Beyond Eminent Domain

Whittle Communications, an innovative publishing and marketing firm located in Knoxville, Tennessee, has enjoyed a rather spectacular rise to the forefront of the business community. Under the dynamic leadership of its founder, Chris Whittle, it has targeted certain specialty markets, and has successfully developed a variety of media to deliver its advertising to them. In 1987, Dr. William Fox, Associate Director of the University of Tennessee’s Center for Business and Economic Research, released a study which indicated that Whittle Communications has experienced a 25 percent annual growth rate and projected that Whittle would contribute $125 million to Knoxville’s income by 1997:

In light of its growth, in 1986 Whittle Communications announced its desire to obtain a downtown site on which to construct the company’s headquarters. The company’s employees were scattered among several downtown buildings, and its leadership not unreasonably wanted to create in one location an atmosphere conducive to the successful implementation of its enterprise. Whittle’s special requirements precluded the use of unoccupied space in nearby high-rise buildings.

Its specifications for the development of a low-level, campus-style structure called for a site that was generally unavailable in downtown Knoxville.

Most urban communities have development agencies empowered by their state’s legislature to draw up redevelopment plans. Such legislation enables a city to purchase or condemn property located within a designated area. Spurred by the Whittle announcement, Knoxville’s Community Development Corporation drafted a plan that included some of downtown Knoxville’s most desirable real estate.

The land included within a redevelopment plan must be linked, at least tangentially, to a blighted condition. While this plan included property with brand-new law offices, the flagship store of Gateway Books, a new restaurant, assorted parking lots, and other viable businesses, the definition of blight was expanded to encompass “inappropriate economic use.” Because some of the property was underutilized, the entire tract could be included within the redevelopment plan. To be sure, this concept has been supported in court decisions, and local lawmaking bodies have been given liberal parameters in which to operate. An astute businessman could implement a plan utilizing the property to its fullest economic potential; he may have been standing before Knoxville’s city council in the person of Chris Whittle.

Property owners generally discovered their participation in the Whittle project when it was first announced in the Knoxville papers. They essentially had two choices: sell or suffer condemnation. Either choice deprived them of the ownership of their property. While several property owners strenuously protested the projected taking, all sold to Knoxville’s Community Development Corporation, and avoided lengthy and expensive condemnation proceedings.

Myron Ely, a local real estate attorney and former property owner, said that the redevelopment created a land-banking effect. “No one wants to buy property facing condemnation,” said Ely. “It places a big, black cloud over the property.”

Karen Sproles, owner of a popular restaurant said, “If developers and the city can do this much without telling anyone, how much more can they do? I think it was very rude the way they did it.” “As it was,” she said, “I feel like I had no choice.”

Knoxville’s downtown district, like those of many cities, has suffered from a growing flight of important businesses to the suburbs. Remaining businesses and civic groups favored any legitimate activity that would encourage people to remain downtown and spend money. Thus, despite the objections of the affected property owners, the Whittle project generated support among the business community and the general pubic. In fact, a poll conducted for the Knoxville Journal found registered voters favoring the use of public financing to assist Whittle by a better than 2-to-1 margin. Richard Cate, senior vice president for urban and government affairs for the Knoxville Chamber of Commerce, summed up much of the sentiment: “i don’t think I need to remind you that we do not have companies or individuals standing in line to make this kind of investment in our community-let alone in our center city. The use of this limited amount of tax-increment financing is the key to making the Whittle project work.”

Chris Whittle and his company unquestionably have made significant contributions to the Knoxville community. In April 1989, the Knoxville papers reported that he and his company were making a $5.2 million gift to the University of Tennessee—the largest in the school’s history. He had previously announced gifts to UT’s College of Communications to fund scholarships for minority students, and also gifts to various downtown organizations. Whittle Communications, like any viable business, employs local people who spend their earnings in the community; that employment is an important contribution in and of itself.

So, what is the problem? Whittle is providing jobs, enriching the economy, and making sizable donations to the community. In the old westerns, he is the man wearing a white hat and riding the white horse.

The Fifth Amendment to the U.S. Constitution states “. . . nor shall private property be taken for public use, without just compensation.” Embodied within that amendment is a principle that holds sacrosanct an individual’s ownership of private property. Thus, actions by the state and those assisted by the state which tend to undermine private ownership must be viewed with suspicion.

Legal Plunder

The perception that it is okay for you to take your neighbor’s property so long as the community receives an economic benefit is reinforced each time a city assists in the acquisition of private property for private gain. Frederic Bastiat has written in The Law: “The nature of law is to maintain justice. This is so much the case that, in the minds of the people, law and justice are one and the same thing. There is in all of us a strong disposition to believe that anything lawful is also legitimate. This belief is so widespread that many persons have erroneously held that things are ‘just’ because law makes them so. Thus, in order to make plunder appear just and sacred to many consciences, it is only necessary for the law to decree and sanction it.”

If the law legitimates such takings, then most of us will feel better about ourselves if we favor such a project, and even more so if we derive an economic or aesthetic benefit from its success. Knoxville Councilman Milton Roberts Sr. expressed a lot of unspoken sentiment when he was quoted as saying, “I want to vote for it, but I want to have a clear conscience.”

Whittle is not the first company to use local government to help it take other people’s property. In the early 1980s, General Motors persuaded the City of Detroit to condemn a large residential neighborhood nicknamed “Poletown” for the construction of an assembly plant, rather than lose it to relocation. Detroit was faced with the loss of a significant number of jobs and other economic benefits. GM presented the carrot and the stick; Detroit acted with a speed uncharacteristic of a government body, liquidating the property rights of hundreds of people under the power of eminent domain within six months. It has been estimated that the cost of acquiring, relocating, and providing utility service to the site exceeded $200 million, but the site was sold to GM for a little over $8 million. The merits of paying this kind of tribute to a large private concern in exchange for an expected preservation of the economic health of the region can be debated for years, but there can be no doubt that the impetus for the taking was founded in the private sector.

A little-noticed side effect of this use of eminent domain is the public’s association of business with the state’s power to take. Justice James L. Ryan, the dissenting judge on Michigan’s Supreme Court, which approved the condemnation, wrote: “. . . the Court has altered the law of eminent domain in this state in a most significant way and, in my view, seriously jeopardized the security of all private property ownership. This case will stand, above all else, despite the sound intentions of the majority, for judicial approval of municipal condemnation of private property for private use. This is more than an example of a hard case making bad law—it is, in the last analysis, good faith but unwarranted judicial imprimatur upon government action taken under the policy of the end justifying the means.”

Many citizens understand the necessity of the state’s power to condemn land for roads and public buildings; but when private developers initiate public condemnation of private land for private purposes that is sustained by the judicial system, their understanding of any important distinction is clouded. Heretofore, the sanctity of private property has been self-evident among the general populace, and the recognition of its inviolability was an impediment to encroachments of state power.

Cases like Whittle and GM expand the state’s concept of public purpose and tend to anesthetize the public, even if only incrementally, into a greater acceptance of future takings. Without the proper barriers to such takings that is offered by a narrower interpretation of the Fifth Amendment, what is to prevent some future court from making a determination that a privately owned rare painting is now the property of the general public? The quality of uniqueness, an element common to real property, has been devalued, and businesses which form partnerships with the state must share some of the responsibility for this depreciation. The Knoxville News-Sentinel, in a December 1987 editorial, wrote: “Little can be said against the potential positive effects Whittle’s plan could have on downtown redevelopment. It is a plan that could reshape the image of the center city and attract commercial and residential spinoffs of equal quality . . . . Blocking the potential good it could do for the center city, has been painted as akin to opposing motherhood and apple pie.”

Since construction on the Whittle headquarters began in May 1989, Time, Inc., has acquired a significant interest in Whittle Communications with an option to purchase more at a future date. The impact of this event may or may not lessen the opportunity for fulfillment of Whittle’s economic potential and the realization of the community’s expectations.

Whittle’s present contributions cannot be denied; it is only when the line between public and private use has become so blurred as to offer no resistance to the exercise of state power that we may realize the inadequacy of our protest and the enormity of our sacrifice. If your neighbor, in hand with your mayor, comes to your home to take your Rembrandt for the new city art museum, be thankful that they wanted only your painting, and not your house for the museum.