The recent decision by the Missouri Supreme Court denying the right to condemn land for economic development purposes assumes a larger than life impact on the ability of state and local government  in Missouri to engage in economic development.

Missouri Supreme Court

After the 2005 Kelo decision by the United States Supreme Court, the General Assembly of the State of Missouri enacted section 523.271 RSMo. to limit the power of a condemning authority to take property for economic development purposes. State of Missouri ex rel. Jackson v. Dolan, is a case of first impression that addresses the limitations placed by the General Assembly on the power of government to acquire land through condemnation solely for economic development purposes.

In the Dolan case the Southeast Missouri Regional Port Authority (“Port Authority”) operated a port district. Within this district, the Port Authority owns between 500 and 600 acres of land. The Port Authority plays two roles with regard to the land it owns. First, it serves as a land developer by developing and leasing land to private companies. In this capacity, the Port Authority provides streets, sewers, utilities, railroad tracks, and access to the harbor contained within the port. The harbor itself is operated by a private entity on land leased by the Port Authority. In its second role, the Port Authority operates a six- mile railroad that connects with the Union Pacific and Burlington Northern Santa Fe. This six-mile railroad provides businesses in the area with the ability to transfer freight between barges and trains at the Port Authority’s harbor. A Port Authority has the power to acquire property of any kind or nature within its district necessary for its purposes by using the power of eminent domain.

In order to expand its facilities, the Port Authority decided to build a loop track on land that it already owned that would enable it to handle unit trains of around 100 cars that come from one shipper that are headed to one particular destination. The acquisition and lease of the land that the Port Authority sought to acquire would provide the underlying revenues to finance the construction of the loop track. The Port Authority’s current track is insufficient to handle trains of this magnitude, and it hopes by constructing a loop track it can reduce freight rates thereby promoting growth in jobs and commerce. The Port Authority sought to purchase a 30.65-acre parcel of land owned by Velma Jackson and Alicia Seabaugh (“Property Owner”) to use as a storage facility to handle liquid products to be transloaded from rail to barge or vise versa.

After negotiations with the Property Owner failed, the Port Authority filed a petition for condemnation to acquire the 30.65-acre parcel. The Property Owner filed a motion to dismiss arguing that the sole purpose for the taking was economic development, which was in violation of § 523.271. After the trial court denied the motion, the Property Owner appealed to the Missouri Supreme Court which held that the taking was barred by section 523.271 because it was “solely for economic development.”  “Economic development” is defined by statute to mean: “…a use of a specific piece of property or properties which would provide an increase in the tax base, tax revenues, employment, and general economic health ….” The Port Authority tried to argue that loop track was not for economic development, but this argument failed since it was obvious that economic development was the heart of the transaction.

It is hard to argue that the analysis applied by the Court was wrong based on the language of the statute and the parroting of  Recommendation #13 of the Eminent Domain Task Force to the Governor, which states:  “The public benefits of economic development, including an increase in tax base, tax revenues, employment, or general economic health, standing alone, shall not constitute a public use.” As a member of the Eminent Domain Task Force, I argued on behalf of local government that the proposed limitation went too far. The record in the Report to the Governor reflects that their was extensive debate on Recommendation # 13.

By its very nature economic development will increase the tax base, increase tax revenues, and employment, and  will improve the general economic health of the district or community.  The taking of land for storage thereby enabling the construction of a loop track would improve the ability of the Port Authority to provide better services for its customers and create jobs is a core function of this special purpose district intended to create economic development.

Road to change is through the General Assembly

With one hand tied behind its back, Missouri will have a very hard time competing with surrounding states. I wonder if the General Assembly might view this limitation on economic development differently than it did when it was adopted it several years after the Kelo decision? The approach taken by the majority of the members of the Task Force failed to consider that economic development comes in many different forms. A more nuanced view of economic development that recognizes the need for a project that will create industrial jobs by building basic infrastruture is in order.

Howard Wright @ 2013