If ever there was a moving target in practicing land use law, it certainly is the task of assembling, financing and permitting public private projects in the area of redevelopment/revitalization of communities or discreet portions thereof

Eminent Domain’s Role in Redevelopment:

The Evolution of the Public Purpose Doctrine

Theodore C. Taub

Shumaker, Loop & Kendrick, LLP

Tampa, Florida[1]

Introduction

If ever there was a moving target in practicing land use law, it certainly is the task of assembling, financing and permitting projects aimed at revitalizing and redeveloping communities or discrete portions thereof. Bringing “partnerships” between the public and private sectors to fruition, while having to negotiate against a backdrop of “government in the sunshine” and public records laws is a process unfamiliar to those having only dealt with strictly private deals. Moreover, the target takes on a different configuration every time. Whether it is a city hall and library combined with retail and commercial activities, a new sports stadium, or a casino, the projects are multi-layered and complex.

The state and local government land use specialist is a necessary player in bringing any of these projects to opening day. And, whether of modest proportion or one of very large dimension and impact, almost every redevelopment or revitalization project requires the expertise of a number of different professionals. Most projects begin with both identifying the property to be redeveloped and how to bring it under the control of the particular entity or entities that may be spearheading the effort, whether that be a city council, a county commission, a development authority, a sports authority, some other governmental entity, or the Developer. The base at the fulcrum of development is what land is to be utilized, who owns it, and how can it be made available in order to have it jointly developed by the public and private sectors.

Thus, whether a mixed use project in Pittsburgh for 2.7 million square feet of offices, apartments, retail shops, parking lots and entertainment venues at a sprawling former LTV industrial site (110 acres producing steel since Civil War times); a redevelopment designed to bring new life to Albuquerque in a twelve block district near historic Route 66, by bringing new multiplex movie theaters, restaurants, a combination of chain and unique retail, and residences; a project covering twenty acres of the “downtown” of the City of Temple Terrace, Florida (population 21,000, “bedrooming” the City of Tampa ) for the purpose of a new city hall, civic center, together with new retail and residential uses; assembling land for a beach redevelopment project in Clearwater, Florida; or baseball stadium projects[2], the starter issue is who controls the land and how to achieve control thereof through judicial means (assuming that a portion of the necessary land must be acquired through means other than arms-length negotiated sales between willing buyers and sellers).[3]

Eminent Domain’s Role in the Process

The usual means of the public forcibly acquiring private property is through the use of eminent domain proceedings. The power of eminent domain is the right of the sovereign to take private property for public use by paying just compensation.[4] The procedure by which the power is exercised is condemnation. The term “taking” is sometimes used as a substitute for condemnation. Without having canvassed the entire country, this author believes that every jurisdiction has a statutory scheme dealing with the exercise of the power of eminent domain.[5] Moreover, many jurisdictions have coupled the use of condemnation by cities, counties and other state agencies or governmental authorities, with its use by a community redevelopment agency (CRA) for the purpose of facilitating redevelopment. Normally, enabling legislation empowers redevelopment agencies with the ability to condemn property for redevelopment under specific criteria and standards set forth in the legislation.

Prior to filing a condemnation action, a condemning authority is usually required to engage in good faith negotiations with the fee owner of the parcel to be acquired. Besides providing the owner with the appraisal(s) upon which the condemning authority based its offer of compensation, the condemnor must strictly adhere to the statutory requirements forming the necessary procedural predicate upon which the condemnor may proceed. There are similar requirements regarding condemnees with potential business damage claims such as lessees in a shopping center that is to be taken for public use.

Further, those engaged in pre-condemnation negotiations per se, must consider the fact that the condemning authority in most (if not all) jurisdictions is required to pay the condemnee’s reasonable attorneys’ fees and costs, as well as those for experts such as appraisers, business damage consultants, land planners and accountants.[6]

Blight and The Public Purpose Doctrine[7]

The assertion of “public purpose” as the linchpin of condemning private property for public use has even spawned cartoons,[8] while controversy regarding the subject is ongoing in the fourth estate as well as legal commentaries and cases throughout the country. In the eyes of many, property deemed “blighted” by condemning authorities for redevelopment projects, just isn’t![9]

Fundamental to the acquisition of private property for public use is understanding that the public purpose doctrine limits the exercise of the power of eminent domain. The concept that private property may be taken for a public purpose is embedded in the Fifth Amendment of the United States Constitution, which provides, however, that private property shall not be taken for public use without just compensation being paid. During the early years of the operation of the Fifth and Fourteenth amendments to the United States Constitution, a broad interpretation prevailed: as long as the purpose was of general benefit to the public, that alone was a valid reason for taking private property. During the mid 1800s, however, courts began adopting stricter views of public purpose, and “actual use” by the public was the standard applied to the taking of private property. Then, in the Twentieth Century, the more narrow view of actual public use broadened again. In the landmark case, Berman v. Parker,[10] and later Hawaii Housing Authority v. Midkiff,[11] the Court expressed this broader point of view. [Quotes and further discussions of Berman and Midkiff will be found in the appended briefs.]

In Berman, the District of Columbia was engaged in a redevelopment effort. A department store owner challenged the condemning authority’s taking of his property, asserting that the store itself was not slum housing. The owner also objected to the taking because the property to be taken was to be put under the management of a private, not public, agency and redeveloped for private, not public, use. Justice Douglas, in a unanimous decision of the Supreme Court, held that public ownership was not the sole method of promoting public purposes of community redevelopment projects. Even though the department store property itself was not slum housing, the Court allowed the property to be taken. The Court reasoned that once a public purpose is established by Congress, the amount and character of the land to be taken for a project, and the need for a particular tract to complete an integrated plan rests with the discretion of the legislature. The Court expressed the view that agencies authorized to carry out redevelopment may attack the problem of blighted areas of a community on an area by area basis rather than on a structure by structure basis. Because the District of Columbia agency had determined that the area in question needed to be planned as a whole and it was important to redesign a whole area rather than use a piecemeal approach, the fact that the particular property to be taken standing by itself was not a slum per se would not prevent its taking. Even though the Berman court allowed the taking, it did admonish that its decision should not be interpreted to mean that every condemnation proposed by an economic development agency would meet with similar acceptance, emphasizing that the public purpose had to be clearly significant and the public benefit had to be the predominant interest to be advanced.

Inasmuch as many redevelopment projects are carried out within a designated community redevelopment area, and because most CRA legislation limits a CRA to acquiring “blighted” property, it is important to understand how courts throughout the country have dealt with a finding of “blight” in the context of a “quick take” order of taking hearing. In addition, the study of novel approaches to land assemblage becomes equally important. Because the definition of “blight” has evolved in CRA legislation in recent years[12] and the courts have imposed a higher burden of proof on condemning authorities in establishing “blight,” land assemblage has become more difficult.

Notwithstanding the fact that both federal and state constitutions authorize the taking of private property for public use when full compensation is paid, they do not speak to the taking of private property for private use per se. States and their political subdivisions must comply with the requirements of the Fifth amendment to the United States Constitution (applicable to the states through the Fourteenth amendment) as well as similar public use provisions contained in state constitutions.[13] For example, Florida’s Constitution, Article X, Section 6(a), provides, in part, that “no private property shall be taken except for a public purpose and with full compensation therefor to each owner. . .” State statutes further circumscribe the exercise of eminent domain in redevelopment.[14] Given the practical difficulties challenging a community redevelopment project on a public purpose basis, most cases turn on whether the condemning authority is acting in accordance with the statutory standards that have been enacted. In undertaking such a challenge therefore, it is extremely important that the practitioner scrutinize the legislation to determine whether the agency is in compliance with its own statutory standards.

Recent Florida legislation (effective July 1, 2002) altered the framework within which one must deal with community redevelopment in several respects. The changes demonstrate the shifting sands in redevelopment law. Although there are grandfathering provisions (thereby not imposing new definitions on prior designated areas), “slum area,” and “blighted area” are defined differently.[15] When comparing the relevant Florida law with the relevant California law, consistencies can be seen regarding the definitions of a “blighted area,” the underlying problems caused by slum and blighted areas and the policies declared by some states with regard to redevelopment of slum and blighted areas.

Selected Earlier Cases

The following cases demonstrate that, depending on jurisdiction, comparing older cases with newer cases highlights the trip that some courts have taken from almost automatic deference to a governmental condemning authority’s finding of public purpose when reviewing redevelopment projects where eminent domain has been used, to strict scrutiny of whether the property sought to be condemned is blighted according to the applicable redevelopment legislation defining “blight,” thus justifying the taking under more sophisticated and creative variations on the definitions of public purpose.

State v. Miami Beach Redevelopment Agency[16]

In 1980, the Florida Supreme Court stated that a determination of the Legislature that a project is for a public purpose “while not conclusive, is presumed valid and should be upheld unless it is arbitrary or unfounded unless it is so clearly erroneous as to be beyond the power of the legislature.”

Village of Wheeling v. Exchange National Bank[17]

In 1991, an Illinois court reiterated the oft-stated position that once an area is designated as “blighted,” a prima facie showing of “necessity” is established, and absent expert testimony diluting the condemnor’s prima facie case of public necessity, condemnation could proceed. The court held that it is not the court’s duty to question a valid taking unless clear abuse is shown. The court further determined that taking property for valid public purposes and then reselling a portion for redevelopment for private [public] purposes does not render the condemnation invalid.

Muskogee Urban Renewal Authority v. Garrett[18]

In 1989, an Oklahoma court held that the condemnor’s use of private resources as part of a redevelopment project did not amount to fraud, collusion or bad faith (thus barring condemnation). As in most jurisdictions, deference was given to a city council resolution finding an area or slum to be blighted.

Crestwood Commons v. 66 Drive-In[19]

The Missouri Court of Appeals held that a local legislative body’s determination that the property was blighted was not an arbitrary exercise of legislative power. The court further held that absent a finding that an arbitrary decision induced by fraud, collusion or bad faith had been made, it would be presumed that the taking was for a public purpose. The court also determined that economic under-utilization was a valid purpose for declaring property blighted.

Curators of the University of Missouri v. Bound[20]

In another Missouri case, the University of Missouri sought to condemn property for a “scholars’ center” parking lot. The property owner challenged the taking, claiming that the scholars’ center was privately owned and, therefore, no public purpose was being served. The Missouri Court of Appeals found that the taking was for a public purpose because the center was devoted to furthering the interests of the university, thus preventing the center from becoming a strictly private enterprise.

Adams v. Housing Authority of City of Daytona Beach[21]

Here, a housing redevelopment plan that authorized acquisition of property for subsequent sale or lease to private enterprise was struck down by the Florida Supreme Court. The housing authority proposed to condemn the land and then allow a private enterprise to develop it. This was challenged on the basis that such a use of the state’s power was an unconstitutional exercise of that power. According to the court, “incidental benefits accruing to the public from the establishment of some private enterprise is not sufficient to make the establishment of such enterprise a public purpose.”[22] The Adams decision turned on the fact that the “incidental benefit” was offset by the fact that, from the court’s perspective, the purpose of the taking was not predominantly a public purpose. The court commented:

It is inconceivable that any one would seriously contend that the acquisition of real estate for the declared purposes set forth in the proposed Redevelopment Plan is for a public use or purpose. No one has ever heard of any corporation, association or individual going into any of the above mentioned businesses [retail, office, wholesale, and restricted industry] except for profit or gain. If the municipalities can be vested with any such power or authority, they can take over the entire field of private enterprise without limit so long as they can find a blighted area containing sufficient real estate.[23]

JFR Investment v. Delray Beach Community Development Agency[24]

Other cases in Florida decided during the same period, however, allowed the incidental private use of property where the purpose of the taking was clearly and predominantly a public purpose. It is important to note that a trial court’s review of a government decision to establish a redevelopment is de novo. When a county or municipality makes a decision to establish a redevelopment area by following procedures authorized by state statute, the entity is essentially performing a legislative, rather than a quasi-judicial function. Therefore, a “fairly debatable” standard applies rather than “strict scrutiny review” as would be the case in dealing with a quasi-judicial decision. The fairly debatable standard dictates that as long as there is some reasonable basis for the governing body’s action so as to make it fairly debatable, the decision stands.

State v. Osceola County[25]

The Florida Supreme Court noted the distinction between “public purpose” and “primary public purpose,” because the Florida Constitution prohibited “counties from using their taxing power or pledging public funds to aid a private entity unless the project [fell] within. . .” a specific exception.

If the County has not exercised its taxing power or pledged its credit, the obligation must merely serve a public purpose. On the other hand, if the County has used either its taxing power or pledge of credit to support the issuance of the bonds, the purpose of the obligation must serve a paramount public purpose and any benefits to a private party must be incidental. [26]

Rukab v. City of Jacksonville Beach[27]

A recent Florida appellate court made the point that earlier findings of blight are not binding on the court when the court is presented with the question at an order of taking hearing. The appellants had purchased land in an area previously designated as blighted with the intention of rezoning the property and developing it. The city denied the appellants’ rezoning request and instituted eminent domain proceedings for the purpose of undertaking a redevelopment project. The trial court determined that the only issue to be resolved was that of just compensation because the blighted status of the area had recently been affirmed in another eminent domain case and the court could take judicial notice thereof. The appellants argued that they were entitled to a de novo review of that status and the city was required to demonstrate both public purpose and necessity. The court agreed with the appellants, finding no judicial doctrine or precedent worked to bind the appellants to the determinations of public use and necessity in a case to which they were not parties. Since the Community Redevelopment Act did not provide a procedure for challenging the designation of the area as blighted, the appellants’ first opportunity to challenge the blight status arose in the condemnation proceedings. The court concluded that “even if there were other opportunities for challenging the designation, a property owner must still be afforded the opportunity for a full hearing in the eminent domain action. During this action, the city must meet the burden of showing public purpose and necessity.” [28]

Poe v. Hillsborough County[29]

In 1997, the Florida Supreme Court reversed a trial court order denying the validation of a series of bond issues for the construction of a new stadium for the Tampa Bay Buccaneers. The stadium agreement between the team and local government provided that the team would receive the first two million dollars of revenues generated from non-team events. The trial court concluded that this provision transformed the deal into one which served a predominately private purpose and therefore refused to validate the bond issues. The trial court noted, however, that because the construction of a new stadium would serve a “paramount public purpose,” it would validate the bond issues if the agreement was modified to preclude revenues from non-team events going to the Buccaneers. The Supreme Court, relying on cases finding that the development of tourism and recreational facilities served a public purpose, reversed the trial court’s decision with instructions to enter an order validating the bonds. The court held that an incidental private benefit did not render a bond issue improper as long as the public purpose predominated. In addressing the trial court’s suggestion that it would approve the bond issue if the stadium deal were modified, the court stated that “once a trial court has found that a ‘paramount public purpose’ exists, the court cannot micromanage the armslength business negotiations of the parties by striking discrete portions of a complex arrangement which, as a whole, the court candidly finds to be substantially beneficial to the public.”[30]

More Recent Cases From Various Jurisdictions

A community’s feelings of “what’s right” for the development of land for “public use” and outdated legal precedent don’t always coincide. These differences can spell trouble in getting through the process in a timely manner commensurate with hitting the bond market and other potential funding mechanisms at the optimum time. Projects get challenged from a variety of quarters, lawsuits occur, and when property and constitutional rights are being vigorously argued the process can produce unforeseen, and unacceptable, delays. The following set of cases have been digested to illustrate how some developers and municipalities have sought to push the envelope on acceptable definitions and new theories to support takings for development.

These approaches incorporate the well known but perhaps not well understood concept of blight as a basis for condemnation. They also go beyond blight to try out creative applications of statutory provisions including such issues as condemnation for related private business expansion, long term reliance on an initial finding of blight, what kind of areas can be designated as redevelopment areas, takings with the unstated intent of preserving a private use for the economic benefit to a community and who wins when a religious organization’s property is to be taken for new retail use.

Today’s courts are producing a variety of results as shown in the following cases. The developer’s attorney proceeds at his or her peril without a knowledge of the multitude of new directions appearing out of litigation over public purpose and blight.

Southwestern Illinois Development Authority v. National City Environmental, LLC[31]

On April 4, 2002, the Illinois Supreme Court held that the Southwestern Illinois Development Authority (SWIDA) had exceeded the scope of its legislative mandate in exercising its eminent domain powers and transferring condemned land for purely private use. SWIDA’s stated purpose is to “promote industrial, commercial, residential, service, transportation and recreational activities and facilities. . .” [32] for the general welfare. In furtherance of this mission, SWIDA supported the development of a speedway in a rural portion of the state by a private developer. The speedway was an overwhelming success. As a result, parking and traffic safety became major concerns. The speedway developer, faced with a choice between constructing an expensive parking garage on site or acquiring additional land for parking, sought SWIDA’s assistance in acquiring additional land from the adjoining operating business owner.

SWIDA made two offers to purchase an adjacent 148-acre tract of land for one million dollars. The neighboring landowner rejected the first offer and felt it unnecessary to reject a second identical offer. SWIDA instituted statutory “quick take” condemnation proceedings. Over the landowner’s objections that the land was going to be put to private use and that SWIDA had refused to make a good faith effort to negotiate, the trial court ruled in favor of SWIDA. Relying on testimony asserting that additional parking would alleviate risks stemming from traffic congestion and further help to eliminate blight, the trial court entered an order of taking and vested title in SWIDA. SWIDA immediately transferred title to the speedway developer.

In affirming the appellate court’s reversal, the Illinois Supreme Court emphasized that public purpose and public use were distinct concepts. The court acknowledged that SWIDA could legitimately exercise its eminent domain powers to promote commercial development and transfer property to private parties; however, the court insisted that when land is taken, even if transferred to a private party, “ ‘the public must be to some extent entitled to use or enjoy the property, not as a mere favor or by permission of the owner, but by right.’ ”[33] The court highlighted the fact that the speedway developer had the more expensive option of constructing a parking garage and that SWIDA’s taking would yield $13-14 million in additional speedway revenues. The court found that public purpose goals such as stimulating the economy or enhancing public safety “must not be allowed to overshadow the constitutional principles that lie at the heart of the [eminent domain] power.”[34] The court concluded that the “initial, legitimate development of a public project does not justify condemnation for any and all related business expansions.”[35]

Peqounnock Yacht Club, Inc. v. City of Bridgeport[36]

The Supreme Court of Connecticut affirmed a trial court’s order requiring a city to reconvey property taken in an eminent domain proceeding. The property belonging to the appellant yacht club was taken as part of a waterfront redevelopment plan. Of the fifty acres to be taken by eminent domain, the ten acres of waterfront property, which included the yacht club property, was economically viable and in good repair, and the remaining forty acres were blighted. The trial court determined the city’s plan of development was speculative and that taking the yacht club’s property could not be deemed necessary. The Connecticut Supreme Court affirmed on different grounds, finding that redevelopment agencies had a duty to “make reasonable efforts to negotiate and consider the integration of the property that is not substandard into the overall redevelopment plan.”[37] Properties that were not in “substandard” condition were not subject to a taking unless they were “essential to the redevelopment” plan. In this case, the city’s refusal to consider integration of the yacht club property was unreasonable and precluded a showing that the property was not essential to the plan. Consequently, requiring the city to return the property to the yacht club was justified.

Aposporos v. Urban Redevelopment Commission[38]

In another Connecticut case, the appellants challenged the validity of a 1988 amendment to a redevelopment plan instituted in 1963. Under the 1963 plan, the appellants’ diner was not included in the designated redevelopment area. In 1988, in response to concerns of local merchants fearing competition from a new mall, the commission amended the 1963 plan expanding the redevelopment area to incorporate four additional properties, including the appellants’ diner. In 1999, the commission initiated the process of acquiring the property. The trial court refused to permanently enjoin the commission from condemning the appellants’ property finding that the commission had complied with the statutory procedures governing redevelopment areas. The Connecticut Supreme Court reversed, holding that the 1988 amendment was in fact a new redevelopment plan requiring the commission to conduct hearings and make findings of blight as required by statute. The court emphasized that the commission was not required to make new findings of blight at every stage of an ongoing redevelopment plan. It recognized, however, that upholding the trial court’s decision would allow “a redevelopment agency [to] make an initial finding of blight and rely on that finding indefinitely to amend and extend a redevelopment plan to respond to conditions that did not exist, or to accomplish objectives that were not contemplated, at the time that the original plan was adopted.”[39] The court found that the “1988 amendments did not relate to the original finding of blight” and constituted a “response to a discrete economic condition that did not exist at the time that the 1963 plan was adopted. . .”[40]

Elizabeth Board of Education v. New Jersey Transit Corp.[41]

The New Jersey Superior Court affirmed a trial court’s dismissal of a school board’s complaint seeking to condemn property owned by a state corporation. The New Jersey Transit Corporation (NJTC) owned the property. Both the City of Elizabeth and the school board wanted to acquire the property. The NJTC informed the board that it was in negotiations with the city and did not desire to negotiate with the board. The board instituted condemnation proceedings, arguing that it had the authority to condemn state property because New Jersey law explicitly barred counties and municipalities from doing so, but school boards were not explicitly barred. The court rejected the board’s arguments of express and implied authority, and although conceding that the board had a general grant of condemnation authority held that state property was not susceptible thereto unless the grant expressly mentioned the state. The court concluded that there were no statutory provisions giving a school board either express or implied authority to condemn state property.

AvalonBay Communities, Inc. v. Town of Orange[42]

In another decision from the Supreme Court of Connecticut, the court affirmed a trial court’s order enjoining a municipality from implementing a hastily drawn development plan. AvalonBay owned a parcel of land zoned light-industrial which allowed for development of affordable housing units. AvalonBay sought approval for the construction of an apartment community that included some affordable housing units. The town denied AvalonBay’s site plan, wetland and special use permits, and three weeks later imposed a residential construction moratorium. The town subsequently commissioned a “project plan” for an industrial park to be situated on lands that included the parcel owned by AvalonBay and moved to take the property by eminent domain. Avalonbay brought an action to enjoin the plan and the taking. Ruling for Avalonbay, the trial court concluded that “the town had proceeded in bad faith and that the project plan was a pretext in an effort to thwart affordable housing on the AvalonBay parcel.”[43] The Connecticut Supreme Court agreed and affirmed the order enjoining the town from proceeding with the plan and found that the injunction rendered the issue of the taking of AvalonBay’s parcel moot since the town could not proceed. The court held that “a project plan – even one that conforms to the [statutory requirement] – may be enjoined if it was adopted, not for the purposes contemplated by [the statute], but in bad faith and in furtherance of a plainly improper motive. . .”[44]

Condemnation of 110 Washington Street[45]

Here, a redevelopment authority in Pennsylvania entered into an agreement with a developer for the purpose of eliminating blight. Under the agreement, the Authority would acquire properties through its eminent domain powers and convey them to the developer. The developer would, in turn, compensate the Authority for costs incurred in the taking. The agreement prohibited the Authority from proceeding with any taking contemplated in the agreement without a specific request by the developer. The appellate court found both the agreement and the taking of the appellant’s property under the agreement to be unlawful because the agreement amounted to a delegation of the Authority’s eminent domain powers. The statutory grant of eminent domain power did not provide that the Authority may “impair its ability to exercise [the] power through contract or agreement, or that it may be prohibited from exercising this power absent a redeveloper’s written request.”[46] The court held that an agreement transferring the eminent domain power to a private individual “must be deemed to be void and unenforceable” and a taking under such an agreement “must likewise be void.”[47]

Beach-Courchesne v. City of Diamond Bar [48]

The Diamond Bar City Council adopted an ordinance approving a redevelopment project involving 1,300 acres of land. The Council made findings that the area suffered from physical and economic blight which required redevelopment. The duration of the redevelopment was estimated to take thirty years. Barbara Beach-Courchesne and other Diamond Bar citizens filed a complaint against the City and others challenging the validity of the redevelopment plan. She alleged, in part, that there was a lack of substantial evidence to support a finding of blight in the project area. The trial court entered a judgment for the City.

In ruling against the City, a California Court of Appeal reversed. The court stated that pursuant to California’s Health and Safety Code section 33030 (appended hereto), a determination of blight is a prerequisite to involving redevelopment. Code Section 33031 (also appended hereto) defines the physical and economic conditions that constitute blight: Buildings in which it is unsafe or unhealthy for person to live or work, factors that prevent or substantially hinder the economically viable use of capacity of buildings or lots, adjacent or nearby uses that are incompatible with each other and in which prevent the economic development of those parcels in the project area, and the existence of subdivided lots of irregular form and shape and inadequate size for proper usefulness.

The City’s 1995 general plan identified redevelopment as a means of mitigating traffic and financing improvements; however, the plan itself did not identify any physical or economic blight in the City. In reviewing the City’s administrative record and findings, the court found that there was no substantial evidence to support the City’s finding of blight within the meaning of the statutory definition. Therefore, the redevelopment plan had to be invalidated.

The court stated that to invoke “the extraordinary powers of community redevelopment” it is not sufficient to issue a report and to adopt an ordinance speaking in the statutory language. The purpose of the California Redevelopment Law (“CRL”) is to provide a means of remedying blight where it exists. The CRL is not simply “a vehicle for cash-strapped municipalities to finance community improvements.”[49] If the showing made in the case were not sufficient to rise to the level of blight, it is the rare locality in California that is not afflicted with that condition. Emphasizing that the exercise of eminent domain as a remedy for blight should be limited to cases where the blight hinders the development of the city and requires public intervention, the court concluded, “The asserted conditions of physical blight are set forth in conclusionary [sic] and summary terms. The purported physical blight is discussed only in generalities, without any showing of the extent to which the alleged blighting conditions have prevented or substantially hindered the economically viable use of the properties.” [50] Regurgitation of statutory language would not support a municipality’s finding of blight; substantial evidence was required. Therefore, the court concluded that there was no substantial evidence to support the City’s finding of blight within the meaning of the statutory definition and the decision of the trial court had to be reversed.

99 Cents Only Stores v. Lancaster Redevelopment Agency[51]

In the Central District of California, the district court enjoined a city and redevelopment agency from initiating condemnation proceedings against the plaintiff’s leasehold. The city, prior to the plaintiff bringing suit, adopted “Resolutions of Necessity” authorizing the condemnation of the plaintiff’s leasehold. The sole purpose of the proposed condemnation was to eventually convey the property to Costco, Inc. in exchange for $1 and Costco’s assurance that it would not relocate its store to another community. The city rescinded its resolutions authorizing condemnation and argued that the plaintiff’s §1983 claim had been rendered moot because the threat of a taking no longer existed. The court noted that the voluntary cessation of condemnation proceedings was not sufficient to establish mootness and the city failed to meet its burden of showing that condemnation proceedings could not “ ‘reasonably be expected to recur.’ ”[52] Moving to the question of whether the contemplated taking was constitutional, the court framed the issue as whether the city had presented a “valid or pretextual public use” for its condemnation plans. The court rejected the city’s argument that keeping Costco in the community was a valid public use in that it would prevent future blight. The court, acknowledging that the property in question used to be blighted, observed:

If a city cannot even obtain redevelopment powers in the first place unless there is existing blight to be redressed, it necessarily follows that, if the city later acquires those powers, it cannot exercise them to condemn property that is not blighted solely to prevent some unidentifiable ‘future blight’ that may never even materialize.[53]

The court held that the threat of future blight could not serve to satisfy the public use clause of the Fifth Amendment and, consequently, any taking of the plaintiff’s leasehold for Costco’s private use would be unconstitutional.

Manufactured Housing Communities of Washington v. State of Washington[54]

The Washington Supreme Court held that a statute giving mobile home park residents the right of first refusal when the park owner decides to sell the property constituted a taking for private use. The right of first refusal was a “fundamental attribute of ownership” which the statute destroyed, resulting in a regulatory taking under Washington law.[55] The court emphasized that a “beneficial use is not necessarily a public use.” Additionally, the fact that under the statute the residents of the park would ultimately be required to pay the same price as a third party making an offer to buy was irrelevant. Washington’s constitution imposed an absolute bar on the taking of private property for private use without regard to compensation. The court struck down the statute as violative of Washington’s state constitution because it effected a statutory transfer of a property right to private parties – the right of first refusal.

Township of West Orange v. 769 Associates, LLC[56]

A New Jersey trial court ruled that a township may condemn property in order to provide access to a landlocked parcel which was being developed for residential purposes. The plaintiff argued that the proposed taking was not for a public use and the benefit derived would be enjoyed solely by the developer. The intermediate appellate court agreed with the plaintiff and reversed. The Supreme Court of New Jersey emphasized that courts must pay great deference to a legislative determination of what constitutes a public use and reversed the appellate court. The plaintiff’s public use argument rested primarily on the fact that the township and the developer had entered an agreement whereby the township agreed to exercise its eminent domain powers if the developer could not negotiate successfully with adjacent landowners in obtaining a right of way. The agreement provided that the developer would pay for all costs associated with the taking and that the township would retain ownership of any property taken. The court found that “condemnation of private property for use as a public road fulfills the public use requirement” and that the agreement did not constitute a delegation of the township’s eminent domain powers.[57] New Jersey courts have adopted a broad definition of “public use” finding it “ ‘synonymous with ‘public benefit,’ ‘public advantage,’ or ‘public utility.’ ”[58] Under that definition, a public use is “anything that ‘tends to enlarge resources, increase the industrial energies, and … manifestly contributes to the general welfare and the prosperity of the whole community.”[59] The court agreed that improving road travel within the township served an important public purpose and the fact the township agreed to exercise its eminent domain powers if the developer failed to negotiate successfully for the purchase of the plaintiff’s property did not detract from the legitimacy of the public use.

Housing & Redevelopment Authority v. Walser Auto Sales, Inc.[60]

A Minnesota appellate court affirmed a trial court’s granting of a statutory quick-take condemnation to the Housing and Redevelopment Authority (HRA). The HRA instituted quick-take proceedings with the intention of conveying the appellant’s property to Best Buy Co., Inc. The appellants challenged the action claiming that it “was not supported by findings of public purpose and necessity.”[61] The court found that the evidence supported the trial court’s finding of public purpose and necessity. Under Minnesota law, “public use” and “public purpose” are interchangeable in the eminent domain context. Consequently, the transfer of condemned property to a private entity did not render a taking invalid as long as a public purpose is served. The record supported the conclusion that the taking would work to remedy blight in a redevelopment area and thus the HRA’s exercise of its statutory authority served a public purpose. The court went on to reject the appellant’s argument that the HRA failed to establish the necessity of the taking, and distinguished cases relied on by the appellants, holding that speculative future uses could not support an assertion of necessity, but observed that HRA was not stockpiling property. HRA had identified a particular use and the contingencies that would allow Best Buy to abandon the deal were “normal contingencies for a major redevelopment project.”[62]

The Minnesota Supreme Court affirmed the appellate court’s jurisdictional holding that the transfer of title in a quick-take proceeding did not render a case moot because the property could be returned to the condemnee, however because the court was evenly split on the issues of public purpose and necessity (one member did not consider the case) the court left the appellate court’s decision undisturbed. [63]

HTA Ltd. Partnership v. Massachusetts Turnpike Authority[64]

The Massachusetts Turnpike Authority (MTA) condemned the appellants’ property ostensibly for the purpose of providing a park-and-ride facility for car-poolers. The appellants sought relief in the trial court challenging the MTA’s authority to take the property and its motives. The trial court dismissed each count of the appellants’ complaint for failure to state a claim upon which relief could be granted. The appellate court reversed the trial court’s dismissal of three counts alleging that the MTA had acted in bad faith. The appellants contended that the MTA concealed the fact that the primary purpose of the taking was to provide access to a private development. The appellate court concluded that the appellants’ complaint alleged sufficient facts to survive a motion to dismiss. Among other things, the appellants alleged that the MTA was aware that the property was too small to accomplish its public purpose and that the MTA had bypassed its usual procedural safeguards associated with takings. The court held that a taking made in bad faith was invalid and that the appellants would be entitled to relief “on a showing that the property was taken solely or dominantly to benefit a private party owning adjacent property. . .”[65] The MTA could not avoid that result by devoting a portion of the property to a park-and-ride location.

Henn v. City of Highland Heights[66]

A federal district court applying Kentucky law determined that the city had acted in an arbitrary and capricious manner in designating an area known as Gateway West as a redevelopment area (in an unpublished opinion, the United States Court of Appeals for the 6th Circuit vacated and remanded on jurisdictional grounds). The city’s comprehensive plan envisioned hotel and business uses in the area. Designation of the area as a redevelopment area would have facilitated development of the area as a whole. Under the applicable statutes, before designating a redevelopment area, the city was required to make findings of blight, housing shortages, expected alleviation of housing shortages through condemnation, and conditions constituting a “menace to the public health, safety, and welfare.”[67] Residents of the area challenged the designation asserting that their neighborhood was no different than other neighborhoods in the city. The court determined that there was no substantial evidence supporting any of the statutorily required findings and that the evidence actually indicated that none of the required conditions existed.

In discussing the need for substantial evidence, the court stated that “Kentucky law does not permit the taking of private property for the purpose of transfer to another private enterprise.”[68] Quoting from Chesapeake Stone Co. v. Moreland, 104 S.W. 762 (Ky. 1907), the court stated:

If public use were construed to mean that the public would be benefited in the sense that the enterprise or improvement for the use of which the property was taken might contribute to the comfort or convenience of the public, or a portion thereof, or be esteemed necessary for their enjoyment, there would be absolutely no limit on the right to take private property. It would not be difficult for any person to show that a factory or hotel or like improvement he contemplated erecting or establishing would result in benefit to the public, and under this rule the property of the citizen would never be safe from invasion.[69]

The court concluded that the statute authorizing the acquisition of blighted areas was “an inappropriate vehicle to accomplish the City’s goals. . .”[70] and held that the development area declaration was void.

Cottonwood Christian Center v. City of Cypress[71]

Cottonwood is a large non-denominational church in Orange County, California. It sometimes hosts 4000 adults at worship services, and another 1,200 children at Sunday school, each week. Its existing facility can only seat 700, so it holds multiple services and, in then, has to turn people away. Church members bought any parcels that they could from different owners, finally securing a vacant 17.9 acre site for over $13 million in a redevelopment area. They submitted plans for a 300,000 square foot sanctuary that could seat more than 4700, plus a youth center, daycare center, gymnasium, and other related facilities. They applied for a conditional use permit under applicable city ordinances, whereupon the city council adopted a moratorium in the area. At the same time, the council approved an “Exclusive Negotiation Agreement” with Costco. Then, even through Costco didn’t own the land and retail was not a permitted use for the property as zoned, the city’s redevelopment agency agreed to Costco’s development proposal. The land, by the way, was the church’s.

The city says it will condemn the land for Costco’s use. Among other things, the church has Congress on its side through the Religious Land Use and Institutionalized Persons Act (“RLUIPA”), which is ostensibly designed to somewhat level the land use playing field for religious organizations’ use of church property. The act prohibits regulation that places a “substantial burden” on the practice of religion.

On January 15, 2002, the church sued the City of Cypress in federal court (Case No. SA CV 02-60 DOC (ANx) in the Central District of California). On April 8, 2002, the Cypress City Council voted to commence eminent domain proceedings against Cottonwood so that it could then sell the property to Costco for a new retail warehouse store. On April 16, 2002, Cypress’ Director of Development wrote the church giving it notice that their redevelopment agency intended to “adopt a resolution of necessity.” City Council adopted the resolution on May 28, 2002. On June 24, 2002, Cottonwood filed to enjoin the City from proceeding. On August 6, 2002, U.S. District Judge David O. Carter denied the City and CRA’s Motion to Dismiss Cottonwood’s suit and granted Cottonwood’s Motion for a Preliminary Injunction, thus halting the condemnation proceedings (a thirty-six page Order).

Stay tuned, because you can be assured that “public purpose,” “public use,” “blight,” and “necessity,” together with the affect of RLUIPA, will be in the further litigation mix.

A Recent Public-Private Land Assemblage Approach

When the City of Clearwater, Florida, wanted to establish a Community Redevelopment Area pursuant to § 163.330 et seq., Fla. Stat., on Clearwater Beach, for various reasons, (none of which had anything to do with legal sufficiency) the City was unable to do so. Nevertheless, the city still needed to facilitate land assembly in order for redevelopment to occur. As a consequence the City (with the assistance of outside legal/planning expertise) came up with a novel approach called “land assembly assistance” to enable redevelopment to proceed.

On May 20, 1999, the City of Clearwater enacted Ordinance No. 6410-99 (the “Land Assembly Assistance Ordinance”) (see Exhibit H). This was followed by the passage of Resolution No. 99-38 on August 19, 1999 (see Exhibit I). The actions followed the review and acceptance of a proposed redevelopment strategy characterized as “Land Assembly Assistance.”

Thereafter, on February 8, 2000, the City and a private limited partnership as the Developer, entered into a fifty (50) page agreement known as the “Land Assembly Assistance and Reimbursement Agreement – City of Clearwater – Beach Revitalization/Redevelopment Area.” Appended to this paper as Exhibit G are selected excerpts from the Agreement. The essence of the Agreement is to facilitate redevelopment and revitalization in an area where even though a developer controls at least sixty (60) percent of the total land needed to bring the project to fruition, the balance is to be acquired through the exercise of the City’s power of eminent domain. Also appended to this paper, as Exhibit J, is the City’s analysis and rationale in support of its new approach.

Conclusion

Some of the lessons to be learned from the cases and alterations in philosophy and concepts might be:

That the real estate transactional lawyer spearheading the “deal” must construct a development team for the private sector players that includes land use and eminent domain expertise at the outset of the negotiations with the public sector players.

That a “common sense” assumption that the project will pass “public purpose,” “public use,” or “necessity” muster may prove to be an exercise in uninformed naiveté.

That the initial, perhaps irrational, exuberance that because government is a co-engineer in the engine cab of the redevelopment train means that the deal “has to” come to fruition is frequently misplaced.

That one man’s “blight” or “slum” may be another’s beauty.

There is still plenty of room for creative counsel with good ideas. The doors to the law of redevelopment and takings seems to be opening rather than closing. To paraphrase Yogi, when you get to the fork in “Redevelopment Road,” and one says “Public Purpose Way,” and the other says “Public Purpose Way (closed for repairs),” take it!

[1] Nothing contained in this paper shall be construed as legal advice. The author reserves the right to assert positions contrary to those stated in this paper.

[2] For a survey of recent baseball stadium financing projects in Boston, Cincinnati, Miami, Minneapolis, St. Paul, New York, Philadelphia, San Diego, St. Louis and Washington, D.C., see The Urban Lawyer, Spring 2002, Vol. 34, No. 2, published by the ABA Section of State and Local Government Law.

[3] This paper will deal with some of the challenges in achieving land assemblage; however, it will not deal with the tactical challenges, such as forming multiple acquiring entities, dealing with various real estate brokers, and other measures used to acquire parcels under different ownership. Nor will the role played by a variety of financing mechanisms such as ad valorem tax abatement, tax increment financing, special assessment districts, bonding, be detailed, notwithstanding that even if one can control the land, no project goes anywhere unless financially feasible for both the public and private participants.

For an article with a State of Washington perspective on pre-condemnation planning and consolidated trials regarding projects involving the acquisition of multiple parcels, see Smith, Eminent Domain Litigation: Multiple Property Consolidated Trials and Pre-Condemnation Planning, The Urban Lawyer, Summer 2000, Vol. 32, No. 3, pages 479-506, published by the ABA Section of State and Local Government.

[4] Adams v. Housing Authority of City of Daytona Beach, 60 So. 2d 663 (Fla. 1952).

[5] The terms “eminent domain” and “condemnation” will be used interchangeably in this paper.

[6] See §§ 73.071, 73.091, and 73.092, Florida Statutes; for a recent discussion of fees for experts, see Seminole County v. Chandrinos, Case No. 5D01-397, opinion filed, May 31, 2002, (Fla. 5^th DCA), 27 Fla. Law Weekly D1278.

[7] For a more comprehensive review of this subject, see, 2A Nichols on Eminent Domain, Chapter 7, §§7.01-7.04 (Rev. 3d Ed. 1996). See also, Edward McKirdy, The New Eminent Domain: Public Use Defense Vanishing in Wake of Growing Privatization of Power, 155 N.J. L. J. 1145 (1999), as well as the writings listed in the Bibliography appended hereto.

[8] See “This Modern World” by Tom Tomorrow, appended hereto.

[9] Professor George Lefcoe, in Finding the Blight That’s Right for California Redevelopment Law, 52 Hastings L. Jour. 991, 994 (2001), observed that so-called “blighted” land is really in a condition to be characterized as “blight that’s right,” i.e., “places just bad enough to provide an excuse, however flimsy, for clearance, but good enough to attract developers.”

[10] 348 U.S. 26 (1954).

[11] 467 U.S. 229 (1984).

[12] Excerpts from California’s Health and Safety Code, specifically §§33030-31 and 33035-38 dealing with redevelopment and “blight” are appended hereto.

[13] For example, Article X, Section 6, of the Florida Constitution, restricts the exercise of the power of eminent domain to the condemnation of private property only for public purposes and, although a particular project may have a public purpose, one also needs to determine if there is a public necessity to acquire the property through condemnation (public purpose is concerned with the quality and nature of the project, whereas public necessity focuses on a determination of which property and how much of that property is needed for the project).

[14] Chapter 166 of the Florida Statutes enumerates the powers delegated to certain Florida governmental entities, including municipalities. F.S. § 166.021 provides, inter alia:

9 (b) The governing body of a municipality may expend public funds to attract and retain business enterprises, and the use of public funds toward the achievement of such economic development goals constitutes a public purpose. The provisions of this chapter which confer powers and duties on the governing body of a municipality, including any powers not specifically prohibited by law which can be exercised by the governing body of a municipality, shall be liberally construed in order to effectively carry out the purposes of this subsection.

(c) For the purposes of this subsection, it constitutes a public purpose to expend public funds for economic development activities, including, but not limited to, developing or improving local infrastructure, issuing bonds to finance or refinance the cost of capital projects for industrial or manufacturing plants, leasing or conveying real property, and making grants to private enterprises for the expansion of businesses existing in the community or the attraction of new businesses to the community.

(d) Nothing contained in this subsection shall be construed as a limitation on the home rule powers granted by the State Constitution for municipalities.

[15] Excerpts from the Florida legislation (showing the statutory language before and after the 2002 amendments) are appended hereto.

[16] 392 So. 2d 875, 886 (Fla. 1980).

[17] 572 N.E.2d 966 (Ill. App. 1991).

[18] 821 P.2d 1067 (Okl. App. 1989).

[19] 812 S.W.2d 903 (Mo. Ct. App. 1991).

[20] 809 S.W. 2d 64 (Mo. Ct. App. 1991).

[21] 60 So. 2d 663 (Fla. 1952).

[22] Id. at 669.

[23] Id. at 668-69. See also State v. Miami Beach Redevelopment Agency, 484 So. 2d 1214 (Fla. 1986); Holloway v. Lakeland Downtown Dev. Auth., 417 So. 2d 963 (Fla. 1982); State of Florida v. City of Daytona Beach, 484 So. 2d 1214 (Fla. 1986) (regarding tax increment financing).

[24] 652 So. 2d 1261 (Fla. 4th DCA 1995).

[25] 725 So. 2d 530, 536 (Fla. 1999).

[26] Id.

[27] 811 So. 2d 727, 733 (Fla. 1^st DCA 2002).

[28] Id.

[29] 695 So. 2d 672 (Fla. 1997).

[30] Id. at 679.

[31] 768 N.E.2d 1 (Ill. 2002), petition for certiorari filed, July 1, 2002 (No.02-34). The Petition to the U.S. Supreme Court, Respondent’s Brief, and an Amicus Brief filed by IMLA (the International Municipal Lawyer’s Association) are appended hereto (without any appendices). On October 7, 2002, the Court denied the petition for certiorari.

[32] Id. at 2.

[33] Id. at 19 (quoting Gaylord v. Sanitary District, 204 Ill. 576, 584 (1903)).

[34] Southwestern Illinois, 768 N.E.2d at 23.

[35] Id. at 26.

[36] 790 A. 2d 1178 (Conn. 2001).

[37] Id. at 1186.

[38] 790 A.2d 1167 (Conn. 2002).

[39] Id. at 1175.

[40] Id. at 1176.

[41] 776 A.2d 821, 822 (N.J. Super. Ct. App. Div. 2001).

[42] 775 A.2d 284 (Conn. 2001).

[43] Id. at 292.

[44] Id. at 302.

[45] 767 A.2d 1154 (Pa. Commw. Ct. 2001).

[46] Id. at 1160.

[47] Id. at 1161.

[48] 95 Cal. Rptr. 2d 265 (Cal. Ct. App. 2000).

[49] Id. at 279.

[50] Id. at 270, 276.

[51] 2001 U.S. Dist. LEXIS 9894, 2001 WL 811056 (C.D. Cal. 2001).

[52] Id. at 10 (quoting FTC v. Affordable Media, LLC, 179 F.3d 1228, 1238 (9th Cir. 1999)).

[53] 99 Cents Only Stores, 2001 U.S. Dist. LEXIS 9894 at 19.

[54] 13 P.3d 183 (Wash. 2000).

[55] Id. at 194.

[56] 2002 N.J. LEXIS 764 (N.J. 2002).

[57] Id. at 19.

[58] Id. at 18.

[59] Id. at 18 (quoting 2A Nichols The Law of Eminent Domain §7.02 [2] (Rev. 3d Ed. 1996)).

[60] 630 N.W.2d 662 (Minn. Ct. App. 2001).

[61] Id. at 665.

[62] Id. at 670.

[63] 641 N.W.2d 885 (Minn. 2002).

[64] 747 N.E.2d 707 (Mass. App. Ct. 2001).

[65] Id. at 712.

[66] 69 F. Supp. 2d 908 (E.D. Ky. 1999), vacated and remanded on jurisdictional grounds, 2001 U.S. App. LEXIS 2490 (6th Cir. Feb. 8, 2001) (the 6th Circuit emphasized the importance of an explanation from the district court regarding the basis of federal jurisdiction when the district court does not reach the merits of the federal claim. Since no explanation was given, the court vacated and remanded “for further elaboration on the district court’s basis for jurisdiction over the plaintiff’s §1983 claim”).

[67] Id. at 912.

[68] Id. at 913.

[69] Id.

[70] Id. at 914.

[71] No reporter cite is available. See, the 1976 decision of the California Supreme Court in Sweetwater Civic Ass’n v. City of National City, 18 Ca. 3d 270 (1976) where the court stated, “One man’s land cannot be seized by the Government and sold to another man merely in order that the purchaser may build upon it a better house or a house which better meets the Government’s idea of what is appropriate or well designed. . . .[The powers of redevelopment and eminent domain] never can be used just because the public agency considers that it can make better use or planning of an area than its present use of plan.” See also, Regus v. City of Baldwin Park, 70 Cal.App.3d 968 (1977); Friends of Mammoth v. Town of Mammoth Lakes Redev. Agency, 82 Cal.App.4^th 388 (2000).