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Eminent Domain and Just Compensation

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Eminent Domain and Just Compensation Law Something for Nothing? Eminent Domain and Just Compensation BY JAMES CROWLEY ecently, the Appeals Court rendered by eminent domain. The partnership, the plaintiff’s expert calculated that the an eminent domain decision however, was entitled to just compensa- discounted net income from tie-ins over entitled North Adams Apartments tion and the order of taking included a the next five years would be $235,000. RLimited Partnership v. City of North pro tanto award of $10,000. Dissatisfied Not surprisingly, the city’s expert Adams, 78 Mass. App. Ct. 602 (2011). by the amount, the partnership filed a disagreed with the plaintiff’s expert. In In this case, a limited partnership owned petition in 2007 in Superior Court seeking his experience, the city’s expert found two parcels in North Adams. It planned additional compensation for the taking. that developers are very willing to build to build an apartment complex on one a connecting sewer system and then deed parcel, and to construct a subdivision it to the municipality in order to avoid consisting of single-family houses on the maintenance and upkeep of the system. other parcel. “ For this reason, it was his opinion that the The limited partnership, however, had After hearing all the highest and best use of the sewer system no access to the city’s sewer system since evidence, the trial judge would be to deed it to the city of North the nearest sewer line ended about 1,800 ruled that the fair market Adams for no consideration. feet south of the partnership’s property. After hearing all the evidence, the A private septic system was apparently value of the sewer trial judge ruled that the fair market value ruled out due to cost. Then, in 1991, the system was zero. of the sewer system was zero. Since partnership obtained an easement from it was standard practice for developers the city to construct a sewer system under to convey developer-built sewers to a a road that would link the partnership’s municipality for nominal consideration, development to the city’s sewer system. the judge ruled that the sewer system was In 1992, the partnership built a pumping At a jury-waived” trial in 2009, the really a liability with no value. station and a sewer line extension at a sole issue for the judge was the value of The judge rejected plaintiff’s depre- cost of $137,000. Shortly thereafter, an the sewer system. Expert witnesses on ciated-reproduction cost methodology apartment complex was built and the both sides offered testimony. Plaintiff’s since the $271,000 amount derived, by residential subdivision was being prepared expert testified that the sewer system was common sense, did not reflect the fair for construction. a special-use property, which means it market value of the sewer system. The In December 2005, the North Adams seldom trades on the open market and judge also rejected the plaintiff’s income- City Council voted to take the easement is therefore not suited to valuation by capitalization method, with its $235,000 and sewer system by eminent domain. the comparable sales method. Instead, value, since no neighboring parcel had A study commissioned by the city had plaintiff’s expert relied on the depreci- tied into the system over the fourteen- determined that it would cost the city ated reproduction cost method, which is year period prior to the December 2005 about $200,000 to build a sewer system defined as the current cost of reproducing eminent domain taking. In the judge’s parallel to the partnership’s sewer the sewer system less depreciation from view, the $20,000 tie-in figure was also system. For this reason, the city opted deterioration and obsolescence. Under unrealistic and exorbitant. to take the partnership’s sewer system this method, plaintiff’s expert valued the The plaintiff then appealed to the property at $271,000. Appeals Court. Plaintiff argued that the James Crowley is an attorney with the In a secondary approach, plaintiff’s trial court judge erred as a matter of law Division of Local Services’ Bureau of expert used the income-capitalization in awarding nothing for the taking. In Municipal Finance Law. method. On the theory that the neigh- its decision, the Appeals Court stated This article is reprinted, with permis- boring property owners would abandon that a property owner is entitled to just sion, from the October 20, 2011, issue their failing septic systems and would be compensation for what the owner has of City and Town, a publication of the willing to tie into the municipal sewer lost. Just compensation is never what Division of Local Services. system at a cost of $20,000 per property, the municipality has gained. For this rea- 32 MUNICIPAL ADVOCATE Vol. 26, No. 3 son, the Appeals Court did not take into not all takings result in an obligation to system, but the plaintiff was no longer consideration that the city saved $200,000 pay compensation. responsible for the upkeep of the system. by taking plaintiff’s sewer system instead The Appeals Court agreed with the In addition, the plaintiff in the future of building a parallel system. The Appeals trial judge that the property owner suffered could derive income from the sale of Court held that damages are measured by no monetary loss from the eminent lots in the subdivision, which now the fair market value of the property at domain taking. The plaintiff built the had municipal sewer. Consequently, the the time of the taking. For this reason, the sewer system to permit construction Appeals Court, in agreement with the Appeals Court had to determine whether of apartments, and offset the sewer trial court, held that the plaintiff suffered the plaintiff suffered any monetary construction costs with rental income no monetary loss and was not entitled loss when the city took the property by from the apartments. After the eminent to compensation. Further appellate eminent domain. The Appeals Court was domain taking, the plaintiff’s property review was denied by the Supreme also aware from prior court decisions that continued to be tied into the sewer Judicial Court. !"#$%&'()$%(*++(,$-&.(&/,$01$$2"!!! 3334-567894:&; <!=4>?"4?@22 !"#$%&'()%*+(,-%.&*/(0#"1(,"&,.2*(*"(",,324&,5 MUNICIPAL ADVOCATE Vol. 26, No. 3 33 .
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