Inside Track: Foxconn and Eminent Domain: Using Blighted Property Designations to Redevelop Land:

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  • Inside Track
    July
    18
    2018

    Foxconn and Eminent Domain: Using Blighted Property Designations to Redevelop Land

    Sara K. Beachy

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    The Village of Mount Pleasant recently declared a large swath of land as "blighted" property, making way for the Foxconn development. In this article, attorney Sara Beachy explains blighted property law in the context of this project.
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    July 18, 2018 – The 2,800-acre, four square-mile future home of Foxconn has now been designated as “blighted.” The blighted zone, also designated as a redevelopment area, includes thriving farms and at least one family’s newly-built dream home. How can this happen?

    Redevelopment and blight designations allow a municipality to finance a redevelopment project by issuing bonds. The bonds, exempt from state and federal taxes, could save a municipality millions.1 In addition, these designations pave the way for the use of eminent domain to acquire the properties needed for the Foxconn project.

    What is Blight?

    In 2005, the U.S. Supreme Court’s decision in Kelo v. City of New London2 galvanized property rights advocates and state legislatures concerned over government overreach in eminent domain. In Kelo, the Court upheld a city’s condemnation of a non-blighted property to transfer to a private corporation for redevelopment. A national discussion ensued.

    Sara K. BeachySara K. Beachy is an eminent domain and commercial litigation attorney at Axley Brynelson LLP, Madison. She is one of the authors of recently published State Bar of Wisconsin PINNACLE® book, Condemnation Law and Practice in Wisconsin (2d ed. 2018). Reach her by com sbeachy axley email or by phone at (608) 283-6763.

    In the wake of Kelo, the Wisconsin Legislature enacted Wis. Stat. § 32.03(6).3 Under that statute, properties that are not blighted cannot be condemned if the condemnor intends to convey or lease the acquired property to a private entity.

    If the condemnor intends to convey or lease blighted property to a private entity, the condemnor must also make certain written findings. These include the scope of the redevelopment project, a legal description of the redevelopment area, the purpose of the condemnation, a finding that the property is blighted, and the reasons for that finding.4

    What is blight? Under Wisconsin law, blight generally refers to properties that are “substandard” or “deteriorated” and are detrimental to public health or safety. This definition is used throughout Wis. Stat. Chapter 66 in the Blighted Area Law5 and Blight Elimination and Slum Clearance Act,6 as well as the Tax Increment Law,7 which governs the creation of redevelopment and tax incremental financing districts.

    The condemnation statutes in Wis. Stat. chapter 32 contain a similar, but slightly different definition of blighted properties.8 To the extent those definitions conflict, it is not clear which definition would govern.

    But the Foxconn area blight designation rests on another, broader definition of blight contained in the Blight Elimination and Slum Clearance law. This broader definition includes areas or properties that are “predominantly open” and which “because of obsolete platting, diversity of ownership, deterioration of structures or of site improvements, or otherwise, substantially impairs or arrests the sound growth of the community.”9

    Once a municipality completes the steps to declare a redevelopment area blighted under these statutes, the condemnor is free to start condemnation proceedings to acquire the properties. Those proceedings are to be “conducted in accordance with ch. 32,” the statutes that govern most exercises of eminent domain.10

    Courts have long upheld the taking of private property to remediate blight. In a 1954 decision, Berman v. Parker,11 the U.S. Supreme Court held that the taking of private property to remediate blight satisfied the public purpose requirement.

    The Wisconsin Supreme Court reached the same conclusion in David Jeffrey Co. v. Milwaukee,12 decided shortly before Berman.

    You Might also be Interested in …

    Condemnation Law and Practice in Wisconsin (2d ed. 2018). This book, published by State Bar of Wisconsin PINNACLE®, is most comprehensive resource available on the condemnation process, start to finish. Topics include: public policy behind condemnation; procedural details; costs and compensation; parties’ rights; remedial options for those affected by condemnation.

    What if My Property isn’t Really Blighted?

    Controversy over blight isn’t new. The Greenfield Crossings redevelopment project ground to a stop in Greenfield in 2010 after vocal objections from business owners and residents over blight allegations.13 That same year, the City of Oak Creek halted plans to designate 94-year old Earl Giefer’s 25-acre farm as blighted for a redevelopment project after public outcry in local media outlets and at city council meetings.14

    But Wisconsin courts have upheld the taking of non-blighted properties in otherwise blighted areas in as far back as 1954. In David Jeffrey, the state supreme court upheld the taking of vacant farm land in an otherwise blighted area.

    The court noted that the law is directed against blighted areas, not individual structures. The court concluded, “[t]he necessity for acquiring vacant parcels and unoffending buildings within a blighted area to effectuate a sound workable plan of redevelopment is obvious.”15

    In 1996, the Wisconsin Court of Appeals reached a similar result in Grunwald v. Community Development Authority of the City of West Allis.16

    Grunwald owned a one-story commercial building occupied by two tenants with long-term leases. The court affirmed the lower court’s finding that the redevelopment area was blighted, despite conflicting expert opinion, and that it was necessary to take Grunwald’s property, though the property was not itself blighted.17

    Owners wishing to challenge a blight determination can use the electoral process, voice their objections at public hearings and meetings regarding the blight designation, enlist the media, and raise public awareness. Opponents of the Foxconn area blight proceedings have done all of these things.

    Once the condemnor starts proceedings to condemn a property, an owner may also file a “right-to-take” challenge under Wis. Stat. section 32.06(5).

    Grunwald unsuccessfully opted for this course in Grunwald. But that action must be filed within 40 days of service of a jurisdictional offer. Owners taking this course need be mindful of the strict time limits and procedural requirements.

    In June, the Wisconsin Supreme Court clarified that owners cannot challenge a blight determination through a declaratory judgment action. In Voters with Facts v. City of Eau Claire,18 the plaintiffs challenged the city’s approval of a redevelopment project which relied in part on funds derived from tax incremental districts.

    Following a detailed discussion, the court concluded that a blight determination is an exercise of police power and a legislative determination, and therefore not appropriate for declaratory review.19

    Instead, the court remanded the action for common law certiorari review with instructions to review the municipal record. For better or worse, the common law certiorari review standard is deferential.

    The lower court’s review will be limited to whether: 1) the city kept within its jurisdiction; 2) it proceeded on a correct theory of law; 3) it acted arbitrarily, oppressively, or unreasonably and represented its will and not its judgment; and 4) the evidence was such that it might reasonably make the determination in question.20

    Blight Provisions in Chapter 32

    But that isn’t the end of the discussion for owners of single family homes. As mentioned earlier, once a municipality has designated a redevelopment area as blighted, the municipality is free to condemn the properties in the area. Those procedures are governed by chapter 32.

    This brings us back to the statutory protections in chapter 32 enacted after Kelo. Opponents of the blight designation for the Foxconn project have pointed to Wis. Stat. section 32.03, titled “When condemnation not to be exercised.” That section provides in part:

    Property that consists of only one dwelling unit is not blighted property unless, in addition, at least one of the following applies:

    1. The property is not occupied by the owner of the property, his or her spouse, or an individual related to the owner by blood, marriage, or adoption within the 4th degree of kinship…

    2. The crime rate in, on, or adjacent to the property is at least 3 times the crime rate in the remainder of the municipality in which the property is located.21

    The above statutes are interesting for at least two reasons. First, they were enacted in 2006, more recently than the blight provisions in chapter 66. Second, in contrast to the broad blight definition in chapter 66, the chapter 32 provisions apply to properties, not areas.

    Conclusion

    Blight and condemnation law are nuanced, and this article only scratches the surface. It’s far from clear how the statutes discussed above interact, and no Wisconsin court has addressed that issue. The issue could factor in the dispute over the single family homes in the Foxconn redevelopment area.

    Endnotes

    1 Rick Romell, Village of Mount Pleasant declares Foxconn area as blighted, may use eminent domain to take properties, Milwaukee Journal Sentinel (June 5, 2018).

    2 545 U.S. 469 (2005).

    3 See Hugh Braun, Wisconsin’s Response to Condemnation for Economic Development, Wis. Lawyer, vol. 80, No. 9, Sept. 2007.

    4 Wis. Stat. § 32.03(6)(c).

    5 See Wis. Stat. § 66.1331.

    6 See Wis. Stat. § 66.1333.

    7 See Wis. Stat. § 66.1105.

    8 Wis. Stat. § 32.03(6)(a).

    9 See Wis. Stat. §§ 66.1333(2m)(b)3.-(bm); 66.1105(2)(ae)b.

    10 Wis. Stat. § 66.1333(5)(b)1.

    11 Berman v. Parker, 348 U.S. 26 (1954).

    12 David Jeffrey Co. v. Milwaukee, 267 Wis. 559, 66 N.W.2d 362 (1954).

    13 Tom Daykin, Greenfield drops plan that included possible eminent domain action, Milwaukee Journal Sentinel (Sep. 22, 2010).

    14 Mark Schaaf, City uproots idea to acquire farm, FranklinNow (Jun. 1, 2010).

    15 David Jeffrey, 267 Wis. at 585.

    16 Grunwald v. Comm. Dev. Auth., 202 Wis. 2d 471, 551 N.W.2d 36 (Ct. App. 1996).

    17 Id.

    18 Voters with Facts v. Eau Claire, 2018 WI 63.

    19 Id.

    20 Id.

    21 Wis. Stat. § 32.03(6)(a).




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