HomeMy WebLinkAboutMemo - Mail Packet - 9/7/2021 - Memorandum From Keith Hanson Re: Eminent Domain Request – North Mason Stormwater Project And North Mason Street Alignment From Alpine To Hickory Street
OPERATION SERVICES
REAL ESTATE SERVICES
P.O. Box 580
Fort Collins, CO 80522
970.416.2276
fcgov.com
MEMORANDUM
DATE: August 19, 2021
TO: Mayor and City Councilmembers
FROM: Keith Hanson, Real Estate Services Manager
THRU: Kelly DiMartino, Interim City Manager
Tyler Marr, Deputy Director, IES
Ryan Malarky, Assistant City Attorney II
Ken Mannon, Operation Services Director
RE: Eminent Domain Request - North Mason Stormwater Project and North Mason Street
Alignment from Alpine Street to Hickory Street.
____________________________________________________________________________
The purpose of this memo is to provide Council with a brief overview of City staff’s practice of
requesting eminent domain authority at the beginning of a capital project and how it applies to the
upcoming agenda item referenced above. Attached is a summary of the reasons for requesting
eminent domain authorization, the general legal procedure, and a flowchart. City staff have
customarily requested eminent domain authorization for all capital projects but have rarely had to
actually use it as the possibility of eminent domain litigation combined with the City’s good faith
efforts to negotiate an acquisition has aided in successfully reaching mutually acceptable terms and
conditions with property owners.
For the North Mason Stormwater Project and Alignment project, the request for eminent domain
authorization is standard, but there is a detail to take note of. The area where the project will take
place was originally platted in 1892, which included the delineation of certain public streets. In the
1920s, a portion of the streets in this neighborhood may have been vacated and the various legal
descriptions included in the property deeds are inconsistent, with some referencing portions of
“vacated streets” that appear to have never actually been vacated. Staff have reviewed all
documentation they can find within the City archives and County Clerk & Recorder’s Office and are
reasonably confident of the delineation between privately-owned property and City-owned streets and
other rights-of-way. However, in an abundance of caution, staff have included in the request for
eminent domain authorization some property they understand to be City-owned right-of-way just in
case a property owner might produce documentation that proves the right-of-way was previously
vacated. Including these parcels in the request does not mean the City must acquire them. Rather,
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including them will allow staff to continue with the acquisition process without delay, instead of
having to return to City Council for authorization to condemn those parcels if it is shown the City
does not own them. If, as staff expect, an adjacent landowner is also unable to locate a record of a
prior right-of-way vacation, then staff will proceed with the acquisition of only the areas they have
identified as privately-owned.
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EMINENT DOMAIN AUTHORIZATION
Eminent domain refers to the power of the government to take private property and
convert it into public use. The Fifth Amendment provides that the government may only
exercise this power if it provides just compensation to the property owners. Eminent
domain is used as a “last resort” to acquire needed property interests such as fee simple
interest or easement interests for City-approved projects. The eminent domain process is
governed by both federal and state law.
It is the City’s goal and desire to acquire all required property for City projects through
successful negotiations with property owners. Realizing that this is not always possible,
Real Estate Services (RES) works with the City Attorney’s Office (CAO) to use eminent
domain as a last resort when necessary. It is important to note, that even after City
Council has authorized the City to use eminent domain to acquire property, RES
continues to work with property owners in good faith to hopefully conclude negotiations
with a mutually agreeable property transaction and avoid legal action.
The City has also acquired some properties through “friendly condemnation.” This has
been used most frequently when the City is attempting to purchase land from
homeowner’s associations or condominium developments. Often times, the by-laws of
these associations require that a large percentage (over 90%) of the homeowners and their
mortgage lenders approve any conveyance of property. In these cases, the owners and
the City prefer to go through a “friendly condemnation.” The CAO files a petition with
the court to condemn the property (after obtaining Council authorization) and then works
with the attorney representing the homeowners to file the necessary agreements with the
Court so that the Judge will issue a Rule and Order which transfers the property interests
to the City.
The City has also used condemnation when a property it is trying to purchase has become
a “no-man’s land.” When the last known owner of the property cannot be located,
oftentimes due to death or disability, the CAO files a petition with the court (again, after
Council authorization) and concurrently asks for permission to publish notice of the
City’s intent to acquire the property. When the record owner of the property does not
appear or respond, the CAO then applies to the court to obtain a Default Judgment to then
obtain the necessary property interests. The CAO typically engages outside legal counsel
to handle eminent domain cases.
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EMINENT DOMAIN PROCESS
Informational Phase
The process for any property acquisition starts in the conceptual phase of a project. It is
the City’s goal to get as much accurate information to the potentially affected property
owners as early as possible. In many cases, this can happen at least a year before the
acquisition is due to commence.
Individual informational meetings are held with the property owners, the project
manager, and a representative from RES. In some instances, the City contracts with
outside property acquisition agents to assist with the acquisition process. In such cases,
the agents would also be involved in communications with property owners. The
emphasis at this early meeting is to share information about the project and often to
acquire a License to Enter. This license grants the City permission to enter a portion of
the property for additional data gathering, such as for surveys, testing, and appraisal
work.
At this first meeting, the RES representative or City agent explains to the property owner
the process to be utilized to acquire property interests, and that as a natural course of
business, Council will be asked to authorize the use of eminent domain as a last resort in
the event a successful arrangement between the City and the property owners cannot be
reached. The City explains to the property owners that the request to Council for eminent
domain authorization is typical for all properties affected by the project, but it is the
City’s goal to conclude negotiations with an agreement that is mutually satisfactory.
After these meetings and as design progresses, the City’s project managers often have
open houses and neighborhood meetings. The potentially affected property owners are
invited to these functions, as well others who live in the area. Staff and City agents will
continue to meet with property owners as often as necessary to explain the project, the
property interests needed, and explore alternatives that allow the project to meet the
needs of the City and also satisfy the needs of the property owner. Input from the
property owner is always encouraged and considered.
Council Authorization of Eminent Domain
Once the project design has been completed to the point where the acquisition areas for
the project have been identified, staff sends a letter to the property owners to inform them
of the date of the upcoming Council action where authority for the use of eminent domain
will be requested. The reason that eminent domain authorization is requested at the
beginning of the project before negotiations with the property owners begin is due to the
required legal process. This procedure and associated timelines must be followed
precisely or the City may have to start over from the beginning before filing a court
action against the property owners, if indeed necessary. Because the eminent domain
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process takes a minimum of five months, and the City is responsible for appraisal costs,
starting the eminent domain “clock” as early as possible helps minimize City expenses
and schedule delays for the project. Good faith negotiations with the property owners are
still ongoing during this entire time and if they result in a successful acquisition of the
property, then the possibility of eminent domain is gone. However, if negotiations are
not successful by the end of the eminent domain timeframe and the City has followed the
required procedure, then the City may proceed to file a court action to acquire the
property.
Eminent Domain – Required Process and Timeline
Attachment A - Property Acquisition City Process Overview - is a flowchart that
summarizes the legal requirements and timeline of the eminent domain process. The
milestones are explained below:
1. Notice of Interest Letter and Authority to Obtain Appraisal (NOI): This notice
is sent to the property owner by certified mail and includes project information,
identifies the property interests to be acquired, informs the property owner that
the City’s policy and obligation is to pay the fair market value for necessary
property interests, and that the City has either hired an appraiser to value the
necessary property interests or that City staff will be performing the value
estimates. Legal descriptions are attached to this Notice. The NOI also informs
the property owner that if the value of the property to be acquired is estimated to
be over $5,000, then the City is obligated to pay the reasonable cost of an
appraisal obtained by the property owner, as long as that appraisal report meets
eminent domain requirements and is submitted to the City within 90 days of the
NOI (therefore, the City may incur the cost of two appraisals for every affected
property). If the eminent domain process is not followed precisely, and the City
has to start the process over, these appraisals are no longer valid and two new
appraisals will have to be obtained.
2. City Offer of Fair Market Value: Once appraisal reports are received and
reviewed, or staff valuations are complete (for properties estimated to have values
of less than $5,000), the City sends an initial Offer Letter via certified mail to the
property owner. The Offer Letter includes the Purchase and Sale Agreement with
the purchase price, timeframes, and other details of the property transaction, as
well as a deadline for acceptance, counteroffer, or rejection, which is at a
minimum, 30 days, but can last longer depending on whether successful progress
is being made.
3. City Final Offer of Fair Market Value: If negotiations plateau at a standstill,
the City must then send a “Last and Final” offer. The minimum deadline for
acceptance of this offer by the property owner is 14 days. After this deadline
passes, the City may initiate court proceedings.
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4.Possession and Use Agreement (PUA). The PUA is a last attempt that can be
proposed to the property owner to obtain possession of the property so that work
on the project can begin while the City and the property owner continue to
negotiate the purchase price and terms of the transaction. When the property
owner executes the PUA, the City deposits the amount of the City’s offer with a
title company or the court. When that deposit is made and the PUA is recorded,
the City has possession of the property interests. If the parties cannot agree to a
final purchase price, the City can continue to court proceedings to have the court
determine the purchase price (or just compensation).
Conclusion
The majority of property acquisitions are settled without the use of eminent domain. The
City has been very successful with property negotiations; however, some transactions are
more challenging than others, and some property owners may view the City as a means
for a financial windfall and hold the project “hostage” until their demands are met.
Success therefore can not be solely defined as avoiding eminent domain, if in doing so it
is at the unreasonable expense of the City’s taxpayers and ratepayers. Having authority
to use eminent domain at the start of negotiations therefore gives the City some leverage
to negotiate fair market value as “just compensation” for the property owner in exchange
for the conveyance of their property rights needed by the City.
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City Council Authorizaon 10 Days Noce of Interest Leer and Authority to Obtain Appraisal Approx. 1 to 2 weeks City Appraisal/Value Esmate Inspecon Approx. 90 Days See below Cont’d City Offer of Fair Market Value 30 days to consider Offer and further nego$a$on If agreement cannot be reached, City iniates court proceedings for Possession of needed property interests 90 Days for Owner to obtain and submit appraisal If the esmated value of the acquision is $5,000 or more, you may elect to have an independent ap-praisal done on your property by an appraiser that you choose. The City will reimburse you for the rea-sonable costs of the appraisal. So long as you provide the City with a copy of the appraisal report within 90 days of receiving the Noce of Interest Le!er, the City will provide you with it’s appraisal at that me. A0er receiving your appraisal report you can choose to submit your appraisal to be consid-ered as part of the City’s Fair Market Value determinaon. (Please note that if your appraisal concludes a value less than the value of the City’s appraisal, the City will use the City’s appraisal value) City Final Offer of Fair Market Value 14 days to consider Final Offer Are terms of Offer acceptable? Sign and return Purchase Agreement—City staff will coordinate closing Are you willing to grant possession of the property interests needed to the City while the final acquisi-on terms are negoated? Sign and return Possession Agreement YES YES NO NO Acquision terms negoated and finalized Negoaons Connue. If an agreement cannot be reached... Property Acquision City Process Overview Updated 3/4/16 Are terms of Offer acceptable? NO YES NO YES Attachment ADocuSign Envelope ID: CAFDE391-378F-4A0E-82CD-A63DCBACE42C