Category: Fair Market Value

If the government wants your property, what should it pay for it?

At a time when the State of Michigan is planning or moving forward on several high-profile construction or public works projects, the issue of eminent domain is once again in the public eye.

Eminent domain, the right of the government to seize private property (with compensation) from businesses or individuals, is a topic that never fails to raise eyebrows and emotions. One of the biggest issues surrounding eminent domain – and one of the common points of conflict that arises when the state moves to seize private property – is determining what constitutes fair compensation.

If your home, business or property stands in the way of an important government project like the Gordie Howe International Bridge, what level of compensation are you legally entitled to? How is that compensation calculated, and what additional factors need to be considered?

What constitutes fair market value when conditions of sale are pegged to a specific time in which the market is skewed – when it’s in a downturn like 2009, for instance? On a long-term basis, this isn’t a problem for those who aren’t immediately interested in divesting themselves of property. If you could wait until the market went up, periodic market fluctuations would be less of a concern. The market during the 2009 recession raised the issue of if and when the market would ever return to the numbers of only a few years before.

In some respects, we’re dealing with valuation challenges today based on circumstances that are 180 degrees different than in 2009. The question now is whether the market in certain areas can remain so high. Consider the housing market has increased in value by over 40 percent in the last four years. At the same time, Detroit’s vacancy rate has diminished by 65 percent or more in the last two years.

On the surface, this might seem like a good thing for property owners subject to an eminent domain proceeding. A healthy market leads to higher prices, but that isn’t the whole story.

Businesses and individuals who own property being acquired for the Gordie Howe International Bridge or the Saginaw Trail Pipeline, for example, are facing a new challenge: there are few similar commercial buildings available for them to move into. Owners (particularly those who own industrial or manufacturing facilities) who could find properties similar enough to modify and move into only six or eight months ago, now have no comparable locations to move to, which maintain necessary cranes, ceiling heights or zoning. The market has dramatically changed, owners simply don’t know what to do.

As recently as 15 months ago, many sales were priced at about 50 percent of present value. Realistically, individuals are not rushing out to buy property right now, given the premium placed upon storage and industrial warehouse facilities. Yet owners generally have between seven months and two years to move in today’s market. Given these time constraints, a substantial problem arises: How do you deal with owners who have nowhere to move?

It’s important to remember that the legal definition of market value includes stipulations that value should be determined based on “what the property would be reasonably worth on the market for a cash price, allowing a reasonable time within which to effect a sale.” Additionally, it presumes a “…prudent seller, at liberty to fix the time and conditions of sale” and an owner who is “not obliged to sell,” and a buyer who is “not obliged to buy.”

In other words, “the reality of an expedited dispossession of a property owner caused by accelerated acquisition schedule will destroy the viability of fair market value because fair market value contemplates allowing a reasonable time within which to affect the sale.”

The standard valuation process recognizes that real estate transactions include a willing buyer and seller, in a balanced market where both sides have the time required to voluntarily transact business over a reasonable time. Today, those conditions do not exist.

When buyers are compelled to buy and sellers are compelled to sell, it skews the market and creates dysfunction. The government should give subjects of seizures as much notice as possible to buy a replacement property, and should compensate them accordingly.

Property owners who receive notice of a seizure should immediately seek professional advice from an attorney who specializes in eminent domain matters.

It might seem as if eminent domain issues aren’t relevant in other settings. However, we are no longer in a down market, and similar issues will face anyone who is compelled (by a death, medical expenses, or other financial hardship) to relocate a residence or business on short notice. The notion of compulsion can change the market in an unfavorable fashion for the existing owner.

To read more, visit Bridge Magazine.

Natural gas pipeline construction will compensate property owners

ABC 12, WJRT – Earlier this week, we told you about plans by Consumers Energy to build a new natural gas pipeline from Zilwaukee to Oakland County. Before they do that, they’re going to have to compensate 650 property owners where the pipes will be installed.

It’s called eminent domain. When authorized by the Michigan Public Service Commission, Consumers Energy will be able to dig the path for the pipeline across private property – but not before paying the land owners.

The work will start this summer in Saginaw County. Consumers will be replacing about 78 miles of pipe and rerouting 16 miles of pipeline on a new path, which has not been finalized.

“Consumers Energy representatives are talking to potentially affected customers at the time and we expect those final decisions to be made in a couple of weeks,” said Kevin Keane, of Consumers Energy.

An attorney with 45 years of experience in eminent domain issues says property owners need to be aware of their rights before signing any agreements.

“Before Consumers Energy meets with an owner about how much they will get paid, Consumers will have to prepare an appraisal on what’s being taken and make an offer not less than that appraisal value,” said Alan Ackerman.

The pipeline will cut a 60 foot wide swath along the new route and Consumers Energy will own that easement. Property owners will have a lot to think about when receiving the appraisal.

“Then each owner can choose whether to hire a lawyer at that time or can hire one earlier, but there’s a limit to what Consumers can do. They have to give people fair value,” Ackerman said.

For those who own property where the old pipeline will be dug up, depending on what the deed says, they may not get much compensation.

“The agreement for the people who already have the pipeline in place may very well say they get paid a dollar a foot,” Ackerman said.

Consumers Energy says the bigger pipeline is needed to meet natural gas demands of the future.

To see the full video, visit ABC 12.

New pipeline to impact 961 acres of ag land

Jennifer Kiel/Michigan Farmer – Consumers Energy is seeking to secure rights-of-way across all private property it needs to construct a natural gas pipeline from Flint to Saginaw.

The pipeline will upgrade to 24-inch-diameter pipe from 12- to 16-inch diameter. The project replaces portions of the existing Saginaw Trail Pipeline, originally built in 1942 on what was primarily agricultural land.

However, due to residential and commercial growth around Flint and Saginaw, 25.8 miles of the existing pipeline will be abandoned in place, and 41.9 miles of new pipeline will be installed around Flint and Saginaw, impacting 961 acres of agricultural land and involving 650 landowners in Saginaw, Genesee and Oakland counties. The Saginaw Trail Pipeline, if approved as proposed, will span 94 miles.

Consumers Energy has been communicating with landowners, local government and related organizations, and safety officials along the pipeline route through several channels, including letters, postcards and face-to-face meetings.

The company filed an application and testimony Sept. 2 with the Michigan Public Service Commission, seeking a Certificate of Public Convenience and Necessity to construct and operate the proposed Saginaw Trail Pipeline.

According to Alan Ackerman, managing partner of Michigan-based Ackerman Ackerman & Dynkowski, more than 3,000 notices were sent out to government entities, businesses, landowners and those within 500 feet of the proposed pipeline. Ackerman specializes in representing landowners in eminent domain issues and has been an adjunct professor teaching eminent domain law at the University of Detroit Law School since 1983. He now serves as an adjunct professor at Michigan State University College of Law.

“This pipeline is most likely going through, as I don’t see anyone getting in their way on this,” he says. “Someone would have to prove that there is not a public need for it, but I don’t believe they would be very successful. The Attorney General’s Office can object, but I believe that is unlikely.”

An environmental assessment for the proposed pipeline concluded that construction would have no significant adverse impact on the environment.

5-year project
Consumer Energy plans to begin construction of the Saginaw Trail Pipeline this summer if the proposal is approved and finished in five years.

According to Consumer Energy, the current natural gas landscape favors growth in its demand. The company believes increasing the diameter of the pipeline to 24 inches is in the best interest of customers, because the current transmission system is approaching its pressure and capacity limits under design peak day conditions. The pipeline is also reaching the end of its operational life.

Debra Dodd, Consumers Energy senior public information director, says the project is necessary to enhance reliability and safety for the company’s natural gas customers.

Michigan contractors for goods and services are being used whenever possible for the $636 million project. According to statement from Consumers Energy about agricultural land, open-trench construction will be used where possible and permitted. Boring of the new pipeline will be done under most roadways and where required for environmental reasons. In agricultural and farm fields, the pipeline will be buried at a depth of 4 feet.

Crop damage relief
Consumers Energy will pay 250% of crop damage (to cover four years) to affected landowners.

All farm tiles will be relocated on affected properties. Consumers Energy will repair tiles should damage occur.

Within Consumers Energy’s application it says, “In active croplands, pastures and hayfields, topsoil will be stripped to a typical depth of 12 inches over the entire construction right-of-way. Topsoil will be segregated from the subsoil excavated from the trench to ensure preservation of topsoil. Following pipeline installation, the subsoil will be returned to the ditch, and the topsoil then replaced in the area from where it was stripped to facilitate vegetation growth and crop production.”

Farm disruption, the company says, will be limited to the growing season during the year of construction. Farmland along the project route is expected to return to agricultural use after completion of construction. Agreements will be made with individual property owners of agricultural land to provide compensation for crop damages or losses.

Construction of the pipeline will typically require a 120-foot-wide construction corridor or construction right-of-way, according to the application.

Ackerman says there may be some long-term effects on soils. “It’s possible that many of these landowners don’t understand the extent of the notification they got. No one really wants to be bothered, and it’s not always a question of money. Farmers who are to be impacted should watch this project closely so they are not taken advantage of,” he advises. “Landowners will be compensated on a per foot basis for damage, but each case is individualized.”

Woodland impact
The assessment corridor crosses about 688 acres of woodland. Construction will require the removal of trees to prepare the construction workspace, which is limited to 75 feet.

Trees cleared within the temporary workspace areas will be allowed to regenerate following construction. However, Consumers Energy is required to maintain its pipeline easement to allow visual inspection of its pipeline and to facilitate pipeline repairs, if required. The new pipeline easement will permanently impact about 23.6 acres of woodland.

$134 million project
The project will cost about $134 million and will be completed in time for the winter heating season.

Construction will begin at a Consumers Energy valve site in Saginaw County south of Evon Road and continue south to a natural gas city gate facility near Vienna Road in Genesee County.

GO WIDE: The pipeline will upgrade to 24-inch-diameter pipe from 12- to 16-inch diameter.

About 20 miles of pipeline will be replaced, as well as the rebuilding of three existing city gate facilities. City gates reduce the pressure of natural gas flow necessary to transport it through the pipeline system, so it can be safely delivered via smaller distribution lines to farms, homes and businesses.

A field office for this project is located in Thetford Township at the northwest corner of North Genesee and East Dodge roads on land owned by Consumers Energy. This will allow construction crews to easily make their way north or south to perform work on the pipeline.

A copy of Consumers Energy’s application may be reviewed on the commission’s website or at the office of Consumers Energy Company. For more information on how to participate in a case, contact the commission at 517-284-8090. Additional questions about the project can be directed to Consumers Energy at 844-502-9014.

MDOT files to take church for Gordie Howe Bridge project

John Gallagher/The Detroit Free Press – The State of Michigan has filed what appears to be the first lawsuit against a large property owner in southwest Detroit’s Delray district to acquire land for the planned Gordie Howe International Bridge.

The so-called condemnation lawsuit filed this week revealed that the Michigan Department of Transportation offered $411,000 to buy the First Latin American Baptist Church at 6205 W. Fort St. in a “good faith offer” on July 25.

Alan Ackerman, a Bloomfield Hills attorney representing the church, said the offer was too low because the church needs at least $2 million to relocate to a new site nearby and improve it to the same condition as its current location.

Since the church refused the MDOT offer, the State of Michigan filed suit this week to take the property. Under the state’s eminent domain law, the amount to be paid will now be determined in court.

“MDOT is working with the church to provide ample time for relocation prior to the state taking possession of the property,” said MDOT spokesman Jeff Cranson in an e-mail. “MDOT will continue discussions with the church on acquisition issues in hopes of reaching agreement.”

The condemnation lawsuit marks the first of what is expected to potentially be a rash of such legal squabbles over how much MDOT must pay for land in Delray for the Gordie Howe Bridge and its approaches, a U.S. Customs and Border Protection inspection plaza, and connections to I-75.

State officials have said they need to purchase an estimated 673 parcels in Delray for the bridge project at a projected cost of about $370 million. Good faith offers have already been made to a majority of the property owners, many of whom own small residential parcels.

But one of the biggest battles may still lie ahead. The state needs to acquire some portion of a 42-acre trucking terminal at 7701 W. Jefferson that is owned by Ambassador Bridge owner Manuel (Matty) Moroun and his family. Moroun’s son, Matthew, said recently the company would fight any attempt by MDOT to take its property for the Gordie Howe Bridge that will compete with the family’s Ambassador Bridge.

The Gordie Howe International Bridge remains in planning stages. Canadian authorities in charge of the massive project estimate it will open to traffic in late 2020. But delays in moving forward may push that completion date out beyond that.

Morouns aren’t done trying to block Gordie Howe bridge

John Gallagher/The Detroit Free Press – The Moroun family that owns the Ambassador Bridge could soon launch a few legal Hail Marys to try to block or delay the rival Gordie Howe International Bridge — including possibly arguing that the Michigan Constitution prohibits using eminent domain to seize private property for a Canada-led project.

The Moroun family business,  which owns land in the path of the new bridge in the Delray neighborhood,  has multiple legal strategies it could present. It could argue broadly about problems with eminent domain or try to delay MDOT’s seizure of the family’s Delray land, where they run a trucking operation.

John Mogk, longtime professor of development law at Wayne State University, said that under Article X, Section 2  of the Michigan Constitution, Michigan governments can take land under eminent domain for a “public use.” Transferring private property to the Windsor-Detroit Bridge Authority, an entity set up by Canada’s government to manage the bridge project, arguably might not fit the definition of a Michigan public use, he said.

“This is a stretch. I’m not saying if I were on the bench I’d agree with this,” Mogk said, explaining that it was just one potential argument the Morouns might raise. MDOT, he said, could counter that the bridge will be half owned by Michigan and therefore the project fits the definition of a public use.

Matthew Moroun, son of family patriarch Manuel (Matty) Moroun, said this week his family’s bridge company would continue to fight the Gordie Howe Bridge, though he declined to reveal any specific legal strategies.

“We never intended to give up our property without a fight,” he told the Free Press this week. “If they throw a punch we’re going to hold up our hands and defend ourselves.”

For example, the Morouns might contend that moving the trucking operation the family owns in the Delray neighborhood that sits in the path of the planned bridge would be so costly that it would take far longer than currently estimated by the state, ensuring more delays.

Every day the rival bridge is delayed means more business for the Ambassador, which is the only above-ground crossing between Windsor and Detroit. The tunnel under the Detroit River is not suited for truck traffic, so quite often the Ambassador is the only game in town for international truckers and cargo.

Truck terminal

The Morouns, who have fought the Gordie Howe project for many years with lawsuits in the U.S. and Canada, intend to go on battling.

Protecting their land in Delray against seizure by MDOT could be the latest strategy.

On that land, the Moroun family’s Central Transport operates a truck terminal on the 42-acre site at 7701 W. Jefferson. The approaches to the planned bridge must cross their land on the way to the U.S. Customs and Border Inspection plaza to the north. It took years for a bi-national study group to select the route and moving the planned bridge now could add years to the project.

On any given day, dozens of the company’s yellow Central Transport truck trailers are lined up at truck bays at the terminal, transferring shipments for customers such as Walmart. Uprooting that operation, if that is what MDOT determines is needed, would involved paying not only for buying the land but transferring the operation to a suitable new location.

The showdown over the terminal has been expected since 2010, when the Morouns purchased the site from another trucking concern and moved their operations there from Romulus. There has been open speculation ever since that the Morouns were placing their operation intentionally in the path of the future bridge project.

Public use or economic development?

Mogk said another potential Moroun argument might run like this: the Gordie Howe bridge project is less a public use than an economic development project, since planners tout the thousands of construction jobs and increased efficiency of cross-border trade.

That might prove a crucial distinction because a 2004 Michigan Supreme Court ruling known as Wayne County v. Hathcock bars governments in Michigan from taking land from one private owner and transferring it to another private owner just to stimulate economic growth.

Mogk said these were just possible lines of arguments. “The arguments are a bit stretched,” he said. “I’m not sure that they will prevail.”

But that may not be all. Alan Ackerman, a Bloomfield Hills-based attorney who represents property owners whose land is being taken by governments under eminent domain, cited a third possibility. The fate of a little-known industrial railroad line running alongside the Moroun truck terminal might create a legal roadblock.

The Delray Connecting Railroad Co. is operated by U.S. Steel to service its steel plant on nearby Zug Island.

MDOT cannot simply seize the land on which the railroad runs, Ackerman said, since railroads are regulated by the federal government, not state governments. If MDOT needs that land — and it’s not immediately clear that it does — it would have to petition the federal Surface Transportation Board to vacate the line first.

It’s also likely that various federal departments and agencies, including Homeland Security, would have to give permission for the railroad to continue to operate beneath the Gordie Howe Bridge. But when or if that decision might be made is not known.

Whatever legal arguments the Morouns offer, even if defeated in court as it has been in its other lawsuits, the family could profit by delaying the bridge project. Each year’s delay in opening the Gordie Howe Bridge means tens of millions of dollars in toll revenue for the Morouns’ Ambassador Bridge.

Andy Doctoroff, Gov. Rick Snyder’s point man for the Gordie Howe project, said late last week that MDOT, working with Canadian officials, believes that all the land needed for the project will be available in a timely fashion to not delay construction.

This week, MDOT released a brief statement declining to comment on the Morouns’ possible legal arguments.

“Legal disagreements are best discussed in court and not in media stories,” the statement said. “The State of Michigan is confident in its approach to this project, however, and will gladly explain that in court when appropriate.”

He saw his land go, and now VDOT wants dough

Imagine losing land to the state so it can build a road, then being told to return $158,000 because, on second look, the government says the property was worth less than it thought.

That’s the scenario facing James and Janet Ramsey in their legal fight against the state highway department. The case, which goes to trial Monday in Circuit Court, highlights what eminent domain lawyers say is a common practice by VDOT to pressure property owners into settling.

What VDOT does is allowed by law. James Ramsey, a retired Virginia Beach city employee, called it appalling.

“You can’t buy something and go back five years later and say you want half your money back,” said Ramsey, 65. “For them to pull a trick like that is just outrageous.”

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