LEARN ABOUT: Municipal eminent domain authority

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By: Rudman Winchell Attorney Erik M. Stumpfel

Maine municipalities, especially smaller communities, are traditionally reluctant to exercise eminent domain authority for any purpose. However, occasions arise when a municipality seeks to acquire land or buildings for municipal purposes ranging from roads, schools, or parks to creation of a municipally-owned business park. What does the town do in such cases when the existing owner refuses to sell – either at all, or for what the municipality considers to be a reasonable price? The U.S. Supreme Court's 2005 decision in Kelo v. City of New London, 545 U.S. 469 brought new attention to this topic, in Maine and elsewhere.

The Maine Revised Statutes contain at least five provisions authorizing municipalities to acquire land or interests in land by eminent domain.

Local Highway Law

            Maine's Local Highway Law, 23 MRSA sec. 3023, 3024 and 3029 prescribes standards and procedures for municipal acquisition of land or easements for local road purposes.

            Under section 3023, a municipality may take property or interests therein for local highway purposes "if the municipal officers determine that public exigency requires the immediate taking of such property interests, or if the municipality is unable to purchase it at what the municipal officers deem reasonable valuation, or if title is defective."  The municipal officers must approve and file a condemnation order with the municipal clerk that specifies the location of the property to be taken by metes and bounds; names the record owner or owners of the property so far as can be reasonably determined; and specifies the amount of damages to be awarded as just compensation for the taking. The municipal officers then serve a copy of the order and the damages check on the affected property owners or, if the power of appropriation rests with the town meeting, the municipal officers submit the order to the town meeting in the form of a warrant article for town meeting approval.

            The town meeting may amend the damages award upward, but otherwise must approve or disapprove the order as drafted by the municipal officers. If the order is approved by the town meeting, a check in the amount of the damages award is immediately served on the affected property owners. However approved, a true copy of the order must be filed at the local registry of deeds per 23 MRSA sec. 3024, to be effective against any property owners or abutters who have not received actual notice.  Title to the property vests immediately in the municipality upon the earlier of service of the damages check or recording of the takings order under section 3024.

            Appeals are governed by 23 MRSA sec. 3029. An aggrieved property owner may appeal the municipal damages award to Superior Court for a de novo hearing. Either party is entitled to have the damages case tried to a jury. Any challenges to the underlying taking normally proceed by declaratory judgment action, and not by a direct appeal.

            In addition to roads, the same chapter authorizes municipal use of eminent domain to acquire "bridle paths and trails" under section 3151. An additional requirement under this section is that "no cultivated or improved land shall be taken without the consent of the owner and a 2/3 vote shall be required for the acceptance of such paths and trails by any town."

            Damages for road takings are governed by 23 MRSA sections 154 through 154-F.  These provisions apply equally to road takings by the State of Maine and municipal governments.

            Under section 154, damage awards must be based on the "highest and best use of the property at the date of taking", minus the remaining value of the property after the taking; both of which are to be based on "fair market value" concepts. Section 154 also provides for payment of "severance damages" when less than an entire parcel is acquired, and the taking diminishes the fair market value of the land not taken – for example, when only part of a building lot is acquired, and the remaining portion no longer meets municipal code requirements. This is an important concept in a variety of contexts.

            Section 154-A provides that any increase or decrease in the value of the property "caused by the public improvement for which such property is acquired" or by the likelihood of its acquisition for the project concerned, is not taken into account in determining eminent domain damages. For example, if a landlocked parcel with no road access is taken as part of a town road project, damages for eminent domain purposes are based on its fair market value as a landlocked parcel, and not based on its development potential after the road goes through.

            Section 154-B prohibits coercive action in negotiations to establish a price for voluntary conveyance.

            Section 154-C allows an owner to require the State or town to acquire the owner's entire parcel, if the proposed taking would leave an "uneconomic remnant". This occurs most frequently when a State controlled access highway project divides an owner's parcel, leaving a remnant parcel with no road access.

            Finally, Section 154-F allows the assessment of "special benefits" against the property owner, but only allows special benefits to be offset against severance damages awarded to the same owner. This provision assures that, at a minimum, the affected property owner will receive the full fair market value of the land or interests actually taken by the State or municipality.

General Municipal Takings Statute

          Under 30-A M.R.S.A. § 3101, a municipality may acquire real estate or easements for any public use by using the condemnation procedure for town ways. However, when proceeding under this statute, the municipality may not take any land without the consent of the owner if, at the time of the taking, the owner or the owner's family resides in a dwelling house located on the land. Additionally, land taken under this section may not be used for any purpose other than the purposes for which it was originally taken, except that land taken for a public park may be conveyed to the federal government to become part of a national park.

Community Development Statute – 30-A M.R.S.A. § 5204

          Under Maine's Community Development statute, 30-A MRSA sec. 5201 et seq., municipalities may designate community development project areas or districts and adopt community development programs where there exists deterioration, dilapidation, slum and blighted areas, dangerous buildings and incompatible use of property, which constitute a serious threat to the public health, safety or welfare of the residents, and where the threats are beyond the remedy and control solely by regulatory process in the exercise of police power. The goals of these community development programs are to redevelop and rehabilitate these blighted areas through acquisition and preparation of land and its subsequent sale or lease. These purposes are declared by the statute to be public purposes for which public money may be expended and property acquired.

            A municipality adopting a community development program is granted enhanced statutory powers within the designated area, under 30-A MRSA sec. 5203(3). Those powers include:

            "A.       Acquisition by purchase or eminent domain of any vacant or undeveloped land and of any developed land and structures, buildings and improvements existing on the land located in designated slum or blighted areas for the purposes of the demolition and removal or rehabilitation and repair or redevelopment of the property so acquired."

            Section 5204 prescribes procedures for municipal takings under the community development statute. These procedures are similar to, but not identical with, the procedures prescribed under Title 23 for local highway takings. Most significantly, community development takings under sec. 5204 are not subject to the limitations contained in 30-A MRSA sec. 3101 for other non-highway municipal takings. Specifically, a municipality may use the community development statute to acquire owner-occupied residential property, even if the owner does not consent, and use of property taken by the municipality is not restricted to the specific use for which it was taken.

            However, if the municipality disposes of unrehabilitated property acquired by eminent domain under the community development statute within ten years after its acquisition, 30-A MRSA sec. 5203(3)(E) normally requires the municipality to offer the original owners an opportunity to re-purchase the property for the amount of the original damages award. The statute makes an exception for properties that were acquired for assembly into a larger parcel consisting of what were originally three or more contiguous lots.

Municipal Development District Statute – 30-A MRSA sec. 5223(4)

            This statute allows municipalities to designate "development districts" within their municipal boundaries that meet certain statutory criteria under section 5223(3). Within these districts, municipalities may acquire land or easements pursuant to an approved development program, by purchase or eminent domain. If eminent domain is used, section 5223(4) incorporates the eminent domain procedures of the community development statute, in section 5204.

Municipal Revenue-Producing Facilities Act – 30-A MRSA sec. 5403(6)

            This statute authorizes municipal eminent domain acquisition of "land, rights in land or water or air rights in connection with the construction, reconstruction, improvement, extension, enlargement or operation of revenue-producing municipality facilities." "Revenue-producing municipal facilities" include parking facilities; water systems; sewer systems; airports; telecommunications systems; and energy facilities. Of these, only parking facilities must be located entirely within the corporate limits of the municipality. The other types of facilities listed may extend beyond the municipal boundaries.

            An unanswered question in Maine law is whether municipalities may use the eminent domain powers granted by this statute to acquire land for revenue-producing municipal facilities (other than parking facilities) if the land is located outside of the municipality concerned.

            Section 5403(6) does not specify a procedure for eminent domain takings under this statute, so by default the provisions of 30-A MRSA sec. 3101 would apply.

Federal Acquisition Regulations

            Many municipal projects receive grant funding, either directly or indirectly, from federal funding sources. Common sources of federal grant funding include, among others, Federal Aviation Administration Airport Improvement Program grants; community development block grant funding administered, in most cases, through the Maine Department of Economic and Community Development; "Rural Utility Service" grants from the U.S. Department of Agriculture (UDAG); Land and Water Conservation grants from the Department of the Interior; and U.S. Department of Transportation grant funding for local road projects, usually administered through the Maine Department of Transportation.

            Most, but not all, federal funding sources require compliance with the "Federal Acquisition Regulation" ("FAR") if grant funds are expended to acquire real estate or other property interests for grant purposes. In cases to which it applies, this imposes a procedural overlay on the municipal eminent domain authority otherwise granted by Maine law. In general, the FAR requires the municipality to (a) obtain a fair market value real estate appraisal of the property being acquired (sometimes with an additional review appraisal); (b) make a written to the owner offer of not less than the fair appraised market value for the property being concerned; and (c) leave the offer open for the period stated in the FAR; before the municipality may initiate eminent domain proceedings.

Constitutional limitations

            All municipal takings under Maine law are subject to the takings provision of the Maine Constitution. Article I, section 21 of the Maine Constitution provides as follows:

            Section 21. Private property shall not be taken for public uses without just compensation; nor unless the public exigencies require it.

            As discussed above, "just compensation" is subject to de novo review in Superior Court. In numerous decisions, the Law Court has held that "public exigency" is a legislative determination, essentially unreviewable by the courts.

            However, the Law Court has held that the phrase "public use" imposes a substantive limitation on the authority of the State or other public bodies to acquire private property by taking. As summarized by the Court in Blanchard v. Department of Transportation, 2002 ME 96, para. 29,

. . . property is devoted to public use only when the general public, or some portion of it (as opposed to particular individuals), in its organized capacity and upon occasion to do so, has a right to demand and share in the use [citation omitted]. The public has to be able to be served by the use as a matter of right, not as a matter of grace of any private party.  The use must also be public at the time of the taking, 'not only in a theoretical aspect, but rather in actuality, practicality and effectiveness, under circumstances required by public exigency' [citation omitted].

            Under this standard, the Law Court has regularly rejected, as being beyond the State's constitutional takings authority, the use of eminent domain power for purposes such as addressing private title deficiencies, correcting faulty lot layout, or compelling transfer of title to a new private owner.

            However, in Crommett v. City of Portland, 150 Me. 217, 107 A.2d 841 (1954), the Law Court recognized "slum and blight removal" as a "negative public use", thereby upholding the City of Portland's eminent domain acquisition of the plaintiff's property for the purpose of blight removal. The Law Court further held that the City of Portland's subsequent sale of the property concerned to a new private owner, following removal of the blighted structures, did not defeat the constitutionality of the City's actions, because the "negative public use" for which the property was taken had been fully accomplished. The private and special act under which Portland had acquired the property at issue in Crommett, the "Slum Clearance and Redevelopment Authority Law" of 1951 (P&S Law, 1951, Chapter 217), became the template for the current community development statute.  Notwithstanding the Law Court's Crommett decision. Article 1, Section 21 of the Maine Constitution continues as a substantive limitation on municipalities' statutory eminent domain powers and bars the use of eminent domain for the purpose of transferring ownership of property from one private owner to another private owner for a non-public use. In this important respect. the term "public use" under the Maine Constitution must be read much more narrowly than the term "public purpose". Economic development and job creation may constitute a "public purpose" sufficient to justify the expenditure of public funds, but without more cannot justify the use of municipal eminent domain powers to acquire property for anything other than a public use.

Kelo v. City of New London

            In 2005 the U.S. Supreme Court decided the case of Kelo v. City of New London, 545 U.S. 469 (2005), in which the court held gat the use of eminent domain for "economic development" qualified as a "public us within the meaning of the Fifth Amendment's takings clause. In reaching this result, the Supreme Court declared that, for purposes of federal constitutional analysis, the term "public use" has essentially the same meaning as the phrase "public purpose".  The Kelo decision does not address arguments based on the takings provisions of the Connecticut or other state constitutions.

            The controversy in Kelo arose when the City of New London, Connecticut condemned privately-owned, non-blighted real property so that it could be used as part of a comprehensive redevelopment plan that was intended to create new jobs, generate tax revenue and build momentum for a downtown revitalization project. Significant to the controversy was the City's decision to lease some property to private developers for nominal sums in exchange for agreements by the developers to develop the property.

            In determining that taking private property for economic development satisfied the "public use" requirement of the Fifth Amendment, the Supreme Court emphasized its long­standing deference to legislative judgments of what serves a "public purpose." The Court explained that it is the takings purpose, and not its mechanics, that determines public use. The Court rejected the contention that the fact that a State immediately transfers properties to private individuals diminishes the public character of the taking. Cf. Hawaii Housing Authority v. Midkiff, 467 U.S. 229 (1984) (Hawaii statute that took fee title from lessors and transferred to lessees, for just compensation, to reduce the concentration of land ownership serves a public purpose). However, because the focus was on the legislative judgment of what constituted a public purpose, the Court preserved the opportunity for states to define for themselves what constitutes a public purpose and to place restrictions on the state's exercise of the takings power.

Post-Kelo Reaction

            Resulting public outcry concerning the perceived loss of property rights protection led many state legislatures to adopt post-Kelo restrictions on state and municipal eminent domain powers. Although the Supreme Court's decision in Kelo v. New London did not alter the Maine Law Court's "public use" jurisprudence under Article I, section 21, of the Maine Constitution, the Legislature and Governor's office were not immune from the temptation to take politically popular action. Despite advice from a number of municipal practitioners that Kelo would have no impact on Maine residents' property rights, the Maine Legislature, in 2005. enacted 1 M.R.S.A. § 816 to read:

            "Sec. 816.  Limitations on eminent domain authority

1. Purposes. Except as provided in subsections 2 and 3 and notwithstanding any other provision of law, the State, a political subdivision of the State and any other entity with eminent domain authority may not condemn land used for agriculture, fishing or forestry or land improved with residential homes, commercial or industrial buildings or other structures:

a.                   For the purposes of private retail, office, commercial or residential development;

b.                  Primarily for the enhancement for tax revenue; or

c.         For transfer to an individual or a for-profit business entity.

2. Blight exception. Subsection 1 does not apply to the use of eminent domain by any municipality, housing authority or other public entity based upon a finding of blight in an area covered by any redevelopment plan or urban renewal plan pursuant to Title 30-A, chapter 201, 203 or 205, but just compensation, in all cases, must continue to be made to the owner.

3. Utilities exception. Subsection 1 does not limit the exercise of eminent domain by or for the benefit of public utilities or other entities engaged in the generation, transmission or distribution of telephone, gas, electric, water, sewer or other utility products or services. 

4. Governmental purposes not affected. Nothing in this section may be interpreted to prohibit a municipal or county governing body from exercising the power of eminent domain for purposes not otherwise prohibited by subsection."

          In subsection 2, the new statute expressly preserves the existing authority for municipalities to use eminent domain for slum and blight removal, as upheld by the Maine Law Court in Crommett. At best, therefore, the statute provides no new protections for Maine property owners, but merely codifies existing case law. However, section 816 also presents the possibility that courts asked to apply the new statute, using the traditional rules of statutory construction, may strive to give the statute independent effect, thereby inferring new substantive limitations on state and municipal eminent domain powers that go beyond the specific public concerns raised by Kelo. Like many laws adopted primarily for show, section 816 may well spawn presently unanticipated consequences.

CONCLUSION

            Whether you are a municipal manager or selectman trying to navigate through the procedural requirements for an eminent domain taking, or a landowner seeking to assure fair treatment and just compensation in taking that affects your land, it is important to have the advice of experienced legal counsel to help you through the process.