District Court, Boulder County, State of Colorado 1777 Sixth Street, Boulder, Colorado 80306 (303) 441-3771 LONGMONT

URBAN RENEWAL AUTHORITY, PETITIONER, v. DSS UNITER, LLC; DILLARDS PROPERTIES, INC.; DILLARD TEXAS SOUTH; EPC TWIN PEAKS LLC; EPC TWIN PEAKS JJ, LLC; DM PROPERTY INVESTMENTS LLC; THOMAS PROPERTIES DE, LLC; PINTAR INVESTMENT PROPERTIES DE, LLC; BUCK CO. LLC; VAN VALKENBURGH INVESTMENTS, LLC; JAMES F. JORDAN AND SUSAN RUTH JORDAN, CO-TRUSTEES OF THE JORDAN REVOCABLE TRUST (DATED APRIL 5, 2004); CONDEV WEST, INC. n/k/a DILLARD STORE SERVICES, INC.; STATE OF COLORADO, PUBLIC SERVICE COMPANY OF COLORADO; BIB HULLINGHPRST, in his official ccapacity as treasurer of Boulder County, RESPONDENTS.
DATE FILED: August 26, 2013

Case Number: 13CV30828 Division 3 Courtroom K ORDER RE: PETITIONERS VERIFIED MOTION FOR VESTING This matter comes before the Court on the Motion of Petitioner, the Longmont Urban Renewal Authority (LURA) for Vesting and the responsive pleadings thereto. An evidentiary hearing was held on July 25, 2013, and the parties submitted written closing arguments. After carefully considering the pleadings, the testimony of the witnesses, the exhibits, and the applicable law, the Court hereby enters the following Ruling and Order: FACTUAL BACKGROUND LURA is a Colorado Urban Renewal Authority organized pursuant to the provisions of the Colorado Urban Renewal Law, C.R.S. 31-25-101, et. seq. In October of 2012, after public notice and a hearing as required by C.R.S. 31-25-107, the Longmont City Council approved and adopted the Amended and Restated Twin Peaks Mall Area Urban Renewal Plan. In approving and adopting the Plan, the City Council expressly found the
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presence of ten blight factors within the urban renewal area. The Plan approved the use of eminent domain. Respondents (collectively Dillards) operate a department store in the urban renewal area. When negotiations to acquire the Dillards property proved unsuccessful, LURA filed a Petition in Condemnation. Dillards has requested a jury trial to determine the final amount of just compensation. LURA also filed a Motion for Vesting, seeking to acquire title to the Dillards property. LURA maintains title must be vested in order to proceed with obtaining zoning and planning approvals and construction financing, and thus proceed with redevelopment of the blighted area to cure the blight and prevent the spread of blight. A private developer, NewMark Merrill Mountain States Twin Peaks LLC (NewMark Merrill) is planning to redevelop the blighted area pursuant to the Redevelopment and Reimbursement Agreement. Mr. Ginsborg is the principal of NewMark Merrill. Dillards ownership of the property includes a Reciprocal Easement Agreement (REA). The REA gives Dillards a veto power over redevelopment plans. Dillards and NewMark Merrill have negotiated redevelopment plans, but they have not been able to reach agreements about plans to redevelop the Twin Peaks Mall area. CONSTITUTIONALITY OF THE VESTING STATUTES Article II, section 15 of the Colorado Constitution states: Private property shall not be taken or damaged for public or private use, without just compensation. Such compensation shall be ascertained by a board of commissioners of not less than three freeholders, or by a jury, when required by the owner of the property, in such a manner as may be prescribed by law, and until the same shall be paid to the owner, the property shall not be needlessly disturbed, or the proprietary rights of the owner therein divested; and whenever an attempt is made to take private property for use alleged to be public, the question whether the contemplated use be really public shall be a judicial question, and determined as such without regard to any legislative assertion that the use is public. LURA seeks title to the Dillards property pursuant to C.R.S. 38-7-101 et. seq. C.R.S. 38-7-101 provides that any urban renewal authority can file a verified motion at any time after a petition has been filed and before judgment is entered seeking to be vested with fee simple title to property that is the subject of an eminent domain proceeding. C.R.S. 38-7-102 requires a hearing on such a motion in which the court shall determine (a) the authority of the petitioner to exercise the right of eminent domain, (b) whether the property is subject to the exercise of the right of imminent domain, and (c) whether the right of imminent domain is being properly exercised. The courts order shall be a final order subject to appeal, but appellate review shall not stay the other proceedings. . . The court shall determine all matters related to vesting and if the matters are determined in favor of the petitioner, the court shall appoint three disinterested commissioners, who
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shall be freeholders, to assess the compensation to which the respondents . . . may be entitled by reason of the appropriation of the petitioner. The commissioners make a preliminary finding a just compensation which the court reviews. The preliminary finding shall not be evidence in further proceedings to determine a final amount of just compensation. C.R.S. 38-7-103 provides that when the certified report of the commissioners is filed with the court, petitioner shall deposit the preliminary just compensation amount with the court for the use of the respondent. Upon payment, the court shall enter an order vesting in the petitioner fee simple title. . . Dillards focuses on the following constitutional language: and until the same [the amount of compensation] shall be paid to the owner, the property shall not be needlessly disturbed, or the proprietary rights of the owner therein divested. Dillards view is that vesting title in LURA constitutes constitutionally impermissible divestment and this cannot occur until there is a final determination of just compensation by a jury, since they have exercised their right to have a jury determine the amount of just compensation. Dillards recognizes that a condemnor can take possession of property prior to a final determination of just compensation. However, they argue, divesting it of title, as provided for in theses statutes, is unconstitutional both facially and as applied. Statutes are presumed constitutional and the burden is on the party challenging the constitutionality of a statute to prove its unconstitutionality beyond a reasonable doubt. See, e.g., Qwest Services Corp. v. Blood, 252 P.3d 1071, 1083 (Colo. 2011). A facial challenge to a statute alleges that there are no circumstances under which a statute can be applied constitutionally, while an as applied challenge alleges that the statute is unconstitutional as to the specific circumstances of the case. People v. Gardner, 250 P.3d 1262, 1268 (Colo. App. 2010). The Colorado Supreme court examined the constitutional provision at issue here in McClain v. People, 11 P.85 (Colo. 1886). In that case, eminent domain proceedings were commenced to condemn a right of way over Mr. McClains land. Id. at 85. Petitioner obtained a court order for occupancy and use pending the condemnation proceeding. Id. Under the applicable statute, the court could authorize possession and use during the pendency of the eminent domain proceeding if petitioner deposited a sum deemed sufficient by the court to pay the amount of compensation to be determined later. Id. After petitioner paid the amount, Mr. McClain resisted the order for possession, and he was found in contempt. Id. Mr. McClain appealed the contempt finding, challenging the constitutionality of the statute that allowed for possession and use during the pendency of an eminent domain proceeding. Id. at 86. The court reviewed the constitutional provision, noting it prohibits the taking of private property for public use without just compensation, which is ascertained by either a board of commissioners of not less than three freeholders or by a jury when the landowner requests a jury determination. Id. The McClain court examined the phrase needlessly disturbed, and concluded the drafters of the Constitution contemplated that other disturbances. . . might be needful. .
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Id. at 87. Noting that the Constitution was silent on the matter, the court found the duty of naming such needful disturbances must have been left with the legislature, which they did in enacting the statute at issue in the case. Id. The McClain court stated, This they [the legislature] have done in the statute before us. They have substantially said that, in some instances, the occupancy and use of premises by petitioner, pending condemnation proceedings, may be needful disturbance, within the meaning of the constitution. The exclusive possession and enjoyment of property are undoubtedly proprietary rights; but by this statute these rights are not divested,-they are merely suspended. Every disturbance of property almost of necessity involves the interference with some proprietary right,-in many cases the temporary suspension thereof. Id. Dillards relies on that language to assert that, while a temporary suspension of property rights might be constitutionally permissible, a permanent deprivation of property rights via title vesting is not. LURA notes that the facts in McClain pertain to a permanent, not temporary, interference with Mr. McClains proprietary rights, the taking of the property for a right of way. The McClain court found payment of security in advance of a final determination of just compensation was an important factor in its determination that the statute was constitutional. The security provided a means to ensure a careful regard for the interests of landowners. [W]hile a prior final investigation and award of damages by commissioners or by a jury is not essential, yet a careful regard for the interests of landowners, and possibly also for the spirit of the constitutional provision before us, rendered security of some kind an important prerequisite to such disturbances as those now under consideration. Id. In this case, as in McClain, the legislature has determined what constitutes a needful disturbance. The legislature determined that title to property that is the subject of an eminent domain proceeding brought to eradicate blight can vest in an urban renewal authority upon payment of a preliminary finding by commissioners of just compensation. These statutes were enacted decades after the McClain decision. The statutes provide for a careful regard for the interests of land-owners by requiring a preliminary determination of just compensation by a board of commissioners, a constitutionally permissible manner of determining just compensation, and payment of same before title vests in petitioner. The Court finds depositing the preliminary just compensation amount satisfies the need for security recognized in McClain. In addition, the statutes also preserve Dillards right to a jury trial on the final determination of just compensation, and provides that the trial is, in effect, a de novo proceeding on the issue of just compensation. The statute specifically prohibits use of the preliminary just compensation amount as evidence in the proceeding that determines a final amount of just compensation, thereby avoiding any prejudicial effect the preliminary amount might have in the determination of an amount of final just compensation. Dillards also relies on Villa at Greely v. Hopper, 917 P.2d 350 (Colo. App. 1996). In that case, a developer obtained approval for a PUD plan to construct a pre-parole facility in Weld County. Id. at 352. Intervenor and others submitted petitions to the county calling for a referendum to give the electorate special authority to review siting decisions over various incarceration facilities. Id. The voters passed a measure in the referendum election in the form of a charter amendment that precluded issuance of a certificate of occupancy for pre-parole facilities until the location and siting of the facility was approved by a majority vote of the county electorate. Id. The developer sought a ruling
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construing its vested property right in the PUD plan development; the trial court found such a vested property right and further found it precluded zoning or other action that impaired the development. Id. at 353. On appeal, the Court of Appeals found the constitutional takings clause did not preclude all disturbances before compensation is paid. Id. at 354. The court stated: While divestment of proprietary rights may be unconstitutional prior to compensation, the mere suspension of those rights is not precluded. McClain v. People, 11 P.85 (Colo. 1886); cf. Swift v. Swift, 119 Colo. 126, 201 P.2d 608 (1948)(when statute allows occupancy and use of property a physical takingbefore compensation, the court must make a finding of necessity before the order for possession is entered). Id. The court found the charter amendment imposed a condition under the Vested Property Rights Act, but it was the type of condition that the Act anticipated could be imposed. Id. at 355 Dillards relies on the Villa case to again focus on the difference between divestment of rights and a temporary disturbance of those rights. The Court does not find the Villa case helpful in the matter at hand. It was not an urban renewal case or even an eminent domain case. It simply restated the takings clause in the Constitution and applied it to the facts to find that the condition imposed by the charter amendment was permissible under the Vested Property Rights Act, which does not apply to this case. However, the difference between possession and divestment is a constant theme in Dillards arguments. For example, Dillards states:
Possession is not permanent, even if structures are built pursuant to an immediate possession order. Indeed, longstanding Colorado case law has recognized that immediate possession orders are themselves interlocutory. Colo. F. & I. Co. v. Four Mile Ry. Co. 29 Colo. 90 (1901); Lavelle v. Julesburg, 49 Colo. 290 (1910), overruled on other grounds at La Plata Electric Asso. v. Cummins, 728 P.2d 696 (1986); Mulford v. Farmers Co. 62 Colo. 167 (1916). And in practice, any construction that takes place on property pursuant to an interlocutory order can be removed, and, in fact, has been removed in cases involving abandonment of condemnation actions or final determinations on appeal that the governmental entity lacks the authority to condemn. See e.g. Johnson v. Climax Molybdenum Co., 124 P.2d 929, 931 (Colo. 1942) (involving construction ditches built pursuant to immediate possession order).

Closing Statement Regarding Constitutionality at 4. Further, Dillards sates:

But this well established remedy [a deposit with the court] is not sufficient when a property owner is divested of his title. Divesting someone of their title leads to irreparable harms that a monetary security deposit will likely not protect against. Divestment also is not as easily unwound as possession, so as
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to return the property owner to his pre-litigation status. Indeed, this case provides a perfect example of the irreparable harm that can result from divestment, and the significant difference between a condemnor taking possession of property versus title to property. Petitioner readily admitted at the vesting hearing that three things will occur if it obtains actual title to Respondents property: (1) Dillards REA rights will be terminated, allowing a third party to redevelop the mall without Dillards input; (2) Dillards title will be transferred to a third party, specifically, NewMark Merrill, and (3) NewMark Merrill will, in turn, use Dillards title as collateral and security for its redevelopment financing financing that will be obtained from potentially several other third parties. None of these actions would be available to a condemnor who obtains mere possession. And all of these actions irreparably harm Respondents in a way that cannot be reversed or cured with simple monetary damages. . .

Id. at 5. Accordingly, the Court will examine the ways in which possession and statutory vesting differ. In either situation, Dillards no longer enjoys the right to possess and use the property as it sees fit. Its proprietary rights, as described in McClain, [t]he exclusive possession and enjoyment of property are undoubtedly proprietary rights, are as impaired under possession as they are under the vesting statutes. Dillards right to receive just compensation is exactly the same under possession or the vesting statutes. Under both, Dillards has the right to have a final determination of just compensation made by a board of commissioners or by a jury. The difference is in the timing. Under the statutes, a preliminary finding of just compensation is made and monies deposited before title is vested in the petitioner. In an eminent domain possession case, the final determination of just compensation is made and monies are deposited before title vests in the petitioner. However, Dillards right to a determination of final just compensation is not impaired or affected in any way, and its right to elect commissioners or a jury to make that determination is not impaired in any way. Under the vesting statutes, Dillards has a right to receive interest if the final determination of just compensation is higher than the preliminary determination. With interest paid, Dillards will not suffer any financial loss as a result of the statutory twostep process. Dillards argues its property rights are impaired because without title it will not be able to mortgage or encumber its property. As a practical matter, that is no different than possession because a lis pendens filed by a condemnor in a possession situation has the same effect. A Notice of Lis Pendens in this case was filed on May 20, 2013 and recorded on May 23, 2013. Ex. 1 to Petitioners Closing Argument. The Court finds the effect of possession and the effect of statutory vesting are very similar in the ways in which they impair a landowners proprietary rights. All parties agree that an order for possession passes constitutional muster.

Dillards argues that it will be irreparably harmed if title to its property is vested in LURA, but it does not say how it will be irreparably harmed in a constitutional way. Article II, section 15 of the Colorado Constitution focuses on two elements of a constitutional taking: (1) just compensation, and the manner in which it is determined, and (2) whether the contemplated use be really public and it provides for judicial determination of that question without regard to any legislative assertion that the use is public. The vesting statutes provide for just compensation by constitutionally permissible methods and provide for a judicial determination of public purpose. What Dillards articulates as irreparable harm is loss of its REA rights, which give it veto power over redevelopment plans. If that is a compensable loss, the loss will be factored into the just compensation determination. Then Dillards complains about how title to the property will be used once vested in LURA. Dillards constitutional right is to just compensation for the value of its property; Dillards does not have a constitutional right to determine how the title to the property is used by subsequent property owners. Dillards focuses on a literal reading of the constitution that requires just compensation before the proprietary rights of the owner are divested. The constitution is silent on what constitutes divestment. The vesting statutes permit the Court to vest title to the property in LURA, but, notably, they do not extinguish all Dillards rights with respect to the property. After vesting, Dillards retains the right to have a final determination of just compensation made by commissioners or a jury and to receive that amount of just compensation. Dillards evidence of unconstitutionality consists of (1) argument that vesting tile in LURA is the equivalent of constitutionally impermissible divestment; however, there is no constitutional definition of divestment, and the Court has found that Dillards retains substantial rights with respect to the property after title vests pursuant to statute, (2) vesting title is significantly different from possession; however, the Court has found, as a practical matter, the effects are very similar, and (3) a final determination of just compensation is required by the Constitution before title can vest in LURA; however, the Court has found that deposit of the preliminary just compensation amount is consistent with the McClain courts finding that a careful regard for the interests of landowners, and possibly also for the spirit of the constitutional provision before us, rendered security of some kind an important prerequisite and depositing the preliminary just compensation amount satisfies the need for security. The Court finds Dillards constitutional challenge to the vesting statutes is resolved by (1) the presumption that statutes are constitutional, and (2) the burden of proof on Dillards to prove the unconstitutionality of the vesting statutes beyond a reasonable doubt. The Court finds that Dillards has failed to overcome the presumption of constitutionality, and it has failed to prove the vesting statutes are unconstitutional beyond a reasonable doubt. Accordingly, the Court does not find the vesting statutes unconstitutional, either facially or as applied.

DILLARDS RIGHT TO CHALLENGE THE BLIGHT DETERMINATION C.R.S. 31-25-105.5(2)(b) states: Any owner of property located within the urban renewal area may challenge the determination of blight made by the governing body pursuant to subparagraph (I) of paragraph (a) of this subsection (2) by filing, not later than thirty days after the date the determination of blight is made, a civil action in district court for the county in which the property is located pursuant to C.R.C.P. 106 (a) (4) for judicial review of the exercise of discretion on the part of the governing body in making the determination of blight. Under this statute, a property owner can challenge a governmental finding of blight by seeking judicial review pursuant to C.R.C.P. 106 (a) (4). It is undisputed that Dillards did not seek such a review. LURA claims that Dillards failure to follow the procedure set forth in the statute constitutes a waiver of its right to challenge the blight determination. Dillards argues that the may challenge language in the statute does not mandate a Rule 106 action to challenge a blight determination, and this Court must engage in its own review of the blight findings as part of the judicial determination of whether Petitioners have met their burden of proof. The statute is silent regarding the consequence of failing to pursue Rule 106 judicial review of a blight determination. It is undisputed that Dillards received notice of the hearing where the blight determination was made and Dillards failed to participate in any way in the public process that resulted in a determination that the Dillards property was blighted. It is not clear to the Court whether C.R.S. 31-25-105.5(2)(b) is the only means to challenge a blight determination. Rather than risk error, the Court will review the blight determination. THE BLIGHT DETERMINATION This Court has lived in Boulder County since 1983, and has been to the Twin Peaks Mall many times, both when it was vibrant and, more recently, when it was moribund. Any reasonable citizen who enters the Twin Peaks Mall today would agree that it is blighted, as a lay person would understand the term blighted. Apart from that lay opinion, a 2012 conditions survey, or blight study, confirmed 10 blight factors. Based on the survey, the Longmont City Council adopted a LURA resolution on October 23, 2012 finding the Twin Peaks Mall area a blighted area. Blighted area means an area that, in its present condition and use substantially impairs or arrests the sound growth of the municipality or constitutes an economic or social liability. C.R.S. 38-25-103(2); Arvada Urban Renewal Authority v. Columbine Professional Plaza Assn, Inc., 85 P.3d 1066, 1070 (Colo. 2004).
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LURA urges the Court to apply a deferential standard to its blight determination, citing City & County of Denver v. Block 173 Associates, 814 P.2d 824, 828-29 (Colo. 1991)(In examining the stated public purpose for a condemnation, we look to whether the stated public purpose is supported by the record.). Dillards maintains that this Court is precluded from giving deference to Petitioners prior blight findings because bight is part of Petitioners burden of proof. C.R.S. 38-1-101((2)(b) places the burden of proof on a condemning agency to demonstrate by clear and convincing evidence that the taking of the property is necessary for the eradication of blight when the condemnation involves taking of property without consent of the owner.. Clearly, this involves proving public purpose, that the taking is necessary for the eradication of blight. It is unclear whether that judicial review reaches back to the blight determination or starts after the blight determination. Again, rather than risk error, the Court will review the blight determination. Dillards criticizes the 2012 conditions survey because it was conducted by Brad Powers, who had not conducted a conditions survey for 10 years, and David Starnes, who had never conducted a conditions survey before this one. LURA maintains the education and experience of both men makes them qualified to conduct the survey. Mr. Powers testified that he served 18 years with the Boulder Urban Renewal Authority before coming to Longmont, and he was the Director of the Boulder Urban Renewal Authority for 12 of those years. Before that, he worked with the Denver Urban Renewal Authority. He holds a Masters Degree in Urban and Regional Planning. Mr. Starnes testified that he holds a Masters Degree in City Planning and had a decade of experience working with a national consulting firm that assisted public and private clients in, among other things, evaluation of properties for conditions of blight. The Court finds that Mr. Powers and Mr. Starnes were qualified to conduct the conditions survey. A blight study was conducted by Leland Consulting in 2009. The scope of work expanded under their contract with the City if Leland found blight. Dillards argues that the integrity of the 2012 study is compromised because Mr. Powers and Mr. Starnes used the 2009 Leland study as a template for the 2012 study, and Leland was highly motivated to find blight. Mr. Powers testified on cross examination that the Leland contract should have separated the survey to determine blight from the additional work. The 2012 conditions survey involved making observations of physical locations such as buildings and parking lots and categorizing those observations. Mr. Powers and Mr. Starnes used the categories and sub-categories used by Leland in the 2009 study. The Court is not persuaded that any motivation Leland may have had to find blight would be reflected in the categories and sub-categories; they are neutral in character and speak for themselves. The categories all relate to the
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statutory blight factors. The Court finds using the Leland categories and subcategories was a reasonable means to determine blight. The blight-qualifying conditions observed by Mr. Powers and Mr. Starnes include: (1) deteriorating structures, (2) inadequate street layout, (3) faulty lot layout due to size, adequacy, accessibility or usefulness, (4) unsanitary or unsafe conditions, (5) deterioration of the improvements, (6) unusual topography or inadequate public improvements or utilities, (7) defective or unusual conditions of title rendering the title non-marketable, (8) the existence of conditions that endanger life or property, (9) buildings that are unsafe because of building code violations, dilapidations, deterioration, defective design, physical construction or faulty or inadequate facilities, and (10) the existence of health, safety, or welfare factors requiring high levels of municipal services or substantial physical underutilization or vacancy of sites, buildings, or other improvements. Exhibit 5. These conditions are consistent with the statutory blight factors C.R.S. 31-25103(2). With the exception of number 7, any citizen could walk around Twin Peaks Mall with a clipboard and this type of conditions checklist and document or photograph observations similar to the ones made by Mr. Powers and Mr. Starnes. The Court has no reason to doubt that Mr. Powers and Mr. Starnes accurately described the conditions they observed. For purposes of determining whether there is blight in the Twin Peaks Mall area, the Court will disregard number 7. If private property is to be acquired by an urban renewal authority by eminent domain, at least five blight factors must be present. C.R.S. 31-25-105.5 (5)(a). The Court finds nine blight factors present in the Twin Peaks Mall area The Court finds the Twin Peaks Mall area is blighted, and, accordingly, the 2012 blight study is valid. It was based on objectively observable conditions that relate to statutory blight factors. The Court finds there is ample evidence to support the Twin Peaks Mall blight determination. It makes this finding independently, uninfluenced by any other blight finding made by the LURA Commission or the City Council. This finding is consistent with the opinion of Dillards former vice president of real estate, who wrote, The center [mall] is awful and our store performs poorly, but we dont have a store in Ft. Collins or elsewhere in northern CO. in December 2011. C.R.S. 38-7-102 ANALYSIS C.R.S. 38-7-102 directs the Court to determine (a) the authority of LURA to exercise the right of eminent domain, (b) whether the property is subject to the exercise of the right of imminent domain, and (c) whether the right of imminent domain is being properly exercised.

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WHETHER LURA HAS THE AUTHORITY TO EXERCISE EMINENT DOMAIN C.R.S. 31-25-105(1)(e) expressly grants an urban renewal authority such as LURA the power to acquire any interest in property by condemnation in the manner provided for the exercise of the power of eminent domain by any other public body. Specifically, the provision states: ...to acquire any property by purchase, lease, option, gift, grant, bequest, devise, or otherwise to acquire any interest in property by condemnation, including a fee simple absolute title thereto, in the manner provided by the laws of this state for the exercise of the power of eminent domain by any other public body (and property already devoted to a public use may be acquired in a like manner except that no property belonging to the federal government or to a public body may be acquired without its consent); except that any acquisition of any interest in property by condemnation by an authority must be approved as part of an urban renewal plan or substantial modification thereof .... 31-25-105(1)(e)(emphasis added). The term public body means the state of Colorado or any municipality, quasimunicipal corporation, board, commission, authority, or other political subdivision or public corporate body of the state. C.R.S. 31-25-103(5). The Court finds LURA is a public body. The Court finds the broad language in C.R.S. 31-25-105(1)(e), any property, includes Dillards property interest in the REA. Accordingly, the Court finds LURA has the authority to exercise eminent domain to condemn the Dillards property. WHETHER DILLARDS PROPERTY IS SUBJECT TO THE EXERCISE OF THE RIGHT OF EMINENT DOMAIN Dillards maintains it is not necessary to condemn its property to redevelop the Twin Peaks Mall area because redevelopment could occur with Dillards remaining in its current location. Mr. Powers testified there were discussions about Dillards remaining on the property, Mr. Ginsborg testified that a considerable amount of his negotiations with Dillards involved Dillards being part of the redevelopment, and Mr. Ginsborg stated in an email, We can work around Dillards to create a successful open-air project. The issue is not whether the mall redevelopment could physically be possible with Dillards remaining as is. As discussed in more detail below, the issue is whether the taking was necessary to redevelop the mall because of Dillards ability to thwart redevelopment with its REA veto power. The 2012 blight study found 6-8 blight factors present on the Dillards property. Dillards witness disagreed with those findings about the Dillards property. Dillards takes great
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exception to the blight finding of a defective or unusual condition of title rendering the title unmarketable, based on its REA rights. It does not matter whether the Dillards blight findings were correct or incorrect. Because the Dillards property is in a blighted area, it is subject to the exercise of the right of eminent domain. An urban renewal authority may condemn properties within an overall urban renewal area containing blight, regardless of whether the particular property being condemned is itself deemed blighted. Rabinoff v. District Court, 360 P.2d 114 (Colo. 1961). The Colorado Supreme Court explained its holding in Rabinoff in a later case: In that case we held that a municipality may make blight determinations on an area-wide rather than a structure-by-structure basis. Thus, we concluded, a municipality may consider the overall character of an area in making a blight determination, and need not assess the state of every parcel and structure within the area. Once a municipality determines that an area is blighted and creates an urban renewal authority to address that condition, the authority may exercise its condemnation power over every parcel and structure within the urban renewal area. Arvada Urban Renewal Authority, 85 P.3d at 1072 (internal citations omitted).. The court then explained the Rabinoff holding addresses only the power of an urban renewal authority to act pursuant to a municipality's initial determination that an area is blighted. Id. The Arvada case concerned condemnation power over parcels that had already been sold by the authority and redeveloped in accordance with the goals of an urban renewal plan. Id. This case involves an initial determination of blight so the Rabinoff holding applies. Accordingly, the Court finds the Dillards property is subject to the exercise of the right of eminent domain because it is located in a blighted area. WHETHER THE RIGHT OF EMINENT DOMAIN IS BEING PROPERLY EXERCISED A renewal authority may engage in activity pursuant to an urban renewal plan only where a statutorily recognized public purpose is the stated basis for [the] action. This requirement ensures that condemnation actions undertaken pursuant to an urban renewal project do not run afoul of the constitutional requirement that private property be taken only for a public use. Id. at 1073 (internal citations omitted). Under our Urban Renewal Law, the only valid public purpose for which an urban renewal plan may be adopted is to eliminate or prevent the spread of slum or blight. Id LURA must prove that a proper public purpose is being served by the acquisition of Dillards property for urban renewal purposes. Tanner v. Treasury Tunnel Mining, 83 P. 464 (Colo. 1906) and Denver West Metro Dist. v. Geudner, 786 P.2d 434 (Colo. App. 1989). In an urban renewal context, this means the property is being taken to eradicate blight and is not being taken for transfer to a private entity for the purpose of economic development or enhancement of tax revenue. C.R.S. 38-1-101(1)(b)(I).
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Dillards argues that LURA does not want to condemn its property to eradicate blight; instead, they claim, it is being taken for transfer to a private entity for the purpose of economic development and/or enhancement of tax revenue. Dillards also claims that LURA acted in bad faith by condemning its property to eliminate its REA veto power. LURA denies bad faith; it seeks title to the Dillards property, LURA maintains, so that it can obtain the necessary permits to demolish the existing mall and construct new buildings because such permits must be in the name of the landowner. At the hearing, witnesses testified that REAs were offered by mall owners to attract anchor stores. The witnesses differ as to how common REAs are in shopping districts today. LURAs witness testified that they are uncommon in new developments, and Dillards witness testified that they are common in many areas where Dillards stores are located. The Court finds whether REAs are common or uncommon in todays shopping districts is irrelevant. The fact that matters is the fact that that Dillards has an REA that gives it veto power over Twin Peaks Mall redevelopment plans. NewMark Merrill owns the rest of the mall property, and Dillards and NewMark Merrill have not been able to agree on redevelopment plans. Based on the testimony of the Mr. Ginsborg, and Mr. Johnson, Dillards Vice President of Real Estate, the Court finds the prospect of these parties reaching an agreement is dim. With Dillards veto power in place, redevelopment of the mall is stymied. Dillards and NewMark Merrill each lay blame on the other for failure to compromise and reach agreement. The Court need not determine why there was failure to reach agreement; it simply must accept the fact that there is no agreement and no likelihood of agreement to conduct its analysis. Dillards relies on a memo dated April 9, 2013 prepared by Mr. Powers, the Executive Director of LURA, as evidence of bad faith. Mr. Powers states, In order for the blight to be remedied and the redevelopment project to proceed, Dillards must approve the redevelopment plans for the property. He then summarizes the unsuccessful negotiations between NewMark Merrill and Dillards. He concludes, Staff and LURA legal counsel have determined that the prospect for a successful and timely resolution to the negotiations between NewMark Merrill and Dillards is no longer feasible. In order to fulfill the provisions of the urban renewal plan and remediate the blighted conditions on the site, the LURA Board of Commissioners is requested to adopt a resolution that will authorize the use of eminent domain as it relates to the Dillards property. Clearly, LURA is using its power of eminent domain to condemn the Dillards property so redevelopment of the Twin Peaks Mall area can proceed. One purpose of the eminent domain proceeding is to acquire Dillards property, thereby extinguishing its REA veto power, in order to permit NewMark Merrill to proceed with the demolition of the existing mall and redevelopment of the shopping area. The issue is whether that constitutes bad faith or does it serve a legitimate public purpose? The intent of Colorado's Urban Renewal Law is to prevent and eliminate the spread of blight through, where necessary, acquisition, clearance, and disposition [of property] subject to use restrictions. 31-25-102(2), 9
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C.R.S. (2003). To accomplish this task, the General Assembly has authorized urban renewal authorities to transfer property to private entities for redevelopment. In fact, the General Assembly expressed a preference for ameliorating blight through private redevelopment in section 31-25107(3.5)(g), which provides that an urban renewal plan should afford maximum opportunity ... for the rehabilitation or redevelopment of the urban renewal area by private enterprise. To ensure that private redevelopment accords with the goals of an urban renewal project, section 3125106(1) authorizes a renewal authority to sell property acquired or held by the authority subject to such covenants, conditions, and restrictions ... as it deems ... necessary to carry out the purposes of [the Urban Renewal Law]. Arvada Urban Renewal Authority, 85 P.3d 1070-71. In other words, it is not bad faith to transfer condemned property to private entities for redevelopment. In fact, it is preferred under the statutes. Some jurisdictions, when addressing claims of sham, fraud, or bad faith, have treated challenges to urban renewal plans or other condemnations as a review of the necessity for the taking. City & County of Denver v. Block 173 Associates, 814 P.2d 824, 829 (Colo. 1991). In Block 173, landowners claimed that the condemnation of a three block area known as Centerstone was improper. Id.at 827. The three blocks were located in downtown Denver within a fifteen-block area that the Denver City Council determined to be blighted for purposes of urban renewal. Id. The three blocks targeted for the Centerstone project were not blighted. Id. Denver Urban Renewal Authority solicited proposals from prospective developers for redevelopment of all or part of the fifteen-block urban renewal area. Id. Only one developer submitted a proposal and it was for Centerstone only. Id. That proposal was accepted and the Centerstone project was to be Phase I of the urban renewal plan. Id. The landowner then filed suit alleging that the sole purpose for the blight determination was to provide a means for the developer to acquire Block 173 and other properties in the Centerstone blocks for the purpose of developing the Centerstone project. Id. at 829-30. The court stated: Because the proper purpose for which a condemnation action may be instituted in Colorado in the context of urban renewal is limited to plans adopted to remedy identified slum or blight conditions, the fact that such conditions were found to exist is not dispositive if the purpose in designating a large study area and in targeting block 173 as part of that area was, as alleged, to acquire block 173 for private purposes. The claims of the landowner may be supported by evidence demonstrating that (1) the primary purpose underlying the urban renewal project was not within the scope of action authorized under the Urban Renewal Law, and (2) the project was undertaken in bad faith or fraud as a subterfuge to achieve an improper purpose rather than the authorized purpose of urban renewal.
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Id. at 830. The court remanded the case to permit the landowner an opportunity to establish that the urban renewal plan for Centerstone was adopted in bad faith or was a sham and a fraud. Id. In Block 173 there may have been bad faith if the actual purpose of designating the 15 block area as blighted was to acquire a specific three block area that was not blighted but subject to the designation because it was within the 15 block area, and that acquisition was for a private, not a public, purpose. In this case, the Twin Peaks Mall blight determination was made because of actual blight. The blight determination was made in October of 2012, long before Dillards engaged in unsuccessful negotiations with LURA or NewMark Merrill. The blight determination made in October 2012 was not made as a subterfuge to acquire Dillards property in August 2013. At the time the blight determination was made, no one had any idea that LURA would need to use its eminent domain power to effect mall redevelopment. Dillards maintains the Powers April 2013 memo describing the breakdown in negotiations with Dillards and recommending use of eminent domain to effect the urban renewal plan is evidence of bad faith. It is not. The bad faith at issue in Block 173 involved bad faith at the time of the blight determination, when property might have been blighted so that it can be acquired by exercise of eminent domain for a private purpose. There is absolutely no evidence of that in this case. Dillards also claims the condemnation in this case is a sham to assist a private party in eliminating impediments to redevelopment. The situation here involves more than a mere impediment. Dillards actions have completely prevented any efforts to implement a legitimate urban renewal plan. An impediment might be a delay in redevelopment; here there is a complete shutdown of redevelopment, leaving Longmont with a blighted mall. Denver West Metropolitan Dist. V. Geudner, 786 P.2d 434 is an eminent domain bad faith case. The District was a special district responsible for controlling flooding. Id. at 435. That case involved relocation of a gulch across property belonging to Mr. Geudner. Id. at 436. When Mr. Geudner refused to sell the property, the District began a condemnation action. Id. All board members of the District were members of the Stevinson family, and a Stevinson-controlled corporation owned land in the District. Id. A gulch crossed that property. Id. The corporation entered into a contract to sell the land, but the purchaser required gulch relocation as a condition of sale. Id. at 435. The trial court found that there was no public necessity for relocation of the gulch; the primary purpose was to facilitate the sale of the corporations property. Id. at 436. The District appealed the courts authority to second guess its decision to realign the gulch. Id. The Court of Appeals affirmed the trial court, stating In reviewing a condemning authoritys finding that a proposed taking is for a public use, the courts role is to determine whether the essential purpose of the condemnation is to obtain a public benefit. Id. In this case, there are no similar allegations of self-dealing. The Court finds the essential purpose of the condemnation in this case is to obtain a public benefit, the eradication of blight.
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Dillards maintains that LURA must prove an essential link between curing blight and the taking, and it has failed to do so. The Court finds taking Dillards property is necessary to eradicate blight because Dillards has demonstrated that it will use its REA veto power to block redevelopment. That is the essential link. Unless there is condemnation to extinguish that REA authority, the mall will remain in its present, blighted condition. Dillards maintains that to condemn its property to eliminate its REA rights, Petitioner must establish that such rights constitute Statutory Blight. Respondents Closing Argument at 19. The Court disagrees. The mall in its present condition meets the definition of statutory blight; the blight is the mall. Dillards present use of its REA veto rights is preventing eradication of the blight, thus making the taking necessary. There is no separate requirement that the Court find the REA rights themselves meet the definition of blight. Dillards also claims that the real purpose of the urban renewal plan is economic development and increased tax revenue. In an urban renewal context, property must be taken to eradicate blight; it cannot be taken for transfer to a private entity for the purpose of economic development or enhancement of tax revenue. C.R.S. 38-1-101(1)(b)(I). Dillards relies on a 2006 retail opportunities study that identified retail leakage that might be recaptured with redevelopment of the mall and a 2008 economic development workshop that recognized there would be an increase in sales tax if the mall were redeveloped as evidence of LURAs illegal purpose. However, there was no evidence presented at the hearing that LURA or the City Council considered information from the 2006 study or the 2008 workshop. In fact, the evidence was that they did not consider that information or information from the 2009 blight study when the 2012 blight determination was made. CONCLUSION The Court finds, by clear and convincing evidence, that LURAs condemnation action serves a proper public purpose, the eradication of blight. Therefore, the right of eminent domain is being properly exercised in this case. The Court does not find that LURA acted in bad faith, GOOD FAITH NEGOTIATION To prevail in this action, LURA must show that it negotiated in good faith with Dillards before instituting this condemnation action. See Old Timers Baseball Assoc. v. Housing Auth., 224 P.2d 219 (Colo. 1950); Thornton v. Farmers Reservoir, 575 P.2d 1382 (Colo. 1978). The Colorado eminent domain case law finds good faith where the acquiring agencys offer is supported by an MAI appraisal. Board of County Commrs v. Blosser , 844 P.2d 1237 (Colo. App. 1992) (rejecting bad faith contention where acquiring agencys offer was based on appraisal by MAI appraiser); City of Holyoke, 22 P.3d 960, 963 (we reject Schlachter Farms' argument that good faith negotiations necessarily require a condemning authority to increase its offer whenever the land owner makes a counteroffer).
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LURA advised Dillards of its right to have its own appraisal done at LURA expense. LURAs witnesses at the hearing testified that Dillards did not request LURA to pay for such an appraisal. LURA had an appraisal done by a MAI appraiser. LURA offered to purchase the Dillards property for 20% more than the appraised amount. The offer was for $3.6 million. Dillards demanded $5 million. LURA did not offer $5 million. LURA witnesses testified they Dillards did not provide an appraisal or other evidence of value to justify the $5 million price. The Court finds LURA negotiated in good faith with Dillards in an attempt to purchase the Dillards property. CONCLUSION The Court GRANTS LURAs Motion for Vesting. APPOINTMENT OF COMMISSIONERS Each party may nominate three persons as prospective commissioners. The names and a brief description of the qualifications of the nominees shall be filed by 5:00 PM on September 3, 2013. August 26, 2013 ______________________________ D.D. Mallard District Court Judge

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