September 26, 2002
Condemnation: Whose property is it?
By WALTER S. TABLER
Graham & Dunn
Some of the projects are further along than others. Sound Transit is planning its 14-mile Greenline, linking downtown Seattle with a station near Sea-Tac Airport and a 1.6-mile link between downtown Tacoma and the Tacoma Dome. It expects some trains to be running by 2009 and the project to be completed by 2020.
The state Department of Transportation is planning 20 years of improvements along the entire 30-mile corridor of I-405 from Tukwila to Lynnwood. The key areas that will be affected are the interchanges with Interstate 90 and state Routes 167 and 520.
A relative latecomer is the Elevated Transportation Co., which hopes to build a 14-mile monorail running from Ballard to West Seattle, going through the heart of downtown. The monorail, which will be on the ballot this November, is scheduled for completion in 2009.
Finally, and perhaps the least defined of the projects, is the Alaskan Way Viaduct and seawall project on the downtown Seattle waterfront. Various alternatives are being considered, but this project could be the biggest of them all.
We don’t know exactly which of these projects will or will not be built, when they will be started, or when they will be completed. However, we do know that major transportation projects will be constructed in the Puget Sound area during the early years of this millennium. There is simply too much pent-up demand for more transportation facilities.
We have considerable catch-up to do. One only need look to the first page of the executive summary of the 2001 Competitiveness Council appointed by Governor Locke to see the importance of this issues. The Competitiveness Council was created in the wake of Boeing’s decision to move its headquarters to Chicago and prominently made the following finding:
“The most important competitive investment the state of Washington can make is to improve its transportation infrastructure. Washington’s currently overwhelmed transportation system threatens jobs and economic vitality, wastes people’s time and money, diminishes quality of life, and degrades our environment ... [W]e must improve our ability to move people and products.”
These projects promise a myriad of impacts to the owners and tenants of nearby properties.
Whenever properties are acquired for public projects, there are both winners and losers. Some types of properties are more sensitive — and more challenging — than others.
Perhaps the most sensitive are the retail sites. For example, let’s look at the monorail project. Current plans have the monorail going through downtown along Second Avenue. Disruption during construction will be a factor for the adjacent retail users. It should not be as devastating for the small retailers as the bus tunnel was along Third Avenue, but it will have an impact.
Perhaps more significant will be the likely long-term impact from having the monorail in place. Currently there is a dramatic difference between the quality — and price — of retail space along Fifth Avenue south of the Westlake monorail terminal as compared to Fifth Avenue to the north. South of the terminal we find what is perhaps of the best retail real estate in the region. This is not the case under the monorail track to the north.
Current designs would put the monorail higher, and perhaps more streamlined than the version we now have from the early 1960s. However, it would still be overhead. The ultimate impact to retailers might also depend upon how far they are from a station. A retail operation near a monorail could have positive impact. At this point, it is very difficult to predict. Much depends on the final design details and location.
Another of the projects with a potential retail impact is the viaduct rebuild. The preferred alternative is cut and cover, which, by most accounts, would seriously disrupt the waterfront and the retailers located there. Even if technical access is maintained during construction, an impact on the tourist trade is to be expected. Much of the retail on the waterfront is tourist oriented.
Industrial properties, especially those used for manufacturing, can also be somewhat sensitive to a condemnation action. These properties often involve substantial fixtures and unusual improvements. These operations are time consuming to move and relocate and many of them can ill afford to be shut down for any significant period of time. We can move an office over a weekend. Not so with a manufacturing operation. The industrial user/owner is also likely to face contamination issues and a whole host of other complications.
Many business owners are surprised to find out that in a condemnation case, lost business and profits are not compensable. There are some aspects of the relocation assistance program which go to business loss, but the acquisition programs are designed primarily to acquire real property. The money is paid for the real property interest.
Landlords and tenants usually battle over who gets the money. Typically, the governmental agencies will pay for the property in its entirety without making an allocation to the landlord and tenant. It is left to the landlord and tenant to either agree on who gets what or to fight over it. Normally this issue will be controlled by the lease.
Owners and tenants who believe that they might be affected by one of the public projects being discussed will certainly want to look at their lease and try to get as much protection as possible. Generally, whatever the lease provides will be followed by the courts.
The shear number and magnitude of the projects being considered, and the strong likelihood that at least some of them will be built, will present real challenges for many businesses in the Puget Sound area. Unfortunately, some businesses will not be able to survive them. Other businesses will thrive, in large part due to these projects.
Making sure that you are fairly treated can often take significant planning and effort. The impact of the project will likely be more severe if you are occupying a property, but even landlords will be affected. Dealing with these issues will almost certainly require hours of attention and thought, and perhaps large sums of money that you would rather not devote to this process. After all, very few property owners or tenants ask to be condemned.
The “ostrich approach” is not the correct one. Early involvement with the governmental agencies, as well as economic and legal planning for the projects themselves, is crucial and can greatly help alleviate the ultimate impact of these massive transportation projects on a business.
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