The power of eminent domain was granted to governments for the purpose of constructing public infrastructure but has increasingly been used as a redevelopment tool to transfer private property from one owner to another. Although there are legitimate reasons for invoking eminent domain, the current practice of condemning private property in the name of redevelopment is rarely about building public infrastructure and regularly about turning areas that produce little tax revenue into high revenue generators. Taking a property owner's brake shop or barber shop because it is too small, too old, too ugly, or another party has a "better" use for the land violates fundamental constitutional principles, creates uncertainty about property rights, and can deter individuals from opening or expanding their businesses.
However, two recent developments are promising. First, in 2003, the Arizona legislature imposed restrictions on the exercise of eminent domain by local governments. The new legislation provides protection by requiring local governments to give several notices to a property owner prior to condemnation. Also, two-thirds of the local governing body must determine that eminent domain is necessary and "critical" to the proposed project. The legislature also restored the term "slum or blighted" and deleted the term "redevelopment" in most relevant Arizona statutes. Second, in 2003, the Arizona Court of Appeals ruled in Bailey v. Myers that taking private property from one private party and transferring it to another private party for a private use was unconstitutional. The ruling prompted one Mesa council member to state that the time had arrived to allow the private sector to determine future developments using free market mechanisms.
Across the country, municipalities and developers are finding attractive paths to redevelopment that respect private property rights. Without resorting to eminent domain, the city of Seattle redeveloped its downtown. From 1996 to 1998, the project redeveloped three city blocks, creating more than one million square feet of new retail space known as Pacific Place. Just months after the debut of Pacific Place and the opening of a new Nordstrom department store, downtown retailers experienced a 15.8 percent increase in taxable sales, double the previous average growth rate. Today, Seattle ranks among the top cities of its size when it comes to retail, dining, and entertainment. Seattle's success and the options suggested in this report serve as a starting point for thinking about alternative ways to redevelop without resorting to abuses of the power of eminent domain.