Posted: October 31, 2008
FasTracks to private property
RTD and land owners are battling over eminent domain as the transit project gains momentumBy Rebecca Cole
Plastered along the faux-Grecian columns of Denver’s Civic Center Park, giant red, white and blue banners fairly scream at the few dozen people gathered on this gray February day to protest the “land grab” of private property by Denver’s Regional Transportation District.
“RTD: You may take our property from us, but you will never take us from our property.”
“RTD: We tear down buildings just because we can.”
Braving the freezing temperatures and erratic spits of snow, an odd mix of state legislators, property rights activists and the park’s ever-present homeless population — attracted by the sound of “free food” blasted over loudspeakers — converge around the “Orange Force One” bus parked on the plaza.
“Must be something for the Broncos,” mumbles one man dressed in a tattered army jacket and POW-MIA cap as he stares at the RTD-branded pig sizzling on an industrial-sized grill.
Wearing a Karl Mecklenburg jersey, Steve Fesch darts through the crowd while manning food-laden tables. Fesch, owner of the bus and a parking lot a stone’s throw from Invesco Field at Mile High, hosts 1,000-strong tailgate shindigs there before Broncos games.
But the party may soon be over for Fesch. Last year, RTD mailed him a notice of intent to acquire the property to make way for FasTracks, the agency’s $6.1 billion transportation project linking metro Denver and the suburbs. While Fesch’s property, which also includes a squat, two-story warehouse he rents to a manufacturing company, is not in the way of any actual rail, the agency says it needs a portion of it for infrastructure purposes.
“They’re working hard to take my property,” Fesch says of RTD. “They only need a sliver and conveniently drew a line right through my building.”
Fesch, 33, purchased the property in 2006, dreaming of one day converting the warehouse into a restaurant and bar, complete with a rooftop deck offering million-dollar views of the Denver skyline and Invesco. After meeting with Denver’s planning department, which Fesch said told him the property was a “gold mine” — smack-dab in the middle of a LoDo-type redevelopment project coinciding with FasTracks — Fesch bought it and started making plans.
Now furious that neither the agency nor the city informed him the property might clash with RTD’s project, Fesch has gone on the offensive. Banding together with others facing eminent domain and with the Colorado Property Rights Coalition, a grass-roots activist organization, Fesch is holding rallies like this one, to lobby legislators and raise public awareness of what they call RTD’s “land grab” of prime real estate for development purposes.
“Think about how valuable my little spot is,” Fesch says. “That becomes the coffee shop, the bagel shop — everything TOD (transit-oriented development). I promise you something is going to be on my land under RTD and their developers. I had a lifetime of opportunity here that now I won’t be able to realize.”
Fesch is just one of many fighting to hold on to their property in Colorado and across the country. In a rising tide of resentment against government agencies, cities and private developers, property owners are throwing up legal roadblocks to stop the use of eminent domain. Mixed-use transit development projects like RTD’s FasTracks constitute a gray area, testing the public’s general wariness about eminent domain and economic development.
The Fifth Amendment reads, in part “nor shall private property be taken for public use, without just compensation.” Known as the Takings Clause, traditionally this statement has been interpreted as a way for government entities to acquire property for public-use projects.
“For the past 50 to 60 years, eminent domain has been used to build some of our most important public projects, like DIA, E-470 and C-470, Coors Field and the convention center,” says Leslie Fields, a partner with Denver law firm Faegre & Benson who specializes in eminent domain and land-use law. “Only recently has there been the negative spin.”
A tipping point occurred in 2005 when the U.S. Supreme Court in Kelo v. New London ruled the city of New London, Conn., could acquire a home to make way for a $300 million Pfizer Inc. facility estimated to bring in 2,100 new jobs. A nationwide backlash followed the court’s decision; 80 percent of people disagreed with the justices, according to an annual index published by the Saint Consulting Group, a land-use political organization based in London and Toronto.
No lake for Wal-Mart
In Colorado, the opposition began to emerge as early as 2003 when the Legislature passed tighter restrictions on fair compensation in eminent domain cases. In 2004, residents stopped Arvada from using eminent domain to acquire a lake in order to build a Wal-Mart Supercenter.
Fields represented the citizens in that case, and originally lost when a trial court ruled it was appropriate for the city to declare the lake “blighted.” Fields petitioned the Colorado Supreme Court, and in a rare move the court quickly intervened, overturning the decision.
In 2006, then-Gov. Bill Owens signed into law a bill that severely limited the acquiring of private property for economic development or to increase tax revenue; by 2007, 42 other states had done the same.
By then, the sentiment against eminent domain had reached a crescendo, with one in three Americans saying “none” when asked what type of development they’d like to see built in their community, according to the Saint Index. Saint researchers also found that 70 percent said they felt “the relationship between developers and officials made the development process unfair.
“In the two or three years following Kelo, there was a significant push by states to pass legislation to address the issue,” Fields says. “But unfortunately, a lot of this legislation went beyond the issue of whether private property was being taken and turned over to other private landowners or developers for tax-generation purposes. It’s opened up this whole discussion about what is public use.”
Citing the Wal-Mart case, Fields says for the most part the system works in Colorado. The 2006 law now creates a gray area, she says, since prior to its passage almost any condemnation constituted a proper public purpose — even those that significantly benefited private interests — as long as the primary purpose was to further a public use.
Intent is the critical issue, Fields says of RTD’s FasTracks project. “What is the real purpose here? What is wagging the dog — is it private development or is it the light rail system?”
Spawned by the Denver Regional Council of Governments and its 2030 metro vision plan, FasTracks is a massive project to modernize Denver’s congested and rapidly decaying transit system for a projected 1.5 million additional people. The vision calls for transforming the region into a series of walkable cities, with downtown Denver at the center, linked through a web of transportation options: bus, rail, road and bike paths. Compact, mixed-use development and high-density urban centers, strategically located near transportation hubs, are critical to the plan’s success.
In 2004, voters approved a 0.4-cent increase in the transit sales tax to fund the project, a 12-year program consisting of 122 miles of commuter and light rail and 18 miles of bus rapid transit. Now at a projected cost of $7.9 billion — $3 billion more than the original estimate sold to voters — RTD conceded in July that, due to escalating fuel and materials costs and reduced sales taxes, it cannot deliver the project as promised by 2017.
The entity is being fingered by owners like Fesch as making up the difference through “land banking:” acquiring properties through eminent domain, ostensibly for transit purposes, and then selling to a developer, an accusation Calvin “Cal” Marsella, the general manager and CEO of RTD, strongly rejects.
Although RTD had used eminent domain in previous projects like T-REX, the $1.67 billion freeway reconstruction and light-rail extension along Interstate 25, this time, public sentiment is different, Marsella says.
“We had some pretty animated individuals on T-REX, but nothing to this level,” he says in an interview in the boardroom of FasTracks’ downtown Denver headquarters. “Nothing has changed in the process. But the opposition now is more orchestrated and definitely oriented to inflame public passion.
“There’s a rumor being spread that we buy more property for the purpose of developing it, but we don’t do that,” Marsella says. “When we buy property, we only buy what we need for the transit purpose, as mandated by the Uniform Act.”
Pauletta Tonilas, FasTracks public information manager, says the property owner is a part of the process every step of the way. “We hear a lot about land grabs. But it’s treated no differently than any other property transaction; folks are paid a fair and reasonable price for their property.”
But that isn’t stopping the agency from considering bids for mixed-use development on top of a transit station, as long as the developer’s plan includes the parking spaces RTD requires.
Citing the example of the Wadsworth station along the West Line in Lakewood, one of 57 slated to be built throughout the FasTracks program, Marsella says if a bid comes in at $15 million for a mixed-use, eight-story building with parking rather than a four-story, $20 million parking garage, the agency will definitely “take a look at that.
“The RTD board has a very specific TOD policy that encourages transferring to development around stations,” Marsella says. “Lakewood came to us and said, ‘We really want to optimize development and build it so it complements your rail station.’ It’s in RTD’s long-term interest, and it’s a win for everybody involved.
“Where the rub occurs is when you have an owner who says, ‘I just don’t want to sell my property under any circumstances,’” he continues. “But we still need it. The reason we have eminent domain is there’s been recognition forever that when major public works projects get built, it may become necessary to acquire properties even if the owner does not want to sell.”
In response to the agency’s budget crunch, RTD is aggressively pursuing public-private partnerships, hiring Wall Street powerhouses Goldman Sachs and JP Morgan Chase to help it map out a strategy.
A prime option for transit development projects, public-private partnerships allow agencies like RTD to spread project costs out over a longer period of time because a private entity takes on much of the risk of building and maintaining the project. At the end of a specified time period, the property is transferred back to the public entity.
“That kind of development is really what has surged across the country,” Tonilas says. “TOD has become a thriving thing because it is looked upon as smart infill development that can serve a community for many years.”
The West Line — now at a price tag of $707 million, up 11 percent from original estimates — rolls by Steve Fesch’s property and then winds through Lakewood, mainly following Colfax Avenue until it ends at the Jefferson County Government Center in Golden. Along the way, the line passes Kim Snyder and Galen Foster’s home and window-tinting business one block from the proposed Wadsworth station.
“This used to be a cherry orchard,” Snyder says, sweeping her hands to include the glass-fronted bookshelves, star-gazing telescope and leather furniture that encompass her cozy living room behind the business. “We’ve been here for 24 years. They want to take it just as my blossoms are ready and worth something, to reap the seeds I’ve sown.”
Hit with an acquisition notice in the mail from RTD last year, Snyder says her emotions have ranged from depression and anxiety to spine-hardening anger. “I try to be strong, but I fall apart all the time,” Snyder says. “The fight keeps me going. In the end, there’s no shame in losing, only for not fighting for what you believe in.”
Snyder’s weariness from the couple’s fight with the Goliath-like RTD shows as her blue eyes well with tears. “I want them to see me as a person and not as a development project.”
Saying she’s “closer to the end than the beginning,” Snyder, 52, says now she doesn’t know what will happen to their lives. “James Madison would be turning in his grave if he saw the way the Bill of Rights is being interpreted.”
If RTD successfully acquires the property, it will become part of Lakewood’s transit mixed-used zone district, an intensely developed urban core anchored by the Wadsworth station. But at a block away, Snyder isn’t convinced RTD needs her property for the actual transit station; instead she says the property will be sold to a developer.
“It’s RTD’s dirty little secret. The city of Lakewood is facilitating RTD and vice versa,” Snyder says. “I am sitting on boardwalk and they want it. Everybody wins here except the little guy."
Cities like Lakewood are making it easy for developers to view transit development projects as sound investment opportunities. No stranger to eminent domain, Lakewood in 2005 adopted a blight resolution for an area along West Colfax, acquiring 30 acres from approximately 27 different property owners and paving the way for Wal-Mart to move in.
Becky Clark, Lakewood’s community planning and development director, says it “was the pebble in the water that created a ripple effect,” spurring other shops to move in, boosting sales tax revenue and drawing customers who had been lured away by Arvada and Golden.
“Once Wal-Mart was built, people came back in droves,” Clark says. “With that plus another store the retailer re-opened, Lakewood has gained back almost all of its lost revenue.”
The rezoned area, radiating outward from the Wadsworth station for more than 200 acres, specifically regulates height restrictions, housing, business types and density ratios. Clark says the goal is to revitalize the district through a sustainable, livable urban neighborhood served by rapid transit, retail, recreation and jobs.
In just one year, total market value of property near the intersection of Wadsworth Boulevard and West Colfax Avenue (a mix of retail, restaurant and residential) increased by 13 percent, from about $174 million in 2006 to $195 million in 2007, according to figures released by the city.
Although Lakewood does not have any concrete projections for future economic gains, Clark says the city will use the 2007 snapshot of property values, jobs and tax revenues to measure yearly growth.
“The city is very excited about this,” Clark says. “We want to lessen the need for cars and make Lakewood more of a green city. Our goal is to make it more active.”
According to Clark, Lakewood will incorporate many existing tenants by folding them back into the new mixed-use plan. “We want to keep small businesses here and are working with developers so they can be put back into the development,” she says. “We’ve offered our services and extended the olive branch.”
Slow lane for FasTracks
Earlier this year it appeared the brakes would be put on FasTracks by legislation co-sponsored by Sen. Lois Tochtrop, D-Thornton. Killed in late April, the bill aimed at further decoupling eminent domain, transit and economic development, restricting RTD to use property acquired through condemnation “only as necessary for transit purposes.”
“I’m concerned,” Tochtrop said prior to the bill’s demise. “I think the intent of what they (RTD) wanted was to expand the power of eminent domain to allow for economic development.”
Now it is up to the courts to sort out the nuances of intent on a case-by-case basis. Fields says she’s “long ago given up predicting what issues are of interest to the Colorado Supreme Court,” but that given the scale of RTD’s project “sees the possibility of the court wanting to give clarity to this issue.”
Although only a few property owners are affected now, with hundreds of miles of projected FasTracks lines and transit stations, and cities convinced of transit development benefits, the fate of many more may hinge on the outcome.
For now, Fesch’s and Snyder’s cases are wending through the various stages of the condemnation process. According to RTD’s Tonilas, an offer based on the “highest and best use” of the property has been submitted to the owners; they in turn have had their property independently appraised on RTD’s dime. If negotiations on price reach a stalemate and the property owners continue to resist the acquisition, the case will go before a trial court.
“RTD will file a condemnation case to take possession of the property and will ask for a hearing very soon after it is filed, usually within 40 days,” Fields says. “RTD will have to prove it is truly condemning it for public purpose.”
If the property owner loses, the case then goes to the valuation phase to determine the property’s fair market value. Once compensation is paid to the owner, the agency acquires the property and can start construction. The problem, Fields says, is that the trial court’s determination isn’t the final word; the landowner can appeal to the Colorado Supreme Court (or even higher), which could take several years to resolve.
Marsella says the real losers in the uproar over eminent domain are the cities and counties.
“Their desire for mixed-use development to generate better tax revenues is being undermined,” he says. “If a site forever must be non-revenue generating, they’re the ones paying the price.”
But Steve Fesch disagrees, saying although he’s in favor of RTD’s FasTracks, he is convinced the agency is abusing its power.
“RTD could easily purchase the land they need from me and save the taxpayers hundreds of thousands of dollars in extra land acquisitions and legal fees,” he says. “But it appears they have their own agenda for my land.
“If I win this thing, that gives everyone else hope that they could win. But right now no one’s really paying attention. Until they open their mail one day and they become us.”
Rebecca Cole is the online editor at Rocky Mountain Institute, a non-profit "think-and-do" tank that drives the efficient use of energy and resources. Learn more about RMI's latest initiative, Reinventing Fire, to move the U.S. off fossil fuels by 2050.