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The Shame of New London

Eminent domain often results in few winners, lots of losers
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The collapse of a development project for New London’s Fort Trumbull area, combined with Pfizer’s plans to skip town, has provided a fitting climax to a landmark eminent domain case that caused dismay across the U.S. And it may have taught New London’s power brokers to be wary of developers bearing promises.

In 2005, the U.S. Supreme Court decreed in a 5-4 decision that the city of New London, CT, should be allowed to seize the homes of Susette Kelo and 89 other homeowners in the Fort Trumbull neighborhood to make way for a private development project. The developer promised a $75 million complex including a hotel, office buildings, retail shops and restaurants. The developer also pledged 3,000 jobs and $1.2 million per year in tax revenues. The economic benefits promised were sufficient, the majority of the justices declared, to qualify the private development as a “public good” – and thus justified the taking of individuals’ homes.

The project was to be part of New London’s efforts to spruce up the area for pharmaceutical giant Pfizer, which had agreed to construct a $300 million research operation adjacent to Fort Trumbull. In return for building the new facility, Pfizer was granted an 80% real estate tax abatement for 10 years.

After winning its eminent domain case, the city of New London speedily bulldozed the 90 homes, creating a huge vacant tract. Then the city waited for the developer to start fulfilling his promises. They waited . . . and waited.

The consequences of "Kelo"

In the meantime, people of all political persuasions – conservative and liberal – were outraged at the Supreme Court’s “Kelo” decision, allowing a governmental body to seize private property to benefit a private developer. As a result, since the “Kelo” decision, 43 states have passed laws placing limits on the use of eminent domain for private economic development.

However, a few states – like New York – have welcomed the ability to harness the awesome power of eminent domain to foster private development projects. New York is currently attempting to use the same stratagem for the Atlantic Yards and Willets Point projects.

Ironically, the city of New London won in court but lost on the ground. The private developer never did get his project financed. And with the bursting of the real estate bubble, it is unlikely the project will be revived anytime soon. Adding insult to injury, Pfizer recently announced that it’s shutting down its New London research center and moving 1,400 jobs out of town – just as the tax abatement runs out.

So all that New London has to show for its years of effort and expenditure of taxpayers’ money is a vast wasteland: No housing, no jobs, no taxes, no neighborhood – just vacant lots and weeds.

But maybe all is not lost for New London. Having invested great sums on legal fees to win its infamous “Kelo” judgment, perhaps New London can now collect royalties from other governmental bodies that want to use that dubious precedent to seize private property to benefit smooth-talking developers peddling pipe dreams!

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