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