Penn Central Transp. Co. v. New York City Summary | quimbee.com

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– [Narrator] In New York
City, Grand Central Terminal should be on every
visitor’s must-see list. It’s an elegant French
Beaux Arts structure in beautiful contrast with the
city’s modern steel and glass high-rise towers. In 1967, the New York City Landmarks Preservation Commission
designated the terminal a city landmark, but a decade
later, that designation found its way to the
United States Supreme Court in Penn Central Transportation Company versus New York City. Landmark designations
restrict property use. A landmark’s owner can’t
replace, upgrade, or improve a structure without approval
from the relevant commission. Commissions won’t approve
changes that impair or interfere with the property’s historic
or aesthetic aspects. Commissions direct property
owners, at their own expense, to maintain the property
to certain standards. Grand Central Terminal’s owner, Penn Central Transportation
Company, plans to build a 50-story office tower
above the terminal. Before construction even
began, Penn Central leased out the entire planned tower. The anticipated income
during the 50-year lease term would have paid for the tower
and provided Penn Central with a hefty revenue infusion. Penn Central submitted two
alternative development plans to the Commission, but the
Commission rejected both plans saying that neither adequately protected the terminal’s architectural features. Penn Central then sued the
city and the Commission in state court. The trial court held that
the Commission’s actions constituted an uncompensated
taking in violation of the 5th and 14th Amendments to the United States Constitution. On appeal, the Appellate Division reversed holding that since Penn Central retains some reasonable beneficial
use of the terminal no taking had occurred. New York’s highest state
court, the Court of Appeals, affirmed the Appellate Division. Penn Central then appealed to the United States Supreme Court. Justice William Brennan
writing for the Court, considered whether a 5th
Amendment taking occurs when a commission limits
a property owner’s ability to profitably exploit its property. He concluded that the answer was no. States can regulate land
use without effecting a 5th Amendment taking. Brennan explained that the
5th Amendment’s takings clause was designed to prevent
the government from forcing one or a few people to bear public burdens that should rightly be borne
by the public as a whole. Physically occupying
property is clearly a taking, but restrictions or limitations
that allow a reasonable use or ability to exploit
one’s property don’t rise to the level of a taking. Moreover, if a law, by
prohibiting a particular use promotes the public’s
health, safety, morals, or general welfare, no
taking occurs as long as there remains to the owner
a reasonable, beneficial use of the property. Governments couldn’t operate
if every incidental reduction in value resulting from a regulation entitled someone to compensation. Regulation constitutes a taking
only if it wholly frustrates the owner’s reasonable
investment-backed expectations, or otherwise renders the
property completely useless. Brennan explained that a
takings analysis focuses on the characteristics of a
government action and the extent of its interference with an
owner’s rights in a parcel as a whole. Here, the Commission’s
objective was to preserve historically significant
buildings and areas and this was a legitimate
governmental interest. And, Penn Central could
still profitably exploit the terminal in the
same manner that it had before the Commission
designated it a landmark as a railroad terminal with office space and retail stores. So, the Commission’s actions
didn’t constitute a taking. Moreover, the fact that its
decision cost Penn Central and only Penn Central
many millions of dollars in lost revenue did not change
the 5th Amendment calculus. Therefore, the Court upheld the state law and affirmed the New
York Court of Appeals. Associate Justice William
Rehnquist dissented. He noted that the landmark law was unlike generally applicable laws
such as zoning regulations. Those encumber all property owners equally and all owners benefit
from the fact that everyone must use their property
in a similar manner. This is what Justice Holmes once called, quote, “an average reciprocity
of advantage”, unquote. Here, Rehnquist argued,
only a few buildings in all of New York City were
subject to the landmark law. Penn Central bore all the costs of the Commission’s
rejection while reaping no reciprocal benefits. Further, the Commission
directed Penn Central at its expense, to maintain the terminal preserving its historic and
architectural character. In effect, the Commission
exercised complete dominion and control over the terminal. A few years after the Commission rejected Penn Central’s proposals, Penn
Central filed for bankruptcy. Though the terminal has
since passed through at least three different owners,
the Commission still has the last word on what can be done with it.

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