Grant funds considered in calculating the fair market value of property in an eminent domain proceeding.

In a case of first impression in that state, the Supreme Court of Connecticut ruled that the availability of state economic development grant funds could be considered in calculating the fair market value of property in an eminent domain proceeding.

The property under consideration here consisted of about 40 acres of land with two dams and approximately 21 industrial buildings located on both sides of the Willimantic River in the town of Windham, Connecticut. From 1884 until 1985, a variety of companies used the property for the manufacture of textiles. In 1986, the property was acquired by the ATC Partnership. In 1995, a multidisciplinary team prepared for the town a master action plan for the redevelopment of the property. The plan considered light industry with ancillary offices to be the highest and best use for the property. However, because of environmental problems, the team estimated the total costs of an environmental investigation and remediation of the property would range from a low of $2.42 million to a high of $4.04 million. Subsequently, The Northeast Connecticut Economic Alliance, Inc. brought this eminent domain proceeding. After protracted and repeat litigation, a trial court awarded the owners $1.7 million after concluding that 80% of the environmental remediation would be recouped from a $3 million state economic development grant. The parties appealed.

On appeal, the Alliance argued, in part, that the trial court improperly awarded the owners the state bond commission grant funds asserting that the grant money was not part of the condemned fee estate and was available only to governmental entities. The appellate court said that it would require no great stretch of the imagination for it to conclude that a prospective real estate purchaser reasonably would consider the availability of such funds before purchasing a contaminated former industrial property located in an economically depressed region. Furthermore, the court said that it would be inequitable to consider the impact of environmental contamination on the property's value but exclude evidence of grant moneys that plausibly might mitigate the negative financial impact of the pollution in the eyes of a potential buyer. Thus, the court said that the availability of such moneys could only enhance the value of the property in the eyes of a reasonable prospective purchaser. Consequently, the appellate court concluded that the trial court did not abuse its discretion by considering the availability of such grant funds in its calculation of the property's fair market value. The trial court decision was affirmed.

Northeast Connecticut Economic Alliance v. ATC Partnership

Supreme Court of Connecticut

December 14, 2004

(AJ/07/F.05--copies not available due to length of decision)