Eminent Domain, Rick Perry, and the Trans-Texas Corridor

Attorney Alan Ackerman has a post up highlighting and commenting on an article that argues that critics of Texas Governor Rick Perry from the right should temper their rhetoric with respect to Perry’s support for the Trans-Texas Corridor. It is true that condemnation of private property is all but inevitable in order for the state to assemble the highway’s right-of-way:

Former California State Assemblyman Chuck DeVore wants critics from the right and left to lay off Texas Governor Rick Perry, who proposed Trans-Texas Corridor, a 4000-mile north to south development with toll roads, rail corridors, and utility lines.

Texas’ growth has exploded in recent years, and it is likely to continue as shipping between Mexico, the United States, and Canada increases. The state needs this infrastructure development badly to support its own growth and increasing international trade.

While critics decry this as an exercise in big government, in reality this project would be privately funded and managed, without relying on tax increases or government budget cuts. Some also criticize Perry because the Corridor would require eminent domain. But as DeVore points out, roads and railways are quintessential public uses. The Constitution has always contemplated takings for infrastructure projects like the Trans-Texas Corridor and the (hopefully soon to be built) Detroit International River Crossing. Whether condemning agencies treat property owners fairly is, of course, another issue altogether. Regardless, these sorts of infrastructure projects will be necessary to support growth in the United States.

I think Ackerman raises some reasonable points about the legitimate (read: constitutional) uses of eminent domain. Texas is badly in need of new and expanded transportation infrastructure and the currently-shelved TTC-35 project was innovative in a number of ways, particularly in its reliance on private-sector financing (pp. 10-11). But to simply sweep away critics’ legitimate concerns over eminent domain abuse with, “in reality this project would be privately funded and managed, without relying on tax increases or government budget cuts” and claim that mega-takings are somehow not an “exercise in big government” is a bit much.

As I’ve pointed out, eminent domain condemnations are not only inherently distortionary, the burden is disproportionately borne by those with the least means to resist takings: specifically, poor minorities. Given that government at all levels spends an absurd amount of money attempting to spur entrepreneurship and economic development among low-income groups, their land-use and development policies are essentially shooting their misguided but well-intended poverty reduction programs in the foot.

Furthermore, Texas’ response to the infamous 2005 Supreme Court ruling in Kelo v. New London has been disappointing. University of Illinois law professor Andrew P. Morris gave Texas a C- for its post-Kelo reform efforts in his paper “Symbol or Substance? An Empirical Assessment of State Responses to Kelo” in 2009’s Supreme Court Economic Review (this is part of an excellent symposium on eminent domain after Kelo). But in 2009, things were finally looking brighter for Texas landowners when voters passed Proposition 11, which amended the state’s constitution to incorporate limited protections from eminent domain abuse. Many thought this was the beginning of a real reform movement. Unfortunately, post-Prop 11 reform has not done so well. Fast forward to 2011, and we have Texas legislators adopting a bogus eminent domain reform package that will do little in terms of enhancing property owners’ protections. Gov. Perry later signed the bill into law.

During the debate over the Senate’s draft, I argued that relatively small tweaks could go a long way in preventing spurious condemnations. For example, adopting specific language narrowly defining public use (so as to prohibit “economic redevelopment” and “blight” takings) and defining “just compensation” as assessed market value times a number greater than 1 (Michigan, for instance, requires that homeowners be compensated at no less than 125 percent of fair market value) would have alleviated a lot of my concerns. But legislators and Gov. Perry opposed such amendments and they were not included in the final bill.

Ackerman also mentions the proposed Detroit River bridge (alternatively known as the Detroit River International Crossing or, for now, the New International Trade Crossing). Here he is completely off the mark. The current bridge linking Detroit and Windsor, Ontario, is the privately owned Ambassador Bridge. That bridge’s owners wish to build a second six-lane span to augment the current four-lane bridge. Yet Michigan’s Republican Governor Rick Synder is for some reason taken with the idea of putting Michigan taxpayers on the hook in order to do something a private company is essentially willing to do on its own. Talk about crowding out investment. The DRIC/NITC is a terrible idea given the alternatives, and anyone who has been following this ongoing battle should know this.

So, while Ackerman raises some good points regarding the importance of infrastructure investments, he ultimately goes too far in dismissing legitimate concerns about takings abuses. As is true with most public policy, the devil is in the details.

ADDENDUM: Dan Biersdorf of Biersdorf & Associates adds his thoughts on condemnors’ systematic undervaluation of condemned property — make it easier for property owners fighting takings to recoup their legal costs. There exists some empirical evidence supporting the claim that government entities do have an incentive to systematically undervalue property owners’ parcels in the takings compensation process (See, e.g., Yun-Chien Chang, “An Empirical Study of Compensation Paid in Eminent Domain Settlements: New York City 1990-2002,” 3rd Annual Conference on Empirical Legal Studies Paper, September 6, 2008.). His post is well worth reading.

ADDENDUM II: Alan Ackerman responds. He misinterprets my point about Synder “putting Michigan taxpayers on the hook” for the proposed DRIC/NITC over the Detroit River. Michigan taxpayers will not be on the hook for up-front financing, nor does the proposed concession agreement require Michigan to bail out the bridge if the private company or consortium goes bankrupt. However, as this is a concession agreement, the bridge will be jointly owned by the Michigan and Canadian governments. That, despite claims from DRIC/NITC boosters that the concession agreement prevents Michigan taxpayers from assuming any risk, actually means that by definition the government will assume long-run project risk. Concessions mitigate financing, construction, and operating risks to the public sector, but they certainly don’t eliminate them.

Boosters are promising all sorts of bells and whistles to Detroit politicians in exchange for their support in destroying residents’ homes to build lane-space that a private company wants to do on its own (with zero risk to taxpayers). “Sustainable development” is an empty term that has been thrown around a lot. While it is unclear if Gov. Synder has the votes in the legislature to get his bridge built, the authorizing legislation will inevitably include all sorts of pork to buy off the opposition. So not only do Michigan taxpayers assume significant risk over the long-run, they will most certainly see their tax dollars spent on wasteful “goodies” in order to buy support from certain political constituencies. In my world, I’d consider that being “put on the hook.”

And present cross-border traffic volumes are not “choking” anything. If you want to solve potential congestion problems, direct your complaints to U.S. Customs and Border Protection, which has gone completely insane post-9/11. There is absolutely no reason to treat DRIC/NITC, or the preferable twinning of the Ambassador Bridge, as an urgent matter. It is not.