In 2005 the Supreme Court held in Kelo v. City of New London that the general benefits of economic growth allowed the taking of private property for a private developer. The Court held that the economic development taking did not violate the public purpose clause of the Fifth Amendment. Since then, many states have adopted amendments to their Constitutions which narrow and specify the “public uses” for which property can be condemned. Virginia is one such state. The Virginia Assembly in 2007 enacted Chapters 882, 901 and 926. The legislation provided that property taken for condemnation must itself be blighted at the time the petition for condemnation is filed. Specifically, the statute read:
The right to private property being a fundamental right, the General Assembly shall not pass any law whereby private property shall be taken or damaged for public uses without just compensation. The term “public uses” mentioned in Article I, Section 11 of the Constitution of Virginia is hereby defined as to embrace only the acquisition of property where: . . . (v) the property is taken for the elimination of blight provided that the property itself is blighted property
– – – –
For purposes of this section: “Blighted property” means any property that endangers the public health or safety in its condition at the time of the filing of the petition for condemnation and is (i) a public nuisance or (ii) an individual commercial, industrial, or residential structure or improvement that is beyond repair or unfit for human occupancy or use
Recently, the Virginia Supreme Court decided an appeal which required it to interpret the applicability of these new provisions. Specifically, the issue in the appeal was whether the Norfolk Redevelopment Housing Authority (NRHA) was bound by enactment of Code 1-219.1 in its acquisition of property for the expansion of Old Dominion University. The property owners were represented by Joseph T. Waldo of Waldo & Lyle, P.C.
The facts of the case are as follows: In January of 1998, the Council of the City of Norfolk approved the Hampton Boulevard Redevelopment projected created by the NRHA under the authority of Virginia Code 36-49 and 36-51. Code 36-59 authorizes a redevelopment and housing authority to “adopt a redevelopment plan for a designated redevelopment area to address blighted areas.” Code 36-51 authorizes localities to “approve redevelopment plans through their governing body or agency designated for that purpose.” The properties affected by the Redevelopment Project included a 9 1/2 block area within the City of Norfolk which was selected for the purpose of expanding Old Dominion University, a public university located adjacent to the project.
The NRHA’s approval of the project was based on a redevelopment study which determined that the project area was blighted as a result of: incompatible land uses, disrepair, environmental risks, demographic changes, and high crime rates.
After the approval of the Project, the Circuit Court decided two decisions, one in 1999 and one in 2009, each rejecting challenges to the NRHA’s condemnation of individual properties within the Project. Suspiciously, the NRHA and ODU had entered into a Cooperation Agreement whereby the NRHA woudl accept a commission of 4% of the total land assembly costs from ODU. However, the Circuit Court found that this did not create an improper agency relationship between the NRHA and ODU.
The petition to condemn the property was filed by the NRHA on April 10, 2010. The specific parcel of land at issue was owned by PKO Ventures, LLC, and was improved by a ten-unit residential apartment building. Important to the issue at hand, the parties entered into a stipulation that the property was not blighted at the time the NRHA filed its petition. PKO filed an answer and grounds of defense to the petition for condemnation; the NRHA filed a motion to strike PKO’s objections and affirmative defenses. The Circuit Court of the City of Norfolk denied PKO’s objections and defenses, granted NRHA’s motion to strike in part, and authorized the NRHA to acquire PKO’s property by eminent domain.
On Appeal the court had to interpret two specific provisions in the Virginia Code dealing with the timing and applicability of section 1-219.1 (requiring an area to be blighted prior to condemnation).
Specifically, Chapter 882, paragraph 3 reads:
Until July 1, 2010, the provisions of this act shall not affect the ability of a redevelopment and housing authority organized pursuant to Title 36 of the Code of Virginia to acquire property pursuant to any development or conservation plan adopted prior to Jan. 1. 2007. However, the provisions of this act shall be applicable to all redevelopment and conservation plans adopted after January 1, 2007.
Under Chapter 882, paragraph 4:
Nothing contained in this act shall prohibit the Norfolk Redevelopment and Housing Authority or the City of Norfolk to acquire property located at …, both located in the City of Norfolk, through the use of eminent domain for the location of a recreational facility open to the public to be owned or operated by a not-for-profit entity, provided such acquisitions are instituted prior to January 1, 2011.
Therefore, PKO argued that the Circuit Court erred by allowing the NRHA to acquire the property after July 1, 2010 by a condemnation action that the NRHA filed before July 1, 2010. PKO maintained that the lower court erred because (1) the property was not blighted at the time the petition was filed (as required by code 1-219.1) and (2) the acquisition of unblighted property was prohibited beginning on July 1, 2010, as indicated by paragraph 3 of Chapter 882.
The Virginia Supreme Court held that the Circuit Court erred by allowing the NRHA to acquire the property subsequent to the statutory deadline. It wrote:
The parties stipulated that the property was not blighted. Further, the NRHA did not acquire the Property by obtaining title by certificate of take or certificate of deposit, or an award pursuant to a petition for condemnation prior to the July 1, 2010 deadline established by Paragraph 3. The NRHA therefore retained its ability to acquire the unblighted property only until July 1, 2010 when the limitations of Code 1-219.1 became applicable. On July 1, 2010, the terms of Code 1-219.1 governed the NRHA’s attempted acquisition and barred its authority to condemn PKO’s unblighted property.
It is certainly worth noting the differences between the Virginia Supreme Court’s strict construction of Virginia Code 1-219.1, limiting the use of eminent domain for private purposes and New York’s laissez faire approach. For a strong example of the dichotomy, we will examine the Court of Appeals’ recent case authorizing the condemnation of 17 acres of privately owned property for the expansion of Columbia University.
The case I am referring to, of course, is Matter of Kaur v. New York State Urban Dev. Corp., 15 NY3d 235 (2010).* The issue before the Court of Appeals was whether the Empire State Development Corporation (ESDC)’s exercise of eminent domain to acquire property was supported by a sufficient public use, benefit, or purpose. The Court concluded that the ESDC’s findings of blight and determination that the condemnation of petitioners’ property qualified as a “land use improvement project” were rationally based and entitled to deference. The project included 16 buildings, publicly accessible open space, a retail market along 12th avenue, and widened tree-lined sidewalks.
The history of the case is as follows: On December 18, 2008 the ESDC issued its determination pursuant to EDPL 204 that it should use its power of condemnation to purchase 17 acres of privately owned property, including petitioners, in connection with the Columbia University Education Mixed Use Development Land Use Improvement and Civic Project (the Project).
The ESDC hired two consultants to prepare neighborhood conditions in West Harlem where the acquisition would take place. In 2003, Urbitran Associates conducted a study documenting and photographing the area based on (1) signs of deterioration (2) substandard or unsanitary conditions (3) adequacy of infrastructure and (4) indications of the impairment of sound growth in the surrounding community. The study determined that the conditions in the area merited a blight designation. In September 2006, the ESDC retained AKRF to perform a Neighborhood Conditions Report on the Project sitef. The AKRF report concluded that the Project site was “substantially unsafe, unsanitary, substandard, and deteriorated” – aka, blighted.
Petitioners took issue with the AKRF study because ARKF had a pre-existing relationship with Columbia University (because it prepared their Environmental Impact Statement) which called into question the validity of their report. In response, the ESDC hired Earth Tech, a second engineering and environmental consultant, to separately assess the conditions of the Project site and issue an independent report of their findings. Earth Tech’s report concluded that the neighborhood conditions created a “blighted and discouraging impact on the surrounding community.”
On February 20, 2009, petitioners (owners of commercial real estate within the Project site), challenged the ESDC’s findings and determination in the Appellate Division pursuant to EDPL 207. A plurality of that court concluded that the ESDC”s determination that the project has a public use, benefit or purpose is “wholly unsupported by the record and precedent.” 72 AD3d 1, 9 (1st Dept 2009). Specifically the Appellate Division agreed that there was “no evidence whatsoever that Manhattanville was blighted prior to Columbia gaining control over the vast majority of property herein.” 72 AD3d at 16.
The ESDC appealed as a matter of right. On appeal, petitioners again argued that the Project approved by the ESDC was unconstitutional because the condemnation was not putting properties to a “public use” within the meaning of Article I section 7(a) of the New York Constitution. They contended that the ESDC’s findings of blight were made in bad faith and that the project only serves the private interests of Columbia University.
The Court of Appeals reversed the Appellate Division, faulting the Appellate Division for undertaking a de novo review and not giving deference to the legislature. The Court ruled that the ESDC considered a “wide range of factors” including the physical, economic, engineering, and environmental conditions of the site, and thus, that the finding of blight was not irrational or baseless.
Additionally, the Court ruled that the term “substandard or insanitary area” was not unconstitutionally vague because the UDC act provided adequate meaning to the term in this case. Additionally, the ESDC properly qualified the project as a “civic project” within the meaning of the New York State Urban Development Corporation Act.
We wish to disclose that we represent a property owner, Spray Tuck, Inc. and tenants Tuck-it-Away Associates, LP, Tuck-it-Away Bridgeport, Inc., and Tuck-It-Away Inc. in the Columbia proceeding.