The dangers of abusive economic development and blight takings are now widely recognized. But some believe that they can be effectively minimized through safeguards that fall short of a categorical ban on the economic development rationale. While not without merit, such strategies are unlikely to be as effective as a ban. In some cases, they may even make the situation worse.
This chapter examines several alternatives to a categorical ban on blight and economic development takings: increased compensation payments to owners of condemned property, increased procedural protections for property owners, special protection for homes, heightened scrutiny of private-to-private condemnations, giving local communities greater say over takings decisions, and reliance on interjurisdictional mobility and competition to restrain abusive local governments. Some of these options could be implemented by state legislatures, some by courts (either federal or state), and some by a combination of both.
Other critics of a ban on economic development takings have, by contrast, argued that it is likely to be ineffective because it does not go far enough. They predict that banning private-to-private condemnations will only promote equally harmful condemnations that transfer property to government ownership. If a ban is limited to economic development takings, while still permitting at least some blight takings, opponents fear that it will lead to a concentration of takings in areas inhabited by the poor.1 Such concerns have a measure of validity. Even a complete ban
on economic development and blight condemnations will not eliminate all eminent domain abuse. But it is likely to make the situation significantly better than it would be otherwise.
A complete ban can potentially be instituted by either a federal Supreme Court decision, state judicial decisions interpreting state constitutional public use clauses, state legislation, federal legislation, or some combination of the above. For reasons discussed in chapters 5 and 6, I am skeptical that a nationwide ban on economic development takings can be achieved without a federal Supreme Court decision overruling Kelo. Both Congress and a majority of state legislatures were unable or unwilling to enact such a ban even under the immediate impact of the massive Kelo backlash. It seems unlikely that most will do so in the foreseeable future. History also suggests that, while some state courts may enforce strong public use constraints on takings, there is likely to be at least a substantial minority that will not. Even at the height of the influence of the narrow view of public use in the nineteenth century, a significant number of state Supreme Courts endorsed the broad view.2 In this chapter, however, we compare the relative merits of a categorical ban and other possible reforms without regard to the means by which the former might be achieved.
Increased Compensation for Property Owners
The injustices inflicted by economic development takings are exacerbated by the fact that the owners of condemned property generally receive compensation far below the true value of what they lose.3 Scholars with a variety of political viewpoints have argued that current compensation levels are inadequate and have urged an increase.4 During the Kelo oral argument, several justices, including Stephen Breyer, Anthony Kennedy, and David Souter—all of whom ultimately voted to uphold the Kelo takings—suggested that the traditional “fair market value” compensation standard was inadequate and seemed inclined to favor a more generous formula.5 Justice Breyer asked whether “there is some way of assuring that the just compensation actually puts the [owner of a condemned home] in the position he would be in if he didn’t have to sell his house.”6 Justice Kennedy, in turn, wondered whether “when you have property being taken from one private person ultimately to go to another private person, that what we ought to do is to adjust the measure of compensation, so that the owner . . . can receive some sort of a premium for the development.”7 Leading property scholars, such as James Krier and Christopher Serkin, and Thomas Merrill, have also argued for increasing compensation as a tool for alleviating eminent domain abuse.8
Unfortunately, there are two serious problems with this approach: one well known in the takings literature and the other often ignored.9 The well-known difficulty is the challenge of estimating the “subjective value” that owners assign to their property.10 In most cases, it is reasonable to assume that property owners value their holdings at more than the market price; otherwise, they would presumably have sold the property already.11 Many owners attach sentimental value to their property, have valuable connections with friends and neighbors in the area, derive unusually great value from a given location, or simply have a particularly high distaste for the prospect of moving. In addition to such individual subjective value, large-scale takings may also destroy subjective value attached to entire communities, by undermining social ties of various kinds.12 Unfortunately, it is often impossible to determine how much particular owners value their land above the properties’ fair market prices. Simply asking the owners will not solve the problem, since they would have a strong incentive to overstate the value of the land in order to receive greater compensation.
It might be possible to incentivize owners to reveal the true value they attach to their property by allowing them to choose the compensation level paid for condemned land, but then require them to use the new assessed value as the baseline for future property taxes if the government chooses not to pay the price and instead forego condemnation, an idea proposed by property scholars Abraham Bell and Gideon Parcho-movsky.13 But their approach is likely to be impractical, because owners would be stuck with the assessed value in the future, despite major potential changes in their life circumstances and real estate markets.14 When self-assessment was used to estimate property values for both takings and taxation in Taiwan between 1954 and 1977, owners tended to systematically underestimate the value of their property relative even to market prices, possibly for this very reason.15 However, the Taiwanese system relied on self-assessments conducted before owners knew whether or not their land might be targeted for condemnation in the near future.16 The Bell-Parchomovsky proposal, which calls for assessments conducted after owners know the government seeks to condemn their land, might be less subject to this bias. But owners faced with the prospect of being stuck with the same tax assessment base indefinitely might still be prone to understating their true valuations.
Bell and Parchomovsky would also forbid the owners from selling their property for less than the indicated amount at any time after the government refuses to pay it and thereby foregoes condemnation.17 This constraint might deter owners from overstating their subjective value, but it is likely to introduce errors in the opposite direction, since owners would otherwise risk being stuck with a property they no longer want after their personal or professional circumstances have changed.
Attempting to establish a formula that pays owners a set rate above market value runs into the same types of problems as the fair market value approach. Whatever the rate set, some owners’ subjective valuation of their land will still be higher than the formula provides, while others might actually be overcompensated. Moreover, setting too high a compensation level might give owners an incentive to actually lobby in favor of condemnation of their property, as may have happened in the 1984 Midkiff case, where some of the seventy-two large landowners who dominated Hawaii’s real estate market may have preferred to have their land condemned rather than purchased on the market because the former turned out to be advantageous for tax reasons.18 Therefore, it is difficult to imagine a compensation formula that can, in Justice Breyer’s formulation, put the property owner “in the position he would be in if he didn’t have to sell”19 without simultaneously creating a serious risk of overcompensation that would create perverse incentives to lobby for condemnation.20 None of this refutes the widespread - and generally accurate - perception that current law undercompensates the owners of condemned property. But it does highlight a danger that could arise if the law is changed to increase compensation to levels far above fair market value.
The second shortcoming of a compensation-based approach is often ignored but is perhaps even more telling.21 As the Poletown case dramatically demonstrated,22 property owners are not the only victims of ill-conceived economic development takings. The taxpayers who have to pay for the taking, as well as absorb some of the economic damage caused by the expropriation of existing businesses, nonprofit institutions, and public buildings, are also among the victims. As experienced eminent domain real estate appraiser Wallace Kaufman points out, “Property owners . . . are not the only ones put at risk” in an eminent domain case. “The other principal party to a takings case is not, as many people presume, the government. It is the taxpayer.”23
In Poletown, taxpayers eventually had to pay some $250 million to acquire the property in question and prepare it for General Motors’ use, a figure that does not include various indirect costs to the community such as the loss of expropriated businesses, churches, and schools.24 In Kelo, tens of millions of dollars in taxpayer money was spent on New London’s redevelopment project, with little prospect of anything approaching a commensurate return on the public’s investment.25 Ironically, raising compensation levels actually exacerbates the taxpayer costs of economic development takings.
The political process could potentially screen out and prevent takings that cost the taxpayers more than they are worth. But this is unlikely, because economic development takings are extremely difficult for citizens to assess. As discussed in chapter 3, widespread political ignorance, lack of transparency, and time horizon problems combine to ensure that many economic development condemnations will be undertaken despite the fact that their costs to the public greatly outweigh the benefits.26 These problems are exacerbated in situations where a large part of the cost is borne by taxpayers in jurisdictions other than the one that decides to proceed with condemnation and expects to reap the benefits of the development project.27 Such a situation often arises when development condemnations undertaken by local governments are subsidized by state and federal grants.28
If even such highly publicized and much debated condemnations as Poletown and Kelo are vulnerable to these dangers, the risk is likely to be even more severe in more typical cases. These considerations substantially reduce the likelihood that even greatly increased compensation levels will significantly reduce the incidence of economically inefficient takings for development purposes.29
The danger of taxpayer exploitation can arise even with conventional takings. But economic development takings are particularly susceptible to this problem because of the great difficulty of assessing their benefits, the long period of time that is likely to elapse before any benefits are realized, and the strong incentives of developers and condemning authorities to overstate their benefits in ways that are difficult for the public to penetrate.30
A final problem with the strategy of increasing compensation is that empirical evidences suggests that lower-income property owners with less valuable properties are often undercompensated even by the fair market value standard, whereas wealthier owners of higher-valued properties are far more likely to get more compensation than current law requires.31 The causes of this bias are not completely clear. It could be due to a variety of distortions inherent in the eminent domain real estate assessment process that work against the interests of poor, inexperienced, or legally unsophisticated property owners.32 But if the greater political influence and legal sophistication of wealthier owners is an important part of the explanation, this suggests it may be difficult to reform the legal and political system to increase compensation for the sorts of poor and politically weak owners who tend to be targets of economic development and blight condemnations.
None of this suggests that increasing compensation levels is useless. To the contrary, the problem of subjective value suggests that there is a strong case for increasing compensation for takings at least somewhat above market value.33 Indeed, that case goes beyond economic development and blight takings and is applicable to other types of condemnations as well. But there is good reason to believe that increased compensation is not, by itself, an adequate solution to the abuses caused by economic development and blight takings. In some situations, it may even exacerbate them by increasing taxpayer costs and creating incentives for “overcompensated” property owners to lobby for condemnation of their property.
Procedural Safeguards
An alternative to judicial review urged by many Kelo critics is that of procedural safeguards for eminent domain defendants.34 Possible protections include requiring extra advance notice of condemnation proceedings, mandating a detailed report laying out the purpose for which eminent domain is to be used, extensive public hearings to justify the planned taking, and an opportunity for opponents of the project to “voice their objections to being uprooted.”35 In theory, “strict enforcement of these procedural protections makes eminent domain largely self-regulating” because “[r]equiring the condemning authority to jump through enough procedural hoops will cause the costs of eminent domain to rise relative to the costs of voluntary exchange,” thereby ensuring that “[e]minent domain will be used only when the transaction costs of voluntary exchange are truly prohibitive.”36
Procedural protections for eminent domain defendants certainly have some value, and it is true that their cost could sometimes deter abusive condemnations. Advocates are right to believe that the “delay” created by “procedural hoops” can in some instances increase the costs of condemnation and thereby “increase . . . the bargaining leverage of property owners faced by condemnation.”37 But there are several major reasons why procedural protections are unlikely to be an adequate substitute for a judicial ban on economic development takings.
Perhaps the most fundamental limitation of the argument that the cost of “jumping through procedural hoops”38 will deter abuses of the eminent domain power is that it implicitly assumes that the public officials who decide on condemnation and the private interests they seek to benefit will be the ones who bear those costs. In reality, most of the procedural costs are likely to be borne by taxpayers, not by condemning authorities or by the new owners of the condemned property. It is taxpayers who would bear the costs of additional hearings, preparation of reports justifying condemnation, and any extra compensation paid to property owners to persuade them not to exercise their procedural rights to the hilt.
This distinction would be unimportant if taxpayers closely monitored the costs of eminent domain. In reality, however, the complex and nontransparent nature of the condemnation process combine with generally widespread political ignorance to ensure that this will rarely be the case.39 Thus, condemning authorities might often choose to accept even very substantial procedural costs, so long as those costs are borne by taxpayers who are unlikely to be aware of them and therefore unlikely to punish the offending officials at the polls.
A second problem with purely procedural remedies for eminent domain abuse is the possibility that increased costs might deter relatively small-scale condemnations but not large ones. Many of the procedural costs, such as preparing a plan, holding hearings, and so forth, are likely to be relatively fixed, regardless of the size and scope of the planned condemnation. Thus, the procedural cost of condemning one thousand properties is likely to be far less than one thousand times greater than the cost of condemning one. In cases where the planned project and its associated condemnations are expected to be on a very large scale, any procedural costs are likely to be only a small fraction of the total cost. More importantly, they will be only a small fraction of the benefits expected by the new private beneficiaries of the takings, such as Pfizer in Kelo or General Motors in the Poletown case. Procedural remedies are likely to be least effective in those cases where very large numbers of people are likely to be displaced. And such large-scale condemnations are also the ones that have the greatest potential for abuse.
A third major shortcoming of procedural remedies is the seeming impossibility of properly calibrating the level of protection. If procedural protections are to be “self-regulating” in the way that advocates hope,40 they must be based on a reasonably accurate calculation of the level of cost that will deter socially harmful takings while still permitting beneficial ones to go forward. Unfortunately, there is no way for legislatures or courts to judge what level of procedural protection to provide other than by trying to estimate the likely costs and benefits of the condemnations themselves.
A major reason why supporters of procedural protection advocate them as an alternative to substantive scrutiny under the Public Use Clause is that they believe that “courts are not very good at policing the uses to which eminent domain is put.”41 Attempting to calibrate levels of procedural protection in order to achieve the “right” amount of deterrence merely reintroduces substantive judicial review of takings by the back door. Moreover, it actually forces courts to make a more complicated calculation than does traditional substantive review of public use issues. The latter requires that courts judge only the substantive nature of the taking. On the other hand, calibrating procedural protections to achieve optimal deterrence requires courts to both calculate the costs and benefits of condemnation and also determine what level of procedural protection is necessary to achieve the right level of deterrence.
To be sure, advocates of procedural remedies might argue that the relevant calculations should be made not by judges but by legislatures or by administrative officials. This could enable the use of greater technical expertise in setting protection levels. But it does so at the cost of relying on the political process to solve the problem of eminent domain abuse, despite the fact that it is the defects of that process which largely caused the problem in the first place.
If victims of economic development takings had sufficient political power to force legislatures to enact procedural protections strong enough to deter abuses, they would presumably also have had sufficient clout to prevent such condemnations from being initiated in the first place. Unfortunately, the political economy of economic development takings ensures that most property owners targeted for condemnation are likely to have relatively weak political influence, while their opponents are likely
to be powerful interest groups who are “repeat players” in the condemnation process.42 Thus, the political process is unlikely to enact sufficient procedural protections to prevent socially harmful takings for precisely the same reasons that it often allows them to go forward in the first place.
Even if legislators do make a good-faith effort to enact effective procedural protections, they face many of the same information problems as courts do. Like judges, legislators have no good metric for determining how much procedural constraint on eminent domain is optimal.
Finally, it is important to recognize that, to the extent that procedural protections make the eminent domain process longer and more complex, they also increase the costs borne by property owners who choose to contest a taking. These burdens include both the direct costs of the time and money devoted to the fight, and the indirect costs of months or years of uncertainty, during which time the owners will not know whether they will get to keep their property or not. As described in chapter 1, the Kelo property owners could not have afforded to contest their takings for years on end without the intervention of the Institute for Justice, which provided topnotch legal representation for free. Few property owners targeted by blight or economic development condemnations have the resources necessary to wage such a prolonged fight on their own.
Procedural protections for property owners caught up in the eminent domain process are not wholly worthless. They can serve a useful purpose in providing notice to affected property owners and allowing them to raise objections. The cost of procedural protections might also serve to deter some relatively small-scale and marginal condemnations. But this remedy is unlikely to be sufficient to prevent most of the worst abuses.
Special Protection for Homes
A number of prominent scholars have suggested that homes should get special protection against eminent domain beyond that extended to other types of property. Advocates of this approach include leading constitutional law and property scholars such as Akhil Amar, Daniel Farber, Margaret Radin, Benjamin Barros, and Eduardo Penalver.43
The strongest argument for giving homes extra protection is the relatively high subjective value that many people attach to them.44 More than with most other types of property, owners are likely to attach greater value to their homes than the fair market price compensation normally given to owners of condemned property. This is particularly true in the case of homes owned by longtime residents, people who live in unusually close-knit communities, or the elderly. Even scholars skeptical of the more general case for giving homes special status concede that forcible displacement inflicts disproportionately great harm on some categories of homeowners.45 The suffering of the elderly residents of Fort Trumbull whose homes were condemned in the Kelo case is a good example of this kind of harm.46
There is little doubt that the condemnation of homes often inflicts great suffering. But that is not a good justification for denying protection to other kinds of property. Homes are not the only properties often targeted for condemnation that have high subjective value. The same can also be said for houses of worship and various other nonprofit institutions, for example.47 Small businesses are also often targeted for condemnation and often suffer losses that go beyond the market value of the condemned land.48 In many cases, small businesses are dependent on the advantages inherent in a particular location in ways that cannot easily be replicated at a new site. For example, involuntary relocation can disrupt relationships with long-time customers or force a business to abandon a site that is strategically located for the convenience of patrons.
On the other hand, it is far from invariably the case that homes always have high subjective value. Many people attach only modest additional value to their homes, and adjust to relocation without great difficulty, or at least no more than is experienced by commercial enterprises when they are forced to move.49
Furthermore, the harms of dubious economic development and blight condemnations are not limited to the property owners directly displaced. Such takings also victimize taxpayers who are forced to pay compensation and other associated costs, and the community as a whole, which suffers when the use of eminent domain undermines long-term prospects for economic growth and development.50
There is therefore little justification for requiring greater protection against eminent domain for homes than for properties devoted to other uses. None of this proves that homes are somehow undeserving of protection. A law forbidding or significantly restricting blight and economic development takings that target homes is far preferable to a regime under which all property is vulnerable to such condemnations.51 But it is inferior to one that protects all property equally.
Heightened Scrutiny
Unlike economic development takings decisions in some other states,52 the Poletown opinion was careful to avoid giving a blank check for all condemnations that might be said to promote development, emphasizing that “[o]ur determination that this project falls within the public purpose . . . does not mean that every condemnation proposed by an economic development corporation will meet with similar acceptance simply because it may provide some jobs or add to the industrial base.”53 Instead, the court held that “[w]here, as here, the condemnation power is exercised in a way that benefits specific and identifiable private interests, a court inspects with heightened scrutiny the claim that the public interest is the predominant interest being advanced.”54 The Delaware Supreme Court followed Michigan’s example in adopting the heightened scrutiny test.55 A similar approach was advocated by the three dissenting justices in the Connecticut Supreme Court’s decision in Kelo.56
Unfortunately, the heightened scrutiny test failed to provide adequate protection against eminent domain abuse and in one crucial respect actually made the situation worse. Similar problems undercut academic proposals to control eminent domain abuse through “means-ends” scrutiny of condemnations, or by limiting economic development takings to cases where genuine holdout problems exist.
Shortcomings of the Poletown Heightened Scrutiny Test
The purpose of the heightened scrutiny test was to ensure that there is a “clear and significant” public benefit resulting from condemnation. Unfortunately, the test creates a perverse incentive to increase the amount of property condemned rather than reduce it. Since the public benefit involved is strengthening the local economy, the larger the commercial project served by a condemnation—and the more property owners expropriated as a result—the greater the chance that courts will find that the resulting economic growth is “clear and significant” enough to pass the test.
In fact, Michigan cases applying the heightened scrutiny test displayed precisely this kind of bias in favor of major projects dispossessing large numbers of property owners. Courts applying the test sometimes invalidated condemnations of small amounts of property intended to benefit individuals and small- to medium-size businesses.57 But in the main, Michigan courts applying Poletown felt themselves compelled to uphold condemnations of large amounts of property for the benefit of major commercial enterprises. Thus, in 1989 the Michigan Court of Appeals reluctantly held that Poletown required it to uphold the condemnation of 380 acres of land in order to “transfer the property to [the] Chrysler Corporation for the construction of a new automobile assembly plant.”58 Ironically, the court of appeals believed that both the Chrysler condemnation and Poletown itself constituted “abuse[s] of the power of eminent domain.”59 Nonetheless, it was forced to follow Poletown and endorse the validity of the condemnation of large amounts of property for the benefit of Chrysler.60 And, of course, in Poletown itself, the construction of a large GM plant was held sufficient to justify the displacement of some 4,200 people.61
The Poletown heightened scrutiny test protected property owners least precisely when protection was most needed: in cases where substantial numbers of people are displaced for the benefit of large, politically powerful interest groups. Indeed, interest groups seeking to ensure approval of condemnations under Poletown were well-advised to plan large construction projects utilizing as much property as possible.
The failure of the heightened scrutiny test to curtail the danger to private property created by the Poletown decision is also evidenced by the prevalence of private-to-private condemnations in Michigan during the period when the test applied. According to a 2003 study by the Institute for Justice, which represented the Kelo plaintiffs, from 1998 to 2002 alone, at least 138 condemnation proceedings had been filed in Michigan for the purpose of transferring property to private parties; 173 more were threatened.62
Michigan’s record in this respect compared poorly with that of other states. In the five-year period from 1998 to 2002, only two other states had more reported condemnation filings for the purpose of transferring property to private interests.63 The city of Detroit—the jurisdiction involved in Poletown itself—achieved the dubious distinction of filing more condemnations for private ownership than any other city in the nation in the same time period.64 Detroit’s aggressive use of eminent domain failed to stem the economic decline that eventually led the city to bankruptcy in 2013. Indeed, it likely made the city’s problems even more severe by destroying neighborhoods and rendering property rights insecure.65
Admittedly, we cannot know for certain the degree to which Michigan really was worse than other states in this regard, due to limitations in the Institute for Justice data.66 We can be reasonably confident, however, that Michigan’s heightened scrutiny requirement failed to reduce such condemnations to levels significantly below those observed elsewhere, including in states that lack heightened scrutiny.
Means- Ends Scrutiny
Academic proposals to increase scrutiny of economic development takings by imposing “means-ends” scrutiny of condemnation decisions are similar to the heightened scrutiny test and suffer from some of the same weaknesses.67 Supporters of means-ends scrutiny argue that it will constrain eminent domain abuse by ensuring that the “redevelopment project to be enabled by eminent domain is reasonably necessary to stem the tide of suburban sprawl, to renew a lifeless downtown, or to advance whatever goal the government uses to justify the exercise of eminent domain.”68 The Institute for Justice advanced a similar idea as a fallback position in the federal Supreme Court in Kelo, arguing that even if economic development takings are constitutionally permissible, courts should carefully scrutinize them to ensure that the promised development is likely to materialize.69
Means-ends scrutiny is vulnerable to the same types of perverse incentives as the Poletown heightened scrutiny test. The larger the development project in question, the easier it will be for condemning authority to claim that condemnation is “reasonably necessary” to ensure its completion and that noncoercive alternatives will not suffice. Thus, like Poletown heightened scrutiny, means-ends analysis is likely to create a perverse incentive to actually increase the scale of economic development condemnations.
A related problem is that, so long as economic development is regarded as a legitimate public use, means-ends scrutiny could probably be used to justify virtually any condemnation that dispossessed homeowners or nonprofit institutions for the benefit of for-profit business interests. Almost by definition, the latter are likely to produce more development and tax revenue than the former.70 And so long as the current owners are unwilling to sell voluntarily at the price offered by developers, there is a strong argument that the “development” in question cannot be achieved by noncoercive means.
Depending on how stringent it is, means-ends scrutiny could potentially curb at least some dubious economic development takings. For example, it could prevent condemnations where the government has no clear plan how it intends to use the property, or where the expected economic benefits seem extremely small compared to the costs. But it is unlikely to prevent some of the most serious abuses, and could potentially even create perverse incentives to increase their scale.
Limiting Economic Development Takings to Cases with Genuine Holdout Problems
Leading takings scholar Richard Epstein has argued that courts should limit private-to-private economic development takings to situations where there are genuine holdout problems, carefully scrutinizing the facts of each case to determine whether such a problem exists.71 Epstein urges courts to permit the use of eminent domain for private development projects where it is needed to “overcome serious holdout problems” that block valuable projects that would make a net contribution to the economy. At the same time, he would have them “keep a tight rein on public uses” in order to prevent abuses like those that occurred in Kelo and Poletown.72 Epstein’s view is similar to that of economist Thomas Miceli, a prominent expert on eminent domain who also argues that private-to-private condemnations that go beyond the narrow definition of public use should mostly be limited to cases where there are holdout problems.73
Epstein’s approach is appealing because it potentially allows us to both have our cake and eat it. If properly applied, it would block the numerous blight and economic development takings that needlessly victimize property owners without actually promoting economic growth. But it would also permit the few genuinely productive economic development takings to go forward.
Unfortunately, it is unlikely that real-world judges could implement Epstein’s approach effectively. In order to make the system work, judges would have to determine whether a proposed taking really is needed to overcome holdout problems and whether the resulting project really would make a substantial contribution to the economy. In one of his books, Epstein also suggests that such condemnations should be confined to properties “where the loss of subjective value is small.”74 That might require courts to make determinations about the extent of subjective value at risk.
As the Michigan experience with heightened scrutiny suggests, judges are unlikely to do a very good job of determining whether a given project would to result in substantial economic value or not.75 Moreover, judges who are ideologically or politically sympathetic to government planning are understandably likely to give some leeway to planning officials in cases where the economic projections are uncertain.76 In an ideologically diverse judiciary where most judges are not as libertarian as Epstein, such cases are likely to be common and would probably undermine his goal of using judicial scrutiny to limit economic development takings to cases where “the locational necessities are great.”77
Careful analysis of takings to determine whether or not there is a genuine holdout problem is likely to require considerable economic sophistication and leave plenty of room for judicial discretion. The same goes for determinations of subjective value, which is, by its very nature, often difficult to measure.78 Even judges with extensive knowledge of economics and land use policy and a complete absence of ideological bias, will often find it difficult to make good decisions on these issues. And most judges are neither economists nor land-use experts nor free of ideological preconceptions.
In addition, Epstein’s fear that a bright-line rule against economic development takings would block valuable development projects is partly mitigated by the existence of secret assembly and other market mechanisms for getting around holdout problems in cases where they really do exist.79 These mechanisms are not foolproof, and it is likely that a categorical ban on economic development takings would forestall at least a few genuinely valuable development projects. No bright-line rule is likely to be as efficient as the exercise of case-by-case discretion by unbiased and omniscient judges. But a categorical ban on economic development takings is likely to prove superior to the exercise of discretion by the kinds of judges that typically populate real-world courts.
Effective enforcement of public use limits on takings is likely to cause some inefficiency by preventing at least a few development projects that should be permitted in an ideal world. But there are similar costs to the enforcement of virtually any other constitutional right. Enforcement of criminal defendants’ rights will sometimes allow the guilty to go free and commit additional crimes. Protecting freedom of speech can facilitate the spread of dangerous ideas, such as racism, Nazism, or communism, which might ultimately lead to the adoption of harmful and unjust government policies. Protecting the rights of suspected terrorists might enable some genuine terrorists to escape and kill more innocent civilians. None of these rights are perfect. And perhaps none would be needed in a world where we could trust judges or other government officials to exercise well-informed and unbiased case-by-case discretion. But we accept them, nonetheless, because their net impact is superior to realistically feasible alternatives. The same reasoning justifies judicial enforcement of public use limitations on takings.
Epsteinian judicial scrutiny would likely result in greater protection for property rights than the highly deferential approach adopted by the Court in Kelo. But it is unlikely to be as effective as a categorical ban on economic development takings where the result does not often turn on difficult issues left up to judicial discretion.
Giving Communities a Greater Say in Condemnation Decisions
One possible way to limit eminent domain abuse without banning economic development takings is to create mechanisms to give area residents greater control over condemnation decisions. Legal scholars Michael Heller and Roderick Hills have put forward a particularly interesting institutional reform along these lines, which they call the “land assembly district” (LAD).80 Heller and Hills’ approach would allow the formation of an LAD in any area where a developer, a local resident, or other interested party might propose it, subject to the approval of government land-use planning agencies.81 If the government sought to condemn property in such an area on the grounds that a beneficial development or infrastructure project would otherwise be blocked by holdouts, the taking would only go forward if a majority of voters in the area support it in a ref-erendum.82 Residents who own more land in the area might have greater voting rights than those who own less.83
The virtue of this approach is that takings would only go forward if a majority of local voters believed them to be beneficial to their interests. This would eliminate or at least alleviate the problem of inadequate compensation of victims of eminent domain.84 Heller and Hills are aware that the LAD system could potentially lead to a local “tyranny of the majority,” with majority preferences overriding those of individual landowners who assign unusually high value to their property. But they believe that this danger is likely to be mitigated by the relatively homogenous nature of most neighborhoods and by their idea that the LADs be required to obey a preset formula for dividing up the compensation payments for the sale of their land to a developer.85
The Heller-Hills LAD system might indeed give landowners greater protection against dubious takings than they now enjoy in jurisdictions where there are few constraints on blight and economic development condemnations. But it has a number of significant limitations relative to a categorical ban on such takings. The biggest constraint is that a majoritarian voting process involving more than a very small number of people creates significant incentives for rational ignorance. Because the chance of casting a decisive vote is likely to be low, participants in the referendum will have little incentive to carefully assess the developer or government’s compensation offer and determine whether it really will be preferable to holding on to their land.86 This is a significant disadvantage relative to market mechanisms for land acquisition such as secret assembly. In the latter case, individual owners have much stronger incentives to become well informed.
Furthermore, as Daniel Kelly has pointed out, Heller and Hills may significantly underestimate the risk of majoritarian tyranny in such situations. Even in otherwise homogenous neighborhoods, some landowners could easily attach much greater subjective value to their property than others.87 If the size of such a minority is large enough or the subjective value even a small minority assigns to its land sufficiently high, this could easily result in takings that destroy more value than they create.
Perhaps most important of all, if LADs really do impede abusive condemnations to any great degree, it seems likely that developers and organized interest groups would lobby to alter the legislation governing the creation and functioning of LADs to their advantage. For example, they could skew the distribution of voting rights to the advantage of owners willing to sell for a relatively low price or manipulate the process by which the LAD boundaries are drawn. If these groups are powerful enough to push through dubious condemnations in the first place, they are likely also powerful enough to influence the details of the LAD governance structure.
This problem also bedevils other proposed mechanisms for giving local communities a greater say in takings decisions. For example, sociologist Debbie Becher suggests that the government should protect communities targeted for condemnation by appointing state-funded “community organizers” to help residents mobilize to defend their interests.88 But, as she acknowledges, this reform would be extremely difficult to implement in an effective way, because “[p]oliticians will be reluctant to provide such a resource, and will be very tempted to cut the lifeline to any professionals explicitly organizing against official plans.”89 An alert and well-informed electorate could probably block such maneuvers. But if the electorate were that motivated and knowledgeable, abusive condemnations probably would not be a serious problem in the first place.90
Federalism and Interjurisdictional Mobility
For many economists and legal scholars, interjurisdictional competition is a seemingly obvious alternative to judicial intervention as a means of protecting property owners against abusive takings. If a local government engages in repeated abusive condemnations, owners and investors are likely to choose to relocate elsewhere or not move to that community in the first place.
Some who deploy the federalism argument against judicial enforcement of property rights argue that such intervention is unnecessary because competitive federalism will constrain abuses.91 Advocates claim that state and local governments that abuse the power of eminent domain or engage in excessive regulatory takings will lose business and taxpayers to other jurisdictions, thereby suffering financial losses as a result.92 Robert Ellickson contends that this factor helps account for what he considers to be the relatively strong political reaction to Kelo, under which various states and localities have enacted strong reform laws intended to curb economic development takings.93 Vicki Been has argued that courts need not closely police local government land use regulations because “a developer dissatisfied with a community’s exactions policy can take the project to another jurisdiction that offers better terms.”94 Her point could be applied to economic development takings as well.
Been’s and Ellickson’s arguments are an extension of standard economic theories arguing that the combination of decentralization and mobility will constrain subnational government abuses and force them to adopt efficient economic policies that benefit citizens.95 On this view, exit rights could potentially be an adequate protection for aggrieved property owners even absent judicial protection.
The Impact of Immobility
The main difficulty with such competitive federalism justifications for Kelo is that they fail to take adequate account of the immobility of property rights in land. Property owners are unlikely to “vote with their feet” against eminent domain because, if they move out, they cannot take their land with them. Exit rights are little help in protecting assets that you cannot take with you when you leave.96
This crucial point suggests that competitive federalism is particularly unlikely to protect property rights in land. In some instances, limits on state and local governments’ ability to tax mobile assets, such as income, might actually incentivize them to target immobile ones, such as land, in order to find ways to transfer resources to favored interest groups.97 In this way, competitive federalism might actually exacerbate rather than alleviate the exploitation of immobile resources. For example, state and local governments are limited in their ability to raise income taxes because of tax competition between jurisdictions. Migration patterns tend to favor low-tax jurisdictions.98 This factor increases state and local government incentives to target immobile resources such as land instead. Other evidence suggests that local governments generally tend to overexploit immobile capital, while oversubsidizing mobile resources.99
Limitations of Exit and Voice
Even if competitive federalism does not exacerbate state and local government tendencies to exploit immobile resources, it at least is unlikely to protect them from state predation. Individuals might choose to leave a given jurisdiction. But they will have to leave their land behind, still available for the state to take. For this very reason, it is unlikely that individuals who fear threats to their immobile property will choose to migrate for that purpose in the first place. After all, doing so incurs moving costs but does not actually accomplish the goal of protecting the threatened property.100
The problem is not simply that exit rights “cost money,” which is lost as a result of regulatory impositions.101 It is that moving fails to accomplish the purpose of freeing the owner from the very burden he or she seeks to avoid. If the owner move without selling the property, he is no better off than before, since the land remains subject to the same danger of condemnation as before. If the owner does sell, the price he or she gets will be proportionately lower as a result of the risk of condemnation, and the resulting loss will simply take the form of a lower sale value. Either way, the immobility of property prevents the owner from using exit rights as a means of escaping regulatory burdens imposed on land. For this reason, targeting immobile property is unlikely to cost the state by incentivizing the owners to flee and take their mobile assets and income with them.
Landowners who believe that their land is threatened could potentially avoid the danger, if they sell the land and move before the threat materializes. For example, if they suspect their land is likely to be condemned by local government, they could try to sell the property before the condemnation actually happens. But this strategy is only likely to work if the real estate market fails to take account of the risk of condemnation and incorporate it into the price of the land. In reality, the threat of eminent domain tends to drive down land prices in a given area, a phenomenon known as “condemnation blight.”102 As Ellickson recognizes, “if the abuse [of property rights] were widely known, exiting in this fashion would not enable the landowner to avoid financial loss because most, if not all, of the cost of the abuse would be negatively capitalized in the sale price.”103
Regulatory and tax burdens that affect mobile assets also sometimes impact immobile ones as well. For example, high state income taxes or a weak economy caused by poor regulatory policies might reduce land values. However, there is an important distinction between a regulatory burden that primarily affects a mobile asset and one whose impact falls mostly on an immobile one. In the former case, affected individuals still have a significant incentive to move to avoid the burden, since doing so can relieve them of most of it, even if not all.
Consider, for example, a flawed economic policy 80 percent of whose costs come in the form of reduced incomes and 20 percent in the form of reduced home values. Exit rights can still be used to avoid 80 percent of the associated harm. In this scenario, many of the losers from the policy will have an incentive to exit from the jurisdiction in order to avoid it.
By contrast, the costs of eminent domain mostly fall on immobile assets, and exit therefore cannot be used to avoid most of them. The key point is not so much whether a policy targets immobile assets in a formal legal sense, but whether its effects can be escaped by moving. With most uses of eminent domain, the answer is largely “no.”
Despite recognizing that “[t]he immobility of land reduces political pressures on states and cities to treat landowners fairly,”104 Ellickson nonetheless claims that competitive pressures will reduce such abuses because their presence is likely to drive down land prices. This in turn gives voters incentives to mobilize against them and local governments reason to cut back on abuse in order to maintain their tax bases.105 As a class, homeowners wield great influence over local governments, and keeping up the value of their property is usually one of their main objectives.106
Ellickson’s point would be an important constraint on local government abuse of property rights if all or most property was equally threatened by such abuses, thereby driving down prices across the board. In fact, however, the use of eminent domain for transfer to private parties generally targets the poor and politically weak.107
Politically vulnerable groups do indeed suffer declines in the value of their property in jurisdictions that make extensive use of eminent domain and other restrictions on property rights. But there is likely to be little or no impact on the value of other land in the area. For this reason, many jurisdictions can abuse property rights extensively without risking more than a modest erosion of their property tax base. The fact that politically vulnerable groups are the ones targeted also makes it unlikely that they can effectively use their “voice” in the political process to make up for the ineffectiveness of exit rights.108
The perverse incentives of local governments are often exacerbated by “time horizon” problems. Even if ill-advised takings and other restrictions on property rights do erode the tax base or otherwise weaken the local economy, the effects usually do not become evident for several years, by which time the political leaders who adopted these policies might well be out of office, and public attention will, in any event, have moved on to other matters.109 By contrast, transferring land to politically favored interests at the expense of the poor or politically weak creates immediate political benefits for politicians.
The relatively short time horizons facing politicians further reduce the impact of competitive federalism in restraining abuses of property rights. Given the immobility of land, any negative competitive effects from such abuses are likely to be modest in size and emerge only slowly. When they finally do, enough time may have passed that the political leaders responsible will escape any political retaliation.
Historical evidence on the use of eminent domain also undercuts claims that it can be successfully constrained by competitive federalism. If the theory were true, then takings that inflict great harm on property owners for little or no social gain should be extremely rare, if not nonexistent. In reality, large-scale abuse of eminent domain authority by state and local governments is far from uncommon in American history. As we saw in chapter 3, millions of people have been forcibly displaced by dubious blight and economic development takings since the 1940s. This suggests that competitive federalism is far from a foolproof constraint on such abuses.
The significance of immobility does suggest that state and local governments should be less likely to threaten the rights of owners of mobile assets. For example, the California Supreme Court has ruled that local governments can use eminent domain to condemn sports teams in order to prevent them from moving, thereby authorizing the City of Oakland to use eminent domain against the Oakland Raiders in order to prevent their planned move to Los Angeles.110 Such condemnations are also probably legal in the many other states that define “public use” very broadly and under broad federal public use standards.111 Yet condemnations of sports teams and other mobile assets are extremely rare, probably because the owners of such assets can move them out of state before any condemnation is completed.112 In 1985, an effort by the City of Baltimore to condemn the NFL’s Baltimore Colts franchise in order to keep it from moving to Indianapolis failed because the Colts were able to depart before the city paid compensation for the taking.113 The federal district court agreed that “it is now beyond dispute that intangible property is properly the subject of condemnation proceedings” but refused to uphold the condemnation because the Colts were able to leave the jurisdiction before compensation was paid.114
It is certainly likely that eminent domain abuse would be more common in a world without exit rights and interjurisdictional competition. But it is also likely that the power of exit is at its weakest in protecting rights to real property and other immobile assets. It is not an adequate substitute for judicial review or for laws banning economic development and blight condemnations.
Will Bans Fail Because They Do Not Go Far Enough?
While most critics of bans on economic development and blight condemnations contend that they are unnecessary because they go too far, some claim that they are likely to fail because they do not go far enough. Such arguments take several different forms.
The most obvious is the possibility that eminent domain abuse could simply continue in the form of takings that transfer property to government ownership or to common carriers and public utilities, as is permissible even under the traditional narrow interpretation of public use.115 This is not a new line of argument. An 1876 Nevada Supreme Court decision that rejected the narrow definition in favor of the broad view did so in part on the ground that the narrow view does not actually provide meaningful protection for property owners:
[I]t is argued, that in sustaining this act upon the principles we have announced, there is no limitation to the exercise of legislative will in the appropriation of private property . . . I am of opinion that this argument is more specious than sound . . . [T]he danger of an improper invasion of private rights is not, in my judgment, as great by following the construction we have given to the constitution as by a strict adherence to the [the narrow interpretation of public use]. If public occupation and enjoyment of the object for which land is to be condemned furnishes the only and true test for the right of eminent domain, then the legislature would certainly have the constitutional authority to condemn the lands of any private citizen for the purpose of building hotels and theaters. Why not? . . . The public have the same right, upon payment of a fixed compensation, to seek rest and refreshment at a public inn as they have to travel upon a railroad. One purpose is, so far as the legal rights of the citizen are concerned, as public as the other. The same principle is applicable to theaters....It is certain that this view, if literally carried out to the utmost
extent, would lead to very absurd results, if it did not entirely destroy the security of the private rights of individuals.116
Some modern scholars have adopted a similar line of argument, though without necessarily endorsing the 1876 Nevada Supreme Court’s conclusion that courts should therefore endorse the broad view of public use.117 Critics fear that governments could even potentially condemn private property for transfer to ostensible government ownership that is, in reality, just a smokescreen for control by a private corporation.118
The objection is not without some force. There is little doubt that takings that transfer property to government ownership or to a common carrier or public utility can sometimes have some of the same harmful effects as blight and economic development takings. They can victimize the poor and politically weak, and also transfer property to uses that are less valuable to the community than those of the preexisting owners. On the other hand, as discussed in chapter 3, the case for allowing the use of eminent domain for government-owned facilities and some public utilities and common carriers is much stronger than the case for using it for private economic development or to eliminate blight.119
In any event, the relevant question is not whether takings for narrow public uses can be harmful or unjust, but whether the continued existence of a power to engage in such takings negates the benefits of a ban on blight and economic development takings. It would only do so if governments can readily substitute narrow public use takings in all or most situations where they would have used blight or economic development takings.
It seems improbable that such a substitution is actually feasible in most cases. A private firm or developer is unlikely to want to invest in a new property if the land is going to remain under the government’s control rather than its own, since it would then risk losing that investment any time the government might wish to put the property to a different use. Similarly, businesses that are not conventionally public utilities or common carriers will often find it burdensome to have a legal obligation to serve all members of the public at all times.
Private interests could potentially lobby the government to condemn property and then effectively turn it over to private control, with government ownership reduced to a mere fig leaf.120 For example, the government could condemn a property and then turn it over to a private firm under a ninety-nine-year lease with minimal rent, and without any restrictions on what the firm could use the land for.
But such private control under the guise of “public” ownership should be invalidated by courts applying the narrow interpretation of public use. A public use requires genuine use by either the government or the general public, not merely a paper statement that such use exists. For any constitutional right to be a meaningful protection against government abuse, it must have substantive bite, not just form. For example, facially neutral laws will be invalidated under the Equal Protection Clause Fourteenth Amendment, if it turns out that their true purpose is to discriminate against a racial or ethnic minority.121 Similarly, a law that on its face authorizes the condemnation of property for public use runs afoul of the Public Use Clause, if in reality the land will be under the total or neartotal control of a private entity.
State courts applying relatively restrictive definitions of public use have, on the basis of such reasoning, struck down takings for private roads that, although theoretically open to the public, will in fact be completely controlled by a single private party.122 In 2000, a Massachusetts state court invalidated a taking for a publicly owned baseball stadium because the taking was “done primarily to benefit” the private owner of the sports team, which would have nearly complete control of the stadium and reap most of the benefits.123 In 2011, the Texas Supreme Court ruled that a private firm cannot use eminent domain to build a pipeline as a “common carrier” if the pipeline, although theoretically open to the general public, in reality only connects two facilities owned by the firm itself.124
These types of cases do not provide a perfect test that can definitely separate out genuine public uses from shams. But they are helpful and illustrative. As with many other constitutional rights, the rights protected by the Public Use Clause do not always have absolutely clear boundaries. There will inevitably be some difficult borderline cases. But effective judicial enforcement of public use restrictions should, at the very least, make circumvention difficult.
Even genuine public use takings can still sometimes be unwise, wasteful, or create injustices that inflict severe harm on vulnerable property owners in exchange for little or no public benefit.125 As legal scholar Alexandra Klass has shown in a series of important articles, many states— especially in the West—have extremely lax standards for the use of eminent domain for transmission lines, natural resource extraction, and pipelines.126 Although takings for such purposes often meet the narrow definition of public use, they still sometimes enable interest groups to use eminent domain to promote projects that enrich themselves, but create very little benefit for the general public.
The same is true of takings for publicly owned universities. Although universities provide important educational benefits and also sponsor socially valuable research, the use of eminent domain to transfer property to them rarely if ever benefits the general public, as opposed to interest groups within the university system. The educational and research benefits of universities can be realized more efficiently without resorting to eminent domain.127
Even worse, many states allow the use of eminent domain to build publicly owned sports stadiums.128 In 1994, a federal appellate court upheld a condemnation intended to acquire property to build a publicly owned parking lot for the Texas Rangers’ stadium, for which the franchise—then owned by future president George W. Bush—would pay a nominal one dollar annual rent to use.129 Such projects continue despite the fact that government-supported stadiums make virtually no net contribution to local economies.130 Urban development scholars Alan Altshuler and David Luberoff note that it is “virtually impossible to find an independent economist who view[s] sports facility subsidies as good investments in local economic growth.”131
The ideal constitution would likely impose tighter constraints on narrow public use takings than the Fifth Amendment does. Among other things, it might require the condemning authority to present substantial evidence that the taking will produce extensive public benefits that accrue to the general public. Since a constitutional amendment along such lines is unlikely, state governments and state courts should consider imposing some tighter constraints on their own initiative,132 though such efforts are likely to be bedeviled by the public’s rational ignorance about the subject, as compared to the superior knowledge and organization of narrow interest groups.133
Effective enforcement of public use constraints on takings cannot and will not put an end to all eminent domain abuse. But it can eliminate some of its more pernicious manifestations.
A closely related critique of the narrow approach to public use is that its restrictions on eminent domain will simply incentivize the government to pursue the same ends by using other powers such as taxation and regu-lation.134 In such a scenario, property owners might be even worse off than if the government had resorted to the use of eminent domain, since the latter at least entitles the owners to compensation, whereas taxation and regulation usually do not.135
Taxation and regulation can potentially be substitutes for the use of eminent domain. Instead of condemning property in order to give it to General Motors to build a factory, the government could enact a regulation requiring the present owners to allow GM to operate a factory on the site (perhaps in exchange for nominal rent).
But such substitution cannot evade public use restrictions on eminent domain in cases where the regulation in question either requires owners to grant others permanent physical occupation of their land or deprives them of virtually all economic value. The Supreme Court has held that regulations with such requirements qualify as takings and therefore must be subject to the constraints of the Public Use Clause.136 Most blight and economic development takings that transfer property to private parties do in fact aim at permanent physical occupation of the condemned land, a complete transfer of its economic value, or both.
Another variant of this argument is that banning private-to-private economic development and blight takings will simply lead governments to condemn more property for publicly owned development projects. As Judge Richard Posner puts it, “[t]he more limitations the Court place[s] on the private development of condemned land, the more active the government itself would become in development.”137 Such a trend, critics argue, might even lead takings to be less efficient, because government management of condemned property could be less effective than private.138
This might potentially happen in some instances. But Posner’s critique overlooks the key point that the desire to transfer land to politically influential interest groups is often a key factor in incentivizing governments to engage in condemnation in the first place.139 If judicial enforcement of public use limitations on takings eliminates that option, much of the impetus for economic development condemnations will disappear. In this context, it is worth noting that there is no evidence indicating that condemnations for publicly owned development are unusually frequent in states where courts have enforced state constitutional bans on economic development takings.
Finally, we should briefly consider claims that laws or judicial decisions banning economic development takings without banning blight condemnations in genuinely blighted areas are likely to harm the poor by diverting the use of eminent domain to blighted areas.140 As discussed in chapters 2 and 3, I believe that the Public Use Clause should be interpreted to ban blight takings as well as economic development takings. Post- Kelo reform laws should also ban both types, as has indeed been done in a few states, such as Florida and Nevada.141 But it does not follow that reform laws and judicial decisions that only ban economic development takings are worse than no restrictions at all.
Given the vast differences between neighborhoods that are blighted, in the narrow sense of that term, and most other areas, it seems highly unlikely that eminent domain-driven development projects that might have occurred in the latter will migrate to the former as a result of laws banning economic development takings in nonblighted areas. An area that is severely dilapidated is unlikely to be attractive to the same types of businesses and developers as would prefer to build in a nonblighted area. Even given that a few such displacements may occur, it is important to recognize that economic development takings in nonblighted areas also disproportionately victimize the poor and politically weak. On net, a restriction on economic development takings that applies only to nonblighted areas is likely to benefit the poor significantly, even if not as much as one that also eliminates blight condemnations.142
Even if such limited bans provide tangible benefits to the poor, it is possible that these benefits are outweighed by the “expressive” harm of enacting laws that “privilege . . . the stability of middle-class households relative to the stability of poor house-holds” and “express . . . the view that the interests and needs of poor house-holds are relatively unimport-ant.”143 But it seems unlikely that limited reforms inflict great enough psychological harm on the poor to outweigh their tangible benefits for poor and nonpoor alike.
The poor themselves, at least, do not seem to think so. Survey evidence shows that members of poor households oppose the Kelo decision and support reform laws banning takings for “private development” by roughly the same lopsided majorities as more affluent households do.144 Given widespread voter ignorance, such survey data may have little relevance to debates over the tangible costs and benefits of banning economic development takings. Both poor voters and wealthy ones might be ignorant on these points. But surveys are a more useful indication of the intangible expressive effects on the poor, since these are mostly psychological effects in their own minds.
A ban on economic development takings that does not also ban blight condemnations is far from ideal. But here, as elsewhere, the best should not be the enemy of the good.
Conclusion
There is a great deal of merit in many proposals that seek to limit eminent domain abuse without banning blight and economic development takings outright. If it turns out that a categorical ban cannot be achieved, these ideas deserve serious consideration. Some, particularly increasing compensation, should probably be adopted even if a ban is possible. Increased compensation is often desirable even in cases where property is condemned for narrowly defined public uses.
Yet piecemeal reforms are not an adequate substitute for a comprehensive solution. Each such proposal has important shortcomings. They all leave some large percentage of property owners unprotected, perpetuate the victimization of taxpayers and the community at large, or both.