Cities should not trade existing businesses for potential development

You’ve probably seen ads on the Internet promoting “a weird trick” to lose weight, clear skin, or solve another health problem. The click is an empty promise, as the product it promotes is unlikely to solve the problem. In fact, the product can make things worse rather than better.

At the moment, cities have a strange trick for getting rid of businesses they don’t like. It’s called depreciation. While not widely used now, it could provide cities with a way to circumvent eminent domain reforms that states made to better protect property owners after an infamous Supreme Court decision: Kelo vs. Kelo New London.

In that case, the Court ruled that New London, Connecticut could take Susette Kelo’s little pink house and her neighbors’ homes in the Fort Trumbull neighborhood under eminent domain and give it to a private developer. The decision ran counter to what most Americans thought eminent domain should be used for: infrastructure and other essential government projects.

In the wake of the decision, virtually every state in the US amended its laws and constitutions to prevent the use of eminent domain for private development. This meant that cities and developers looking to impose their vision on neighborhoods could not force property owners to sell. Developers must convince them by making a fair offer or plan around them if the homeowners won’t sell.

Using the amortization trick, a city first changes its zoning code, banning the use of property it doesn’t like. The city then gives the property owner a “reasonable” amount of time (in the city’s view) to continue the prohibited use, ostensibly allowing the owner to “break even” before having to stop their profitable use. This helps the city avoid having to compensate the owner for their loss. It’s happening in South Carolina right now at an auto repair shop.

For nearly a decade, customers have rented and dropped off U-Haul trucks at Sark’s Automotive in Mauldin, South Carolina. It’s been a good side business to their auto repair business for Jeremy Sark and his partner Marie Dougherty. It provides enough income and work to support one or two employees. U-Haul also contracts with the shop to maintain and work on the trucks. Truck rental is also a source of new customers for the auto repair business.

But Mauldin is a town with big plans. The city council and the mayor want to transform its center. One of the many developers the city has featured expressed his distaste for U-Hauls, which they thought were unsightly. In 2021, the city passed sweeping changes to its zoning code to discourage the kind of businesses it didn’t foresee in its future. Every existing business was fathered, except one: moving truck rentals.

Jeremy and Marie didn’t know their rental business was on the chopping block and didn’t learn about the ban until their landlord was sent a notice from the city, which they received in December 2021. That notice said Sark only had until end of December 2022 to continue leasing U-Hauls. Shocked, Jeremy and Marie tried to get the town to change its mind, but their pleas were ignored.

Just operating through the end of the year won’t even come close to compensating Sark’s for the loss of the U-Haul business. Annual income grew from $10,000 to more than $50,000 a year, and Jeremy and Marie have every reason to think it will continue to grow. South Carolina is one of the fastest growing states in the country. If they can no longer rent moving trucks, they would have to lay off an employee or two.

That’s why Jeremy and Marie are fighting back through a lawsuit filed on their behalf by the Institute for Justice. Renting U-Hauls is a safe and reasonable use of their property. Exclusion of this use violates South Carolina law and its state constitution.

While it will be another state court that hears their case, Jeremy and Marie can look north over the border to see another couple that defeated an amortization effort from Wilmington, North Carolina. David and Peg Schroeder were relying on short-term rental income to own a second home near their family. Wilmington decided it didn’t like short-term rentals and held a lottery to determine who would continue to rent their properties. The Schroeders lost the lottery, but they won the lawsuit they filed in IJ.

For cities, amortization can seem like a clever trick to circumvent the rights of property owners. But cities that trade current property owners in hopes of pleasing out-of-town developers may end up with nothing. Decades after New London took over Susette’s house, the promised development never came close to living up to the self-serving hype.

Sark’s is a mile down the road from where the city hopes to build its new center (the development of which is already a year behind schedule). The store is located next to an auto parts store on one side, a furniture store on the other and opposite a mayonnaise factory. All three have box trucks or semi-trailers coming to and from their location. Removing the U-Hauls won’t transform the neighborhood, but it will hurt a family business and people who believe in a paycheck.

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