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The 25th Anniversary of the Penn Central Decision: Its Impact Then and Now  

12-09-2015 17:35

Every now and then there are particular years that seem to mark a special moment in some part of our national history. The year 1903, for example, has been called the “year the world was shrunk.” It was the year of the first transcontinental motor car trip, the year of the first flight by the Wright Brothers, the year Panama and the United States agreed to build the Panama Canal, and the year the Times of London began its transcontinental news service using Mr. Marconi’s new wireless.

I have always thought that 1976 was a year of special importance for the historic preservation movement. The bicentennial of American independence, for example, seems in retrospect a moment when people began to pay more attention to American history than they had in the years before that. The country was alive with all sorts of programs cooked up for the celebration -- from the vast rehabilitation of Washington, D.C.’s Union Station to the decoration of neighborhood fireplugs; and there was the restoration of countless local historic sites, projects that propelled the preservation movement in ways that few other events had done.

Likewise, 1976 was the year Congress passed the Tax Reform Act. It provided the first incentives for the rehabilitation of historic buildings ever to appear in the tax code. The 1976 act gave us our first real development tool, an excellent economic talking point in public campaigns and private negotiations. And it led later to the investment tax credit, which today generates more money for the rehabilitation of historic properties in a single year than all the bake sales we’ve held since the ladies saved Mount Vernon some 150 years ago.

And finally, 1976 was the year when the Penn Central Transportation Company decided to go to the highest court of the state of New York seeking to overrule the New York City Landmarks Preservation Commission, which had denied its request to build a skyscraper on top of one of the great American landmarks of all time: Grand Central Terminal.

The Penn Central struggle was an intricate campaign waged on two levels. It was one part litigation strategy and one part an effort to win the hearts and minds of New Yorkers and Americans more generally. It was law and Chautauqua at the same time.

Legal Landscape Before Penn Central

Some of the legal questions posed by the litigation could fairly be characterized as genuinely new. While both the original federal Bill of Rights and the Fourteenth Amendment had long declared that the government could not “take” private property without paying just compensation, for the first 125 years of the nation’s history, judges and everybody else believed that this simply meant that if the government seized your land, say, to build a highway, it had to pay you the fair market value of the acreage it took.

At the very close of the 19th century, courts began to say that the government might have to pay compensation even when it did not seize property outright. These situations came to be called “regulatory takings.” Plainly it had always been true that various government actions could affect the value of private property, but until the Supreme Court decided the case of Chicago, Burlington, and Quincy Railroad v. Chicago in 1895, these actions were deemed not to invoke a citizen’s rights under the takings clauses of the Fifth and Fourteenth Amendments.

It was at the dawn of the regulatory takings doctrine that the early 20th-century cases about zoning occurred. Most courts embraced the idea that zoning was constitutional because zoning conferred “reciprocal benefits.” This notion was that if your house was in a neighborhood zoned only for residences and therefore protected from commercial encroachment, all of the parcels in the zone received a reciprocal economic benefit. While it was true that an individual owner would suffer a limitation on how she could use her parcel, each owner also obtained the benefit of knowing that the people next door could not build a smelter and destroy the value of her home. This concept sustained not only local zoning but also the later innovation of historic district ordinances.

The mutual protection that land-use regulations represent is still a good talking point for our movement. In local debates about designating new districts, I often point out that purchasers of land in suburban subdivisions willingly pay a premium for covenants that confer the same economic benefit that historic designations confer in inner-city neighborhoods.

But how could this idea be applied to a regulatory regime that picked out single buildings and restricted them, while leaving the rest of the neighborhood unregulated? This was one of the legal conundrums that the Penn Central case presented. While New York City had designated some 400 individual buildings at the time of the Penn Central litigation, even this substantial number was a mere pebble in the vast pond of New York City real estate. It was very difficult, if not impossible, to demonstrate that as a matter of economics a single lot in Brooklyn was benefited by virtue of the fact that a building in the Bronx was likewise regulated.

The legal puzzles working their way through the courts were, of course, but part of the drama unfolding as a result of the proposed skyscraper over Grand Central. The loss of Pennsylvania Station a decade earlier was still much lamented in New York and elsewhere, and the prospect that the city’s other great station might suffer a desecration generated agitation at the highest levels. Organizations such as the Municipal Arts Society took up the cause, and a host of New York’s luminaries joined the protest. The Committee to Save Grand Central, with offices just across from Grand Central in a corner of the Biltmore Hotel (itself later lost to redevelopment), beat the drum repeatedly with assistance from such notables as Jacqueline Kennedy. The collective sense of pending loss which these protests articulated gave rise to the Committee’s slogan, my favorite preservation slogan of all time: “No More Bites Out of the Big Apple.” This slogan showed up on bumper stickers and other ephemera and on delightful blue ties featuring red apples with one chunk taken out.

The Supreme Court Decision

Fortunately, the Penn Central litigants arrived in the judiciary’s marble palace on Capitol Hill at a time when the activist momentum of the Earl Warren/William Brennan court had not yet petered out.

The Court’s 1978 opinion, like the larger struggle itself, reflected both legal and environmental doctrine. It is worth celebrating the victory, still sweet 25 years later, by recalling what the opinion was like.

The Court’s opinion is sprinkled with mention of the role the National Trust plays in preserving America’s built environment and the role it played in the Penn Central case. Footnote One cites two publications of the Trust; Footnote Four cites Frank Gilbert, the dedicated advocate for preservation law whose tireless travels helped create countless local preservation commissions. And it cites Gilbert quoting Trustee Robert Stipe’s speech to a 1971 Trust conference on preservation law.

The Court quotes liberally from the findings of the New York City Landmarks Preservation Commission. Observing that the developers originally proposed to strip off the facade of the station and rebuild the exterior to fit the new tower, the Court quotes the Commission’s declaration that “To protect a Landmark, one does not tear it down. To perpetuate its architectural features, one does not strip them off.”

Assessing Penn Central’s argument that the designation of landmarks is inevitably arbitrary because it is “basically a matter of taste,” the Court said that the argument “has a particularly hollow ring in this case.” While Brennan is talking about the fact that the railroad had not sought judicial review of the designation of the terminal, he seems to be chastising Penn Central’s lawyers for arguing that the specialness of Grand Central might somehow be open to fair-minded challenge.

This warm-hearted embrace of preservation values has the same ring as the Court’s decision seven years earlier in Citizens to Preserve Overton Park v. Volpe, when the Court stopped an interstate highway, which had been on the drawing boards since the Eisenhower Administration, by reading Section 4(f) of the 1967 Department of Transportation Act as a full-throated declaration by Congress that parks (and, of course, historic structures) should not be used for highways unless all other alternatives had proven completely unreasonable. “There are few green havens left,” said the Supremes.

The Penn Central opinion is great fun to read, especially since Brennan is writing for a majority of six, a number that I’ll suggest later has recent significance.

So much for frolic. What was the law that Brennan announced?

First, designation of a landmark cannot be a taking standing all by itself. Rather, a regulatory taking can only occur in the context of real site-specific economic activity.

Second, the factors that indicate a regulatory taking, or whether the government has “gone too far” as Justice Holmes once put it, include the economic impact on the property (especially the extent to which the designation interferes with legitimate investment-back expectations), and whether the government actions can be fairly characterized as a physical invasion of the landowner’s property. Another was whether the regulation generally advances broadly the health, safety, morals, or general welfare of the community.

Third, whether there has been a taking is determined by whether the economic value of the property taken as a whole has been effectively eliminated rather than whether a particular aspect of the property has been diminished in value.

Fourth and very interestingly, the Penn Central court rejected the claim that there could be no reciprocal economic advantage in a regime designating isolated landmarks. The Court observed that New York had designated lots of structures throughout the city, including a good number in districts near the terminal, and brushed off the claim. No problem here, said Brennan: “Legislation designed to promote the general welfare commonly burdens some more than others.”

Finally, Penn Central lost on two grounds important to the modern work of historic district commissions. For one thing, the developers had sought permission only for draconian 50-story additions, nothing less, and the Court was satisfied that the Landmarks Preservation Commission was open to lesser proposals. For another, the air rights above the terminal were transferable and thus hardly lost altogether (even if no tower were ever built).

A Turning Point for Preservation

What, then, has been the broader meaning of the preservation movement’s big victory at the Supreme Court?

To be sure, the Penn Central decision created for our movement a legal environment that has sustained local landmarking activity over the intervening decades. The legal soundness of the regulatory regimes upon which we rely, however, has never been enough to sustain our collective campaign to preserve the nation’s built environment. State and local preservation law have simply given us a solid foundation upon which we can wage our own hometown version of the campaign fought by the Committee to Save Grand Central.

To be successful at that, preservationists have necessarily become savvier at working the economics of preservation. Our emphasis on the economic benefits became such a central part of the movement’s message during the late 1970s and early 1980s that one year the Trust commissioned a Preservation Week poster featuring a house that looked like an oil can. The idea was to play into the national focus on energy independence. The oil and energy theme became so prominent that it led us offcenter from the place where preservationists really live. Most people came to the movement because we love the architecture and the sense of place and neighborhood that historic buildings provide in modern life.

It is possible to love the architecture and still stay focused on the fact that we deal regularly with people who own land, want to build its value, and must react to the market forces that affect their chance to do that. The movement has become ever so much better at remembering, as loquacious James Carville might say, “It’s real estate, stupid.”

Among the lessons of Penn Central was that to succeed outside the courtroom we must be prepared to deal with land for what it is to most other people, namely property. To do that, the movement has created an impressive array of inducements in federal and state tax law, devised innovative real estate practices, and created various vehicles to raise capital for historic property investment. Many of these are things we only dreamed about in 1978. Better yet, preservation organizations at all levels now have the technical expertise to help landowners and developers work their way through these various opportunities, something only a few organizations could do 25 years ago. The techniques that Savannah and Pittsburgh and Denver pioneered in the 1970s are now replicated in countless preservation organizations in virtually every corner of the country.

The maturing experience of the Penn Central episode helped give the movement a second gift: the capacity to be tough-minded in deciding what to save and what to give up on. While it is true that Justice Brennan refused to accept the contention that landmark designations were a matter of taste, I think what preservation sometimes provides in community debates is a voice for good design. That’s useful but tricky; not everybody thinks good taste is a legitimate grounds for public policy. I think we are better at making these calls than we used to be, better at walking away when the economics and the politics of a given situation appear to dictate that we do so. It saves our credibility and conserves our resources for the next series of battles.

Facing New Challenges

While these advancements in the movement’s capacity and maturity have been good news for old building huggers, preservationists and their allies who rely on land-use regulation faced growing legal assaults as the 1980s and 1990s unfolded. Now, Justice Scalia is right about a good number of things, but not about his 15-year campaign to realign takings law in ways congenial to big box developers. Nevertheless, it is a serious campaign, the seriousness of which was demonstrated early on by the 1987 decision in Nollan v. California Coastal Commission. In Nollan, the Court struck down a commission requirement that landowners provide certain beach access as a condition of receiving permission to build a large new house on the site of a smaller one. It held that the state had not shown an adequate “nexus” between its objectives and its means.

The Court upped the ante in Dolan v. City of Tigard, 1994, in which the city’s greenway requirements were set aside on grounds that the city had not proven that there was “rough proportionality” between the need for green space and the environmental loss effected by paving over more land for parking. These decisions constituted a second- guessing of state and local officials on an aggressive level not usually associated with the Republican Party, which is typically a defender of local government.

The judiciary has not been alone in feeling the temptation to intervene in local land-use decisions. Proposals in the Congress to permit disappointed permit-seekers to go straight to federal court without even appealing in state court have several times passed one House or the other. If such legislation ever passes, local zoning boards (not to mention preservation commissions) will find new meaning in the old question, “Are we going to make a federal case out of this?”

Thus, there was reason during the 1990s to wonder whether Penn Central and the principles for which it has stood these last two and a half decades might be in real danger. While I still think that risks exist, last year’s decision in Tahoe-Sierra Preservation Council v. Tahoe Regional Planning Agency was something to write home about. In that case, the glacial motion of good old-fashioned planning activities had created a 32-month development moratorium in one of America’s hottest real estate markets. By a vote of 6 to 3, the Court held that the moratorium was not a taking. Justice John Paul Stevens wrote Tahoe-Sierra with full recognition of the validity and legal usefulness of the tests Penn Central articulated. Justice Stevens was a dissenter in Penn Central, but he’s heard the music and come to like it.

An Inspiring Preservation Story

We can thus celebrate Penn Central’s 25th birthday with some confidence in the vitality of the legal and political values vindicated on the rock of one of the greatest landmarks in the nation’s greatest city.

Just as all Americans enjoy the fruits of what the modern preservation movement has become, New Yorkers were hardly alone in sensing that the railroad’s plans 25 years ago threatened a place that was important to our national life.

My parents took me to see Grand Central during a visit from the Midwest in 1952 or so, because there were rumors it might be torn down. But people who had never set foot in Grand Central could imagine its grandeur and feel the allure of train travel to distant points. The great terminal excited the public’s imagination as millions of them listened to the opening sequence of the popular radio show Grand Central Station (on from 1937 to 1954) and heard the announcer say: “As a bullet seeks its target, shining rails in every part of our great country are aimed at Grand Central Station, heart of the nation’s greatest city. Drawn by the magnetic force of the fantastic metropolis, day and night great trains rush toward the Hudson River, sweep down its eastern bank for 140 miles, flash briefly by the long row of tenement houses south of 125th Street, dive with a road into the two-and-a-half-mile tunnel which burrows beneath the glitter and swank of Park Avenue and then…Grand Central Station…a thousand stories daily.”

The victory in Penn Central made possible thousands of great preservation stories during the years since 1978. I say it is our duty to be stouthearted in writing thousands more.



Publication Date: Winter 2004

#ForumJournal
#Legal

Author(s):Randall T. Shepard
Volume:18
Issue:2