Eminent domain used often to spur economic development

Recent history is full of cases where eminent domain has been used or threatened as a tool for economic redevelopment.

The Alameda Square shopping center, at South Federal Boulevard and West Alameda Avenue in southwest Denver, was home to some 25 Asian-oriented businesses. When Wal-Mart Stores Inc. in 2002 wanted to move in with a 209,261-square-foot Supercenter, it worked with the Denver Urban Renewal Authority to threaten existing businesses with condemnation through eminent domain if they didn’t vacate. In 2003, DURA declared the center “blighted,” the first step in evicting the businesses and clearing the way for Walmart, and offered the chain $10 million in tax subsidies.

However, the center’s small businesses mobilized the surrounding Asian community and Denver media, and Wal-Mart backed out in late June 2003. Brighton Corp. of Boise, Idaho, acquired the 20-acre site and planned to build a new, 200,000-square-foot, $25 million shopping center there anchored by a 103,000-square-foot Lowe’s Home Improvement store. DURA agreed to reimburse Brighton up to $7.3 million from sales and property taxes generated at Alameda Square. Lowe’s opened in 2009 — but closed 19 months later.

Controversies over use of eminent domain for economic development culminated in the U.S. Supreme Court’s 2005 Kelo vs. City of New London decision. The Connecticut city wanted to raze a waterfront neighborhood of single-family homes to make way for tax revenue-generating retail development. The justices voted 5-4 that the general benefit a community could receive from economic growth qualified private redevelopment plans as a permissible public use under the “takings clause” of the Fifth Amendment to the U.S. Constitution. The redeveloper, who stood to get a 91-acre waterfront tract of land for $1 per year, couldn’t get financing, however, and the redevelopment project was abandoned. The tract remains vacant, generating no tax revenue for the city.

In an ongoing case, Denver-based Alberta Development Partners and Chicago-based Walton Street Capital want to fill the aging Foothills Mall in Fort Collins with higher-end retailers in a $100 million redevelopment it hopes to have open by the 2014 holiday season. The plan was unanimously approved Feb. 7 by the city’s planning and zoning board. The developer said acquisition of the existing Sears store is central to the redevelopment because the 40-year-old store doesn’t fit in its planned tenant mix, and has asked the city to invoke eminent domain if Sears won’t sell. Fort Collins City Manager Darin Atteberry said in mid-January that the two parties would have 30 days to come to an agreement, after which eminent domain would be considered.

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