Public Power, Private Gain: Ohio

Overview

 

Ohio cities seem to be on a redevelopment rampage, condemning property for private development and designating perfectly nice areas as blighted in order to authorize condemnation for private development. Indeed, there have been at least 13 such projects in Ohio between 1998 and 2002, involving at least 90 properties condemned and an additional 330 properties threatened with private use eminent domain. In response to this aggressive land-grabbing by Ohio municipalities and private developers, citizen groups opposing eminent domain have sprung up around the state; there were at least five at the end of 2002. Even the legislature seems to be noticing the problem and has taken a first step toward reform by telling condemnors that they should actually have a plan and timetable in mind before taking property. It’s a modest step, but at least it’s in the right direction. The next few years should be telling, as greater grassroots activism takes hold and cases wend their way up through the courts. 

 

 

Legislative Actions

 

 The Ohio state legislature recently enacted a law that requires that the “public purpose” behind a state agency condemnation be achieved “in a defined and reasonable period of time.” H.B. 426 also contains various provisions for improvements in the appraisal and valuation process.539

 

 

Private Use Condemnations

 

Akron

Ganley Toyota-Mercedes Benz wanted to expand. However, three homes, the Kathmandu Restaurant, the Quinn Furnace Co., an apartment building and other property stood in its way. The dealership recently threatened to relocate to the suburbs outside Akron unless the City helped it acquire the properties for an expanded lot. Ganley only opened in 1995 and was aware at the time of the properties adjacent to it, but it quickly became ready to oust its neighbors.540 On December 11, 2001, the Akron City Council voted to create an urban renewal area encompassing all of the properties, as a first step toward condemning them in favor of the dealership. While the homeowners eventually sold their properties, the City began eminent domain proceedings against the furnace company. The other properties are still under threat.541

 After witnessing the lengths to which Akron City officials have bent to please Ganley, other dealerships are now joining in on the act. Dave Walter Volkswagen warned that it might leave town unless the City helped it acquire property for an expansion. So the City bought the gas station next door and then entered into a purchase agreement with the dealership for the land. The only stipulation to the deal is that Dave Walter must stay within the Akron city limits.542  

Cincinnati

Cincinnati city leaders dream of a glitzy new downtown area, but time and again they bungle planned redevelopment projects, leaving a string of relocations, condemnations and wasted funds in their wake. In 1998, retailing giant Nordstrom wanted to open a new department store in downtown Cincinnati. However, there was a problem with the location Nordstrom wanted: A Walgreens pharmacy already occupied that space. In order to accommodate Nordstrom, the Walgreens would have to be relocated. So, working together with Eagle Properties, the sole private developer of the new Nordstrom site, Walgreens agreed to move to another location one block away from its current store. Unfortunately, there was a slight problem there too. CVS Pharmacy (Walgreens’ primary regional competitor) already operated a drugstore on the chosen site and refused to consider moving. The City began the process of taking the CVS building so that Walgreens could move in and Nordstrom could avoid negotiating its own real estate transaction. CVS sued to stop the condemnation but eventually settled with the City. Under the settlement, the City agreed that it would move Walgreens to a location across the street from the CVS, a compromise that required the City to condemn a number of other small businesses operating on four separate parcels there. Included among the displaced businesses was Kathman’s Shoe Repair, which was forced by the City to close its doors after being in business for 95 years. Finally, Walgreens was ready to build its new store across the street from CVS. All of the previously aggrieved parties were happy (except for the small businesses that didn’t have enough clout to negotiate a new location for themselves). Then, the board of the Cincinnati Equity Fund dropped another bomb on the Nordstrom plan (those who have lost track, please note that this whole process was undertaken to free up space for a new Nordstrom store). Cincinnati’s initial agreement with Eagle Properties (Nordstrom’s developer), in which the City had agreed to loan the developer $12 million, included a provision that required the City to leave vacant the very parcel that it had just handed to Walgreens, so that Eagle Properties could attract additional “upscale” retail to the corner adjacent to the new Nordstrom. The City’s failure to honor this provision would scuttle the entire Nordstrom deal. Apparently nobody acting on behalf of the City had even bothered to read the agreement or bring up this fact to other City authorities.543 It looked like the City would again have to shuffle the various pieces around to accommodate Eagle Properties. But then, something peculiar happened. The Nordstrom did not get built as planned, and the vacant lot where Walgreens had originally stood began to languish and deteriorate. The site eventually took the form of an unsightly hole in the ground. After two years, millions of dollars paid to the developers and various property owners, as well as the destruction of small family businesses, Nordstrom announced in November 2000 that it was pulling out of the Cincinnati deal because of its declining profits.544 The City eventually paved over the erstwhile Nordstrom site, so that the tract could at the very least operate as a City-owned parking lot until a new retailer comes along with another deal for this “can do” city.545 The site is still a parking lot today.546  

Cincinnati

The Contemporary Arts Center, a private museum, wanted to expand its exhibition space with a new building in downtown Cincinnati. With the City’s help, the museum decided on a location that had been occupied by two businesses owned by the Batsakes family for 90 years. The Batsakes are third-generation Greek-Americans whose forbears started J&G Batsakes Dry Cleaners upon their arrival in America. The family later opened Batsakes Hat Shop, a world-renowned hatmaker that has dozens of famous clients and is the only shop of its kind on the continent. At the time the Arts Center targeted the Batsakes property, descendants of the original family owners still ran both of these successful businesses. However, prominent international recognition and long-term roots in the local community did not help the Batsakes when faced with condemnation.

 Citing the Cincinnati 2000 Plan, a downtown redevelopment plan adopted by the City in 1982, the museum claimed that the Batsakes properties were “blighted.” In December 1999, the museum convinced Cincinnati officials to condemn both Batsakes properties for its planned expansion. The Batsakes responded by filing a federal lawsuit against the City, claiming that the City’s blight determination in the 2000 Plan did not comply with the criteria outlined in the City’s municipal code because the study did not include an expert review of the interiors and exteriors of the buildings, but rather a cursory “eyeballing” of area properties. An additional 1998 study on which the museum relied was never even approved by the City’s planning commission or subject to public hearings, as required by the municipal code.547 Before a court decision, however, the Batsakes settled with the City. The Contemporary Arts Center got to build its new museum on the Batsakes property. The family’s hat store moved to another nearby location, but the dry cleaning business shut down.548 Although the Batsakes did eventually agree, under the pressure of an ongoing condemnation, to give up their property, Cincinnati saw another small local business close. Ken Million, a 20-year customer of Batsakes Dry Cleaners, wonders why the City is so insensitive to small business. “We’re pumping multi-millions for large operations,” Million says, obviously referring to Cincinnati’s bungled attempt to bring a Nordstrom downtown. “Here are small business people who ask for nothing but to ‘Leave us alone’.”549  

Cleveland

The Rathskeller, a century-old drinking establishment that caters to a blue-collar clientele, was forced by the City to give up its location in downtown Cleveland, so that private developer MRN Ltd. could turn the location into upscale retail stores and restaurants as part of the redevelopment of East 4th Street. Nick “Red” Hillman, the Rathskeller’s owner, wanted to be included in the City’s redevelopment plans, but was told that he would have to give up his location unless he agreed to make his bar upscale, so that it would be a fitting establishment for the patrons of the upscale retail shops being planned. According to Hillman, he would have had to pay three times his normal rent, so he could ‘fit in’ with the rest of the area’s renovations. After the Cleveland City Council declared the area around East 4th Street to be blighted, Hillman and other area business owners were forced to make a choice—either finance costly repairs on their buildings and change their clientele or risk losing the building through eminent domain. Hillman felt he really had no choice, and decided to move to a new location.550  

Evendale

In 2001, Evendale officials came up with a scheme to pass an ordinance establishing an urban renewal area along Reading Road. Claiming that redevelopment is essential to revitalizing Evendale’s commercial core, the City commissioned a blight study and adopted language governing the publication of notice so that property owners affected by the urban renewal plan would have an opportunity to speak at public hearings on the matter.551 However, the City ignored its own notice requirements, publishing a tiny notice in the back of the local newspaper that contained only a vague description of the affected properties.552 To make matters worse, the few owners who attended the hearings were surprised months later when they learned that the resulting blight study recommended that the best way to improve the Reading Road corridor would be to “[d]emolish, redevelop, upgrade or renovate underutilized, outdated and/or deteriorated buildings.”553 The owners were surprised because nobody at the hearings had used this language, and the first draft of the blight study did not contain it. Apparently, the City had just added the language after the fact to fit its redevelopment agenda. Not surprisingly, the Evendale Council passed the urban renewal plan, giving the City the power of eminent domain to take private properties and hand them over to other private owners.

 The Evendale plan declared “blighted” 130 properties owned by 90 different owners in the Reading Road corridor. The owners demanded that the City reevaluate their properties, in light of the fact that the City had given only minimal notice of the public hearings on the matter, whereas the City’s standard practice has been to send owners a certified letter notifying them of any pending action affecting their property. Facing a deluge of public pressure, the City relented and agreed to reconsider the condition of affected properties in the Reading Road corridor.554 So far, Evendale officials have not moved forward with any plans to condemn the properties along Reading Road. The targeted owners are nervous, however, that the City’s underhanded tactics have already devalued their properties and left them vulnerable to the threat of eminent domain. According to Bruce Hassel, who owns A to Z Discount Printing on Reading Road, the owners are outraged. “What they’re doing is they look at parcels and say, ‘We could have something better here and that gives us the right to transfer ownership from one person to another if we think we’re going to like [the future use] better,” says Hassel, “[and] that’s wrong.” In the meantime, the owners have banded together to fight the City and take it to court, if necessary, to prevent it from taking their beloved homes and businesses.555 The Castle Coalition has been helping the Evendale businesses oppose the possible condemnation of their property.  

Huron

The City of Huron owned a five-acre piece of property along the shores of Lake Erie. Unbeknownst to the City, the parcel was encumbered by an easement held by the Ohio Department of Transportation, restricting access to the nearest main roadway for safety reasons. After determining that it no longer needed the land, the City divided it into two parcels and sold them. A Wendy’s restaurant went up on one parcel, while Carl and Lucille Hanson bought the other so they could relocate, consolidate and expand their local business. During negotiations between the City and the owner of the Wendy’s, the City made a warranty that the restaurant would have direct access to the main road via a driveway. However, after the Wendy’s was completed the DOT informed the restaurant owner that the driveway violated the DOT’s easement right. So the Wendy’s owner demanded that the City uphold their deal by condemning a portion of the Hansons’ adjacent property for a driveway leading to the Wendy’s.

 

In April 1999, the Huron City Council resolved that it was necessary to condemn the part of the Hansons’ land that was needed for the Wendy’s driveway. At trial, the court ruled in favor of the Hansons, finding that the City’s purpose for taking their property was to satisfy its liability to provide the Wendy’s with access to the main road. The Ohio Court of Appeals upheld the trial court’s ruling, stating that the City abused its discretion when it determined that the condemnation was necessary for a “public purpose” because satisfying a contractual liability to one party by appropriating the property of another party is not a valid public use.556

 

Lakewood

In the West End section of Lakewood, CenterPoint Properties is currently trying to assemble land for a $100-million development with 200 condominiums, along with restaurants, retail stores and a theater. To do so, CenterPoint must acquire 66 houses, five large apartment buildings and a number of small businesses. Jim Saleet and his neighbors are quite contented with their well-maintained colonial homes in Lakewood and have no interest in moving. Mayor Madeline Cain and other City leaders pushed for passage of a redevelopment plan that designated the targeted area as blighted. The designation will allow the City to use eminent domain to force out any owners who are unwilling to sell their properties to CenterPoint.

 

One would think Mayor Cain would be a little more respectful of the owners’ desire to stay put, given that her family had to sell their home under threat of eminent domain for an elementary school when she was a child. According to Cain, “I vividly remember the trauma that began when they first talked about buying the land…. I remember the trauma in my family. I’ve lived through it, and I don’t wish that on anybody.” Anybody, it appears, other than the dozens of families whose homes she is in favor of taking out of concern for “the future of this community.”557

 

After a contentious public meeting at the Lakewood City Hall, in which 200 residents packed the auditorium to voice their opposition to the City’s scheme to hand their homes and businesses over to CenterPoint Properties,558 the City Council in December 2002 approved the redevelopment plan and the finding of blight.559 As there were no structural problems with the houses, the City relied on terms like “economic and functional obsolescence” to find blight. Translation: The houses lack two-car attached garages and second bathtubs and their yards are a little too small. No modern family could possibly want a historic, well-maintained house without a two-car attached garage. Saleet and other residents and businesses of the West End, however, vow that this is only the beginning of their fight to keep the bureaucrats and developers off their property. The Castle Coalition has been working with the owners in opposing the condemnation of their homes.

 

Norwood

Walgreens operated a store on a prominent Norwood street corner, but the pharmacy giant wanted to build a new 18,000-square foot store a block away on a piece of land large enough to accommodate a drive-thru window and sizeable parking lot. So, rather than trifling with the expense and hassle of negotiating with the 10 parties who currently owned the land, Walgreens simply asked the City to condemn the land for its benefit. The land Walgreens wanted was occupied by a number of small businesses that served the local working-class community, including the Village Thrift Store, Norwood Christian Books & Gifts, and the Humble Abode used furniture store. Walgreens found an enthusiastic ally in Norwood Mayor Joe Hochbein, whose aggressively pro-development beliefs were matched only by his penchant for official misconduct, as demonstrated by his pleading no contest to a felony charge of election falsification.560 Mayor Hochbein mounted a public relations campaign to portray the existing businesses as run-down and undesirable. With the threat of condemnation hanging over their heads, the targeted property owners all eventually vacated their premises.561 In the end, the Norwood City Council never officially authorized eminent domain, but the threat of eminent domain turned out to be just as effective.

 

Norwood

The City of Norwood wants to take the homes of 77 families whose crime is that they live in homes that occupy a choice location along Interstate 71, where the City would prefer to see a $125-million expansion to the adjacent 50-acre Rookwood upscale retail development. The proposed Rookwood Exchange would add 140,000 square feet of shops and restaurants, 350,000 square feet of office space, 200 luxury condominiums and a parking garage.562 The homes targeted for demolition under the plan are tidy and well kept. However, City leaders consider the homes to be eyesores, compared to the Crate & Barrel, Cheesecake Factory and snarling traffic that would replace them.

 

Rather than risk losing the development and the tax revenue it would add to the City’s coffers, the Norwood City Council is considering tagging the area with a “blight” designation, which would allow the City to use eminent domain to force out any recalcitrant owners. The developers involved with the Rookwood project have been trying to persuade owners in the area to sell their property. However, at least 20 owners have vowed to fight as long as they must to prevent their City and developers from taking their homes away.563 They don’t believe that because they live close to a major highway, they must forfeit their homes to make way for the City’s preferred use of their land. Furthermore, they are insulted by the proposed blight designation of their nice homes. As of December 2002, the developers had agreements to purchase the homes of 60 percent of the targeted owners. The rest of the owners have dug in for what may be a lengthy court battle to stop the City if it tries to take their homes under its flimsy blight rationale.564 The Castle Coalition has been helping the Norwood homeowners oppose the possible condemnations.

 

Ohio City

In 2001, the City began taking steps to condemn a Family Dollar discount store located on the site where a private developer wanted to build 10 large townhouses and 34 condominiums, as part of the City’s plan to redevelop its commercial district. Family Dollar, which said that its targeted store was one of its best performing stores in northeast Ohio, refused to sell for anything less than the cost of the business, which it estimated to be around $2 million. The retailer was willing to negotiate for a new store at another location within the redevelopment, but the City insisted that the discount chain was not the type of store the new project wants to attract.565 After a protracted fight with the City, Family Dollar agreed to close the store so that the redevelopment project could proceed. In return, the City offered generous tax abatements and other incentives to offset the developer’s $1.3 million tab from paying for the relocation of Family Dollar.566 While in the end the parties reached an agreement, Ohio City taxpayers are footing quite a large bill just to move their working class neighbors out of the way.

 

Shaker Heights

Sean Tucker and his wife have a company, Shaker Development Corp., that owns an apartment building on a 2-acre parcel of land in Shaker Heights. The building provides 27 families with affordable housing. The City wants to take the Tuckers’ property and sell it to developers for 157 luxury townhouses and loft condominiums as part of a $33-million redevelopment of Shaker Towne Center and the surrounding area. The owners of the neighboring properties all sold to the City. After the Tuckers rejected the City’s offer to buy their land, the Shaker Heights City Council voted in October 2002 to condemn the property.567 Update: In January 2003, City officials voted to purchase Tucker’s building.568

 

Toledo

In 1999, the City of Toledo condemned 83 homes to make room for expansion of a DaimlerChrysler Jeep manufacturing plant. Even though the homes were well maintained, Toledo declared the area to be a slum. After threatening to leave town otherwise, Chrysler asked for and received $232 million in state and municipal aid for its new plant. Using $28.8 million loaned to the City by HUD, Toledo paid for relocation of the property owners and used eminent domain to acquire the homes of those who resisted its offers. Toledo had hoped to repay the loan through increased tax revenue from the expected 4,900-person Chrysler workforce. However, the new plant that Jeep built was fully automated, assembling cars by laser-guided robots without much human participation. In total, the new plant employs only 2,100 workers.569

 

Willowick

Local officials in Willowick want to bulldoze four blocks containing 30 homes along the shores of Lake Erie and replace them with new luxury homes and condominiums. The City’s plan calls for the use of eminent domain to take the homes, many of which are cottages that date back to 1919. The City claims that the area is blighted because the sewers are outdated, the streets are too narrow a majority of the homes are in disrepair.570 No blight designation has yet been made by the City as of March 2003, but the affected property owners are nervous and angry. At a recent public meeting, a local lakefront resident received loud applause after she declared, “We will not go down without a fight, and I speak for everyone who lives along the lake.”571

 

*These numbers were compiled from news sources. Many cases go unreported, and news reports often do not specify the number of properties against which condemnations were filed or threatened.

539 H.B. 426, 124th Sess. (Ohio 2001) (codified at Ohio Rev. Code Ann. §§ 163.52 & 163.59 (Anderson 2002)).

540 “Should City Aid Land Deals for Private Business?,” Akron Beacon Journal, Nov. 28, 2001, at A15; “What Should Be City’s Role in Brokering Private Land Deals?,” Akron Beacon Journal, Dec. 5, 2001, at A11.

541 Julie Wallace, “Neighbors Will Divide $464,000,” Akron Beacon Journal, Oct. 1, 2002, at B1.

542 Julie Wallace, “Akron Will Help Car Dealer Expansion,” Akron Beacon Journal, Jan. 8, 2002, at D1.

543 Robert Anglen, “Walgreens May Snag Nordstrom Deal; Move the Drug Store or Lose Retailer, Loan Board Says,” The Cincinnati Enquirer, June 24, 2000.

544 Lisa Biank Fasig & Robert Anglen, “Nordstrom Won’t Build Downtown After All,” The Cincinnati Enquirer, Nov. 23, 2000.

545 Robert Anglen, “Nordstrom Site to Become Parking Lot,” The Cincinnati Enquirer, Nov. 24, 2000.

546 Ken Alltucker, “Consultant’s Priority: Curing Downtown’s Heart,” The Cincinnati Enquirer, Jan. 15, 2003, at 1D.

547 Dan Klepal, “Hat Sellers Battle City’s Ouster Order,” The Cincinnati Enquirer, Feb. 11, 2000.

548 Tom O’Neill, “Hats Off to Batsakes,” The Cincinnati Enquirer, Feb. 13, 2001.

549 Lisa Biank Fasig, “Batsakes Tossing in Towel; Dry Cleaner Ends Relocation Fight,” The Cincinnati Enquirer, June 29, 2000.

550 Tom Breckenridge, “The Future of 4th Street Draws on its Past; Developer Out to Revive Once-Lively District,” The Plain Dealer (Cleveland, OH), July 9, 2000, at 1B.

551 Evendale, OH, Ordinance No. 01-32 § 6 (passed by the Evendale Council on May 3, 2001).

552 See “Notice of Public Hearing of the Evendale Council,” The Cincinnati Enquirer, June 28, 2001.

553 Summary Report by KZF Design, presented to the Evendale Community Improvement Corporation, Sept. 2002, available at http://www.blightedevendale.com/legal.htm.

554 Jenny Callison, “‘Blighted’ Properties to Get 2nd Look,” The Cincinnati Enquirer, Oct. 30, 2002, at 3C.

555 Susan Vela, “Group Promotes Fight Against Eminent Domain,” The Cincinnati Enquirer, Dec. 15, 2002, at 2B.

556 See City of Huron v. Hanson, 2000 Ohio App. LEXIS 3358, at *20 (July 28, 2000).

557 V. David Sartin, “Plans Aim to Revive Neighborhoods; Lakewood Targets West End for Development,” The Plain Dealer (Cleveland, OH), Dec. 11, 2002, at B1.

558 V. David Sartin, “Lakewood Leaders Find that the Best Plan for West End Is in the Eye of Beholder,” The Plain Dealer (Cleveland, OH), Dec. 13, 2002, at B2.

559 V. David Sartin, “Lakewood Moves to Revitalize,” The Plain Dealer (Cleveland, OH), Dec. 17, 2002, at B4.

560 Susan Vela, “Norwood Mayor to Step Down,” The Cincinnati Enquirer, Dec. 10, 2002, at 1B.

561 Ken Alltucker, “Corner Braces for Walgreens; Businesses Prepare to Be Booted,” The Cincinnati Enquirer, Aug. 10, 2000, at C3.

562 Susan Vela, “Norwood Homeowners Balk at Selling,” The Cincinnati Enquirer, Sept. 29, 2002, at 3B.

563 Susan Vela, “Owners Dig In to Keep Homes,” The Cincinnati Enquirer, Oct. 27, 2002, at 1B; Susan Vela, “Development Decision Nears in Norwood,” The Cincinnati Enquirer, Jan. 24, 2003, at 4B.

564 Susan Vela, “What Is Blight?,” The Cincinnati Enquirer, Dec. 23, 2002, at 1A.

565 Mya Frazier, “Ohio City Retail Store in Dispute Over Buyout,” The Plain Dealer (Cleveland, OH), July 7, 2001, at 1C.

566 David Bennett, “City Aid Would Speed Fries & Schuele Project; Developers, Family Dollar Reach Deal on New Home for Discounter, Await Tax Abatement OK,” Crain’s Cleveland Business, Nov. 11, 2002, at 14.

567 Rosa Maria Santana, “Property Owners Are Holdouts on Shaker Heights Project,” The Plain Dealer (Cleveland, OH), Oct. 27, 2002, at A13.

568 Rosa Maria Santana, “Purchase Paves Way for Shaker Towne Centre Plan,” The Plain Dealer (Cleveland, OH), Jan. 4, 2003, at B4.

569 Gideon Kanner, “The New Robber Barons,” The National Law Journal, May 21, 2001, at A19.

570 Kristin Anderson, “Willowick Wants to Bulldoze 30 Lakefront Homes,” WKYC-TV.com, Aug. 10, 2002, available at http://www.wkyc.com/news/morelocal/willowick/020810lakefronthomes.asp.

571 Michael Scott, “Willowick Debates How to Make Best Use of Lakefront,” The Plain Dealer (Cleveland, OH), Dec. 10, 2002, at B4.