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Eminent Danger

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

By Joshua Kurlantzick

Opinions expressed by Entrepreneur contributors are their own.

Dino Paspalakis was sure his business was secure. For 17 years,as co-owner of Joyland Amusement Center, a popular arcade inDaytona Beach, Florida, he's been pouring his money intoupgrades, drawing a consistent clientele, and carrying on thefamily business. His father opened the arcade in the 1960s,"after working every snack bar on the Daytona Beach boardwalkto make money to buy it," Paspalakis, 40, says. But now hefaces a threat. The city of Daytona Beach, using a legal doctrinecalled eminent domain, is trying to take the property and give itto developers to build high-rise condos and hotels. "InFebruary [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 andstate governments used eminent domain to take over property forpublic infrastructure, such as highways and schools. But in recentyears, as cities have assumed more responsibility for encouragingeconomic development, they have extended the power of eminentdomain and started repossessing property to give to developers andother large companies. Eminent domain "has increasingly beenused as a redevelopment tool to transfer private property from oneowner to another," argues Mark Brnovich of the GoldwaterInstitute, a Phoenix think tank. And more often than not, theprivate property lost belongs to small companies.

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