, 147 N.H. 57, 62 (2001); Merrill, 127 N.H. 234, 236 (1985).
It may be instructive to examine the impact of the amendment on a particular case. In Velishka, 99 N.H. 161 (1954), the Court upheld the Urban Redevelopment Law as constitutional, notwithstanding that the Housing Authority had the ability to resell or lease properties in a blighted area to private parties on conditions consistent with the public purpose of the redevelopment plan.
Would the result be different under the proposed constitutional amendment? Such a taking could involve an indirect transfer—through the Housing Authority—to another person for a private use of the property. On the other hand, the resale or lease of blighted properties on conditions consistent with the redevelopment plan arguably would be in keeping with the public purpose of the condemnation, rather than for the purpose of private development or other private use.
If the proposed amendment is approved, would a court find that the Housing Authority could lease, but not resell, blighted properties? Would a court determine that resale or lease to private parties would involve a private use of the property? These and other questions will have to be answered by the courts
The thrust of the proposed constitutional amendment may already be a part of our eminent domain law. In Merrill, 127 N.H. 234, 238 (1985), the City of Manchester and the Manchester Housing Authority sought to take by eminent domain certain forest land under current assessment for purposes of an industrial park. The NH Supreme Court ruled that open land, “as long as it poses no threat of actual harm to the community, may be condemned for development purposes only if it is to be put to a use which directly benefits the public, such as for a school, a playground, or a utility line, and not to a use which has only an incidental public benefit, such as for the private industrial park contemplated in the instant case.” The outcome would doubtless be the same under the new constitutional amendment.
Haden P. Gerrish, of the Donahue, Tucker & Ciandella law firm in Exeter, is a member of the NHBA Municipal Law Section and practices in the areas of municipal law, development and land use. Section member John J. Ratigan, an attorney with the same firm, contributed to the article.