Condemnation Condemnation Proceedings, Public Proceedings, Public

Purpose, and Changes Purpose, and Changes to Eminent Domain Lawto Eminent Domain Law

Robert B. NeblettRobert B. NeblettJackson Walker L.L.P.Jackson Walker L.L.P.

100 Congress, Suite 1100100 Congress, Suite 1100Austin, Texas 78701Austin, Texas 78701

(512) 236-2000(512) 236-2000rneblett@jw.comrneblett@jw.com

OverviewOverview• What is eminent domain and who has the What is eminent domain and who has the

power to use it?power to use it?• Limitations on the power of eminent Limitations on the power of eminent

domaindomain• Recent Case Law and the Legislative Recent Case Law and the Legislative

Response Response • Issues to Consider as a CondemnorIssues to Consider as a Condemnor

The Power of Eminent DomainThe Power of Eminent Domain

• Stems from superior rights of the CrownStems from superior rights of the Crown

• 55thth Amendment of the United States Amendment of the United States ConstitutionConstitution

• Article 1, Section 17 of the Texas Article 1, Section 17 of the Texas ConstitutionConstitution

Authority to CondemnAuthority to Condemn

• Vested in the LegislatureVested in the Legislature

• Article 16, section 59 of the Texas Article 16, section 59 of the Texas Constitution provides for the creation of Constitution provides for the creation of “conservation and reclamation districts.” “conservation and reclamation districts.”

Authority to Condemn, Authority to Condemn, ((contcont.).)

• Texas Water Code § 11.033 (Wagstaff Act) -Texas Water Code § 11.033 (Wagstaff Act) -• ““All political subdivisions of the state and All political subdivisions of the state and

constitutional governmental agencies exercising constitutional governmental agencies exercising delegated legislative powers have the power of delegated legislative powers have the power of eminent domain to be exercised as provided by eminent domain to be exercised as provided by law for domestic, municipal, and manufacturing law for domestic, municipal, and manufacturing uses and for other purposes authorized by this uses and for other purposes authorized by this code …”code …”

Water Code Section 49.222Water Code Section 49.222

““(a) A district or water supply corporation (a) A district or water supply corporation may acquire by condemnation any land, may acquire by condemnation any land, easements, or other property inside or easements, or other property inside or outside the district boundaries, or the outside the district boundaries, or the boundaries of the certificated service area boundaries of the certificated service area for a water supply corporation, necessary for a water supply corporation, necessary for water . . .”for water . . .”

Water Code 49.222, explainedWater Code 49.222, explained

• Provides general eminent domain authority “inside Provides general eminent domain authority “inside or outside the district boundaries” for all general or or outside the district boundaries” for all general or special law districts.special law districts.

• Specifically prohibits condemnation to acquire Specifically prohibits condemnation to acquire groundwater or other water rights. groundwater or other water rights.

• Special law districts may have broader powers Special law districts may have broader powers according to their enabling legislation, including the according to their enabling legislation, including the power to condemn water rights.power to condemn water rights.

The Power to CondemnThe Power to Condemn

• Groundwater Conservation DistrictsGroundwater Conservation Districts• General Law DistrictsGeneral Law Districts

―Municipal Utility Districts (MUDs)Municipal Utility Districts (MUDs)―Special Utility Districts (SUDs)Special Utility Districts (SUDs)―Fresh Water Supply Districts (FWSDs)Fresh Water Supply Districts (FWSDs)

• Special Law DistrictsSpecial Law Districts

Groundwater Conservation DistrictsGroundwater Conservation Districts

• A general law district created under Chapter A general law district created under Chapter 36 of the Texas Water Code.36 of the Texas Water Code.

• Has eminent domain power including fee Has eminent domain power including fee simple acquisition, but does not have the simple acquisition, but does not have the power of eminent domain over water rights.power of eminent domain over water rights.SeeSee Tex. Water Code § 36.105. Tex. Water Code § 36.105.

General Law Districts:General Law Districts: MUDs, SUDs, WCIDs, FWSDs, etc.MUDs, SUDs, WCIDs, FWSDs, etc.

• General law districts are granted condemnation General law districts are granted condemnation authority by Water Code § 49.222.authority by Water Code § 49.222.

• General law districts do not have the power of General law districts do not have the power of eminent domain over surface or groundwater.eminent domain over surface or groundwater.

Special Law DistrictsSpecial Law Districts

• Created by special act of the legislature.Created by special act of the legislature.

• Numerous MUDs, SUDs, FWSDs and GWCDs Numerous MUDs, SUDs, FWSDs and GWCDs have been created by special legislation.have been created by special legislation.

• Condemnation authority governed by § 49.222 Condemnation authority governed by § 49.222 unless broader power granted by enabling unless broader power granted by enabling legislation. legislation.

River AuthoritiesRiver Authorities

• Feature an independent legislative Feature an independent legislative authority that trumps the Water Code.authority that trumps the Water Code.

• Have additional eminent domain powers, Have additional eminent domain powers, as granted by their enabling legislation, as granted by their enabling legislation, up to and including acquisition of fee up to and including acquisition of fee simple title and condemnation of simple title and condemnation of groundwater rights. groundwater rights.

Bottom Line, Bottom Line, ((contcont.).)

• General law districts: General law districts: no power to condemn no power to condemn water rights.water rights.

• Generally, when any of these entities use their Generally, when any of these entities use their power to condemn it is for easements for power to condemn it is for easements for pipelines, land for reservoirs, water or pipelines, land for reservoirs, water or wastewater treatment facilities, and/or some wastewater treatment facilities, and/or some form of drainage control.form of drainage control.

Public Use: The ConstitutionalPublic Use: The Constitutional Limitation of Eminent DomainLimitation of Eminent Domain

• The Texas and U.S. Constitutions both The Texas and U.S. Constitutions both limit the exercise of eminent domain limit the exercise of eminent domain power.power.

• Must be for a “Public Use.”Must be for a “Public Use.”

Liberal View of “Public Use”Liberal View of “Public Use”

• Borden v. Trespalacios Rice and Irrigation Co. Borden v. Trespalacios Rice and Irrigation Co. – Borden Borden dealt with the taking in Matagorda County that dealt with the taking in Matagorda County that

was seemingly for the profit of private cotton and cattle was seemingly for the profit of private cotton and cattle interests.interests.

– Condemnees contended that condemnation was not for Condemnees contended that condemnation was not for public use and therefore the condemnation was unlawful.public use and therefore the condemnation was unlawful.

– Court held that the condemnation was for a public use, Court held that the condemnation was for a public use, even though it would have some private benefit.even though it would have some private benefit.

Public NecessityPublic Necessity

• A taking must be both for a public use, and A taking must be both for a public use, and necessary to achieve the declared public necessary to achieve the declared public purpose. purpose.

• However, the condemnor’s discretion to However, the condemnor’s discretion to determine public necessity is nearly absolute determine public necessity is nearly absolute absent fraud, or arbitrary and capricious absent fraud, or arbitrary and capricious behavior.behavior.

Public NecessityPublic Necessity, , ((contcont.).)

• Malcomson Road Utility District v. NewsomMalcomson Road Utility District v. Newsom

– Private developers seeking property asked the District to Private developers seeking property asked the District to condemn the portions of Newsom’s land that they had condemn the portions of Newsom’s land that they had failed to purchase.failed to purchase.

– District Condemned Newsom’s land and Newsom District Condemned Newsom’s land and Newsom appealed. appealed.

– Court held that there was a fact issue as to whether the Court held that there was a fact issue as to whether the District reached its condemnation decisions arbitrarily District reached its condemnation decisions arbitrarily and capriciously or by abusing its discretion.and capriciously or by abusing its discretion.

The The KeloKelo Decision Decision• New London, Connecticut utilized eminent New London, Connecticut utilized eminent

domain to revitalize an economically domain to revitalize an economically distressed city.distressed city.

– Revitalization was projected to create 1,000 jobsRevitalization was projected to create 1,000 jobs

– Create a State Park, build a marina and river walkCreate a State Park, build a marina and river walk

– 300 million dollar Pfizer, Inc. research center300 million dollar Pfizer, Inc. research center

• United States Supreme Court found that United States Supreme Court found that promoting economic development is a public promoting economic development is a public use under the U.S. Constitution.use under the U.S. Constitution.

Texas Legislature’s Texas Legislature’s Response to Response to KeloKelo

Senate Bill 7 -TEX. GOV’T CODE § Senate Bill 7 -TEX. GOV’T CODE § 2206.001 2206.001

• Prevents the condemning of property for: Prevents the condemning of property for: – (1) the private benefit of a private party; (1) the private benefit of a private party;

– (2) a public purpose that is merely pretext to confer (2) a public purpose that is merely pretext to confer a private benefit on a private party; or a private benefit on a private party; or

– (3) purely economic development purposes (3) purely economic development purposes

Texas Legislature’s Texas Legislature’s Response to Response to KeloKelo

Senate Bill 7 -TEX. GOV’T CODE § Senate Bill 7 -TEX. GOV’T CODE § 2206.001(c) 2206.001(c)

• The Act does not affect the authority of The Act does not affect the authority of an entity authorized by law to take private an entity authorized by law to take private property through the use of eminent property through the use of eminent domain for … water supply, wastewater, domain for … water supply, wastewater, flood control, and drainage projects…flood control, and drainage projects…

Further Legislative Efforts Following Further Legislative Efforts Following KeloKelo

• HB 1495 – Landowner’s Bill of Rights HB 1495 – Landowner’s Bill of Rights (2007)(2007)

– Codified at § 21.0112 of the Property CodeCodified at § 21.0112 of the Property Code– http://www.oag.state.tx.us/agency/Landowners_billofrights.pdfhttp://www.oag.state.tx.us/agency/Landowners_billofrights.pdf– Amended by HB 2685 in 2009Amended by HB 2685 in 2009

• SB 11 – Production of Certain Information SB 11 – Production of Certain Information (2007)(2007)

– Codified at § 21.024 of the Property CodeCodified at § 21.024 of the Property Code– Requires Condemnor for “Critical Infrastructure” to Requires Condemnor for “Critical Infrastructure” to

produce certain information relating to the condemnation of the produce certain information relating to the condemnation of the specific property for which information was requestedspecific property for which information was requested

Further Legislative Efforts Following Further Legislative Efforts Following KeloKelo

• HB 51 & HJR 14 HB 51 & HJR 14 (2009)(2009)

• Constitutional Amendment passed in Constitutional Amendment passed in NovemberNovember–Amends Art.1, Sec. 17Amends Art.1, Sec. 17–Places restriction on condemnation for Places restriction on condemnation for

economic development within the economic development within the ConstitutionConstitution

Further Legislative Efforts Following Further Legislative Efforts Following KeloKelo

• HB 51 & HJR 14HB 51 & HJR 14 (2009)(2009)

• Constitutional Amendment passed in Constitutional Amendment passed in NovemberNovember– Adds qualifying language that the taking, damage, or

destruction must be for the ownership, use, and enjoyment of the property

– Requires any new law (general, local or special) bestowing the power of eminent domain to receive a two-thirds vote of both the House and Senate

Further Legislative Efforts Following Further Legislative Efforts Following KeloKelo

• HB 2006 (2007) & SB 18 (2009)

– Neither bill has become law– Both bills would have defined public use to include the “possess use, and enjoy”

language that is now a part of our Constitution– Would have required a governmental entity to authorize condemnation at a

public meeting and by record vote– Would have allowed repurchase by landowner for price paid by condemnor (as

opposed to current fair market value)– Would have slowed down condemnation process by requiring 20 days notice

prior to hearing and prohibiting the scheduling of a commissioners hearing within 20 days from the appointment of commissioners

– Would have required a bona fide offer and allowed for abatement of suit and recovery of fees if no bona fide offer was made.

Further Legislative Efforts Following Further Legislative Efforts Following KeloKelo

• SB 1023 (2009)

– Would have added a requirement that public necessity must be stated in petition and proven by condemnor

– Would have required the condemnor to pay attorneys fees, expert fees and cost if the commissioners returned an award greater than the condemnors’ final offer or, if the case was appealed, if the court returned a higher award than the commissioners

Non-Non-KeloKelo Legislation Legislation• SB 1253 (2009)

– Repealed section 49.2205 of the Water Code– Water District and Water Supply Corporation right-of-way

easement now cannot be used for wind (or any other) electric transmission line projects

• SB 1254 (2009)

– Would have limited Freshwater Utility Districts use of eminent domain to an area of 5 miles outside its boundaries without TCEQ approval

– Would have limited the use of eminent domain to an area of 75 miles outside its boundaries even with TCEQ approval

Public/Private Ventures after Public/Private Ventures after Malcomson Malcomson and and Constitutional AmendmentConstitutional Amendment

• Hypothetical Question Raised:Hypothetical Question Raised:– A private water supply corporation with a water A private water supply corporation with a water

supply contacts a River Authority with the power supply contacts a River Authority with the power to condemn and asks the River Authority to to condemn and asks the River Authority to condemn for a water pipeline and then transfer condemn for a water pipeline and then transfer the rights to the corporation. Can they do this?the rights to the corporation. Can they do this?

Public/Private Ventures, Public/Private Ventures, (cont.)(cont.)

• Answer:Answer:– Probably not, unless there is some public Probably not, unless there is some public

necessity for the River Authority to engage in the necessity for the River Authority to engage in the project in some way. It is the River Authorities project in some way. It is the River Authorities board that is making the determination that the board that is making the determination that the taking is for a public use and that it is necessary.taking is for a public use and that it is necessary.

Practical Considerations for Partnering Practical Considerations for Partnering under 49.227under 49.227• Public entity should participate in the project Public entity should participate in the project

as much as possible in order to successfully as much as possible in order to successfully fend off a challenge to the right to condemn. fend off a challenge to the right to condemn.

• Such efforts on the part of the public entity Such efforts on the part of the public entity should include the following: should include the following:

Practical Considerations, Practical Considerations, (cont.)(cont.)

• Acquiring easements, including negotiation. Acquiring easements, including negotiation.

• Owning easements and physical appurtenances of the Owning easements and physical appurtenances of the project. project.

• Acquiring/identifying customers to be served by the line. Acquiring/identifying customers to be served by the line.

• Utilizing condemnation agreements that do not Utilizing condemnation agreements that do not indemnify the District for opposing party’s attorney’s indemnify the District for opposing party’s attorney’s fees should the Court find no right to condemn. fees should the Court find no right to condemn.

Regulatory TakingsRegulatory Takings

• Barshop v. Medina County Underground Barshop v. Medina County Underground Water Conservation DistrictWater Conservation District

– District and cattle interests challenged the act which District and cattle interests challenged the act which created the Edwards Aquifer Authority as created the Edwards Aquifer Authority as unconstitutional because it allowed the Edwards Aquifer unconstitutional because it allowed the Edwards Aquifer Authority “to regulate groundwater withdrawals by well Authority “to regulate groundwater withdrawals by well from the aquifer[.]” from the aquifer[.]”

BarshopBarshop, , (cont.)(cont.)

– Supreme Court dodged the issue of whether Supreme Court dodged the issue of whether groundwater vested before or after it was captured by groundwater vested before or after it was captured by the landowner, instead upholding the constitutionality the landowner, instead upholding the constitutionality of the Act on the grounds that: of the Act on the grounds that:

– The Act affected the use of water, not title to it;The Act affected the use of water, not title to it;

– Even if plaintiffs were divested of a real property right, Even if plaintiffs were divested of a real property right, the state has condemnation power to do so; andthe state has condemnation power to do so; and

– The act provided adequate due process. The act provided adequate due process.

CONDEMNATION PROCESSCONDEMNATION PROCESS• Governed by Chapter 21 of the Texas Property CodeGoverned by Chapter 21 of the Texas Property Code

• Corporate ResolutionCorporate Resolution

• Negotiations with LandownerNegotiations with Landowner

• File SuitFile Suit

• Appointment of Special CommissionersAppointment of Special Commissioners

• Hearing by the Special CommissionersHearing by the Special Commissioners

• Damage Calculations by Special CommissionersDamage Calculations by Special Commissioners

• Possession Pending LitigationPossession Pending Litigation

Adequate CompensationAdequate Compensation

• Fair Market ValueFair Market Value

• State v. CarpenterState v. Carpenter – “…“…all circumstances which tend to increase or diminish present all circumstances which tend to increase or diminish present

market value”market value”

– But not “remote, speculative, or conjectural uses…not reflected in But not “remote, speculative, or conjectural uses…not reflected in present market value”present market value”

• Appraisal ApproachesAppraisal Approaches