Life After Public Purpose

The Star Tribune recently ran an article about Minnesota’s 2006 law change that prevents cities from pursuing eminent domain for public purpose economic development schemes. It prevents cities from condemning property and reassembling it for projects (such as the Best Buy Corporate Campus along I-35 and I-494),

“It used to be that … you could use eminent domain to assemble some or all of that [redevelopment] site, and resell it for private use,” said Larry Lee, Bloomington’s community development director. “We can’t do that now.

“What cities still have eminent domain for is to use it for a public purpose: a city hall, a fire station, a park, a trail.”

Quick refresher. Prior to 2006 in Minnesota, eminent domain allowed for the public taking of private land for a public use and public purpose. The “public purpose” has been removed from the equation, and probably for the better. It had a very malleable definition, as one could argue that a public purpose was to take property for economic development, jobs and increased property tax revenue.

It appears as if the law is working as intended and cities are now only using eminent domain for projects that fit a public use, such as utility upgrades, street improvements, sidewalk expansions, bike trails, etc.

Eminent domain has had a spotty history across the country. The most tragic being the use of land takings in Connecticut, where City of New London (pop. 26,000) acquired vast amounts of property and tore down a historic neighborhood so drug-giant Pfizer could move in (see Kelo v. New London). The company spent $294 million on a 750,000 square foot suburban complex only to abandon it 8 years later (the New York Times has brilliant coverage on the story and Strong Towns covers the issue well).

Here’s what New London looks like today, post-public purpose eminent domain: http://www.dr5.org/kelo-v-new-london-the-aftermath/.

The Best Buy story isn’t as tragic, yet. However, Best Buy has been experiencing trouble and has reduced its workforce from around 9,000 to around 4,500 employees at the corporate campus in Richfield. Rumor has it that one of the four towers on site has never been occupied.

The problem with ‘public purpose’ eminent domain is that it typically aims to provide the silver bullet approach; one big project comes into town and the next thing you know, a town’s got jobs and tax revenue! Reality is a little harsher as these projects, as they fail, typically leave the municipalities who championed them holding the ball when all hits the fan. Pfizer can always relocate and Best Buy close-up shop and dissolve assets to shareholders, whereas the City of Richfield and New London aren’t going anywhere.

When it comes to economic development, our thinking is too 1995. One quote from Richfield’s Community Development Director in the Star Tribune article stands out as an example of this;

“… [the Director] said if Best Buy were looking for big plot of land today, without a tool like eminent domain Richfield probably couldn’t compete with an outer-ring suburb that could point the company to a cornfield.

Now that the economy is picking up, Stark said, it could be just a matter of time before legislators begin looking at cities and asking why certain areas are suffering from disrepair and disinvestment.

If Best Buy were looking to relocate today, they certainly would not be looking at a cornfield in Lakeville or wetlands in Chanhassen. They’d be looking for office space in downtown Minneapolis. The tables have turned and the competitive advantage is no longer cheap land, its amenity.

The mega suburban corporate campus is a dying model that, once empty, is hard to lease. It’s also a model of development that is insular and has few positive spillover effects. Why no spillover effects? Because it’s designed to keep employees under one-roof and to not engage them in the wider economic activities of a metropolitan area. This model kills innovation by eliminating casual encounters and knowledge spillovers.

It’s also wrong to think that disrepair and disinvestment in cities or inner-ring suburbs are a result of a lack of large economic development projects. Cities that can’t grow out must grow up, both literally and figuratively. The economic gardening approach, which is safer, lower-risk economic development approach, needs to be the status quo – not the exception. Whatever the case, a city needs to create a template for incremental growth; which includes small-scale density improvements over time, transit and transportation access, urban design improvements, the growth of existing business and the welcoming of small, growing businesses.

The cities that have been the most successful over the course of the last 20 to 30 years are those that have embraced small business growth through innovation, and those that have been nimble, urban and welcoming to change. And, eminent domain that supports large, insular development such as corporate campuses (or large master-planned development, football stadium, etc.) is likely to not add much to a community in the long-run.

Eminent domain for a public use is only fair; although I’m confident it’s been used for bad projects. Nonetheless, there are certainly good and reasonable uses for it. The broad-ranging public purpose, which is now a relic of the past, is something entirely different. It’s the taking of land for what essentially amounts to a gamble; that a baseball stadium or convention center or corporate campus will help revive a town that’s too lethargic to put in the hours and grow from the ground up.


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13 Responses to Life After Public Purpose

  1. Sean Hayford Oleary
    Sean Hayford Oleary August 23, 2013 at 1:51 pm #

    As we speak, Richfield is in the process of demolishing homes along 17th Ave/Richfield Pkwy that they “need” in order to install a median and trail in that street. The right-of-way is probably wide enough now, and the land use across the street is a parking lot. There’s no doubt the single-family homes could be spared (save for one or two that are actually in the path of the street at a curve). While there is ostensibly a “public purpose”, it is clear the real point is to redevelop the area. Eminent domain was not used, but that gun was held at the temples of homeowners during the voluntary process to sell their homes to the City.

    I quite disagree on your assessment of Best Buy. I certainly agree that what was built was a disgraceful failure for both Best Buy and Richfield, a development Jim Lileks aptly calls, “a suburban office park of breathtaking mediocrity”. But that doesn’t damn the whole process. I think development on the fringe is a real threat — look at Medtronic, Carlson Companies, Healthpartners, Normandale Lake district, etc. (Bloomington isn’t exactly the “fringe”, but both Normandale Lake area and East Bloomington are lifeless green/brownfields). This weakened law does harm the competitiveness of Minneapolis and the inner ring.

    • Sean Hayford Oleary
      Sean Hayford Oleary August 23, 2013 at 1:56 pm #

      Ah I see the Richfield Parkway project is actually mentioned in the article. Again, it is does not mention that the proposed street is not going to be where the structures are today, or even particularly close to them. The street is an excuse to clear the homes.

      • Nathaniel M Hood
        Nathaniel M Hood August 23, 2013 at 2:13 pm #

        I’m not familiar with the project or the homes. I imagine the city views the homes as eyesores?

      • Sean Hayford Oleary
        Sean Hayford Oleary August 23, 2013 at 2:28 pm #

        I think it’s more just the proximity to Crosstown Highway and Cedar Avenue/77 makes it far more valuable to use for a higher-density residential use or a commercial use. (The original plan was a senior living condos or apts, but that fell through in the recession.)

        Most homeowners were happy to go, as they did not enjoy the traffic of Cedar Point across the street. But of course, that burden is the result of previous City- and MAC-led redevelopment.

  2. Nathaniel M Hood
    Nathaniel M Hood August 23, 2013 at 2:11 pm #

    Sean -

    Thank you for commenting. I agree that because something is a ‘public use’ doesn’t guarantee it’s a worthwhile project. I’m not familiar with the 17th Ave / Richfield Parkway project, but I’ll take your word on it.

    I respectfully disagree with your assertion that it harms competitiveness. Minneapolis, for example, has seen more growth in the last 7 years (since the 2006 law change) than it has in the previous two decades. That isn’t to say eminent domain’s public purpose is responsible for that, but it probably shows that macroeconomic forces and social and cultural trends have a greater impact on place.

    Richfield has tremendous strengths beyond just proximity to Minneapolis and other key job centers. It has a traditional grid pattern for starters, affordable spaces, access to transit and key transportation nodes and what is likely to be a growing population. A better economic development strategy in Richfield would be to find struggling former-strip mall nodes (e.g. Lyndale Ave. south of Highway 62) and upzone it to a mixed-use residential-commercial corridor that would allow live-work units). That’s just one idea of hundreds.

    Economic development projects, while I typically find myself disliking many of them, need to be judged on a case-by-case basis. The taking of land (and further subsidizing) for large “silver-bullet” approaches is a gamble, and it’s something that should be avoided.

  3. Walker Angell
    Walker Angell August 23, 2013 at 3:41 pm #

    Great post. Something I’ve noticed over years of public and private work is that people with skin in the game tend to make much better economic decisions. Risk is a very powerful and necessary force. The Vadnais Sports Dome is one of the latest examples of no skin no risk failure. Public Purpose seemed to just lessen the risk that much more and too often on the backs of people who didn’t choose to put their backs in the game – former homeowners and businesses.

    (Not every decision should be based on just economics though. We are humans and have needs or desires far beyond economics. A streetcar is not necessarily economically viable, yet adds immensely to a space, not to mention getting rid of a big negative (bus noise, exhaust, and the napkin blowing whoosh of wind when they go by your sidewalk table)).

    • Nathaniel M Hood
      Nathaniel August 26, 2013 at 9:55 am #

      Decisions about what to finance don’t need to be always based on economics or return-on-investment (for example; the new beach / man-made pond in North Minneapolis will never “pay for itself” but will be a major benefit to the community).

      I believe that we lie to ourselves (at a macro-policy level) on insisting that some of these projects do pay for themselves. As a result, we bloat their budgets and aim for something too big (e.g.: Vadnais Heights Dome). Let’s look at the Vadnais Heights situation. What if the decision-makers knew the sports complex wasn’t going to return a profit? That doesn’t necessarily mean that they wouldn’t (or shouldn’t) build a place for people to play hockey; but they’d probably be much more modest.

      Walker – I agree with what you’ve written. And, I wanted to say that it should be viewed with EXTREME SKEPTICISM anytime a for-profit consulting company approaches a municipality and advocates for the building of a large building funded by (exclusively) public dollars for which they will privately operate and manage at a profit.

  4. Jeremy Mendelson
    Jeremy (Critical Transit) August 24, 2013 at 12:45 pm #

    Terrific post. If only we could make up for those mistakes by condemning all those car parking lots and replacing them with neighborhoods to serve a better “public purpose”. It just shows that the law is always on the side of those with money (and political power), so the change is good.

    Time will tell if cities and big developers will start justifying private developments for eminent domain by incorporating public spaces like parks. Or perhaps the tide has simply shifted as you say, away from large insular complexes and toward dense mixed-use neighborhoods. I hope so.

    • Nathaniel M Hood
      Nathaniel August 26, 2013 at 10:04 am #

      Interesting question. I’m not sure if it would be legally possible to use eminent domain for a park to aid a development. Of course, if the City of Minneapolis can find a loop-hole around the $10 million limit stadium referendum by re-routing Convention Center revenue, then maybe there is a lawyer clever enough to bypass eminent domain?

      • Sean Hayford Oleary
        Sean Hayford Oleary August 26, 2013 at 11:04 am #

        Assuming it will be a public park, I don’t think there would be any issue. (In fact, that’s even one of the imagined legitimate public uses the Bloomington employee is quoted as saying.)

        Whether it’s for economic development or not should be of no concern. After all, the six-lane stroads that eminent domain is used for are often built in the name of economic development, too.

  5. Alex August 26, 2013 at 9:32 am #

    Nate, good post and I agree with your points. However, I’m not as optimistic as you are that companies have abandoned the suburban campus model. While we haven’t seen companies moving from the city to the suburbs as much as in years past, and there have been encouraging moves back to the city, we’ve also seen lots of large employers doubling down on their suburban locations. Most infamously Target, but also United Health and Ecolab. Certainly eminent domain was a flawed and risky tool to fight this centrifugal trend, but it was effective in some cases and I don’t think it’s unreasonable for an economic development director in a 1st ring suburb to lament its loss.

    • Nathaniel M Hood
      Nathaniel August 26, 2013 at 10:34 am #

      Great comment (and it deserves a 2,000 word follow-up post) …

      The trend is shifting back to the urban core, but there will certainly be firms that will prefer the suburbs. Some firms are doubling down locally (good examples); but that may be a cause of an existing sunk cost in land and/or existing corporate infrastructure on-site or nearby.

      I know little of corporate decision-making regarding location. But, I do know that for the next 10 to 15 years, most large companies will still be directed by Baby Boomers. This will likely keep them out in the suburbs. But, even for those looking to move in the future, it won’t be an easy decision. Even for a company as large as Motorola (linked to in article), abandoning a $100+ million suburban facility is a tough-decision!

      Another element that might keep companies in the suburbs is the combination of cheap land and historically high unemployment. Millenials (and younger generations) may prefer working and living downtown, but they *more* prefer having a job and a livelihood. High-skill workers might be able to demand a more urban location from employers, but i’m not sure if other workers will have that luxury.

      I probably shouldn’t have been so critical of the economic development director. Not every use of eminent domain is bad. I believe it needs to exist as a tool; but using it as a way to incentivize corporations to build campuses under the disguise of a ‘public purpose’ typically yields poor results.

      • Alex August 26, 2013 at 11:41 am #

        More good points Nate. By the way, I think I’ve read studies that found that the greatest predictor of a corporate hq location is the location of the CEO’s home. Your criticism of the economic development director is actually entirely appropriate, I just think it’s reasonable for someone with such a tough job to focus more on the short-term than the long.