EMINENT DOMAIN CLASHES RISE WITH POPULATION
Clashes of eminent domain rise with population
As property values rise and a growing state population demands infrastructure, the agency is trying to address the need to complete projects with the lengthy — and often emotionally distressing — eminent domain process.
After more than 30 years in Denver, Reed Art & Imaging is moving its custom print shop to Lakewood. Such a move would typically mean expansion or prosperity for a business, but it is quite the opposite for the Reeds. They say they were forced to leave and now fear they may go out of business.
The family business’ parking lot was taken in an eminent domain deal for the expansion of Federal Boulevard — one of several major construction projects in the Denver metro area that are spurring an increase in right-of-way land acquisition. Without a secure and easily accessible loading area for customers’ large pieces of artwork, the business cannot function, the Reeds said.
“It’s painful,” said founder and owner Bob Reed. “The fact that we didn’t shut our doors is a blessing, but it didn’t come easy.”
As Colorado’s economy grows and property becomes more valuable, land acquisition is on the rise, too. And it’s getting expensive.
The Colorado Department of Transportation’s land acquisitions are increasing, and its costs in the Denver area are exploding. As property values rise and a growing state population demands infrastructure, the agency is trying to address the need to complete projects with the lengthy — and often emotionally distressing — eminent domain process.
Acquisitions of commercial and residential properties by CDOT and local agencies across the state increased 21 percent from 2008 to 2016, the department said. But CDOT has stepped up its share of the activity significantly. CDOT acquisitions more than tripled from 185 in 2008 to 582 in 2016.
And while the cost of the process fluctuates, ranging anywhere from $14.6 million to $35.9 million, the number and expense of the Denver-area acquisitions has exponentially increased with new projects, according to CDOT.
Since 2014, more than half of CDOT’S annual acquisition costs have been for Denver-area properties, while from 2008 to 2013 the metro area accounted for an average of just 5 percent of those costs.
The Denver metro area’s property values are on the rise, but CDOT is doing more with less, according to Josh Laipply, the department’s chief engineer. He said CDOT officials are not able to do as much as they would like in Denver because it’s too expensive, and more acquisitions are needed as the area becomes more densely developed.
“We spend a lot more of the budget on the area as property values increase, and that takes away from the amount of infrastructure that we can build,” Laipply said. “Projects in the metro area are condensed. … Right-ofway costs often increase quicker than the state can design projects.”
With property values going up, landowners and businesses are less inclined to go down without a fight. Few of these negotiations see a judge or paperwork. Most hire a lawyer to negotiate for a higher value.
“Almost all of the cases that get filed are because there are some unique features of the property that make it difficult to value,” said Don Ostrander, an attorney hired by the Reeds who has represented the government and landowners in Colorado eminent domain cases for 35 years.
Typically, disputes arise when the state or governing agency does not recognize unique features of properties that are difficult to value — similar to what happened to the Reeds and what could happen with unique properties in the way of the National Western Center’s renewal and expansion project
Ostrander said his firm has seen an increase in condemnation disputes in recent years, correlating with RTD’S Fastracks metrowide mass transit project, and the expansion of Interstate 70 in northeast Denver and Federal Boulevard in southwest Denver.
These acquisitions have become more costly, Laipply said, particularly in industrial spaces that are being used by the growing recreational marijuana industry.
“The industrial prices in Colorado have really skyrocketed,” he said, adding that many parcels in industrial areas are located near interstates, one of CDOT’S major priorities.
The price to move from the seized location is skyrocketing as well. The Reed family’s plight to find a new, custom, 24,000square-foot space to make huge works of printed art was going to be difficult in the first place — particularly as their available cash hung in the balance of city negotiations — but it became nearly impossible when each property they placed an offer on was snatched up by another buyer the same day.
“Timing became incredibly difficult,” said Kim Reed, president of the company and son of the owner. “We only had a few months to find a building. This whole time, I’ve been telling people that there’s a really good possibility that we’ll go out of business.”
Part of the problem is the bureaucratic procedures that agencies have to go through in order to acquire the land and relocate owners, Laipply said. Even when the owner is in favor of relocation, they have to wait for CDOT committee approval.
“It’s a question of if government process can keep up with how fast the market moves,” Laipply said.
“This is always such a sensitive area, and you want it to be difficult,” Laipply said, referring to the due diligence that government must complete in taking properties. But, he said, state laws on eminent domain are antiquated and stretch out the process. Assistance for relocation is particularly complex.
The Reeds appealed for relocation benefits. They argued for nearly two years that their business was inoperable without a large parking lot. They lost. Ostrander said this is not uncommon for unique pieces of property. He described the state laws that govern relocation benefits as cookiecutter.
“The (state) law is written in a way that doesn’t cover this type of circumstance,” Ostrander said. “There should be a lot more flexibility.”
Landowners are entitled to fair market value when CDOT seizes property, which is typically determined by an appraisal. Those who need to relocate their business or home are entitled to reimbursement of moving and relocation costs — but eligibility “depends on the situation,” according to CDOT Right of Way manager Christine Rees.
After CDOT’S decision to withhold the relocation package from the Reeds — which came about a year after they received their first letter from the department — they wanted to go to court. But they would have had to wait almost another year to get a court date — time they didn’t have as they were trying to vacate their current property and buy a new facility. So they settled with the city, which was acting in partnership with CDOT, for about $1 million.
According to several attorneys, the Reeds were lucky. As a wellestablished, high-end business, they had the resources to appeal.
“My perspective is that the law and court system tends to favor the government more than the individual landowner,” said Michael Mccormick, an eminent domain lawyer with Montgomery Little Soran & Murray who represented the Reeds in part of their case. “Landowners are isolated and typically do not have adequate resources to take on the government in expensive eminent domain litigation.”
It’s a “tough road” for landowners who vie for limited relocation assistance funds, Mccormick said. The Reeds estimate that the process, including the move to Lakewood, will cost them about $693,000 out of pocket.
But for some, the system works — as well as they could expect it to.
Don Callarman moved near I-70 between 46th and 47th avenues in 2009. Almost immediately after he moved into his rental property, he began to hear that the I-70 project would force him to relocate.
“For the first five or six years that I moved there, I was essentially in limbo,” Callarman said.
Callarman said he was fairly compensated after the move — CDOT provided a down payment on a house and covered all his moving expenses — but the process was slow and stressful. He waited five years to get his acquisition letter that provided details and official notice.
“I’m almost 80 years old,” Callarman said. “The move was not quite traumatic, but I was not planning to move. I was waiting and wishing it was quicker, so the long wait was kind of rough.”
“There are many steps the city takes to ensure people are fairly compensated and property owners are entitled to appeal during the process,” city of Denver spokesperson Heather Burke wrote in a statement to The Denver Post, citing door-to-door outreach and public meetings.
But Bob Reed went so far as to call these meetings a fox in sheep’s clothing, and his son, Kim, said the system is stacked.
“It doesn’t matter if we’re unique,” Kim Reed said. “Denver shouldn’t be in the position to put people out of business.”
Laipply said state and city officials work hard to be fair.
“We’re always looking for better ways to streamline those processes,” he said.