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it's basically just an offer to buy your land that you can't refuse

That is a seizure, full-stop. Imagine if Microsoft or Oracle decided to get into the bingo business and convinced the state of Illinois that the public would be best served by them running BCC rather than me. Fair market value for BCC is almost certainly south of $50k, based on sales of other websites, revenue multiples, and the like. I have no desire to sell BCC for anything close to that number: I have plans for the future, get psychic enjoyment out of it, etc etc. Tough to be me, though, if someone with deep pockets convinces the government to pretend they have constitutional authority to be an M&A team with guns.

It is not reasonable to compare the "fair market value" of a small business with the fair market value of Manhattan real estate, which is far more liquid and easily valued.

The real estate is part of the business. A large part of the value of the business comes from customers knowing that those businesses were where they were. By stealing the land, Columbia is stealing the business as well.

I don't really understand this point, but I don't think I need to. It is objectively true that some assets are more liquid and easier to value than others; one of the hardest assets to value is a going business concern, and one of the easier assets to value is Manhattan real estate.

Similarly, a (fictitious and nonsensical) eminent domain claim on a portfolio of treasury bills would be inherently fairer than a (fictitious and only slightly less nonsensical) eminent domain claim on Bingo Card Creator; the holder of the bills can easily calculate the fair value of his assets, and Patrick can't.

On a spectrum running:

<-- small business --------------------- treasuries -->

where is a gas station in Manhattan? It's not right next to Bingo Card Creator.

Perhaps I'm biased because my father is a real estate broker and I've heard his stories, but there is a (probably overpaid) profession of people whose only job is to sit down together and dicker over how much commercial real estate should actually sell for. It isn't a T-bill, where you can just ask the computer, or a stock, where you can just look at the transaction for a fungible unit which sold 5 seconds ago, or even a pork belly, which for an agreed upon quality of delicious piggy goodness can be treated as "implements IPorkBelly" and sold quite easily. (Hiring questions: what methods does IPorkBelly offer...)

I agree that CRE isn't t-bills; I point out only that there is a spectrum of liquidity, and that on it, small businesses are to the left of antique furniture and the works of second-tier postminimalist painters. I originally wrote "commercial bonds" instead of treasuries, but realized quickly that someone on HN would write 6 grafs on how the bond markets are opaque, unfair, and intensely susceptible to gamesmanship.

Thomas, you keep focusing on the 'type of private property' where as Patrick, me and others are talking about the benefiting party. The 'type of private property' being seized is IMMATERIAL.

If NYC wanted to build a subway and needed to acquire the gas station, I would be completely on-board with the use of Eminent Domain but that's not what is happening here.

The type of property is not immaterial. A very straightforward bit of intellectual wankery gets you to that point: you own Bingo Card Creator; there is a national Bingo emergency; eminent domain is employed; the US Government pays you $15MM USD. Patrick's a principled guy but I say this as one of his friends that principle is for sale for $15MM.

So now we're just haggling over the price.

Given that we are, it is inherently less fair for seize something for a which a real market value can't be determined.

When you evoke seizure of a software company, you're evoking the image in your mind of a government attempting to value your company. But the market famously doesn't know how to value small businesses. You know you're not getting anything resembling what it's worth.

When you seize a piece of commercial real estate in Manhattan, you can tell me all you want about how shady the NYC CRE market is, but there is a relatively liquid market for NYC CRE. It is less unfair to seize commercial real estate, corporate bonds, t-bills, or proven mineral deposits than it is to seize a business.

But. And please read this next sentence carefully. I agree with you about Columbia. I think this is an abuse of eminent domain.

(Why - oh - why is Thomas talking about this then? Because it's so - f'ing - much - more - interesting than yet another long rant about how the government is evil and I'm ashamed of my country and the weather in December is awful and God really needs to get on top of fixing that).

?? The current discussion is about the abuse of eminent domain, not about the type of property which fall under eminent domain. IMHO, you are not adding much to discussion by bringing up NYC CRE.

If the property sold in an arms length transaction, then I would agree, it would be very easy to determine its fair market value: the mutually acceptable price at which the sale occurred. However, if the parties were able to come up with a mutually acceptable number, then one party wouldn't have had to call in a favor and have the state seize the property for them.

"A house kinda like your house just sold for $500k, so here is $500k, now give me your keys" is just as unfair as "A business kinda like your business just sold for $50k, so here is $50k, now give me your passwords."

First let me concede up front that we are descending into handwavery here.

Second let me acknowledge that on the merits of this case divorced from the issues we're discussing here, I agree, Columbia shouldn't be the beneficiary of eminent domain.

But your logic doesn't hold. Just because there is a fair market value for an asset doesn't mean one party will be reasonable about selling it. It's not even likely that they'll be reasonable. The unreasonableness of a seller can indeed inflict economic harm on the overall market and on the public good. We recognize this, which is why we can build interstate highways without being held hostage by 2-bit real estate wildcatters.

A friend of mine is dealing with this right now in the real estate market; she owns several properties but rents her own property. Her landlord is being foreclosed on. She's made an offer above fair-market value for the house in a fashion that spares the owner from the (dreadful) cost of real estate agency. But the seller won't budge, believing that any offer from my friend must be the market floor value, else it wouldn't have been offered. And so my friend may have to move and the seller will end up receiving less money as a result.

This kind of micro-tragedy happens every other minute in a free market and I generally agree that we should suck it up and be happy for all the benefits the free market offers in return, but it's not fair to pretend there's no trade-off.

And, come on, it's totally unfair to compare a real estate transaction to the valuation of a small business.

I disagree. If Eminent Domain is used for public good, it could be justified. Here, they forcefully took the property for a private organization [It does not matter whether it's profit or non-profit]. I completely understand the need for Eminent Domain but it's clearly being abused here.

Also, how does your friend's example make any sense? If the seller doesn't want to sell at a particular price, it's seller's choice.

Let me take another example. I bought my first car (a used 2001 Altima) in 2004 from some guy. As it was my first car, it has a special emotional value to me. In 2010, the value of the car is around 2000$ [I don't even drive it anymore]. Let's say tomorrow Nissan finds out that it's their 1 millionth car sold and they want it back to put it in Nissan Museum. They offer me the 2000$, the market value of the car. I refuse because the car more than 2000$ to me. They offer me 10,000$ and I still refuse. What if there is no price at which I am willing to sell the car? Should US Government deposit 2000$ in my bank account and give the car to Nissan by force?

[On a side note, I believe that their is price for everything. But seller should be able to decide the price, not buyer.]

Looking at the actual case: There were two businesses involved. Tuck It Away and a gas station owned by Gurnam Singh and Parminder Kaur. From their names, I can tell you that they are from state of 'Punjab'. Most likely they are immigrants to America and they would have worked hard to set up their gas station. Don't you think it's morally wrong to seize their business property just because another private organization can benefit? What if US Government forced you to hand over your company (which you built it from blood and sweat) to McAfee for 3x multiple of your revenue? Would that be okie to you?

Please do not get distracted by 'small business' example of Patrick. We are talking about 'private property' (either small business, real estate, car or what have you) and using (or rather abusing) eminent domain to seize that private property and giving it to another private organization.

It's not quite a fair comparison as these two businesses can simply move next door and continue to operate shop. It would be more similar to Microsoft buying land that included the BCC offices and you had to accept it and then move down the block. Depending on the offer it ranges from a really good deal to outright theft.

It's not a really good deal, because if it was a really good deal they would try to persuade you directly rather than asking the legislatosaurus to do it for them.

For a single isolated transaction that may well be fine; when (for whatever reason) there is only one possible vendor - the last parcel of land blocking a scheme for example - that vendor is using the law (of private propoerty in that case) to exploit the other party quite as much if they choose to hold out for an unreasonable sum. The whole purpose of this system is to determine a fair means for the transaction as a whole to proceed without either party being able to unreasonably exploit the other.

A couple of points:

The term seizing implies the use of force, not necessarily the absence of compensation. When you have no choice but to sell, seizing is indeed the appropriate term.

I'm not educated in the law, so I cannot speak with authority to your assertion about the incorrect use of the term "public-domain". However, given that the term is in quotes and the the author is Beauchamp Brogan Distinguished Professor of Law at the University of Tennessee, my guess is that the term has a historical context of which I am unaware.

Just because Columbia serves many "less well-off" students, or is a 501(c)(3) non-profit does not mean that Columbia is not the big bad meanie in this case. They are an enourmously powerful and influential institution.

Using this legal power to seize (And I use this term advisedly) a small business owners property makes them a bully in my book. There is probably a price at which he would sell willingly, Columbia almost certainly has the resources to pay that price, they are using the power of this law to twist his property out of his hand backed by the power of the state, this in order to further their "Vision". That is wrong.

> eminent domain, however, requires paying fair market value for any land taken (it's basically just an offer to buy your land that you can't refuse)

If it's "fair market value," then why do they need to exercise eminent domain in order to force the sale? I don't see how this can ever be considered OK. If you want to buy someone's land and they won't sell it, you offer them more. You get creative and offer to help them relocate their business.

How do you determine "fair market value," anyways? The land and the building on it might be worth like $800,000 according to a property appraiser, but that completely ignores the value of the business. They're going to have to get new property elsewhere and build similar facilities; this will almost certainly cost more than their existing property is worth. So you're forcing a business to eat the cost of relocating, and they're losing revenue during the relocation, and this is fair how?

You can't make people do anything, you can only give them incentive to do what you'd like them to do. In a fair system, that incentive is a compensation package that works for both parties. It's not getting the government on your side to use force as the incentive.

And if the person is irrational and refuses to sell their land at any price, you freaking change your plans. I don't understand why we should accept the idea that certain people have more rights to property ownership than others, for no other reason but money and clout. Although the article wasn't the most well-written, I think it did a good job of conveying that idea.

If it's "fair market value," then why do they need to exercise eminent domain in order to force the sale? I don't see how this can ever be considered OK.

In the U.S., this is specifically discussed in the fifth amendment to the Constitution: ...nor shall private property be taken for public use, without just compensation.

This suggests that government may choose to take private property for public use so long as the compensation is "just". Note that "just" may not be the price that you want the government to pay, but it might instead be based on some other theory of justice, such as the current market value for similar property.

Now, not everything allowed for by the Constitution is morally desirable. (Recall the "3/5ths of a person" compromise.) But the U.S. government does have a defensible rationale for eminent domain; our ancestors agreed to the Constitution, and we haven't ever amended that part of it.

However, the Constitution also says "public use." I'm always very leery when there are private actors involved, not the least because there's a huge incentive to corrupt the government.

"I'm always very leery when there are private actors involved, not the least because there's a huge incentive to corrupt the government."

Indeed.

http://en.wikipedia.org/wiki/Kelo_v._City_of_New_London

> If it's "fair market value," then why do they need to exercise eminent domain in order to force the sale?

Because sometimes individuals choose not to sell at the fair market value (e.g., not everyone sells their stock at the current stock price - in fact, some people choose to buy at that price. That's the definition of a fair market value.)

> And if the person is irrational and refuses to sell their land at any price, you freaking change your plans.

Sometimes this makes the plans dramatically more expensive and/or impossible. The canonical example is if a road needs to be built. It may be that there is _no_ viable route where all the existing property owners are willing to sell. This may either be because of personal attachments to the property or because they know that as the last holdout, they can demand a higher price.

In either case, "eminent domain" says the government can force the sale, paying a just compensation, in order to promote the public welfare.

Yes, this is imperfect (the owner may not consider it a fair price, or may not want to sell at any price). Yes, it is open to abuse. But yes, there are cases where it is needed, hence the inclusion in the Constitution, but with possibility of judicial and electoral review.

kb

Eminent domain (or compulsory purchase in the UK) is designed to keep fair market value fair though. Otherwise there is an escalating cost of acquisition for each subsequent parcel of land - the cost to abandon the project rises with each previous purchase and every delay caused by an individual seller and the last to sell is in a position to obtain a very substantial surplus over the natural market value, simply because that one asset holds the entire remainder to ransom. This might be natural, unfettered markets in action, but it's also rather close to extortion for my taste.

It's important to note that the valuation assigned by government appraisers is often well below what the property would be worth on the open market. When I was young, my grandparents were caught up in an eminent domain suit. They were to be paid about two thirds the worth of their home (the worth of their home, in this case, being based on mortgage appraisals[1]). If they had run a business, they would have also had to factor in relocation costs, downtime, etc. Insofar as the seizing body is an interested party, or operates via political pressure from an interested party, the "fair market value" is prone to work in the buyer's favor.

[1] - obvious disclaimers - This is anecdotal evidence, and it happened in the 90s. Perhaps there was a tendency amongst lending institutions to inflate their appraisals so as to justify offering loans with higher profit margins. But I still think my point holds.

But this is surely an argument for better valuation rather than against the principle of forced sale per se. I'm not at all arguing that people should be forced to surrender for less than the true value, but I'm also well aware (my ex worked in this area) that each and every vendor will have an explanation for why they should get more money than it might seem at first. The customer who needs the land for whatever public good is just as restricted as the person required to sell and the whole point of this system is to ensure the seller gets a fair valuation while the customer isn't at the mercy of vendors gold-plating special cases for why they need more money.

> If it's "fair market value," then why do they need to exercise eminent domain in order to force the sale?

Because without something like eminent domain, someone with a relatively worthless piece of property can inflate the value of it by holding an entire project hostage in exchange for their piece of land. If I have land that I ordinarily couldn't sell for more than a hundred thousand, but I know that the government will be doing a multi-million dollar project, I might demand a half a million for my land, in order to make a nice profit at the taxpayer's expense.

Now, this case is in more of a grey zone than that. It's not at the taxpayers expense, but at the expense of a private, non-profit institution. I'm not sure how I feel about that; it's certainly less objectionable than using eminent domain for a for-profit developer, but still makes me uneasy.

Even more troubling, however, is the fact that if you check other sources on this story, such as Columbia's own daily paper http://www.columbiaspectator.com/2010/12/13/us-supreme-court... , you find that part of the reason the neighborhood has been determined "blighted", which is necessary for the justification that it's in the state's interest to buy the land and sell it to someone else, is that Columbia has already bought up many of the buildings in the area and left them abandoned. If that claim is true, then it certainly is outrageous to grant eminent domain on that basis; it means that any private developer who wants to gobble up land can just destroy the neighborhood, both driving down prices and allowing them to use eminent domain to buy up any remaining land.

The strident populist rhetoric in the New York Post article originally linked to is a bit misplaced. But given a bit more research, I'm inclined to agree on this particular case that there's something pretty rotten going on here.

> I don't understand why we should accept the idea that certain people have more rights to property ownership than others, for no other reason but money and clout.

The idea is that the city or state has an interest in cleaning up blighted neighborhoods; there are serious risks of crime, public health, land value, and the like with property is allowed to decay. When that really is the case, there is an argument for the government having the power to buy up whole blocks at a time in order to redevelop them (it is very difficult to impossible to fight blight a bit at a time, since no one wants to move in next to an abandoned building filled with squatters or drug dealers). However, it should not be the case that a private developer can cause blight buy buying and abandoning land, and then using that as an excuse to get the rest of the land through eminent domain.

The area in question was not thriving before Columbia began buying the property on the open market. It's not fair to suggest that Columbia engineered entirely the conditions of that real estate.

But it doesn't matter whether they engineered it or not---if the fact of them buying up land, and thereby blighting it further, gives a boost to their eminent domain claim, then this creates a moral hazard and perverse incentive for future developers who want to eminent domain some land.

I think I agree with this; I just wanted to clarify.

While I agree with the general thrust of this, I'm not entirely sure what they could have done better. Deliberately blighting an area to drive down prices and increase their chances is clearly not on, but when they've been clearly establishing a pattern of purchasing pockets of land with a long-term view to collecting them together for a grand scheme, should they really be required to let them out until they have the full compliment to avoid the appearance of blighting? This seems equally unreasonable; they are purchasing development plots as fast as they can and (within reason) should surely be allowed to treat them as empty development plots until commencement to maximise their chances of speedy success?

Not thriving and blighted are very different. I live in the neighborhood and often go to that very gas station. The spot is far from blighted. Here is a street view of the station:

http://maps.google.com/maps?f=q&source=s_q&hl=en&...

Why- Columbia is a big rich bully in this situation. Sure, they are a non-profit, but they have a 6.5 Billion dollar endowment that they are using to lawyer up and kick people out of their land. And, the article is right to note that the people who mostly benefit from this are the mostly affluent students and professors at Columbia. Yes, they are paying them "fair value," how would you feel if someone supposedly wanted to use your startup/company/car and decided took it while giving you an amount they determine as appropriate?

This is a slippery slope that shouldn't be encouraged.

I have to disagree. My own sense is that it has become impossible for the US to complete publicly-beneficial projects anymore.

You see it in many cities that want high-speed rail or simple public transit. These projects have become unaffordable. Why? Not because of the labor or materials cost, but because every piece of land needed for such a project will require a protracted legal battle spanning many years in order to squeeze money from the government and determine a "fair value" that in the end is usually very inflated.

I think the US could find itself in a very sorry situation if we remain paralyzed when it comes to building publicly beneficial infrastructure. Meanwhile China (who I am loathe to imitate) is building itself into the 21st century overnight, while we litigate for years (or decades) over the abandoned lot or corner gas-station that was in the way of something that provides much more value to the public.

Columbia has apparently purchased the overwhelming majority of the land needed for this project on the private market. They didn't simply decide to "lawyer up and kick people out of their land" (also, for what it's worth, the "land" in question was a largely abandoned warehouse district).

The appeal to personal feelings is also misguided. How would I feel if the State of Illinois decided that a new light rail project should run right through my house? Very, very bad! Burn the witches! But that's a textbook case of eminent domain, not an abuse; the only way to argue against it is to enter into a very unproductive argument about whether all eminent domain claims are abusive.

I disagree with Columbia in this case; the doctrine that says eminent domain comes into play simply because the benificiary can make the property more productive is unsettling. But it's still incumbent on us to make valid arguments.

> requires paying fair market value for any land taken

"fair market value" in this case does not mean "what the seller would take". It means "what the buyer thinks that the seller should take".

The seller will argue that a gas station isn't worth much, that a house in that area isn't worth much, etc. However, that land is clearly worth a lot more to the seller, so I'd argue that the "fair market value" is the value to the seller.

> anyone who gets in will be able to afford it regardless of their financial status.

"anyone who gets in" isn't "anyone" - it's folks selected by Columbia, which is a small fraction of "anyone".

For example, that "anyone" doesn't include significant numbers of folks from that neighborhood. You know, the folks who are being displaced....

Considering that value is an abstract concept - ie, ultimately (in usual business dealings), its determined by how I "vote" with my dollars and not some empirical physical rule, I think the concept of "fair market value" in the case of eminent domain is a complete sham, much like property taxes based on fair market value. If I haven't made any monetary choices and someone else has decided those choices for me, there is no value whatsoever.

Not that it really matters in the scope of the legal world, it's more of a philosophical argument, but its something thats constantly pissed me off about eminent domain, easements and property taxes.

As has been pointed out by many people, while Columbia is to a large extend a social club for extremely privileged young people, the extensions being built are largely intended to support research work, the output of which is a public good. Apparently, Columbia's research facilities are genuinely and alarmingly overcrowded.

It is misleading to suggest that Columbia is arranging to have private property seized simply for the benefit of those wealthy enough to attend Columbia.

I'm opposed to the underlying doctrine of eminent domain that suggests that land can be seized if the parties who it will be granted to can make better overall economic use of it, and thus I suppose "opposed" to this instance of eminent domain, but it's still important to have the facts straight.

> This article uses language which far overstates the case, and ignores many facts.

I beg to differ.

> (it's basically just an offer to buy your land that you can't refuse).

That's more akin to seizing than not.

> The article sets up strawmen, like the politicians who denounce property rights, without ever quoting any politicians as actually denouncing property rights.

You can't be serious. What about the politicians that want higher taxes? That's a violation of property rights. What about the bailout? What about net neutrality? What about the "socialist" Bernie Sanders?

The problem with this particular case, as with the ones that I just mentioned, is that they are premised on the idea that it's OK to sacrifice somebody for the good of "society" (i.e., someone else). Frankly, human sacrifice is barbaric.

Big Rand fan? I love it. :)

Yeah. But since many people don't realize it, I'd like to point out that the vast majority of Rand's work--and her most important work--is fundamentally not about politics.