Eminent domain denied in Ohio

COLUMBUS – Ohio property owners breathed a sigh of relief July 26 when the state Supreme Court voted unanimously to stop the city of Norwood in Hamilton County from taking private homes to make way for a development complex.
Norwood is the first state supreme court decision on eminent domain since the U.S. Supreme Court ruled in July 2005 that local governments could claim private property and turn it over to developers.
The Ohio Supreme Court ruling also declared a portion of Ohio’s eminent domain statute unconstitutional, established that an economic benefit to the community alone does not justify government taking of private property, and set a heightened level of scrutiny for Ohio courts to apply when considering eminent domain cases.
Wouldn’t sell. The highly publicized Norwood case involved a challenge by several “holdout” homeowners to the city of Norwood’s eminent domain action. The city sought to take possession of the property to make way for two new city-owned parking garages and a large, privately owned commercial development intended to create jobs and increase local tax revenues.
In 2002, Rookwood Partners Ltd. approached Norwood city officials with a proposal to redevelop a 10-acre residential and commercial area of the city known as the Edwards Road Corridor into a major new apartment, retail and office complex to be known as the Rookwood Exchange.
The city expressed interest and conducted public meetings to get citizen input on the proposed development, but initially declined to play an active role in the necessary land-acquisition process.
Rookwood negotiated with property owners in the targeted area, and eventually secured private sale agreements with 66 of the 71 property owners.
Deteriorating. When it became clear that Rookwood could not privately negotiate the acquisition of these “hold-out” properties, Norwood hired a consultant to conduct an urban renewal study to determine if current conditions in the Edwards Road Corridor qualified it as a “slum, blighted or deteriorated area” or as a “deteriorating” area in danger of becoming blighted.
If the area was found to fit in one of those categories, the Norwood city charter authorized the city to use its powers of eminent domain to acquire the land for redevelopment.
The consultant found that, while most structures in the target area were sound, other conditions including the neighborhood’s growing isolation from nearby residential areas, traffic safety issues and susceptibility to “piecemeal” conversion from residential to commercial uses in the future merited a classification of the area as “deteriorating.”
City council. Norwood City Council members voted unanimously to adopt the Rookwood plan and invoked the city’s eminent domain power to acquire the remaining hold-out properties.
The property owners filed suit in Hamilton County Common Pleas Court contesting the city’s right to take their property. The trial court ruled that the city council had not abused its discretion in determining the area to be deteriorating. The 1st District Court of Appeals affirmed the trial court’s ruling.
The trial court established the amounts of compensation the city must pay each of the displaced owners for their property. After depositing amounts determined to be fair compensation, the city transferred title to Rookwood, which obtained court orders requiring the hold-out owners to vacate.
Emergency stay. Meanwhile, the property owners appealed the 1st District’s decision to the Supreme Court of Ohio. The supreme court issued an emergency stay to prevent Rookwood, which was already in the process of demolishing the other structures in the renewal area, from damaging the properties involved in the lawsuit pending the outcome of the appeal.
In the July 26 ruling, the Ohio Supreme Court found: