SPENCER MICHELS: Bernard's Luggage is in an historic neighborhood that declined in the '90s and, according to the Hollywood Chamber of Commerce, needed a major facelift.
LERON GUBLER, President, Hollywood Chamber of Commerce: When we hit rock bottom, there were numerous boarded-up buildings along Hollywood Boulevard, panhandlers, homeless everywhere. There were prostitutes, as well.
SPENCER MICHELS: With the chamber's support, the city's Redevelopment Agency invoked eminent domain on Blue's store so it can replace it and 30 other small businesses with a luxury hotel, housing units, upscale shops and restaurants.
LERON GUBLER: The Redevelopment Agency had the ability to make things happen, including the eminent domain tool. You need that because, once an area starts spiraling downward, there's no way to bring it back unless people start investing in the community.
SPENCER MICHELS: But Blue doesn't want to sell or move. He has posted a huge movie-style billboard over his store to gain public support.
BOB BLUE: I think this fight is about big business versus small business and existing business. We have people, out-of-town developers coming in, wanting to put in a luxury hotel. And they want to kick out the people that have struggled through the years and survived.
SPENCER MICHELS: What bothers Blue the most is that his private property is being condemned and sold, not for a road or a school, but to private developers and at a price authorities set, not what the owner thinks its worth.
BOB BLUE: I didn't even know that they could use eminent domain for private use, so it got thrust upon me.
SPENCER MICHELS: Eminent domain is an old practice of taking private property, sometimes blighted, for a public use. The Constitution recognizes it as long as there is just compensation, and the Supreme Court has upheld it many times, most recently last June in its ruling in the Kelo case in Connecticut, where the justices ruled this private home could be seized by the city and sold to a private developer, if the transaction would benefit the public.
Justice John Paul Stevens wrote in the 5-4 decision, "Promoting economic development is a traditional and long-accepted function of government." But the court also said, "Nothing precludes any state from placing further restrictions on eminent domain."
The decision set off a storm of political activity across the nation, across political lines, mostly among those who believe eminent domain is being abused.
PETITIONER: This petition is a petition to limit the government's authority to eminent domain people's property.
SPENCER MICHELS: These paid workers are trying to gather nearly a million signatures so that voters in California will get a chance to severely restrict the use of eminent domain and make it illegal to transfer private property to a private developer.
This petition drive and similar campaigns in six other states, plus a slew of bills before state legislatures, are gathering steam. In fact, bills with varying provisions have already passed in 13 states.
Political consultant Kevin Spillaine is organizing the California Protect Our Homes Campaign, whose initial financing -- up to $2 million -- comes from a libertarian group which seeks to limit government.
KEVIN SPILLAINE, Political Consultant: This Kelo decision has basically energized the population. They're upset. It's really an issue about government needing to be restrained.
SPENCER MICHELS: Tim Sandefur, a staff attorney with the property-rights group Pacific Legal Foundation is helping shape some of the new proposals.
TIM SANDEFUR, Pacific Legal Foundation: People don't have the right to take away your property just because they think it would be better for society. Private property is a right, not a privilege, and they don't have the right to take it away from you just because they think it would be in the public's interest, whatever that might be. It's not in Mr. Blue's interest.
SPENCER MICHELS: The reaction to Kelo has alarmed John Shirey, who directs the California Redevelopment Association.
JOHN SHIREY, California Redevelopment Association: There's been a backlash to that decision, and I think it's going to result in legislation that won't be good. It's a reaction to a lot of emotion.
SPENCER MICHELS: Shirey contends that the backlash is being used by lawyers and politicians for their own purposes.
JOHN SHIREY: What's in jeopardy is that what we do through redevelopment will be greatly hampered, but we also need to keep in mind that a lot of the legislation here in California, the voter initiatives that are out there, go far beyond the issues that were in the Kelo case.
SPENCER MICHELS: Shirey says new laws could drive up the cost of acquiring property for roads and schools, restrict legitimate attempts to regulate land use, to say nothing of stopping needed redevelopment. In San Jose, officials are afraid the Kelo backlash could derail its attempt to turn its aging and blighted neighborhoods around.
Harry Mavrogenes directs the Redevelopment Agency.
HARRY MAVROGENES, Director, San Jose Redevelopment Agency: We're very concerned that, in losing the eminent domain authority, that we may be precluded from doing certain very critical projects, affordable housing, for example.
SPENCER MICHELS: Redevelopment and eminent domain, he says, have brought parks, and museums, and jobs to a decaying downtown area. Adobe Systems, for example, now employs 2,500 people.
HARRY MAVROGENES: It was a major company that would not have come to downtown had we not assembled a site for them.
SPENCER MICHELS: But that's a private company, a profit-making company, and you had to get rid of some existing buildings that were there to build this, right?
HARRY MAVROGENES: Yes. We did, and we worked with some of the owners. We did use eminent domain on one of them.
SPENCER MICHELS: He points to this new shopping center as an example of successful redevelopment with limited use of eminent domain. It replaced a high-crime, seedy neighborhood.
HARRY MAVROGENES: The liquor store was one of the things the neighborhood really didn't want in here.
SPENCER MICHELS: But San Jose also exemplifies how just the specter of redevelopment often brings fear, especially in residential areas. Even though no homes have been taken by eminent domain in the prosperous Nagley Park (ph) area, concern over what could happen has prompted a rebellion.
These residents are furious their aging neighborhood was designated a redevelopment zone. Beth Shafran-Mukai, who calls herself a political progressive, says it's absurd to call this area of million-dollar homes blighted.
BETH SHAFRAN-MUKAI, Chair, Neighborhood Association: We know we're a beautiful, historic neighborhood of generally single-family homes on the edge of a downtown frame. And our city is focused on development and increasing tax revenue. And our concern is, over the years, we will see the edges of our neighborhood gobbled away and that people will, indeed, lose homes.
SPENCER MICHELS: Association members have become more alarmed since the Kelo decision and are helping gather initiative signatures.
SUE BERNHAM, Bookshop Owner: For me, more than even the neighborhood, it is the loss of our rights as citizens and human beings. With each thing that is taken away, it brings us closer to a Soviet state, almost. And, to me, that is frightening.
HARRY MAVROGENES: We really have not used the eminent domain tool, and we don't intend to.
SPENCER MICHELS: In San Francisco's largely African-American community, long before Kelo there was suspicion and hostility toward redevelopment and eminent domain. Kelo has only added to it.
Bayview Hunters Point has a high crime rate. Proposals to redevelop the decaying area which, during World War II was home to a major naval shipyard, have met serious resistance. And much of that stems from an infamous urban renewal project in the '60s, when another largely black San Francisco district, the Fillmore, was bulldozed and the population evicted in the name of progress.
Patricia Wright, now a chef for the San Francisco Giants, grew up in the Fillmore.
PATRICIA WRIGHT, Resident, Hunters Point: I was one of the people that was swept away. I remember losing my friends, family, my mother and father in this Victorian building that we grew up in.
SPENCER MICHELS: After the Kelo decision, Wright, today a resident of Bayview, began working with neighborhood newspaper publisher Willie Ratcliff to circulate anti-eminent domain petitions.
WILLIE RATCLIFF, Newspaper Publisher: The point is, if you take away the state laws that allows private eminent domain, one private party taking property from another.
SPENCER MICHELS: But Bayview Hunters Point needs government help to upgrade buildings, remove blight, and reduce crime, says Angelo King, who chairs the Citizen's Advisory Committee for Redevelopment.
ANGELO KING, Chair, Citizens Committee: No eminent domain shall not be used on any legal-occupied dwelling unit, period, that's irregardless to zoning or anything else. And so our intention from the very start was that nobody's home would ever be taken by eminent domain.
PATRICIA WRIGHT: I don't believe it.
SPENCER MICHELS: Why not?
PATRICIA WRIGHT: Because I've seen it happen. My greatest fear is that the community will be gone.
SPENCER MICHELS: The Pacific Legal Foundation's Tim Sandefur doesn't trust the politicians either.
TIM SANDEFUR: Under the rationale of cases like Kelo, anything that the politicians believe is good for the public is sufficient grounds for the use of eminent domain.
JOHN SHIREY: Local officials are loathe to use eminent domain. They avoid it whenever possible.
SPENCER MICHELS: Afraid of the political backlash to Kelo, the redevelopment lobby intends to sponsor its own mildly restrictive legislation hoping to head off more drastic measures that could halt redevelopment in its tracks.