Eminent Domain and Fair Market Value in a Depressed Real Estate Market (2014)

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7 On the other hand, it is reported that because of the crisis some states benefited because of the decreased cost of materials.45 The lower cost for land acquisition is said to have assisted some states in reducing costs and in being able to resume some suspended projects.46 For example, although revenue decreased to $4.1 billion from $4.7 billion in 2008, the Colorado Department of Transportation reported that its costs of materials decreased, thus allowing the department to narrow the gap between revenue and expenses. For one transportation project in Colorado, estimated construction costs dropped almost half a billion dollars between 2008 and 2009.47 III. THE USE OF FAIR MARKET VALUE TO DETERMINE JUST COMPENSATION The Fifth Amendment to the U.S. Constitution provides that private property shall not be taken by the government for public use without just compensation.48 The language was designed to limit the power of the government and to serve the interests of both the public and private owners.49 In particular, the Fifth Amendment was intended to ensure that the government would “deal fairly with individuals” and to prevent individuals from “bearing burdens that should be borne by the public as a whole.”50 Both the federal and state governments may take property for a public use but only if they pay just compensation to the landowners for their property.51 To make a “present value determination” most states have established a date on which the value of condemned property is to be determined.52 In a denver/stories/2010/01/04/daily35.html?page=all. 45 Rick E. Rayl and Bradford B. Kuhn, Do You Feel (Federally) Stimulated: Stimulus Dollars Really Having an Impact on California’s Infrastructure?, Sept. 15, 2009, available at http://www.nossaman.com/ showealert.aspx?show=5865. 46 Id. 47 Proctor, supra note 44. 48 U.S. CONST. amend. V. 49 Marissa Fegan, Just Compensation Standards and Eminent Domain Injustices: An Underexamined Con- nection and Opportunity for Reform, 6 CONN. PUB. INT. L. J. 269, 274 (2007), hereinafter referred to as “Fegan.” 50 Id. at 275; Armstrong v. United States, 364 U.S. 40, 49 (1960). 51 Christopher A. Bauer, Government Takings and Constitutional Guarantees: When Date of Valuation Statutes Deny Just Compensation, 2003 B.Y.U.L. REV. 265, 265-266 (2003), hereinafter referred to as “Bauer.” 52 Id. at 266. majority of states, the valuation date is set by statute.53 Thus, just compensation traditionally is determined on the basis of the fair market value of a property as of the date of the taking.54 Condemnees are protected if their property’s value falls after a valuation on the prescribed date of taking, but not when the value of the property increases after its valuation as of the taking. Although just compensation may be affected by the date a state has established as the date of taking, the issue for the Report is whether property may be valued any differently when a taking occurs during a time of generally depressed real property values. In 1893, the Supreme Court articulated the current standard for just compensation in Mononghela Navigation Co. v. United States.55 The Court stated that “compensation must be a full and perfect equivalent for the property taken.”56 Exactly what constitutes a perfect equivalent, however, was not established until almost thirty years later when the Court decided Olsen v. United States.57 In Olsen, the Court held that the equivalent compensation that was sufficient to satisfy the Fifth Amendment’s just compensation requirement was the fair market value of the property condemned.58 In United States v. 563.54 Acres of Land,59 the Court clarified that the term fair market value meant “‘what a willing buyer would pay in cash to a willing seller’ at the time of the taking.” The Fifth Amendment does not require payment for all losses incurred by a property owner by reason of a taking of his or her property 53 Id. 54 Although beyond the scope of this digest, as of the date of the Bauer article in 2003, 21 states and the Dis- trict of Columbia had no valuation date statute. Some states, such as California, provide for three methods and dates of valuation. Bauer, supra note 51, at 277. Twenty-nine states had a variety of approaches to the date of valuation, such as “the date of summons, the date of trial on compensation, the date that the con- demnation action begins, the date that the condemnor deposits probable compensation, and the date that the condemnor takes the land.” Id. at 278. 55 148 U.S. 312, 13 S. Ct. 622, 37 L. Ed. 463 (1893). 56 Mononghela Navigation Co., 148 U.S. at 326, 13 S. Ct. 622, 626, 37 L. Ed. at 468. 57 292 U.S. 246, 54 S. Ct. 704, 78 L. Ed. 1236 (1934). 58 292 U.S. at 255, 54 S. Ct. at 708, 78 L. Ed. at 1244. 59 441 U.S. 506, 511, 99 S. Ct. 1854, 1857, 60 L. Ed. 2d 435, 441 (1979) (quoting United States v. Miller, 317 U.S. 369, 374 (1943)).