Monday, June 04, 2007

Begging for Billionaire$

Philip Klein wants to build a better battering ram.

You might not think that is the the type of metaphor an eminent domain abuse crusader would employ, but Klein is a "fight fire with fire" sort if ever there was one.

"I think the tide is changing. People are learning what to do to make a battering ram to knock open the door and restore property rights to where they once were," stated Klein when I interviewed him recently about his upcoming documentary on eminent domain abuse, Begging For Billionaire$.

Klein, a Kansas City native and film maker, was taken aback by the abuses he found in both his home-town and home-state.

"Missouri has one of the worst records of eminent domain abuse in the country. Much of it is right here in Kansas City. St. Louis feels the brunt of eminent domain even more than Kansas City. And the state of Kansas is almost as bad as Missouri. Did you know the state of Kansas helped NASCAR use eminent domain to build a racetrack?"

Klein brings a boundless zeal and enthusiasm to his project and a conversation with him on the subject will bounce back and forth across the country as Klein touches upon the victories and defeats for property rights, and the past, present and future of the struggle. "Sometimes it is hard to keep all the names straight," he says somewhat sheepishly, "But, its been a hectic week."

It had at that. Just that week the Missouri Supreme Court considered a case with eminent domain implications.


Centene Plaza Redevelopment Corporation, v. Mint Properties, Inc., [pdf warning] clearly represents the absurd lengths municipalities will go in an attempt to broaden the scope of eminent domain powers. The city of Clayton, located in suburban St. Louis, had declared one of the prime real estate locations in all of Missouri "blighted" despite all evidence to the contrary. At the heart of the area was the site of the former Library Limited bookstore, well known throughout St. Louis as one of the last great large independent bookstores before it was bought and dismantled by the Borders chain.

I pull the following quotes from the defendants brief to give readers the "flavor" of it:

The issue in this appeal is whether the concept of blight can be stretched to the point where a private corporation can condemn some of the most valuable real estate in the entire St. Louis area to pursue its own development project. The properties at issue in this appeal are located in the middle of one of Missouri’s wealthiest communities. They are situated on Forsyth Boulevard in downtown Clayton, directly across the street from the Pierre Laclede Center. There is no question that these parcels are not blighted. Plaintiff/Respondent Centene Plaza Redevelopment Corporation (“Centene”)nevertheless claims it can condemn them because they are in a redevelopment area declared blighted by Clayton. The majority of this “blighted area” consists of Centene’s Library Limited property at Hanley Road and Forsyth Boulevard that Centene bought in 2004 for $12,250,000, or for $7.4 million an acre. According to testimony at the condemnation hearing, this is the highest price per square foot ever paid for real estate in St. Louis.

To say the defendants are "unmoved" by the contentions of the plaintiff would be an understatement:

The finding of blight is not supported either legally or factually. First, the allegedly blighted area is not a “social liability” as required by § 353.020(2)... Additionally, there was no evidence, let alone substantial evidence, to support a finding that the redevelopment area is an “economic liability” or that the conditions in the redevelopment area are “conducive to ill health, transmission of disease, crime or inability to pay reasonable taxes,” as required by § 353.020(2). In fact, the assessed values of the properties in this supposedly blighted area increased from 2000 to 2005 by 25%, the same increase as all commercial properties in Clayton during the same period and more than double the increase in the Consumer Price Index. Most significantly, the increase in assessed value for this “blighted area” is more than double the rate of increase of the majority of the blocks around the redevelopment area.

Finally, even assuming the Library Limited property was blighted, the taking of Defendants’ non-blighted properties is not “necessary” for the redevelopment of blighted property, as required by Missouri statutes. Several redevelopment plans for the allegedly blighted property had been pursued in the open market without utilizing Defendants’ properties...

The apparent deference given to Clayton’s blight findings by the trial court is misplaced. In response to the United States Supreme Court’s decision in Kelo v. City of New London, Connecticut, 545 U.S. 469, 125 S. Ct. 2655 (2005), the Missouri General Assembly enacted legislation in 2006 to make certain that blight determinations, like the one at issue here, receive increased judicial scrutiny. Section 523.261 now mandates that there be substantial evidence to support the legislative findings. Centene clearly failed to establish the requisite substantial evidence to support the legislative action. Therefore, the ordinance granting Centene the power of eminent domain is void. Furthermore, Clayton’s legislative determination of blight also fails the previous common law test (whether the findings were arbitrary or capricious, or induced by fraud, collusion or bad faith.)

The linking of increased judicial scrutiny to the U.S. Supreme Court decision on eminent domain in Kelo v. City of New London comes as no surprise to Klein:

"Kelo was the straw that broke the camel's back. At first, I think some people thought Kelo was a solution, but it made matter worse. Kelo alerted Americans to the question of property rights. As a result many states have gone back and given a hard look to their eminent domain laws."

Certainly, this increased scrutiny can be seen in the Missouri case. Even though the behavior of the city of Clayton so egregious it would have run afoul of the pre-Kelo standards, it is an open question if any pre-Kelo court could have seen it that way.

"[The question of blight] is a half-assed deal anyway," says Klein, "since so much depends on your definition. Are a couple of newspapers on the lawn evidence of blight? How about if your gutters are askew? I've seen both of those given as evidence of blight. The truth is if they want your property they will get it."

Klein makes it clear that he is not against eminent domain in all cases. "It is one thing if eminent domain is used for a road, or a school or a hospital. It is another when it is used to benefit a Fortune 500 company. After all, they can afford to pay for what they want."

Klein points to many examples of local municipalities placating large corporations. "Wal-Mart is one of the biggest abusers nationwide. I know of a case where H&R Block used eminent domain to move their headquarters 30 blocks and had the city pick up the tab for the furnishings in the new building!

"We need redevelopment reforms badly. Corporations should not be given blank checks or private property."


Such reform efforts would require concerned and sympathetic politicians, but according to Klein, that is exactly what is lacking.

"The callousness of elected officials is what you notice. It is unnerving and sickening how elected officials treat citizens.

"I've known people who had only 1 weeks notice before an eminent domain hearing. They were thrown out like they were a wet dirty towel.

"Politicians are supposed to represent the people but they don't. They represent special interests. Today you can buy a politician right off the shelf, the same way you buy something at Toys-R-Us. I hate to sound so cynical but it is true. Politicians can be bought for campaign contributions.

"Politicians need to know that we can vote them out. That is the real power of democracy. We have forgotten what democracy is. You need to go out and elect people who really represent you and who wont sell out to special interest."

Klein pointed to the recent election of Mark Funkhouser to the Mayoral office in Kansas City as an encouraging sign. "Funkhouser is one of the good guys."

In his campaign, Funkhouser made an issue of an audit that showed Kansas City losing revenue due to the use of Tax Increment Financing (of TIF). TIF is a tool municipalities use in order to lure corporations to build new facilities. In theory, the large tax breaks cities give to these corporations (sometimes lasting for decades), will be made up by other revenue benefits, but many have doubts on this score. As the Kansas City Business Journal reported:

Kansas City's redirected revenue from tax increment financing projects is $233 million shy of the city's $465 million projection for TIF-financed projects, Acting City Auditor Gary White said Tuesday.

White released a draft audit on Tuesday of the city's TIF projects. The audit, which has become an issue in the city's mayoral race -- a race that includes former City Auditor Mark Funkhouser -- was released in draft form because of requests made by citizens citing the state's Sunshine Law.


In a summary of the TIF audit, it says that by the end of 2005, TIF plans produced just 50 percent of promised economic activity taxes (which include earnings taxes, utility taxes, etc.) and payments in lieu of taxes, or the increment between taxes on the unimproved property and on the improved property. TIF plans typically allow developers to recover all payments in lieu of taxes and half of new economic activity taxes.

Revenue from five city-backed TIF plans is insufficient to cover debt service payments, the audit says. The city has made up this gap from the general fund.

The audit calls for the city to develop a more defined economic incentive policy, including consequences when projects receiving incentives fail to deliver
planned benefits.

"We need a policy for economic development incentives, and then we need a method to measure its use," White said. "The new charter approved in August requires us to create an economic development policy for incentives."

It is instructive that Missouri citizens had to use legal action to get the report released, although the former Mayor of Kansas City, who was backing an opponent of Funkhouser saw it differently:

Kansas City Mayor Kay Barnes on Wednesday blasted a draft audit of the city's primary development tax incentive program, calling the audit's methodology flawed and the timing of its release political.

"I am outraged by what is going on in this community," Barnes said during a news conference she called in her City Hall office. "It is time to push back hard and make it very clear that I'm not going to stand for this community to go down the drain because of some outrageous, biased, distorted, supposed facts being presented."

However, the voters of Kansas City also decided to "push back" and defeated Barnes' hand-picked successor. (One wonders if the blow back will have any detrimental effects on Barnes' own future political ambitions.)

Klein sees the TIF issue working hand-in-hand with the larger eminent domain concerns. "Businesses have been given 30 years tax free. They pit cities against each other, and businesses move city to city or state to state to get more tax breaks once the original deal runs out. When you question the politicians on this you can never get real answers. Politicians say these deals will mean more revenue, but it never happens."


Klein also took some of the media establishment to task for shirking their responsibilities to ask tough questions.

"In general the local media is not as skeptical as they need to be. The media takes a 'go along to get along' attitude. They are afraid they will be denied access to elected officials if they do not play along.

"TV and Radio media vary somewhat, but print media tends to be very pro-developers."

Klein tells a story about asking a question of Kay Barnes at a press conference while she was Mayor that she ignored because Klein was not a "proper" reporter. "A couple of weeks later one of the newspaper guys tells me he thought I asked a pretty good question. I blew up at him and said, 'Well, you should have asked it right after me then!'"

Klein praised the efforts of the national television news networks in asking many of the hard questions, but more work, he feels, needs to be done:

"It doesn't matter if you are in print, film, television or Internet media. We have an obligation to ask hard questions of public officials and get answers for the people."


Klein's attempt to get answers for the people will be his finished film which follows events in both Kansas City and St. Louis. "We are finishing up the editing process, and hope to be done in the next week or so. We have some new footage dealing with the Kelo case that we want to work in, and there are always new developments."

Klein hopes to have the film accepted for the St. Louis International Film Festival, November 8-18, 2007. "That would mean the film's world premiere would be in St. Louis which would be great."

At present folks who are interested in the film can see two trailers (here and here) and a bit of the unedited raw interview footage (here).

It is the personal stories that seem to have the greatest impact upon Klein.

"They are taking property and livelihoods...years of memories. I know of an elderly couple that all they wanted was to die in the home where they raised their family. It was taken by a developer to build a hotel.

"When you are hit with this reality, it is overwhelming."

You can see and feel the impact in the short interview clip. In it a man tries to sort his thoughts while he attempts to also sort through the few things he can save before the wrecking ball demolishes what had been his property. The man is neither irrational or even fatalistic in his approach...there is not even a touch of "You can't fight city hall" about him. He looks like a man who knows an injustice is being committed against him, but he just cannot figure out how his country could allow it to happen. In its quiet dignity it speaks more loudly than any ranting or raving ever could.

Klein sees the concern about eminent domain abuse cutting across any well established party lines. "This issue isn't about being a Democrat, or a Republican, or a Socialist. Its about money."

However, the winners and losers are not defined ultimately by the amount of cash they each have at hand. Klein wants everyone who faces an eminent domain fight to know they can win.

"There are resources available to fight eminent domain. The Castle Coalition has materials available to help anyone fight back.

"You can beat big money by being smart with your money. You need to prepare effective strikes with full impact damage to your opponent.

"I've seen $1500 take on $2 million and $1500 win."

Still, it is the losses that strike the strongest emotional chords.

"There was a community in Kansas that was wiped out by eminent domain. All that was left was a street sign in front of a chain link fence. It struck me that this is what this film is about. I made that image the poster for the film."

Some links:

The Official Begging For Billionaire$ website:
The Castle Coalition:

This is cross posted at Stubborn Facts. Thanks to Pat and the crew over there for helping to get the word out.

UPDATE: This version is somewhat changed in that I originally claimed, incorrectly, that the decsion in Centene Plaza Redevelopment Corporation, v. Mint Properties, Inc., had come down. It has not. I also had a quote of Philip Klein's that referred to the oral arguments, not to a final decision. I regret the error.


Anonymous said...

The decision was not handed down. There is no opinion nor decision handed down yet. Your quote was not from the court, rather from the defendant' brief. Your facts are not correct and the comments misleading when you state, " I pull the following quotes from the Missouri Supreme Court opinion to give readers the "flavor" of it:" and "To say that the court was "unmoved" by the contentions of the plaintiff would be an understatement:"

The Iconic Midwesterner said...

You are absolutely right. I was misled by the link I used to find the brief. It will be corrected.

The Iconic Midwesterner said...

Just like the New York Times, The Iconic Midwest has its legion of fact checkers.

It is humbling but appreciated. Getting it right is all I want to do.

Tully said...

Unlike the NYT, The Iconic Midwest actually makes notiably public corrections. :-)