Attorney General: Kevin J. Rasch, Esq., Legal Counsel, Formal Opinion 2006-005, Attorney General State of Connecticut

Attorney General's Opinion

Attorney General, Richard Blumenthal

March 8, 2006

Kevin J. Rasch
Legal Counsel
Executive Chambers
State Capitol
Hartford, CT 06106

Dear Mr. Rasch:

You have requested an opinion concerning a proposed resolution by the City of New London (“City”) to deal with the issue of the continuing possession of certain properties by their former owners after the properties were taken by eminent domain.  These properties are located in the section of the City known as the Fort Trumbull peninsula.  As you note in your letter, “the Department of Economic and Community Development (“DECD”) has engaged the services of a mediator to meet with and discuss a resolution of the Fort Trumbull situation following the issuance of the United States Supreme Court decision in Kelo v. City of New London.  Following discussions with the mediator, the City now seeks to utilize certain unexpended funds that were provided to the City’s designee, the New London Development Corporation (“NLDC”), under an Assistance Agreement (“Agreement”) with the DECD, to finally resolve this matter.

Specifically, the City wishes to use approximately $1.4 Million that remains unexpended under the Agreement as a source for payments to reach final settlements with the six former property owners who continue to occupy their former parcels, title to which vested in the City as a result of takings that were initiated in November, 2000.  The authority of the City to take the property by eminent domain has been the subject of lengthy litigation.  See Kelo v. City of New London, ___U.S. ___, 125 S. Ct. 2655 (2005). 

We have reviewed the City’s proposal that you included with your letter, and we have also discussed the details of the issues with the DECD. We find no legal impediment in the Agreement or its authorizing legislation to using these funds for acquisition costs of the property as part of the proposed settlement.  Whether such an approach is advisable as a matter of policy and economics is a decision to be made by DECD, the City and the property owners.

The Agreement between DECD and the NLDC was executed in June, 2001.  The Agreement was permitted under 2000 Conn. Pub. Act No. 00-167, “An Act Concerning The Bonds of the State For Capital Improvements And Other Purposes” (hereinafter the “Act”).  Section 53(d)(3) of the Act authorizes the State Bond Commission to issue bonds for DECD’s Fort Trumbull project as follows:

(d)  For the Department of Economic and Community Development: . . .  (3)  Grants-in-aid to New London for economic development and for the additional costs of improvements to the Fort Trumbull peninsula, not exceeding $50,000,000, provided $30,000,000 of said authorization shall be effective July 1, 2000, and $20,000,000 of said authorization shall be effective July 1, 2001.

 

The Agreement between DECD and NLDC contains paragraph 2.8 (B), which provides:

 

(B)  Budget.  The Project Financing Plan and Budget most recently approved by the Commissioner in connection with the Commissioner’s Proposal, shall constitute the Master Budget for the Project.  Upon each approval of an allocation of the Funding by the Bond Commission, Applicant shall submit to State for State’s review and approval, a proposed amendment to the Master Budget, in the form of an individual finance plan and budget for the specific allocation of the Funding, setting forth the sources and uses of the allocation of the Funding approved by the Bond Commission and any other amounts required to be provided by Applicant for the Project.  If State approves the proposed amendment to the Budget, the Budget shall be so amended in accordance with the terms thereof, and the Funding shall be disbursed to Applicant by State in accordance with the terms of this Agreement and the amended Budget.  For the purposes hereof, State shall not be obligated to advance to Applicant any allocation of the Funding unless:  (i) the Bond Commission shall have approved such allocation, and (ii) Applicant shall have submitted and State shall have approved an individual budget with respect to an allocation of the Funding (hereinafter referred to as an “Individual Budget”, and severally as the “Individual Budgets”).  Upon receipt and approval of an Individual Budget by the State, the Budget shall be deemed to have been amended to include the approved individual Budget and allocation of Funding which is the subject matter thereof.  The Budget may be further amended by request of the Applicant if such request is approved in writing by the Commissioner.  Approval by the Commissioner of any Individual Budget shall not constitute or imply a revision of the amount of the Funding.

 

(Emphasis added.)

 

 NLDC submitted a proposed amendment to the Master Budget for the project after the Bond Commission approved each allocation under § 53(d)(3) of the Act.  DECD has approved each amendment to the Master Budget, and by the terms of the Agreement such amendments became incorporated into the Master Budget.  The Master Budget, as amended, contains a line item for “CAPITAL COSTS – Land/Building Acquisition.” DECD has informed us that the Master Budget, as amended, would include the settlement payments contemplated by the City.  Should DECD determine that a further revision of the Master Budget is required, DECD may request such a revision from NLDC pursuant to paragraph 2.8(B) of the Agreement, to expressly provide for the “possession” payments the City proposes.

We note that the State has already invested considerable funds in this project.  Without possession of the real property, the project cannot go forward on those parcels. It seems apparent that possession of these parcels will not be turned over to the City without either the institution of suit to achieve possession or a settlement of the dispute among all parties. There will be a potential cost in both time and money to litigate the issue of possession and bring it to finality. A payment to each former owner in return for complete and absolute possession of the parcels by the City, and the exchange of general releases between the City and each former owner for any and all existing and potential claims to the subject real property each may have, as a cost of settling such potential litigation, can be considered a cost of acquisition of the property. As such, this payment would fall within the terms of § 53(d)(3) of the Act as an expenditure for “economic development” or a “cost of improvement to the Fort Trumbull peninsula.” 

You have also asked about the City’s proposal to forgive use and occupancy charges as part of this settlement.  This is a question of municipal law and the City’s authority to offer such forgiveness that should be addressed by the City’s corporation counsel.  This office does not issue opinions regarding areas of the law that are within the jurisdiction of municipal governments, because this office is not statutorily authorized to provide legal advice on such subjects.1

In summary, there is legal authority under state law and the Agreement for the proposed settlement to consider the planned payments “economic development” costs or “costs of improvements to the Fort Trumbull peninsula” within the meaning of the Act.  The decision whether to enter into such a settlement is not a legal one, but rather a policy and economic one for DECD, the City and the property owners to make.


I trust this answers your questions.

Very truly yours,


RICHARD BLUMENTHAL
ATTORNEY GENERAL

William J. Prensky
Assistant Attorney Generel

1According to Conn. Gen. Stat. §  7-148(c)(3), the City may:  "Take or acquire by gift, purchase, grant, including any grant from the United States or the state, bequest or devise and hold, condemn, lease, sell manage, transfer, release and convey such real and personal property or interest  therein absolutely or in trust as the purposes of the municipality or any public use or purpose, including that of education, art, ornament, health, charity or amusement, cemeteries, parks or gardens, or the erection or maintenance of statues, monuments, buildings or other structures, or the encouragement of private commercial development, require,  Any lease or real or personal property or any interest therein, either as lessee or lessor, may be for such term or any extensions thereof and upon such other terms and conditions as have been approved by the municipality, including without limitation the power to bind itself to appropriate funds a necessary to meet rent and other obligations as provided in any such lease."


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