Beyond Fair Market Value

Scottsdale Settles Condemnation Case For $8,290,000

dale@zeitlinlaw.com (Dale Zeitlin) — Tue, 31 Mar 2009 15:04:32 -0700

The Scottsdale City Council last week approved the settlement of a condemnation action it had filed against CGP-Aberdeen for the principal amount of $7,500,000, plus interest of approximately $790,000, for a total settlement amount of $8,290,000. The property owner was represented by Dale Zeitlin.

The City had filed a lawsuit against the property owner on January 1,2003, which under Arizona law established the date of valuation. The City, however, did not ask the court to take early possession of the property until July 2004 at which time the City paid $4,000,000 (the City's appraised value for the property)to the property owner, a delay of eighteen months.

Mr. Zeitlin argued that the statutory date of valuation when applied to a factual situation where the government delays taking possession of the property for a lengthy period of time was unconstitutional. The trial court rejected this argument, but on appeal, the Arizona Court of Appeals agreed with Zeitlin's argument and held that property must be valued when the government takes possession of the property and first pays its estimate of just compensation. Thus, the valuation date was not January 2003, but July 2004, a date when values were significantly higher.

The settlement was reached using the July 2004 date of value.

This case also has significance to every condemnation case that is filed by Arizona Public Service or other governmental entities that do not have the right to take immediate possession of property. In all of these cases, the property owner will be able to argue for a later date of value. APS had filed amicus curiae briefs opposing using the later date of valuation throughout the appellate process.

Top 100 Verdicts

dale@zeitlinlaw.com (Dale Zeitlin) — Tue, 24 Mar 2009 12:20:54 -0700

The National Law Journal recognized Dale Zeitlin's jury verdict in City of Scottsdale v. Toll Brothers as one on the top 100 verdicts for 2008. In fact, the verdict, which was for $81,903,496, plus pre-judgment interest in the amount of $9,826,023, was the 26th largest jury verdict in the United States during 2008.

The City of Scottsdale condemned 383 acres of vacant desert land in 2004. The property had a highest and best use for low density single family residential development The City valued the property at $33,800,000.

The jury verdict stands as the largest eminent domain verdict in Arizona history.

Town of Gilbert Takes Advantage of Real Estate Market and Buys Park Land

dawn@zeitlinlaw.com (Dawn Zeitlin) — Tue, 24 Mar 2009 11:00:32 -0700

The Town of Gilbert, using a portion of $80 million of bond money, has agreed to purchase 63 acres of land near Germann and Greenfield Roads from a landowner for a special events center. Town Manager George Pettit said that "[t]he opprotunity was there, the land was there", but that the Town needed to issue bonds to fund the purchase. In addition to the private land, the Town purchased or leased an additional 121 acres from the Maricopa County Flood Control District.

The Arizona Republic reports that Gilbert set aside money as a cushion to help repay the bonds if system development fees are not sufficient, the Town was able to take advantage of favorable interest rates and a less aggressively priced real estate market than has existed in the past few years.

Smokeshop Battles Chandler Intersection Expansion

dawn@zeitlinlaw.com (Dawn Zeitlin) — Sun, 22 Mar 2009 15:43:00 -0700

The City of Chandler authorized condemnation against Trails, a smoke shop, which is the final holdout in the City's plans to acquire land for the expansion of an intersection at Ray Road and Alma School Road. The City's real estate manager reports that the City has reached agreement with the owners of all affected property except Trails. The City budgeted $10.6 million for land acquisition, design and construction on the project scheduled to begin in 2010.

The City has additional plans to extend Washington Street in downtown Chandler to Pecos Road, which would require the acquisition of homes, unoccupied properties, part of a park and parking lot. The City also plans to spend $36 million to widen Gilbert Road, which would require acquisition of parts of 83 properties and the likely relocation of several businesses. The projects are intended to alleviate traffic congestion now and in the future.

While the City may consider the condemnation of the Trails store part of a "standard intersection project as fars as that goes", it is doubtful that Trails considers it business as usual. Trails faces the prospect not only of loss of its property, but also dislocation and disruption of its business at a time when few businesses can afford additional economic impedements.

Highway Projects to Proceed on Stimulus Money

dawn@zeitlinlaw.com (Dawn Zeitlin) — Sun, 22 Mar 2009 14:47:59 -0700

The Arizona State Transportation Board announced recently that 41 "shovel ready" projects previously shelved because of a lack of funds, may proceed with federal stimulus money. Five of the projects are in Maricopa County, four of which will benefit the west Valley and one of which will benefit the north Valley.

The Board chose two projects on the Maricopa Association of Governments' list of priority projects: the widening of the I-10 freeway in the west Valley between Sarival Avenue and Verrado Way, and the addition of one lane in each direction on Interstate 17 between the Carefree Highway and Anthem Way. Although it is unclear whether stimulus grant money can be used to pay for these projects, but ADOT plans to try to use grant money for the projects and is awaiting the rules governing stimulus money. Two other projects are in the area of the US 60 and Grand Avenue and one is the construction of an interchange for Loop 101 at Beardsley Road and Union Hills Drive.

Apparently much of the federal stimulus money designated for transportation projects will be used by the State of Arizona for projects that were funded by the legislature and under way, but that had funding pulled because of budget constraints.

Scottsdale Approves Settlement in Three Condemnation Cases Taken for the Preserve

dale@zeitlinlaw.com (Dale Zeitlin) — Fri, 29 Aug 2008 16:55:38 -0700

The City of Scottsdale approved the settlement of three more condemnation cases, in which I represented the property owners. The properties were taken for the Sonoran Desert Preserve, and may represent the last few properties that will be condemned by the City for quite a while as the City has limited funds left after paying the judgment in the Toll case.

The three properties were located in north Scottsdale in an area known as Dynamite Hills. They consisted of about 25 acres. The properties did not have paved access or water and sewer. The City filed these actions 4 years ago, and now will have to pay four years of interest on top of the settlement amount for each property. Each of the properties will receive about double the City's original appraisal, plus the four years on interest.

China Could Use The Fifth Amendment To Protect Property Rights

dale@zeitlinlaw.com (Dale Zeitlin) — Tue, 19 Aug 2008 10:11:19 -0700

The Wall Street Journal reported this morning on the imprisonment of a husband and wife who were trying to stop a development company from taking their property without paying just compensation. The couple was charged with the criminal offense of "obstructing official business". Confiscation of homes was prevalent as China prepared for the Olympics.

For example, the Journal reports that another couple has fought for compensation for seven years and has been under surveillance ever since.

Thank goodness we have the Fifth Amendment in the United States and a judiciary that is willing to ensure that property owners can have a fair jury trial to determine just compensation. A property owner can stand up to various sorts of government projects as unconstitutional: urban renewal projects have been stopped when courts have found that they do not serve a public purpose. And even in questionable types of takings, such as new baseball stadiums that have been constructed using public monies, ie., the Washington Nationals new ballpark, property owners have been fairly compensated for the takings of their properties.

City of Scottdale Pays Largest Condemnation Award in History of Arizona Eminent Domain Trials

dale@zeitlinlaw.com (Dale Zeitlin) — Mon, 18 Aug 2008 10:54:24 -0700

The City of Scottsdale voted to pay the full jury award, plus statutory interest, which amounted to $92,000,000. The City decided to pay the judgment rather appeal the jury's award.

The jury award was the largest award in the history or Arizona trials in eminent domain actions. This was also one of the largest jury verdicts in the United States for trials that occurred in 2008.

The City had condemned Toll Brothers' land that Toll had planned to development into a high-end residential single family community. Toll's land was condemned for the McDowell Sonoran Preserve, a project where the City wished to preserve desert land in its natural state and prohibit development.The City had appraised the 383 acres for $82,000 per acre or about $31,000,000.

The jury rejected the City's appraisal, and found that the fair market value of the land was about $214,000 per acre, or $82,000,000. Although the City threatened to appeal, the City ultimately realized that the jury's decision was fair and that it did not have a viable appeal.

Municipality May Attempt to Use Planning Power to Acquire Parking

dawn@zeitlinlaw.com (Dawn Zeitlin) — Wed, 02 Jul 2008 13:12:06 -0700

A developer purchased 17 acres of prime Scottsdale land from the Arizona State Land Department at public auction, where the developer was the sole bidder. The City of Scottsdale, which has publicly declared its need for a portion of the land for additional parking for Pinnacle Peak Park, did not bid on the land. The City Manager has announced the City's intention of using its planning powers to "acquire" the additional parking from the developer.

When a municipality starts talking about using its "planning power" to acquire property watch-out. That is really a euphemism for an unconstitutional taking of property without just compensation. Often, a City will try to exact property from developer's during the zoning process, knowing that the developer may need the cooperation of the city during the land entitlement process. A city will use this to its advantage and require a developer to give up land for reasons that may be completely unrelated to the zoning and use of the property. The only way that such unconstitutional activity can be stopped is for the developer to stand up to the city and refuse to dedicate the land. Even if that means having to fight the city in court.

The ability to use planning powers to acquire private property is limited. Announcing its intention prior to a planning request and on the eve of a private purchase of the property may subject a municipality's actions to closer scrutiny if the property owner challenges the municipality's actions

Creative Land Acquisition by Municipalities Not Always Successful

dale@zeitlinlaw.com (Dale Zeitlin) — Wed, 02 Jul 2008 12:18:34 -0700

Both the Toll Brothers condemnation case and another case handled by Dale Zeitlin, City of Scottsdale v. Hualapai L.L.C., which involves the land on which the City of Scottsdale has built a water treatment plant near Pima Road and Hualapai Drive, continue to impact land acquisition decisions by the City of Scottsdale.

For more see Arizona Republic column

Budgeting constraints may limit the ability of a municipality to accomplish its long term goals in a direct manner, but federal and state Constitutional protections mandate that municipal goals not be achieved at the expense of individual property rights and Constitutional procedures

Zeitlin Prevails in Appellate Case Curbing Valuation Abuse

dawn@zeitlinlaw.com (Dawn Zeitlin) — Mon, 17 Mar 2008 18:01:13 -0700

The Arizona Court of Appeals ruled on March 7, 2008, that the Arizona statute setting the date of valuation in condemnation cases filed in Arizona is unconstitutional. Dale Zeitlin successfully argued that where the City of Scottsdale filed a condemnation case in January 2003, but did not take possession of the condemned property until May 2004, the date of valuation must be the date the City took possession. Dale Zeitlin argued successfully that the Arizona statute that states the date of valuation is the date the case is filed, violates the United States Constitution.

For more, read East Valley Tribune - "Scottsdale Preserve Condemnation"

City considers appeal of condemnation verdict

dale@zeitlinlaw.com (Dale Zeitlin) — Thu, 07 Feb 2008 08:52:54 -0700

The City of Scottsdale is considering whether to appeal the Toll Brothers condemnation verdict of nearly $82,000,000. The City needs the property for its preserve project and has the money to pay the judgment.

It is likely that any appeal will cause Toll to file a cross-appeal, which could have the effect of increasing the City's exposure to $120,000,000.

If the City uses good management practices, it will simply pay the judgment and not appeal.

States Stop Condemnation Abuse

dale@zeitlinlaw.com (Dale Zeitlin) — Thu, 31 Jan 2008 11:39:27 -0700

The Wall Street Journal reported that States' legislation that has curtailed the use of condemnation for urban renewal projects has not had any negative economic effect.

This is not surprising to Dale Zeitlin, who represents property owners in condemnation cases, because urban renewal has been used as a tool by developers and cities to force owners to sell their properties for less than fair market value.

DC Court orders Secret Agreement Produced

dale@zeitlinlaw.com (Dale Zeitlin) — Thu, 31 Jan 2008 11:15:40 -0700

The DC court ordered that the District of Columbia produce a secret agreement , known as a "Mary Carter Agreement" between the District and one of the property owners in a condemnation of properties for the new baseball stadium in downtown District of Columbia.

Dale Zeitlin, who represents one of the largest properties that is being condemned, asked the court to produce the agreement because it could have the effect of prejudicing his client's right to a fair trial on the issue of just compensation.

The court did the right thing and ordered the production of the secret agreement.

Condemnation Award Largest in Arizona

dale@zeitlinlaw.com (Dale Zeitlin) — Thu, 31 Jan 2008 11:11:26 -0700

The jury, in the condemnation case between the City of Scottsdale and Toll Brothers, awarded Toll nearly $82,000,000 for its property, which the City had taken in 2004. This is the largest jury verdict in Arizona history in a condemnation case.

The jury deliberated for two days before reaching its verdict.

The jury reached a fair and reasonable result and I applaud the jury for doing so.

Jury Rejects Project Enhancement

dale@zeitlinlaw.com (Dale Zeitlin) — Thu, 31 Jan 2008 10:59:10 -0700

The Jury, in the condemnation case, between the City of Scottsdale and Toll Brothers, rejected the City's attempt to devalue Toll's property. The City argued that Toll's property, which was taken for a natural preserve, should have a lower value because the City itself had caused the property to be more valuable because it was next to the preserve.

The City ignored the fact that the desert and mountains were not created by the City. Oops!

The jury saw through the City's argument. The jury system works again.

Property in the Path of a Road Alignment is Not Enough - Must be Within Boundaries of Condemning Authority

dale@zeitlinlaw.com (Dale Zeitlin) — Thu, 24 Jan 2008 17:14:55 -0700

On January 8, 2008, Maricopa County Superior Court ruled that the Town of Gilbert could not condemn private property that was within a Maricopa County island to expand a town road. Gilbert needs 80 feet of the property owner's yard, 40 feet of which is in the county island and 40 feet of which is in the Town of Gilbert. Gilbert condemned the entire 80 feet. The property owner's land is in the path of the planned road and is adjacent to land in the Town of Gilbert that Gilbert purchased for a road widening project. The court ruled that the 40 feet in the county island is outside Gilbert's reach. Gilbert reportedly went to work immediately to get the county's cooperation fo a condemnation of the land in the county island.

For more, read East Valley Tribune - "Court Rejects Gilbert..."

For the court to have allowed the town to condemn county property would have been to condone an constitutionally prohibited taking of a municipality's property by another governmental entity.

Delegation of Power to Condemn is Limited

dale@zeitlinlaw.com (Dale Zeitlin) — Thu, 24 Jan 2008 16:13:30 -0700

Although a governmental authority with power to condemn may not directly assign its power to condemn to a private developer, the power to condemn may be indirectly passed to the developer. In a recent case in Hawaii, the trial court struck down a county's agreement to allow a developer to exercise almost complete control over eminent domain proceedings. In striking down the county's attempts to take private property, the court found that if a government attempts to delegate its power of eminent domain to a private party under an agreement allowing the private party to control what property is taken, pays all the expenses, and is given the right to demand institution of eminent domain proceedings against property owners, then the delegation of the governmental power is illegal and void.

For more, read Inversecondemnation.com - "Court Strikes Delegation..."The court saw through what was a thinly veiled outright delegation of the county's power to condemn to the developer. While property is often condemned in connection with private projects, the power to condemn property for public use and necessity is a power granted to governmental entities and courts require that the governmental entities retain some real and substantive control over the process.