A small-town mayor in rural Indiana has made it his personal mission to oust the residents of a tight-knit working-class neighborhood, bulldoze their homes and build a fancy new subdivision for much wealthier people. The only things standing in his way are a plethora of state statutes, the Indiana and U.S. Constitutions and, now, the Institute for Justice, which has filed a lawsuit against the city on behalf of dozens of property owners.
Following the U.S. Supreme Court’s notorious decision in Kelo v. City of New London, which permitted cities to take private property for “economic development,” the Indiana Legislature enacted sweeping reforms to prevent the use of eminent domain for private gain. To evade this law, city officials in Charlestown, Indiana, working in concert with a private developer named Neace Ventures, have concocted a scheme to destroy the working-class Pleasant Ridge neighborhood through a process that amounts to eminent domain by other means.
Their plan is both simple and sinister. Charlestown Mayor Bob Hall has turned the city’s once-benign housing maintenance code into a bludgeon. City inspectors have begun issuing crippling fines for property-code violations—including even trivial ones such as a torn screen, chipped paint or a downed tree limb. The fines accumulate at a rate of at least $50 per day, per violation, quickly leaving homeowners with thousands of dollars in fines and no way to pay.
While homeowners try to address each violation, the fines continue to accumulate and the city finds new violations to compound the penalties. Faced with crippling fines, the homeowners find themselves confronted with an offer they cannot afford to refuse. Neace Ventures steps in and offers to buy the property for $10,000. Neace does not have to worry about the fines or repair orders because the city has agreed not to enforce the law against the developer.
The inspections regime has been a windfall for Neace Ventures. Not only has it compelled more than 150 property owners to sell—it has also forced them to sell at a considerable loss. The tax assessed value of the homes is between $25,000 and $35,000, and their fair market value was much higher before the city destroyed the market by vowing to demolish every property. The net savings for Neace, so far, is near $2 million.
Mayor Hall’s alternative eminent domain scheme is illegal and unconstitutional under local and state statutes, as well as the Indiana and U.S. constitutions. The Institute for Justice has teamed up with residents to file a preliminary injunction asking the court to put an end to the mayor’s mission to destroy their community.
