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Just compensation

Two prominent local cases of property acquisition by the city highlight the eminent domain controversy

By Michael Summers

michael_summers@fortwaynereader.com

Fort Wayne Reader

2005-09-05

In November of 2004, Diana Kruse was raking leaves in the front yard of her 11-acre farm property on Rothman Road in Northeast Fort Wayne when she was approached by a representative from Fort Wayne’s Water Resources Program. The property next to her had been sold, and a housing development was going in. The city needed 1/3 of an acre off the front of her property to put in a sewer and water line.

“I said ‘I really don’t want to sell it,’” Kruse recalls. “I have trees over 200 years old in my yard, I have an abstract that goes back to 1835. I told him I really didn’t want to lose my trees, and I really don’t want the sewer line in my front yard.”

Diana and her husband Stan bought the property in 1964, and built the house in 1967, long before 469, the shopping center on the corner of Maplecrest and Rothman, and countless housing additions. They’ve raised seven children there. As little as ten years ago, Rothman was a gravel road (the area was incorporated into the city in 1995). Their property, which is zoned for agriculture, is also home to horses, a cow, and other animals.

Despite Kruse’s reluctance, she asked the representative to mail in an offer. An offer for $5,000 came a little later. Kruse got a counter offer, and talked to an arborist about what could be done about saving her trees.

According to Kruse, the city wasn’t interested in her concerns. This began what Kruse describes as a campaign of harassment to get her to sell the land — phone calls four or five times a day, visits after business hours, cars parked across the street from her land. Even after Kruse got an attorney, she claims she continued to receive phone calls and visits. “It became a joke,” says Kruse, who put up a sign on her fence reading “The City Steals Land” late last year. “I mean, this is a representative from the City of Fort Wayne, and he’s calling me from his home? To me, it was another harassment tactic, especially when we had an attorney involved. Why are you continuing to call me when we have an attorney?”

Kruse adds: “I was told ‘we will get your land, one way or the other.’ How would you like to be told that?”

But that’s eventually just what happened. Kruse’s land was condemned. She says she didn’t receive any notification of it, but 38 of her neighbors did. “They sent a letter… saying that (my property) was going to be condemned. It said the owners are being obstinate and not cooperating, so we have no choice but to condemn their property.”

In a Board of Works meeting on May 18th, it was decided that Kruse would receive nothing for the acquisition. Kruse was at the meeting, but says she was not allowed to speak. Though it was a meeting and not a public hearing, Kruse feels she should have been allowed to say something. “They’re talking about condemning your property, they’re telling you your going to receive $0 for your damages, you come from the back of the room up to the front, raise your hand twice, speak out three times and say ‘excuse me, I would like to speak.’ And you’re totally ignored.”

As bizarre as the Kruse’s story sounds, it’s not all that untypical. Long before the Supreme Court delivered its controversial 5 – 4 ruling that backed forced sales of property for private economic development earlier this summer, the issue of eminent domain had been attracting a lot of attention, with opponents charging that city and state governments have become increasingly aggressive in acquiring land for redevelopment.

In Fort Wayne, perhaps the most public example has been the battle for the corner of Harrison and Jefferson Boulevard, the site now occupied by Belmont Liquors. According to reports, the city spent around $1 million over the course of more than two years to obtain the land for use as a hotel site. It’s a perfect illustration of the problem at the heart of the eminent domain controversy — the city acquiring private land for private use. City Councilman Don Schmidt (R-2nd) says that governments acquiring land for public use such as roads, schools, and sewer lines has been acceptable for years, and probably should be. “Where the thing really breaks down is where you’re taking private land and giving it to another private individual for what the government thinks is a higher and better use,” says Schmidt, who is considering a bill that would limit local government’s ability to acquire land for this purpose. “That’s the scary part, and that’s where most jurisdictions are drawing the line.”

“That’s what we were bumping into with the liquor store, because they wanted it for a hotel site,” says Jim Federoff, a local attorney who worked on the Belmont Liquors case. “That hotel would not be a city owned hotel, it would be Westin or whoever, but the city would condemn it so that Westin could build a hotel.”

Tom Druley, the owner of Belmont Liquors, has become a sort of icon of the private businessman trying to stand up for himself in the face of city planning. During our conversation, Druley is perfectly friendly and polite, but his tone of voice suggests he is thoroughly sick of talking about the subject — as anyone might be after years of negotiations and a mountain of legal fees. “Well, the story is all out there,” Druley says. “I said that if the hotel wanted my property, I would be willing to give it up, but I would want to negotiate a price… I said my property is not blighted, but that’s what they (the city) used, and I lost. It went to Superior court, and then we appealed it, and I lost on appeal, and then we went to Indiana Supreme court, and they wouldn’t hear it. You could say I lost at three levels, and after paying a lot of attorney fees, I said ‘okay, well, I’ll do the best I can.’”

Druley was paid for his property in December, 2004. The city agreed to let him stay for the rest of the year, until he can negotiate a new location. The irony, of course, is that after all that, the city is now saying that perhaps the corner of Harrison and Wayne, now occupied by Cindy’s Diner, might be a better place for a new hotel. That’s fine with Druley. He says that business has been hurt since Harrison was closed to accommodate the expansion of the Grand Wayne Center, so moving might be a good idea anyway. Besides, the city still owns the land. “They want to use my land for something, and it doesn’t look like at this time it’s going to be a hotel,” Druley says. “They don’t seem to be in any big hurry. They could use it for surface parking, bulldoze the building. But that’s not all that attractive unless they put a lot of shrubbery or something. Maybe they’ll give me a little more time.”

In order to acquire property for redevelopment, government has to condemn the property, and in order to do that, they have to show “blight,” that the property is in deteriorated condition. But this is where it gets tricky, with critics arguing that frequently, “blight” means whatever the local government says it means. Jim Federoff says “the courts have given a very broad treatment of blight and allowed blight to be established even when the property itself is not blighted.” For example, say a redevelopment commission creates a proposed redevelopment district of four city blocks. If blight can be established anywhere within those four blocks, that’s legally adequate for the city to acquire title to the property through condemnation.

That’s what happened in the case of the Belmont Liquors property. “We felt the property wasn’t blighted,”says Druley. “We keep it in very good condition, the building painted and the shrubs trimmed. I guess the court saw ‘blighted’ in the same way realtors see property, and that’s the ‘highest and best use.’ A liquor store definitely is not the ‘highest and best use’ for this corner, but I’ve owned this property since ’75, and I should have property rights. Obviously, I would not have paid all those legal bills if I thought I did not have a case.”

Druley emphasizes that at no time was he poorly treated by anyone in the city. “They felt they were just doing their job, and so be it,” he says. “We just had a difference of opinion.”

The case of the Kruse’s land is a little different. Since it qualifies as a public utilities project, the city does not need to show blight in order to condemn the property. And this is where the case starts to sound a bit like a version of “he said/she said,” with the city claiming they’ve fulfilled every legal obligation and more in establishing eminent domain. According to Ted Nitza of the city’s Water Resources Program, the Kruse’s land was looked at by two independent appraisers, who put the total value at between four and seven thousand dollars. After the initial offer of $5,000 was rejected, the city eventually came back with an offer of $8,500. But there was more to the offer than just the cash. The city said they would waive the permit fees for hooking up to city sewer and water, not only for Kruse’s house but up to two additional possible future structures on the property. They would also repair the driveway, fence, and landscaping.

A public utilities project needs to go through two public hearings by the Board of Works, the first hearing to establish public purpose, the second to assign value. Nitza says that Diana Kruse did not come to the first hearing. At the second hearing to establish value, Kruse asked for and was granted a week extension to gather more information. “At that next hearing, she brought a counter-offer to the $8,500,” Nitza says. “It exceeded what the utilities felt comfortable paying. We’re still working off of rate-payers money, we’re still stewards of the utilities. It’s inappropriate for us to pay outlandish amounts for things we already have established values for. We were already offering her more than what it was worth.”

Furthermore, Nitza says that the city has gone above and beyond its obligations as far as legal requirements for notification in every step of the process, including start dates for construction. “We not only provided for the legal requirements for notification for both hearings, we also went out of our way to take letters to her house. We sent letters express mail, we sent letters certified mail… I’m confident that we not only provided legal requirement of notification for every step of the process, we exceeded those requirements in an effort to make sure she was advised and aware… that the process was moving forward.”

The end result: after the offer of $8,500 was rejected, Kruse was given no money for her property, with the city saying that the value of the project to her land is sufficient compensation (the city has also repaired Kruse’s fence, driveway, and other items that had to be moved or changed due to construction).

The Kruses have appealed the decision, with proceedings set to begin in October. Nitza says the judge in the case has tasked the parties to work with a mediator in order to find common ground. “All along in this process, we’ve contacted their lawyer to ask for the ability to sit down and talk this out,” Nitza adds. “We’ve not had a response. But what we do look forward to is in October being able to sit down as the first step in that appeal process, to able to reach some type of consensus.”

But the whole incident may end up costing the Kruses a lot more than land and attorney’s fees. Gilmour and Thomas, the firm developing the housing addition next door to the Kruse’s property, recently hit them with a bill for over $9,000 — compensation for what they claim in a letter was lost work time “due to your (the Kruse’s) acts of obstruction and tortuous interference.”

Diana Kruse says that Liberty construction showed up for work one day, without notifying her they were coming. “What they’re talking about is that I was setting up a garage sale on my own property, in my own front yard,” Kruse says. “Plus, at that time I had a car for sale on my own property.” She says they threatened to impound the car and the garage sale items.

As Kruse sees it, she doesn’t want or need the city’s sewer system — the septic system the property uses has served them well for years. What it all comes down to is that this has been her land for decades, public use or not. “If you came over to the developer’s front yard, or city council’s front yard, and start hacking down their trees, take their fence down, pay them $0 for it, threaten them, send letters around to the neighborhood without their knowledge, you can be doggone sure they’d be damn mad,” she says. “They wouldn’t put up with it.”