By Sekou Campbell, Associate at Fox Rothschild on January 5, 2013

Seattle hedge fund magnate, Chris Hansen, demonstrates that condemnation is not as necessary an evil for urban development as described here.  Chris Hansen has committed to develop a new sports arena for an NBA franchise in Seattle, filling the void left by the now Oklahoma City Thunder.  Hansen purchased rather than “took” all necessary land for his development project.  His project serves as an interesting counterpoint to the Atlantic Yards development project, home of the Brooklyn Nets, because Washington and New York are two states that maintain the broad power to transfer private property to a private developer for a “public purpose” permitted after Kelo.

This post proposes that Hansen’s loyalties to, and interests in providing a public benefit in Seattle at least played a role in him declining to seek condemnation of the properties he purchased.  Extending this logic, rules requiring a closer scrutiny into public benefits generated by sports stadiums may yield more favorable deals for host cities and their surrounding communities.  Alternatively, legislative fixes limiting the bargaining power of developers rather than the condemnation power of states may also yield more equitable deals between states and private stadium developers.

Brooklyn’s Takin’ It

KRS-1, in “The Bridge is Over,” the (in)famous classic battle rap, opines:
Bronx Keeps Creatin’ It
Manhattan Keeps on Makin’ It
Brooklyn Keeps on Takin’ It
[My apologies to Queens and Staten Island]

Evidence of the “Takin’ It” character of Brooklynites lies in, among others, Branch Rickey taking the “whites only” sign off of major league baseball; Spike Lee taking a new path to filmmaking success; or Red Auerbach’s invocation that “[t]he only correct actions are those that demand no explanation and no apology” (e.g. takin’ it).

Ironically, the “taking” of the Atlantic Yards played an integral role in the departure of one Brooklyn sports team and the arrival of another, more than fifty years later.  Back in the late 1950s, as Ebbets Field aged and the Dodgers sought to construct a new stadium, the controversial “master planner,” Robert Moses, decided not to condemn the Atlantic Yards because he did not consider a stadium a “public purpose” project.[1]  The Dodgers, rather than move to Queens’ now bygone Shea Stadium, moved to L.A., and the rest, as they say, is history.  Flash forward fifty years, and the NBA’s Nets franchise, seeking to place a sports arena in the very same Atlantic Yards, tried again to acquire the Atlantic Yards through condemnation.

Now, in the era of government subsidized private development, the Atlantic Yards finally got its sports venue, and Brooklyn once again got a team.  But, at what cost?  John W. Polonis analyzes the unique character of New York condemnation law and the broad takings power authorized by Kelo v. City of New London, 545 U.S. 469 (2005).[2]  True, as Kelo reasons, legislators stand in a much better position to adjudge the public benefits of particular economic development projects, but even they have overwhelmingly responded to Kelo by limiting their own constitutional takings powers.

Furthermore, sports teams, leagues, and owners hold an imbalanced bargaining chip in any negotiation regarding development of stadiums and arenas, particularly in urban centers where condemnation is most likely.  Kelo, by broadening the already considerable deference paid to local and state governments regarding takings, has only strengthened the leverage of private developers and heightened the political pressures on local and state governments.  See id.

Judge Thomas’ dissent in Kelo points this fact out:

[A] deferential shift in phraseology enables the Court to hold, against all common sense, that a costly urban-renewal project whose stated purpose is a vague promise of new jobs and increased tax revenue . . . is for a ‘public use.’  . . . In my view, the Public Use Clause, originally understood, is a meaningful limit on the government’s eminent domain power.  Kelo, 545 U.S. at 506.

Indeed, the Second Circuit, appropriately following Kelo in upholding the Atlantic Yards Project, holds that so long as a political branch has some conceivable “public purpose” reason to forcibly transfer property between private parties, such takings are constitutional.  Goldstein v. Pataki, 516 F.3d 50, 65 (2d Cir. 2008).

However, the Kelo Court could have fashioned a rule that defined a “public purpose” as clear and convincing evidence (or at least a preponderance of the evidence) that transfers between private parties would, at minimum, provide an economic benefit to the area affected by the “taking.”  With such a rule, transactional costs and political pressures would certainly not disappear.  However, courts could at least provide a standard by which the lower courts could determine “public purpose.”  Indeed, objective studies showing that stadiums impose a net economic loss on their communities would at least permit governmental agencies not to give so many economic concessions to stadium developers.[3]

Seattle’s Payin’ for It

Chris Hansen stands out then as one who has not sought condemnation to develop an arena in Seattle.  As a hedge fund manager, Hansen likely understands the costs and benefits of his development plan.  So, he likely did not just make a mistake by choosing to purchase land privately rather than go through a condemnation process in order to build his new arena in Seattle.  Instead, many news outlets have reported that Chris Hansen has a powerful loyalty to the city of Seattle and the Northwest region of the country.  Therefore, he has not simply committed to owning an NBA franchise or building a stadium but rather to owning a Seattle-based NBA franchise with a new stadium there.  Indeed, it is hard to find opposition to Hansen’s project at all, let alone of the kind producing the myriad of lawsuits attacking the Atlantic Yards Project.

Hansen’s loyalties take away the most significant bargaining chip of modern day sports franchise owners: “if you do not give me what I want, my team will leave forever.”  No politician wants to be the office holder when the Yankees, Cowboys, or Mets (to name a few franchises getting new stadiums recently) leave town.

Not every owner will or should be as loyal as Hansen is to his host city.  So, what policies can cities, states, and even the federal government adopt in order to ensure a more level playing field between sports stadium developers and city planners?  Professor Marc Edelman offers some interesting suggestions: prohibiting or limiting state lending-of-credit to private entities; public purpose doctrine discussed above; court-ordered expansion of sports leagues; and breaking up the sports leagues.[4]   Each of Edelman’s solutions has its benefits and costs, too lengthy to discuss here.  Furthermore, nothing will serve as a panacea to the issues surrounding urban development of sports venues.  However, observing Chris Hansen’s handling of the Seattle expansion may give municipalities and states context for negotiating new stadiums with private developers.

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[1] See Neil J. Sullivan, The Dodgers Move West (Oxford Univ. Press 1987).
[2] See John. W. Polonis, The Public Purpose of Stadiums Under Kelo, Sports Law Scoreboard (Nov. 30, 2012), http://sportslaw.foxrothschild.com/2012/11/articles/sports-business-and-the-law/the-public-purpose-of-stadiums-under-kelo/.
[3] See, e.g., Dennis Coates, A Closer Look at Stadium Subsidies, The American: The Online Magazine of the American Enterprise Institute (April 29, 2008), available at http://bit.ly/cb6Id1; Marc Edelman, Sports and the City: How to Curb Professional Sports’ Teams Demands for Free Public Stadiums, 6 Rutgers J.L. & Pub. Pol’y 35 (Fall 2008), available at http://bit.ly/VIjXb3.  As an aside, Professor Edelman’s article on the litigation relating to concussions in the NFL will appear in the upcoming issue of the Jeffrey S. Moorad Sports Law Journal, Volume XX Issue 2.
[4] Edelman, supra note 2.

 

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