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Court to Let Private Land be Seized for Carilion Site

The Roanoke Times
November 18, 2009
By Laurence Hammack

A judge said condemnation of private property near Riverside Center didn't violate state eminent domain laws.

A small flooring business that sits in the expanding shadow of Carilion Clinic will soon be taken to make room for a medical complex -- even though the property owners say it's not for sale.

Condemnation of the land by the Roanoke Redevelopment and Housing Authority does not violate Virginia's eminent domain laws, Circuit Court Judge William Broadhurst has ruled.

Broadhurst's ruling clears the way for the first seizure of property for the Riverside Center, a gleaming business park and medical school being constructed where a mill and other aging industries once operated along South Jefferson Street and Reserve Avenue.

The case pitted a small business against the region's corporate giant and a city government entity -- a David vs. Goliath matchup made even more daunting by its reliance on laws that allow the taking of private land for public use.

"I just never thought this would happen in Virginia," said Stephanie Burkholder, who owns the property with her husband, Jay. The Burkholders plan to appeal.

"It's not American, and I'm not going to accept it," she said.

Since 1999, when Carilion and the city of Roanoke announced plans for what eventually became Riverside Center, most of the businesses in the area have sold out to the housing authority and have been demolished.

But the Burkholders, who own nearly 3 acres where Surfaces operates a flooring business, held out. They refused a $1 million offer from the authority that they said was too low, then challenged the condemnation of their land in a lengthy court battle that followed.

In his nine-page decision dated Thursday, Broadhurst ruled that the housing authority properly determined that the redevelopment area was blighted and thus subject to condemnation. A jury now will be impaneled to determine a fair price for the property, which the authority will pay to the Burkholders.

The Burkholders have contended that Carilion and the city colluded on a project they both benefited from financially, struck a deal in private, and then had the housing authority do their bidding.

"Carilion drove the bus," said Joe Waldo, the Burkholders' attorney.

Because neither Carilion nor the city had the legal authority to condemn land, that task fell to the housing authority. Once blight was established, the authority gained leverage in its efforts to buy the property with public money provided by the city.

The authority then sold the land to Carilion, often at a loss but with the understanding that the health care system would spend millions more to develop an economic engine that would bring more than 2,000 jobs to the area.

"That was the real reason," Waldo said of the project's economic potential. "Which means that the blight issue was a pretextural reason."

But in an August 2008 decision, Broadhurst found that the authority's primary goal was to eliminate blight, and whatever economic good that came from that did not invalidate the plan.

The judge then held a hearing, which lasted several days last summer, to hear testimony and arguments before deciding a second question -- whether a blight determination, made by consultants for the authority, was proper.

During the hearing, Waldo emphasized the secretive nature through which the Riverside Center began. City staffers gave the project a code name of "Andy's Warehouse" while working out details that were then announced as a done deal.

Waldo also presented testimony suggesting that city officials pressured the housing authority to reach a conclusion consistent with the deal it struck with Carilion.

Broadhurst also heard conflicting testimony about how much of the area was blighted. Under the law that applied to the case, the authority had to show that a majority of the area was blighted in order to take the Burkholders' property, which was not blighted. The General Assembly has since changed the law so that only a property that is blighted can be condemned.

While ruling against the Burkholders, Broadhurst acknowledged some of their points, including the argument that city officials tried to influence the housing authority.

"This conduct clearly suggests to the court that the city was responding to pressure from Carilion," Broadhurst wrote. "This overreaching, coupled with the city's participation in status meetings [about the project] gives substance" to the claims raised by the Burkholders.

The judge also noted that conflicting opinions from witnesses could be the product of "an animus toward Carilion, the secrecy surrounding the development of the project by the City and Carilion, the corresponding lack of public input on the project, or some combination of all three."

But in the end, he ruled, "despite apparent overreaching by the City in some areas," the housing authority consultants who made the blight determination "were able to insulate themselves from any improper effect of that conduct."

The Burkholders' argument that Carilion manipulated the process is "simply untrue," a spokesman said Tuesday. Carilion acted "as part of our commitment to support economic development in the city and the region," Eric Earnhart said.

Carilion has no immediate plans for the Burkholders' property, which includes a one-story brick building on Reserve Avenue that is now dwarfed by a new clinic building, parking garage and a hotel that is under construction.

Despite Broadhurst's ruling, Surfaces -- which the Burkholders lease to a family member -- will likely continue business as usual for the foreseeable future. An appeal, which could take years to play out, is all but certain.

Waldo said he believes the case could become a test of overhauls that Virginia's legislature made in response to a controversial 2005 ruling by the U.S. Supreme Court that expanded the use of condemnation.

The court, in Kelo v. City of New London, upheld a governmental taking of land for economic development purposes so a locality could transfer the property to a private developer. In the past, governmental land takings were primarily used for schools, roads, hospitals and other historically established public uses.

But with all the recent commotion over property rights, it's important to keep in mind the improvement to what was once a run-down part of town, said Mark Loftis, the attorney for the housing authority.

Some property owners have said they benefited by selling out and moving to new locations. But that holds little comfort for Stephanie Burkholder.

"They're thinking they're going to get what they want. ... But I'm a fighter, and I'm not ready to give up on this one."