Eminent Domain Blog : Pennsylvania Eminent Domain Lawyer & Attorney : Fox Rothschild Law Firm : Condemnation, Real Estate Valuation : Philadelphia, Bucks County, Pennsylvania

U.S. and international accounting proposals are being circulated which could impact the way private equity, venture capital and other alternative private investment funds explain how they appraised an asset including real estate. According to a recent story in Pensions & Investments, managers of these funds could face much tougher rules on explaining how they arrived at an asset's value and the methods used to appraise such assets.

The proposed changes are part of an ongoing effort to standardize the way fair-value reporting is handled at the international level. In conjunction with a recent G-20 meeting, both the Financial Accounting Standards Board and the International Accounting Standards Board released exposure drafts of revised fair-value standards. The IASB’s draft focuses on increased transparency about fair-value measurements, including valuation techniques and assumptions made to measure fair value, according to Pensions & Investments. The FASB’s draft would essentially require managers to clearly state how they arrived at fair-value valuations and would more plainly bring U.S. standards in line with international accounting standards, Pensions & Investment reported.
 

The story can be found:  www.pionline.com/apps/pbcs.dll/article

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President Obama signed the financial regulatory reform bill into law on July 21.  The Bill included appraisal provisions including provisions to sunset the controversial Home Valuation Code of Conduct by directing for the establishment of a federal appraisal independence standard, enhancing appraiser competency provisions - including clarification regarding consideration of professional appraisal designations – and providing for financial resources for oversight and enforcement of appraisal rules.

The Appraisal Institute “applauded the legislation’s inclusion of the first modernization of real estate appraisal regulations in more than 20 years.” “This bill will mean good news for consumers because they should see more reliable home appraisals,” said Appraisal Institute President Leslie Sellers, MAI, SRA. “It will encourage the use of highly trained and competent real estate appraisers and will provide much-needed resources for oversight and enforcement.”

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The Pennsylvania General Assembly is considering creating “land banks” as a way to deal with vacant or abandoned properties. House Bill 712 (J. Taylor, R-Philadelphia) provides for the creation of land banks by counties, cities and/or boroughs with populations of 10,000. The proposed Land Banks Authority Act authorizes those municipalities to establish a land bank authority and sets forth the parameters by which the authority may act to acquire, manage and sell property. The Act expressly prohibits the use of eminent domain to acquire the targeted property.  The bill passed the House by a vote of 190 to 8 and has been referred to the Senate Urban Affairs and Housing Committee.

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On July 6, 2010, Governor Rendell signed the Fiscal Code Bill (Senate Bill 1042), providing, in part, for the automatic suspension, during the "extension period" (which begins after December 31, 2008, and ends before July 2, 2013), of approvals granted by a government agency for or in effect during the extension period, whether obtained before or after the beginning of the extension period. This new legislation is a significant benefit, to Pennsylvania developers and landowners hurt by the recession. Significantly, certain permits and approvals that may have expired since December 31, 2008, may no longer be considered to have expired, but have been suspended since January 1, 2009, thereby buying a developer or landowner significant additional time.

There are exceptions, however. For example, the suspension is not automatic in Philadelphia. In addition, Highway Occupancy Permits can only be extended by the Department of Transportation upon the submission of a complete and accurate application throughout the extension period for one year intervals. Further, any approval issued by the Department of Environmental Protection for a discharge into exceptional value or high quality waters is not subject to the automatic suspension. Any holder or recipient of an approval may seek written verification from the issuing government agency for any of the following: (1) the existence of a valid approval; and/or (2) the expiration date of the approval under the new legislation.
 

A copy of the legislation can be viewed here:  www.legis.state.pa.us/CFDOCS/Legis/PN/Public/btCheck.cfm

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The U.S. Supreme Court recently handed down a very interesting decision. The Court’s decision in Stop the Beach Renourishment, Inc. v. Florida Department of Environmental Protection (No. 08-1151) must be viewed in two parts.  The opinion can be found at www.supremecourt.gov/opinions/09pdf/08-1151.pdf

First, the Court unanimously rejected property owners’ claims that a Florida beach reclamation project constituted an unconstitutional taking. Under Florida law, beachfront property seaward of the median high-water mark belongs to the state, while the owners of beachfront property own the land between that line and their homes. Florida cities put new sand on beaches which extended the beaches into the sea by seventy-five feet. The new land would belong to the state and owners of adjacent property would not have exclusive access to the water or own any new land subsequently added naturally.

Justice Scalia wrote the opinion for the unanimous Court (Justice Stevens did not participate) ruling that there was no taking. The decision was based upon Florida law that property owners do not have any right to the filled-in land and that the state has the right to fill in its own seabed.
The second and more interesting issue, was whether there can be a “judicial taking” – that is, whether a decision by a Judge could constitute a taking. 4 members of the Court – Justices Scalia, Roberts, Thomas and Alito – went out of their way to consider and find that there can be a judicial taking. They stated that a judicial taking occurs in situations where a “court declares that what was once an established right of private property no longer exists.” Justice Scalia, writing for this plurality, opined that “it would be absurd to allow a State to do by judicial decree what the Takings Clause forbids it to do by legislative fiat.”

There were 2 opinions dissenting from this part of Justice Scalia’s opinion. Justices Sotomayor, Kennedy, Breyer and Ginsburg, in essence, concluded that they should not address the question of whether there could be a judicial taking since they found that, in any event, there was no taking in that case.

It is very difficult to predict what, if any, impact this case will have. The first part of the case is limited to Florida property law. The second part – whether there can be a judicial taking – did not have a majority opinion. Further, it is uncertain, if not unlikely, that a lower court judge will want to conclude that a Judge’s decision constituted a taking.

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In response to questions by Republican Senator Charles Grassley on July 1, 2010, Supreme Court nominee Elena Kagan discussed property rights and the Court’s Kelo decision. The following are some excerpts of her testimony:
GRASSLEY: Do you believe that the Supreme Court correctly decided the Kelo case or do you believe that the Supreme Court improperly undermined constitutionally protected private property rights?
KAGAN: Senator Grassley, it was obviously a very controversial decision that has inspired a great deal of action in the state legislatures. Of course, what what the court in Kelo did was to say that the question of public use was not necessarily use by the public, but instead was use for a public purpose. And the court said that in the context of a taking of property that was done pursuant to a broad-scale urban development plan. So I think it remains an open question whether that public purpose test would apply in any other context without such a broad– scale urban development plan . . . .
[W]hat states have done in the wake of that decision, in a very striking manner, I think, is to say, “Thanks, but no thanks, you know. We don’t want that power. We don’t want to be — we don’t want to do this. We think doing this, taking property from one person to give it to another person, even in the context of a broad redevelopment plan, is not appropriate public policy.”
And so a number of states . . . have passed these kinds of anti-Kelo legislation, which makes sure that the question never arises because the state government doesn’t try to affect such a taking in the first instance.
GRASSLEY: Can you think of any areas where, in your opinion, the Supreme Court has failed to provide adequate protection of constitutional property rights? And if you can think of any, then I’d like to know examples — or an example.
KAGAN: Well, you know, I’ve tried very hard, Senator Grassley, not to suggest where I see deficiencies with — in — in — in the court’s handling of cases. So I think, you know, I think I won’t answer that question with that degree of specificity.
GRASSLEY: The president who appointed you, in “Audacity For Hope,” his book, said our Constitution places the ownership of private property at the very heart of our system of liberty. Do you agree with that statement?
KAGAN: Well, I do think that property rights are a foundation stone of liberty, that the two are intimately connected to each other in our society and in our history.
 

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The City of Philadelphia has until March 2011 to spend $45 million to fight blight.
The money is the last of the bond proceeds for the city's Neighborhood Transformation Initiative that former Mayor John F. Street started in 2001 to demolish abandoned buildings and acquire vacant properies. When the Nutter administration took over, it did not have a record of the amounts left in the fund and is now struggling to spend the money.

These monies may go only to certain neighborhoods - including parts of Germantown, North Philadelphia, Point Breeze, and West Philadelphia - that are specially designated for redevelopment. City Controller Alan Butkovitz said that the time it takes to condemn and acquire a property has created some of the delay. The monies not spent would be deposited into an escrow account until the City has to start paying off bondholders.
 

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The Philadelphia International Airport will embark upon a $5.2 billion expansion plan for over the next 12 to 15 years. The proposal would lengthen two of the airport's four runways and build a fifth runway along the Delaware River, where UPS now operates. UPS would move to the airport's west end on 200 acres in Tinicum Township that the airport would acquire. The FAA plans to issue a final environmental impact statement by late summer, and a "record of decision" on the project by the end of 2010.

A significant amount of property will need to be acquired for the project. According to the Philadelphia Inquirer, the airport will acquire and demolish buildings at the International Plaza, and acquire 106.5 acres of private land east of the airport from 13 owners and demolish the buildings. Two public streets, Escort Street and Executive Avenue, would be closed. The plan also calls for relocating or closing several public roads and relocating railway facilities. The Airport has stated that construction would be paid for by Philadelphia revenue bonds, passenger-facility charges, and federal FAA grants

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Philadelphia voters yesterday approved a charter change abolishing the 156-year-old Board of Revision of Taxes. The BRT sets the value of all properties in Philadelphia which determines the amount a property owner must pay in property taxes. Voters approved the ballot question by a more than 7-3 ratio. Mayor Nutter, most of City Council, newspaper editorial boards, and the Committee of Seventy all came out in favor of abolishing the BRT. "This is a very important moment in Philadelphia's history. We've dissolved an entity that is a throwback to the 1800s, an entity that needed to be put out of business so that we can move forward with the hard work of reform," Mayor Nutter said.

Members of the BRT challenged the legality of the ballot questions. Although the PA Supreme Court declined to intervene in the election, the court's ruling did not address the merits of the case. It is still possible for those BRT members to renew the suit.

At this point,, the BRT will no longer exist as of Oct. 1. A new Office of Property Assessment (OPA) will be responsible for making and supervising all assessments and valuations of residential and commercial real estate in Philadelphia.

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