THE EXPEDIENCY OF ADOPTING IN THE UNITED STATES THE EXCESS CONDEMNATION PRINCIPLE
We are not here considering the value of excess taking where the sole or even primary purpose is to recoup the municipality’s investment in a public improvement. Such a use of the power would probably not pass the constitutional test, would be too open to abuse, and would tend to draw municipalities into such large speculative holdings of real estate as might easily overstrain their credit. But in the cases where excess taking is made primarily to secure the greatest physical benefit from the improvement, the community is able incidentally to reap a portion of the increase in values caused by the investment of the community’s money through the sale of such land as is not actually needed for the improvement. This method of distributing the cost of an improvement is supposed to produce a larger financial return to the city than the special assessment method, and at the same time to avoid the expense of litigating with property owners the question of benefit.
1. FINANCIAL VALUE OF EXCESS CONDEMNATION
In cities where special assessments to cover a large portion of the cost of acquiring land are levied and collected, and the tax payers are not restive, there is little enthusiasm over the European method of financing reconstruction. But cities in which special assessments are ineffective or non-existent, as in Boston, Philadelphia, and cities of Ohio, see in excess condemnation an opportunity to get for the community a large portion of the increment resulting from reconstruction with less chance for litigation by the land holders. No city in the United States has yet experimented with such condemnation,[101] but precedents from abroad are confidently cited as establishing its financial value. To determine the soundness of this opinion would require an analysis of European reconstructions in which excess takings have been made, and such an analysis depends for its value so much on a first hand acquaintance with many various sets of local conditions that to attempt it here is impossible. A review of the available sources of information on the subject does not make out an overwhelming case for the financial success of excess condemnation.
Financial Results in France. From 1852 to 1869 new streets were laid out in Paris which required a total surface of 2,726,000 square yards. Under the law, the authorities were allowed to take in excess of actual need for street purposes only when the lots left after the taking were unsuitable in shape or size for the erection of proper buildings; but the policy of the French government allowed a very liberal construction of the law, and ‘remnants’ were taken in some cases 5,000 square feet in area. Remnants which were at the time of the taking considered unsuitable for building purposes were subsequently subdivided into at least two lots, each of which was sold for a building lot. Just how much excess land was taken for the purpose of new streets in this period is not known. In 1869 the sales of such land had totaled $51,800,000, and there was still on hand 728,400 square yards, valued at $14,400,000. The cost of all the land taken was $259,400,000. Valuing the excess taking at $66,200,000, the land actually used for street purposes cost $193,200,000.[102] “In other words, the sale of lands purchased in excess of the requirements for the purpose of making new streets, together with the sale of 390,000 square yards obtained through the discontinuance of old streets, yielded only 25.5 per cent of the original outlay upon land—$259,400,000. That means that the efforts to secure a part of the increase in values resulting from the laying out of 56.25 miles of streets proved unsuccessful.”[103]
No period offered a better opportunity for a successful test of the principle of excess taking as a method of recoupment. The years from 1852 to 1869 were marked by rapid increase in values. The prices received by the city for the sale of surplus land were considered excellent, but the initial cost of all the land condemned had been enormously heavy and for this the juries were responsible. M. Brelay, a former member of the Commission des Indemnités, a body established by the state for the purpose of bringing together without recourse to the jury, public authorities and owners of land says: “The proceedings before the juries are among the most discouraging symptoms of the day. In these proceedings cheating almost has come to be honorable; the juries willingly accept scandalous statements as to value and inventories and leases prepared by lawyers and expert valuers who display a profound knowledge of the extent to which human folly will go in the person of the juror.” In 1890 awards were so excessive to owners of land that an award of 50 per cent more than the fair market value was commented upon as honest by Brelay in his survey of public improvements in Paris.[104] Awards to tenants, whether merchants or householders, were even more excessive. In 1888 the city took 48 houses occupied by tenants who paid an average rental of $54 a year. The owners of property had the right to dispossess the tenants on three months’ notice. The tenants’ holdings were therefore worth $13.50—three months’ rent; the juries awarded an average of $169.[105] In another case the city offered housekeeping tenants $700;[106] the jury awarded $13,000. The offer of the city to tenants with trade interests was increased by the jury from $486,560 to $935,120.[107] To one tenant, with no trade interest or lease, the city offered $7.40; the jury gave him $600.[108] “The city had authorized the construction of the Bourse de Commerce on the assumption that the compensations for taking for public use would aggregate $5,000,000; in September, 1887, the compensations awarded aggregated $8,000,000.”[109]
The avowed purpose in the liberal takings between 1852 and 1869 was to reduce the expense of street improvements. There was no satisfactory law under which the cost of land for streets could be assessed on benefited properties, and only by the sale of excess lands could the expense be reduced. The failure of the method resulted in a change of policy by the Council of State which, from the time of the establishment of the present republic, opposed any excess takings simply for the purpose of resale. When the Trousseau Hospital was removed the Council of State refused to approve the taking of any remnant whose area exceeded 650 square feet, even though it was admitted that the controlling purpose of the city authorities was not recoupment.[110] Approval was given for the taking of small remnants on the ground that the additional cost of acquisition was trifling, and small remnants were readily sold at a price which more than compensated for the additional cost.
As a result of the experience, both before and after the establishment of the present republic, it is the consensus of opinion among those who have had experience with both methods, that extended excess taking for the purpose of securing a profit from the resale of surplus land is neither desirable nor profitable.[111]
Financial Results in Belgium. The law which permits excess taking in Belgium was passed at the instance of Brussels and to satisfy a peculiar need. The old city of Brussels had no street system worthy of the name, and the jumble of narrow, crooked streets and blind alleys resulted in a most unsanitary condition. Lots, as a rule, were small, in some cases ridiculously so, one plan showing lots with areas of 150 to 175 square feet. Through the center of the lower part of the city flowed the River Senne which was little better than an open sewer. The improvement made possible by the law of 1867 was to carry the river underneath the city and to build over the old river bed a broad central thoroughfare, which is now the main business street of the city. The law fixed no limit to the extent of land which could be taken in excess of actual needs, and Brussels used the law most liberally.
In addition to the heavy outlay for land, the authorities incurred extraordinary expenses in order to induce a rapid and yet proper development of the new streets. Several public buildings were constructed by the city on the new boulevard; loans were made to contractors to the extent of one-half of the estimated cost of buildings; surplus land was sold on very easy terms, the only requirement being the payment of 4.5 per cent per annum on the purchase price for sixty-six years, payments which were calculated to “extinguish the principal of the debt at the end of that term while giving the city an income on the amount unpaid of 4⅕ per cent.”[112] These terms proved altogether too tempting and the speculation that resulted brought about wholesale failure of contractors and purchasers. In the end the city was forced to complete the construction of the new boulevard at an expense greatly in excess of the original estimate, to complete unfinished buildings on which loans had been made, and to foreclose through the failure of purchasers of lots. Today the city is the owner of nearly 400 buildings on this thoroughfare known as the New or Inner Boulevard. The increase in debt occasioned by this and other improvements was enormous. At the beginning of the year 1867 the debt was less than $8,000,000; by the year 1879 it exceeded $50,000,000; and when refunded in 1886 it was about $56,000,000. The city in the early 80’s was on the verge of bankruptcy.[113]
In 1902 it was estimated that the properties acquired by the city in connection with the new boulevard had cost approximately $6,400,000. “The value of the properties at the time of acquisition was fixed either by expert appraisal or the foreclosure sale at $5,200,000.” In 1902 they were believed to be worth about $6,400,000; but on the basis of the income which the city receives they would not sell for much more than $5,500,000, and the city is satisfied to keep the properties which are yielding more than enough “to meet interest and sinking fund requirements[114] on the amount of debt which could be retired through their sale.”
Authorities of the city of Brussels without exception consider that excess taking is the only method which could have produced the Brussels of today, and the burgomaster, in 1904, was even of the opinion that the method had been a means of reducing the expense of street improvements. Other cities of Belgium, by avoiding the extraordinary expense connected with the building operations under loans undertaken in Brussels, are reported to have secured a profit out of the sales of excess lands. This is notably so in the case of Liege. Despite the financial strain through which Brussels went from 1875 to 1886, it is probably true that the peculiar conditions of Brussels justified the extraordinary methods adopted for its improvement; but whatever may be the consensus of opinion about the success of the experience of the city with excess condemnation it can not be advantageously cited as a precedent for the adoption of excess condemnation as a means of reducing the expense of reconstruction in the United States. The experience with excess taking in Paris and in the cities of Belgium shows conclusively that a considerable period must elapse before real estate contiguous to the improvement increases to any great extent in value[115] and this experience is confirmed by that of London as shown below. It has, with surprising uniformity, been at least eight years in all three countries before such increase has been noticeable. As an element of the cost of excess condemnation, therefore, the interest on the outlay for the acquisition of land and buildings must be figured for a period of eight to ten years.
Financial Results in London. From 1857 to 1889 the Metropolitan Board of Works of London made 14 miles of street widenings and thoroughfares, for the most part in the central portion of the city, in order to “supply the deficiencies resulting from centuries of neglect and to keep pace with the wants of an ever increasing population.”[116] During these years the policy of the board was most conservative, and in this respect it differs from both the practice in Paris and the practice in Belgium. The taking of costly buildings was avoided even at the expense of the appearance of the street, and such takings as were made were strictly limited to those properties the whole or a part of which were required for the actual improvement. The cost of the land taken for street improvements was $58,859,000, and there was subsequently recovered from the sale of surplus lands $25,607,000 or 43.5 per cent.[117] The exact amount of land taken or the land sold is not given in the History of London Street Improvements, but in connection with each street the total cost and the total return from sales are given; and of the 54 separate improvements made by the Metropolitan Board of Works only one, namely, Northumberland Avenue, shows a profit from the entire transaction exclusive of cost of construction. The cost was £711,491 and recoupment from sales, £831,310. The profit in this street improvement is variously accounted for.[118] In evidence given before the select committee of the House of Lords the case of Northumberland Avenue was cited as entirely exceptional, because the Duke of Northumberland had given the land at a price which was calculated to leave a profit from the improvement. Moreover, the land was not occupied by buildings and there were no tenants with trade interests. It is these two factors, representing a dead loss to be charged against any increase in land values, which are largely responsible for the poor financial showing of excess condemnation.
Out of a total of 57 streets, those in which the recovery exceeds 35 per cent of the cost are given in the following table:[119]
TABLE 6.—COMPENSATION FOR LAND, GROSS COST, RECEIPTS FROM SALE OF LAND, AND NET COST FOR IMPROVEMENTS MADE BY THE METROPOLITAN BOARD OF WORKS IN CASES IN WHICH THE RECOVERY EXCEEDED 35 PER CENT OF THE COST. LONDON, 1857-1889
| Street | Compensation for land | Other payments reckoned | Gross cost | Receipts from sales of land | Net cost |
| Garrick | £106,691 | £16,521 | £123,212 | £89,072 | £34,140 |
| Southwark | 476,238 | 108,692 | 584,930 | 218,860 | 366,070 |
| Queen Victoria | 2,055,408 | 245,112 | 2,300,520 | 1,224,233 | 1,076,287 |
| High St., Shoreditch | 184,184 | 27,519 | 211,703 | 89,887 | 121,816 |
| Shaftsbury Ave. | 1,004,990 | 131,466 | 1,136,456 | 377,569 | 758,887 |
| Mare St., Hackney | 54,175 | 5,827 | 60,002 | 24,340 | 35,662 |
| Tooley St. Extension | 68,673 | 7,233 | 75,906 | 45,388 | 30,518 |
Most of the remaining streets show a recovery from the sale of surplus land of less than 20 per cent, and doubtless in many of these cases if the taking had been limited to the land necessary for the street there would have been a saving in the net cost. In the case of Gray’s Road Inn, for instance, a simple street widening, the land alone cost $2,017,000 and from sales $422,000 was recovered, which made a net cost of $1,595,000. “Had the board bought only the land needed for street purposes the cost would have been $1,264,000.”[120]
The Metropolitan Board of Works was criticized for not making more liberal takings, and in the history of its successor, the London County Council, many bills were proposed which authorized a more liberal taking of land solely for recoupment purposes. The London County Council, however, continued the policy of the Metropolitan Board of Works and favored as an additional method of paying for the cost of the improvements a special assessment for benefit.
The relative advantages of excess taking for “recoupment” and the levying of an assessment for benefit were the subject of investigation during the history of the London County Council. Members of the old Metropolitan Board of Works were uniform in condemning excess takings as a method of reducing the cost of improvements.[121] In 1894 Mr. Charles Harrison, vice-chairman of the London County Council, said that recoupment as carried out in London had been unsatisfactory and had tended to result in a net loss. Mr. W. H. Dickenson, deputy chairman of the London County Council, was of the opinion that past public improvements had produced a rise in prices which would have made the recoupment operations yield a certain profit had that profit not been eaten up before it had been obtained. Mr. J. F. Moulton, member of the London County Council, gave evidence that “recoupment is almost always a loss, and increases the cost unless you are going through comparatively unoccupied property or property which is used for habitation and not for purposes of trade.” H. L. Cripps, twenty-five years a member of the Metropolitan Board of Works, said, “It may be taken generally that in no single case, according to the opinions of competent surveyors, has recoupment turned out other than an extravagant operation.” As a result of its own experience and that of its predecessor, the Metropolitan Board of Works, the London County Council took the position before every investigating committee of Parliament that the practice of recoupment by the sale of excess lands should give way as both less desirable and less practicable than an assessment for special benefit.
From 1890 to 1898 Parliament refused to grant to the Council the power to assess for special benefit, and in this period practically no large improvement schemes were initiated by the Council. In 1899 the power was granted and was incorporated in the legislation which made possible the King’s Highway improvement from Holborn to the Strand. This is probably the most important large improvement of recent years, and in it are united both the principles of excess condemnation and of assessment for betterment. It has been cited in this country as the strongest illustration of the advantage of excess taking as a method of recouping the cost of an improvement.
It is impossible to get accurate figures on the net cost of this improvement since much of the excess land taken is not yet sold or leased, and since it is not certain what portion of the original cost has been returned to the city by sale of excess land and what portion has been returned by assessment for benefit. The cost of land taking and improvement is variously estimated from £4,862,500 to £7,000,000. The last figure includes approximately £2,000,000 for interest charges covering a period of at least fifteen years. The most favorable estimate of the return is £5,000,000, which includes the return from the benefit assessment, making the net cost of the improvement approximately £2,000,000, or the amount of interest charges during the period of development.[122]
In analyzing these figures it must be remembered that they were submitted by a political party opposed to the one which initiated the scheme, and items of cost are included which are more than offset by indirect gains that are not easily reducible to figures. The physical results accomplished by the King’s Highway would have been impossible without the very liberal use of excess taking. The very satisfactory financial result may be due in a large measure to the advantageous lease of surplus land, but, considering the opinion of best informed authorities in London and the history of London street improvements from 1859 to 1900, and considering further that some part of the return in the case of the King’s Highway is the result of betterment assessments on property not acquired, it seems unwise to lay too great stress on the King’s Highway improvement as a precedent for the use of excess taking merely as a method of recoupment.
The causes of the general failure of excess taking to give satisfactory financial returns in London are much the same as they are in France:
First, the cost of acquiring excess land is great because of extravagant jury awards and because of the practice of paying for trade interests and for the “goodwill” of such businesses as are obliged to seek other locations. Mr. Harrison, vice-chairman of the County Council, is of the opinion that recoupment cases show not that there is a loss on the land which is acquired, but that the loss arises exclusively from buying what can not be resold (trade interests), and represents great waste, legal costs, and other items of expenditure attached to each interest.[123] Mr. Dickenson, deputy chairman of the County Council, believes that even if the fee simple alone were taken and the leasehold and subleasehold interests allowed to run out, extravagant prices would be paid and that it would be best to “intercept the benefit” by means of a betterment tax. The fee simple alone would cost at least 10 per cent more than the market value, and to that sum must be added much more in costs.[124]
Second, the effect on values of an improvement is uncertain. In every country where excess taking is practiced it is the common experience to find that occupation of all kinds adapts itself slowly to a considerable change in the street plan. This phenomenon is not dependent on racial characteristics. In Paris, in the cities of Belgium, and in London at least eight years, as has been noted, were necessary before the city or property owners received the benefit expected from the change.
Third, the large power entrusted to administrative boards, both in the awards for damages and in the negotiation and sale of excess land, is open to great abuse. Charges of maladministration in the Metropolitan Board of Works were made the subject of investigation by a royal commission in 1888, and in spite of the finding by the commission that the board was not corrupt, a great deal of uncontradicted evidence of dishonest practice was offered.
Difficulties in the United States. In considering whether excess condemnation is justifiable on the ground of securing to the city such profit from the resale of excess land as will enable it to recoup a large part of the cost of the improvement, it must be borne in mind that “failure of administration” is as likely to defeat expectations in the United States as in Europe. Certainly jury awards in many jurisdictions, and particularly in older jurisdictions, where reconstruction is most necessary, are excessive, and municipal administrations in the United States are no more above temptation than was the London Metropolitan Board of Works.
2. PHYSICAL VALUE OF EXCESS CONDEMNATION
Irrespective of its value as a financial expedient, excess taking allows the municipality to secure the greatest physical benefit from an improvement. The widening or relocating of a built-up street is likely to involve a complete rearranging of lot lines, particularly in older cities where the lot line is irregular and the depth of lots varies greatly. To limit the taking of land to that actually acquired for the construction of the street results inevitably in remnant lots, and the one effective way to unite these remnants with larger parcels is to put their control in the hands of the municipality, and to provide for an impartial appraisal of their value. It should be an exceptional case where the owner of the lot adjoining the remnants would not take the land at its appraised value, but even if the remnants remained unoccupied their control by the municipality would be more likely to prevent their use for undesirable purposes than if they were left in private ownership.
Control over remnants is possible with a very limited right of excess taking. If the right is enlarged and the municipality permitted to take on both sides of a widened business thoroughfare land enough for suitable building lots, the construction of buildings can be secured which will fit the thoroughfare and will yield the highest possible return in taxation. It is equally desirable for the municipality to control land abutting on parks, parkways, and approaches to public buildings, both to prevent a use of the land which would be disfiguring and to induce by restriction in the deed of sale of such land a type of construction which would harmonize with the public purpose.
Those who oppose the radical extension of the power of eminent domain believe that control over development by the municipality can be as effectively gained by the acquisition of easements in the land abutting on streets, parks, and parkways, which would prohibit certain uses of the land and prescribe the character and even the style of architecture of the buildings constructed upon it. Much has been accomplished by such easements. They may do no more than require an open front yard or garden of minimum depth on the private property[125] or fix an arbitrary height limitation on buildings,[126] or they may require approval in detail by a public authority of the designs of buildings in case they are built above or beyond certain limits.[127] In theory at least they may curtail the freedom of the land owner to any extent which might be found necessary to secure to the public completely satisfactory use of the adjacent public improvement. But practically they are limited by the fact that if they diminish too far the freedom of control which the owner of the fee can exercise over the development and use of the property they will establish a divided responsibility which is fatal to efficiency and initiative, and which absolutely destroys much of the economic value of the property. The fear of such a result may raise the damages for the acquirement of extensive easements almost to the full value of the property. In addition to this practical limitation upon the taking of easements in connection with special assessments as a substitute for excess condemnation in those cases to which the latter is specially applicable, it is to be noted that one important function of the excess condemnation method is not provided for at all; namely, the prompt readjustment of such serious disturbances of the normal size and shape of lots and of the normal relation of property lines to streets as may have been caused by the public action in forcing through an improvement. These disturbances constitute a situation as full of injustice to the owner of the lots as it is unsatisfactory from the point of view of the public.