Cities Should Not Trade Existing Businesses For Potential Development

You have probably seen ads on the internet promoting “one weird trick” to lose weight, get clear skin, or solve another health problem. The clickbait is a hollow promise, as the product it promotes is unlikely to solve the problem. In fact, the product might make things worse rather than better.

For now, cities have one weird trick to get rid of businesses they don’t like. It’s called amortization. While it isn’t widely used right now, it could provide cities a way to get around eminent domain reforms that states made to better protect property owners in the wake of an infamous Supreme Court decision: Kelo v. New London.

In that case, the Court ruled that New London, Connecticut could take Susette Kelo’s little pink house, and the homes of her neighbors in the Fort Trumbull neighborhood, by eminent domain and given them 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, practically every state in the U.S. changed 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 can’t force property owners to sell. Developers must convince them by making a fair offer or plan around them if the homeowners won’t sell.

By using the amortization trick, a city first changes it’s zoning code, banning uses 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 banned use, supposedly allowing the property 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 to an auto repair shop.

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

But Mauldin is a city with big plans. The city council and mayor want to transform its downtown. One of the many developers whom the city has courted expressed their distaste for U-Hauls, which they thought were unsightly. In 2021, the city passed wide-ranging changes to its zoning code to discourage the type of businesses it didn’t envision in its future. Every existing business was grandfathered in except for one: rental moving trucks.

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

Just operating until the end of the year won’t come even close to compensating Sark’s for the loss of the U-Haul business. The annual revenue 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 rental moving trucks, they would have to lay off one or two employees.

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

While it will be a different state court that considers their case, Jeremy and Marie can look north over the border to see another couple who beat an amortization attempt by Wilmington, North Carolina. David and Peg Schroeder were counting on short term rental income to own a second home close to their family. Wilmington decided that it didn’t like short term rentals and held a lottery to determine who would get to keep renting their properties. The Schroeders lost the lottery, but they won the lawsuit they filed with IJ.

To cities, amortization can seem like a slick trick to get around property owners’ rights. But cities that trade away present property owners in the hope of pleasing out-of-town developers may end up with nothing. Decades after New London took Susette’s home the promised development never came close to living up to the self-serving hype.

Sark’s is a mile down the street from where the city hopes to build its new downtown (the development of which has already been delayed a year). The shop is next to an auto parts store on one side, a furniture store on the other side, and across the street from 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 count on a paycheck.