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Wisconsin Supreme Court ruling fortifies eminent domain

By: dmc-admin//July 27, 2009//

Wisconsin Supreme Court ruling fortifies eminent domain

By: dmc-admin//July 27, 2009//

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A Milwaukee veterans group is homeless and $300,000 poorer after a Wisconsin Supreme Court decision simplified eminent domain for state and local governments.

The July 17 decision ended a lawsuit between the City of Milwaukee Post No. 2874 Veterans of Foreign Wars of the U.S. and the Redevelopment Authority of the City of Milwaukee. The veterans sued the city for more money after Milwaukee in 2001 used eminent domain to acquire a former hotel on Wisconsin Avenue. The VFW had a long-term lease in the hotel.

The Supreme Court’s 4-3 decision sided with the city and Wisconsin Department of Transportation, which joined the city in the lawsuit. The court also wiped away the $300,000 the VFW was to receive for losing its lease on the property.

“When I heard the news, it’s like taking a knife and putting it in your back and twisting the knife and turning it because it’s such a blow to all of the members because here we fought in all of the wars,” said Robert Drakos, commander of the VFW post.

The case stretches back nearly 50 years to when the VFW post owned the property on Wisconsin Avenue. The post sold the land to Towne Metropolitan Inc., one of Milwaukee developer Joseph Zilber’s firms, in exchange for a 99-year, $99 lease for 5,250 square feet of the hotel Towne built there.

The city evicted the VFW in 2003 and tore down the hotel the same year. The property is still vacant.

The decision takes away the VFW’s last chance to benefit from the lease.

But for the Milwaukee redevelopment authority and WisDOT, the decision irons out legal uncertainties.

It gives government more security when using eminent domain to acquire run-down buildings, said Charles Graupner, who was the redevelopment authority’s trial counsel when the case was in circuit court.

“Taxpayers and governments can breathe a sigh of relief that, when they have to take property, they’re going to pay the fair market value of the property but not more,” said Graupner, a partner at Michael Best & Friedrich LLP, Milwaukee.

The legal question before the Supreme Court was: How do governments determine the value of a property to compensate property owners who lose land through eminent domain?

The VFW argued Milwaukee should have considered the value of the VFW’s lease when paying for the land. In this case, the VFW’s 99-year lease was more valuable than the hotel and property, which the court said were worth nothing when Milwaukee acquired them in 2001.

WisDOT joined the case because it acquires more than 1,000 properties a year, but parcels often have multiple tenants, said Jim Thiel, WisDOT counsel. In 2007, for example, WisDOT acquired 1,136 properties with 2,450 owners and tenants.

“There would be no end in trying to unravel separate ownership status,” Thiel said.

The Supreme Court reversed an appeals court decision that would have opened the door for abuse, Thiel said. Property owners could inflate the value of leases to get more money if government must pay based on leases instead of land, he said.

“I could sign a lease with you for 50 years,” Thiel said, “and you would have to do this and have to do this, and it would only cost you a dollar.”

If tenants are owed money for leases on condemned properties, they can work with the landlord to collect a share of the eminent domain compensation, Graupner said.

For the VFW, the decision means members will continue to meet in the American Red Cross building on Wisconsin Avenue in Milwaukee where they are gathering until a more permanent home is found, Drakos said. The post might not get a new building, he said.

“That was taking a right cross and a left cross and almost knocking us down to the ground,” Drakos said of the decision. “But we’re known for standing back up on our feet, and I don’t know where the fight will go from here, if you can call it a fight.”

The case is City of Milwaukee Post No. 2874 VFW v. Redevelopment Authority of the City of Milwaukee, 2006AP2866.


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