On January 13, 2016, Michael Rikon gave a roundtable luncheon speech to some of Staten Island’s most prominent real estate developers about New York City’s (“City”) storm water program for Staten Island and how the City chose to condemn wetlands instead of constructing storm sewer lines.
The storm water program, the “Bluebelt,” encompasses 16 watersheds and approximately 12,000 acres. Once the City chose a wetland parcel to condemn, the New York State Department of Environmental Conservation would not issue a wetland permit for that parcel.
Mr. Rikon discussed the City’s early mistakes and violations of the Eminent Domain Procedure Law. The City never made written offers to property owners that valued the parcels at 100% of its highest approved appraisals. The City’s wetland experts never actually inspected the parcels but rather generated generic reports on multiple parcels that all read the same.
As an example, Mr. Rikon recounted Ramfis Realty, Inc., 37 Misc.3d 1207(A) (Sup. Ct. Richmond County 2012), which illustrated the collusion between the City and the Department of Environmental Conservation in an attempt to keep damages low. The City argued that the parcel was not developable because, as a wetland, it could not obtain a permit due to alleged illegal fill. The State Department of Environmental Conservation refused to delineate the wetlands because of the alleged illegal fill. Mr. Rikon argued that even if the parcel had wetlands, it could obtain a permit for development. The court adopted claimant’s measurement and awarded $10,050,880 plus an additional allowance for reimbursement of legal and appraisal fees, a total of $12,150,880.
Mr. Rikon focused on Matter of New Creek Bluebelt, Phase 4 [Paolella], 122 A.D.3d 859 (2d Dep’t 2014), which found that the wetlands regulations caused a regulatory taking and further developed the formula used for valuing wetlands in condemnation cases. The formula utilizes an increment above the regulated value of the property that must be added to the regulated value of the property. It is a percentage that represents the premium a reasonable buyer would pay for the probability of a successful judicial determination that the regulations were confiscatory. The court affirmed use of a 75% increment.
Mr. Rikon continued with Matter of New Creek Bluebelt, Phase 3 [Staten Island Land Corp.], 48 Misc.3d 1202(A) (Sup. Ct. Richmond County 2015), in which the City again attempted to avoid using the 75% increment and tried to use a 32% increment. When asked on cross where the valuation theory came from, the City’s appraiser could only reply that it was suggested by the City’s attorneys. The court instead again adopted the 75% increment. The court awarded $3,500,000. The City’s appraisal was $1,122,000.
Last, Mr. Rikon spoke about Matter of Oakwood Beach Bluebelt, Phase 1 [Yeshivas Ch’san Sofer, Inc.], 47 Misc.3d 1229(A) (Sup. Ct. Richmond County 2015), a large parcel that was to be developed as a rabbinical seminary despite being designated a wetlands. The Yeshiva successfully pursued a hardship application before the New York Freshwater Wetlands Appeals Board. The City valued the property at $13,174,000 but deducted extraordinary costs at $16,794,000, which meant that the extraordinary costs exceeded the value by $3,500,000. Claimant used an experienced Staten Island engineer while the City used a large engineering company that had absolutely no experience in development on Staten Island or elsewhere. The court valued the property after deduction of the appropriate extraordinary costs as $10,100,000.
The takeaway from Mr. Rikon’s talk was that the City has not complied with the requirements of the Eminent Domain Procedure Law. The City has used appraisers and experts who have no experience in actually developing land on Staten Island and the City consistently refuses to follow valuation formulas adopted by the New York courts.