Peoria Pundit

Editor’s note: Back in November 2004, I wrote articles for what was supposed to be Peoria’s new alternative newspaper, the River City Times. It was a fun gig, although it ended badly. The paper’s not around anymore. I have no idea if the publisher is still around. I am still owed more than $100 for work I did, and the amount is worth trying to get it.

But I was turning out some good work for the plucky little rag, including this piece about an issue that was near and dear to my libertarian heart: Eminent domain. The reason I am reprinting it and the accompanying photos will be made clear.

Enjoy.

In the closing years of the last decade, a rich and powerful businessman came to Fanny Ort and informed her that she would be sacrificing the home she and her late husband Robert raised their children.

Her East Bluff neighborhood was in decline, and the City of Peoria had decided it needed to be redeveloped. Besides, the new shopping center would bring in more property and sales taxes.

“They said either you take it or the city would use eminent domain and then we would have to take whatever they offered,” she said. “We weren’t very happy.”

Today, Fanny lives in a home a quarter of the size.

And a vacant lot sits where her home once stood.

The shopping center is Midtown Plaza, with its anchor store Cubs Foods and a handful of smaller businesses located in the site’s strip mall.

It sits on about five acres of land on the east side of North Knoxville Avenue from East Nebraska to East Richmond Avenue. To make room for the strip mall and the out lots, real estate developer David Joseph had to acquire 64 pieces of private property, mostly homes and several businesses, along Knoxville and Dechman.

Joseph had a potent weapon at his disposal: The threat of eminent domain.

The City of Peoria has used its eminent domain powers at other projects it deemed necessary for economic development: Campustown, O’Brien Stadium, Southtown and several others.

And, the ordinance that created Med-Tech District – a business incubator project that also will include retail development – also allows for the use of eminent domain.

If the city plans to authorize eminent domain seizures for the Med-Tech District, it better hurry. The U.S. Supreme Court will hear a court case that might limit cities’ power to take private property and hand it over to developers.

Eminent domain and the law

The government has always had the power to seize private property, said Bert Gall, an attorney for the Institute for Justice, a libertarian-minded civil liberties law firm that focuses on private property rights and free speech cases. Without it, single property owners could prevent the construction of most public works projects.

It is a relatively new phenomenon to use eminent domain to take private property and then hand it over to a private developer for a profit-making venture, he added.

It all started in the District of Columbia when the government wanted to tear down slums and build new housing, Gall said. The case ended up in the U.S. Supreme Court, which decided in 1954 the project qualified as a “public purpose” and was allowable under the Fifth Amendment to the Constitution, which prohibits taking private property be taken for public use without just compensation.

“The Supreme Court said in its decision that removing the slums would be a ‘public purpose.’ They cracked open the door a bit,” Gall said. Before then, eminent domain was used to take land to build things like roads, bridges, courthouses.

“That was the understanding we lived with right up until that time,” Gall said.

Since then, the definition of what constitutes public use has been “stretched to its limits,” Gall added.

In New London, Conn., the local government wants to take property on 90 acres of land and turn it over to developers to build luxury hotels, condominiums and a fitness center, all for the benefit of the drug company Pfizer, whose world headquarters is located there.

The Institute for Justice represents a landowner who fought to stop the use of eminent domain. The landowner won the first trial, but lost the appeal. Had the U.S. Supreme Court not agreed to hear the cause, the eminent domain seizers would have taken place.

“They obviously thought that the case presented a very important question that needed to be resolved,” Gall said. Arguments will be heard in spring and a decision could be announced in the summer of 2005.

That’s good news for the Institute.

“Our philosophy is that individuals should be able to control their own destiny with as little government interference as possible,” Gall said. “If you work hard to establish a home or a small business, the government shouldn’t be able to take it away from you and give it to someone richer than you with more power than you.”

There are those in Peoria who agree.

Skeptical about TIFS

Gary Sandberg, an at-large member of the Peoria City Council, says the Supreme Court case may be playing a role in a recent shift in plans for the museum project at the former Sears block. That block includes a narrow strip of land that its owners have consistently resisted selling.

New plans call for the museum to be located on that land, owned by Betty and the late Arthur Ehrlich. Previously, retail development would have been located on that strip of land. Presumably, the museum could be considered public use and pass legal muster if the Supreme Court tights eminent domain rules.

Sandberg isn’t a fan of eminent domain for private business development.

“At Midtown Plaza, we’ve got about five acres of land, all within a half-mile of downtown that used to be in 60 plots that now are in one,” he said.

“It’s tragic. The one thing that has never been discussed about the eminent domain process is its hidden result. It’s like taking land from many and putting it into the hand of one person. That’s the toxic result.”

The resulting piece of property is more valuable than the sum of its many parts, Sandberg said.

“And it all belongs to one person and it’s worth a lot of money.”

Sandberg also is a consistent skeptic of tax increment finance districts, such as the ones used to create Midtown and Campustown, both shopping centers developed by David Joseph.

According to Ben Vyverberg, the city issued approximately $5 million in bonds to pay for infrastructure and property acquisition for the Midtown Plaza project. Under terms of the TIF, sales and real estate tax collections that go to various government taxing bodies will be frozen for the life of the bonds, which will run for another 23-26 years depending on possible refinancing.

But the taxes will go up because the development makes the land more valuable, and because of the increased retail sales. Any increase in incoming taxes will be used to pay off these bonds, Vyverberg said.

In return, Joseph agreed to keep a shopping center open at the site for the life of the TIF, Sandberg said. Beyond that, there are no guarantees, he added.

And until the TIF expires, taxing bodies like school, library and sanitary districts will not see one dime of the property tax revenue being generated. It all goes to pay off the bonds.

And Sandberg noted that Joseph – like many big property owners – routinely challenged his property tax assessments.

No apologies

“Is it fair?” Joseph asks of using eminent domain for Midtown and other projects. “The only way I would bid on a development is if I knew the whole thing could be developed. Otherwise, you’re taking a big chance. Campustown and Midtown needed [eminent domain] to ensure the success of making it happen.

“If the city fathers also see it that way, I participate.”

Many residents are glad to see eminent domain come along to relive them of the burden of owning property that can’t be sold because the neighborhood has deteriorated, Joseph said.

“In my experience, I’ve found that 90 percent of the people are pretty willing sellers,” he said. “Ten, maybe 15 percent have a nice home or business. You can’t please 100 percent. But there are some people who are happy to get cashed out.”

The problem with blighted, destitute areas is that no one wants to invest there on their own, Joseph said.

“It takes a city’s investment along with private business, to make that initial investment,” Joseph said.

The neighborhood wasn’t all that bad, Sandberg said.

“Midtown Plaza was not even located in a blighted area,” he said. “It was what we would call a conservation area. It could not even meet the loose conditions under the TIF ordinance.

“These people just got pushed out,” he added. “I totally think it’s the wrong thing to be doing.”

Back was he was employed as a member of the city’s professional staff, Sandberg surveyed the properties that were cleared out to make room for Campustown. It’s an objective process that counts the number of rentals to owner occupied, coding violations and other criteria. A similar process happened along Knoxville and Dechman.

Signs of improvement?

This is what a document on the City of Peoria’s Web site says about the Midtown Plaza TIF:

“The Plan found that 96 percent of the buildings exceed 35 years of age and 91 percent exhibit deterioration and depreciation of physical maintenance and 91 percent exhibit deterioration and depreciation of physical maintenance. Furthermore, the area is in a state of physical decline, evidence[d] from the deficiencies in physical and infrastructure facilities. Additionally, single family homes in the area are increasingly (73 percent) used for rental units, which generally signals instability in the neighborhood.”

This begs a question: What has the TIF done to improve the surrounding area. Not much, apparently. Newspapers continue to report on gang- and drug related crime. Homes and businesses are still boarded.

Joseph thinks the neighborhood is improving.

“I think I cleaned up an ugly situation,” he said. “I think it’s been a benefit to the whole neighborhood.”

He noted that a new O’Reilly’s automotive parts retail store is opening at the nearby site of the former Ponderosa restaurant. He predicted more business development.

“Between the Med-Tech district (part of which lies in nearby) and the Interstate project, we are going to see an almost whole new area.”

Marty Palmer has lived at 1706 N. California for six years.

“No one is investing in the East Bluff and no one has moved to the East Bluff because of it,” said Palmer, president of the East Bluff United Neighborhood Association. Crime is still a problem, two years after Midtown was supposed to clear out the places they lived.

“I can remember when Midtown Plaza came in. It was supposed to solve all the problems here,” he said. “But it hasn’t done anything but provide grocery service to some of the people in the neighborhood.”

Joseph talks up the projects effect on crime.

“At Midtown Plaza, we have not had once incident,” Joseph said. “We had people saying there would be having robberies there all the time. That hasn’t happened once in the two years we’ve been opened.”

Palmer isn’t as sure it’s as crime free of Joseph says.

“I’ve seen them make arrests there in the parking lot,” he said. He and association secretary-treasurer Nancy Kimble-Mitchell say the store used to be open 24 hours a day, but have started closing progressively easier, possibly out of safety concerns.

To be fair, the neighborhood association is a little miffed at Cubs Foods for not supporting the organization efforts to clean up the neighborhood. They went to Cubs Foods seeking food donations for the group’s “Night Out Against Crime” event, held last August.

They were turned down.

While not enthusiastic about Midtown, the organization is far from hostile to it. Palmer did acknowledge the costs to the residents forced out.

“It did solve some of the (crime and abandoned building) problems on Dechman, but some of these people had real investments there,” he said. “If they had a 10,000-square-foot home, what they got (from the sale) wouldn’t pay for a 10,000-square-foot home in Dunlap. It just doesn’t compare.”

Take it or leave it

That’s what happened to Fanny Ort. The silver-haired senior who still speaks with an accent from her native Holland found herself having to settle for far less than she thought she could get otherwise, and her new home cost  $30,000 more than the buyout.

She and her late husband Robert raised four children in four-story home – if you count the attic and the basement, which she does – located near the corner of Dechman and Nebraska. The children attended nearby White Grade School and Woodruff High School.

They moved there in 1968.

Robert was a bit of a handyman, he handled all the wiring and plumbing work on his own.

“I loved that house,” she said. “My husband and I put so much work into it.

“It was a great place to live. There were a lot of children. It slowly went downhill.”

By the mid 1970s, the neighborhood started changed. The single family homes were more and more being broken up into apartments. Before she would leave in 2001, drug dealing became open and there was a shooting on the corner outside their home. She stayed in the home — protected by her security system — except when she went to her car.

After more than 30 years there, she received an ultimatum.

“I got a take-it-or-leave-it offer. He said ‘don’t tell anyone else about it, or it won’t be as much.’”

She would later read in the newspaper that other neighbors had held out longer and sold out for more.

She found a home on Devonshire in a subdivision along Big Hollow Road. The new home is about a quarter the size of her old home.

“I just hate it. My living room is too small, and the kitchen has no counter space and not enough electric outlets,” she said.

Had the city reigned in the absentee landlords and drug dealers that caused the neighborhood’s decline, she might be living there yet, she said.

What’s next?

The use of eminent domain for private development projects didn’t start with Midtown Plaza or even with David Joseph. And, it might not end there.

Although the local news media rarely mentions the fact – if it has ever been mentioned at all – is that the Peoria City Council created the Med-Tech District with the ability to seize private property as well.

“The ordinance says they can use eminent domain,” Sandberg said. “All the definitions and all the criteria are identical to the language used to create Midtown Plaza.

“It (Med-Tech) could easily be converted into a TIF because off the definitions are fungible,” he added.

In fact, a consultant for the Med-Tech District recently made a public statement reminding proponents that the district includes possible retail development as well as the high-tech businesses city leaders envision can be spun off from research being conducted at the city’s medical facilities and federal agriculture research laboratories. It might be a signal to backers that they shouldn’t get their hopes too high.

Sandberg doesn’t think much of the chances this district will create a local high-tech industry.

“The concept is strong, but the timing is a little weak,” he said. “We have some resources here, but I think it’s naive to think that we can compete in the well-established bio-science industry.”

And, the Med-Tech District is huge. Although most of the press coverage has focused on development plans in the West Main Street corridor, a map on the City of Peoria’s Web site shows an area that includes most of central Peoria roughly bordered by Interstate 74 and East Ravine to the North and Martin Luther King Drive to the south, as well as blocks south of the hospitals to Monroe Avenue between Wayne Street and Kumpf Boulevard.

The present

Ironically, the land David Joseph bought from the reluctant Fanny Ort isn’t being used for anything.

It’s part of now a vacant lot, sparsely covered with grass and exposed rocky ground. Signs cheerfully announce that 5,400 square feet are available for office or retail development.

It’s a depressing sight, symbolic of the continuing decline of the neighborhood despite the city’s best effort to improve it by betting rid of some of the neighbors.

“It was a great place to live,” she said.

This entry was posted on January 14, 2009 at 12:57 am and is filed under Local with tags david joseph, eminent domain, Gary Sandberg, midtown plaza. You can follow any responses to this entry through the RSS 2.0 feed Both comments and pings are currently closed.