A big thanks to the Appraisal Institute – Greater Oregon Chapter for hosting the January 20, 2017 seminar entitled “Preparing Appraisals for Condemnation Assignments, and How to Improve Skills as an Expert Witness.” I was honored to present the day-long seminar alongside Don Palmer, MAI, of Appraisal & Consulting Group LLC. Don is one of the deans of condemnation appraisers in Oregon and the Pacific Northwest, and a true gentleman. We had a great turnout, a wealth of questions and comments, and much positive feedback. I look forward to future opportunities to work with this great group of appraisers. Finally, a special thank you to Vicki Champ, the Chapter’s executive director. Vicki is a pleasure to work with and a true professional.
The City of Lake Oswego is moving forward with its Boones Ferry Road Project, which calls for the widening of Boones Ferry Road from Madrona Street to the Oakridge Road/Reese Road intersection, together with associated public improvements. As set forth on the Project’s website, the Project includes:
- Four vehicular travel lanes
- Landscaped medians with vehicular turn lane improvements
- New, safer sidewalks with street trees, lighting, street furniture and landscaping
- Two new signalized intersections and two new pedestrian crosswalks
- Bike lanes in each direction
- Improved storm drainage systems
- Undergrounding of utilities
- Pedestrian crossing at Lanewood
The City of Lake Oswego is targeting the taking of 50 properties in whole or part. While this Project serves a legitimate public purpose, whether the owners of the impacted properties will receive just compensation is another matter.
According to press coverage, the City is armed with condemnation resolutions and will soon commence taking property through eminent domain if “negotiations” are not successful. Property acquisitions are scheduled to take place through 2017, with construction to commence in 2018.
On September 30, 2015, the Federal Energy Regulatory Commission (FERC) issued its Final Environmental Impact Statement (FEIS) for the Jordan Cove Energy and Pacific Connector Gas Pipeline Project. The FEIS is the culmination of years of study and debate regarding this massive LNG project, and sets the stage for FERC issuing a Certificate of Public Convenience and Necessity (Certificate). FERC’s issuance of the Certificate will allow the Project, consistent with the federal Natural Gas Act and Oregon law, to exercise the power of eminent domain to acquire right of way for the pipeline.
If constructed, the Pacific Connector pipeline will consist of approximately 232 miles of 36-inch pipeline from Coos Bay to Malin. It will cross four counties–Klamath, Jackson, Douglas and Coos–and will impact approximately 306 landowners and 436 parcels. Its estimated $1.5 billion price tag will constitute about 20% of the overall $7.5 billion Project.
For the most part, and if authorized, the Project will take right of way in the form of easements. These easements will consist primarily of permanent easements for the pipeline itself and temporary easements for construction activities. The easements will allow the pipeline company to construct, maintain, access, repair, and replace the pipeline. The easements will also prevent property owners from using their property in any way that would interfere with the pipeline operations.
The Project will try to first acquire these easements by “agreement.” Through a right of way agent, the Project will present property owners a modest offer of compensation and a form of easement agreement. Not surprisingly, the form of the agreement will strongly favor the pipeline company to the detriment of property owners, and the offer of “compensation” will be lacking in fundamental ways. If the Project cannot reach “agreement” with a property owner, it will then invoke its power of eminent domain, as delegated to it by the government, and take the easements on the terms it offered, with “just compensation” to be determined by judge or jury.
Given the fundamental impacts these easements and the pipeline itself will have on the value of property and quality of life, property owners would be remiss if they did not take these issues very seriously.
The Steering Committee has unanimously advanced the Tilikum Crossing to cross the Willamette River; unanimously advanced 82nd Avenue and chose to continue studying 50th and 52nd Avenues; and advanced three route options (Main/223rd, Cleveland, and Hogan Road) to connect to Stark Street and Mt Hood Community College.
As set forth in the Plan, from 2015 to 2017, the Project will create a detailed design of the new transit line and station areas, and complete environmental review and permitting. From 2018 to 2020, the transit line and station areas will be constructed.
From all indications, Washington County has begun filing condemnation actions against property owners with whom it has not reached “agreement” on its Farmington Road Project.
As I noted in my post on the Project earlier this year, it calls for the widening of Farmington Road from Murray Boulevard to Hocken Avenue.
In road widening projects such as this one, which result primarily in partial “strip takings,” the often-found fundamental tension between the government’s approach and just compensation is the government’s propensity to ignore or minimize damages to the value of the property remaining after the taking. Unfortunately for property owners, such damages can be significant, even if the strip taken is relatively small. In addition to factors such as an increased proximity to travel lanes and attendant noise, property owners can be faced with adverse impacts to access, parking, on-site vehicle maneuvering, and conformity with set-backs and other development requirements. In certain situations, the highest and best use of the property can take a hit, potentially resulting in very significant damages.
Fortunately, property owners have a constitutional right not to have their just compensation minimized. Vindicating that constitutional right, however, requires action and standing up to the government.
Fresh off its decision in Dunn v. City of Milwaukie, 355 Or 339, 361, 328 P3d 1261 (2014) (en banc), the Oregon Supreme Court has, again, narrowily read its previous decisions and raised the bar for property owners seeking recourse on inverse condemnation claims under the Oregon constitution. In Hall v. Department of Transportation, 355 Or 503, 326 P3d 1165 (2014) (en banc), the court held that a property owner seeking relief on a “condemnation blight” inverse condemnation claim–one in which a property owner seeks relief for damages resulting from the specter of condemnation ahead of an actual taking–the property owner must allege and ultimately prove that the government’s actions deprived the property owner of “all economically viable use.” Id. at 523. In other words, it is not enough that the government’s actions have diminished the value of a property, even substantially; to maintain a condemnation blight claim, the property must apparently have virtually no remaining value.
Upholding the court of appeals reversal of a jury verdict in excess of $3,000,000, the supreme court held that the plaintiffs’ classic “condemnation blight” allegations and supporting evidence failed to “establish a cognizable de facto taking by condemnation blight” because “plaintiffs’ property retained some economic value.” Id. at 523. In reaching its decision, the court expressly rejected the plaintiffs’ argument that condemnation blight claims are subject to the less stringent “reduction-in-value damage requirement” associated with “the substantial-interference-with-use-and-enjoyment standard,” id. at 522, reserving this standard for cases in which “a governmental actor physically occupies private property or invades a private property right.” Id.
To give some flesh to the bone, the plaintiffs in this case presented evidence at trial supporting the following allegations:
- The Oregon Department of Transportation (ODOT) “had disseminated information to the public that plaintiffs’ access to the state highway system would be eliminated and that ODOT planned to acquire plaintiffs’ property through eminent domain proceedings”;
- ODOT had conducted public hearings and otherwise informed the public that the highway interchange near the plaintiffs’ property was dangerous, it would be eliminated, and that plaintiffs access to it property would accordingly be eliminated;
- ODOT had disclosed plans and consulting reports recommending the closure of the interchange and taking of plaintiffs’ property;
- ODOT had informed the local city with jurisdiction over the area that it intended to remove plaintiffs’ access and take their property; and
- ODOT had specifically informed prospective investors, lessees, purchasers and developers of the subject property that it intended to close the interchange and take plaintiffs’ property.
Id. at 506-07.
This activity went on for a period of six years without ODOT initiating condemnation proceedings, as it worked through public opposition to removal of the interchange. Id. at 506. Indeed, during a period of ODOT-instituted delay, when ODOT learned that the plaintiffs were trying to develop their property, ODOT internal emails confirmed that “ODOT had taken steps to stop any future development of plaintiffs’ property.” Id. Moreover, “[b]etween 2005 and 2007, plaintiffs attempted to sell their property or reach agreements to development,” which efforts were unsuccessful, id., and “[a] real estate broker . . . testified that he was unable to consummate an agreement because of the uncertainty surrounding the closure of the . . . interchange.” Id.
At the close of evidence, “ODOT moved for a directed verdict on the ground that there was no evidence that its conduct amounted to a nuisance but, rather, the evidence showed that it had engaged in planning for a public purpose, and that the proper standard of harm was whether ODOT’s conduct had deprived the plaintiffs of all economically viable use of their property.” Id. at 508. The trial court denied the motion and rejected ODOT’s proposed jury instructions premised on similar arguments. Id. “In response to questions posed in the verdict form, the jury found that ODOT’s actions had substantially and unreasonably interfered with plaintiffs’ use and enjoyment of the land, and that those actions were sufficiently direct, particular, and of a magnitude to support a conclusion that the interference had reduced the fair market value of the property.” Id. at 509. “The jury found that the value of the property without interference was $4,000,000 and that ODOT’s interference had reduced that value by $3,378,750.” Id. “The trial court denied ODOT’s motion for judgement notwithstanding the verdict and entered judgment for the plaintiffs.” Id.
The court of appeals reversed the trial court’s decision on two grounds: (1) “evidence that ODOT’s actions lowered the value of plaintiff’s property was insufficient to establish a compensable taking”; and (2) the trial court erred to the extent it relied in its rulings for plaintiffs that ODOT was pursuing a vendetta against them because plaintiffs’ assertion of ODOT’s malicious intention was “self-defeating” in that “[i]f * * * the intent behind ODOT’s actions was not to take plaintiffs’ property for public use, then those actions could not amount to a taking.” Id. at 509 (emphasis in original) (citation omitted).
On review, the supreme court ignored the “vendetta” issues, and confined its analysis to “plaintiffs’ assertions that the trial court properly based its dispositive ruling, jury instructions, and verdict form on its conclusion that the substantial-interference-with-use-and-enjoyment standard–not the more stringent deprivation-of-all-economically-viable-standard–applied to plaintiffs’ inverse condemnation claim.” Id. at 510. It specifically held that “because the actions that plaintiffs challenge involved planning related to the designation of plaintiffs’ property for eventual public use, and plaintiffs did not allege that those actions deprived them of all economically viable use of their property or prove that ODOT physically occupied their property or invaded their property rights in a way that substantially interfered with its necessary use and enjoyment, the trial court erred in denying ODOT’s motion for a directed verdict.” Id.
The court reached this decision only by reading its previous decision in Lincoln Loan Co. v. State Hwy. Comm., 274 Or 49, 545 P2d 105 (1976) to an extremely narrow–and arguably distorted–extent. In Lincoln Loan, the plaintiff “brought [an] inverse condemnation action against the Oregon State Highway Commission to recover damages for an alleged taking of plaintiff’s property in the process of the construction of the East Portland Freeway by allegedly placing a ‘cloud of condemnation’ over the property, which resulted in a ‘condemnation blight’ and a de facto taking, not of the possession of the property, but of a substantial use and benefit thereof.” Id. at 51. The Oregon Supreme Court held that plaintiff stated a claim for inverse condemnation based upon this condemnation blight theory on the following allegations:
- “[A]bout ten years prior to the filing of the complaint in this action the defendant, by resolution, declared plaintiff’s property necessary in the construction of the said East Portland Freeway.”
- ‘That at the time of declaring the resolution aforesaid and at all times thereafter defendant commenced the taking of real property in the vicinity of plaintiff’s property for highway purposes and did in fact file condemnation proceedings against plaintiff’s property herein.”
- “That in so taking said properties, defendant has caused the following:
Id. at 51-52. After a thorough analysis, the court held that “[p]laintiff has alleged adequate facts which indicate a substantial interference by the state with the use and enjoyment of its property. The combination of the acts alleged in plaintiff’s complaint, the alleged pervasive extent of that combination of acts and the alleged duration of those acts over a ten-year period unite to allege a substantial interference with the use and enjoyment of its property by plaintiff.” Id. at 57. The court then went on to specifically describe as “unpersusive” a number of cases from other jurisdictions “all of which held that preliminary steps taken to exercise the power of eminent domain without an actual physical taking or invasion are not actionable by the landowner.” Id. at 58.
To avoid the clear direction of its previous decision in Lincoln Loan, the Oregon Supreme Court in Hall, rather than looking to the totality of the circumstances which gave rise to the condemnation blight inverse condemnation claim in Lincoln Loan and the court’s express rejection in Lincoln Loan of a requirement of physical taking or invasion to invoke the substantial interference standard, focused on only one of the acts alleged–the creation of “dust, noise and confusion”–and thus marginalized Lincoln Loan as follows:
“The plaintiff in Lincoln Loan alleged that the defendant had interfered with its use and enjoyment of its property by, among other things, creating noise, dust, and confusion by the demolition of neighboring properties.
Hall, 355 Or at 516 (emphasis added).
Whatever your sense of the outcome of case, it is a good read and one that thoroughly explains the Oregon Supreme Court’s analytical framework for inverse condemnation claims. Also of interest, it was argued for the plaintiff property owner by former Oregon Supreme Court justice Michael Gillette.
Finally, it is also very important to note that the holding applies only to claims under Oregon’s constitution. As noted by the court in its concluding footnote, the plaintiffs did not “raise a federal constitutional argument in this court; accordingly, we do not address that issue.” Id. at 524 n 9.
Metro is moving forward with preliminary planning for its “Powell-Division Transit and Development Project.” For this “high capacity transit” project–meaning most likely light rail or bus rapid transit–Metro is currently soliciting input from the public and the Project’s steering committee regarding transit type, route, station areas, and redevelopment opportunities. Similar to Metro’s “Southwest Corridor” planning, such move was foretold by Metro’s 2009 High Capacity Transit Plan, which sets forth its vision and priority for high capacity transit projects across the Portland metropolitan area.
The Powell-Division corridor, as currently envisioned, stretches from downtown Portland to Gresham. As the name of the Project indicates, the corridor centers on SE Powell Boulevard and SE Division Street for much of its length. A “Project Atlas” published by Metro provides a many-layered view of the corridor area.
As noted above, the planning for the Project is currently in its public input phase, after which the Project team will decide on a preferred mode of transit and preferred route. The Project’s published timeline, from its most recent fact sheet, indicates that the Project team will make a final decision on mode and route recommendations in Winter 2015.
Whatever route and mode of high capacity transit is ultimately chosen, many properties, homes and businesses will likely be impacted. While many elements of the Project appear to serve legitimate public purposes, whether the owners of the impacted properties will receive the just compensation to which they are constitutionally entitled is a wholly different matter. It will also be interesting to see how the Project implements its development goals.
Metro has set its sights on the “Southwest Corridor” as the region’s next area for construction of “high capacity transit,” meaning most likely light rail or rapid bus transit. Such move was foretold by Metro’s 2009 High Capacity Transit Plan, which sets forth its vision and priority for high capacity transit projects across the Portland metropolitan area.
The Southwest Corridor, as currently envisioned, stretches from downtown Portland to Tualatin. It centers on SW Barbur Blvd/99W for much of its route, working its way through Tigard, and then south through the Bridgeport area to downtown Tualatin.
The planning for the project is currently in its “refinement phase,” in which the stakeholders will zero in on a preferred mode of transit and preferred route. “Recommended routes for further discussion” are set forth in Metro staff’s May 5, 2014 report. The Project’s published timeline indicates that the Project’s steering committee will make a final decision on design options in June 2014.
Whatever route and mode of high capacity transit is ultimately chosen, many properties, homes and businesses will likely be impacted. While this Project appears to serve a legitimate public purpose, whether the owners of the impacted properties will receive the just compensation to which they are constitutionally-entitled is a wholly different matter.
In the event the government decides to take your property, you will most likely receive a visit from a “right of way agent” who will present you the government’s “offer” to acquire your property. This post explores what that “offer” typically looks like and what next steps you need to think about.
What kind of communication from the government will accompany the offer?
The government must attempt to reach agreement with you on the fair market value of the property and its acquisition. ORS 35.235(1). Without such an attempt, the government cannot initiate a condemnation lawsuit. ORS 35.245(1). As part of this negotiation, the government must make you an unqualified offer based upon what the government contends is the just compensation for the property. The offer will be in the form of a letter from the government or a private right of way agent with whom the government has contracted.
What is the government’s offer based upon?
In most cases, the government’s offer must be accompanied and supported by a written appraisal. ORS 35.346(2). However, if the government determines that the amount of just compensation is less than $20,000, it may provide you with a “written explanation of the bases and method” by which it arrived at fair market value, in place of a formal appraisal.
The offer mentions possible environmental issues. What is this about?
As part of the appraisal process, the government will often times conduct an environmental review of the targeted property. This review is looking for evidence of possible environmental contamination stemming from present or past uses of the property. A common example giving rise to governmental concern is the presence of an underground storage tank for petroleum products. If the government determines that the property will require some level of environmental remediation, it may seek to have associated costs deducted from the determination of just compensation.
Am I entitled to relocation compensation?
Yes, property owners, as well as tenants, are often entitled to reimbursement for certain relocation and business reestablishment costs resulting from displacement from the taken property. Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, 42 U.S.C. § 4601 et seq.; ORS 35.500 to 35.530. Relocation compensation is determined by an administrative process different from the process used to determine just compensation for the taking of the property.
Am I entitled to loss of value to my business?
Technically, no. In the event of a partial taking of property, however, the taking could affect your ability to use the property for a particular business purpose, which also happens to be its highest and best use—for example, a restaurant adjacent to a highway. If the taking results in a less intensive highest and best use, you may be entitled to resulting damages.
Are there benefits to securing a team of experienced advisors in responding to the offer?
Yes, definitely. A team of advisors experienced in condemnation matters can help you achieve just compensation, advise you on relocation issues, and assist you with tax planning in regard to the proceeds of condemnation. Your team may include a condemnation attorney, appraiser, relocation specialist, real estate broker, and tax planner. In certain circumstances, you may need to also enlist the services of, among others, surveyors, land use planners, architects and engineers.
How much time do I have to respond to the offer? Do I have to accept or reject the government’s offer within this time?
The government must give you at least 40 days to respond to the offer before filing a condemnation action. ORS 35.346(1). It is important to note, however, that you are not required to respond to the offer. If you fail to respond, you will be deemed to have rejected the offer. The government may then initiate the condemnation action, but negotiations will most likely continue regarding fair market value and the government’s acquisition of title up to and through the litigation process.
If I reject the offer or do not respond to it, will the government lower its offer?
No, the government generally cannot lower its offer as a negotiation strategy. For practical purposes, the government’s initial offer represents a floor for the negotiations regarding just compensation. As a matter of law, the government cannot lower the amount of its initial offer except upon an order of the court, and that order cannot be entered less than 60 days before trial. ORS 35.346(2).
Should I obtain an independent appraisal?
Yes, in most circumstances, you should obtain an independent appraisal. Though the appraiser contracted by the government is a professional and bound by professional standards, he or she is hired by the government. You also need an analysis performed by an independent professional. Further, if you know the government’s offer is imminent, obtaining an independent appraisal before receiving the offer will, in certain situations, provide you and your advisors the necessary information to develop a proper negotiation strategy.
Washington County and the City of Beaverton are moving forward with their Farmington Road Project, which calls for the widening of Farmington Road from Murray Boulevard to Hocken Avenue. As set forth on the Project’s website:
Farmington Road, between Murray Boulevard and Hocken Avenue, is a heavily-used four-lane section of roadway that lacks continuous bicycle and pedestrian facilities.
This project will make needed safety and traffic capacity improvements to this section of Farmington Road, for all modes of transportation.
■ Widening the roadway to five lanes (two travel lanes in each direction with a center turn lane)
■ Continuous bicycle facilities
■ Continuous pedestrian facilities
■ Street lighting
■ Realign 141st and 142nd Avenues
An aerial strip map showing the extent of the takings and impacted properties is found here. While this Project appears to serve a legitimate public purpose, whether the owners of the impacted properties will receive the just compensation to which they are constitutionally-entitled is a wholly different matter.
The Project’s published schedule indicates that the government has begun “right of way acquisition,” which will continue into the Fall of 2014. Construction was slated to begin in the Spring of 2015, but has been accelerated to the Summer of 2014 according to recent reports.