57 RI Bar J., No. 3, Pg. 13. Eminent Domain and Economic Development: Rhode Island General Assembly addresses Kelo vs. City of New London.

• Author: Harris K. Weiner, Esq.

Rhode Island Bar Journal

Volume 57.

57 RI Bar J., No. 3, Pg. 13.

Eminent Domain and Economic Development: Rhode Island General Assembly addresses Kelo vs. City of New London

Rhode Island Bar Journal 57 RI Bar J., No. 3, Pg. 13November/December 2008 Eminent Domain and Economic Development: Rhode Island General Assembly addresses Kelo vs. City of New LondonHarris K. Weiner, Esq.Of Counsel with the Law Office of Jeffrey B. Pine, P.C.Preface

In the classic legal drama Blazing Saddles, the Johnson family of the Town of Rock Ridge, with the aid of two brave lawmen and a seductive Teutonic spy, foiled the corrupt use of eminent domain for economic development. Instead of six shooters and the lovely Lily Von Schtupp, Rhode Island now has the equally provocative Home and Business Protection Act of 2008 to control government takings for economic purposes.

Introduction

At the invitation of the United States Supreme Court, this past legislative session the Rhode Island General Assembly passed a bill restricting the use of eminent domain for economic development which Governor Carcieri signed into law on July 2, 2008. (fn 1) In 2005, the United States Supreme Court, in Kelo vs. City of New London, (fn 2) ruled 5 to 4 that government agencies can take private property by eminent domain and convey it to other private parties for economic development purposes. Populist outrage ensued. In Rhode Island, after more than a dozen failed legislative proposals over the next two years, a new state eminent domain procedure emerged from the 2008 General Assembly. The Rhode Island Home and Business Protection Act: broadly defines economic development; treats it separately from other public purposes; requires approval by elected governing bodies of development plans prior to these takings; and mandates payment of at least 150% of fair market value to condemnees whose property is seized for economic development. This article explores the following related issues: 1) the basics of eminent domain practice in Rhode Island; 2) common pitfalls; and 3) new judicial and legislative developments.

1. The Basics - "It's good to be the King." (fn 3)

   The power of eminent domain is an inherent sovereign right. This authority is limited by the Takings Clause of the Fifth Amendment to the United States Constitution which states that private property shall not be taken for public use without just compensation. The Due Process clauses of the Fifth and Fourteenth Amendments also apply. Article I, Section 16 of the Rhode Island Constitution echoes the federal Takings Clause. The Rhode Island Constitution also empowers the State to condemn blighted property and to take private property for transportation purposes. (fn 4) The General Assembly has delegated this power by statute (fn 5) to a number of state and municipal agencies through which acquisitions are made. In turn, municipalities establish their own eminent domain procedures which must comport with state law. It is noteworthy that the United States Supreme Court defers to states in determining the local scope of permitted takings pursuant to the public purpose doctrine.

   The first step in representing a condemnee is to review the condemnor's statutory authority, which can vary significantly from agency to agency. Counsel to a condemnee should compare the process that actually occurred to the applicable statute and agency regulations if any exist. For example, the quick-take procedure available to the Rhode Island Economic Development Corporation (fn 6) differs from the three-appraisal method that has been employed by the Providence Redevelopment Agency. Failure to follow pertinent statutes, ordinances and regulations may render a taking susceptible to legal attack and cause the condemnor to either correct the deficiencies or abandon the taking. The next pre-suit step is to obtain an appraisal of the condemned property.

   The eminent domain process typically begins with an advertised announcement of the public works project. However, until the project is funded and finalized, it generally remains a plan which may be delayed, altered or never realized. Reliance on unconsummated plans is perilous and non-actionable. (fn 7) After a project is funded by the legislative body and the condemning agency, and duly authorized by the State Properties Committee (fn 8) (for Rhode Island Department of Transportation and Rhode Island Department of Environmental Management condemnations) or local city or town council for municipal takings, the condemning agency may try to negotiate the purchase of properties. These administrative negotiations, which often require releases of any claims by the property owner, can occur either before or after issuance of written notices of condemnation. Government entities prefer to acquire properties voluntarily through deed and release to speed scheduling and cut off reversionary rights of first refusal in the event that all or part of the property is subsequently sold by the taking entity. (fn 9) This presents an opportunity for landowners to negotiate a premium above the fair market value of the property.

   When administrative negotiations are skipped or unsuccessful, the agency issues its offer of just compensation for the acquisition. The offer should be based on an appraisal by a properly certified real estate professional and should include a reasonable deadline for response. If the offer is rejected expressly or by inaction, the agency may proceed to file condemnation papers including plat descriptions in the local land evidence records of the municipality where the property is located. (fn 10) The condemning authority then either tenders a payment in the amount of the offer of just compensation to the condemnee or deposits the funds into a court registry. The condemnee is generally permitted to accept the tender of just compensation with a reservation of rights to later challenge the price paid. Subsequent legal settlements, which are not reviewed by the State Properties Committee, can also be pursued through trial. Once the condemnation papers are recorded in land evidence records, title changes by operation of law from the condemnee to the condemnor and the project proceeds unless enjoined on constitutional or statutory grounds. These challenges are difficult to win, although there is precedent to bar takings that do not serve a public purpose. (fn 11)

   On the other hand, suits initiated to challenge the tendered compensation are often successful in...