Prohibits the exercise of the powers of eminent domain by the State and counties for economic development resulting in the development of nongovernmental improvements.

A BILL FOR AN ACT

SECTION 1. The legislature finds that the fifth amendment to the United States Constitution provides, in part, the following: "[N]or shall private property be taken for public use, without just compensation." Similarly, section 20, article II, of the Hawaii state constitution provides the following: "Private property shall not be taken or damaged for public use without just compensation."

In a recent United States Supreme Court decision, Kelo v. New London, (04-108) June 23, 2005, the court determined that the "public use" provision of the taking clause of the fifth amendment to the United States Constitution allowed the use of the powers of eminent domain for economic development purposes to be carried out by a private entity.

In that landmark case, the city of New London, Connecticut, following decades of economic decline, targeted an area of ninety acres in the municipality for a planned economic redevelopment. Following public meetings, the state of Connecticut authorized a private nonprofit entity to proceed with the redevelopment that would eventually include a waterfront conference hotel, restaurants, retail shops, offices, residential units, and a marina for recreational and commercial uses. The stated purpose of the project was to create new jobs, generate increased tax revenues, and revitalize that section of the municipality. In proceeding with the project, the private entity vicariously utilized the city's power of eminent domain to condemn certain parcels within the redevelopment area that were privately owned by persons not willing to voluntarily sell their property in lieu of condemnation, thereby resulting in the case. The state of Connecticut trial court ruled partially in favor of the exercise of the power of eminent domain by the city. The trial court decision was appealed to the supreme court of Connecticut, which upheld the trial court, in part, and reversed, in part, resulting in a full condemnation of the subject development project. The United States Supreme Court affirmed the decision of the supreme court of Connecticut.

This United States Supreme Court decision raised many dismayed voices, including many in this State, clamoring that private property should in no case be taken by the powers of eminent domain from one private entity to be then transferred to another private entity for whatever stated public purpose or good.

With some irony, the Supreme Court, in support of its decision, cited Hawaii Housing Authority v. Midkiff, 467 U.S. 229 (1984) several times, in which case the court considered a Hawaii statute through which fee title was taken from lessors and transferred to lessees. The court concluded that "the State's purpose of eliminating the 'social and economic evils of a land oligopoly' qualified as a valid public use. (cite omitted)" Kelo at p. 11. In further support of both Hawaii Housing Authority and Kelo, the court went on to state, "[f]or more than a century, our public prudence has wisely eschewed rigid formulas and intrusive scrutiny in favor of affording legislatures broad latitude in determining what public needs justify the use of the taking power." Kelo, at p. 13.

However, it is this latter point, the upholding of legislative policy, that is of interest at the present time. In its closing, the majority opinion of the United States Supreme Court stated, "[w]e emphasize that nothing in our opinion precludes any State from placing further restrictions on its exercise of the takings power. Indeed, many States already impose 'public use' requirements that are stricter than the federal baselines. Some of these requirements have been established as a matter of state constitutional law, while others are expressed in state eminent domain statutes that carefully limit the grounds upon which takings may be exercised." Kelo, at p. 19.

The legislature also finds that the taking of private property for purely public use, such as the development of roads, airports, water and wastewater works, schools and libraries, and other public building and improvements is necessary and appropriate. The legislature further finds that the taking of private property and transferring it to another private party for use by the public, such as in the case of railroads and rail transit companies with common carrier duties or other public power and utility companies serving the public as public utilities, is also necessary and appropriate. However, the legislature believes that the exercise of the power of eminent domain to take private property and transfer the property to another private entity for a purported economic development purpose is not a taking for a public purpose.

The purpose of this Act is to prohibit the exercise of the power of eminent domain to take private property and transfer the property to another private entity for economic development purposes.

SECTION 2. Chapter 46, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§46- Eminent domain for economic development purposes; prohibited. No county or any of its departments, agencies, commissions, authorities, or any private entity may take any interest in or damage any private property through the use of eminent domain under section 46-1.5 if the taking is for the purpose of urban or economic development that would result in the development of any nongovernmental retail, office, commercial, residential, or industrial development or use."

SECTION 3. Section 101-2, Hawaii Revised Statutes, is amended to read as follows:

"§101-2 Taking private property for public use; disposal of excess property[.]; public use. (a) Private property may be taken for public use. Private property may also be taken by the State or any county in excess of that needed for [such] the public use in cases where small remnants would otherwise be left or where other justifiable cause necessitates [such] the taking to protect and preserve the contemplated improvement, or public policy demands [such] the taking in connection with the improvement, in which case the condemning authority may sell or lease [such] the excess property, with [such] restrictions as may be dictated by considerations of public policy in order to protect and preserve [such] the improvements; provided that in the disposal of [any such] the excess property, if [such] the property [is less]:

(3) Lacks proper access to a street[,];

it shall be offered to the owner or owners of the abutting land for a reasonable price based on an appraisal; provided further that if [such] the excess property conforms to [said] the minimum lot size requirements, is of a configuration and topography [which] that, in the judgment of the appropriate county zoning authority, can be put to a reasonable use in accordance with the applicable zoning regulations and has proper access to a street, then the State or the county, as the case may be, may sell [such] the property at public auction.

(b) If there is more than one abutting owner who is interested in purchasing [any such] the excess property [which is] that

it shall be sold by the condemning authority by sealed bid to the abutting owner submitting the highest offer above the appraised value; provided [further] that if [any such] the excess property abuts more than one parcel, the condemning authority may make application for subdividing [such] the property so that a portion thereof may be sold to each abutting owner at the appraised value, if the public interest is best served by [such] the subdivision and disposal.

All moneys received from the sale or lease of [such] the excess property shall be paid into the fund or appropriation from which money was taken for the original condemnation and shall be available for the purposes of [such] the fund or appropriation.

(c) For purposes of this chapter, "public use" does not include any use of property that is for urban or economic development that would result in the development of any nongovernmental retail, office, commercial, residential, or industrial development or use."

SECTION 4. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.

SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 6. This Act shall take effect upon its approval.