The city of Boston couldn’t accumulate enough land to build the gleaming new $800-million convention center it wanted on the south side of town. So the city government used its powers of eminent domain to snatch about 20 properties from private owners to provide space for the center, justifying the seizure on the grounds that the new center would boost the local economy. Today, the recently opened Boston center sits idle much of the time. First-year bookings and attendance were only one-sixth of what the city projected. Taxpayers now find themselves on the hook not only for the center’s construction cost but also for its operating deficit.
It’s no wonder defenders of private property rights went ballistic over the Supreme Court’s decision last month in Kelo vs. City of New London, in which the court endorsed for the first time the government’s power to seize private land for the sake of economic development. In its decision, the court pronounced that government can legitimately use eminent domain if it believes it will “provide appreciable benefits to the community, including -- but by no means limited to -- new jobs and increased tax revenue.” The court thus gave federal constitutional authority to a form of property-taking that local governments such as Boston have been already -- and increasingly -- using in recent years.
But the fact is, the public benefit promised by urban economic development programs rarely materializes. In fact, such initiatives often become tax eaters -- a public burden rather than a public benefit. Throughout the country, cities have liberally used eminent domain to take land in order to build publicly subsidized mega-projects that have wasted tax dollars and distorted the private marketplace. Regrettably, the Supreme Court’s decision is already encouraging more such plans.
The Boston facility is only the latest in a long line of convention centers that governments have built or expanded by bulldozing over private property rights with little or no economic gain to show for it. Dozens of new centers have opened over the last decade, creating a nationwide glut in convention space. In San Francisco, to take another example, the city engineered a $191-million expansion of the Moscone Center in part by taking land on which stood an office building and several restaurants. The center’s expanded wing opened in 2003, but faced with competition from other cities and a national drop in convention attendance, it has flopped. About 40 more projects now in the pipeline will only worsen the convention-center glut, a recent Brookings Institution study concluded.
As one after another economic development scheme fails, politicians often wind up throwing good tax money after bad, and eminent domain encourages that bad habit. For instance, governments have rushed to “fix” their convention center mistakes with other nearby development that theoretically will boost the centers -- which themselves were supposed to be the economic engines. Officials in upstate New York, for instance, used eminent domain to take property away from an owner who was unwilling to sell in order to build a planned subsidized hotel in downtown Syracuse, which the officials say will boost the city’s flagging convention center -- which itself was originally built to boost the hotel industry.
Politicians often justify such projects with consultant studies purporting to show big potential economic gains. But the track record of such government-sponsored economic studies is dismal. Urban policy expert Heywood Sanders of the University of Texas at San Antonio analyzed more than 30 studies supporting convention center construction and found them “consistently flawed and misleading.”
In California, a bill sponsored by state Sen. Kevin Murray (D-Culver City) that would set up an authority to build and construct sports and entertainment facilities is marching to the governor’s desk. Giving eminent domain powers to the authority, the bill is meant to help boost Los Angeles’ chances to develop a new stadium to lure a National Football League franchise.
The court decision, in other words, represents a home run -- or a touchdown, depending on your preferences -- for the purveyors of state capitalism. It’s not just property owners but taxpayers who will be losers.
Steven Malanga is a senior fellow at the Manhattan Institute and a contributing editor of City Journal, where a longer version of this article appears.