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Business Observer Friday, Oct. 10, 2003 15 years ago

Land Grab

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Claiming Murdock Village is blighted, Charlotte County plans to purchase 3,000 largely undeveloped lots through condemnation. Is it constitutional?

Land Grab

Claiming Murdock Village is blighted, Charlotte County plans to purchase 3,000 largely undeveloped lots through condemnation. Is it constitutional?

By Sean Roth

Real Estate Editor

It started like every other Charlotte County town hall meeting, but before it was over - shouts, insults, accusations and threats were flying. The meeting got so raucous that a debate ensued over whether a tape of the event should be aired on the local cable television station. That meeting was a small peek into the brouhaha brewing over a redevelopment project.

Murdock Village, a small community in Port Charlotte, is on the frontlines of a national debate over property rights. Landowners and critics say the county is stealing property to make it easier for developers. County officials say they have no choice and the county's economic future is at stake.

The standoff stems from a redevelopment plan for northwest Port Charlotte. In November 2000, Charlotte voters approved a referendum for a one-cent sales tax, collecting $3 million to develop a master-planned mixed-use business park on 125 acres in the West Murdock area. The Urban Land Institute in Washington, D.C., conducted an economic study on the area that showed the property could be redeveloped.

A year later, county commissioners asked planners to expand the project's scope. Another study was conducted on 1,100 acres in the West Murdock area. That study, conducted by Orlando's Real Estate Research Consultants, reported the entire section was in dire need of redevelopment. The consultant found that the area's deterioration was such that it was "materially injurious to the both the area's and community's overall sustainability."

In May, Charlotte commissioners, in a 4-0 vote, designated the 1,100 acres as blighted and renamed the area Murdock Village. The commission declared the neighborhood, a Community Redevelopment Area (CRA), and approved a plan to acquire all the property at an estimated cost of $65 million. Once the county owns the property, it plans to sell the land to a developer, which would build a new town center and commercial/residential project.

The county decided to assess the properties and offer all the property owners full market value. But when a landowner declines to sell the property, the county would have the option to take the property based on eminent domain.

And that's what set off the contentious, emotional debate.

Legal ground

The heart of eminent domain law is that the government must prove that the land is being taken for public use. The Fifth Amendment of the U.S. Constitution, which specifically addresses eminent domain, states "nor shall private property be taken for public use, without just compensation." But critics ask: Is it really a public use to have a private town center development?

"That is open to debate," says Jackson Bowman, a partner in the Sarasota law office of Brigham Moore LLP, which is working pro bono on behalf of Murdock Village landowners. "Our position is it is not (a public use). That is just one of our many arguments. Our position is that condemning property to eventually sell to a private party violates the federal and state constitution as written."

The Brigham Moore attorneys have made a reputation representing landowners in eminent domain cases across the state. They see themselves as part of the vanguard against economic redevelopment eminent domain abuse.

"We aren't doing this because it's a money issue," Bowman says. "Most of the time our clients don't have the wherewithal to pay large attorney bills."

Beyond the legal issue is the philosophical issue of government using tax revenue as the justification for seizing property. Critics argue that it degrades property rights; if increased tax revenue is a valid basis for taking property, then no one's property is safe. An axiom used by opponents of economic redevelopment eminent domain is that this rationale makes property owners essentially lessees until a developer comes along with a better plan for their property.

"This flies in the face of what we hold true as Americans," Bowman says. "This is going on all over the state and country. We've got to stop it. Government says, 'We don't like the way you live so we are going to take your land and pay you a depressed value for it.' "

Renee Francis Lee, lead attorney for Charlotte County, says research shows the county's decision is on safe legal ground.

While the opposition's argument can be made, Lee says: "I don't think it is an argument that can be won. We believe very strongly that this is a public purpose. I believe that the board has found that there is a public necessity for this action. The fact that a private developer is involved is somewhat the end product. This is economic development. It has been found by the Florida Legislature to fulfill a public purpose. We just want that area developed in the most effective way."

The county has hired outside eminent domain counsel Robert Gill, an attorney with the Sarasota office of Fort Lauderdale-based Ruden, McClosky, Smith, Schuster & Russell.

Tampa real estate attorney Vanessa Cohn says Florida case law supports Charlotte County's argument. "The developer is just the mechanics," Cohn says. "It has always been an objective for government to relieve blight. They (developers) are just a mechanism to get the public objective achieved. I think there are a lot of cases out there that say it is OK to use private enterprises."

As a practical matter, politics restrain governments from wholesale use of eminent domain, Cohn says. But as a legal matter, taxable income is a fair value for measuring eminent domain usage, "just as long as it is not arbitrary," she says.

It is true, Bowman says, that the courts have ruled that public use includes economic redevelopment. But he says the decisions were wrong.

"It is time to swing the pendulum back," Bowman says. "We think there are cracks forming in the statute that are so egregious that we will be successful challenging it. With Murdock Village we have tremendous facts on our side."

Geriatric money

Proponents of the redevelopment - government officials and planning consultants - say the plan is necessary because of the property's history and lack of development.

In the 1950s, General Development Corp. purchased the Murdock land. The now-bankrupt developer, which also founded the city of North Port, had platted the property into relatively small tightly grouped parcels for sale as an investment, primarily to northern retirees.

"This place was founded on geriatric money," says J. Paul Payette, manager of the county's real property services. "It is a product of the '50s. It wasn't laid out for development. It was laid out for $100 or $500 a parcel." Payette says that eventually about 2,700 people bought property in the development.

Today, most of the nearly 3,000 parcels are still vacant. Only 75 homes have been built, along with 16 businesses, three churches and three small duplexes, according to the county. Most of the property has no water, sewer or electrical service. Lack of development has caused many of the roads to be eaten up by the encroaching grass and foliage. There are at least 1,700 property owners. People from out of state own at least half of all the property, about 1,600 parcels.

Almost all the businesses are located along Tamiami Trail. They include a large Citgo retailer, A+ School Supplies, Universal Dance Academy, a retail strip center and a truck dealership called Trucks R Us. There is no business on the other two thoroughfares: El Jobean Road (also known as State Road 776) or Collingswood Boulevard. Littered throughout the community are for sale signs. County officials and consultants say the wilderness areas have become prime areas for illegal dumping.

Charlotte County Commission Chairman Matthew DeBoer, one of the plan's founders, acknowledges the redevelopment plan is a drastic step, but says it is the only way to properly redevelop the area. "This is not an unusual problem," DeBoer says. "There is over-platting all over South Florida. Port Charlotte is set to have very rapid growth in the next few years. We need to develop in a way to capture the next wave of growth. The growth rate there is just too sluggish. This is a bold political move and I credit the county commission with facing this head on. Yes, there are going to be legal challenges to this. But we feel the law does lean on our side right now."

According to the county and its consultant, the property generates about $88,000 in annual property taxes. It is unclear how much the county spends each year providing services to the area. DeBoer says: "We have outstanding infrastructure liabilities in the area of almost $35 million. Creating a town center is essential to Charlotte County and to the future of the county. Without those town centers or redevelopment, the degradation to the county would be unacceptable."

County officials argue that the hurdles to new development are too high for any private owner to change the property on his own. A developer would have to deal with a large number of property owners for even a small-scale development. In addition, over the past 10 years, land speculators have made their own money off the property - hyper-inflating purchase prices by as much as 1,000% over assessed values. Single-family lot assessments average $2,500 to $3,000, but the realty signs suggest $10,000, $20,000 or even $50,000 per parcel. County officials contend no developer would invest in the necessary infrastructure changes needed to build. Most of the properties need water, sewer and electrical service, and the roads are in need of repair. In some areas, new connector roads would be required.

DeBoer says there are no other viable options. Asked about the possibility of raising taxes on the properties to cover the additional infrastructure, DeBoer says: "That would amount to a violation of the Bert Harris Act. It would amount to an unfair taking. It's a Catch-22. It would be an about $10,000 assessment per lot. That's four to five times the value of the property. That is simply not acceptable."

Contracts purchased

The county is moving forward with the project. In March, the commission told staff to begin buying property from willing sellers. Payette hired two Realtors and an experienced real estate assistant and had a number of appraisals done at about $200 to $325 per property. The department sent letters to all property owners of record. County staffers have also been calling and visiting the properties to discuss the acquisition plans.

Most of the property owners live in other states, some are even from as far away as China and Singapore. Says Payette: "You would also be surprised at some of the prices some of these people paid for these parcels - $18,000 to $20,000 for parcels that are assessed at $2,000 or $3,000. So guess what happens when we offer them that?"

So far, the county has contracted to purchase about 550 parcels. Of those, 33 are single-family developed parcels and one commercial developed parcel. The county expects to have bought 600 parcels for about $10 million by the end of 2003. Says Payette: "We are shooting for at least 30% willing sellers." That would require the county to acquire an additional 2,000 parcels via eminent domain.

Meanwhile, the county has accepted requests for qualifications from five potential developers: WCI, Bonita Springs; The Bonita Bay Group, Bonita Springs; Lennar/US Home Corp., Sarasota; Forest City Enterprises Inc., Cleveland; and Fort Myers-based Advance Composite Technology Inc. in a partnership with Centex Rooney Construction and WilsonMiller. Plans from the companies should be submitted to the county by January.

Blighted?

But while the county is moving forward, so is the opposition.

Port Charlotte entrepreneur Bob Guariglia, owner of Bob's Lock & Alarm, has owned four vacant commercial parcels in the Murdock Village area, three of which are on Tamiami Trail, for more than 15 years.

He is fighting the redevelopment plan.

"I don't understand who can call anything on U.S. 41 blighted," Guariglia says. "(A couple years ago) I wanted to put a restaurant there. The county told me to hold off on it one year until they put in the water and sewer (service.) It never happened. Then the city said 'You can't build a restaurant or anything having to do with food service unless there is water and sewer there. We have to stop the government or it's going to tell you when you can sneeze. They offered to pay me less than I paid for two of the parcels. I'm not going to let them steal my property."

Bowman, who is not representing Guariglia, says Florida's statutes for declaring a property blighted are too simple.

Bowman contends the statutes have no time frames for eminent domain seizure and do not provide a fair sales price for properties. "Landowners are subjected to too much uncertainty," Bowman says. "The government comes in and offers the property owner a price. If the property owner says 'No,' then government says it will condemn the property. But it doesn't tell them when. Meanwhile, they (government officials) are acquiring property all around them, perpetuating the blight. The closed-down property causes property values to decrease even further. That amounts to oppressive pre-condemnation."

Critics say the plan has received little public input. The commission held only one public hearing on the entire 1,100-acre area, in which public input was allowed. That same day, May 27, the commission voted to impose the CRA plan. County officials, however, say that many public meetings were held on the concept of redeveloping the area, but those meetings were held before the area was increased by slightly less than a thousand acres. DeBoer says there have been numerous opportunities for public input on the redevelopment plan since 1998 when the first plans were floated.

Not just a local problem

Nationally, political attention on eminent domain usage is at a high. Last year, the Institute for Justice (IFJ), a Washington, D.C., Libertarian public interest law firm, founded The Castle Coalition, to fight what it perceives as eminent abuse.

"These cases are being litigated much more than they used to," says Dana Berliner, a senior attorney at the IFJ and author of "Public Power, Private Gain," a five-year, state-by-state report examining the abuse of eminent domain. "People are realizing that government has gone too far. Cities (and counties) are being more and more brazen about things they will condemn for private use. The despotic power of government to throw someone out of their homes through eminent domain is a very serious incremental power."

Although not familiar with the Murdock case, Berliner says that all the vacant land by itself should be a clear sign that eminent domain is unnecessary. "People with vacant land have a reason to sell," Berliner says. "Land speculators have a need to sell the property as well. There is no benefit to them to not sell the land. People should be able to sell their property for whatever they can get on the private market. Cities (or counties) are really acting as a real estate brokers for private developers."

She suggests that may be the county has set its obstacles to development too high. "The first thing that a city could look at is reducing the barriers to private construction," Berliner says. "Detroit uses eminent domain a lot, because they make it almost impossible to build there. Then they wonder why the only development comes from public/private partnerships."

The cost

Purchase price for the project is an estimated $65 million, or about $59,090 per acre. County marketing material says that in the end, it will cost taxpayers nothing. "The upfront purchase of the property is expected to cost $75 million (sic), but within a very short period of time the land will be sold to developers. When that occurs, the county will replace the funds it advanced for the purchase."

Robin Stublen, a Punta Gorda resident who is a member of the Castle Coalition and also a candidate for the commission District 1 seat, says the plan will cost taxpayers. "They have yet to complete an economic feasibility study. I have seen their marketing video, which shows (Commissioner) Tom D'Aprile saying the benefits will outweigh the costs. They have no clue whether it will or not. This sounds to me quite honestly like welfare for developers."

Tom Cookingham, planning services manager for Charlotte County, acknowledges there hasn't been an economic study of the entire property. But redevelopment proponents say an economic study conducted by the Urban Land Institute on 125 acres can be extrapolated for the 1,100 acres. Cookingham says the county is working with the Real Estate Research Consultants to finalize a new economic study on the entire property, which should be completed soon. However, the study is not expected to cause any major changes to the redevelopment plan; it will most likely have a greater effect on the county's negotiations with the five potential developers.

Bowman plans to file a lawsuit soon. "I think that people are fed up with this," he says. "If the constitution means anything the courts need to put a stop to this."

Guariglia has chosen a more public route. He organized a protest in front of the county administrative building last month and he plans to collect signatures to recall the commissioners. "First we will clean up the government then we will work on the courts," Guariglia says.

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