ABSTRACT

This paper examines the shifting nature of the purpose, power, and public acceptance of American redevelopment authorities (RDAs) over time. By presenting a historical examination of broad social, legal, and market developments throughout the 20^th Century, I argue that the RDA model has failed to evolve as quickly as its operating environment. At present, these entities face an identity crisis of sorts: their mission lies somewhere between the public and private sectors. The paper subsequently presents a summary of the resultant critiques relating to the independence, autonomy, transparency, and often ill-defined purpose of the modern RDA. These critiques notwithstanding, the final section argues that RDAs have the ability to play a pivotal role in managing the physical fabric of cities as we enter an era increasingly complex interactions of private property rights.

Introduction

The stewardship of a vibrant urban fabric is a critical component for any comprehensive economic development program. Over time, policy makers have realized that some urban areas have evolved to the point of private market dysfunction: the transfer and redevelopment of strategic parcels is often unpalatable or fiscally impossible for the powers of the private market. Nationwide, public and quasi-public redevelopment authorities (RDAs) have emerged to facilitate productive use of these challenging areas, ostensibly for the public good.

To overcome the hurdles encountered by the private market, these authorities often possess broad powers to seize property, circumvent regulatory processes [1] , and source vast amounts of funding. Yet, despite their clout, RDAs have not evolved as quickly as the frameworks in which they operate. Throughout the century-long history of the modern RDA, there have been considerable changes in property rights legislation, government, societal views, and the role of capital markets. Such changes prompt questions into the role and relevance of the modern redevelopment authority. This paper seeks to explore these issues by tracing the changing role of RDAs in America. It begins with an introduction into the background of redevelopment authorities. Subsequently, I present an analysis of the evolution of 20^th Century urban redevelopment and how this evolution shaped the mission of the common RDA. The final section assesses the modern redevelopment authority model, summarizing common critiques and drawing conclusions.

Section I: A Brief History of Redevelopment Authorities

Since their establishment, a comprehensive definition of a public authority the dark continent of American politics - has remained rather elusive (Leigland, 1994, p.522). There is a lack of consensus within academic literature regarding the fundamental characteristics of these entities. Relying in part on Axelrod, this paper will consider a redevelopment authority as having the following features: (i) a distinct corporate entity, separate from government; (ii) a management structure that is comprised of a publicly-appointed board of directors, but is otherwise exempt from government control; (iii) the power to issue tax-exempt bonds; (iv) the ability to construct and operate capital projects; and (v) the power to enter into contracts, own, and transact property (Axelrod, 1992).

The birth of this type of public corporation can be traced back prior to the founding of the United States. Trading companies, such as the East India Company, were the predecessors of the current breed. They were chartered by the king of England but subscribed private shareholders. In America, this form of government corporation arose in the 19^th Century in response to industrial expansion and the need for comprehensive infrastructure provision (Mitchell, 1999). A more recognizable form gained prominence during the Progressive Era (early 20^th Century). In particular, President Woodrow Wilson proposed a series of major government corporations immediately upon his election (Mitchell, 1999). The Port Authority of New York and New Jersey established by a 1921 interstate compact to coordinate shipping activity - is widely recognized as the first modern public authority (Leigland, 1994). The Great Depression saw a rise in public authorities and corporations to promote job creation (i.e. The Tennessee Valley Authority) and to secure the financial industry (i.e. The Federal Deposit Insurance Corporation).

Redevelopment-specific authorities proliferated widely during the post-WWII period (1946-1960). The confluence of returning veterans, expanding families, the rise of mass production/consumption, and the rise of new technology created a demand for the construction of a new version of the American Dream. During this period, hundreds of local public authorities were established for the purposes of slum clearance, housing creation, and expansion of the federal highway system (Axelrod, 1992).

Because this intensive expansion was taking place in addition to the on-goings of everyday government, the authority management/operations model was well-positioned to fill the void. First, it could operate quickly, avoiding extended bureaucratic processes. Further, the authority could devote a dedicated staff to steward a given project, as opposed to coordinating a number of disparate state and municipal departments. Finally, its often contentious public actions were mostly shielded from the political process.

Initial advocates of redevelopment authorities were a diverse group, comprised of real estate developers, politicians, urban planners, and progressive city reformers (Pritchett, 2003). At this time, the ideals of planning were gaining wide traction throughout the United States and there was a broad idea that, through the application of technology, the city could become a sanitized, futuristic metropolis (Graham and Marvin, 2001). With this public sentiment evident in cities across the nation, it is unsurprising that redevelopment authorities quickly became entrenched within the political framework.

Section II: The Rise of Urban Renewal and the Evolution of Property Rights

Mid-20^th Century urban renewal advocates became aware that constructing this new version of the city would require uprooting much of the existing urban fabric both the built environment and the people who lived there. Whereas similar rebuilding efforts in Europe were undertaken by the government, the general American sentiment was opposed to such centralized state intervention in the property market (Pritchett, 2003). Resting on the laurels of capitalism, these quasi-independent RDAs emerged as the perfect compromise: private rebuilding corporations that had government powers. It was a bold step towards privatization, all the while leaving one foot in the realm of government support.

To execute this vision, two components were necessary, the first being funding. The passage of the Housing Act of 1949 provided municipalities with two-thirds of the project funding for the redevelopment of blighted areas. The Housing Act of 1954 further expanded this funding to encompass non-residential projects (Avila and Rose, 2009). With large sums of available money, local leaders had an attractive incentive to remake their cities on the dime of the federal government.

The second component was power. Redevelopment authorities were widely given [2] the power to circumvent local entitlement processes and to exercise eminent domain, one of the most potent tools held under state constitutions. By definition, eminent domain is the power of the state to take private property for public use, with just compensation ( 26 Am Jur 2d, 2010) . The state or its designee, after attempting to negotiate the voluntary sale of a property, may serve notice of condemnation. Eminent domain hinges on two fundamental requirements: (i) its exercise must be necessary for the execution of a given project and (ii) the project must be for a public use (US Const. Am. 5). Both of these concepts are fundamental to the protection of personal property rights from the sovereign, while giving the state power to take property (Jones, 2000).

Prior to the 20^th Century, eminent domain was generally viewed by the public as a benign power used to accommodate infrastructure growth and expansion ( Wilder and Stigter, 1989) . Quite literally, the second requirement of eminent domain was almost always satisfied through the provision of infrastructure systems that were physically accessible to the public (i.e. railways or highways). Even more innocuously, this power was usually exercised over undeveloped private holdings, avoiding the moral and societal complications of condemning housing structures and viable businesses.

The clear distinction between what was considered public and what was considered private became ever more blurred with increasing industrialization and the expansion of infrastructure (Sandefur, 2004). Indeed, the new economic system of the late 19^th Century began to recast property rights, due to previously unanticipated market interactions (including new externalities to be borne by market actors). For some, the necessity of the state was reaffirmed in these new markets to help direct private self-interest into the beneficial channels of general public welfare (Pigou, 1932, Pt. II, 1.2).

From a spatial perspective, many city neighborhoods were comprised of small parcels with narrow dimensions, often involving dozens of property owners on a single block. With so many parcels, developers viewed many urban real estate markets as inefficient; there were no easy means for effectively assembling property to allow for large-scale, modern development. It seemed that many urban markets had escalated to the point of inefficiency by an over-provision of property rights (Webster, 2011).

To help accommodate and supersede this interplay of rights, new legal interpretations emerged. In drafting RDA legislation, urban renewal advocates employed a broader public use requirement of eminent domain (Pritchett, 2003). Rather than actual physical use by members of the public, the broad interpretation posits that property can be taken if the action results in some public benefit, effectively stretching public use to encompass public purpose [3] (Cohen, 2006). These condemnations were legally permissible according to the theory that the benefits of the takings would be available to the general public even if the land was developed by private parties. This important distinction allowed for the transfer of lucrative development rights to private developers, post-condemnation.

Public purposes such as blight removal and economic development became accepted justifications for condemnation. It was seen as a fitting public use to reclaim a slum that was providing a disastrous economic and social liability to its community (Ihlder and Brooks, 1936, p.360). Rather than a tool for creation (i.e. a railway on unoccupied land), eminent domain gradually became a tool for eradication. This opened the door for RDAs to exercise their power with wide latitude, as the term blight was often defined vaguely in eminent domain enabling legislation. However, as takings lawsuits increased, it became clear that the urban renewal model caused a critical tension in the balance of personal property rights and the development of limited resources, ostensibly for the good of the broader public (Pritchett, 2003). Clearly, if urban renewal were to take hold, a transformation in the legal relationship between the state and individual property rights needed to occur.

In what was to become the signature case of the period, the District of Columbia Redevelopment Land Agency (DCRLA) declared a large tract of southwest D.C. as blighted in 1950 for the purpose of acquiring and demolishing the existing properties some of which were viable businesses. The DCRLA planned to transfer the condemned land to the Bush Construction Company for redevelopment. This plan was challenged on Fifth Amendment grounds by some business owners in the blighted tract, and the case eventually wound its way through a lengthy appeals process (Berman v. Parker, 1954). The Supreme Court eventually upheld the DCRLAs action, stating that the broader public purpose was validated and that the local government used its police power to effect the advancement of health, safety, welfare, and morals in the community. In this sort of slum clearance, the benefits or harm accruing to the respective parties private corporations or low-income residents were seen as incidental to the overall furthering of the public purpose ( Wilder and Stigter, 1989). Beginning with the Berman ruling, the US court system lent judicial legitimacy [4] to the privatization of urban renewal. This ruling marks the constitutionalization of urban renewal by accepting a broad application of the public use clause (Pritchett, 2003, p.37).

At this juncture, it is useful to examine the national state of urban redevelopment from a broad theoretical perspective. This urban renewal period could be seen as an increase in government intervention in the private (real estate) market. Indeed, it involved vast sums from federal and state coffers and ostensibly the championing of the public good over private property rights. However, because of how and by whom this redevelopment power was exercised, this reassertion of the government into the market was superficial; rather than the empowerment of the state, it can be called a shift to the super-private. Private urban renewal [5] by RDAs could more realistically be viewed as a do over to reset the rules of private spatial development under the aegis of planning. Because these actions effectively transferred with governmental authority property from one group of private individuals to another for practically the same use, a private market that respects a duality of property rights was created (Pritchett, 2003).

Clearly, this duality of rights placed the heaviest burden on the most vulnerable groups of society (Sandefur, 2004). The condemnation and redevelopment of underutilized urban property had class and, to a greater extent, racial overtones (Avila and Rose, 2009). Often times, there was an explicit directive to rehabilitate failing neighborhoods that were traditionally white, while simultaneously following a policy of slum clearance in traditionally black neighborhoods (Schuyler, 2002). These areas then played host to new residential neighborhoods or office towers with the promise of job creation. This was effectively a forceful club-ification of space for preferred members of society under the auspices of an all-inclusive public good.

Beginning in the 1960s, redevelopment authorities and more importantly, their funding began to falter, as it became increasingly clear that widespread condemnation was failing to cure inner-city blight (Smith, 2009). Conservative commentators fell back to a position of espousing purely private markets; any government intervention was seen as harmful. This neo-conservative movement spurred on federal budget cuts, arguing that cities should compete for their economic futures (Jonas and McCarthy, 2009, p.300). This led to an increasing devolution of authority to the local level beginning with the Nixon administration (Avila and Rose, 2009). Urban renewal funds were effectively terminated by the Housing and Community Development Act of 1974, which dramatically shifted to a more neutral allocation of HUD funds (Frej and Specht, 1976, p.276). Despite the loss of federal capital, the charters of most RDAs and their associated state-granted powers - remained intact.

One of the most illustrative redevelopment cases in this new era was Poletown Neighborhood Council v. the City of Detroit (1981). As Berman established, eminent domain was justified as a removal of some type of community harm [6] . By contrast, Poletown involved the condemnation of a declining but viable residential sector of the City. Facing the relocation of a 6,000-employee General Motors (GM) plant, the Detroit Economic Development Corporation (DEDC) was compelled to "compete for GMs good graces. The DEDC condemned the entire community of Poletown so GM could build a modern plant. The condemned site, which displaced over 3,400 residents and cost Detroit over $200 million, was conveyed to GM for just $8 million (Jones, 2000). The Michigan Supreme Court ruled in favor of the City, citing that the preservation of jobs was a broadly defined public use because it fostered economic development (Poletown Neighborhood Council v. City of Detroit, 1981). The Poletown ruling was the continuation of a trend lasting at least a half century (Sandefur, 2005, p. 654).

In 2005, the Supreme Court once again ruled on the public use issue, in the case of Kelo v. New London. The case was the first instance where the Supreme Court explicitly ruled on the constitutionality of economic development, without the determination of blight, as a valid public use. Similar to Poletown, Kelo involved a condemnation by the New London Redevelopment Authority of a 90-acre tract, including several middle-class single-family homes for the private redevelopment of a mixed-use facility and office park. In its ruling, which was in favor of the City, the Court recognized the diverse and always changing needs of society, which continued to allow for a broad interpretation of the public use (Kelo v. The City of New London).

While the Court was fairly consistent with its ruling in both cases, public and legislative acceptance has not been. The public and the news media quickly decried the decision (CNN, 2005). As a result, 44 states had enacted some form of post-Kelo reform law as of 2009, narrowing the conditions for eminent domain (Somin, 2009). Thus, although the Kelo decision was theoretically a victory for supporters of eminent domain, it actually strengthened property rights in most states via the legislative fallout subsequent to the decision. Further, this vehement response also highlights the modified public opinion of urban renewal . [7]

During the last two decades, urban renewal has given way to urban regeneration, which is associated with a more entrepreneurial form of metropolitan governance (Jonas and McCarthy, 2009, p.303). The redevelopment of the urban core under urban regeneration involves strategies of smart growth, TOD, and brownfield remediation it is more surgical than widespread blatant condemnation a la Kelo. More importantly, the strategies to carry out regeneration have become more nuanced and sophisticated, such as business improvement districts and tax-increment financing. These strategies emerged from the demand side (lack of federal funds) and also from the supply side (restless private capital looking for stable returns) (Hackworth, 2007, p.27). As a result, this private-market financialization of urban development has exacerbated the competition between cities to attract that capital (Weber, 2010, p.254).

Section III: Modern Redevelopment Authorities and Critiques

In the midst of these evolutionary processes social, legal, economic, and governmental - where are Redevelopment Authorities left? Despite these shifts, the RDAs created in the 1940s continue to exercise great power. Although most RDAs currently play the role of facilitator, many still use their powers to acquire and assemble real estate outside the sphere of the private market (Pritchett, 2003). It seems that public opinion and an evolution in government funding has shied away from slum clearance but as Kelo illustrates the exercise of extensive eminent domain by RDAs is still legally permissible, if unpopular. As such, RDAs can fall easy prey to a number of criticisms.

Judicial Deference and Independent Control

The first critique perhaps the most serious is not levied directly at the redevelopment authorities per se, but rather at their exercise of eminent domain. As a country, we are currently unclear as to what public use means to us. Granted, it has never been a clear definition and it has become increasingly complex. Technology has given us the ability to splinter property rights in ways we have never imagined and, in doing so, has applied acute pressure on the idea of the common good (Graham & Marvin, 2001). The public use clause was explicitly put in place by the drafters of the Constitution to further this very common good while providing protection for private property (U.S. Const., Am. 5). What happens when the common goods gradually become private ones? In a time when the public services and the physical fabric of cities are increasingly club-ified, who constitutes the public?

In deferring to the locality to determine what constitutes a public use, the judiciary may be providing an unchecked degree of power (OConnor, Kelo v. City of New London, 2005). More importantly, this deference devolves to the individuals that comprise the boards of directors that run the authorities (and their associated networks). These individuals have exclusive control over sanctioning eminent domain decisions. For example, the Empire State Development Corporations board of directors declared the site [8] of its Atlantic Yards Project in Brooklyn blighted over a year after the project was unveiled and the developer was selected (Lavine and Oder, 2010). Moreover, because they are state-enabled entities, they preempt municipal zoning and building codes. Limiting these arcane powers may be warranted because urban planning and zoning have evolved significantly since the time that RDA powers were first established (Lavine and Oder, 2010).

Transparency

RDAs often benefit in project execution because they are regularly separated from political turnover ( Dowall, 1990). However, this isolation negatively affects the transparency of their actions. These entities can bypass the public participation process entirely. As private companies, redevelopment authorities are generally not required to reveal their budgets, balance sheets, or operating statements (Krumholtz, 1999) . Any bond issuances, contracts, or project proposals are likewise withheld from public scrutiny (Axelrod, 1992). Even if information were publicly available, it might be too convoluted to be useful; the very nature of these entities is extremely complex, often times with multiple subsidiaries and holding corporations that span decades.

Free from mandatory public open bid processes, many RDAs rely on established networks and existing relationships with private developers. This can create barriers to entry for new participants who want to participate in real estate development (Weber, 2010). Even if there were public bidding, the unique nature of the projects make the establishment of object criteria very difficult (Lavine, 2010). This creates incentives for RDA employees to game the system by seeking lucrative consulting and full-time positions with private sector firms looking for an inside track (Frieden, 1990).

Accountability

As the failure and inequity of urban renewal has taught us, concentrated power without any checks and balances can be devastating. As noted above, the explicit purpose of the urban renewal movement was to provide a means for the speedy private redevelopment of urban areas with a veneer of government legitimacy. However, the result was the creation of RDAs that were controlled by a small number of real estate interests and politicians (Pritchett, 2003, p.5). This era left us a heritage of RDAs whose incorporating documents were written with the flexibility to serve private interests, effectively skirting the traditional system of public accountability.

Although they are supposed to be largely self-financed, many RDAs receive state and local tax dollars to carry out their mission (Axelrod, 1992). Even if they are not provided with a direct allocation of tax funding, their activities are often subject to grants, low-interest loans, and tax breaks, making them indirectly financed by the tax-payer. Thus, the failure of a project can have lasting impacts on surrounding property owners, tax-payers, bond-holders, and the municipality in which these corporations operate. In times of such failure, most censure is post hoc. In these instances, elected officials [vent] their choicest clichs about the breakdown of accountability and cobble together long, fruitless, and often expensive post-mortem investigations (Axelrod, 1992, p.92).

It is important to realize that RDAs have accountability issues precisely because they were often designed to skirt traditional checks and balances of government. They were established to mobilize and employ capital quickly as a vehicle to circumvent the requirement that states balance their annual budget (Axelrod, 1992). Effectively, these authorities are manifestations of the new public management model, adopting business-like values and flexibility to enhance efficiency and cost-savings (DeLeon and Denhardt, 2003) . However, the resultant efficiency gains through the use of private entities are suspect at best (Warner, 2008).

Unclear Mission

Like a bull in a china shop, these redevelopment authorities can often be viewed as having too much power and too little direction. The danger is the nebulousness of state eminent domain legislation, which leaves RDAs with vast amounts of latent power. For example, the City of Wilkes-Barre (PA) had a dormant RDA until its powers were needed for a redevelopment project in 2003. The RDA was revived overnight, staffed with a board sympathetic to the project, and proceeded to exercise a swift eminent domain proceeding (Newman, 2011). Further, t heir status outside of the public sector, while presumably permitting considerable autonomy from regular government managerial processes, is not protection from political influences (Kosar, 2008, p.7).

These issues give us a drastic reframing of the concept of public-private partnerships (PPPs). Many times, RDAs will play the public role in a PPP, acting as an assembler of lands and a conduit for government funds, in concert with the private developer. Yet, is it even accurate to call these arrangements PPPs? We have traditionally assumed a clear public component; in reality, these entities are anything but (it might be better to call them quasi-public-private partnerships). Since PPPs are already mired in questions about public accountability, this reframing seems to enhance their inherent insulation from public oversight (Krumholtz, 1999).

Conclusion

Coupled with these criticisms, the current budgetary pressures faced by states have given some politicians ammunition to try to curtail RDA funding or disband them altogether (Greenhut, 2011). Yet, criticism does not justify their complete eradication. As the Constitution drafters recognized, eminent domain is a necessary tool of the state. The complexity of certain urban markets has diffused property markets to the point of dysfunction (Webster, 2011). The complexity of modern land assemblage in urban areas renders many projects infeasible without government intervention. Although the power of condemnation disturbs private property rights, its mere presence can encourage fair market sales, rather than exploitative hold-out behavior (Mihaly, 2007). An RDA can be a useful tool to exercise this power in line with a comprehensive development plan.

Further, these authorities have the ability to take on urban development in decayed sections of the city considered too risky for the private market. Unlike private for-profit corporations, they are tax exempt, allowing them to engage in multi-year developments which may be unpalatable to the private market (Axelrod, 1992). Often, RDAs can transcend jurisdictional boundaries; some redevelopment strategies can span blocks, cities, or entire regions. For this reason, they can play an important role in an era of increasingly complex inter-scalar and multi-scalar structures of government (Jonas and McCarthy, 2009)

Given the current complexity of property rights, this form of governmental power is still unquestionably necessary. Raising project-specific capital and staffing it with project-specific personnel separating projects from political posturing can be advantageous. However, despite changes in their legal and market environment, many RDAs across the nation are still mired in their mid-20^th Century form, with too much power and too little oversight. Adjustments in enabling legislation governing accountability and oversight, especially can help make bring these authorities into the twenty-first century.

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[1] State legislatio n enables these authorities, often giving them power to ignore local statute. Some bi-state authorities, such as the Port Authority of New York/New Jersey, can be separate from the state.

[2] Though promulgated at the federal level because of funding, the legislative authority to engage in urban renewal was granted by the state via various urban redevelopment/renewal acts, which allowed for the creation of independent, chartered corporations . These proliferated widely in the mid-20^th Century.

[3] The danger here, as voiced in OConners Kelo dissent, is that this public purpose can be further stretched to validate takings for purposes of a higher property tax base, job growth, or aesthetics.

[4] Note that the Berman decision was not binding on state courts interpreting takings in light of their respective constitutions; even so, the judicial precedent was very influential in these subsequent rulings (Jones, 2000).

[5] Ironically, these small, inefficient urban parcels that RDAs sought to remedy were exactly the result of the private market (and, as was argued at the time, a lack of proper urban planning).

[6] The harm in Berman was large swaths of blighted property.

[7] Alternatively, some commentators portray the Kelo case as a white, middle-class reproduction of Berman v. Parker (Dana, 2007). The resultant backlash illustrates a clear public emphasis on the value of protecting the property rights of middle-class households rather than those of low-income households.

[8] Harkening back to Berman, portions of the site were undergoing gentrification and private revitalization at the time that the blight designation was issued (Lavine, 2010).