When Public Power Is Used for Private Gain

It's time for New York's highest court to say no to eminent domain abuse

Damon W. Root | October 8, 2009

In December 2003, Bruce Ratner, a New York real estate tycoon and owner of the New Jersey Nets basketball team, announced his long-simmering plans to build a 22-acre "urban utopia" in central Brooklyn, featuring more than a dozen office and apartment towers rising as high as 60 stories, a 180-room hotel, and a fancy new basketball arena for Ratner's Nets to call home.

Dubbed the Atlantic Yards, this ambitious project faced several potentially ruinous obstacles. First, various private parties owned more than half of the 22-acre site, which meant time-consuming and possibly unsuccessful negotiations to acquire their land. Second, the size and scope of the project would violate numerous zoning restrictions on height, density, and use. And third, the powerful Metropolitan Transit Authority (MTA), which runs New York City's subways, buses, and commuter trains, controlled a crucial 8-acre rail yard at the center of the proposed footprint.

So Ratner did what most politically-connected elites do when they run into trouble: He turned to the government—including his old Columbia law school pal Gov. George Pataki—for a bailout. More specifically, Ratner partnered with the Empire State Development Corporation (ESDC), a controversial and embattled state agency with the power to bypass zoning laws and seize private property via eminent domain.

The result of that unholy union is Goldstein v. New York State Urban Development Corporation, which New York's Court of Appeals—the state's highest court—will hear next Wednesday in Albany. At issue is the ESDC's use of eminent domain to seize privately-owned homes and businesses on behalf of Bruce Ratner's Atlantic Yards.

It's a classic case of eminent domain abuse. Ratner isn't planning to build a bridge or a road or any other legitimate public project that might permit the forceful taking of private property. He wants to build a basketball arena, sell tickets to the games (not to mention sell broadcast rights, advertising space, concessions, and merchandise), and make a big fat profit. That's not public use, it's private gain.

Furthermore, state officials have gone out of their way to put those profits in Ratner's hands. Consider that when the project was officially announced in 2003 there was no mention of blight, which is the state of extreme disrepair frequently cited by the ESDC to trigger an eminent domain taking under state law. Two years later, however, Ratner and the ESDC started claiming that the neighborhood was "blighted." Yet by that point Ratner had already acquired many of the properties he wanted (thanks to eminent domain) and left them empty, thus creating much of the unsightly neglect he now cites in support of his project.

Moreover, the ESDC report counted minor things like "weeds," "graffiti," and "underutilization" as evidence of blight in the various holdout properties. Yet as the Institute for Justice argues in an excellent friend of the court brief it submitted, "A finding of blight premised on underutilization or the presence of weeds in a yard is not a finding of blight—that is, not a finding that property is causing harm to surrounding properties—it is simply a finding that the government does not like what a property owner is doing with a particular piece of property." If this "finding" is allowed to stand, few homes or businesses in New York would be safe from condemnation.

As for that 8-acre rail yard at the center of the proposed Atlantic Yards footprint, the MTA quietly struck a deal with Ratner as early as February 2005 without first opening the property up for competitive bidding. After a public outcry over this blatant act of favoritism, the MTA gave prospective developers a mere 42 days to submit their own "competitive" bids—another transparent attempt to privilege Ratner, whose plans had been in the works for years, over his competitors, who had to scramble to put something together.

Still, the real estate firm Extell submitted an attractive $150 million bid for the rail yard, a property which has been appraised at over $200 million. In response, Ratner bid just $50 million and won, with that figure later negotiated to a lump-sum payment of $100 million. This past June, the MTA decided to pour a little more sugar on the deal, allowing Ratner to pay a mere $20 million up front, with the remaining $80 million due over the next 22 years. Keep in mind that the allegedly cash-strapped MTA recently raised subway and bus fares and received a $2.3 billion bailout from the state.

So what should New York's highest court do about this corporate welfare boondoggle? Remember that New York is one of just seven states that has yet to pass any laws protecting property rights in the wake of the Supreme Court's notorious 2005 decision in Kelo v. City of New London, which allowed that municipality to seize private property on behalf of the Pfizer Corporation. As Robert McNamara, a staff attorney at the Institute for Justice, told me, "New York is one of the most egregious abusers of eminent domain in the country. With no meaningful change coming from the legislature, New Yorkers need the courts to start reining in these abuses. This case is a perfect place to start."

Damon W. Root is an associate editor at Reason magazine.

Why Ayn Rand is Hot Again

The unconservative Ayn Rand and her relationship to the American right

Sources from The New York Times to the United Kingdom's Guardian agree that 2009 is the Year of Ayn Rand. Fortuitously surfing the wave of Rand fascination is the first thorough and largely unbiased book about her life and ideas by a serious American academic, one neither a personal friend nor a bitter enemy of the controversial Russian-born novelist and philosopher.

Goddess of the Market: Ayn Rand and the American Right, by University of Virginia historian Jennifer Burns, delivers a smart assessment of Rand's life and ideas and how they influenced each other. On what her book's title promises—the connections between Rand and the American right wing—Ms. Burns is less convincing, though she does provide enough data to make it clear why Rand has never really been a "goddess" to the American right.

Why is Rand, dead since 1982, so hot again today? Ironically, big government, one of Rand's betes noires, is stimulating her sales. Her more than 1,000-page 1957 novel, Atlas Shrugged, sold 25 percent more copies in the first half of this year than it sold in all of last year, shipping a total of 300,000 copies so far this year—tremendous success for a 52-year-old novel.

Readers and pundits alike look at America and see a world scarily reminiscent of Rand's government-choked dystopia in Atlas. It's a world with a struggling economy where political pull matters more than success in the free market, where the government blithely takes over huge transportation industries.

Ms. Burns says Rand was "among the first to identify the problem of the modern state's often terrifying power and make it an issue of popular concern." Seeking the foundation of Rand's ferocious mistrust of government—especially government motivated by altruism—Ms. Burns skillfully re-creates the young Alisa Rosenbaum's (Rand's name before creating the "Rand" identity when she moved to America in 1926) experiences watching Bolshevism destroy her family's way of life in Russia.

Rand saw communism purportedly motivated by a desire to help elevate the downtrodden and, as Ms. Burns writes, became fascinated with "the failure of good intentions." The novelist countered communism with her own moral philosophy that elevated "selfishness"—the belief that your happiness is your proper goal and your accomplishments are a necessary means to happiness. This Randian morality was meant, Ms. Burns wrote, to "eliminate all virtues that could possibly be used in the service of totalitarianism."

Rand came to America hoping to win fame as a Hollywood screenwriter; movies formed her image of a glorious and joyous America, so different from her dismal and deprived Soviet Union. She worked various jobs in the film industry in the 1920s and 1930s. After years of struggle (though with more help from family and friends than Rand, queen of the self-sufficient, liked to make people believe) she became a fabulously successful novelist. Her first big hit was 1943's The Fountainhead (the tale of an architect who blew up a housing project he had designed, on the grounds that his rights as a creator had been violated by unapproved changes to the structure) and then Atlas Shrugged.

Rand was more than a teller of tales. She was an exponent of a philosophy she called Objectivism. Ms. Burns explains thoroughly how Rand, through relationships with many other individualist, conservative and libertarian thinkers and activists in the 1930s and '40s, forged her unique approach to small-government individualism, linked with Aristotelian rationalism.

In later life, she tired of communicating with anyone but her continually narrowing circle of acolytes, and after her affair with her chief disciple, Nathaniel Branden, ended in 1968, she largely retreated from any attempt to spread or further her philosophy, embittered with a culture she thought rejected all her values—moral, political, and esthetic.

READ MORE REASON

October Letter to the Editor by Dr. Richard Davis

Over the last few weeks a few people have offered monetary contributions for my campaign and have seemed a bit surprised when I refused. Let me repeat here that I am accepting no cash contributions. I encourage supporters to pass the word along asking others to vote for me and to seek out groups I might address with my positions, but I will accept no campaign money.

I DO realize that this is NOT how the current system works: the Republicans and Democrats, individually and collectively, take in huge numbers of campaign contribution dollars. When they get into power, they then dole out vastly larger numbers of (tax) dollars in the form of grants, subsidies, tax breaks, government contracts, “stimulus packages”, “bailouts”, various entitlement programs, and so on.

I believe this is not only wrong but self-destructive for the country. Neither Congress nor the executive branch seems to have any clear idea that there are limits to the resources you can expend, however limitless may be the means to expend them.

I also recognize that, even if elected, I cannot change this by myself. My hope is that other candidates in other districts share my concern and goals for this country and its citizens. Only when enough voters in enough districts demand the kind of changes I seek for can we really hope to get those changes. Even so, we need to start somewhere. Why not here?

Sincerely,

Richard J. Davis, D.D.S.

Libertarian for Congress

The Furlough Day Smoke and Mirror Scheme

Like many states Maryland is facing a serious financial crisis that is going to require hard choices not just symbolic gestures. Programs need to be cut. Departments need to be merged. A new crop of legislators need to be elected to end this 20th Century way of doing business.

One idea of using furlough days to help trim the budget is nothing more than band-aid on a cut that needs stitches. However, it is so nice for the governor and other elected officials to take furlough days along with state employees to show solidarity. It does trim the budget somewhat yet not quite enough to make a serious difference and there is still the unintended consequence shooting your self in the foot.

Essentially they are cutting an employee's pay. Which in turn reduces how much they pay income tax. They have also targeted employees who are contracted through grants. Many of these are not career state employees, they are hired for a purpose directed through an agreement to receive a grant, donation, or whatever source of funding that project received. Many of these people work in universities, colleges, for the state, or local counties and municipalities. The unintended consequence could place these grants in jeopardy if the money is not spent as spelled out in the fine print.

An example would be Jane was hired to do a specific task through a grant of $200,000 from DHS, let's say 4 years at $50,000 per year is what she signs in her contract. This money is set aside specifically to pay her. Jane is not a career state employee. Yet, in the great wisdom of our governor, she is furloughed for 10 days which is roughly $2,083.00. This is in violation of her contract, it is also in violation of the amount that the state agreed to in the terms of the grant.

This situation causes several concerns. Are there penalties for changing the contract? Could the grant funding be pulled if the state does this to people hired through grants? Could this affect future grants the state tries to get through this entity?

The other issue is County governments and local municipalities are looking at doing the same thing. Certainly caution is always the best avenue and hopefully these issues have been vetted. It certainly would be moronic if these decisions are made only to find out it is going to cost us more money in legal fees, penalties, or the loss of the income because we were trying to save a few bucks.

Libertarians suggest Nobel announcements should be moved to April Fool's Day

WASHINGTON - The Libertarian Party today suggested that, in the future, the announcement date every year for Nobel Prizes be moved to April 1.

"Unlike the gullible people who listened to The War of the Worlds radio broadcast in 1938 and thought Martians really were attacking the United States, when I heard this morning that Barack Obama won the Nobel Peace Prize, I changed the channel in disbelief. But, the same thing was being said in multiple places," Libertarian National Committee Chairman William Redpath said.

"The gravity of the Nobel awards has not been augmented by some of their recent selections, including today's announcement, last year's award of the Economics prize to Paul Krugman, or the 2007 Peace Prize to Al Gore, whose global warming theories he will not defend in open debate. Maybe an early Springtime announcement date would be more appropriate."

Redpath continued, "I didn't know that it was the role of the Nobel Peace Prize Committee to be handicapping the future performance of individuals and organizations. Nonetheless, we congratulate President Obama on his award and hope that three-and-a-quarter or seven-and-a-quarter years from now the Nobel Peace Prize Committee will be seen as prescient.

"President Obama will best fulfill the promise of peace that the Nobel Committee apparently sees in him by not trying to cure all the ills of the world, but by working to make the United States an example for the other nations of the world through implementation of a Libertarian foreign policy--military non-interventionism combined with free trade policies in fact, and not just in rhetoric. With those guiding principles, the world will be a freer, safer and more prosperous planet at the conclusion of the Obama Administration."

For more information, or to arrange an interview, call LNC executive director Wes Benedict at 202-333-0008 ext. 222.

The LP is America's third-largest political party, founded in 1971. The Libertarian Party stands for free markets and civil liberties. You can find more information on the Libertarian Party at our website.

Despite New Deficit-Cutting Claim, Baucus Bill Is Just Tax-and-Spend

by Michael D. Tanner

The Senate Finance Committee's version of health care reform is being hailed as a model of bipartisan moderation. One Republican may even vote for it.

And it's undeniably an improvement over the bill approved early by the Senate Health, Education, Labor, and Pensions Committee, or the one making its way ever so slowly through the House.

But that's a low bar. In reality, the Finance Committee bill still represents a radical government takeover of the U.S. health care system.

Let's start with the price tag. According to the report just released by the Congressional Budget Office, the bill will cost roughly $829 billion over the next 10 years. And, significantly, it is even projected to reduce the budget deficit over 10 years by $81 billion. Of course, both those numbers are misleading.

The $829 billion cost is for the next 10 years, 2010-2019, but the most expensive provisions of the bill don't take effect until July of 2013. The cost over the bill's first 10 years of actual operation is closer to $1.3 trillion.

In addition, the bill assumes that Congress will implement a 21% reduction in Medicare payments that is already scheduled under current law. The only problem is that Congress has been supposed to make those reductions since 2003 — and never has. There is no reason to believe it will do so this time either.

Most importantly, the bill does not achieve its deficit reduction by controlling spending or reducing health care costs. In fact, by the end of the 10-year budget window, the cost of the program is expected to be growing at 8% per year. But revenue from the bill's new taxes would be growing between 10% and 15% per year.

In particular, the bill imposes a 40% excise tax on health insurance plans that offer benefits in excess of $8,000 for an individual plan and $21,000 for a family plan. Insurers would almost certainly pass this tax on to consumers via higher premiums.

As inflation pushed insurance premiums higher in coming years, more and more middle-class families would find themselves caught up in the tax — providing the government with more revenue.

The overall tax increases in the bill are more than double the amount of deficit reduction. This isn't a health care efficiency bill or a cost-containment bill. It is a tax-and-spend bill, pure and simple. READ MORE @ CATO