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EDA's Follies: Part One
April 1, 2006: April Fools Day is the perfect time to kick off a series about the follies of eminent domain abuse. Aka EDA. Eminent domain, also called "taking" or "condemnation", is the right of government to seize private property in the name of what the U. S. Constitution calls "public use". Public use has traditionally been narrowly defined. Think construction of schools, parks, bridges, etc. Yet in the current United States of Real Estate, eminent domain has become a popular redevelopment tool wielded by local governments and private developers. A practice widely referred to as "eminent domain abuse".

EDA got a boost in June, 2005, when the U.S. Supreme Court, delivered its decision re Kelo v. New London. The Connecticut city of New London had condemned the low income neighborhood of Fort Trumbull, in order to make way for an upscale development project. The city's idea of "public use" was a projected rise in property tax revenues, and enhancement of nearby property values. The Supreme Court, in a close ruling, let this definition of public use stand. Though the Court's decision has tended to be seen as a ruling on the constitutionality of EDA, it was in fact, a ruling in favor of letting local governments define public use. The EDA hot potato was tossed back into local laps.

Eminent domain at the service of development is vastly unpopular with the American people. Yet many politicians (particularly municipal ones) have come to rely on EDA. Major projects are pending that depend on it. Battles are raging at community levels across the nation and legislators are rushing to hammer out anti EDA laws. Many of those laws will have loopholes through which an army of bulldozers will roll. More individuals and communities will resist. Thanks to the Supreme Court's non-ruling as to what constitutes "public use", the EDA wars will be with us for some time.

That's the national stage. Meanwhile, on myriad homefronts, EDA's follies are colored by local facts of life.

O Buh Albany!

Park South in Albany, New York is a small, basically blue collar neighborhood with a big institutional neighbor. University Heights is a conglom of legal and medical facilities and colleges. Due to proximity, and the property holdings of one of its members, University Heights is considered a stakeholder in the revitalized future of Park South. Which does need a fix up, due largely to the toll taken by slumlords and drug crime.

Despite the presence of drug dealers in Park South, people disabled by addictions who live in the neighborhood have one major advantage. Potential salvation is just a short walk away, since a number of nearby medical facilities offer rehab programs. As for Park South's slumlords, the biggest one owns housing all over Albany. In Park South, 18 of his multi-family buildings are crammed onto a few blocks. Others are scattered throughout the neighborhood. Many (though not all) of the slumlord's tenants are Section 8. A HUD voucher program that delivers rent payments directly into the hands of landlords. Section 8 is income adjusted; if a tenant's income goes down, HUD pays a larger share of the rent. In Albany, the Albany Housing Authority (AHA), administers the program. In advertising aimed at landlords, the AHA claims to run criminal checks on all Section 8 tenants.

In the small (9 city blocks) neighborhood of Park South, the concentration of buildings owned by the slumlord had a major impact. Property values sank. Many long time homeowners, businesses, and tenants left. Those who remained complained to city hall for more than 10 years about drug trade, violence, neglected buildings, and related issues such as 24/7 noise and garbage strewn streets. The response from Albany Mayor Jerry Jennings was perceived as wimpy wimpy wimpy.

The big guy had his reasons. That pesky slumlord was too legally tough to dislodge with anything so simple as a perfect storm of building and public nuisance violations. (Though this approach recently closed down one of his buildings in another neighborhood.) Besides, drug trade in Albany was the fault of Mayor Rudy Giuliani in New York City. Crime fightin' Rudy had chased/shipped NYC's addicts and dealers upstate. Into programs and housing which profited people in and around Albany. Many of whom hob-nobbed with Jennings in his official capacity.

But why look back on the bad? Mayor Jennings eventually got on the stick, mustered his quasi-public local development forces, and decided to revitalize Park South by bulldozing and rebuilding it. Property owners who didn't want to sell would answer to eminent domain. Though the scorched earth plan was never officially announced, it was chortled by various city officials in conversations with residents who'd done a lot of complaining. And the Albany Common Council, at the behest of the Jennings administration, declared Park South an official urban renewal area. Which flung wide the door for the use of eminent domain.

The official Park South Plan, as put forth by the Jennings administration and the quasi-public forces of local development, was primarily a vision of student and rental housing. The vision to be actualized by a private developer, with an unspecified amount of assistance from public funds and private investment. Though Park South is already choc-a-bloc with renters, the new rental housing would be better than the old. And student housing would meet the needs of the stakeholders in University Heights, as would new facilities for one of its medical entities.

Many Park South residents objected to the eminent domain aspect of the plan. They wanted change-- but didn't want land grabs or whole scale bulldozing. BBL Development Group, the Albany based company who seemed the likely preferred developer for the project, got spooked by the public outcry and pulled out of the running. (Thankfully this didn't affect their belief in Mayor Jennings' political positions; BBL continues to be counted among his supporters in the development community.) WinnDevelopment then stepped up to the plate. WinnDevelopment is one of the WinnCompanies. Winn develops, acquires, and manages multi-family and mixed income properties throughout the United States. They're heavily into affordable housing and have been expanding their holdings in New York State. WinnCompanies is based in Boston, as is WinnDevelopment. The latter has a regional office in Rochester, New York.

Apparently, WinnDevelopment's project developer has been courteous in her dealings with Park South residents and responsive to neighborhood input. Winn seems inclined to an in-fill approach to redevelopment, rather than kill-to-cure. Winn doesn't have a rep for EDA, and have stated they won't use eminent domain on owner occupied properties. However, they haven't ruled out using it on non-owner occupied property-- but only if necessary.

Does this mean that Park South's most prominent slumlord will be forced to accept buy-outs for his buildings? At the kind of rock bottom values his properties helped establish?

According to the 03/26 Albany Business Review, a deal with Mister Slumlord for the 18 multi-family buildings that cluster on a few blocks in Park South, has already been struck. It doesn't sound cheap. Winn will be asking state taxpayers for nearly 2 million dollars in affordable housing loans. Which will be combined with almost one million dollars worth of affordable housing tax credits. (Presumably from the federal government, from whence affordable housing tax credits flow.) WinnDevelopment's project manager says the combo of government loans and tax credits will generate equity loans from private sources. In the Business Review's words, "...raising the total price tag of the purchase and renovations (of the 18 buildings) to an eye-popping $10 million, or a little over half-million per building." Another quote: "A check of city records show the properties..are generally assessed at about $50,000."

If Winn's application to proceed is approved by the state Division of Housing and Community Renewal (the decision will be made by August) it will be interesting to see how that projected half million per building breaks down between acquisition and renovation, which financial institutions supply the equity loans, and whether those loans are sold as investments. Also of interest is how other, non-occupying property owners are treated. Hopefully, Park South's more responsible landlords won't be the ones to receive the cheap-o offers the threat of eminent domain so often facilitates.

One last quote from the Albany Business Review. When reeling with "sticker shock" re the 10 million dollar price tag for compensating, and renovating the properties of, the slumlord who did so much to drive Park South into the ground, it's important to remember the words of Andrew Harvey, economist at the New York State Public Service Commission and President of the Park South Neighborhood Association: "Even though it sounds outrageous on the face of it, without that we may not be able to bring this community back."

Pondering this bit of economic wisdom may help quell the thought that if Albany Mayor Jerry Jennings had broken out the building codes, nuisance violations, or possibly some HUD enforcement, ten years ago, Park South's most prominent slumlord might now be living in someone else's affordable housing. And the threat of EDA would never have been raised and held over the heads of the good people of Park South.

Upcoming EDA Follies:
Ratapolis: In Brooklyn, Develop Don't Destroy (DDD) rassles the Empire State Development Corporation (ESDC) over a case of conflict of interest./Ho Ho Hoboken: New Jersey does EDA like nobody else. And more often./Get A New Plan Stan: News from New London, Connecticut. Aka EDA Central. An upside down American flag in the devastated neighborhood of Fort Trumbull says it all.

Carola Von Hoffmannstahl-Solomonoff

"Imagine landlords face severe penalties if they tolerate crack dealing from their buildings."

Number 11 of 20 "imagines" presented on an agenda by the Park South Walk & Watch, for a Park South Neighborhood Association meeting 09/25/02.

Sources include but are not limited to:

"Park South Project spurs interest, hope," Michael Demasi, The Business Review (Albany), 03/26/06

"Apartment Dispute Back in Court", Brian Nearing, Albany Times Union, 06/16/05

"Developer withdraws Park South bid," Brian Nearing, Albany Times Union, 05/13/05

The CDARPO News, Capital District Association of Rental Property Owners, 01/05

"Park South Redevelopment Plan, Implementation Action Steps," Design Collective 03/30/04

By-Laws of the Capital District Association of Rental Property Owners, Inc. 2004

Transcript, Park South Neighborhood Association (PSNA) Meeting, 10/23/02

WinnCompanies Website, http://www.winnco.com/

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Copyright (c) 2006 by Carola Von Hoffmannstahl-Solomonoff. This material may be freely distributed subject to the terms and conditions set forth in the Open Publication License. This license relieves the author of any liability or implication of warranty, grants others permission to use the Content in whole or in part, and insures that the original author will be properly credited when Content is used. It also grants others permission to modify and redistribute the Content if they clearly mark what changes have been made, when they were made, and who made them. Finally, the license insures that if someone else bases a work on this Content, that the resultant work will be made available under the Open Publication License as well.


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