10/08/2005

Daily Kos: Kelo, Eminent Domain and Political Corruption

Who should profit when a zone gets changed by the city ? -- law

Kelo, Eminent Domain and Political Corruption
by NathanNewman
Fri Oct 7th, 2005 at 17:22:58 CDT

Kevin Drum, seconded by Todd Zywicki at Volohk think this story (Assemblyman denies influencing townhouse deal) outlines exactly the kind of corruption that the eminent domain endorsed by Kelo allows.

Except it doesn't. Instead, it highlights why eminent domain is often useful in making sure the public isn't riffed off by political operatives.

Read the story and come back, but here's the core of the story:

* Carol Segal, a local retired electrical engineer, buys up a bunch of abandoned industrial property in Union Township for $1.5 million. He lobbies the local government to rezone the land for residential development, which will instantly make him rich, since what was low-value land becomes instantly more valuable with the zoning change.

* The city demands that as a condition of making Segal rich that he agree to various conditions, including working with developers picked by the Township, possibly for public interested reasons, more probably to share the economic booty from the zoning change with their political supporters.

* Segal refuses and the Township takes the land by eminent domain, meaning Segal will get paid back the value of the land without the zoning change, but he won't get rich as he hoped. Instead, some other political operator in the town will probably get the booty from the zoning change.

Now, Kevin or Todd thinks I should be outraged that the original political operator didn't get the unearned windfall from the zoning change. The real question is why any private landowner should get the windfall.

In the ideal, Union Township buys the land from Segal at the pre-zoning change market price, the town makes the zoning change, and the land is resold at its now much higher price. The city taxpayers reap the increased value from the zoning change and the development moves forward.

Pay attention to that jump in value due to the zoning change. That's really what all these debates are about. Who deserves to get that windfall?

Answer at the source:

Daily Kos: Kelo, Eminent Domain and Political Corruption

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