By Michael Petro, originally published in Buffalo Business First on 9/12/16.
Eminent domain played role in Buffalo stadium development
Development projects in which eminent domain is used must be to the benefit of the public. Sometimes that benefit is obvious, such as in the building of a waterline, school or putting up a municipal building.
Courts have determined that economic development projects are also deemed to be for public purpose, because they create jobs — during the construction and permanent employment afterward. They also increase the tax base and spark economic activity and spin-off development that are to the benefit of the community.
Although the power of eminent domain, in which government agencies take privately owned land in exchange for fair market value, is seldom used and mostly as a last resort, New York has taken advantage of it for these types of projects, including in the erecting of stadiums and arenas statewide. This has been considered cutting edge.
For Barclay Damon attorney Mark McNamara, one of the first eminent domain matters he handled had to do with the downtown condemnation and development of Pilot Field (now Coca Cola Field), the Bisons’ Triple-A stadium, in the mid-1980s. Less than a decade later, he worked on the process to garner land for the Buffalo Sabres arena, the KeyBank Center (formerly Marine Midland Arena, HSBC Arena and First Niagara Center).
While eminent domain has been used nationally for stadium and arena development, those projects in Buffalo are two of the larger-scale economic development endeavors in which it played a role, according to McNamara.
“We were ahead of the curve in Buffalo,” said the chairman of the firm’s real property tax and condemnation practice.
An appeals court in New York upheld Empire State Development Corp.’s use of the power of eminent domain to construct an arena in Brooklyn, the Barclays Center, as part of the Atlantic Yards development. Also, eminent domain was recently upheld by a court in the expansion of Columbia University in New York City.
Eminent domain has even received play during the presidential campaigns. When Republican nominee Donald Trump was criticized for its use in building casinos and hotels in Atlantic City, he countered by saying it was used in building the new luxurious AT&T Stadium in Dallas for the Cowboys.
“Economic development is a legitimate public use benefit and that’s been validated and upheld in a variety of cases,” McNamara said.
When a government agency needs land to achieve a public purpose project, perceived to be for the benefit of the larger good, it has the power of eminent domain, according to Phillips Lytle attorney Adam Walters. It’s well established in New York that eminent domain is available for projects such as stadiums and arenas, and he said it may be necessary if a downtown stadium project is ever taken on for the Buffalo Bills.
“We’ve built them all over the state, and almost every time eminent domain is necessary in order to complete the land acquisition for the project,” said Walters, a partner in the real estate development practice.
Still, there are few projects in Buffalo or elsewhere that use eminent domain. Government agencies know they’ll be in the spotlight if they take property by eminent domain, Walters said.
Most government development projects can go anywhere; it’s when you have to put it in a specific place that eminent domain comes into play, according to Walters.
He said the power of it alone gets a developer through a deal nine out of 10 times. It’s used more as leverage than anything else.
“So 99.9 percent of the time, they’ll either work out a deal on the land acquisition or they‘ll go somewhere else,” he said of developers.
Eminent domain is used in projects where the entity that has the power of condemnation is unable to acquire the property at its fair market value or there are so many parcels that must be acquired for a larger or urban project that it becomes difficult to get everyone to agree to sell their property.
New York state delegates this power under certain circumstances to a variety of entities, such as municipalities, sewer districts, school districts, IDAs, urban renewal agencies and state development corporations.
It is always the intent and in the best interest of the entity that wields the power to acquire the properties by purchase and to avoid eminent domain, which involves more time and expense.
Sometimes the state or county agency negotiating the land acquisition will pay more than fair market value just to avoid the headache of litigation, Walters said. But there’s always landowners who will overvalue their property, he added.
If eminent domain is used, the title automatically transfers to that government agency. The landowner has the option of allowing the court to decide what is fair market value. One’s personal attachment to the land typically doesn’t get someone too far in the process, Walters said.
“It’s really a question of what is just compensation and (then) paying people for that,” he said.
There are elements of public opposition that go into many of these projects, and those against them will use arguments such as “We shouldn’t be taking private property for such a project,” according to Walters.
Most of the opposition to eminent domain comes when a government agency is condemning blighted property and turning it over to a private developer for redevelopment, he added.
When Pilot Field was being developed and eminent domain was used to acquire the parcels needed, McNamara said the notion was that the project would help bring people into the city. At the time, it was deemed to be an underutilized property, and the theory was that the new stadium would spur economic development.
In the case of Marine Midland Arena, eminent domain was justified by Memorial Auditorium being on its last legs and the new arena being an opportunity to rejuvenate an area of downtown that had been underdeveloped, McNamara said.
Could eminent domain be used for a new downtown stadium for the Bills? Absolutely, McNamara said.
“Every other situation I have seen like that invariably required the exercise of the power of eminent domain or at least the threat of that power by the entity that had the power,” he said.
The biggest hurdle would be getting through the environmental impact assessment process, before even attempting to take any property through eminent domain, Walters said. A project of that magnitude typically requires that an environmental impact statement also be completed.
It can take as little as a year but could be longer. For example, the city of Buffalo is in its third year of the environmental review process for its Green Code.