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The Ramifications of Post-Kelo Legislation on State Transportation Projects (2012)

Chapter: VII. POST-KELO REFORMS' PROCEDURAL CHANGES AFFECTING TRANSPORTATION PROJECTS

« Previous: VI. THE EFFECT OF POST-KELO LAWS ON TAKINGS OF BLIGHTED PROPERTY
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Suggested Citation:"VII. POST-KELO REFORMS' PROCEDURAL CHANGES AFFECTING TRANSPORTATION PROJECTS." National Academies of Sciences, Engineering, and Medicine. 2012. The Ramifications of Post-Kelo Legislation on State Transportation Projects. Washington, DC: The National Academies Press. doi: 10.17226/14631.
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Suggested Citation:"VII. POST-KELO REFORMS' PROCEDURAL CHANGES AFFECTING TRANSPORTATION PROJECTS." National Academies of Sciences, Engineering, and Medicine. 2012. The Ramifications of Post-Kelo Legislation on State Transportation Projects. Washington, DC: The National Academies Press. doi: 10.17226/14631.
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20 FHWA cautions that states must monitor supercom- pensation payments and practice because state- mandated payments exceeding traditional concepts of just compensation could “prove to be inconsistent with the stewardship of Federal-aid highway funds.”224 VII. POST-KELO REFORMS’ PROCEDURAL CHANGES AFFECTING TRANSPORTATION PROJECTS A. Introduction Some post-Kelo changes have been procedural in na- ture. According to one source, procedural protections may have been included in the belief that they would help to deter “abusive condemnations” or would in- crease property owners’ “bargaining leverage.”225 How- ever, the source submits that “it is the taxpayers who…bear the costs of additional hearings, preparation of reports…, and any extra compensation paid to prop- erty owners” and that although such protections may “deter relatively small-scale condemnations,” they do not deter “larger ones.”226 The DOTs responding to the survey provided exam- ples of the post-Kelo requirements in their states and the effects thereof. Caltrans’ response drew attention to three bills enacted into law in California. First, SB 1210 changed the prejudgment possession process.227 Al- though under prior law an ex parte hearing was suffi- cient, the law now requires an Order of Possession Hearing that is attended by both parties, which is when the property owner may identify a hardship that, de- pending on the evidence, could delay possession “indefi- nitely.”228 The law requires a condemning agency to pay the reasonable cost of an appraisal (up to $5,000) if the owner so chooses.229 Caltrans noted that the second bill, SB 1650, changed the prior law to require that the department offer to sell back property to the original owner if Cal- trans does not use the property within 10 years and lease it back if the department will take longer than 2 years to go to construction.230 224 Id. 225 Somin, supra note 7, at 218. 226 Somin, supra note 7, 15 S. CT. ECON. REV. at 219. 227 SB 1210, effective Jan. 1, 2007, unless otherwise noted, amended §§ 1250.410, 1255.040, 1255.410, 1255.450, and 1255.460; added § 1263.025; and repealed §§ 1255.420 and 1255.430 of the Code of Civil Procedure, as well as added § 1091.6 to the Government Code and amended §§ 33333.2 and 33333.4 of the Health and Safety Code. See eBULLETIN, Leg- islative Amendments for 2007 to California Community Rede- velopment Law, hereafter cited as “eBULLETIN,” available at http://extranet.bbklaw.com/news/IndivArticle.cfm?NEAMID=1 255, last accessed on July 5, 2011. 228 Caltrans’ Survey Response, dated Mar. 18, 2011. 229 Id. 230 Id. SB 1650, effective Jan. 1, 2007, unless otherwise noted, amends § 1263.510 of, and adds §§ 1245.245 and Third, as a result of the enactment of AB 1322 an owner is entitled to receive a full copy of the depart- ment’s appraisal.231 Prior to passage, an Appraisal Summary Statement was all that was required. The department is entitled to receive a copy of any appraisal for which it pays, including those provided under SB 1210.232 Prior to the enactment of AB 1322, appraisal efficiencies existed because the department could com- bine a number of appraisals in one report that shared comparable properties.233 Caltrans advises that because of the need to craft one appraisal for each property, the combined reports are no longer as expeditious.234 In Missouri, as a result of post-Kelo reforms, there are several new eminent domain requirements: a land- owner must be given an opportunity to propose alter- nate locations; a condemnor must provide a pre- condemnation notice of the intended acquisition; a con- demnation petition may not be filed within 30 days of the written purchase offer; there must be co-signature of a certified appraisal on appraisal reports; and a con- demnor must offer the statutory homestead or heritage bonus when it applies.235 Furthermore, the depart- ment’s view is that the new law, which statutorily rede- fined the concept of fair market value, will increase a condemnor’s costs.236 Nevada stated that the state’s recent amendment of its constitution “open[s] the door” for payment of legal fees in eminent domain actions; allows for challenges to necessity; necessitates that all appraisals be provided to every property owner; mandates that interest that is paid must be compound interest; and requires that the DOT “must use the property within 5 years of obtaining it in a condemnation action.”237 The Wyoming DOT reported that the post-Kelo re- forms have affected the “process used to acquire prop- erty for highway projects.”238 The changes did not affect “what could be acquired,” but they did affect “how the state acquired the property.”239 Wyoming’s response, moreover, stated that the “greatest impact was to the ‘good faith negotiation’ requirements. These changes added several steps to the process [that] complicated 1263.615 to, the Code of Civil Procedure. See eBULLETIN, supra note 229. 231 See CAL. STS. & HWY. CODE § 102(b). See also Caltrans Memorandum, Office of Appraisals and Local Programs and Office of Right of Way Project Delivery, Implementation of AB 1322, dated Dec. 21, 2007, available at http://www.dot.ca.gov/ hq/row/localprog/docs/ImplementationofAB1322.pdf, last accessed on July 5, 2011. 232 Caltrans’ Survey Response, dated Mar. 18, 2011. 233 Id. 234 Id. 235 MHTC’s Survey Response, dated Mar. 10, 2011. 236 Id. 237 Nevada DOT’s Survey Response, dated Mar. 14, 2011. 238 Wyoming DOT’s Survey Response, dated Mar. 22, 2011. 239 Id.

21 and added significant time to right-of-way acquisitions under the threat of eminent domain.”240 B. Attorney’s Fees and Other Expenses If a condemnation proceeding is abandoned or if the court determines that the condemnor may not acquire the property, the owner may be entitled to recover fees and expenses for the services of an attorney, appraiser, and engineer.241 A property owner may be entitled to “relocation damages.”242 In some states, a property owner may be able to recover reasonable attorney’s fees and costs if a taking is found not to be for a public use.243 Oregon’s statute provides that a court, first, must “independently determine whether a taking of property complies” with the law’s requirements “with- out deference to any determination made by the public body.”244 Second, if the court determines that the taking is not compliant with the requirements, the property owner is “entitled to reasonable attorney fees, expenses, costs and other disbursements reasonably incurred to defend against the proposed condemnation.”245 As ex- plained in Section VIII.A.1, two DOTs stated that their costs had increased because of post-Kelo provisions hav- ing to do with a property owner’s recovery of attorney’s fees. C. Notice Requirements Although it is beyond the scope of the digest to dis- cuss the various provisions of state codes applicable to the eminent domain process, it may be noted that sev- eral states’ post-Kelo reforms went beyond defining public use, prohibiting or restricting the taking of prop- erty for transfer to another private person or entity, or limiting the definition of blighted property. States that appear to have significantly revised their eminent do- main procedures in the wake of the Kelo decision in- clude, for example, Georgia, Indiana, Louisiana, Minne- sota, and Tennessee.246 Whether in connection with takings by eminent domain generally or takings specifi- cally of blighted property, some post-Kelo reforms pro- 240 Id. 241 GA. CODE ANN. § 22-1-12. 242 Id. § 22-1-13(1)-(4) (stating that a condemnee may re- cover actual reasonable moving expenses, actual direct losses of tangible personal property as a result of moving or discon- tinuing a business or farm operation, other relocation expenses authorized by law, and, with the condemnee’s consent, the condemnor may provide alternative site property as full or partial compensation). 243 ARIZ. REV. STAT. § 12-1135(B); IND. CODE ANN. § 32-24- 4.5-7 (recovery if condemnor does not establish blight in accor- dance with the statutory elements); OR. REV. STAT. § 35.015(6)). 244 OR. REV. STAT. § 35.015(6). 245 Id. 246 GA. CODE ANN. § 22-1-1, et seq.; IND. CODE ANN. § 32-24- 4.5, et seq.; LA. CONST. art. 1, § 4; MINN. STAT. § 117.102, et seq.; and TENN. CODE ANN. § 29-17-101, et seq. See also Castle Report, supra note 40. vide for increased notice for property owners.247 For example, state law may require the posting of a notice near the property a specified number of days before the exercise of eminent domain.248 After the Kelo case, the Tennessee legislature, among other changes, revised its quick-take method for takings from a 5-day notice that existed prior to 2006 to a 30-day notice before public agencies may take possession of a property.249 D. Right of First Refusal If property is condemned but not used for the pur- pose for which it was taken, before the public agency may sell the property, state law may require that the property first be offered for sale to the one owning the property prior to condemnation.250 If the prior owner does not accept within a certain period the public agency’s offer, such as the amount of the price paid for the property or the current fair market value, which- ever is less, the property may be sold to any other pri- vate party.251 The duration of the right of first refusal of the former owner, or his or her heir or successor in in- terest, varies from state to state, such as 5 years in 247 WASH. REV. CODE ANN. § 8.25.290(2)(a)(1) (providing that notice of a planned final action must be sent by certified mail at least 15 days before the final action). 248 GA. CODE ANN. § 22-1-10(a)(1) (providing that no less than 15 days before any meeting when a resolution approving the exercise of eminent domain is to be considered, a condem- nor must post a sign, if possible, in the right-of-way adjacent to each property stating the time, date, and place of the meeting). 249 TENN. CODE ANN. §§ 29-17-903(c) and (d) (stating that a notice of the filing of a petition must be given to the owner at least 30 days prior to the taking of any additional steps in the case and that after 30 days from the giving of notice, if the right to take is not questioned, the condemner shall have the right to take possession of the property). See Beau Pemberton, Reforming Eminent Domain in Tennessee after Kelo: Safe- guarding the Family Farm, 4 TENN. J. L. & POL’Y 73, 93 (2008) (citing TENN. CODE ANN. § 29-17-903(c) (Supp. 2007)). 250 ALA. CODE § 11-47-170(c); see also ALA. CODE § 11-80- 1(c); FLA. STAT. ANN. § 73.013(2)(b)(2); GA. CODE ANN. § 22-1- 2(c)(1) (former owner has to apply for a reconveyance); MICH. COMP. LAWS § 117.226(a); OHIO REV. CODE ANN. § 163.211 (right of repurchase extinguished after 5 years); S.D. CODIFIED LAWS § 11-7-2.2 (applicable to any transfer of the property within 7 years of acquisition). 251 ALA. CODE § 11-47-170(c) (90 days); see ALA. CODE § 11- 80-1(c); FLA. STAT. ANN. §§ 73.013(2)(a) and (b).

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TRB's National Cooperative Highway Research Program (NCHRP) Legal Research Digest 56: The Ramifications of Post-Kelo Legislation on State Transportation Projects explores the consequences of legislation enacted by state legislatures that limits the use of eminent domain in response to the 2005 United States Supreme Court case of Kelo v. the City of New London, where the Court held that the use of eminent domain to take nonblighted, private property for a city-approved, privately implemented economic development plan was constitutional.

The report examines how state legislation has affected the use of eminent domain for economic development, for condemning blighted and nonblighted property, and for restricting transfers of condemned property to private parties. The report also examines how states have legislatively redefined the concept of “public use.”

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