Texas Public Use Doctrine’s Fate Will Be Settled in the Courts

Texas has had a resurgence of private property rights and small government advocates pushing to limit the public use doctrine to circumstances where the property acquired will be owned by the government and put to the public’s actual use. If adopted and enforced literally, such a constraint would vastly affect how the eminent domain power could be invoked to facilitate growth and development in the state.

The conservative ideology that has dominated Texas politics since 1994 carries tension between private property rights, which favor small government, and big business, which substantially benefits from the tacit private subsidies associated with public infrastructure investment. The ensuing three decades have seen tough talk against the taking of private property for public use, while little has been done to constrain the exercise of eminent domain.

Eminent domain—the government’s power to acquire private property—is a key component of most public infrastructure projects. It allows governmental and public use entities to compel a transaction to ensure the most desirable or efficient physical footprint that might be otherwise unachievable through negotiation and voluntary transactions.

Eminent domain’s traditional constraints involve the public use doctrine—the project must serve a public purpose—and the compensation obligation. On the public use side, the threshold for establishing a public purpose sufficient to justify the exercise of eminent domain has historically been a low bar.

In Texas, a condemning authority’s own determination of public use presumptively establishes the project’s public purpose in the absence of an abuse of discretion, fraud, or arbitrary and capricious conduct. In 2005’s Kelo v. City of New London, the US Supreme Court confirmed this standard, reasoning that it isn’t the courts’ role to second-guess a legislative determination as to what projects will serve the public good, what land is necessary for those projects, or how the projects will be implemented.

From a legal standpoint, Kelo was unremarkable. It followed long-standing precedent dating back at least to the 1954 landmark decision in Berman v. Parker, in which the Supreme Court upheld the government’s ability to take private property for urban renewal. This applied even when it would be transferred to private developers, establishing a broad view of “public use” beyond direct public access.

Although Kelo wasn’t a landmark decision, it signified a tipping point. Before Kelo, eminent domain could be considered an unexplored, dark corner of the law. Kelo highlighted the issue, and many were appalled to learn that the “public use” component of the takings clause provided barely more than nominal protection of private property rights.

The backlash was immediate. The initial aftermath targeted takings for economic development: Thirty-nine states enacted some form of legislation barring eminent domain for economic development purposes. More than 20 years later, Kelo’s reverberations are still being felt.

While the rule affording deference to legislative determinations of public use endures in Texas, its hold is crumbling. Dissenting opinions in the Texas Supreme Court have called for a sweeping rejection of the deferential standard, and even majority opinions applying the rule appear only to be waiting for the right case to abandon it altogether.

The lower courts of appeal don’t seem inclined to wait, with at least one appellate court holding that a city’s lease of its golf course to a private operator may not qualify as a public use and another indicating that a port’s operations—which inherently involve the sale or lease of property to private shippers and cargo handlers—may be similarly deficient.

Should a municipality with no expertise in golf courses be required to operate its municipal golf course rather than farm out this responsibility to a golf course operator or lose its power to condemn? Should a seaport have to handle the cargo and terminal operations rather than farm this function out to firms that specialize in such work?

It’s too soon to say how far the pendulum against economic development will swing. But it is also worth noting that this shift could affect many for-profit uses that have traditionally relied on the ability to acquire the property rights needed for their projects through eminent domain.

Texas’ economic success has largely been driven by the perception that it is “open for business.” Much of the state’s vibrant economic growth has stemmed from substantial investments in public infrastructure, including:

• energy production facilitated by oil and gas pipelines and processing plants
• trade and commerce facilitated by ports (both sea and inland)
• real estate development facilitated by extended and expanded utilities and other infrastructure
• communities with quality education systems and recreational amenities that motivate people to keep moving to Texas

Since 2009, Article I, Section 17 of the Texas constitution has explicitly excluded transfers to a private entity for the “primary purpose of economic development or enhancement of tax revenues” from the definition of public use. But each of the drivers identified above could be construed as either serving economic development or enhancing tax revenue to one extent or another.

This is an election year. Gov. Greg Abbott (R), who appointed seven of the nine sitting justices on the Texas Supreme Court, is running for reelection on the Texas economy and his success in creating a business-friendly climate.

A commitment to public infrastructure has been a key ingredient of that success, but the broad notions of public use underlying this commitment increasingly conflict with conservative and populist notions of when the government should be able to take private property. A resolution of this conflict in the courts is imminent and could be consequential to the state’s ability to continue to meet its ever-growing demand for infrastructure.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Charles McFarland is a condemnation lawyer, a Counselor of Real Estate, and the Texas member of Owners’ Counsel of America.

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