The Empire State and Eminent Domain

A neighborhood with $600,000 apartments is declared 'blighted.'

By NICOLE GELINAS

New York
In September, Dan Goldstein received a letter from New York State informing him and his wife that the government was about to seize their Brooklyn apartment "In furtherance of the Atlantic Yards Arena and Redevelopment Project." The building would be razed as part of a 22-acre, $4.9 billion sports-complex project.
New York Mayor Michael Bloomberg, Brooklyn Borough President Marty Markowitz, and developer Bruce C. Ratner have promised that the project will bring jobs, affordable apartments and the Nets basketball team. Lost amid these promises is the story of Mr. Goldstein, his wife Shabnam Merchant, and a few others who have spent years resisting efforts to dislodge them. The state's highest court—the New York Court of Appeals—is expected to issue its ruling in Goldstein et al. v. Empire State Development Corporation any day. The case is a pivotal one in the struggle to prevent abuse of the power of eminent domain.
Eminent domain leapt onto the national stage in 2005 when the U.S. Supreme Court ruled in Kelo v. City of New London that governments can take private property for economic redevelopment because the redevelopment's "public purpose" fits a broad definition of the constitutional "public use" test. The decision sparked a national outcry that led more than 40 states to pass restrictions on eminent domain. Yet in New York there should not have been a debate at all.
For decades, New York courts rejected the notion that private landowners can be compelled to sell their property for the benefit for other individuals or companies, which is a central component of many redevelopment projects. In a 1951 case, for example, a state court prohibited a property seizure in New York City because the public use—the creation of a park—was incidental to the benefits for the private developer who would profit from building on land around the park.
Also in 1967, New York voters were asked whether to add a "public purpose" provision to the takings clause in the state's constitution to make it easier to seize private property. It was voted down.
So to push the Atlantic Yards project through the courts, New York state isn't arguing that it needs to take Mr. Goldstein's property for economic development. Instead, it has declared that Mr. Goldstein's neighborhood is "blighted." This allows the state to condemn property on the theory that clearing unsanitary and unsafe slums constitutes a public benefit.
In fact, the Prospect Heights neighborhood that Mr. Goldstein and his wife have made their home is hardly a slum. Prospect Heights was thriving before Atlantic Yards construction began. It's a hip neighborhood that's a short hop on the subway from Manhattan.
To meet the needs of in-flowing residents, developers had been converting sturdy old warehouses into condos. One of the newer arrivals, Mr. Goldstein, paid $590,000 in 2003 for his three-bedroom condo in a distinctive, eight-story dry-goods warehouse designed by a renowned Chicago architect and solidly built nearly 80 years before. His neighborhood was home, too, to small-scale industrial firms and a still-operating Prohibition-era bar, as well as to working-class renters.
To discover blight in all this, Albany hired consultants. Their 2006 report pointed to below-grade railyards for the Metropolitan Transportation Authority (MTA), which make up less than half the condemned area, and noted weeds growing and graffiti on some properties. All of this could be remedied without demolishing a large swath of urban landscape if the state compelled the MTA to sell the development rights above its underground tracks at a market rate.
Mainly, however, the report pointed to "underutilization" of the land, concluding that the area wasn't being used to the maximum economic benefit allowed by law. But that means the Atlantic Yards is really an economic-development project—and that the politicians along with Mr. Ratner want to manage Brooklyn's economy rather than let competitive forces continue to improve the neighborhood.
Specifically, New York would use its power to condemn private property, along with $700 million in subsidies to aid Mr. Ratner's arena, while he would deliver economic benefits favored by officials in City Hall and the state capital. To wit: 2,000 subsidized apartments and a few thousand jobs, a basketball arena and 4,000 luxury apartments.
Just last week, Mr. Ratner bristled at requests from a reporter at Crain's New York Business to see his specific building plans. "Why should people get to see plans?" he said. "This isn't a public project." A curious statement, given the state's use of eminent domain on behalf of the project.
All of this places Mr. Goldstein in an important spot. The case that bears his name is the first opportunity since Kelo for New York's highest court to affirm that the state's constitutional standard for seizing property is more stringent than the federal constitutional standard.
If the court rules against Mr. Goldstein, however, he and his wife could suffer one final injustice. The letter they received in September informed them that the state will compensate them $510,000 for their property—less than what they bought it for and less than half of what Mr. Ratner offered to pay them for it four years ago.
It's also less per square foot than what Mr. Ratner expects to sell his luxury apartments for once they are built. "I think [the state] lowballs to deter people from fighting like we have," Mr. Goldstein told me.
Mr. Goldstein should win. The state constitution supports him. If he loses, so will the owners of private property everywhere in the Empire State.
Ms. Gelinas, a contributing editor to the Manhattan Institute's City Journal, is author of the forthcoming book "After The Fall: Saving Capitalism from Wall Street—And Washington" (Encounter Books).