Virginia regularly uses eminent domain to transfer land to private developers and also uses the threat of eminent domain to force people to sell. In the past few years, there have been at least 58 condemnations for private parties (almost all for one project in Hampton), threatened condemnations, and properties currently under threat of condemnation for other private parties. Apparently, Virginia bureaucrats have short memories. Virginia has a history of spectacular failures in redevelopment projects. And as the former home of James Madison and Thomas Jefferson, one would think Virginia would have greater respect for the private property rights guaranteed by the Founders in both the U.S. and Virginia Constitutions.
The Virginia state legislature has not considered any bills affecting the ability of government to take property. In April 2002, it did pass a law that allows either the property owner or condemning authority in a condemnation proceeding to request a pre-trial settlement conference, conducted by a neutral third party.657 Also, a bill went before the legislature that would allow business owners whose property is condemned to seek compensation for lost profits and business goodwill, which currently are not compensable in Virginia. This measure did not pass but has been continued until the 2003 legislative session.658
Private Use Condemnations
When the owners of the Gates of Arlington, a 465-unit privately owned rental community, recently announced their intent to sell the property to developer Clark Construction, the County decided that it needed to stop the sale. In May 2002, the County threatened to condemn the Gates if the owners refused to sell the property instead to Arlington Housing Corporation, Inc., a nonprofit development organization specializing in low-income housing.659 The owners sold.660
The City of Chesapeake began working with a private developer to build a 20-acre retail complex along Battlefield Blvd., anchored by a Costco warehouse store, a large furniture store and a 200-room hotel. The problem for both parties was that two privately owned gas stations operated on the property. The Developer offered to pay the City $2 million to cover acquisition of the properties through eminent domain, plus another $2 million for road and infrastructure costs. However, the owners of the gas stations said they have no desire to sell or give up their locations. Both businesses had operated successfully at this location since long before the area began its retail boom.661
The Chesapeake City Council planned to vote on the measure in March 2002, but at the last moment the Council pulled the issue from its meeting agenda. City officials declined to specify why the vote was pulled back, but it might have had something to do with the local uproar caused by the City’s efforts to force the gas station owners to give up their choice location in favor of another developer.662 The proposal came up for a City Council vote two more times,663 and each time was withdrawn at the last moment.664 Citing the continual problems with getting the condemnations approved, the developer finally withdrew his plans to build a retail center on the site, and instead decided to pursue the development of an apartment complex that would not require taking the gas stations. At the end of 2002, all parties achieved their development goals without resorting to eminent domain for private use: the Battlefield Blvd. site was being redeveloped, and the two gas stations were at last free to operate without the threat of condemnation hanging over their heads.665
In 2000, the City condemned 57 parcels of land totaling 107 acres to make way for the Power Plant, a sprawling $129-million private retail-entertainment center adjacent to the Hampton Coliseum. While many owners reached agreements with the City prior to condemnation, the City eventually filed quick take actions against those who had not sold by April 2000. This process allowed the City to pay a deposit and immediately take over the land, while a court deliberated over the price. Among the owners displaced by the project was NDS Development Co., a small business whose 1.5-acre parcel was taken. The City agreed to pay for relocation of NDS to a business park across town.666
However, not all of the targeted landowners agreed with the City that taking their land for a private retail development served a valid public use. Kenneth Slater and James Hunsucker challenged the City’s condemnation of their two parcels, only to later accept the amount awarded by juries.667 Frank and Dora Ottofaro owned a two-bedroom house and two lots, which they rented out to supplement their income. The house stood in the path of the road that the City wanted to build leading to the Power Plant. The Ottofaros planned to fight the condemnation in court, under the theory that the City would not have undertaken to build the road across the Ottofaro property, but for the private development to which such road would provide access. Unfortunately, the Ottofaros had no chance to get their house back, because the City bulldozed it immediately after undertaking the initial quick take action. This destruction of the subject of debate occurred even though the family was challenging the taking in state circuit court, and construction on the Power Plant would not begin for many months.668 In May 2002, after the Ottofaros lost their fight before the trial court, the Virginia Supreme Court agreed to hear their appeal.669 Update: In January 2003, the Virginia Supreme Court upheld the condemnations, emphasizing that the property was being used for a public road. The court explicitly declined to review the Ottofaros’ claim that the property was condemned for the purpose of facilitating a commercial shopping center.670 Critics suggested that Hampton undertook an unreasonable risk when it committed $25 million to a major retail development that would certainly cannibalize other local retail stores, on the dubious premise that out-of-towners would flock to this exciting “attraction.” At the time, local boosters derided these critics as cynical naysayers. However, since Kmart went bankrupt in January 2002, the massive husk of its future Power Plant location has sat half finished, becoming both a visual eyesore and a structural danger.671 As of this writing, the Kmart walls still stand unfinished, although the developer recently began construction on the entertainment portion of the Power Plant project, albeit with considerably scaled-back plans for luxury retail tenants.672 The twin outcomes of this case, namely the condemnation of private property and the developer’s continued inability to attract stable tenants, demonstrate eloquently how and why developments that utilize private use eminent domain, rather than free market approaches to property acquisition, so often result in failure and disappointment.
City officials in Norfolk are trying to close down the Lafayette Motor Hotel, because they think that its pink outer facade is an eyesore to the surrounding Riverview neighborhood. The City came up with a plan to condemn the motel and turn the one-acre tract of land into a park, even though Norfolk already has plenty of parkland. Lal and Kay Mirpuri, who own the motel, believe that the City is only using the park as a cover for its true motive of clearing the property to improve sightlines for residents of a new 100-unit luxury waterfront condominium development that is being planned for the vacant property adjacent to the motel.673 On June 25, 2002, the Norfolk City Council voted unanimously to redesignate the area surrounding the Lafayette Motor Hotel as high-density residential, as well as to convert the motel and street in front of it into a park. This is a first step in the City’s effort to remove the motel through condemnation. The Mirpuris vow that they will put up a fight.674
The Children’s Museum of Virginia, located in Portsmouth, plans to expand at some point in the next two or three years. Although the private, nonprofit museum has begun raising funds to pay for the project, no definite plans have been finalized. However, this has not stopped the City from taking steps to condemn an adjoining building to make way for this as yet nonexistent expansion. This building contains four small business tenants, including an ice cream store and a hair salon. Members of the Portsmouth City Council made waves in early 2002 when they stated that since these businesses merely rent their space in the targeted building, the City would do nothing to help pay their relocation costs. According to Councilman Cameron C. Pitts, “I would not support using taxpayers’ money to try to help with the relocation costs when there’s no legal obligation.”675
Christina Fulp, who owns the Mica II Salon, has poured over $50,000 of her savings into her business, and recently signed a 10-year lease on the premises. Chelsea Hall has invested tens of thousands of dollars over the years in improvements to her ice cream parlor. Both businesses thrive because of their prime location, and are frequented by museum-goers. On March 12, 2002, the Portsmouth City Council approved permits for a soul-food restaurant and art gallery to open up in vacant spots in the targeted building. However, in the same meeting, the Council voted unanimously to condemn the property, which allows the City to take ownership until the Children’s Museum decides to expand (if the expansion ever occurs).676 The prospect of an uncompensated move that could be forced by the City at any time convinced the soul-food restaurant to withdraw its application to move there.677 Fulp, on the other hand, remains at her location and plans to fight for some financial assistance from the City if she should be forced out.
The City is working with Carilion Health System on a plan to turn an industrial riverfront area south of downtown into a 75-acre biomedical business park. In March 2001, the City Council slapped the area with a blight designation, which allows the City to condemn area properties and force owners to either sell or convert existing buildings to such uses as medical research, technology or multifamily housing.678 The biomedical park is planned in several phases over 15 years. The plan calls for the demolition of nearly all existing buildings. Some owners have sold or tentatively agreed to sell.679 Many other owners not yet targeted for condemnation have already sold out to the City.680 Roanoke City Mills, a wheat mill, occupies 17 parcels of land and has asked to be allowed to stay, but the City doesn’t want that. Nor does the City want to pay for the actual cost of reopening the business elsewhere. Because that would be too expensive, the City wants to pay only the appraised value.681 The mill owner worries that having to close down operations will destroy the business. The mill property will be targeted in a later stage of the project, and news reports do not indicate any further move by the City toward acquisition or condemnation.
The City of Virginia Beach and the Virginia Beach Redevelopment Authority entered into a contract with a private developer to develop oceanfront property owned by the City. Under the agreement, the developer would build a $30-million, four-star hotel and retail complex, and the City would invest $20 million to acquire the necessary land and build an 850-space parking garage. The City would lease a portion of the garage back to the developers for hotel customers and keep the rest for public parking. The City also committed to use eminent domain to acquire the land needed for the garage. That land was not owned by the City yet. In November 1999, the City filed suit to condemn a piece of oceanfront property that had been leased to five tenants, including the 47-year old Neptune’s Restaurant, run by the Christopolous family, in order to build the garage. The City claimed it could collect $49 million in taxes and rent from the complex in the first 25 years.682
In August 2000, a circuit court judge ruled that the City could not condemn the land because it would benefit the developer more than the public.683 The Virginia Beach City Council then voted 10-1 to reaffirm their commitment to the project and directed the City manager to provide public parking on the site even if the development is not built.684 In December 2000, the City moved forward with its plan, and again condemned the Neptune’s property. Neptune’s sued the City, claiming it held a lease on the property that was valid until 2006. On February 4, 2002, the City and Neptune’s finally reached an agreement, whereby the City would pay the restaurant $85,000, and allow Neptune’s to stay on the property rent-free through September 2003. The Christopolous family was pleased with this resolution,685 but not as pleased as they would have been if the City had just left them and their successful business alone.
*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.
657 See H.B. 843, 2002 Sess. (Va. 2002).
658 See H.B. 291, 2002 Sess. (Va. 2002).
659 Mary Shaffrey, “Eminent Domain Powers Invoked; Arlington Man Forced to Sell,” The Washington Times, May 23, 2002, at B1.
660 Frederick Kunkle, “Plans for New T.C. Williams Has Residents Seeing ‘Green’,” Washington Post, Dec. 26, 2002, at T2.
661 “Chesapeake’s Power Play Against Gas Station Owners,” The Virginian-Pilot, Mar. 12, 2002, at B10.
662 Robert McCabe, “Plan to Seize Gas Stations Pulled from City Agenda,” The Virginian-Pilot, Mar. 13, 2002, at B1.
663 Robert McCabe, “Controversy Over Gas Stations Likely to Resurface Third Time,” The Virginian-Pilot, June 5, 2002, at B6.
664 Robert McCabe, “Resolution for Forced Sale of Gas Stations Withdrawn,” The Virginian-Pilot, June 11, 2002, at B4.
665 Robert McCabe, “Work Begins on New Retail Complex in Chesapeake; Plan Calls for a Kohl’s and a Few Other Shops at Battlefield Blvd.,” Dec. 27, 2002, The Virginian-Pilot, at D1.
666 Fred Tannenbaum, “Hampton Might Gather Land in Court; Property Is Needed for Power Plant,” Daily Press (Newport News, Va.), May 20, 2000, at C1.
667 Susan Friend, “Jury Awards $170,000 to Couple; Hampton Took 2 Lots and House for Power Plant,” Daily Press (Newport News, Va.), Aug. 17, 2001, at C5.
668 Alison Freehling, “Hampton Removes Power Plant’s Opponent; City Levels House, Family Plans to Battle in Court,” The Daily Press (Newport News, Va.), Dec. 21, 2000, at C4.
669 Susan Friend, “Va. Court Will Hear Hampton Land Case,” Daily Press (Newport News, Va.), May 24, 2002, at C1.
670 See Ottofaro v. City of Hampton, 574 S.E. 2d 235, 237, 239-40 (Va. 2003).
671 Jody Snider, “Unfinished Kmart Walls Get Safety Check; Structure’s Future is Uncertain Since Firm Filed for Bankruptcy,” Daily Press (Newport News, Va.), Apr. 11, 2002, at C9.
672 Jody Snider, “Adapting the Power Plant; Developer David Cordish Offers a Realistic Assessment of Ambitious Hampton Project,” Daily Press (Newport News, Va.), Mar. 2, 2003, at E1.
673 Earl Swift, “Gritty Norfolk Motel Rankles City Officials,” The Virginian-Pilot, June 14, 2002, At A1.
674 Christopher Dinsmore, “Norfolk OK’s Changes to Spur Development Near Colonial Place,” The Virginian-Pilot, June 26, 2002, at B10.
675 Harold Nedd & Janie Bryant, “Businesses May Lose to Expansion Plan; Shop Owners Told Not to Expect Any Relocation Help,” The Virginian-Pilot, Jan. 29, 2002, at B1.
676 Janie Bryant & Harold Nedd, “Children’s Museum Expansion; Portsmouth OKs Businesses, For Now; City Council Approves Plan to Forcibly Buy High St. Building,” The Virginian-Pilot, Mar. 13, 2002, at B1.
677 Louis Hansen, “Soul Food Restaurateur Withdraws Request for Move,” The Virginian-Pilot, Mar. 27, 2002, at B12.
678 Todd Jackson, “Council Approves Biomed Park,” Roanoke Times & World News, March 20, 2001, at B1; Todd Jackson, “Blight Definition Fits Biomed Park Site, Report Says,” Roanoke Times & World News, Feb. 8, 2001, at C1.
679 Todd Jackson, “Authority Pays $275,000 for $103,000 Lot; Half-Acre in Roanoke Biomed Park Fetches 2 ? Times Assessment Value,” Roanoke Times, Oct. 23, 2001, at B1.
680 Todd Jackson, “Research Park Takes Next Step; Some Landowners Have Tentatively Agreed to Buyouts, Spokeswoman Says,” Roanoke Times, Sept. 7, 2001, at A7.
681 Todd Jackson, “Council Approves Biomed Park,” Roanoke Times, Mar. 20, 2001, at B1; Todd Jackson, “Mill May Grind out Barriers to Biomed Plans,” Roanoke Times, Mar. 26, 2001, at C1.
682 Katrice Franklin, “Beach Sues to Get Land for Hotel; City Officials Want Site Condemned to Pave Way for $50 Million Resort,” The Virginian-Pilot, Nov. 5, 1999, at B1.
683 See City of Virginia Beach v. Christopolous Family, L.C., 54 Va. Cir. 95 (Aug. 10, 2000).
684 Katrice Franklin, “No Land Grab, Judge Reaffirms If 31st St. Plan Were for a Park, It Would Be a Different Story,” The Virginian-Pilot, Aug. 26, 2000, at B1.
685 Jason Skog, “Beach Restaurateurs Settle Suit with City, Will Operate Till 2003,” The Virginian-Pilot, Feb. 5, 2002, at B7.