Property Rights Foundation of America®

from the Sixth Annual New York State Conference on Private Property Rights
November 16, 2002, Albany, New York

Eminent Domain — Current Status, Future Directions
James E. Morgan

Thank you, Carol. I am going to ask for your indulgence for a moment and I am going to do something that I rarely do. I am going to read you the introduction, which is the first section, Section 101, of the eminent domain procedure law. I want you to know what the stated purpose of this law is, and I'll explain to your how it is applied and misapplied and not applied selectively.

"It is the purpose of this law to provide the exclusive procedure by which property shall be acquired by exercise of the power of eminent domain in New York State, to assure that just compensation shall be paid to those persons whose property rights are acquired by the exercise of the power of eminent domain, to establish opportunity for public participation in the planning of public projects necessitating the exercise of eminent domain, to give due regard to the need to acquire property for public use as well as the legitimate interest of private property owners, local communities, the quality of the environment, and to that end to promote, facilitate, recognition of careful consideration of those interests to encourage settlement of claims for just compensation, expedite payments to property owners, and to establish rules to reduce litigation and to assure equal treatment to all property owners."

Who could disagree with those words? The reality of it is that in the State of New York there is a fairly just procedure set forth in this volume for the State to acquire land for public purpose. The key to that has been, what is the definition of public purpose? That obviously is defined by the powers that be. Now, this statute, as in other states, has been upheld on the constitutional challenges over the years in numerous states and federal courts. The most recent cases had to do with the meaning of "public purpose." As many of you may be aware of — it is more true in urban areas but we have heard references to Florida today, and it is been going on in the state of New York, which I will get to in a couple of minutes — where a public purpose is defined by environmentalists or whomever, then they do their best to insure that this statute, or its equivalent where the property resides, is not applied. This statute provides that each side gets appraisals, it provides for judicial process where those appraisals can be reviewed, a finding is made, a court decision rendered, and, in theory, just compensation be paid by the public entity to the property owner.

What has happened is that this has been used, for example, in numerous states including this state, for urban renewal process where what they term "blighted" neighborhoods can be taken by condemnation process and then sort of tossed off into quasi-public corporation, or, in some cases, strictly private organizations, for development. As I said, initially these statutes were applied with great vigor starting in the sixties and seventies, and they were upheld against most challenges.

Today we are seeing, not a retreat from the broad-based power, but the courts have been showing more willingness to define what is a public purpose. When you find that the government is basically taking property from some private individuals and giving it to private corporations for development for what are at best quasi public purposes, the courts have in certain instances stepped in and said, no, that you must apply proper eminent domain procedure, this is not a public purpose, and blocked the condemnation.
But again you are fighting city hall. Where the courts are looking at it today is on very narrow grounds, looking to see where the power or procedures have been imperfectly applied.

What I meant was that this statute is more observed in the breach than in what it actually is. For example, we represent the Civil Property Rights Association, which consists of several hundred property owners on Long Island. This property was basically taken from them in 1993 through the legislature's enactment of the Pine Barrens Act. Basically this places 50,000 acres of privately owned property in what's called the "core area," and that core area is subject to the control of the Pine Barrens Commission, basically prohibiting all forms of development. In theory, agriculture is allowed, but that is something we are testing in court at this moment. The statute says agriculture is a permitted use; however, you have to get a hardship amendment, a hardship permit granted to conduct agriculture in this same area. And that process, of course, is set forth in that. We took over the case in 2000. The case is going to be argued again in the Second Circuit appeals court sometime; I would say within the next two to three months. We have had the case perfected for three months, and we have not had a date set for argument.

What has been the key to that case is that these people are allowed to continue to pay taxes at full assessment even though there is a privilege in the statute that allows the towns to lower the assessments. But they continue to pay taxes at full assessment value for the privilege of owning property that they can literally do nothing with. The groups have simply cut off the transportation to the property. Nature Conservancy and others have actually blocked the roads, public roads. We can prove this. It is not something that is not provable. We can prove it in court if we can ever get a court to listen.

Our clients would not have a problem per se if they had applied the eminent domain procedure law, but instead they created an unofficial system which allows part of the compensation theory which allows, you have heard it referred to before, something called TDR, transfer of development rights. This is a theory that for a certain acreage of land you will get a, usually fractional, development right that is sent to what is called a receiving area where you get supposedly beneficial zoning treatment by the local community. I am summarizing a very elaborate process, but these TDRs are purchased by the Pine Barrens Commission and resold at public auction to developers. They've been purchased at an average of between $5,000 and $7,000 for a full TDR from private landowners. They have no where else go with their property. They can't sell it. They hold the property and continue to pay taxes. They sell this for $5,000 to $7,000 and it is resold at public auction for values exceeding $45,000.

We have asked several times where does the money go, the difference between what the property owner received and what the government entity received? In theory, it goes back into the TDR program. If you look at the balance sheets, it disappears. It's in somebody's account. I hope it is a public entity, but I don't know. All our clients would ask for would be the application of the eminent domain procedures law, which would allow them to litigate the value of the land. Instead, they get this artificial program, TDRs. But you cannot sell your own TDR to a private individual. You can only sell it to the Pine Barrens Commission. It's sort of a captive audience; you see, they can pay precisely what they value it at. And they have paid that. They have been putting experts from Florida, who have testified at the Congressional level previously to this program being established, who said that the TDR program does not really work because it is not just and fair compensation. This is the same expert that helped develop the valuation for the TDRs that people have been subject to.

The eminent domain procedures law was enacted to protect the interests of the private property owner. I've read you the purpose. That purpose is backed up by the Constitution of the United States. No person should be deprived of property without due process of law and fair compensation. But, in reality, there's alliance that has been going on between such groups — again, this is a common theme that you have heard all day — between The Nature Conservancy, land trusts , other not-for-profits.

The State of New York has raised this to a very interesting thing that we are working on developing a challenge to. They partnered themselves with these not-for- profits to escape or circumvent the protections of this very statute. The reason the Pine Barrens Commission with the people on Long Island did not put in for eminent domain is because they were afraid they would have to pay fair market value, which is what they should pay.

You know, we stand in court and represent these individuals, who, some are, well to do. Most are, I would say the average age of our clients runs close to 80. One family has owned the property for 105 years. Most of them have either inherited it or carried it forward for generations. The idea is an investment or a place for their children to build or something like this. All we hear from the state attorney general's office is, you are endangering the environment, you represent land speculators, and all this, and you are trying to pollute the land. The people can do nothing with the land but pay taxes on it. That's gratefully accepted, of course.

Again, there is a statute on the books that is designed to provide a fair means, but the government's excuse for avoiding the use of this statute is, it costs too much money. So they have devised new and different means of compensation including the TDR program I just described to you, where you have to sell to a government entity. The developers would pay the private owners probably the same price that they bid at the public auction, because what the Pine Barrens Commission has done over the last eight years is taken basically all the remaining private property except for about 3,200 acres that is still in private hands, and 90 percent of that is owned by our clients. They have taken that and it has gone either into not-for-profits or the State or the county or the Pine Barrens Commission itself. These people continue to pay taxes, and any number of them have told me they would rather pay taxes until they are gone, than to give up. All they seek is fair and just compensation, and this statute was enacted to provide that. But in no way, shape or form has the State let it be applied.

There is actually a clause in the Pine Barrens Commission statute that allows for use of eminent domain if it can be shown that the property is taken. Of course, there is an elaborate procedure you are supposed to go through for that. This property has already been taken. This alliance between the not-for-profits and the State, allowing them to circumvent the application of this statute, benefits the government. It benefits the not-for-profit, because, we can prove, for example, in large Adirondack purchases the State has participated in from such groups as the Champion properties and the Diamond properties and several others — I mean Champion property which consisted of the purchase of a conservation easement on 110,000 acres plus another outright 29,000-acre purchase in fee where the state paid $29 million where the private outfit the day before had paid the Champion company $25 million approximately. There is approximately 20 percent markup for one day's stewardship. These are the same groups that are given the ability to enforce conservation easements, if you read the statutes.

There is something very wrong with the system. Eminent domain procedures law may not be a perfect statute. It has been applied historically through State acquisitions for, say, such things as the New York State Freeway, the highway system, and other things like this. If properly applied, the people may not feel they have gotten full compensation, but they have gotten at least the compensation that in theory a neutral body, a judge in a court of law, has given them. However, it is not really applied except in very limited circumstances, and the future of where eminent domain procedure law goes is going to depend on new court challenges in the future. Thank you.


Carol LaGrasse: Thank you very much. What an interesting final point that the future depends upon what we do!

Questions and Answers (Excerpts)

Ms. LaGrasse: In representing property owners in the Long Island Pine Barrens, Jim Morgan has re-invigorated an old case by a miracle that you would never think a judge would have allowed back in court, because it sat so long on account of the illness of the lead attorney. There are two more cases on behalf of the Long Island Pine Barrens owners that have had no compensation although their properties is zoned for zero use and TDRs have been offered. He has also been litigating for the people in the Town of Hardenburgh because of the unequal treatment of similarly situated landowners. They have only 198 people, but they pay so much taxes. Do you know how much they pay per landowner? A phenomenal amount of property taxes even though they only send a few students to school.

Mr. Morgan: There are two students in one district and for that district it is $835,000 in school taxes.

Ms. LaGrasse: Can you imagine that! So this is the kind of litigation he has been willing to take on.

Mr. Morgan: Three students in the school districts.

Ms. LaGrasse: And he has taken Joe Hermes' case. Joe is back there. Canada lake, the same lake where the former chairman of the APA has his property and a couple other noteworthy people in the environmental movement.

Thank you very much for speaking to us today.

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