The Antiplanner

New London Redevelopment

17th November 2008

New London Redevelopment

posted in News commentary, Planning Disasters |

In June, 2005, the Supreme Court infamously decided that cities could condemn peoples’ land to give to private developers provided the government had written an economic development plan for the project. In response to arguments that many previous such plans had failed, the Supreme Court merely said that “we decline to second-guess the City’s considered judgments about the efficacy of its development plan.”

Susette Kelo, who fought New London’s plan for her Fort Trumbull neighborhood.
Flickr photo by cereza juana.

Three years after the decision, no one had to second-guess the city’s judgments. Instead, it was clear that they were wrong. The homes of Susette Kelo and her neighbors have all been torn down or removed. But, except for the remodeling of one government building into another government building, virtually no new development had taken place in the Fort Trumbull district by May, 2008.

Having spent at least $78 million on the Fort Trumbull project, the city had awarded development rights to a company named Corcoran Jennison, which planned to build a hotel, an office complex, and more than 100 upscale housing units. The developer had until November, 2007, to obtain financing.

When that deadline lapsed, it received an extension to May 29, 2008. In desperation, the developer sought an FHA loan of $11.5 million. When that didn’t work and May 29 came and went, New London revoked the agreement.

But that doesn’t mean there is no redevelopment in New London. According to eminent domain attorney Gideon Kanner, several redevelopment projects are taking place in the city. They are just all private, including the renovation of old downtown and waterfront buildings into condominiums.

If private developers could use their own money to successfully turn old buildings into condos, why couldn’t Corcoran Jennison, bolstered by $78 million in government subsidies, find the money it needed to build new housing? The company blamed the eminent domain lawsuits which “created a lot of negative impressions in the financial and larger markets.”

Naturally, the Antiplanner is suspicious that the real problem is that the market for condos is simply somewhere else. The yuppies who like to live in condos in walkable neighborhoods want to have somewhere to walk to, and downtown New London is just a little far to walk from Fort Trumbull. Or maybe the banks that finance such projects were willing to risk a little money on downtown condos but not the huge amount of money Corcoran Jennison needed to fulfill the city’s ambitious plans.

Unfortunately, information is hard to come by. Kanner doesn’t include very many links in his blog. New London’s newspaper charges non-subscribers for any stories that are more than a few weeks old. The New London Development Corporation — the government agency that did all the planning — doesn’t even have an operating web site. The economic development portion of the city’s web site is a depressing list of subsidies and regulations.

No doubt city leaders tell themselves that the Fort Trumbull plan would have been a great success if only Susette Kelo and her neighbors (and her non-profit attorneys) hadn’t postponed plans until the beginning of the current recession. But, according to the Office of Federal Housing Enterprise Oversight, Norwich-New London housing prices did not peak until the first quarter of 2007, which gave Corcoran Jennison at least eighteen months to get financing for its project. Its failure to do so should — but probably won’t — give the Supreme Court a lesson in government planning disasters.

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  1. 1 On November 17th, 2008, the highwayman said:

    http://upload.wikimedia.org/wikipedia/commons/8/8d/Studebaker_advertisement%2C_1902.jpg

    posted on November 17th, 2008 at 2:19 am

  2. 2 On November 17th, 2008, the highwayman said:

    http://findarticles.com/p/articles/mi_m0EIN/is_/ai_n16833397

    Eminent Domain Lawsuit Results in $5 Million Judgment, According to Eminent Domain Consultant, Lewis Realty Advisors
    Business Wire, Oct 2, 2006

    HOUSTON — A jury has awarded a $5 million judgment to the REI sporting goods retailer, which lost a considerable number of parking spaces through a condemnation proceeding that widened Interstate 10.

    REI filed suit against the State of Texas after the government acquired 1 acre of REI’s 3.5-acre retail site in March of last year in an eminent domain proceeding.

    The acquisition included over 50% of the parking and rendered the building of no value. “A retail store without adequate parking can no longer operate as a retail store because the store’s customers cannot find a place to park,” said Lewis Realty Advisors principal Mark Sikes, who testified as an expert valuation witness in the case.

    The state contended that REI should be compensated $3.3 million. Sikes said that retailer should receive $5 million, reasoning that the property was worth $9.6 million before the eminent domain taking and $4.6 million after the taking.

    A jury in Judge Jack Cagle’s Harris County Court-At-Law No. 1, agreed with Mr. Sikes and ruled in favor of REI. The store has been demolished and the retailer moved elsewhere.

    The widening of I-10 in west Houston, resulted in dozens of disputes with the state about property values and acquisition prices. The Lewis Realty Advisors team, led by Sikes, handled many cases for Katy Freeway property owners in negotiating fair purchase prices from the state.

    The REI case was the first lawsuit to go to jury trial in the Katy Freeway eminent domain takings, Sikes said.

    “The taking of a commercial property through eminent domain is a complex event and property owners do not want to tackle it without an expert in this specialized field,” Sikes said. “A significant number of Katy Freeway property owners enlisted our help. The initial offers by the state were consistently too low and the property owners were wise to protest.”

    Houston-based Lewis Realty Advisors, founded in 1961, has handled thousands of eminent domain matters over the years. The company works with private companies and government agencies in real estate appraisal, acquisition and counseling. The national leader in eminent domain expertise, Lewis Realty Advisors is the bridge between government and private property owners.

    posted on November 17th, 2008 at 2:35 am

  3. 3 On November 17th, 2008, the highwayman said:

    http://money.cnn.com/2005/06/23/news/fortune500/retail_eminentdomain/

    Eminent domain: A big-box bonanza?

    Court’s ruling OKed land grab for business like Target, Home Depot, CostCo, Bed Bath & Beyond
    June 24, 2005: 3:20 PM EDT
    By Parija Bhatnagar, CNN/Money staff writer

    NEW YORK (CNN/Money) – The Supreme Court may have just delivered an early Christmas gift to the nation’s biggest retailers by its ruling Thursday allowing governments to take private land for business development.

    Retailers such as Target (Research), Home Depot (Research) and Bed, Bath & Beyond (Research) have thus far managed to keep the “eminent domain” issue under the radar — and sidestep a prickly public relations problem — even as these companies continue to expand their footprint into more urban residential areas where prime retail space isn’t always easily found.

    Eminent domain is a legal principle that allows the government to take private property for a “public use,” such as a school or roads and bridges, in exchange for just compensation.

    Local governments have increasingly expanded the scope of public use to include commercial entities such as shopping malls or independent retail stores. Critics of the process maintain that local governments are too quick to invoke eminent domain on behalf of big retailers because of the potential for tax revenue generation and job creation.

    The Supreme Court’s decision Thursday clarified that local governments may seize people’s homes and businesses — even against their will — for private and public economic development.

    The ruling would seem to offer new opportunities to retailers. However, some industry watchers caution that with Thursday’s decision thrusting the eminent domain issue into the national spotlight, companies using eminent domain risk a very public backlash.

    Craig Johnson, president of retail consulting group Customer Growth Partners, said that retailers shouldn’t interpret the high court’s decision to be a green light to aggressively expand even into those neighborhoods where a big-box presence is unwelcome.

    “Even with the Supreme Court’s decision potentially in their favor, smart retailers would rather go into communities wearing a white hat rather than a black one,” said Johnson.

    The appropriate move for companies would be to selectively use eminent domain as a last resort, he said, not as a first course of action. “I think companies have learned a few lessons from Wal-Mart’s public relations struggles,” he said.

    Where’s the space crunch?
    According to industry watchers, retailers face a different type of expansion problem on the East Coast versus the West Coast.

    “On the West Coast, land availability takes a back seat to labor union issues and that’s why Wal-Mart has consistently run into problems in California,” Johnson said. “On the East Coast, because of population density it’s very hard to get big open space and the zoning is more restrictive,” Johnson said.

    Industry consultant George Whalin said that’s one reason that Target, the No. 2 retailer behind Wal-Mart, (Research) has resorted to using eminent domain to set up shop in a few East Coast markets.

    Target and Wal-Mart could not immediately be reached for comment.

    “Wal-Mart and Target have both been criticized for their eminent domain use,” said Burt Flickinger, a consultant with the Strategic Resources Group.

    Meanwhile, eminent domain opponents called the high court ruling a “big blow for small businesses.”

    “It’s crazy to think about replacing existing successful small businesses with other businesses,” said Adrian Moore, vice president of Los Angeles-based Reason Public Policy Institute, a non-profit organization opposed to eminent domain.

    “There are many, many instances where we’ve found that the cities that agreed to eminent domain use not only destroyed local businesses but the tax revenue that the local government had hoped to generate did not come to pass,” Moore said.

    But at least one retail industry analyst sees things a little differently.

    “Expanding for big box store is a challenge, especially in the Northeast. Therefore, retailers will have to devise a strategy for using eminent domain,” said Candace Corlett, retail analyst with WSL Strategic nRetail.

    “Local communities may oppose Wal-Mart and Target coming to their area but as consumers, they also want to shop at these stores and they complain when they don’t have these stores nearby,” she said. “The fact is that shoppers ultimately vote with their dollars and retailers are very well aware of that.”

    posted on November 17th, 2008 at 2:57 am

  4. 4 On November 17th, 2008, bennett said:

    Well this time O’Toole, I agree. The New London ruling was not cool to say the least. I’m a planner and usually advocate for stances opposite of the Antiplanner, but many eminent domain cases and the idea “taking” land from one private entity to give it to another for the sake of economic development is wrong and a heartless way to plan.

    posted on November 17th, 2008 at 6:15 am

  5. 5 On November 17th, 2008, Dan said:

    The thing about the USC is that it rarely breaks with precedent. It merely added to an inexorable move toward privileging business and corporations. Penna Coal was a way worse decision, in my view. If you’re going to be mad about property, be mad at that one.

    That said, I’m with bennett on this one. This is a farther slide down the slippery slope than usual.

    And the economic conditions in this country – where municipalities are pressured by residents to provide services and cut taxes – force cities to chase after biness and retail.

    If you’re going to chase after biness and retail and have – Northern California-like – stores covering every inch of the land, than this is what happens. You can’t have it both ways.

    DS

    posted on November 17th, 2008 at 6:25 am

  6. 6 On November 17th, 2008, Unowho said:

    An interesting back story about Corcoran Jennison – the company was the lead developer for the City of Stamford (about a 90-minute drive west of New London) in a downtown urban redevelopment project. Standing in the way of the planners was a certain Mrs. Maria Aposporos, proprietor of Curley’s Diner. She successfully fought off the efforts of the city and C-J (the latter led by its president, a former HUD official and ULI board member) to take her property via eminent domain, although her court victory was not based on constitutional grounds. Her story is here:

    http://www.nytimes.com/2006/07/07/nyregion/nyregionspecial2/09ctcol.html?_r=1&oref=slogin

    Mrs. Aposporos is still in business, although the city has erected a spite fence and an incredibly ugly parking lot around her property. As with Ms. Kelo, a perfect example of the principle that men talk tough while women are tough.

    posted on November 17th, 2008 at 12:01 pm

  7. 7 On November 17th, 2008, Dan said:

    Yes, the holdout problem. I like walking around cities and looking for these. I’m back east right now and have found a number of interesting ones in this city.

    There’s a lady in Seattle who just died and was a holdout as well – Edith Macefield. I think the construction foreman took her cats. Tough as nails.

    DS

    posted on November 17th, 2008 at 12:54 pm

  8. 8 On November 17th, 2008, the highwayman said:

    http://www.youtube.com/watch?v=thqK24LJR3o

    Dido made a video with eminant domain as part of plot.

    posted on November 17th, 2008 at 1:28 pm

  9. 9 On November 18th, 2008, JimKarlock said:

    Hi Dan,
    We are still waiting for you to show us that peer reviewed paper proving that CO2 can cause dangerous global warming.

    As a logical person, you know that absent this proof, there is absolutely no proof that global warming is man made. (Of course to establish man’s guilt one also has to show that warming is unnatural, it is harmful, man’s contribution is major and that man is responsible for the observed CO2 increase.)

    Thanks
    JK

    posted on November 18th, 2008 at 1:17 am

  10. 10 On November 18th, 2008, the highwayman said:

    http://electkarlock.com/VPamphlet.htm

    posted on November 18th, 2008 at 3:08 am

  11. 11 On November 18th, 2008, bennett said:

    Welcome to the conversation Karlock. Nice to see you have something relevant to add to the eminent domain conversation. Why don’t you go hijack you own blog.

    posted on November 18th, 2008 at 6:08 am

  12. 12 On November 18th, 2008, D4P said:

    We are still waiting for you to show us that peer reviewed paper proving that CO2 can cause dangerous global warming

    Perhaps Mr. Karlock can produce a peer reviewed paper proving that smoking cigarettes can cause dangerous cancer.

    (HINT: Aside from tautologies and mathematics, humans can’t prove anything)

    posted on November 18th, 2008 at 7:41 am

  13. 13 On November 18th, 2008, prk166 said:

    “And the economic conditions in this country – where municipalities are pressured by residents to provide services and cut taxes – force cities to chase after biness and retail.

    If you’re going to chase after biness and retail and have – Northern California-like – stores covering every inch of the land, than this is what happens. You can’t have it both ways.”
    –DS

    California’s not a great example since as a state 15-20 years ago they passed a referendum that while technically not forcing cities to chase retail for $$$ but no sane city there would do otherwise.

    As for other cities, the other half of the story is that they never can find a service that they don’t “have” to provide. Schools only half full? Why consolidate them when you can get the voters to cough up more tax money? The problem is over time big cities frequently end up duplicating a multitude of services that are already covered at a county, state and even federal level. Do that a few times here and there and there goes $10 million / year. And there are other areas like police coverage. From what I can tell no one really knows what is “needed” for coverage. We’ve seen forces grow and crime grow; PD’s shrink and crime shrink. Yet the city politicians will insist that the world could end if 10 or 20 (a million or two) peace officers are trimmed from the force. But eh, that’s politics.

    posted on November 18th, 2008 at 12:55 pm

  14. 14 On November 18th, 2008, the highwayman said:

    Prk166 wrote:
    “…there are other areas like police coverage. From what I can tell no one really knows what is “needed” for coverage. We’ve seen forces grow and crime grow; PD’s shrink and crime shrink. Yet the city politicians will insist that the world could end if 10 or 20 (a million or two) peace officers are trimmed from the force. But eh, that’s politics.”

    Thus martial law was invented.

    posted on November 18th, 2008 at 3:35 pm

  15. 15 On November 19th, 2008, Dan said:

    California’s not a great example since as a state 15-20 years ago they passed a referendum that while technically not forcing cities to chase retail for $$$ but no sane city there would do otherwise.

    One wonders what the price rate increase curve would be if CA property owners had to pay taxes based on the current value of their property. Would they blithely stand by and watch their values soar if their property taxes went up by a similar %age?

    Nonetheless, thus are the unintended consequences of so many initiatives.

    DS

    posted on November 19th, 2008 at 12:17 pm

  16. 16 On November 19th, 2008, Dan said:

    From what I can tell no one really knows what is “needed” for coverage.

    Well, sounds like you can’t speak to the issue of police resources needed based on square miles, population, density and road miles (plus response time).

    This paper examines the impact of urban sprawl, a phenomenon of particular interest in Spain, which is currently experiencing this process of rapid, low-density urban expansion. … Our initial aim is to develop an accurate measure of urban sprawl so that we might empirically test its impact on municipal budgets. Then, we undertake an empirical analysis using a cross-sectional data set of 2,500 Spanish municipalities for the year 2003 and a piecewise linear function to account for the potentially nonlinear relationship between sprawl and local costs. The estimations derived from the expenditure equations for both aggregate and six disaggregated spending categories indicate that low-density development patterns lead to greater provision costs of local public services.

    Urban sprawl has thus become a matter for concern, not only because of the intensity of the process but also because of its great environmental, social and economic impact. An increase in commuting due to the more scattered nature of urban areas also exacerbates traffic congestion and, in turn, air pollution (Sierra Club, 1998; Brueckner 2001; Glaeser and Khan, 2003). … Then, several poverty-related problems arise in low-income neighbourhoods, such as increasing crime rates, poor-quality public services and lack of fiscal resources. However, among the many consequences already mentioned the impact on municipal finances is perhaps the most relevant. Although many factors have an influence on the amount, allocation and distribution of local public spending, there is a growing conviction that urban spatial structure is gaining in importance. Low-density expansion increases the costs of providing local public services. Major investments are required to extend the highway network, and water, electricity or sewer lines to a relatively small number of residents (see., e.g., Carruthers, 2002). Likewise, as a result of the greater dispersion of population in the municipality, such districts fail to capitalize on economies of scale and optimise on facility location of several public services, including public education, police protection or public transportation (Carruthers and Ulfarsson, 2006). [emphases added]

    Huh. They all seem to find the same thing. I wonder if Enlightenment principles will break through to certain ideologies any time soon…

    And that Glaeser guy – I thought he hearted sprawl?

    DS

    posted on November 19th, 2008 at 12:31 pm

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