Life After Public Purpose

The Star Tribune recently ran an article about Minnesota's 2006 law change that prevents cities from pursuing eminent domain for public purpose economic development schemes. It prevents cities from condemning property and reassembling it for projects (such as the Best Buy Corporate Campus along I-35 and I-494),

Quick refresher. Prior to 2006 in Minnesota, eminent domain allowed for the public taking of private land for a public use and public purpose. The "public purpose" has been removed from the equation, and probably for the better. It had a very malleable definition, as one could argue that a public purpose was to take property for economic development, jobs and increased property tax revenue.

It appears as if the law is working as intended and cities are now only using eminent domain for projects that fit a public use, such as utility upgrades, street improvements, sidewalk expansions, bike trails, etc.

Eminent domain has had a spotty history across the country. The most tragic being the use of land takings in Connecticut, where City of New London (pop. 26,000) acquired vast amounts of property and tore down a historic neighborhood so drug-giant Pfizer could move in (see Kelo v. New London). The company spent $294 million on a 750,000 square foot suburban complex only to abandon it 8 years later (the New York Times has brilliant coverage on the story and Strong Towns covers the issue well).

Here's what New London looks like today, post-public purpose eminent domain: http://www.dr5.org/kelo-v-new-london-the-aftermath/.

The Best Buy story isn't as tragic, yet. However, Best Buy has been experiencing trouble and has reduced its workforce from around 9,000 to around 4,500 employees at the corporate campus in Richfield. Rumor has it that one of the four towers on site has never been occupied.

The problem with 'public purpose' eminent domain is that it typically aims to provide the silver bullet approach; one big project comes into town and the next thing you know, a town's got jobs and tax revenue! Reality is a little harsher as these projects, as they fail, typically leave the municipalities who championed them holding the ball when all hits the fan. Pfizer can always relocate and Best Buy close-up shop and dissolve assets to shareholders, whereas the City of Richfield and New London aren't going anywhere.

If Best Buy were looking to relocate today, they certainly would not be looking at a cornfield in Lakeville or wetlands in Chanhassen. They'd be looking for office space in downtown Minneapolis. The tables have turned and the competitive advantage is no longer cheap land, its amenity.

The mega suburban corporate campus is a dying model that, once empty, is hard to lease. It's also a model of development that is insular and has few positive spillover effects. Why no spillover effects? Because it's designed to keep employees under one-roof and to not engage them in the wider economic activities of a metropolitan area. This model kills innovation by eliminating casual encounters and knowledge spillovers.

It's also wrong to think that disrepair and disinvestment in cities or inner-ring suburbs are a result of a lack of large economic development projects. Cities that can't grow out must grow up, both literally and figuratively. The economic gardening approach, which is safer, lower-risk economic development approach, needs to be the status quo – not the exception. Whatever the case, a city needs to create a template for incremental growth; which includes small-scale density improvements over time, transit and transportation access, urban design improvements, the growth of existing business and the welcoming of small, growing businesses.

The cities that have been the most successful over the course of the last 20 to 30 years are those that have embraced small business growth through innovation, and those that have been nimble, urban and welcoming to change. And, eminent domain that supports large, insular development such as corporate campuses (or large master-planned development, football stadium, etc.) is likely to not add much to a community in the long-run.

Eminent domain for a public use is only fair; although I'm confident it's been used for bad projects. Nonetheless, there are certainly good and reasonable uses for it. The broad-ranging public purpose, which is now a relic of the past, is something entirely different. It's the taking of land for what essentially amounts to a gamble; that a baseball stadium or convention center or corporate campus will help revive a town that's too lethargic to put in the hours and grow from the ground up.