New York Zoning and Municipal Law Blog

The Appellate Division held that taking of private property by eminent domain fulfilled a public purpose even though the taking primarily benefited commercial traffic. In the Matter of 225 Front Street, Ltd. v. City of Binghamton the court noted the limited scope of judicial review of a proceeding under the EDPL which "must focus on "whether the proceeding was in conformity with constitutional requirements, whether the proposed acquisition is within the statutory jurisdiction or authority of the condemnor, whether the condemnor's determination and findings were made in accordance with the procedures set forth in EDPL article 2 and ECL article 8, and whether a proposed [public] use, benefit or purpose will be served by the proposed acquisition."

Here the Court found that the purpose of acquiring the petitioner's property was to facilitate road improvements in order to resolve traffic congestion in the City. Petitioner argued that the taking served no public purpose but was for the private benefit of commercial traffic. The court held: "[p]utting aside the fact that commercial use of public highways has obvious public benefits, there can be no doubt but that where an intersection of two public roadways is constructed in such a way that some vehicles cannot safely negotiate it, all vehicular traffic that utilizes the area is obviously affected. This project, as designed, seeks to address such a concern and, as such, has a public purpose."

Last year we reported on the case of Goldstein v Pataki, 516 F3d 50 [2008] involving the proposed condemnation of property in Brooklyn, New York in order to build the so called Atlantic Yards Project which includes a huge residential and commercial development along with an arena for the New Jersey Nets. This week the Appellate Division, First Department (In re Develop Don't Destroy (Brooklyn) v. Urban Development Corporation) again addressed claims by property owners alleging that the State Environmental Quality Review Act (SEQRA) had not been adequately followed and that the project does not involve an appropriate public project within the meaning of the various governing statutes including the Eminent Domain Procedures Law.

In dismissing the claims the court made far reaching findings which are best recited in the court’s own words. The first claim was that the financial participation of the Empire State development Corporation (ESDC) in the project had not been properly analyzed as part of the SEQRA review findings and therefore had not been subjected to appropriate environmental scrutiny. The court disagreed that the ESDC’s financial participation was an area for environmental inquiry holding: “[a]ccordingly, where the decision, although discretionary, is governed by criteria unrelated to the environmental concerns addressed in an EIS, environmental findings based on the EIS are unnecessary as it would be pointless to mandate reliance on an EIS in the interest of informed decision-making in circumstances where the EIS is by hypothesis irrelevant to and cannot inform the decision to be made”

The Plaintiffs then argued that the lead agency failed to take a “hard look” under SEQRA at the threat of a terrorist incident, particularly with respect to the arena. The Court disagreed finding that although there may be exceptions in the case of storage of particularly dangerous materials: “SEQRA contains no provision expressly requiring an EIS to address the risk of terrorism and, indeed, it would not appear that terrorism may ordinarily be viewed as an "environmental impact of [a] proposed action" (ECL 8-0109[2][b] [emphasis added]) within the statute's purview.”

Next the Plaintiffs claimed that the lead agency did not properly determine the build year for various aspects of the project, which they claim resulted in an inadequate review of the proposal. Yet again the court disagreed noting: “the ultimate accuracy of the estimates is neither within our competence to judge nor dispositive of the issue properly before us, which is simply whether the lead agency's selection of build dates based on its independent review of the extensive construction scheduling data obtained from the project contractor may be deemed irrational or arbitrary and capricious”

The final SEQRA claim was that the lead agency did not adequately consider alternatives and specifically failed to take into account prevailing real estate trends. In perhaps its most devastating conclusion with respect to the Plaintiffs’ SEQRA claims the court held: “[t]o be sure, as the EIS discloses, there were more adverse impacts associated with the proposed project than with its less ambitious alternatives, but, on balance, there is no tenable argument that that lead agency's preference for the FCRC project, arrived at after an evidently conscientious weighing of alternatives, was not rationally and sufficiently based on the project's distinctive constellation of otherwise unattainable benefits. Certainly, the lead agency did not in this case exceed the "considerable latitude" afforded it under SEQRA to evaluate environmental effects and choose among alternatives (Jackson, 67 NY2d at 417).”

The Plaintiffs also raised issues relating to the determination of blight for purposes of condemnation, arguing in part that the properties in question were not actually blighted. In rejecting this argument the court stated: “reinforced by a standard of review that may with great understatement be described as lenient: ‘When [the agencies to which the initial blight determination has been committed] have made their finding, not corruptly or irrationally or baselessly, there is nothing for the courts to do about it, unless every act and decision of other departments of government is subject to revision by the courts" (Kaskel v Impellitteri, 306 NY 73, 78 [1953], cert denied 347 US 934 [1954])’…. Plaintiff does not dispute with defendants as to the condition of these properties or of the whole area. He is simply opposing his opinion and his judgment to that of public officials, on a matter which must necessarily be one of opinion or judgment, that is, as to whether a specified area is so substandard or insanitary, or both, as to justify clearance and redevelopment under the law.”

Finally, the court concluded: “The issue posed is not which of the parties has more persuasively characterized the area in question, but whether there was any basis at all for the exercise by the agency of the legislatively conferred power to make a blight finding, and plainly there was.”

An article entitled " 'Atlantic Yards' Condemnation Upheld," written by Steven Silverberg, founding partner of Silverberg Zalantis LLP, is featured in the March, 2008 ALM Law Journal Newsletter, New York Real Estate Law Reporter. The article discusses the recent decision by the Second Circuit Court of Appeals to dismiss the challenge by several property owners to the condemnation of their properties in order to construct a huge private development in downtown Brooklyn, New York. See: http://www.lawjournalnewsletters.com/newsletters/home/ljn_nyrelaw.html

The Second Circuit Court of Appeals upheld dismissal of the challenge to condemnation of private property for the Atlantic Yards Project in Brooklyn stating in the case Goldstein v. Pataki, decided on February 1, 2008: “…eminent domain has its costs, it has its benefits, and in all but the most extreme cases, Supreme Court precedent requires us to leave questions of how to balance the two to the elected representatives of government, notwithstanding the hardships felt by those whose property is slated for condemnation.” The Court found that neither the fact that the area at issue would be developed privately nor the fact that the individual property owners’ lots are not themselves blighted changed the public purposes of the project to remove blight and provide affordable housing.

The well publicized proposal is to construct a new sports arena for the New Jersey Nets, sixteen high rise apartment buildings and several office towers in a portion of downtown Brooklyn which the Court described as being “afflicted for decades with substantial blight.” Plaintiffs are 15 property owners whose homes or businesses are in a less blighted portion of the project area which are slated for condemnation.

Plaintiffs claimed violations of the “Public Use Clause” of the Fifth Amendment and the Equal Protection and Due Process Clauses of the Fourteenth Amendment to the United States Constitution, along with a New York State law claim. The basis for the action was the allegation that the “public use” for the project is merely a pretext and any incidental public benefit is secondary to the primary purpose of the project, which Plaintiffs’ claim is to allow a private taking in order to advance the personal fortune of the developer, Bruce Ratner.

The District Court, on a motion to dismiss, dismissed the federal claims and declined to retain supplemental jurisdiction over the state claim. Finding that “pretext” was an argument that could be advanced under the Supreme Court decision in Kelo v. City of New London, the District Court determined a reasonable juror could not conclude removal of blight and construction of 2,250 new units of affordable housing were mere pretexts. The District Court also concluded, based upon a prior holding by the Circuit Court in Brody v. Port Chester, that the due process challenge to the New York Eminent Domain Procedure Law would fail.

On appeal, Plaintiffs claimed that government officials had abdicated their eminent domain authority and had been co-opted by Mr. Ratner in order to increase his personal profit. While the Circuit Court noted that the Fifth Amendment requirement that private property may not be taken without just compensation has been understood to include the prohibition of taking private property for the benefit of another private person without “a justifying public purpose” the court also observed that “the primary mechanism for enforcing the public-use requirement has been the accountability of political officials to the electorate, not the scrutiny of the federal courts.”

The Court concluded the role of the Courts is the narrow one of determining if the exercise of eminent domain is “rationally related to a conceivable public purpose” (citing Hawaii Housing Authority v. Midkiff). It found the Complaint on its face conceded “several well-established categories of public uses, among them the redress of blight, the creation of affordable housing, the creation of a public open space, and various mass-transit movements.”

Finally, the Court determined that the “single sentence” in the Kelo decision referring to pretext did not open the door “to require federal courts in all cases to give close scrutiny to the mechanics of a taking rationally related to a classic public use as a means to gauge the purity of the motives of the various government officials who approved it.”

In what the Appellate Division, Second Department called a case of first impression, the court has ruled an attempt by the Village of Haverstraw to acquire a property by condemnation for affordable housing violated the Eminent Domain Procedure Law. In the case 49 WB, LLC v. Village of Haverstraw the court found the Village failed to demonstrate a public purpose.

The Village proposed to condemn the property at issue for acquisition by a local not-for- profit, HOGAR. In finding that the acquisition of the property had a public purpose the Village had determined that (1) HOGAR would provide a community outreach health center, (2) provide an office for HOGAR and (3) the site would be suitable to construct 16 units of affordable housing. The Court found: (1) the Village failed to demonstrate that HOGAR was more likely to provide a community outreach health center than the current owner who had a plan for such use and therefore “failed to articulate how or in what manner the condemnation …fosters any benefit to the public which would not be obtained absent condemnation”; (2)HOGAR already leased space in the building and the owner had offered a long term lease, further “there is no foundational support in the record to conclude that any “public” benefit would flow from having a private, not-for-profit corporation such as HOGAR be an owner of its office space rather than a tenant”; and (3) the condemnation, through a complex analysis outlined below, actually results in fewer affordable housing units for the Village.

The Court found that the entire affordable housing argument was tied to a private development of the Village’s waterfront. The Court noted that in exchange for permission to construct a large development on the Village’s waterfront, the waterfront developer was required to “participate” in the development of 85 units of affordable housing. The developer intended to contribute to HOGAR’s acquisition of the property and therefore, the Court found, would get credit for participating in the 16 units of affordable housing HOGAR proposed for the site. This would reduce the developer’s obligation to build affordable housing by the 16 units. But the Court found that the present owner already proposed 6 units of affordable housing on the site which, unlike HOGAR’s proposal, did not include “participation” by the developer and would not be credited to the developer’s requirement of 85 units. Therefore, by pursuing the condemnation and giving the developer credit for HOGAR’s 16 units, the Village was actually losing the 6 additional units that would have been constructed by the owner of the property. The Court concluded allowing the present owner to construct 6 units would net the Village 91 units of affordable housing rather than 85. Thus the purported public purpose of providing more affordable housing was illusory.

The Court found, based upon this analysis, “the condemnation solely benefits the private entities.” Significantly the Court then limited its holding by stating: “we do not suggest that private owners of property can avoid the proper exercise of a municipality’s condemnation authority by merely offering to utilize the property in the same manner as intended by the municipality. Instead, our opinion rests upon the evidentiary record that the Village invoked its power of condemnation for the sole purpose of benefiting private and not public interests.”

Another issue was whether the challenge had been brought within the 30 day statute of limitations. The court noted that EDPL 204(A) provides for publication of notice of the determination and findings in “at least” two successive newspapers. In this case the Village published notice in five successive newspapers. The court found that since the publication was not “complete” until the last date of publication, even though the three additional days of publication were optional by the Village, the time to appeal did not run under EDPL 207 (A) until thirty days from the date publication was completed.

Finally, the Court found that the petitioner was not entitled to attorney’s fees and costs under EDPL 702 (B) as no acquisition procedure had been commenced. EDPL has a two step process (1) determining public purpose and (2) acquisition. As no actual acquisition procedure had been commenced the Court determined there was no right to recover fees and costs.