| Penn Central Transportation Co. v. New York City | ||||||
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Supreme Court of the United States |
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| Argued April 17, 1978 Decided June 26, 1978 |
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| Full case name | Penn Central Transportation Company, et al. v. New York City, et al. | |||||
| Citations | 438 U.S. 104 (more) 98 S. Ct. 2646; 57 L. Ed. 2d 631; 1978 U.S. LEXIS 39; 11 ERC (BNA) 1801; 8 ELR 20528 |
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| Prior history | Appeal from the Court of Appeals of New York | |||||
| Holding | ||||||
| The application of the Landmarks Law to the Terminal property does not constitute a "taking" of appellants' property within the meaning of the Fifth Amendment as made applicable to the States by the Fourteenth Amendment. | ||||||
| Court membership | ||||||
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| Case opinions | ||||||
| Majority | Brennan, joined by Stewart, White, Marshall, Blackmun, Powell | |||||
| Dissent | Rehnquist, joined by Burger, Stevens | |||||
| Laws applied | ||||||
| U.S. Const. amend. V | ||||||
Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978) was a landmark United States Supreme Court decision on compensation for regulatory takings.
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The New York City Landmarks Law was signed into effect by Mayor Robert F. Wagner, Jr., in 1965. This law was passed after New York citizens grew concerned over the loss of culturally significant structures such as the Pennsylvania Station, demolished in 1963. The Landmarks Law's purpose is to protect structures that are significant to the city and still retain their ability to be properly used. This law is enforced by the New York City Landmarks Preservation Commission.[1]
Use of railroad systems saw its peak in the 1920s, and began to falter in the mid to late 1930s. World War II revitalized use of the railway systems in the early 1940s and brought the industry back to prior success. While this period saw nearly half of Americans using the railroad systems, by the late 40s there was once again a steep decline in railroad use. This put many of the railroad companies out of business and left others to find new ways to increase revenue. [2][3]
In 1954 New York Central Railroad began to look at proposed plans to replace the Grand Central Terminal. Early designs by William Zeckendorf and I. M. Pei included an ambitious 80-story, 4,800,000-square-foot (450,000 m2) tower that would be over 500 feet (150 m) taller than the Empire State Building. [4] None of the early designs ever made it past the sketch phase and for the time being all plans to replace Grand Central Terminal were abandoned.
In 1958 Erwin S. Wolfson created proposals to replace Grand Central Terminal's six-story office building just north of the Terminal. Erwin S. Wolfson developed the project in the early 1960's with the assistance of the architects Emery Roth and Sons, Walter Gropius and Pietro Belluschi.[5] The Pan Am Building was completed in 1963 and bought Grand Central Terminal more time away from proposed reconstructions.
Despite increased office space, New York Central Railroad found itself facing bankruptcy in 1967 due to continued decline in railway use. Pennsylvania Railroad found itself in a similar position after the offices built following the demolition of Pennsylvania Station were no longer bringing the company sufficient income.
In 1968 New York Central Railroad merged with Pennsylvania Railroad to create the Penn Central Railroad company. The newly formed Penn Central began to look into updating the uses of the Grand Central Terminal in order to increase revenue and save the company from financial straits. [6]
In mid 1968 Penn Central Railroad unveiled two designs by Marcel Breuer one of which would potentially be built atop Grand Central Terminal. The first design (Breuer I) was a 55-story tall office building to be constructed on top of Grand Central. This building was to be cantilevered above the existing structure allowing Grand Central to maintain its facade. The second design (Breuer II) called for the demolition of one of the sides of Grand Central in order to create a unified facade for a new 53-story office building. Both designs were submitted to the New York City Landmarks Preservation Commission after the structures met city zoning laws. [7]
Upon reviewing the submitted designs for Grand Central Terminal the Landmarks Preservation Commission rejected the plans on September 20th, 1968. Penn Central then filed for a Certificate of Appropriateness for both proposals but was again denied. The Landmarks Preservation Commission summarized their reason for rejecting both plans:
Breuer I
| “ | Breuer I which would have preserved the existing vertical facades of the present structure, received more symptomatic considerations [than Breuer II]. The Commission focused on the effect that the proposed tower would have on on desirable feature created by the present structure and its surroundings: the dramatic view of the Terminal from Park Avenue South. | ” |
Breuer II
| “ | To protect a Landmark, one does not tear it down. To perpetuate its architectural features, one does not strip them off. | ” |
| “ | [We have] no fixed rule against making additions to designated buildings—it all depends on how they are done . . . But to balance a 55-story office tower above a flamboyant Beaux-Arts facade seems nothing more than an aesthetic joke. Quite simply, the tower would overwhelm the Terminal by its sheer mass. The 'addition' would be four times as high as the existing structure and would reduce the Landmark itself to the status of a curiosity.
Landmarks cannot be divorced from their settings — particularly when the setting is a dramatic and integral part of the original concept. The Terminal, in its setting, is a great example of urban design. Such examples are not so plentiful in New York City that we can afford to lose any of the few we have. And we must preserve them in a meaningful way — with alterations and additions of such character, scale, materials and mass as will protect, enhance and perpetuate the original design rather than overwhelm it. |
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The Landmarks Preservation Commission did offer Penn Central the Transfer of Development Rights (TDRs) which would allow them to sell the air space above Grand Central Terminal to other Developers for their own use. Penn Central felt this was not enough to be considered just compensation for the loss of their land use. [8]
After the New York City Landmark Preservation Commission rejected Penn Central's proposals for new use of the Grand Central Terminal, Penn Central filed suit, arguing that under the New York Historical Preservation Law it was entitled to a reasonable return on the value of its property, whereas in the existing condition Grand Central Terminal could not break even and because (a) Penn Central was a regulated railroad, and (b) it was in bankruptcy, it could not cease the deficit-causing operations, thus suffering a taking of its property, for which they were entitled to compensation. The trial court agreed. On appeal, the New York Appellate Division reversed, holding that Penn Central did not use proper accounting methods to demonstrate that it was suffering an ongoing deficit. On further appeal, the New York Court of Appeals affirmed. In a novel opinion that revised some of Henry George's discredited ideas, it ruled that in New York, a property owner was entitled to a return, not on the value of his entire property, but only on that increment of its value that was created by private entrepreneurship. Penn Central appealed to the U.S. Supreme Court.
In the United States Supreme Court, Penn Central changed theories, arguing that it was receiving a reasonable return on its property, but arguing instead that the regulation took its air rights above Grand Central Terminal which had been designed to accommodate a 20-story building on top of it. The Supreme Court disagreed, and held that under a new taking test it formulated in this opinion, the economic impact on Penn Central was not severe enough to constitute a taking because Penn Central could continue with its present use whose return, it conceded, was not unreasonable, so the regulation did not interfere with its reasonable investment-backed expectations. The court therefore found that the city’s restrictions on the Grand Central Terminal did not amount to a taking.
The case is perhaps best summarized[says who?] in Section II-C of the Opinion of the Court.
| “ | Unlike the governmental acts in Goldblatt, Miller, Causby, Griggs, and Hadacheck, the New York City law does not interfere in any way with the present uses of the Terminal. Its designation as a landmark not only permits but contemplates that appellants may continue to use the property precisely as it has been used for the past 65 years: as a railroad terminal containing office space and concessions. So the law does not interfere with what must be regarded as Penn Central's primary expectation concerning the use of the parcel. More importantly, on this record, we must regard the New York City law as permitting Penn Central not only to profit from the Terminal but also to obtain a "reasonable return" on its investment. | ” |
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—Court Justice William J. Brennan, Jr.[9] |
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The dissent argued that in this case there was a net transfer from the Penn Central to the people of the city who were meant to benefit. The dissent argued that it was not fair to have the entire burden of preserving Grand Central fall on its owners. That cost is the opportunity cost of not developing the airspace over the terminal.
Although Penn Central nominally lost, it was at the time in bankruptcy and lacked the funds to maintain the Grand Central Terminal, which fell into misuse and became a place for the homeless to use as shelter and as a toilet. Eventually, the Metropolitan Transit Authority took it over and restored it at public expense—which was what Penn Central contended for to begin with.