Public Power, Private Gain: Michigan

Overview

 

Michigan is notorious because of its supreme court’s decision in Poletown.324 That decision is cited all over the country for the proposition that homes and businesses can be taken solely for another business. Perhaps regretting that decision, the Michigan Supreme Court has decided in favor of property owners in subsequent public use cases.325 In 2001, the Michigan Supreme Court struck down its Private Roads Act because it allowed condemnations that are not for public use. Some Michigan appellate and trial court decisions have criticized eminent domain actions for the benefit of private parties, although some others have upheld similar takings. Detroit has paid no attention to the courts and continues to use eminent domain shamelessly for all kinds of private parties—casinos, relatives of the mayor, sports team owners and private developers. The rest of Michigan has shown more restraint, and it is always possible that after a few more court decisions, Detroit too will get the hint.

 

Legislative Actions

 

The Michigan legislature passed a bill in 2002 that revises the state’s eminent domain laws and makes it easier to condemn individual properties and transfer them to private developers. House Bill 4028, which Governor John Engler signed into law on March 5, 2002, strengthens the ability of local governments and redevelopment agencies to condemn parcels of land designated as “blighted,” even where that land is not located in a redevelopment zone. H.B. 4028 sets forth the process for municipalities to acquire such property and eventually sell it to private developers. Interestingly, while the new law imperils many private homes and small businesses in Michigan, it provides specific exemptions for industrial, farm and railroad properties from similar takings.326 According to section 2(c), “blight” designations under this law cannot include structures or lots inherent to farming operations, any property belonging to railroad companies and industrial properties whose taxes are paid and that are in areas zoned for industrial use.327

 

Private Use Condemnations

 

Allouez Township

Glen Tolksdorf owned a piece of land in rural Michigan that was landlocked, and completely cut off by neighboring parcels from access to a public roadway. Tolksdorf wanted to subdivide his land into separate lots for housing, so he tried first to negotiate with the other owners to secure easements for a private road and utility lines that would travel across their properties and onto his own. However, the other owners did not want a road bisecting their properties, and refused to grant Tolksdorf the easements. So in 1992, Tolksdorf sued the other owners under the Michigan Private Roads Act, an old statute that allowed a private landowner to petition the township to open a private road across another landowners’ property.328 The act called for a jury to determine whether the road is necessary, and also to determine the dollar amount that a petitioner must pay to compensate the owner of the land where the road is built.

 

In May 2001, the Michigan Supreme Court upheld the rights of private landowners by determining that the Private Roads Act violates Michigan’s constitution, because it allows the government to condemn private property for a private, rather than public, benefit.329 The Michigan court rejected Tolksdorf’s argument that the act predominantly advances a public interest by enhancing the value of otherwise landlocked property. Instead, the court held, the Act merely provides an improper mechanism for the state to use its eminent domain power to force the transfer of land from one private person to another.330

 

Detroit

In a 1996 referendum, Michigan voters approved casino gambling in Detroit. Shortly thereafter, an advisory committee recommended that the three casinos allowed under the referendum be clustered within a 110-acre parcel of land along the riverfront. At the time, the land mostly consisted of restaurants and other businesses. Almost immediately after the advisory committee’s recommendation, most of these businesses began to suffer under the black cloud of threatened eminent domain.

 

Greektown, Motor City and MGM Grand all opened temporary casinos in downtown Detroit, and the City began trying to assemble the riverfront land needed for permanent casino development. Local newspaper polls showed that 63 percent of local residents opposed a riverfront casino district.331 City officials were not deterred.

 

In August 1999, the City filed suit in Wayne County Circuit Court to condemn 47 privately owned parcels of land along the river, but did little in the meantime to negotiate with the landowners over compensation. The owners fought the City, and in December 1999, a judge sided with the owners and threw the condemnation cases out. Chief Circuit Judge Michael Sapala ruled that, although the casino district would be a valid public use for the land, the City had nonetheless failed to make good faith offers to the landowners.332

 

The City then tried to buy the land outright, but was ultimately unsuccessful. In 2001, Detroit Mayor Dennis Archer announced that the City could no longer afford to buy the entire parcel, and that the City would have to scale back its casino redevelopment effort. Under the revised plan, only the MGM Grand would relocate to the riverfront. The new MGM Grand would occupy parcels of land whose previous owners had already agreed to sell. The only part of the riverfront development requiring condemnation of private property would be several waterfront parcels taken for a public park adjacent to the casino. Greektown and Motor City would stay in their current downtown locations, which have since undergone expensive renovations as each casino has added an 800-room hotel.333 Of course, even though some of the properties escaped condemnation, they had to bear the consequences of being threatened with condemnation for several years and the cost of opposing the condemnations in court.

 

Detroit

In the late 1990s, Detroit decided to build two new stadiums, one each for the Lions football team and the Tigers baseball team. The stadiums would be adjacent to each other along Woodward Avenue in downtown Detroit. Land acquisition costs were split between the teams and the City, with the state chipping in an additional $25 million to the effort. The plan called for the stadiums themselves to be jointly owned by the City and the respective teams, with the teams retaining a majority interest.

 

Over the course of a few months in 1996, the Detroit/Wayne County Stadium Authority reached settlements that gave it title to all but 24 of the properties on the stadium site. The authority then condemned those 24 remaining properties, which comprised about a quarter of the total land for the project, and paid the owners figures equal to what it had originally offered them. Most of the remaining owners did not challenge the government’s authority to take the property, but were not happy with the amount of money offered. The owners asked for millions of dollars more, but the jury disagreed.334

 

Only two owners actually challenged the power of the stadium authority to take the property. Freda Alibri and her family owned and operated Prime Parking LLC on a one-acre lot on Woodward Avenue. The Alibris’ property was across the street from both of the new stadiums, and the stadium authority claimed it needed the Alibris’ lot for stadium parking. Under the threat of condemnation, the Alibris agreed to sell. What the authority did not tell the Alibris was that the $264,551 it used to buy their land had actually been loaned to the authority by Mike Ilitch, who owns both the Detroit Tigers and the Detroit Red Wings hockey franchise. From the time the City chose the Woodward Avenue site for the Lions’ and Tigers’ stadiums, Ilitch had been quietly acquiring land across the street in hopes of someday building a new hockey arena adjacent to the sports complex. Once the Alibris learned of the loan from Ilitch to the stadium authority, and the fact that the authority was planning to transfer title to the Alibris’ land as repayment of the Ilitch loan, the family sued to get their land back.

 

In August 2000, a judge ruled that at the time the stadium authority sought the Alibris’ property, it did not have the power to condemn it. That power was the only reason the Alibris sold. Since there was no power, the sale was invalidated. The judge ordered the stadium authority to transfer the land back to the Alibris. On appeal, however, the decision was reversed. The appeals court found that the trial court should have looked at the case as an agreement to purchase, rather than as a condemnation. Since the Alibris agreed to sell, and they did not show the existence of fraud, they were bound to honor that agreement.335

 

One other owner was luckier. The stadium authority also filed a condemnation action against a building owned by Joseph Maday. The Woman’s Exchange Building is separated from the rest of the project area by a church. The authority had no current plans for Maday’s property and no idea what it would do with it. The judge rejected the condemnation, ruling that the taking was unnecessary.336

 

Detroit

Detroit wanted to transform a lower east side neighborhood into upscale urban housing that might boost the local property tax base and census count. One obstacle to the City’s $92 million redevelopment plan, however, was that the 90-acre site near the Detroit River was already occupied by 223 homes and flats.337 Without seeking any input from the homeowners and residents, the City enlisted local developer Graimark Realty Advisors to implement the redevelopment plan, which would replace all the existing homes, worth an average of about $30,000 each, in addition to other vacant land the City already owned, with more than 400 houses costing around $175,000 each.338 The City tried to buy up the properties from existing owners, but after two years about 50 owners still refused to sell. So in 1999, Detroit officials decided to oust the remaining landowners using eminent domain.339

 

Everyone agreed that the area had been going downhill—many of the homes were abandoned and in disrepair. But the remaining residents argued that the City had been buying property in the area and then leaving the properties empty and failing to maintain them. When residents attempted to buy City-owned property in the neighborhood, the City refused to sell. Even someone from the City Council’s research and analysis division believed the City helped caused blight in the neighborhood.340 The homes that remained occupied were classic, well-made homes with features like stained glass and leaded windows.341

 

The project required the eviction of many long-term residents of this once-vibrant black neighborhood. Freda Harrison had lived in her home since 1953. Clarence Henderson had lived in the neighborhood since 1929.342 Virginia Cantrell, who moved to the neighborhood in 1954, commented, “They are taking private property to give to a private developer for private profit.”343 Harrison, Henderson and Cantrell were among the approximately 18 homeowners who sued the City to prevent losing their homes.344

 

During the course of the ensuing litigation, several facts came to light that called into question the roles of some who worked on behalf of the developer. For instance, Dennis Archer Jr., the son of Detroit Mayor Dennis Archer, served as director of business development for Graimark. Also, C. Beth DunCombe, the Mayor’s sister-in-law, who had previously also worked for Graimark, now served as president of the Detroit Economic Growth Corp., which handled the City’s end of the development. Archer Jr., DunCombe and Graimark were also partners in other business ventures. The suing homeowners raised questions about the propriety of these associations, as well as the fact that Graimark did not have to bid against other developers for the project. The City denied any impropriety, because Archer was not a principal in Graimark and DunCombe said she was not involved in the project.345 As of March 29, 2002, the case was still pending.346 Construction has now begun on the project, called Jefferson Village. About six homeowners still remain at the end of 2002.347 The lawsuit settled before a judicial decision.

 

Detroit

Detroit wanted to build a municipal sewage overflow basin on 19 acres of vacant land owned by Crown Enterprises, Inc. The City adopted a resolution stating that condemnation of the Crown land was necessary for the project, and that the primary purpose of the drainage basin was to benefit the public. The resolution was based on the report of a City environmental engineer, who recommended that the City build the basin on 12 acres of Crown’s property, and reserve the remaining seven acres for future expansion of the basin or other proper uses.

 

When the City condemned the Crown land, the company challenged the taking. The state trial court dismissed Crown’s complaint, and upheld the condemnation of the entire parcel, even though the seven acres were not necessary to the project. Crown appealed to the Michigan Court of Appeals, arguing that a genuine issue exists as to whether the City’s reason for the excess taking serves as a mere pretext for what Crown believes is the true reason the City wants to take the entire parcel. According to Crown, the City’s environmental engineer skewed his findings in order to recommend a basin site that would not be adjacent to a new subdivision owned by Windham Realty, a private developer. Windham had mounted a campaign to persuade the City that placing the facility near the subdivision would hurt the developer’s efforts to sell homes there.

 

In February 2002, the Michigan Court of Appeals affirmed the trial court’s decision. The appeals court based its decision on the Poletown case, and stated that it is up to a jury to decide the relative extent of the public and private benefits in a land condemnation for “public use.” However, in this case Crown had failed to convince the court that such an issue actually existed, and therefore the case should be dismissed.348 The Michigan Supreme Court refused to hear the case.349

 

Detroit

In April 2001, Wayne County condemned 11 properties, totaling 1,200 acres, for Pinnacle Aeropark, a proposed mixed-use business park with a focus on development of light manufacturing plants, hotels, golf courses and other private development. The County stated that taking the land was a “public necessity,” because the development would create jobs, stimulate private investment in the area and stem population loss. However, the County made no determination as to how exactly it would use each parcel, and no companies had committed to the project. The owners challenged the condemnations, arguing that the agency exceeded the scope of its powers, but in December 2001 the trial court allowed the County to take all the land.350 The case awaits decision by the Michigan appellate court.

 

Detroit

In 1979, the U.S. government initiated eminent domain actions to acquire land from Detroit International Bridge Company (DIBC) for a project to expand a U.S. Customs facility on the American side of the Ambassador Bridge in Detroit. DIBC owns the bridge. Seventeen years later, as part of the same plan, the government condemned a small portion of land owned by Commodities Export Company, which operated a duty-free store where government officials planned to build an expanded truck ramp. There was no legislation authorizing the condemnation, which occurred pursuant to an agreement between DIBC and the government whereby DIBC, a private entity, would fund the acquisition of Commodities’ land. Not coincidentally, the principal owner of DIBC is also principal owner of Ammex, Inc., which operates the only competing duty-free store in Detroit. Commodities sued to prevent the condemnation, arguing that the stated “public purpose” of the project was a mere sham and a cover-up for the purpose of putting Commodities out of business, to the sole benefit of its competitor. At trial, however, the federal trial court ruled in favor of DIBC, holding that Commodities failed to prove that the taking was in bad faith.351

 

Novi

The City of Novi set out to construct two new roads that would supposedly relieve traffic congestion at a major local intersection. One of the proposed roads was designed specifically to serve industrial traffic going to two businesses—General Filters, Inc. and Progressive Tool & Industries Co. In order to get the land needed for the spur, the City brought an action to condemn a parcel of property owned by a number of trusts belonging to the Adell family and leased to the Novi Expo Center. The Adells challenged the condemnation on the ground that the proposed spur served primarily to benefit the two industrial facilities to which the spur would lead. The City tried to argue that since the road would be open to the public, its purpose was public by definition according to Michigan’s eminent domain statute. The trial court disagreed, holding that the Adells had met their burden of showing that the condemnation served no valid public purpose. The Michigan Court of Appeals upheld the trial court’s ruling that the primary purpose of the taking was to confer a private benefit on General Filters and Progressive Tool.352 

*These numbers were compiled from news sources. Many cases go unreported, and news reports often do not specify the number of properties against which condemnations were filed or threatened.

324 See Poletown Neighborhood Council v. Detroit, 304 N.W. 2d 455 (Mich. 1981).

325 See City of Lansing v. Edward Rose Realty, 502 N.W.2d 638 (Mich. 1993).

326 Amy Lane, “Capitol Briefings: Blighted-Land Bill Heads to Senate, With Exemptions,” Crain’s Detroit Business, July 16, 2001, at 6.

327 See H.B. 4028 § 2(c), 91st Sess. (Mich. 2001).

328 Opening of Private Roads and Temporary Highways Act, Mich. Comp. Laws § 229.1 et seq.

329 See Tolksdorf v. Griffith, 626 N.W. 2d 163, 165 (Mich. 2001).

330 See id. at 168.

331 See e.g., Tina Lam, “Most Want 3 Casinos to Stay Put,” Detroit Free Press, Mar. 13, 2001, at 1A.

332 “Late News: Judge Dismisses 47 Suits on Riverfront Property,” Crain’s Detroit Business, Jan. 31, 2000, at 1.

333 Tina Lam, “Only MGM Will Move to Detroit Riverfront; Archer: Clustering 3 Casinos Would Be Too Costly,” Detroit Free Press, Mar. 30, 2001, at 1A.

334 Tina Lam, “Dispute Could Cause Price of Land for Stadiums to Rise,” Detroit Free Press, May 17, 1999, at 1B; Tina Lam, “Landowners Lose with New Stadiums; Condemnation Cases Go Against Higher Payouts,” Detroit Free Press, Feb. 25, 2000, at 1B.

335 Daniel G. Fricker, “Stadium Authority Must Give Lots Back,” Detroit Free Press, Aug. 4, 2000, at 1A; Alibri v. Detroit/Wayne County Stadium Authority, 254 Mich. App. 545, 554-56, 566 n. 2 (2002).

336 See Detroit/Wayne County Stadium Authority v. Mayday, No. 97727648CC (Wayne County Cir. Ct. Nov. 19, 1998).

337 Jennifer Dixon, “Residents Forced to Move Want Answers,” Detroit Free Press, Feb. 13, 1999, at 10A.

338 “Residents Fume at City’s Deal-Making,” Detroit News, March 5, 1999, at 1A.

339 “Upscale Development Upsets Longtime Detroit Homeowners,” AP Wire, Mar. 5, 1999.

340 Mark Puls, “Detroit Homes Face Date with Bulldozer,” Detroit News, Jan. 2, 2001, at 1A.

341 “Neighbors Fight to Save a Piece of Detroit’s Past,” Detroit News, March 5, 1999, at 1A.

342 Jennifer Dixon, “Fighting to Stay Put,” Detroit Free Press, March 2, 2000, at 1B.

343 “Neighbors Fight to Save a Piece of Detroit’s Past,” Detroit News, March 5, 1999, at 1A.

344 “Residents Sue to Stop Condemnation of Their Homes for New Development,” AP Wire, Aug. 4, 1999; Jennifer Dixon, “Fighting to Stay Put,” Detroit Free Press, March 2, 2000, at 1B.

345 “Residents Fume at City’s Deal-Making,” Detroit News, March 5, 1999, at 1A.

346 Bill Johnson, “Don’t Use Race Against Gentrification,” Detroit News, Mar. 29, 2002, at 11A.

347 Tom Walsh, “Once-dead Detroit Housing Plan Alive,” Detroit Free Press, Nov. 15, 2002.

348 See City of Detroit v. Crown Enterprises, Inc., No. 00-012666-CC, slip op. at 7-8 (Mich. App. Feb. 19, 2002).

349 See City of Detroit v. Crown Enterprises, Inc., 644 N.W.2d 759 (Mich. 2002).

350 See Wayne County v. Hathcock, No. 01-113583 (Wayne County Circuit Ct. December 19, 2001).

351 See U.S. v. Certain Land in Detroit, 43 F. Supp. 2d 762 (E.D. Mich. 1999).

352 See City of Novi v. Robert Adell Children’s Funded Trust, 253 Mich. App. 330, 355-56 (2002).

 


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