[URBANTH-L] NEWS: Eminent Domain (An update on property rights, poverty and new urbanism)

[Angela Jancius]

Eminent Domain: Is It Only Hope For Inner Cities?
By RYAN CHITTUM
Staff Reporter of THE WALL STREET JOURNAL
October 5, 2005; Page B1

EAST ST. LOUIS, Ill. -- This city doesn't scream "build here" to most
real-estate developers. One of the poorest urban areas in the U.S., its
median household income is $21,324, and nearly 32% of families live below
the poverty line, more than triple the national average.

Jim Koman looks at the numbers another way. He sees a city, like many other
downtrodden places, with few quality stores to serve its residents. East St.
Louis has just 3 square feet of retail space per person, compared with the
national average of 20 square feet.

In 1999, after pharmacy chain Walgreen Co. came to him looking for retail
space, Koman Properties Inc., of Clayton, Mo., built the city's first new
shopping center in several decades. Now, amid street after street of
trash-strewn lots and broken-down buildings, it is a commercial oasis
stretching for several blocks, including a grocery-anchored strip mall with
a beauty salon, a Foot Locker, an Auto Zone and other chains. About 95% of
the shopping center's workers are from East St. Louis, bringing the city
much-needed, if low-paying, jobs.

When the Walgreen's opened, then-President Clinton showed up to visit. The
State Street Shopping Center "is night and day for these people that don't
have anything," Mr. Koman says.

But to build in an urban area like East St. Louis, Mr. Koman must rely on
eminent domain -- the government's power to force a landowner to sell
property at what is considered a fair price. The State Street project
wouldn't have happened if the city hadn't used the threat of eminent domain
to clear about 40 houses and a gas station, Mr. Koman says. Of those
properties, only two owners held out for long periods, and one of those
buildings was condemned and appropriated through eminent domain after the
owner refused to settle.

Such cases have received new attention following the Supreme Court decision
in June upholding the use of eminent domain to seize property for private
use. Opponents of the eminent-domain doctrine have pointed to high-profile
cases such as arenas and other big urban-development projects as evidence of
abuse. But situations such as Mr. Koman's are far more common and in some
ways knottier.

Many builders say eminent domain is the only way to bring services and jobs
to areas like East St. Louis. Mr. Koman says he wants to show a different
side of the "big, bad developer." But to the people who are losing their
homes and their businesses, Mr. Koman is exactly that.

He is currently involved in several disputes with property owners. Across
the Mississippi River, on the north side of St. Louis, another struggling
area, Mr. Koman plans to expand a shopping center he owns, with a regional
urban-wear store, a fish-and-chicken restaurant and a men's hair salon
committed to going in. But he is running into local opposition.

To get the land he needs, Mr. Koman wants to buy a trash-strewn lot and an
old brick building that are located across the street. The building is owned
by St. Louis Housing and Service Corp., a nonprofit group that bought it for
$1 a few years back. "They have a business plan, and we have a business
plan," says the group's chairwoman, Leeora Daniels, a 63-year-old retired
schoolteacher. Mr. Koman's plan "is a strip mall. Our building has social
programs along with storefronts to support what we're trying to do." The
group plans to house day-care centers for children and adults among other
social services, she says, adding that her group has hired a lawyer to fight
the developer.

Mr. Koman says the roof is caving in and the building is a hazard. He
contends there was no activity there until he came around looking to
purchase it. The mayor's office agrees with him. "I think this would clearly
qualify as blighted under pretty much anybody's definition," says Barbara
Geisman, the mayor's executive director for development in St. Louis.

Next door, Mr. Koman is facing a fight over a postage-stamp-size vacant lot
appraised at $7,000. The sale is being held up by one of six heirs to the
property, who lives in Atlanta and wants $50,000 for his share alone. "It's
all about greed," Mr. Koman says. "How much free money can I get from this
developer?" The holdout didn't show up in court recently and couldn't be
reached for comment.

Situations such as this, rather than those in which people are pushed out of
their homes, make up a large percentage of cases in which St. Louis uses
eminent domain, Ms. Geisman says. "There are always going be those poster
children, but the reality is a whole lot more complicated than that. We
can't let one person hold up something that the entire city wants and
needs." It wouldn't be possible to do widespread redevelopment in an old,
historic city like St. Louis if the Supreme Court hadn't upheld
eminent-domain rules in its Kelo v. New London decision, Ms. Geisman adds.

Eminent-domain opponents, such as the Institute for Justice, the Washington
nonprofit law firm that represented the homeowner in the Kelo case, beg to
differ. "The idea that private development in cities can't happen without
eminent domain is crazy," says Dana Berliner, senior attorney at the
institute. "Private development happens all the time without eminent domain.
People buy the property: If it's difficult to buy the property, they work
around that person or they buy another property."

Why get involved in messy development battles? Mr. Koman doesn't deny it is
a way to make a good profit, although he declines to say how much money he
has made in the East St. Louis development. His properties there are
100%-occupied, and he hasn't had a tenant go out of business since opening.
"Please come invest in the inner city," he says. "We are making money in
East St Louis."

Mr. Koman's background, however, lends ammunition to critics who say eminent
domain often benefits the powerful at the expense of the less well-off. Mr.
Koman's father, Bill, played pro football for the old St. Louis Cardinals in
the 1950s and '60s and then went into development. Jim Koman and his brother
followed their father into the business. Now, the brother has a separate
company that builds offices, and Jim handles retail development. He
currently has 18 shopping centers under construction within 180 miles of St.
Louis. Six of them may require the use of eminent domain to get the
necessary land, including a big cornfield in Troy, Ill, just outside St.
Louis.

Mr. Koman isn't averse to using hardball tactics. He tells people who don't
want to settle that he will take them to court, where they will get much
less than what he is offering. As he drives through a trailer park he is
currently trying to buy out, he mocks the people who fight his efforts. "Oh
my God, you're ruining my life!" he quotes them as saying. "But half these
people can't even find jobs or are alcoholics or whatever," he adds. "Most
people are just ecstatic [with the buyouts]."

In East St. Louis, Mr. Koman wants to expand his shopping center but has run
into opposition from the owner of a beauty salon who has refused to give up
his lease on a neighboring property. Tony Ngo, who owns U.S. Nails, has
strong feelings about eminent domain. "Eminent domain is a horrible law...I
feel that it's a little bit worse than communism," he says. "The
communists -- you know they're going to come in and they're going to take.
This is a business that I plan to grow."

He is negotiating with Mr. Koman, and the two sides appear to be close to a
deal. "The question is, Is it faster for me to buy this guy off, or quicker
to go to court and condemn it?" Mr. Koman says.

Write to Ryan Chittum at ryan.chittum at wsj.com