A Zoning Kerfuffle: Picking Pockets in Bloomington

October 19, 2012

by Craig Ladwig

Bloomington is a town full of itself. It imagines it’s Portland, Oregon, on which its civic posture is modeled. That is, Bloomington governs itself – especially in matters of zoning — as if there were an unlimited supply of persons wanting to live and invest there.

That posture, though admirably boosterish, runs counter to the actual driver of location and investment, i.e., the absolute nature of private property. For if an investor believes his property can be diminished by political whim or maneuver, even a little bit, his investment will be withheld accordingly.

Before we get into that, you need to know that Bloomington, unlike Portland, is not nestled at the confluence of beautiful rivers. Nor was it platted between mountain and ocean with cool summer breezes and soft winter rains ideal for growing hops and roses.

To be honest, the climate in Monroe County can be hostile, the soil is relatively poor and Bloomington isn’t known for its hops. It imports most of its beer (lots when school is in session), and roses don’t particularly flourish there. Of the private investment it attracts, most is merely following millions in state dollars, all of them assigned by legislative edict to the government bureaucracy that is Indiana University.

Indeed, Monroe County’s distinguishing feature is political. Bloomington is proud to be the most liberal city in the state. It votes for the Democratic candidate, any Democratic candidate, by whopping margins.

Stripped of pretension, then, Bloomington is a non-tillable wide spot in the limestone-and-chert hills, the former home of Robert Montgomery Knight and the sister city of Santa Clara, Cuba.

Returning to what drives investment, the city’s ultra-progressive bent is not normally a problem. Government money, after all, is still money. Cheryl Underwood, however, has made it her problem. Ms. Underwood, a music teacher turned real-estate entrepreneur, took on city hall and won.

“Working a second job as a waitress, I would save until I had enough to buy my next house, fix it up and rent or sell it,” she told me in explaining how she built her real-estate firm one house at a time. She had an eye for a deal and a location; she was optimistic about Bloomington’s future; she earned the respect of the real-estate community; she prospered.

In the summer of 2010, though, Ms. Underwood was shocked to learn that the city by fiat had devalued rental property she was developing — stolen it, to some minds, by changing its zoning designation without notice. Overnight, her property became more limited, “Institutional” was the term of art (for use as a university, church or related public building). “Do Not Occupy” signs were tacked on the door at a time she was trying to fill her newly renovated building with tenants.

Let us leap over the financial anguish, bureaucratic misdirection and legal maneuver that can be assumed when anyone challenges a local axis as powerful as municipal government and a state university trying to leverage a little guy’s private property. This week the city council unanimously reversed itself in an apology of sorts. It restored Ms. Underwood’s property to its original designation.

The impression, though, was that of a pickpocket caught with a wallet saying, “Thank goodness; I was wondering who owned this.” The council was not disturbed that Ms. Underwood’s pocket had been picked, only that it had been picked without notification — that and whether notification of pocket-picking could be achieved “logistically” in the future. There was no sense in the official discussion of moral danger, no mention of the larger implications for zoning policy.

Some argue, for instance, that the “Institutional” designation allows the quick and the clever a loophole through the state’s recently reformed eminent-domain law. The professed needs of higher education can be used as cover to redefine property for unstated other purposes. Does that mean gulling one hapless property owner in favor of a more institutionally connected one? Can your “property,” then, turn out to be only what some university administrator and his brother-in-law, the parking-garage contractor, say it is?

It depends on which lawyer you consult. But even if the property in question is fairly, nay generously, compensated, and even if the result is overall economic growth in the “common good,” there’s a problem. Let Dr. Cecil Bohanon, a professor of economics at Ball State University, explain:

“I have come to believe that private-property rights are not about economics per se. They are ultimately about affirming individual dignity and autonomy. Private-property rights ensure the rich cannot prey on the poor, the strong cannot oppress the weak and the politically connected cannot run roughshod on the outsider, the King (a university president) cannot do whatever he wants. Private property ensures no one can take what is yours without your consent. In extraordinary or clearly prescribed circumstances this can be trumped. But speculative private economic development or attainment of the particulars of a university plan don’t meet this standard for most of us.”

So what might be the effect of ignoring all this on Portland . . . er, Bloomington?

Ms. Underwood is just a soldier in that army of small investors who keep any town alive. They inject value in otherwise broken, expended property, fixing things over here, selling things over there, renting things in between, until the big shots figure out what they want to do.

With property-rights uncertain, however, there will be fewer Cheryl Underwoods in Bloomington’s future or, for that matter, in any other Indiana university town. There is the risk that the incentives of a powerful institutional investor such as a university, unlike an individual looking for immediate rental income or turnaround, will be to let property degrade until a long-range master plan comes into play. That can affect adjacent real-estate investment, creating at least near-term market instability.

Bloomington, to make up for that, will have to ship in a lot of mountain scenery, meandering rivers and red roses. And more beer wouldn’t hurt either.

Craig Ladwig is editor of The Indiana Policy Review. Contact him at director@inpolicy.org

Resources

1. Cory Craig. “The Nine States of Indiana.” The Indiana Policy Review, winter 2012.

2. Cecil Bohanon, Ph.D. “Kelo in My Backyard.” The Indiana Policy Review, Aug. 21, 2012.

3. T. Norman Van Cott, Ph.D. “Eminent Domain: Ahab and Jezebel in Muncie?” The Indiana Policy Review, Oct. 18, 2012.

4. Rod Spaw. “Bloomington Property Owners Battle with City over Rezonings.” the Bloomington Herald-Times, Sept. 14, 2012.



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