Posted by Ilya Somin:
Maryland May Use Eminent Domain to Take over the Preakness:
http://volokh.com/archives/archive_2009_04_05-2009_04_11.shtml#1239318173
Maryland state legislators are [1]considering legislation that would
enable them to use eminent domain to condemn the Preakness Stakes
horse-racing track, as well as the trademark and other intellectual
property rights associated with the famous race which is part of the
Triple Crown [HT: VC reader John Thacker]:
Under the bill, the state could seize the tracks as well as the
Woodlawn Vase and Preakness-related trademarks, copyrights and
contracts, if doing so prevents "the loss of the historically,
culturally, and economically important" horse racing legacy . . .
The last-minute legislation was prompted in part by reports that
Pikesville developer Carl Verstandig was interested in razing
Pimlico and turning the Northwest Baltimore property into a
shopping center. He has since said he would prefer to keep the
Preakness at Pimlico, as have other potential bidders.
Magna Entertainment Corp., the firm that currently owns the Preakness
,is facing bankruptcy. And Maryland officials, including the governor,
claim that the threat of eminent domain is needed to keep the
Preakness from being moved out of state, as the Baltimore Colts were
in 1984.
This argument doesn't make much sense. As [2]I pointed out in a recent
post, the Colts' famous midnight departure to Indianapolis was itself
precipitated by the state's threat to use eminent domain against them.
More generally, state efforts to use eminent domain against mobile
assets tend to be self-defeating. They cause owners of those assets to
flee the jurisdiction and also deter new firms from moving to the
state. I suspect, therefore, that Maryland's efforts to use eminent
domain to keep the Preakness in-state will be unsuccessful. They may
even bring about the very result that state legislators say they want
to avoid.
However, there is a complication. It's not clear to me whether the
most valuable elements of the Preakness really are mobile assets or
not. Since I don't know much about horse-racing, I'm not sure whether
the truly valuable commodity here is the race track (which is static)
or the trademarks and other intellectual property rights associated
with the annual Triple Crown race (which can potentially be held at a
different race track in another state). In other words, would
horse-racing fans be just as willing to watch a Preakness race held in
a different state? Or is there something unique about the Maryland
site that would make the race significantly less popular if it were
moved elsewhere? If the latter is true, then Maryland's threat to use
eminent domain might accomplish its objective of keeping the Preakness
race going in-state. Ironically, it would do so precisely because the
race can't really be moved out of state without losing much of its
profitability. The owner's only realistic options would be to either
keep the race in Maryland or shut it down entirely in favor of some
other use for the land; eminent domain can prevent Magna from picking
the latter option. Perhaps readers with greater knowledge of
horse-racing can enlighten me as to the true nature of the Preakness'
value.
Even if Maryland's eminent domain threat is rational in the sense of
having a real chance of achieving its purpose, I'm not convinced it is
good policy. If the owners of the Preakness track prefer to shut it
down and use the land for other purposes, the state probably should
not intervene. After all, the owners have the strongest incentives to
allocate the land to its most valued use; unlike state legislators,
they have their own money at stake. If the highest valued use of the
land turns out to be something other than horse-racing, I don't see
any good reason for government intervention to prevent it. Indeed, if
the new use produces more economic value than the race track does,
preventing the change might actually hurt the state's economy during
an already difficult time.
References
1.
http://www.baltimoresun.com/news/local/politics/bal-preakness0408,0,5266142.story
2. http://volokh.com/posts/1238788954.shtml
_______________________________________________
Volokh mailing list
[email protected]
http://lists.powerblogs.com/cgi-bin/mailman/listinfo/volokh
