Eminent Domain, Municipalization, and the Dormant Commerce Clause

Abstract:     
Municipalization is the process by which a local government unit becomes the owner and operator of a public service previously provided by a private entity, such as electrical services or other utilities. Municipalization has sometimes involved the government’s use of its eminent domain power to acquire ongoing enterprises by paying just compensation for privately owned utility companies. Federal doctrines, such as the dormant Commerce Clause, federal preemption and other federal constraints, should be used to limit or temper municipalization efforts to control national interests or subvert individual rights while allowing sufficient state power to regulate and experiment with solutions to local problems, such as the provision of a stable supply of electrical power at reasonable rates.

Part I of this Article discusses efforts to municipalize privately held public utility companies and other ongoing enterprises through the use of eminent domain. Part II explores the federal constraints on using the eminent domain power to acquire an ongoing business based on the Fifth Amendment and the dormant Commerce Clause. Other federal constraints such as the Commerce Clause, the Tenth Amendment, the Supremacy Clause, the Contract Clause, and antitrust laws are also briefly discussed. Professor Saxer concludes that existing federal restraints on government power are not sufficiently protective of private property rights and suggests that we consider strengthening these limits through congressional action and by closely scrutinizing government motivation when the eminent domain power is used.

Number of Pages in PDF File: 57

Keywords: counties, cities, local government, eminent domain, dormant commerce clause

JEL Classification: K11, K29, K49

Accepted Paper Series