Kelo.  June 23 will mark the fourth anniversary of the United States Supreme Court decision in Kelo v. City of New London.  The Court held that eminent domain could be used by a municipality for the purpose of private economic development.  The decision has resulted in a public outcry so loud and intense that 44 states have enacted legislation and constitutional amendments to restrict and in some instances prohibit the taking of private property for private economic development.

Without a doubt the Kelo decision has been at the center of more debate than any other case decided in this century and for many years before.  What makes it different from other controversial decisions is the fact that the decision is universally disliked.  There is, at best, only a small portion of the general public who agree that government should be able to take homes and other properties and turn them over to private developers for their use and profit.

The power of government to determine that private property is underutilized and therefore subject to seizure by eminent domain has never been under so much attack as it has been in the last four years.  This newsletter will be devoted to understanding the changes that have occurred since June, 2005 in Connecticut and providing a list of other changes to Connecticut’s statutes that should be given serious consideration by our state legislature.

Statutory Changes.  In 2006 the legislature enacted Public Act No. 06-187 which provided for the establishment of the Office of Ombudsman for Property Rights.  At the time Connecticut was only the second state, Utah being the first, with such an office.  The law gave the Ombudsman eight separately defined responsibilities including providing mediation services and recommending changes to the general statutes related to eminent domain powers.  The Ombudsman was appointed by Governor Rell and confirmed by the House of Representatives in May 2007.  For the last two years the Ombudsman has provided assistance to state and municipal agencies having the power of eminent domain and property owners and their tenants including small businesses who have had some or all of their property taken.  Hundreds of owners in more than 76 municipalities have received assistance, including mediation.  Many state and municipal agencies have also sought and received assistance from the Ombudsman.

In 2007 the legislature took up the task of amending the existing statutes, particularly Chapters 130, 132 and 588l which deal with municipal redevelopment and economic development projects.  The major changes to the economic development statutes are:  prohibiting as the primary purpose of a taking the increase of local tax revenue; requiring a notice of public hearing mailed to all owners of record whose property is located within 100 feet of real property that may be acquired by eminent domain; requiring the approval by a vote of at least two-thirds of the members of the legislative body of the municipality including a legislative determination that public benefits outweigh any private benefits, that the current use of the real property cannot be feasibly integrated into the overall development plan and that the taking is reasonably necessary to successfully achieve the objectives of the development plan; and the right of the owner or the owner’s heirs to repurchase the land from the agency if the municipality does not use the real property for the intended purpose at the price paid by the agency for the land or the current appraised fair market value, whichever is lower.

Because the redevelopment statutes are premised on protecting the community from the social ills resulting from blighted properties or neighborhoods, the legislature added a definition for the terms “deteriorated” or “deteriorating” which means an area within which at least twenty percent of the buildings contain one or more building deficiencies.  What follows in the definition is a recitation of 13 criteria for determining whether an area or property is blighted.  Many are extremely vague such as “defects that warrant clearance” or “extensive minor defects.”  Thus properties or areas which are marginal can be designated blighted more easily and be subject to government’s power of eminent domain.  Redevelopment usually has an economic development component as a part of the rebuilding of an area, so, to the extent of economic development activity, redevelopment statutes should be subject to the same requirements as economic and business development statutes. 

The redevelopment statutes still do not provide for notice to owners of record by mail of the public hearing nor do they require every redevelopment agency to have a website and post all notices of hearings and meetings thereon.

An important addition to the statutes is the requirement of two independent appraisals, both paid for by the municipality.  A copy is to be delivered by the appraiser to the owner of record.  Municipalities engaging in projects planned and approved under Chapters 132 and 588l Economic and Business Development that use eminent domain must offer to pay the owner of record of real property 125% of the average of the two appraisals.  If property is acquired by eminent domain under Chapter 130 Redevelopment, then the agency offers the property owner the average of the two appraisals.  Going forward municipalities are far more likely to plan projects using Chapter 130 to avoid paying the additional 25%.

The redevelopment statutes place a time limit of ten years from the date the first property is taken by eminent domain for the agency to finish its acquisition phase.  This is not ironclad because an amendment to an approved plan that satisfies all the statutory requirements including approval of the legislative body is likely to be interpreted as providing for a new ten year period to acquire properties by eminent domain.  In fact, another statute requires the legislative body to review and reapprove the plan at least once every ten years in order for the plan to remain in effect.  Approval of a redevelopment plan needs only the vote of a simple majority of the legislative body.

What changes are needed?  The biggest difference between the majority and minority opinions in the Connecticut Supreme Court’s Kelo decision, also decided in favor of New London, concerns which party carries the burden of proof.  The majority requires the property owner to prove by a high level of proof that the intended use is not a public use and that the taking of the owner’s property is not necessary to implement the approved plan or project.  The courts give great deference to the opinion of the legislature as set out in the general statutes and to the administrators whose responsibility it is to implement the approved plan or project.  Therefore, the burden of proving public purpose, necessity, probability of success, integration and so many other elements of an eminent domain case falls on the owner and not the condemning public agency.  The same is true with the level of proof required.  This should be changed.  A public agency should have to prove all of the elements set forth above by clear and convincing evidence.  After all, the agency is in possession of the information on which the plan has been designed and approved and understands better than the property owner why the acquisition is needed to implement the plan.

Although a definition now exists for the words “deteriorating” or “deteriorated,” see Section 8-125(7), the word “blight” is not defined nor is there any process that allows for a challenge to the designation of a property or neighborhood as blighted except through an action seeking an injunction contesting a taking.  Attached is an example of an amendment to Section 8-127 that may serve as a model for providing property owners this important right.

Now that the general statutes require the legislative body of a municipality to approve not only the plan or project but also the acquisition of every property taken by eminent domain pursuant to an approved plan, it makes much greater sense to have disagreements come to light early in the administrative process and for the municipal legislative body to consider the merits of the owners’ concerns and disagreements before millions of dollars is spent on acquisition and litigation.

As indicated previously, economic development projects require a vote of two-thirds of the legislative body for approval but redevelopment projects require only a simple majority.  The legislature should consider making the statutes read alike and require all approvals by a vote of two-thirds of the legislative body.

It should be noted that the changes to provisions of Chapter 130 affect more than redevelopment in that Section 48-6 When Municipal Corporations May Take Land and Section 48-12 Procedure for Condemning Land require the use of eminent domain procedures outlined in Chapter 130, Redevelopment, Section 8-128 through Section 8-133.

Courts.  Because the concurring opinion of United States Supreme Court Justice Kennedy emphasized that a taking for the benefit of a particular private party with only incidental or pretextual public benefits is still forbidden under the United States Constitution, future litigants are apt to use this statement as the basis to contest takings of private property pursuant to redevelopment and economic development statutes.  Our statutes require the legislative body to determine that public benefits outweigh private benefits but they don’t provide municipal officials with a method to measure how much of a plan must or should be devoted to traditional public uses or what constitutes incidental and substantial public benefits.  The majority opinions of both Supreme Court decisions provide some answers in that both mention that New London’s plan incorporated several traditional public uses, a museum, a park and other improvements that could be used by or for the benefit of the general public.  Traditional public uses would appear to be a necessary part of any plan approved post-Kelo under Connecticut’s new statutory scheme.  Until another economic development plan involving eminent domain is reviewed by Connecticut’s Supreme Court one can’t be sure how the court will interpret the law.

Cases.  Since the Kelo decision, Connecticut’s Appellate and Supreme Courts have not decided any cases based on the issues raised in the Kelo decision.  The closest was a case in which the Supreme Court upheld the eviction of Ocean State Job Lots Stores from the downtown Bristol Centre Mall which the city had acquired under the threat of eminent domain.  The use of the mall property has not yet been determined.  The court stated that the term “public use defies absolute definition” and cited Kelo for the proposition that “instead of attempting judicially to define a public as distinguished from a private purpose, have each case be determined on its own peculiar circumstances.”  As of September, 2007, there appears to be no change in the court’s interpretation of what constitutes a public use pursuant to Connecticut’s eminent domain statutes.

In Superior Court, Bridgeport successfully defended against a developer’s claim of hundreds of millions of dollars of damages.  The contractual relationship between the city and developer terminated 10 years ago.  The developer indicated he would appeal.  Attorneys’ fees for both sides are in the millions.  The development is Steel Point, approximately 52 undeveloped acres.  A new developer has been chosen.  Due to the state of the economy, the project is on hold.  The original Steel Point plan was approved in 1970 and has been amended at least eight times.

Steel Point was the subject of other litigation between the city and Pequonnock Yacht Club, Inc.  In that case, decided in 2002, our Supreme Court ordered Bridgeport to reconvey the marina property to the Club because the city had provided no specific reasons for the taking other than to enhance desirability of the area to private investors.  In 2007, the city purchased the property from the Club.  Part of the reason the Club agreed to sell, according to its counsel, was the Kelo decision.

Derby’s downtown development project is stalled and the preferred developer has sued the city claiming millions of dollars.  In addition a property owner has sued asking the court to order Derby to take his property.  This suit raises issues involving inverse condemnation, pre-condemnation damages, condemnation blight and relocation assistance.  Neither case has been tried.

Branford’s taking of property in 2004 to “protect” the public from possible environmental problems has led to two separate trials and judgments against Branford of more than 20 million dollars.  Branford appealed and the Supreme Court heard arguments in late May.  The parties’ briefs can be viewed on the Supreme Court’s website http://blog.ctbriefsonline.com/?m=200903.  During the argument, counsel for Branford argued that the owner’s claim that the taking was of a pretextual nature based on a fabricated set of facts was incorrect and not even relevant to this case.  Counsel said a claim of pretextual benefits only pertains to development cases which this case is not.  The Court’s decision won’t be available until later this year.

East Haddam’s taking of over 200 acres of land for the building of a school was upheld by the Supreme Court saving the taxpayers of East Haddam from having to bear the cost of reconveying and then reacquiring the property, this time with a brand new school located thereon.  The majority of cases decided were contests over the amount of compensation.

Conclusion.  Much has happened in Connecticut and throughout the country as a reaction to the Kelo decision.  Most of what has occurred has provided more protection to property owners.  In Connecticut this has been done without materially restricting or eliminating the ability for municipalities to engage in redevelopment or economic development projects. 

In that Connecticut’s private property owners and tenants still face loss of property, valuable business locations, income and what is to many, “my home,” the legislature should consider another round of statutory changes in 2010 which would guarantee greater rights to these citizens and impose greater responsibilities on government agencies to justify development projects that use other people’s property.