- [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.