February
18, 2003 9:00 a.m. This
Land is Costco’s Land
Cities
steal property, and give it to Costco.
ostco, the
big warehouse chain, took a minor p.r. hit last year when the city council
of Cypress, California, tried to kick a church off its land in order to
give it to the company. But this case does not appear to be an isolated
incident. The libertarian legal activists at the Institute
for Justice say that Costco is a major beneficiary of local governments'
abuse of their power to seize private property. They want to put an end
to that abuse.
The institute does
not deny that governments have the power to seize private property "for
public use," so long as they provide "just compensation"
(the wording of the Fifth Amendment to the Constitution). But it insists
that such seizures should be limited to actual public uses. Taking someone's
property to sell it to a company doesn't count.
There's no central
database of beneficiaries of eminent-domain abuse. But Dana Berliner,
a lawyer at the institute, has been collecting news reports and case filings
about these transfers of property since the beginning of 1998. "Of
the big-box retailers, Costco shows up the most," she says. In late
2001, a Costco shareholder, Susan Watson wrote to the company's headquarters
expressing her concern at the company's tactics. Its chief legal officer
wrote a response that conceded that "there are probably dozens"
of Costco projects "where eminent domain or the threat of it has
been involved in acquiring land for redevelopment." (Costco representatives
did not return my phone calls for this article.)
One of these projects
was in Lancaster, California. Costco wanted to expand its store by knocking
down a 99 Cents Store. Costco threatened to leave the city if it didn't
get what it wanted. In 2000, federal judge Steven Wilson found that Lancaster
had improperly condemned the store: "In this case, the evidence is
clear beyond dispute that Lancaster's condemnation efforts rest on nothing
more than the desire to achieve the naked transfer of property from one
private party to another. Indeed, Lancaster itself admits that the only
reason it enacted the [condemnation] was to satisfy the private expansion
demands of Costco. It is equally undisputed that Costco could have easily
expanded. . . onto adjacent property without displacing 99 Cents at all
but refused to do so. Finally, by Lancaster's own admissions, it was willing
to go to any lengths — even so far as condemning commercially viable,
unblighted real property — simply to keep Costco within the city's
boundaries. In short, the very reason that Lancaster decided to condemn
99 Cents' leasehold interest was to appease Costco. Such conduct amounts
to an unconstitutional taking for purely private purposes."
Cities engaging in
such property seizures typically claim that they are necessary to promote
economic development. Members of the city council in Cypress, and the
council's defenders, noted that Costco would generate more tax revenue
for the city than a church would (not surprising, considering that churches
are tax-exempt). But as Berliner notes, that's a dangerously far-reaching
justification. "Most people's homes would in fact produce more real-estate
taxes if they were Costco," she says. "If all it takes to condemn
someone's property is to say your house, if it were a Costco, would generate
more taxes, then we're all in trouble."
The economic-development
justification for property seizure is a license for abuse. It will always
be possible to dress up the appeasement of powerful financial interests
in an area in this fashion. The best economic-development strategy for
cities, in any case, is not to attack property rights but to maintain
their roads, apprehend and punish criminals, keep taxes low, and fix the
schools.
I'm less enamored
of litigation than the Institute for Justice. I also think that local
governments that abuse their eminent-domain powers-and the state governments
that allow this conduct-are more to blame than companies that take advantage
of this regime. But I'll give the last word to Berliner: "Big box
stores always try to justify their involvement in eminent domain by saying
oh, it's not up to us, it's up to the city. But transactions happen when
there's supply and demand, and if private businesses weren't happy to
take advantage of other people's property — acquired by force and
at a discount — then cities wouldn't do it. So I don't believe they
can claim they have no responsibility."
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ostco, the
big warehouse chain, took a minor p.r. hit last year when the city council
of Cypress, California, tried to kick a church off its land in order to
give it to the company. But this case does not appear to be an isolated
incident. The libertarian legal activists at the 
