Private Business as Public Good: Hotel Development and Kelo
36 Pages Posted: 13 Dec 2007
In the summer of 2004, New Haven Mayor John DeStefano, Jr. announced plans to demolish the all-but-derelict New Haven Coliseum and replace it with a publicly financed redevelopment that would include a 300-room hotel. Critics of the plan immediately objected that the hotel - even if it were completed - was a poor public investment, that there was no demand for such a hotel, and that the money could be better spent elsewhere. Some critics pointed to New Haven's own checkered history of major development projects, especially the failed downtown mall and the famously catastrophic Oak Street redevelopment. As of February 2006, the city was still considering variations on the hotel plan, though a report from the city's own Office of Economic Development suggested that the proposal was not financially viable without subsidies from the city.
Just a few blocks from the site where DeStefano sought to build a new hotel, two other prominent buildings bear mute witness to New Haven's past development follies: the Omni Hotel of New Haven (formerly known as the Park Plaza) and the Hotel Taft. Together, the two remain the most towering figures in New Haven's hotel history, and their interwoven stories have much to say about the relationship between the hotel industry, the city, and the "public" benefits of private businesses.
This Note tells the story of New Haven's well-intentioned but ultimately disastrous attempts to revitalize its hotel industry, and relates that story to the current nationwide debate about the scope of state and federal eminent domain power. The history of New Haven hotels demonstrates that similar public redevelopment projects are unlikely to provide benefits sufficient to outweigh their significant costs. This history thus offers a valuable lesson both for legislators working to limit the use of eminent domain in their states, and for New Haven itself, as the city struggles to decide how to fill the void left by the Coliseum's destruction.
Keywords: public good, hotel, kelo, economic development, eminent domain, externality, subsidy
JEL Classification: H4, O2, R5, K11, H72, A13, D62, D23, D70, H2, H3
Suggested Citation: Suggested Citation