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Eminent Danger

Cash-strapped cities use entrepreneurs' property to lure big businesses.

This story appears in the January 2005 issue of Entrepreneur. Subscribe »

Dino Paspalakis was sure his business was secure. For 17 years, as co-owner of Joyland Amusement Center, a popular arcade in Daytona Beach, Florida, he's been pouring his money into upgrades, drawing a consistent clientele, and carrying on the family business. His father opened the arcade in the 1960s, "after working every snack bar on the Daytona Beach boardwalk to make money to buy it," Paspalakis, 40, says. But now he faces a threat. The city of Daytona Beach, using a legal doctrine called eminent domain, is trying to take the property and give it to developers to build high-rise condos and hotels. "In February [2004], they told me they'll be seizing the land. Developers are pushing out [independent] shops," he says.

Paspalakis' story is hardly unique. Historically, city and state governments used eminent domain to take over property for public infrastructure, such as highways and schools. But in recent years, as cities have assumed more responsibility for encouraging economic development, they have extended the power of eminent domain and started repossessing property to give to developers and other large companies. Eminent domain "has increasingly been used as a redevelopment tool to transfer private property from one owner to another," argues Mark Brnovich of the Goldwater Institute, a Phoenix think tank. And more often than not, the private property lost belongs to small companies.

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