Monday, December 21, 2009

Financing Problem With Atlantic Yards?

Amy Lavine of Albany Law's Government Law Center has uncovered an interesting issue regarding the bond financing for the Atlantic Yards project.  The Atlantic Yards Report has a detailed post on the issue.  Here's a taste:

The issue was unearthed by Amy Lavine, a staff attorney at the Albany Law School's Government Law Center who has been studying public authorities. (She has been advising Perkins on eminent domain issues as part of her job and also offered pro bono help in off-hours for Develop Don't Destroy Brooklyn.)

"We've been trying to reform public authorities for the last few years," Lavine explained, citing the legislature's recent--and finally successful efforts. "So it's really important that we control these entities and make sure they're acting in a transparent and accountable way."

Typically, public authorities have to get their bonds approved by the Public Authorities Control Board--the governor, Senate Majority Leader, and Assembly Speaker hold the controlling votes--and the state Comptroller.

The BALDC was authorized under § 1411 of the Not-For-Profit Corporation Law. The PACB approves the financing and construction of any project proposed by the ESDC or the sibling Job Development Authority, which created the BALDC.

(The BALDC is the Issuer in the chart at right, from the Barclays Center Arena Preliminary Official Statement prepared by Goldman Sachs. Click to enlarge.)

"ESDC apparently did not want to go through this process," she said, and thus it created the BALDC, to which it will lease the arena land. The BALDC in turn will lease the land to the private company that will manage the arena.

The ESDC, she said, does have the authority to issue bonds, but "by skirting the process that's supposed to be followed, it seems that the bonds may have been issued illegally."

"Basically, the LDC is not a public entity," she said. "And it's controlled by different sections of the tax code in New York State. Either ESDC didn't think of the implications of this or they didn't think anyone would notice, because it is rather esoteric. It seems that, under the tax section that applies to the LDC, they're not eligible for exemption from property taxes." (The LDC is subject to §420-a of the property tax code.)

According to the recent Court of Appeals decision in Lackawanna LDC v. Krakowski, the LDC leased property to a for-profit manufacturing company and the property was considered taxable, because manufacturing and economic development is not a tax-exempt purpose. Had the Legislature intended a blanket property tax exemption for LDCs, it would have done so expressly, as it has in other contexts, the court said.

And if they're not exempt from property taxes, she said, there's no way to divert property taxes to pay for the arena bonds, via PILOTs (payments in lieu of taxes), and so nothing backing the bonds.

"To go forward, I believe that the process has to start over and ESDC will have to do this properly and get it reviewed by the Public Authorities Control Board and the state Comptroller," she said.

And that means they'd have to review the financial merits of the bonds, which hasn't happened, she said.

Ben Barros

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December 21, 2009 in Takings | Permalink | Comments (0) | TrackBack (0)

Saturday, December 19, 2009

Selmi on Land Use Regulation by Contract

Daniel P. Selmi (Loyola LA) has posted Land Use Regulation by Contract on SSRN.  Here's the abstract:

In recent years the use of contracts, known as development agreements, to establish land use regulations has grown rapidly. Both municipalities and development interests have found it in their interests to support the increased use of these agreements. This article, however, suggests that the use of contract as a means of making land use decisions marks a key turning point in the evolution of land use regulation. The article examines the effects of such contracts on four sets of norms that underlie the current land use system. The article concludes that contracts have important effects on whether local governments comply with these norms in making land use decisions.

Ben Barros

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December 19, 2009 in Land Use, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Friday, December 18, 2009

Adams on Homeownership

Kristen Adams (Stetson) has posted Homeownership: American Dream or Illusion of Empowerment? on SSRN.  Here's the abstract:

In this Article, I endeavor to show that because Americans value homeownership so much — in fact, more than we should — we have placed ourselves in an untenable position as a country and now find ourselves in the midst of a well-documented housing crisis. In addition, we have used the primacy of homeownership as an excuse not to fulfill our country’s commitment to provide housing assistance to those persons who need it most. We have done this in part by undervaluing quality, affordable rental property (and quality renters) just as we have overvalued homeownership (and homeowners). Some have used the word “myth” in talking about the American view of homeownership; however, the word I prefer is “illusion,” which I intend to be less pejorative while still acknowledging that homeownership does not always deliver the benefits it promises, particularly for lower income homeowners. This Article is not particularly concerned with the question of who is to blame for the current housing crisis, because I believe fault in this context is too complicated to be laid at the feet of just one party or another. Part II of this Article examines the median American household, mortgage, and house, concluding that many Americans cannot afford the homes they have purchased. Next, Part III addresses the question of why our country overvalues homeownership to such an extent that it now finds itself in this position. In doing so, Part III examines the many benefits that homeownership supposedly provides to both individuals and society. Part IV contrasts society’s customary treatment of homeownership as a virtue with its stigmatization of renters, concluding that the latter is unfounded. Part IV also explores how the very interests that have promoted homeownership have also benefited most from its growth. Part V considers several factors that contributed to the real estate boom that culminated in the mid-2000s, including homeowners’ treatment of mortgage debt as wealth, financing options such as no-down-payment and interest-only loans, increased utilization of home equity loans, and certain features of subprime lending. Part VI concludes by suggesting that universal homeownership does not provide the benefits Americans have come to expect from it and proposing four steps policymakers should follow in creating healthier, more sustainable housing policy.

Ben Barros

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December 18, 2009 in Property Theory, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Smith on Institutions and Indirectness in Intellectual Property

Henry E. Smith (Harvard) has posted Institutions and Indirectness in Intellectual Property on SSRN.  Here's the abstract:

Intellectual property rights are controversial because on first glance they present a disjunction between the purposes they serve and the mechanisms they employ. New Institutional Economics (NIE) suggests that for reasons of transaction costs, broadly conceived, institutions are imperfect and their imperfections may nonetheless be cost-effective. This Article draws on the NIE to present a theory of the similarities and differences between IP and regular property, and sharpens some empirical questions relating to the advisability of property-style IP protection. IP is characterized by two types of indirectness that need not both be present in regular property. In first-order indirectness, the resource to be measured is difficult to meter, leading to the use of rough proxies. Variation in outcomes along dimensions of the resource – for example, animals supported by grazing land – show high variance, i.e. risk. Second-order indirectness involves uncertainty or ambiguity about the return from a resource, in terms of how to employ it or even to carve it up – for example choosing crops or deciding between agricultural and residential subdivision. The greater the uncertainty, the more attractive, in terms of maximizing option value, it is to delegate decisions over these dimensions of resource activity to those close to the resource. Both types of indirectness point to advantages that in theory a modular structure of rights can provide: difficulty in measuring dimensions (first-order) or identifying the relevant dimensions (second-order) suggests that a given activity be placed within a module and control over local remodularization be given to private actors. Because information is nonrival, the benefits of modularity must be traded off against the benefits of exclusion costs. In both patent licensing and remedies, an NIE approach to property that does not emphasize information costs has difficulty explaining patent rights as opposed to other internalization and coordination devices. The Article applies the information-cost theory to IP licensing and patent remedies. Licensing implements a governance strategy that enriches the interface between IP rights in limited ways. Injunctive remedies dovetail with a modular structure of exclusion rights, and the traditional equitable approach to injunctions provides for targeted safety valves for problems relating to lack of notice and reasonable reliance by potential infringers.

Ben Barros

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December 18, 2009 in Intellectual Property, Property Theory, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Thursday, December 17, 2009

Epstein on Heller's Gridlock Economy

Richard A. Epstein (Chicago) has posted Heller's Gridlock Economy in Perspective: Why There is Too Little, Not Too Much, Private Property on SSRN.  Here's the abstract:

This Article critiques Michael Heller’s important contribution in the Gridlock Economy. At no point does it take the position that gridlock, or the associated anticommons, is not a serious issue in the design of a legal system. But it does insist that gridlock is not the major source of social dislocation, or that private ownership is the major source of gridlock. More concretely, the articles examines the other important sources of economic distortion that are unrelated to economic gridlock from private action. These include the use of excessive government subsidies (as with health care), misguided government licenses (as with broadcast licenses); the unwise use of government power to create gridlock situations (as with employment law); the excessive role of government permitting (as with real estate development); and the use of creative private techniques to overcome gridlock (as with patent licensing as a way to combat the patent thicket). Thereafter, the Article explains how traditional common law rules did a better job in controlling for gridlock than many current initiatives, by narrowly defining the class of actionable harms to exclude competitive loss, blocked views, and hurt feelings. It closes with an explanation of how broad definitions of harm slow down decisions in the public sector, thereby impeding the use of the eminent domain power that could otherwise respond to gridlock issues.

Ben Barros

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December 17, 2009 in Property Theory, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 16, 2009

Lehavi on Fennell's Unbounded Home

Amnon Lehavi (Interdisciplinary Center Herzliyah - Radzyner School of Law) has posted Is Law Unbounded? Property Rights and Control of Social Groupings on SSRN.  Here's the abstract:

This review essay follows up on a suggested model for resolving problems of neighborhood externalities and exclusionary associational patterns in today's metropolitan areas through a property rights regime of "alienable entitlements," as articulated by Lee Anne Fennell in The Unbounded Home (2009). The essay frames the model as promoting a groundbreaking approach to the fundamental quandary over the role of law as a tool for broad-based social change, which has been at the center of the law and society literature.

The essay asks if legal rules can fully absorb the multiple types of societal effects that influence the nature of contemporary homeownership. It then assesses more pointedly the normative desirability of controlling metropolitan-wide social exclusion through alienable property entitlements, identifying an internal tension between Fennell's support for a market-like process and her pursuit of an objective ideal that impacts the analysis. The essay concludes by suggesting that even if one accepts the tentative blueprint for addressing social engineering issues through alienable legal entitlements, it is unclear if such an approach would practically change the ways in which the social dynamics of groupings and exclusion currently take place.

This analysis aims at offering broader insights for socio-legal inquiries beyond the above particular themes of examination. Its central arguments are not limited to a certain ideological perspective - be it the promotion of social justice or of utilitarianism - or to a particular type of social concern. The essay aspires to broadly illuminate the complex ties between law and social studies, and the boundaries of law in controlling social conduct.

Ben Barros

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December 16, 2009 in Property Theory, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Hamilton on the Unconstitutionality of RLUIPA

Marci A. Hamilton (Cardozo) has posted The Constitutional Limitations on Congress's Power Over Local Land Use: Why the Religious Land Use and Institutionalized Persons Act is Unconstitutional on SSRN.  Here's the abstract:

The purpose of this Article is to bring to the forefront of discussion bedrock principles of land use law, which have been ignored to date, and to place RLUIPA analysis on a more constitutionally sound base. The Article is divided into three main sections. Section I recounts the history of land use principles from the drive to ordering urban centers in the seventeenth and eighteenth centuries to the development of the rich amalgam of modern practices that now constitute local land development and planning. Section II examines the Supreme Court’s constitutional doctrine of land use law and describes the federal laws that directly or incidentally affect local land uses and shows that these few are cabined within narrowly circumscribed arenas or in fields in which federal coordination of the states is necessary. These laws are readily distinguishable from the sweeping effect of RLUIPA on local land use determinations. Section III then looks closely at Section 2(a), to show how it impacts local decision-making, and operates as a radical and careless interference with settled constitutional principles. In addition, it points out that state courts have a history of rooting out invidious discrimination against religious landowners and invalidating discriminatory or arbitrary zoning and permitting decisions.

Ben Barros

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December 16, 2009 in Land Use, Recent Scholarship, Takings | Permalink | Comments (0) | TrackBack (0)

Lavine on Berman v. Parker

Amy Lavine (Albany Law School) has posted Urban Renewal and the Story of Berman v. Parker on SSRN.  Here's the abstract:

The Supreme Court’s 1954 decision in Berman v. Parker serves as the foundation for much of our modern eminent domain jurisprudence, including the controversial 2005 Supreme Court decision in Kelo v. New London. But the story behind the case starts well before 1954, and it carries implications that are relevant today. It’s a story that played out in many cities across the nation, just as it did in Washington, D.C., where the case took place. It’s the story of urban decay and urban renewal.

This working paper covers the history of redevelopment in Southwest Washington, from the turn of the century to today. It discusses the City Beautiful movement and progressive housing reform in Washington, the rise of public housing and slum clearance policies, the urban renewal planning process as it played out in Southwest D.C., and the demise of urban renewal as a federal policy in the wake of its failures. The conclusion points out while we may approach contemporary economic development projects differently than we approached urban renewal in the 50s and 60s, much can still be learned from the story behind this landmark case.

I learned a lot from reading this article.  Highly recommended!

Ben Barros

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December 16, 2009 | Permalink | Comments (0) | TrackBack (0)

Eminent Domain at the Play Table

Using eminent domain to take legos!  With real due process problems.

Ben Barros

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December 16, 2009 in Takings | Permalink | Comments (0) | TrackBack (0)

Friday, December 11, 2009

Peñalver and Katyal's Property Outlaws

Yale University has just published Property Outlaws, by Eduardo M. Peñalver (Cornell) and Sonia K. Katyal (Fordham).  Here's the burb from the YUP website:

Property Outlaws puts forth the intriguingly counterintuitive proposition that, in the case of both tangible and intellectual property law, disobedience can often lead to an improvement in legal regulation. The authors argue that in property law there is a tension between the competing demands of stability and dynamism, but its tendency is to become static and fall out of step with the needs of society.

The authors employ wide-ranging examples of the behaviors of “property outlaws”—the trespasser, squatter, pirate, or file-sharer—to show how specific behaviors have induced legal innovation. They also delineate the similarities between the actions of property outlaws in the spheres of tangible and intellectual property. An important conclusion of the book is that a dynamic between the activities of “property outlaws” and legal innovation should be cultivated in order to maintain this avenue of legal reform.

Ben Barros

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Eduardo Moisés Peñalver is a professor at the Cornell Law School.

Sonia K. Katyal is a professor of law at Fordham Law School.

December 11, 2009 in Books, Property Theory, Recent Scholarship | Permalink | Comments (2) | TrackBack (0)

Wednesday, December 9, 2009

How Do You Value Damage to a Tree?

Inquiring minds have wanted to know since Tiger Woods hit his neighbor's tree.  Christopher Beam explains at Slate.

Ben Barros

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December 9, 2009 in Real Estate Transactions | Permalink | Comments (0) | TrackBack (0)

Friday, December 4, 2009

New York Court Rejects Eminent Domain for Columbia Project

An intermediate appellate court in New York has rejected the use of eminent domain for a project associated with Columbia University.  The New York Times has a story on the case, and Ilya Somin comments at the VC.  There seems to be some conflict with the NY Court of Appeals' recent decision in the Atlantic Yards case.  Particularly because the intermediate appellate court's decision was 3-2, this case is quite likely to go up to the Court of Appeals.

Ben Barros

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December 4, 2009 in Recent Cases, Takings | Permalink | Comments (0) | TrackBack (0)

Thursday, December 3, 2009

New York City Bans Storefront Gates

Just in time for those of you looking for an exam question on regulatory takings, comes this New York Times story on the New York City Council's regulation of storefront gates.  But the ban on gates that completely block the view of the store until 2026.

A couple of  key quotes from store owners:
“If the government pays, then O.K.,” said Mr. Lee, the owner of the shop, who was not surprised to learn that the government would not, after all, be covering the cost of a new gate. “They make law, law, law, and people’s life is more difficult.”

"If the government pays, then O.K."  That may be the title of my next article.

And this, about the long period to amortize the cost of the current gates:

[Frank Caputo] has had the second gate — a $4,000 model with an electric motor that allows him to turn a key or press a button to raise or lower it — for about two years, and he figured that by 2026, when the ban fully kicks in, he would need to replace it, anyway. “If they would have told me I had six months to replace it, I would have been upset,” Mr. Caputo said.

Alfred Brophy

December 3, 2009 | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 2, 2009

Of Hotdog Stands and Beach Parties -- Oral Argument in Stop the Beach

The Supreme Court heard oral argument this morning in Stop the Beach Renourishment v. Florida DEP.  If you are new to the case, this post summarizes what it at stake.  My overall view of the case hasn't changed much after hearing oral argument.  I will update this post with notes from oral argument throughout the afternoon.  For now, here are some quick thoughts:

(1)  Justice Stevens was not on the bench.  Informed comment around the Court seemed to be that he has recused himself because he owns Florida beachfront property.  This is a potentially big deal because (a) Justice Stevens has been the most vocal advocate of the government position in the Supreme Court's recent regulatory takings jurisprudence and (b) because it increases the chances of a 4-4 decision.

(2) I'm really not sure how this case is going to come out.  There was a lot of support for the general idea of judicial takings on the bench, and Florida's counsel conceded that the right case could present a judicial taking.  The doubts are about whether there was a judicial taking in this case.  A number of justices who the petitioner need to win in this case -- the Chief Justice, Justice Scalia, and Justice Kennedy, all asked some skeptical questions.  Not that skeptical questions mean that much in this context.

More, including an explanation of the title of this post, soon.


Okay, the transcript of oral argument is now available on the Supreme Court's website.  So I won't bother doing a blow-by-blow of the argument.  The title of the post comes from the hypotheticals that the members of the Court were playing around with.  The hot dog stand stuff starts pretty early with a question from Justice Sotomayor. 

Having thought about it a bit further, here are my thoughts on how the case comes out. First, the usual caveat that predicting case outcome based on oral argument questions is a fool’s game.  So call me a fool – here’s my guess.  I think that the Chief Justice and Justices Scalia, Alito, and Thomas are likely to be sympathetic to the Petitioner’s case.  (As usual, Justice Thomas didn’t ask any questions, so this is just a guess based on his general pro-property owner tilt in takings cases).  This seems to me to be a best-case for the Petitioner, and even these four votes might not be solid.  Justice Scalia, in particular, asked some questions that seemed to suggest that he thought that there might be some basis in Florida caselaw for the Florida Supreme Court’s decision.  Justice Scalia also wasn’t as aggressive in pressing Respondent’s counsel as I would have expected. 

That’s only four votes for the Petitioner, and the Petitioner needs five to win.  Justice Kennedy would be the most likely fifth vote, but he asked a number of questions that suggested that he is skeptical of Petitioner’s claims in this particular case.  He commented at one point that one Florida case that Petitioner had cited didn’t help Petitioner’s case.  He also suggested that this was a close case based on Florida law – if this is his view, then it is hard seeing him finding that this was a judicial taking.  Finally, Justice Kennedy asked a fairly skeptical question about what the standard would be for judicial takings.  This gist of the question was whether the standard would be based on a pile of adjectives like “sudden” and “unexpected” in describing a change in state property law.

Justice Breyer was fairly aggressive in trying to help Respondents’ counsel out during the argument.  As expected, Justice Ginsburg also appeared to be sympathetic to the government.  Justice Sotomayor asked some good, interesting questions, but these questions didn’t suggest to me that she was leaning either way.  Still, if the Petitioners appear to be having a hard time with Justice Kennedy, it seems likely that they will have difficulty getting Justice Sotomayor.

All of this said, there seemed to be some widespread concern among the members of the Court about judicial overreaching, and there didn’t seem to be a lot of hostility to the general idea of judicial takings.  Justice Breyer raised the hypothetical of a state Supreme Court suddenly holding that the state could put a power plant on someone’s private property without compensation, and phrased the question in a way that made it seem that he thought that this kind of judicial action would be an obvious taking.  The Chief Justice presented a hypothetical in which a state legislature passes a law, the state Supreme Court holds that it is a taking, a person runs for election to the state Supreme Court on a platform opposing the takings holding, is elected, and becomes part of a majority that changes the law to eliminate the takings problem.  This was very interesting hypothetical on a number of levels, but at the least it suggested that there was a set of facts that the Chief Justice thought would constitute a judicial taking.

So one possible outcome is an opinion of the Court that supports the general idea of judicial takings, but finds that there wasn’t one in this case.  At a panel held at Georgetown Law after the oral argument, Richard Lazarus made an interesting observation that Justice Stevens’ absence could be very important here.  If the Petitioners lose, and the Chief Justice is in the minority, then the opinion assignment would typically go to Justice Stevens.  With Justice Stevens recused, the senior justice in the majority may be Justice Kennedy, or even Justice Scalia.  Presuming that the senior justice keeps the opinion, then either Justice Kennedy or Justice Scalia might be expected to write an opinion more favorable to the general idea of judicial takings than Justice Stevens would.

Given the general lack of hostility on the Court to the idea of judicial takings, I’d be surprised to see an opinion that closed off the possibility of judicial takings entirely.  The more likely outcome would be an opinion that holds that this case didn’t present a judicial taking, and leaving the question of whether another case could constitute a judicial taking open.  And, of course, the possibility still remains that the Petitioners will get their fifth vote, and the Court will find a judicial taking in this case.

Ben Barros

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December 2, 2009 in Recent Cases, Takings | Permalink | Comments (4) | TrackBack (0)