Joe and John Seravalli: Victims of Eminent Domain Abuse
Imagine you sign a two-year lease with your landlord. After the first year, you decide you’re tired of paying rent and would like to buy the property instead. You make him an offer, which he rejects as too low. In response, you go to the board of aldermen and ask them to declare the apartment blighted, condemn it, and turn it over to you for redevelopment.
The Gentry’s landing apartment complex. The fence in the foreground surrounds a supporting cable for a crane that’s being used for new construction across the street.
It might sound absurd, but something very similar is happening right now in Saint Louis. The story demonstrates just how ripe for abuse Missouri’s eminent domain laws have become. And there’s little reason to think the eminent domain bill the state legislature passed in May will prevent such abuses in the future, because the “blight” loophole being used by the city was not closed by the legislation.
When you think “urban blight,” you probably don’t think of the downtown Radisson. The Radisson is one of three skyscrapers built on land leased from Florida real estate developers John and Joe Seravalli. The other two are apartment buildings: the Mansion House and Gentry’s Landing. The owners of the buildings pay rent for the use of the land under leases that last for decades.
A view of the Mansion House apartment as seen from the “blighted” courtyard that lies between the Mansion House and Gentry’s Landing.
Gentry’s Landing is owned by Integrity Real Estate, headed by Peter McCann. For years, McCann has expressed interest in purchasing the land under his building from the Seravallis in preparation for building renovations, but they have not been able to agree on a price. In 2001, McCann began hinting that if he didn’t get a “reasonable” price, he might ask the city government to condemn the land and turn it over to him for redevelopment. Those threats became more overt in 2005, with warnings that he would have “no choice” but to pursue condemnation of the land if a deal was not reached. When the Saravallis continued to refuse McCann’s terms, McCann made good on his threat. On April 28, 2006, the city of Saint Louis notified the Seravallis that they would have to sell or have their land seized using eminent domain.
The neighborhood in question does show some signs of neglect. The city declared the area to be blighted back in 1989. Today, retail space along the street includes a payday loan shop and a couple of vacancies. The Gentry’s Landing apartment building is beginning to show signs of age. But it’s not obvious why the blame for those problems should fall on the Seravallis, who only own the land underneath the complex, rather than McCann, who owns and operates the facility itself.
The lobby of the “blighted” downtown Radisson hotel, on the same block as Gentry’s Landing.
The Seravallis contend that the reason is politics: that McCann and the city are conspiring to take their land for below its fair market value. They have filed suit against the plan, asking why, after 17 years of inaction, the city has suddenly become interested in redeveloping the neighborhood.
The story illustrates how precarious property rights have become in Missouri. Property rights should not depend on whether you have connections in city hall. The eminent domain legislation passed in May is unlikely to solve the problem. The legislation does require that blight determinations not be “arbitrary or capricious or induced by fraud, collusion, or bad faith.” But it’s difficult to prove bad faith in court, and judges have historically been reluctant to second-guess the decisions of legislative bodies. Such vague rules are unlikely to be much of a deterrent.
Some retail stores down the street from Gentry’s Landing.
More importantly, the legislation did not close the “blight” loophole, which has become one of the most common justifications for the use of eminent domain in Missouri. The legislation sets a 5-year time limit on blight designations, but it allows city legislative bodies to renew the blight designation indefinitely. And the legislation does not tighten the definition of blight, leaving city officials with wide latitude in defining the term.
The power of eminent domain has traditionally been used for public uses like roads, police stations, and hospitals. The Seravallis’ battle with the city of St. Louis illustrates how far we’ve strayed from that ideal. Although the proposed redevelopment might result in increased tax revenue for the city, the primary beneficiary is clearly a private real estate developer. And any incresed tax revenue would come at the cost of weakening property rights for everyone.
The Seravallis are successful commercial real estate developers who can afford to hire the best legal talent to defend their rights in court. They may ultimately prevail. But the battle will take years and cost tens of thousands of dollars in legal fees. Few homeowners could afford to mount that kind of legal defense. If property rights in Missouri aren’t strengthened, the big losers won’t be wealthy businessmen like the Saravallis, but ordinary homeowners who won’t have a prayer of standing up to unjust seizures of their land.
Timothy B. Lee is a policy analyst at the Show-Me Institute.