Eminent Domain & Economic Contributions

Executive Summary 

The power of eminent domain authorizes the government to take private property for public use if there is an associated direct or indirect public benefit. Since the 1950s, eminent domain has been used by the government and private interests if the primary objective of the taking leads to a scheme that will eventually promote economic development, public welfare, or advantage. According to Missouri statute, private property cannot be taken for public use without just compensation and that the compensation shall “be ascertained by a jury or board of commissioners of not less than three freeholders, in such manner as may be provided by law; and until the same shall be paid to the owner, or into court for the owner, the property shall not be disturbed or the proprietary rights of the owner therein divested.” House Bills 1876 & 2005 further specify that the Public Service Commission cannot issue an approval for a merchant line without a resolution of support passed by the county commission in each county through which the merchant line will be built. The bills also specify that no entity in Missouri would have the power of eminent domain for the purposes of constructing merchant lines, unless they are rural electric cooperatives or electrical corporations operating under a cooperative business plan. 

Highlights 

• Once eminent domain is announced, the market value of a property tends to drop due to less demand caused by the fear of high court costs to fight the eminent domain proceedings.

• For landowners not interested in selling their land-parcels, investment in the maintenance of their land is discouraged due to the fear of eminent domain takings.

• States that have restricted the use of eminent domain have seen no adverse effects in terms of state employment and gross state product or county employment.

• Eminent domain can be both a rent-seeking tool and a solution to market failure when it comes to land assembly.

• The public use of eminent domain can be problematic to all landowners, as it introduces instability to concepts underlying basic property rights.
  • Cases, where eminent domain was justified by public use for economic development, have shown to disproportionately affect racial minorities, the elderly, and low-income individuals.

Limitations 

• The real economic effects of restricting eminent domain for utility purposes are not known, since studies have not looked specifically at utility projects.

This Note has been updated. You can access the previous version (published November 2020) here.