Landgrabs under assault

Landgrabs under assault

Supreme Court ruling could change the rules for eminent domain; Columbia,
Nets, West Side plans endangered

Crains
By Andrew Marks
Published on January 17, 2005

When Anne Whitman saw Columbia University's model for its planned campus
extension into West Harlem at a community meeting last spring, she was more
than a little shocked. The school's first project, and the centerpiece of
its proposal, was a building on Broadway and West 129th Street housing a
biotechnology research facility. It wasn't Columbia's desire to build a
science center in Manhattanville that surprised Ms. Whitman, the owner of
moving company Hudson North American, but its location.

"My business is right where their front door is," she says.

The fact that she'd already told Columbia representatives she wasn't
selling hadn't deterred the private university from including her property
in its plans. That's because the university expects the state to invoke
eminent domain to force out any recalcitrant owners to make way for its
real estate project.

Columbia's uptown expansion, like Forest City Ratner's proposed Nets arena
and development in downtown Brooklyn and the massive plans for
Manhattan's far West Side, is counting on the broadest interpretation of
eminent domain to acquire critical real estate.

But even as these three private developments have thrust the issue into the
spotlight, changes are afoot that legal experts and city real estate
insiders alike say could undermine those plans. "New York state has
expansive eminent domain powers, but there's legal pressure coming from
outside the state that could rein in its aggressive use of condemnation in
the name of private redevelopment," says Robert Von Ancken, executive
managing director of Grubb & Ellis, who has worked with property owners and
developers on many eminent domain cases.

A nationwide wave of public opposition and legal criticism has led to
several court rulings that have narrowed the prescribed use of eminent
domain in some areas of the country. The true test is likely to come in
June when the U.S. Supreme Court is expected to rule on an eminent domain
case in which the city of New London, Conn., condemned land for a new
Pfizer Corp. plant. The decision could have vast repercussions for New
York's permissive eminent domain rights.

"The Supreme Court taking the Connecticut case will change the landscape
for the abusive and unfair way eminent domain is exercised in New York,"
says Norman Siegel, former head of the New York Civil Liberties Union, who
is representing community groups both in Manhattan and in Brooklyn who are
challenging the Columbia and Forest City Ratner projects.

The power of eminent domain, which allows the government to take away
privately held property in the name of public use--such as parks, schools
or roads--is a state right guaranteed under the "takings clause" of the
Fifth Amendment, as long as there is "just compensation." A 1954 Supreme
Court ruling broadened the definition of "public good" to include "public
benefit," such as when a private project would result in increased tax
revenues or job creation.

Both the state and New York City have aggressively taken advantage of the
public benefit ruling to clear the way for privately developed megaprojects.
Eminent domain was instrumental in building Lincoln Centerand more
recently in revitalizing Times Square. In the last two years, the state
initiated condemnation proceedings to obtain property for The New York
Times Co.'s new home in midtown, as well as for the Durst Organization's
Bank of America tower on Sixth Avenue.

Plans going forward

The city, the state's economic development agencies and the private
developers involved would not comment on the likelihood of using eminent
domain for the three new projects. However, an attorney who is providing
outside counsel to the Empire State Development Corp. claims the pending
Supreme Court decision has had no impact on plans to use eminent domain in
either the Columbia or Brooklyn developments.

"The Supreme Court's taking the Connecticut case is making people very
apprehensive here," he says. "But those projects that are in the pipeline
will go forward."

Lawyers disagree as to how broad the Supreme Court's ruling is likely to be
and whether it will have an impact on the way New York uses eminent domain.
Currently, public agencies in the state have great latitude in interpreting
what constitutes blight and therefore most eminent domain actions fall into
the category of public good, not public benefit.

"The (three) projects will invoke eminent domain for reasons of blight
elimination," says Charles Webb, a partner at Berger & Webb who often
represents the state in eminent domain cases. "The question the Supreme
Court will consider is narrowly focused on whether eminent domain can be
used in the name of economic benefit to the public."

But Robert Goldstein, a partner at Goldstein Goldstein Rikon & Gottlieb,
who represents both condemners and condemnees, says the court "might very
well expand the scope of its decision to include how states define blight
as well."

Noting the pro-private property stances of many Supreme Court justices, Mr.
Goldstein believes the court may call for heightened scrutiny at the state
judicial level to determine whether the public good is the primary
beneficiary in a given eminent domain case.

Opponents of the three major projects, however, aren't sitting idly
awaiting the highest court's decision. Instead, they are actively trying to
win their case in the court of public opinion. Observers say the toughest
battle will be in Brooklyn. Bruce Ratner, the owner of the Nets and the
force behind the arena development, is a veteran of eminent domain battles,
having weathered opposition to developing MetroTech in Brooklyn with the
help of state condemnations.

Strong support

Mr. Ratner also has local political support. Borough President Marty
Markowitz, who declined interview requests, has spoken strongly in favor of
Mr. Ratner's plan and its promise to create new jobs and housing.

Even the local community board chairmen are backing the project, despite
local opposition. "We're fighting a real uphill battle here," says Gustave
Von Peebles, a local resident whose apartment is in the 13 acres of
privately owned property Forrest City wants to demolish.

It's a very different story in Manhattanville, the strip of West Harlem
from West 125th to West 133rd streets between Broadway and 12th Avenue
that Columbia has earmarked for its new campus. The local business
community and politicians are united behind the six holdout property
owners, who have organized as the West Harlem Business Group.

"Columbia must pledge not to use eminent domain against the West Harlem
Business Group if it wants the support of the Harlem business community,"
says Marita Dunn, chairwoman of the Manhattan Area Community, a group of
50 Harlem businesses.

The local community board voted 29-0 to oppose the use of eminent domain,
and Manhattan Borough President C. Virginia Fields, who is trying to bring
the two sides together to broker a compromise, says, "Columbia and the
state need to publicly say that eminent domain is off the table."

University officials have said that invoking eminent domain would be a last
resort and there have been indications that Columbia's architects are
working on an alternative plan that might allow existing businesses to
remain. "I'll be surprised if some sort of compromise isn't worked out,"
says the attorney working with the ESDC.

It's unclear how effective opposition will be in the area affected by the
proposed development of Manhattan's far West Side. The political muscle
behind the plan from both Albany and City Hall is considerable and will
only grow, should New York win the bid for the 2012 Olympic Games.

Ms. Fields, however, intends to weigh in on the side of the owners
threatened by the condemnations. Federal Express, which has spent more than
$50 million on a building it leases in the area, has announced its
intention to fight any eminent domain action.