Woodcrest Homes v. Carousel Farms Metro District

December 10, 2019 • Legal Briefs
By Robert H. Thomas, Kimberly S. Hermann, Luke Wake, Ilya Shapiro, & Trevor Burrus

The Constitution requires that governments must give “just compensation” when they take private property, and even then property can be taken only for “public use.” While the Supreme Court has given a broad reading of these terms, it has insisted that private property cannot be taken on a mere pretext of public benefit to provide a private benefit to favored individuals. Even in the infamous Kelo case, when the Court allowed a woman’s house to be taken for the “public use” of increased tax revenue, the Court said that if a purported public use was actually a mere pretext for private benefit, then it would be unconstitutional. Yet the Court has resisted further defining what a “pretextual taking” might look like. This case, featuring a sham municipality created to take property for private benefit, gives the Court an opportunity to show that it was serious about stopping pretextual takings.

Woodcrest Homes is a housing developer whose property was taken by the Carousel Farms Metropolitan District. In 2006, Woodcrest purchased a parcel of land near Parker, Colorado with the intent to develop the property. When recession struck, however, Woodcrest abandoned the project and declined to exercise an option to purchase two adjoining plots. Later these adjacent properties were purchased by Century Communities, another developer. The Parker town government would not approve Century’s development unless Century was in possession of all three properties. When Century failed to negotiate the sale of Woodcrest’s land, they decided to obtain the property by other means.

Century filed to create a special district, a specialized unit of local government under Colorado law. Because even non‐​resident property owners are eligible to elect district officers, Century was able to use a series of phony transfers to engineer a government made up entirely of its own employees and stakeholders. That sham government then voted to condemn and take Woodcrest’s property. While the board members were required to disclose their conflicts of interest, which they did, no state law prohibited them from voting for their private interests.

The condemnation of Woodcrest’s parcel was upheld by the Colorado Supreme Court. Woodcrest is now seeking review by the United States Supreme Court. Cato, joined by the Southeastern Legal Foundation, has filed a brief in support of the petition. This case offers the court an opportunity to address several lingering ambiguities that have vexed the lower courts since Kelo. We argue that the court could establish a new, higher, standard of review for cases where government authority is wielded by private actors. If the Colorado Supreme Court’s decision is not overturned state power may continue to be captured by self‐​interested actors, endangering Americans’ property rights and making a mockery of local representative government.