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Innovations by Minneapolis millers led to the production of Minnesota "patent" flour, which commanded almost double the price of "bakers" or "clear" flour, which it replaced.

http://www.nytimes.com/2005/10/05/realestate/05domain.html?ex=1286164800&en=9db6fe4671e7851c&ei=5088&partner=rssnyt&emc=rss

By TERRY PRISTIN Published: October 5, 2005

RICHFIELD, Minn. - Few recent Supreme Court opinions have aroused as much public outrage as Kelo v. City of New London, Conn., the June ruling that reaffirmed the use of eminent domain to promote economic development.

Critics on both the left and the right politically have said that the Kelo decision potentially endangers every home and business. Bills to limit condemnation powers have been introduced in 31 states, according to the Institute for Justice, a property rights group.

Had such a statute been in place in 2000 in Minnesota, however, a single auto dealer might have been able to block Best Buy, the fast-growing national electronics retailer, from building a $160 million corporate headquarters in Richfield, a suburb of 34,000 people that borders Minneapolis. The 1.6-million-square-foot campus, made up of four buildings shaped like ships, was completed in 2003 and currently houses 4,500 employees. City officials say it has given a big boost to an aging community that had been steadily losing population since the 1970's.

Though there was loud opposition to the project from employees of the holdout property owner, Walser Auto Sales, and others who feared its effect on traffic, much of the community supported it. After a campaign in which redevelopment was a central issue, the mayor, Martin Kirsch, was re-elected in 2002 by a wide margin.

In addition, the owners of the other 82 homes and businesses on the site sold their property without a fight, for what several said was a fair price that included relocation costs. "The homeowners weren't exactly on our side," said Bradley J. Gunn, the Walsers' lawyer.

With local government officials throughout the nation struggling to defend themselves against the storm of criticism unleashed by the Kelo decision, the International Economic Development Council, a professional group based in Washington, cites the Best Buy headquarters to illustrate why eminent domain is sometimes a crucial tool in combating urban decay and sprawl.

Some of the displaced homeowners, including Michael and Cindy Triggs, who said they received $24,000 above their house's market value, agreed that the redevelopment was in the best interests of Richfield. They said it also benefited the metropolitan area by moving thousands of employees from scattered suburban offices to a more central location within reach of bus transportation. "It would have been a lot easier for Best Buy to deal with one farmer in Lakeville," said Mr. Triggs, referring to a more distant suburb.

To property rights advocates, though, the Best Buy case is a troubling example of municipal overreaching. Mr. Gunn said the courts merely took the city's word that the neighborhood was blighted. "In too many of these cases, the courts seem to believe they must defer to the very agency whose conduct is at issue," he said.

In response to cases like this one, the Institute for Justice will support bills in the coming session "to prohibit the taking of property for so-called economic development," said Lee McGrath, the executive director of the Minneapolis office.

That effort will be opposed by the League of Minnesota Cities. Nevertheless, the league will seek to make the condemnation process more transparent and require "that the government entity has to declare in writing whether the public benefit is more than the private benefit," he said.

In Richfield, officials say they have occasionally resorted to using eminent domain only to help ensure their city's survival. Adjacent to Minneapolis-St. Paul International Airport and surrounded by highways, the city is largely made up of small bungalows and ranch homes built in the 1950's. As the officials saw it, the housing supply was too homogeneous, and its shopping districts too dated.

In the 1990's, they began an aggressive redevelopment program as they sought to reverse the population decline. Since then, new or redeveloped shopping centers, prime office buildings, condominiums and apartment houses have sprung up in place of obsolete structures. Many of these projects were subsidized through tax increment financing, or TIF, with the city agreeing to forgo a certain amount of the increase in property tax generated by the new developments.

In 1998, a local developer proposed turning a site near the juncture of two busy highways, 35W and I-494, into a mixed-use development, replacing many of the modest homes and businesses. Homeowners said that a majority of their neighbors were willing to be bought out. Over the years, the Walsers had expanded their car dealerships, causing friction in their once-tranquil neighborhood. (The Walsers declined to be interviewed.)

Some residents had already bought new homes when the developer withdrew, so the subsequent Best Buy proposal came as a relief. "This whole thing had dragged on for four years," said Cathy Bergin, who found herself with two mortgages. "They had worn us down. We were happy to get out of there."

Only the Walsers, who had been offered $9.4 million for their two car dealerships, took the city to court, challenging the condemnation as well as the use of a TIF.

Under Minnesota law, a city housing and redevelopment agency can condemn property only to provide housing or eliminate blight. But the definition of blight is broad enough to give public officials a lot of leeway. Testifying at the trial, Bruce Palmborg, the city's community development director, cited the proximity of the auto dealers and the houses as an example of blight. A consultant said the commercial spaces were obsolete.

The blight finding was upheld, but city officials were chastised by one appeals court for failing to prove that half the buildings were "structurally substandard," a requirement for a TIF district. The case was settled when the Walsers agreed to move the dealerships to nearby Bloomington for an additional $9 million.

Real estate brokers and residents say having a Fortune 100 company has been a boon to Richfield. Prices of single-family homes have risen 8 percent in the last year, with the median now at $224,000, according to George Bodnia, a residential broker for Century 21 Luger Realty. Best Buy has been "substantial for the community," he said.

But critics like Mr. McGrath point out that it will be a long time before Richfield benefits from the higher property tax revenue generated by the complex. Annual revenues have risen to $3.2 million, from $700,000, but under the TIF agreement, Best Buy gets to keep the difference for 25 years.

Mr. Palmborg acknowledged that it was hard to put a dollar figure on what Best Buy has meant to Richfield. The company has instituted mentoring and other programs and it also helped pay for a badly needed bridge spanning I-494. At the same time, its employees have been encouraged to spend money within their self-contained campus, which has its own large health club, pharmacy, bank branch, billiard tables, dry cleaner, day care center and restaurant-like cafeteria.

But he said the headquarters had proved its worth by permanently changing the town's image and prompting residents to invest in their homes. "Best Buy is not going to be in a town that's perceived as a loser," he said.

http://www.ij.org/private_property/castle/MNEDR/background.html (claims abuse of eminent domain)