Real Estate Acquisition for Public Projects What Municipal Attorneys Should Know About Eminent Domain
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Real Estate Acquisition for Public Projects What Municipal Attorneys Should Know about Eminent Domain Joseph J. Rolling Michelle E. Martin von Briesen & Roper, s.c. Axley Brynelson, LLP 10 E. Doty Street, Suite 900 N20 W22961 Watertown Road Madison, Wisconsin 53703 Waukesha, Wisconsin 53186 (608) 661-3974 (262) 409-2288 [email protected] [email protected] I. BACKGROUND Eminent domain is the power of the sovereign to condemn property. The power of eminent domain “appertains to every independent government. It requires no constitutional recognition; it is an attribute of sovereignty.” Mississippi & Rum River Boom Co. v. Patterson, 98 U.S. 403, 406, 25 L. Ed. 206 (1878). The United States and Wisconsin Constitutions require payment of just compensation for private property taken for public use. The Fifth Amendment to the United States Constitution provides in relevant part: “nor shall private property be taken for public use, without just compensation.” U.S. Const. amend. V. This “Takings Clause [is]…made applicable to the States through the Fourteenth Amendment.” In re Country Side Rest., Inc., 2012 WI 46, n. 10, 340 Wis. 2d 335, 814 N.W.2d 159 (citing Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 536, 125 S. Ct. 2074, 161 L. Ed. 2d 876 (2005)); see also Chicago, B. & Q.R. Co. v. City of Chicago, 166 U.S. 226, 17 S. Ct. 581, 41 L. Ed. 979 (1897). The “Takings Clause ‘does not prohibit the taking of private property, but instead places a condition on the exercise of that power.’ In other words, it ‘is designed not to limit the governmental interference with property rights per se, but rather to secure compensation in the event of otherwise proper interference amounting to a taking.’” Lingle, 544 U.S. at 536–37 (quoting First Eng. Evangelical Lutheran Church of Glendale v. Los Angeles Cty., Cal., 482 U.S. 304, 314–15, 107 S. Ct. 2378, 96 L. Ed. 2d 250 (1987)). The Wisconsin Constitution is similar, providing that, “The property of no person shall be taken for public use without just compensation therefor.” Wis. Const. art. I, § 13. Thus, a “taking”1 of private property for public use requires the award of just compensation under both the United 1 The constitutions of some states also provide for just compensation for “damages” to private property. See e.g., Minn. Const. art. I, § 13 (“Private property shall not be taken, destroyed or damaged for public use without just compensation therefor, first paid or secured.”). Wisconsin’s does not. See Wis. Const. art. I, § 13. States and Wisconsin constitutions. E-L Enterprises, Inc. v. Milwaukee Metro. Sewerage Dist., 2010 WI 58, ¶ 21, 326 Wis. 2d 82, 785 N.W.2d 409 (citations omitted). II. WHAT CAN BE ACQUIRED AND WHEN IS IT NECESSARY TO FOLLOW THE CONDEMNATION PROCESS? A. What can be “taken?” Wisconsin law recognizes a variety of rights and interests in property. Wisconsin Med. Soc'y, Inc. v. Morgan, 2010 WI 94, ¶ 42, 328 Wis. 2d 469, 787 N.W.2d 22. These include, for example: Access Rights — See e.g. Eberle v. Dane Cty. Bd. of Adjustment, 227 Wis. 2d 609, 595 N.W.2d 730 (1999); see also Lee v. State of Wisconsin Dep’t of Transp., 2015 WI App 75, 365 Wis. 2d 195, 870 N.W.2d 247 (unpublished per curiam); Cf. Hastings Realty Corp. v. Texas Co., 28 Wis. 2d 305, 137 N.W.2d 79 (1965). Leases lasting longer than 1 year — Wis. Stat. § 32.19(4m)(b); see Van Asten v. State, 214 Wis. 2d 135, 571 N.W.2d 420 (Ct. App. 1997); 61 Wis. Op. Att’y Gen. 16, 18 (1972). Air Space — Brenner v. New Richmond Reg’l Airport Comm’n, 2012 WI 98, 343 Wis. 2d 320, 816 N.W.2d 291 Freedom from Flooding — Hillcrest Golf & Country Club v. City of Altoona, 135 Wis. 2d 431, 400 N.W.2d 493 (Ct. App. 1986); Kohlbeck v. Reliance Const. Co., Inc., 2002 WI App 142, ¶ 23, 256 Wis. 2d 235, 647 N.W.2d 277; Anhalt v. Cities & Villages Mut. Ins. Co., 2001 WI App 271, ¶ 29, 249 Wis. 2d 62, 637 N.W.2d 422. Vested Rights in Professional Fund Assets — Wisconsin Med. Soc’y, Inc., 2010 WI 94, ¶ 99. B. When Required If an agency with condemnation authority desires to acquire property voluntarily, it does not have to use its condemnation powers to do so. It may acquire property voluntarily. If the agency would never acquire the property but voluntarily, then it is not required to follow the condemnation process in Wis. Stat. ch. 32. However, if there is any chance that the agency will use condemnation authority if the property is not voluntarily sold to the agency, then the agency must follow Wis. Stat. ch. 32. See below for discussion on relocation benefits even in voluntary transactions. III. PROCEDURES A. Wis. Stat. § 32.05 and Wis. Stat. § 32.06 Wisconsin Stat. ch. 32 sets out the procedure the government must follow in acquiring private property for public use. E-L Enterprises, Inc., 2010 WI 58, ¶ 36. This chapter yields a complete Rolling/Martin- 2 - and exclusive method of procedure in condemnation matters. City of Madison v. Tiedeman, 1 Wis. 2d 136, 143, 83 N.W.2d 694 (1957). Wisconsin Stat. § 32.04 states: “All acquisition of property in this state by condemnation, except as hereinafter provided, commenced after April 6, 1960 shall be accomplished in the following manner:” Wisconsin Stat. §§ 32.05 and 32.06 provide two similar mechanisms for condemnation. The key difference is that use of Wis. Stat. § 32.05 is limited, generally, to transportation facilities or facilities related to sewers, water distribution, and waste disposal. Another key difference between the two processes is the time it takes to condemn. Wisconsin Stat. § 32.05 is a “Quick Take” process. This means that the condemnation can be completed on the condemnor’s own volition with the filing of an Award of Damages and the payment of just compensation. In contrast, Wis. Stat. § 32.06 requires a condemnor to petition a court for condemnation proceedings. The court will direct the matter to a condemnation commission for hearing on the matter of just compensation. This represents additional steps, making this a slower take. B. Blight and Condemnation for Urban Renewal In any city, condemnation for urban renewal pursuant to Wis. Stat. § 66.1333 may proceed either under Wis. Stat. § 32.05 or Wis. Stat. § 32.06 at the option of the condemning authority. Wis. Stat. § 32.05. There are multiple blight elimination statutes in Wis. Stat. ch. 66. These include, for example, Wis. Stat. § 66.1333, otherwise known as the “Blight Elimination and Slum Clearance Act.” Defining “blight” Blight generally refers to properties that are “substandard” or “deteriorated” and are detrimental to public health or safety. The broader definition in the Blight Elimination and Slum Clearance Act includes areas or properties that are “predominantly open” and which “because of obsolete platting, diversity of ownership, deterioration of structures or of site improvements, or otherwise, substantially impairs or arrests the sound growth of the community.” Wis. Stat. § 66.1333(2m)(b)3.–(bm) If a municipality wishes to acquire blighted property via condemnation and then lease or convey it to a private entity (such as a developer), additional steps set forth in Wis. Stat. § 32.03(6)(c) need to be followed. IV. PROCEDURE A. Authority to Condemn 1. Enabling Ordinance Wisconsin Stat. § 32.02 addresses who may condemn. Additionally, specific statutory sections identify entities that may acquire real property. These include, for example, the following: • Wis. Stat. § 62.22 addresses the acquisition of properties by cities. Rolling/Martin- 3 - • Wis. Stat. § 61.34(3)(a) authorizes the acquisition of property by villages. • Wis. Stat. § 59.52(6) authorizes the acquisition of property by counties. 2. Prohibitions Wisconsin Stat. § 32.03 discussed when condemnation is not to be exercised. Most relevant here, property may not be acquired by condemnation to establish or extend a recreational trail; a bicycle way, as defined in s. 340.01(5s); a bicycle lane, as defined in s. 340.01(5e); or a pedestrian way, as defined in s. 346.02(8)(a). Wis. Stat. § 32.015. 3. Relocation Order/Resolution of Necessity If a condemnation is going to occur under Wis. Stat.§ 32.05, the typical first step in the condemnation process is for the condemning authority to issue a Relocation Order outlining the project for which the property is being acquired, including a map or plat and the property interests required. Wis. Stat. § 32.05(1)(a). If a condemnation is going to take place under Wis. Stat. § 32.06, then the condemnor must have necessity to condemn. Necessity is determined pursuant to Wis. Stat. § 32.07. B. Appraisal The condemnor is required to have an appraisal made upon which it will base its offer. Wis. Stat. § 32.05(2)(a); Wis. Stat. § 32.06(2)(a). An appraiser should be familiar with the condemnation process and the requirements for condemnation appraisals. For the practitioner, it is important to recognize the difference between a financing appraisal, like those used in buying a house, and the kind of “full narrative appraisal” used in condemnation. A full narrative appraisal includes a detailed description of the process an appraiser uses to reach an opinion of the property’s fair market value. The opinion must contain the appraiser’s rationale for determining the value and be documented by market data that support the appraiser’s rationale. Preparing a good appraisal tends to require that the attorney engage the appraiser at least 6 weeks before the due date.