A Maricopa County Superior Court judge ruled Tuesday that Tempe can’t force a group of property owners off their land to make way for a $200 million shopping center.
Judge Kenneth Fields said the city was trying to condemn private property for a development that offered few public benefits.
The decision — which comes just months after the U.S. Supreme Court ruled that eminent domain can be used for economic development — reaffirms that Arizona protects private property, legal experts said.
It is unclear how the decision will affect the Tempe Marketplace. City officials will decide whether to appeal during an closed session Thursday.
"This is not just a victory for me. It is a victory for everybody who owns property, because everyone is vulnerable to condemnation," said Troy Valentine, owner of Woodchuckers, a cabinetmaking business.
Valentine, along with nearly a dozen other property owners, have battled to keep the city from seizing their property for the project. Some could still cut deals with the developers, using the decision as economic leverage to up the price for their land.
PROPERTY OWNERS WIN
After three weeks of deliberating, Fields sided with the property owners.
"Private parties appear to be gaining more financially by the taking of the property than the public," Fields stated in his ruling. "The private developer Miravista Holdings and its principals are the driving forces behind this project, not the Plaintiff, the City of Tempe."
Tom Liddy, an attorney for Miravista Holdings and Vestar Development Co., said the court’s decision does not match reality and should be won if the city appeals. He said the ruling would not cause unexpected delays if the case is appealed, which could take a year.
The developers can’t appeal the case because only governments have the power to use eminent domain.
In court, attorneys for Miravista and Vestar argued that building the Marketplace on the 120-acre site near loops 101 and 202 would bring thousands of new jobs as well as millions of dollars in new sales tax revenue.
Likewise, the project would require an extensive environmental cleanup before construction started, which would reduce safety and health risks.
The court agreed that the area, which is located on a former Environmental Protection Agency Superfund Site, has environmental problems.
On two former landfills, the area is spotted with dilapidated buildings that rest on pockets of highly flammable methane gas.
The area was taken off the Superfund list so it would qualify for the federally funded Brownfield program, which helps communities redevelop blighted areas. The program awarded Tempe $7 million, which would have to be repaid if the ruling stands and the area is not cleaned. It is unknown how much the legal battle has cost the city.
ANOTHER LOSS FOR TEMPE
The decision is the second high-profile loss for Tempe this summer. In June, a federal judge ordered the city to pay $2.4 million to a group of Hispanic current and former city employees in a discrimination case.
But Tempe Mayor Hugh Hallman said the Marketplace ruling was not a setback. Instead, he called it a disappointment because it stalls the city’s efforts to clean up the area.
Besides the environmental issues, Hallman said there are buildings violating the city’s fire codes, which poses a major threat to public safety.
Hallman voted to condemn the properties in January despite repeatedly saying he opposes eminent domain in most cases. Citing a contract between the city and the developers, Hallman said Tempe was bound to condemn the properties if the owners did not sell their land.
"My obligation is to uphold the council’s decisions and protect the city from risk," he said.
The original development agreement between the city and developers was signed in April 2004, while Neil Giuliano was still mayor.
Hallman said if he and the council voted against condemnation, it would have opened the city to a lawsuit by developers suing the city for a breach of contract.
SUPREME COURT ALSO WEIGHED IN
Tuesday’s ruling comes after a June 23 decision by the Supreme Court allowing municipal governments to take land for economic redevelopment.
In that case, the nation’s highest court ruled in favor of New London, Conn., which intends to redevelop nearly 90 acres of waterfront land near a $300 million research center.
To do so, the town, which is still economically reeling from the 1996 closure of a U.S. Navy base, needed to condemn the property of 15 homeowners.
Among them was Susette Kelo, who had extensively remodeled her home, and Wilhelmina Dery, who was born in her house in 1918 and lived there her entire life.
"The Arizona courts have stepped up and drawn a line in the sand by not allowing private property to be taken for economic development," said Jennifer Barnett, a staff attorney for the Arizona chapter of the Institute for Justice. The institute successfully defended Mesa brake shop owner Randy Bailey in 2003 against that city’s attempts to condemn his business for a developer.
Likewise, Arizona State University law professor, Dennis Karjala, said the Supreme Court ruling would have little effect on Arizona law, which severely limits when a city can seize property in the wake of the Bailey case.
"The ruling shows the court’s commitment to the approach of the Bailey case," he said.
In an ironic twist, the Bailey case — once a major setback for Mesa — will help the city’s economic development plans.
The ruling that once killed Mesa’s plan to redevelop downtown now helps it build the Riverview project faster than Tempe can build the competing Marketplace two miles west.
Mesa Riverview spokeswoman Joanie Flatt said Tuesday’s court decision will have no impact on the Mesa project, formerly known as Riverview at Dobson.
"It really doesn’t involve us," Flatt said. "I’m sure it will continue to move through the court process and what will be, will be."
Cinemark has broken ground on its 16-screen movie theater at Riverview and the developers are working on construction drawings for the "theater district," an outdoor shopping area.
In May, Mesa voters approved the 250-acre Riverview project at Loop 202 and Dobson Road, and its estimated $80 million incentive package.
The residents’ group Valley Business Owners (And Concerned Citizens) turned in a valid number of signatures in December that forced the referendum. Former Arizona Speaker of the House and Vestar consultant Jeff Groscost funded the signature-gathering process. Then, the overwhelmingly majority of the opposition’s financial backing came from Harkins Theatres, a signed tenant at Tempe Marketplace.