Legislature(2001 - 2002)

04/08/2002 02:05 PM Senate JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                                                                                                                                
            SB 278-TAKING PROPERTY BY EMINENT DOMAIN                                                                        
                                                                                                                                
MS. KIM  OGNISTY, Staff to Senator  John Torgerson, sponsor  of SB
278,  said   SB  278  was   concerned  with  eminent   domain  and                                                              
declaration  to  taking proceedings.    She  said the  bill  would                                                              
introduce a reasonable  and diligent effort clause  that attempted                                                              
to place the  condemnor of the land and the  private landholder in                                                              
an equal negotiating  position.  She said the bill  did not try to                                                              
remove the authority  of the State to take land  by eminent domain                                                              
or complicate existing proceedings.   She said current law did not                                                              
require the  State to engage in  a good-faith effort  to negotiate                                                              
with private  property owners  and the State  was free to  make an                                                              
unreasonable  offer or  no offer  at all.   She  said striving  to                                                              
initiate communication  from a more equitable  bargaining position                                                              
would promote  more productive  negotiations, facilitate  dialogue                                                              
over  reasonable  concerns  and  encourage  suggestions  from  all                                                              
parties involved.   She said similar statutes had  been adopted in                                                              
at least 23  other states.  She  said the intent of SB  278 was to                                                              
reduce  litigation by  encouraging  more cases  to  be settled  up                                                              
front, promoting expediency in government actions.                                                                              
                                                                                                                                
She said Senator  Torgerson yielded to the wisdom  of the Chairman                                                              
regarding any amendments.                                                                                                       
                                                                                                                                
SENATOR THERRIAULT asked for the  source of the proposed amendment                                                              
in the bill packet.                                                                                                             
                                                                                                                                
MS. OGNISTY said Sealaska suggested the amendment.                                                                              
                                                                                                                                
CHAIRMAN TAYLOR asked Mr. Rick Kauzlarich to provide testimony.                                                                 
                                                                                                                                
MR.  RICK  KAUZLARICH,  State Right-of-Way  Chief,  Department  of                                                              
Transportation  & Public  Facilities (DOTPF),  said he had  worked                                                              
for DOTPF  for over  22 years as  a right-of-way  agent.   He said                                                              
DOTPF acted in  good faith to purchase property  before proceeding                                                              
into  condemnation.   He said  SB 278  would introduce  additional                                                              
steps into an already complicated process.                                                                                      
                                                                                                                                
He said DOTPF  followed a strict set of guidelines  when acquiring                                                              
property.    He said  the  guidelines  were  based on  Article  1,                                                              
Section  18 of  the Constitution  of  the State  of Alaska,  which                                                              
said, "Private property  shall not be taken or  damaged for public                                                              
use  without  just  compensation."   He  said  that  mirrored  the                                                              
Constitution of the United States  of America.  He said DOTPF also                                                              
followed Title  3 of  the Uniform  Relocation Assistance  and Real                                                              
Property  Acquisition Act  (URARPA) of 1970,  which required  that                                                              
real   property   must   be   appraised   before   initiation   of                                                              
negotiations.                                                                                                                   
                                                                                                                                
He  said DOTPF  required documentation  in  each acquisition  file                                                              
that the owner  of the property or the owner's  representative was                                                              
given   opportunity  to   accompany  the   appraiser  during   the                                                              
inspection  of the  property.   If  the  appraiser  was unable  to                                                              
contact  the   owner  or  the  owner   refused  to  sign   a  form                                                              
acknowledging that opportunity that  was documented in the file as                                                              
well.                                                                                                                           
                                                                                                                                
MR.  KAUZLARICH  said  the  1987 amendment  to  URARPA  and  DOTPF                                                              
defined an  appraisal as, "A  written statement independently  and                                                              
impartially  prepared by  a qualified appraiser  setting  forth an                                                              
opinion of  defined value of  an adequately described  property as                                                              
of  a specific  date  supported by  presentation  and analysis  of                                                              
relevant market information."  He  said DOTPF's staff was required                                                              
to conduct  an appraisal review and  establish an amount  for just                                                              
compensation for  each parcel to  be acquired before an  offer was                                                              
made  to  purchase  property.     This  was  called  a  reviewer's                                                              
determination.   He said the determination  could be no  less than                                                              
the market value as outlined in the approved appraisal.                                                                         
                                                                                                                                
CHAIRMAN  TAYLOR  said he  understood  that  a property  could  be                                                              
condemned and the  owner could pay for an appraisal  to be brought                                                              
to DOTPF.   He  asked if  Mr. Kauzlarich  was talking about  DOTPF                                                              
contracting  with someone  to appraise  the land  and that  person                                                              
giving the appraisal to DOTPF for review.                                                                                       
                                                                                                                                
MR. KAUZLARICH  said DOTPF  contracted with a  fee appraiser  or a                                                              
staff  member  to do  an  appraisal  that  went through  a  review                                                              
process.   A negotiator  then contacted  the property  owner.   He                                                              
said  the  property  owner  could also  submit  an  appraisal  for                                                              
consideration.  That appraisal was  reviewed and could become part                                                              
of  the  negotiations.    He said  the  federal  government  would                                                              
reimburse  all  costs  associated   with  the  acquisition  if  an                                                              
agreement were reached between DOTPF and the property owner.                                                                    
                                                                                                                                
CHAIRMAN TAYLOR asked if the owner's  appraisal would be paid for.                                                              
                                                                                                                                
MR. KAUZLARICH  said the appraisal would  be paid for if  it was a                                                              
legitimate cost in the negotiations.                                                                                            
                                                                                                                                
SENATOR  COWDERY asked  what types  of  resistance DOTPF  received                                                              
from property owners.   He also asked how many  times the property                                                              
owner's appraisal was included in negotiations.                                                                                 
                                                                                                                                
MR. KAUZLARICH  said condemnation  appraising was a  very specific                                                              
and  involved process.   He  said a  bank appraiser  who did  home                                                              
appraisals  might  not  have  the  expertise  necessary  to  do  a                                                              
condemnation appraisal.   He said condemnation  appraisal involved                                                              
looking at  the value of  the part to be  acquired as part  of the                                                              
whole.   He said some appraisers  didn't understand  that concept.                                                              
He said  many times  the property  owners' appraisals didn't  fall                                                              
within  DOTPF's   published  guidelines.    He   said  the  review                                                              
appraisers  worked  with  the appraisal  and  the  negotiator  and                                                              
points in that appraisal that were  pertinent were considered.  He                                                              
didn't  think there  had ever  been  a case  where the  negotiator                                                              
rejected an appraisal outright.   He noted that the negotiator was                                                              
concerned  with doing  what was  fair  for the  property owner  in                                                              
accordance with the Constitution of the State of Alaska.                                                                        
                                                                                                                                
SENATOR  COWDERY said  there  was a  downturn  in property  values                                                              
during the 1980s.   He asked how DOTPF dealt  with appraisals that                                                              
were less than the mortgage.                                                                                                    
                                                                                                                                
MR. KAUZLARICH  said a  lot of single-family  homes were  acquired                                                              
for the  Eagle River Highland  Bridge project.   He said a  lot of                                                              
the  appraisals were  less  than  the mortgages.    He said  DOTPF                                                              
worked with the  Federal Highway Administration and  the banks and                                                              
was able to  buy the properties and  put the people into  homes as                                                              
good as  or better than  their previous  homes without  losing any                                                              
money.  He said DOTPF recognized  those situations and worked with                                                              
property owners to resolve them.                                                                                                
                                                                                                                                
He  said property  owners  could submit  appraisals  to DOTPF  for                                                              
consideration.    He said  in  cases  where the  property  owner's                                                              
submittal  didn't  adequately  reflect   the  value  of  the  part                                                              
acquired the  review appraiser could  outline the  shortcomings of                                                              
the appraisal for the negotiator  and the property owner.  He said                                                              
the  appraisal  had  to  meet the  same  requirements  as  DOTPF's                                                              
appraisal in  order to  be reimbursed  by the federal  government.                                                              
Otherwise the costs would come out of State monies.                                                                             
                                                                                                                                
He said right-of-way  acquisition was critical in  the timeline of                                                              
a project.  He  said part of the timeline for  a project accounted                                                              
for contracting the  necessary appraisal reports.  He  said SB 278                                                              
had the  potential to  delay projects while  DOTPF waited  for the                                                              
property owners'  appraisals.   He said  the property owner  could                                                              
already have their  expert review DOTPF's appraisal  and come back                                                              
to DOTPF  with any  questions or  problems with  the appraisal  as                                                              
well as submitting their own appraisal.                                                                                         
                                                                                                                                
He said  SB 278 would  introduce additional  steps to  the process                                                              
rather than enhancing  and streamlining the process.   He believed                                                              
it had  the potential  to increase  costs to  DOTPF in  additional                                                              
appraisal expenditures  and costs  associated with the  review and                                                              
administration of processing the  property owners' appraisals.  He                                                              
said DOTPF staff  was aware that all reasonable  costs incurred by                                                              
the property owner should be considered in a settlement.                                                                        
                                                                                                                                
SENATOR COWDERY asked  if the appraisers were licensed.   He asked                                                              
if those licenses had to be renewed.                                                                                            
                                                                                                                                
MR. KAUZLARICH said there were two  levels of appraisal licensing.                                                              
The first  was residential licensing.   The second  was commercial                                                              
licensing.   He said condemnation  appraisal would be  included in                                                              
commercial licensing.  He said the  licenses went through periodic                                                              
review  and   continuing  education   was  required   to  maintain                                                              
licenses.     He  said   DOTPF  only   contracted  with   licensed                                                              
appraisers.                                                                                                                     
                                                                                                                                
SENATOR  COWDERY  said  Mr.  Kauzlarich   mentioned  he  had  done                                                              
appraisal work for the State.  He asked if he was licensed.                                                                     
                                                                                                                                
MR. KAUZLARICH said he was not.   He said at the time he was doing                                                              
appraisal work, there was no license.                                                                                           
                                                                                                                                
SENATOR COWDERY  asked if review  appraisers were  picked randomly                                                              
or if the same few were used.                                                                                                   
                                                                                                                                
MR. KAUZLARICH  said there  were two  review appraisers  on staff.                                                              
He said there  were situations where  it was necessary to  hire an                                                              
independent  appraiser  to  do  a  review or  an  analysis  of  an                                                              
appraisal that had been submitted to DOTPF.                                                                                     
                                                                                                                                
SENATOR  COWDERY  said he  had  worked  with the  Municipality  of                                                              
Anchorage and  there were arbitrators  hired by the  Municipality.                                                              
He said  there was  some concern  that the  same arbitrators  were                                                              
hired over and over again and were  conscious of who paid them and                                                              
might not be completely fair.                                                                                                   
                                                                                                                                
MR.   KAUZLARICH  said   the  appraisers   used   by  DOTPF   were                                                              
independent.   He said the  review appraisers and  the independent                                                              
appraisers didn't always agree.                                                                                                 
                                                                                                                                
SENATOR  THERRIAULT  said  there   were  two  different  types  of                                                              
acquisitions.   He said DOTPF could  be putting in a new  road and                                                              
need to acquire  a strip of houses.   He thought most  of the time                                                              
DOTPF was  widening the  right-of-way and taking  a strip  of land                                                              
from each  property.   He wondered  how much  of the  negotiations                                                              
involved  taking a strip  of land  and what  taking that  strip of                                                              
land would do to the rest of the property.                                                                                      
                                                                                                                                
He said  constituents had contacted  him during some  big projects                                                              
in the  North Pole area.   He found  DOTPF to be  very reasonable.                                                              
He said  in one instance an  elderly couple was  concerned because                                                              
the driveway  in front of their  house would no longer  be usable.                                                              
He said  there was  a driveway  behind the  house that the  couple                                                              
couldn't use because  they couldn't negotiate the steps.   He said                                                              
DOTPF purchased the entire property and resold it.                                                                              
                                                                                                                                
MR. KAUZLARICH said  that was one of the reasons  he was concerned                                                              
with  SB 278.   He  said  the majority  of  the approximately  500                                                              
takings each year  were strip-takings.  He said  the appraiser had                                                              
to  determine whether  the taking  would  damage the  rest of  the                                                              
property or make  it unusable for the owner.  He  said DOTPF would                                                              
offer  to purchase  the property  in  that situation.   He  didn't                                                              
think that most  bank appraisers understood how  to determine that                                                              
sort of loss  in value and  that was why a condemnation  appraiser                                                              
was so important.                                                                                                               
                                                                                                                                
He  said the  property  owner might  not want  the  project to  go                                                              
forth.  He saw  SB 278 as a way for these people  to stop or delay                                                              
projects.   He said  property values could  increase if  a project                                                              
was  delayed long  enough.   He said  that  made the  cost of  the                                                              
entire project increase.                                                                                                        
                                                                                                                                
CHAIRMAN  TAYLOR asked  Mr. Bill Satterburg  to provide  testimony                                                              
over the  telephone.   Mr. Satterburg  was unavailable  to testify                                                              
but had sent notes regarding SB 278.                                                                                            
                                                                                                                                
He asked Mr. Bill Cummings to provide testimony.                                                                                
                                                                                                                                
MR.  BILL CUMMINGS,  Assistant  Attorney  General,  Transportation                                                              
Section,  DOL,  said   the  State  went  through   the  steps  Mr.                                                              
Kauzlarich  outlined  whether  the  project  came  from  State  or                                                              
federal  monies.   He said  the federal  government  paid for  the                                                              
majority of condemnation  cases.  He said the  procedures laid out                                                              
in SB 278 would  be inconsistent with AS 34.60.120,  which set out                                                              
a  very thorough  acquisition  policy  for federally  funded  land                                                              
acquisitions.                                                                                                                   
                                                                                                                                
He said  SB 278 would add  a lot of  things that would have  to be                                                              
proved in  court proceedings.   He  said the  State would  have to                                                              
prove   they  had   been   diligent   and  reasonable   in   their                                                              
negotiations.    The State  already  had  to  prove they  had  the                                                              
authority to take the land and the  necessity to use the land in a                                                              
public  project  and  the  taking   had  been  done  in  a  manner                                                              
consistent  with the greatest  public good  and the least  private                                                              
injury.  SB 278 would add another  step in that litigation process                                                              
by requiring  the State  to prove  that the  manner in which  they                                                              
treated  the property  owner  was fair.   If  they  hadn't done  a                                                              
reasonable and  diligent effort in  their negotiations  the taking                                                              
would be denied and they would have to start all over again.                                                                    
                                                                                                                                
MR.  CUMMINGS said  SB 278  didn't  have an  appreciation for  the                                                              
process the  State followed  as mandated under  AS 34.60.120.   He                                                              
said  having a  licensed appraiser  come  in and  do an  appraisal                                                              
wouldn't  necessarily  fix the  situation  because that  appraisal                                                              
could be unacceptable.                                                                                                          
                                                                                                                                
He  said  there was  a  case  in  Ketchikan  in which  a  licensed                                                              
appraiser did an appraisal of a piece  of property for DOTPF.  The                                                              
negotiations using  that appraisal weren't successful.   DOTPF had                                                              
another appraiser with designation  from the American Institute of                                                              
Real Estate  Appraisers appraise  the property and  that appraisal                                                              
value  was higher.   He  said the  property owner  had a  licensed                                                              
appraiser appraise the property but  that appraiser used a legally                                                              
incorrect method to come up with  an estimate of just compensation                                                              
and that appraisal was thrown out.   The property owner then got a                                                              
second appraisal.  He said they went  to court and the jury didn't                                                              
believe  either appraisal  but  the award  was  closer to  DOTPF's                                                              
number than the property owner's  number.  He said appraisers were                                                              
always going  to differ on numbers.   In that case  four different                                                              
licensed appraisers came up with four different numbers.                                                                        
                                                                                                                                
He said it could take up to six months  for the court to rule on a                                                              
motion.  He said  it might not take six months  to rule on whether                                                              
DOTPF had been reasonable and diligent  but it would cause a delay                                                              
nonetheless.  He noted that time was money.                                                                                     
                                                                                                                                
He then  addressed the  following proposed  amendment in  the bill                                                              
packet labeled 22-LS139\A.1:                                                                                                    
                                                                                                                                
                        A M E N D M E N T                                                                                   
                                                                                                                                
                                                                                                                                
OFFERED IN THE SENATE                                                                                                           
                                                                                                                                
     TO:  SB 278                                                                                                                
                                                                                                                                
                                                                                                                                
Page 1, line 14, following "negotiation":                                                                                   
                                                                                                                                
     Insert "as provided in (b) and (c) of this section"                                                                    
                                                                                                                                
                                                                                                                                
Page 1, line 14, through page 2, line 5:                                                                                        
                                                                                                                                
     Delete "; for purposes of this paragraph, "reasonable and                                                              
                                                                                                                                
diligent effort"  includes inviting  the property owner  to secure                                                          
                                                                                                                                
an  appraisal  from  a  real  estate   appraiser  certified  under                                                          
AS 08.87, and  either offering  to purchase  the property  for its                                                          
                                                                                                                                
full  appraised  value  as  determined  by  the  property  owner's                                                          
                                                                                                                                
appraiser plus  the cost  of the appraisal,  or explaining  to the                                                          
                                                                                                                                
property owner why full appraised value is not being offered"                                                               
                                                                                                                                
                                                                                                                                
Page 2, following line 5:                                                                                                       
                                                                                                                                
     Insert a new bill section to read:                                                                                         
                                                                                                                                
   "* Sec. 2.  AS 09.55.270 is amended by adding new subsections                                                            
                                                                                                                                
to read:                                                                                                                        
                                                                                                                                
          (b)  Before taking property, a condemnor shall invite                                                                 
                                                                                                                                
     the property  owner to,  within a  reasonable period  of time                                                              
                                                                                                                                
     set by the condemnor,                                                                                                      
                                                                                                                                
               (1)  obtain an appraisal from a real estate                                                                      
                                                                                                                                
     appraiser  certified under  AS 08.87  and offer  to sell  the                                                              
                                                                                                                                
     property to  the condemnor for  the appraised value  plus the                                                              
                                                                                                                                
     cost of appraisal; or                                                                                                      
                                                                                                                                
               (2)  offer any alternative means of satisfying the                                                               
                                                                                                                                
     public purpose for which the property is sought.                                                                           
                                                                                                                                
          (c)  If a property owner offers to sell the property                                                                  
                                                                                                                                
     under (b)(1) of this section  within the reasonable period of                                                              
                                                                                                                                
     time set by  the condemnor, the condemnor  must either accept                                                              
                                                                                                                                
     the  offer, or  reject  the offer  and  provide a  reasonable                                                              
                                                                                                                                
     explanation  of the reasons  for the  rejection along  with a                                                              
                                                                                                                                
     reasonable  counter  offer.    If  a  condemnor  invites  the                                                              
                                                                                                                                
     property  owner to  make an  offer  to sell  the property  as                                                              
                                                                                                                                
     described  in (b)  of  this section  and  the property  owner                                                              
                                                                                                                                
     fails to  respond within a reasonable  period of time,  or if                                                              
                                                                                                                                
     the property  owner rejects  a reasonable counter  offer made                                                              
                                                                                                                                
     under  this  subsection,  the  property  owner  may  commence                                                              
                                                                                                                                
     eminent domain proceedings under AS 09.55.290."                                                                            
                                                                                                                                
                                                                                                                                
Renumber the following bill section accordingly.                                                                                
                                                                                                                                
                                                                                                                                
Page 2, lines 23 - 24                                                                                                           
     Delete "made a reasonable and diligent effort to acquire the                                                           
                                                                                                                                
property by negotiation"                                                                                                    
                                                                                                                                
     Insert "complied with AS 09.55.270(b) and (c)"                                                                         
                                                                                                                                
                                                                                                                                
Page 2, line 30, through page 3, line 2:                                                                                        
                                                                                                                                
     Delete all material and insert:                                                                                            
                                                                                                                                
"(2)    the  plaintiff  was required  to  make  a  reasonable  and                                                          
diligent  effort  to acquire  the  property by  negotiation  under                                                          
AS 09.55.270(b) and  (c) and the  plaintiff failed to  comply with                                                          
AS 09.55.270(b) and (c)."                                                                                                   
                                                                                                                                
MR. CUMMINGS  said the  amendment  would remove  some of the  more                                                              
burdensome  language  but  the replacement  language  wasn't  much                                                              
better.  He said subsection (c) in  Sec. 2 would require the State                                                              
to  accept a  counter-offer  or come  up  with another  reasonable                                                              
counter-offer.   He  said those changes  would  make it a  gentler                                                              
condemnation  code  but  would increase  the  amount  of  possible                                                              
litigation.   He said  litigation  on whether  the State had  been                                                              
reasonable  could  go on  for  days.   He  said  modern  pre-trial                                                              
discovery allowed  for the disclosure  of documents going  back to                                                              
the beginning of  time and depositions of everyone.   He said that                                                              
would use a lot of valuable resources.                                                                                          
                                                                                                                                
He thought SB 278 addressed a problem  that didn't exist.  He said                                                              
the  State  had a  very  fair  and reasonable  process  under  the                                                              
guidance of AS  34.60.120.  He thought the public  was well served                                                              
by existing laws.                                                                                                               
                                                                                                                                
CHAIRMAN  TAYLOR   said  Mr.  Satterburg  suggested   a  provision                                                              
requiring DOTPF to prepay condemnation costs and fees.                                                                          
                                                                                                                                
MR. CUMMINGS  said that  was a bizarre  suggestion.  He  said that                                                              
suggestion came from  a case Mr. Satterburg lost  in Supreme Court                                                              
in which he  wanted to do a  drilling program on some  gravel land                                                              
he thought  held gold.   DOTPF  would have  paid for  gold-bearing                                                              
land  if he  had  found gold.    He said  Mr.  Satterburg filed  a                                                              
petition for  review that was turned  down and he had  been trying                                                              
to get that provision into law every time he saw a chance.                                                                      
                                                                                                                                
TAPE 02-14, SIDE A                                                                                                            
                                                                                                                              
3:40 p.m.                                                                                                                       
                                                                                                                                
CHAIRMAN TAYLOR asked  what a property owner had  to do to protect                                                              
their interests against a condemnation.                                                                                         
                                                                                                                                
MR.   CUMMINGS  said   the  property   owner  had   a  number   of                                                              
responsibilities and  assumptions made about their  abilities.  He                                                              
said the  property owner  could say there  were other  things that                                                              
could have  been done rather  than take their  land.  He  said the                                                              
State had  to consider viable  options during the  process leading                                                              
up to the filing of the condemnation.                                                                                           
                                                                                                                                
CHAIRMAN TAYLOR asked if the property  owner had to hire an expert                                                              
to do that.                                                                                                                     
                                                                                                                                
MR. CUMMINGS  said that was correct.   He said the  property owner                                                              
would  be reimbursed  for  reasonable costs  if  they were  right.                                                              
They would have to bear the costs if they were wrong.                                                                           
                                                                                                                                
CHAIRMAN TAYLOR said  the property owner would  only be reimbursed                                                              
for a percentage of the costs.                                                                                                  
                                                                                                                                
MR.  CUMMINGS said  Civil Rule  72 provided  for reimbursement  of                                                              
actual  and reasonable  costs for  expenses  that were  reasonably                                                              
necessary   to  prove   the   property  owner's   case   including                                                              
appraisers, engineering experts, lawyers and paralegals.                                                                        
                                                                                                                                
CHAIRMAN TAYLOR said the state would  have to pay for gold-bearing                                                              
land if a property owner were willing  to go out and spend $75,000                                                              
to $100,000 to get their land drilled  to determine whether or not                                                              
it was  gold-bearing  land and  did find  gold.   He asked if  the                                                              
State  would also  have to  pay for  the  drilling and  attorney's                                                              
fees.                                                                                                                           
                                                                                                                                
MR. CUMMINGS  said that  depended  on the nature  of the  drilling                                                              
program.   They  would be  reimbursed  for at  least the  prorated                                                              
portion of those drilling costs that  were in the area affected by                                                              
the taking.                                                                                                                     
                                                                                                                                
CHAIRMAN  TAYLOR  said  Mr. Satterburg  also  suggested  that  the                                                              
decision to  appeal a master's decision  should be left  solely to                                                              
the property owner.   He said if a master's award  had been given,                                                              
the State  should pay it  and not appeal the  award.  He  asked if                                                              
existing law allowed both parties to appeal a master's award.                                                                   
                                                                                                                                
MR.  CUMMINGS said  the  State had  10 days  to  appeal while  the                                                              
property  owner had  15 days  to appeal.   He said  the State  not                                                              
being able to appeal would stand  everything on its head.  He said                                                              
there could be situations  in which the master did  a bad job.  He                                                              
gave an example in which a master  had gone off on a tangent and a                                                              
awarded  approximately $200,000,  which was  a lot  more than  the                                                              
State thought  the taking was worth.   The State appealed  and the                                                              
case went to a jury trial and the  jury agreed with the State.  He                                                              
said  each side  should have  the  ability to  appeal because  the                                                              
ultimate  arbiter  was  the  jury,  which was  the  voice  of  the                                                              
community and the people.                                                                                                       
                                                                                                                                
CHAIRMAN TAYLOR thought the State  had to deposit the value of the                                                              
land into the registry of the court.                                                                                            
                                                                                                                                
MR. CUMMINGS  said that was correct.   He said that  despoit would                                                              
be available  to the  claimants of interest  such as  the property                                                              
owner,  the  city  for  the prorated  portion  of  taxes  and  the                                                              
mortgage holder.                                                                                                                
                                                                                                                                
CHAIRMAN TAYLOR  asked if that money  could be withdrawn  if there                                                              
was an appeal.                                                                                                                  
                                                                                                                                
MR. CUMMINGS said it could always be withdrawn.                                                                                 
                                                                                                                                
CHAIRMAN TAYLOR  asked if the  property owner could  withdraw that                                                              
money and still bring suit for a higher value.                                                                                  
                                                                                                                                
MR. CUMMINGS said yes.                                                                                                          
                                                                                                                                
CHAIRMAN TAYLOR asked if the State  was required to make a deposit                                                              
for the master's award.                                                                                                         
                                                                                                                                
MR. CUMMINGS  said the  State was  not required to  do so  if they                                                              
appealed the master's award.  He  said the property owner would be                                                              
entitled interest  from the time the  case was filed on  the extra                                                              
amount of  compensation if the master's  award was appealed  and a                                                              
higher amount was awarded.  He said  that was an inducement to get                                                              
as much money on deposit as possible.                                                                                           
                                                                                                                                
CHAIRMAN  TAYLOR asked  if the  property owner  was only  entitled                                                              
interest if the decision wasn't appealed to the Superior Court.                                                                 
                                                                                                                                
MR. CUMMINGS said the interest was  charged on the amount that was                                                              
greater than  the amount  of the deposit  from the date  the State                                                              
filed until compensation was finally rendered.                                                                                  
                                                                                                                                
CHAIRMAN TAYLOR  said the State could  go through the  process and                                                              
deposit $100,000.   Then the case could  go to a master.   He said                                                              
the master  could say the property  was worth $125,000.   He asked                                                              
if the State would have to deposit another $25,000.                                                                             
                                                                                                                                
MR. CUMMINGS said no.                                                                                                           
                                                                                                                                
CHAIRMAN TAYLOR said  the State could then appeal  within 10 days.                                                              
He  said the  case could  then go  to  Superior Court  for a  jury                                                              
trial.                                                                                                                          
                                                                                                                                
MR. CUMMINGS said that was correct.                                                                                             
                                                                                                                                
CHAIRMAN TAYLOR said  the jury could award $200,000.   He asked if                                                              
the State had the right to appeal that decision.                                                                                
                                                                                                                                
MR. CUMMINGS said yes.                                                                                                          
                                                                                                                                
CHAIRMAN TAYLOR said his point was  that it could take a long time                                                              
for the  final decision  to be  made on  the value.   He said  the                                                              
State would  owe interest  from the  date the  master's award  was                                                              
appealed.                                                                                                                       
                                                                                                                                
MR. CUMMINGS  said the interest  would be  owed from the  date the                                                              
deposit  was  made, not  from  the  date  the master's  award  was                                                              
appealed.                                                                                                                       
                                                                                                                                
CHAIRMAN TAYLOR  said the interest  was accrued on the  money that                                                              
was awarded above and beyond the amount made in the deposit.                                                                    
                                                                                                                                
MR. CUMMINGS  said that was correct.   He said  condemnation cases                                                              
were major interferences with peoples'  lives and the State didn't                                                              
really want to  condemn property if it wasn't necessary.   He said                                                              
the State tried  to resolve issues without  extensive proceedings.                                                              
He  said only  exceptional  cases went  to  jury trial.   He  said                                                              
comments and  concerns like Mr.  Satterburg's were very  broad and                                                              
went  far beyond  what SB  278 was  trying  to do  to the  eminent                                                              
domain code.                                                                                                                    
                                                                                                                                
CHAIRMAN TAYLOR  asked if Mr.  Cummings had any  further testimony                                                              
to provide.  He did not.                                                                                                        
                                                                                                                                
MR. RON WOLFE,  Corporate Forester, Sealaska Corporation,  said SB
278 would  require the  State to  make a  reasonable and  diligent                                                              
effort to negotiate  the purchase of real property  from a private                                                              
property owner before  condemning the property.   He said Sealaska                                                              
had  gone through  the  land acquisition  process  twice when  the                                                              
State  required  Sealaska land  for  an  airport expansion  and  a                                                              
highway realignment  and upgrade.  He said Sealaska  and the State                                                              
were able to  negotiate equitable land exchanges in  a manner that                                                              
prevented a hostile  eminent domain process.  He  said the process                                                              
was awkward  both times  because the State  had no requirement  to                                                              
negotiate with  the property owner  and the rules  for negotiation                                                              
were not clear.                                                                                                                 
                                                                                                                                
MR. WOLFE said  SB 278 would correct  the situation.  He  said the                                                              
bill would  require fair  and equitable  treatment while  carrying                                                              
out the eminent domain process.   He said the result would be that                                                              
the property  owner would  feel they had  been treated  fairly and                                                              
openly  by the  State  and would  be less  likely  to bring  forth                                                              
litigation.  He  said the court would also be less  likely to find                                                              
that a property  owner was not  treated fairly.  He  said Sealaska                                                              
thought these changes  would be positive for the  State as well as                                                              
property owners.                                                                                                                
                                                                                                                                
CHAIRMAN TAYLOR asked  if there were any questions  for Mr. Wolfe.                                                              
There were none.                                                                                                                
                                                                                                                                
MR.   JON  TILLINGHAST,   independent   legal  counsel,   Sealaska                                                              
Corporation,  said  at least  23  other  states had  adopted  laws                                                              
similar to SB 278.   He said the bill was based  on a provision of                                                              
the model  eminent domain  code by the  Commission on  Model State                                                              
Laws,  which was  put  together by  state  legislators to  reflect                                                              
their judgment  on the best public  policy in issues  like eminent                                                              
domain.                                                                                                                         
                                                                                                                                
He  said the  scholars on  eminent domain  such as  the author  of                                                              
Nichols   on  Eminent   Domain   felt  the   provisions   deterred                                                              
litigation.   He  said  SB 278  would give  the  property owner  a                                                              
bargaining chip to  use at the table because the  State would have                                                              
a legal  requirement to  be reasonable  with them.   He  said this                                                              
would  make the  property owner  join the  process as  more of  an                                                              
equal rather than a victim.                                                                                                     
                                                                                                                                
He said  AS 34.60.120 was  basically a re-codification  of federal                                                              
policy, which required  the State to make every  reasonable effort                                                              
to  acquire property  by  negotiation  before condemning  it  when                                                              
using federal monies.  He said SB  278 would make that requirement                                                              
enforceable  because  the  property  owner  could use  that  as  a                                                              
defense to the condemnation.                                                                                                    
                                                                                                                                
He then  addressed the  proposed amendment.   He said  most states                                                              
with similar eminent domain laws  didn't define what the State had                                                              
to  do to  be reasonable  and diligent  in trying  to negotiate  a                                                              
purchase.  He said early in the drafting  of SB 278, an example of                                                              
what might  entail reasonable  and diligent  effort was  suggested                                                              
and placed  in the bill as a  safe harbor.  This was  not intended                                                              
to be  the only way  the State could  be reasonable  and diligent,                                                              
but  one of  the many  things the  State could  do.   He said  the                                                              
problem  with using  an example  was  that people  would begin  to                                                              
focus on the  example.  He said  they struggled to come  up with a                                                              
better example.  He said they had  come to the conclusion that the                                                              
majority of  states had done the  right thing by not  providing an                                                              
example.  Sealaska suggested the committee do the same thing.                                                                   
                                                                                                                                
MR. TILLINGHAST  proposed a different  amendment to  end paragraph                                                              
(4) on page 1 at line 14 with the  word "negotiation" and deleting                                                              
the text  after that up  through and including  line 5 on  page 2.                                                              
He said SB  278 would then  read virtually identical to  the model                                                              
eminent domain code.                                                                                                            
                                                                                                                                
3:58 p.m.                                                                                                                       
                                                                                                                                
MR.   TILLINGHAST  said   the  proposed   amendment  (marked   22-                                                              
LS1399\A.1)  would remove  the existing  example from  SB 278  and                                                              
insert a  new example.  He  was concerned that this  example would                                                              
have  the same  problems.   He said  the example  in the  proposed                                                              
amendment was  probably better  than the  example in the  existing                                                              
bill.  He  said the example  in the proposed amendment  was worded                                                              
in such a way that it would no longer  be an example but something                                                              
the State would be required to do in every case.                                                                                
                                                                                                                                
CHAIRMAN  TAYLOR  asked  if  the   language  regarding  incapacity                                                              
cleared up difficulties that had been encountered.                                                                              
                                                                                                                                
MR. TILLINGHAST  said that clause,  which would release  the State                                                              
from the  requirement to negotiate  with a property owner  if they                                                              
couldn't be found or were not legally  capable of negotiating, was                                                              
similar to almost all other states' eminent domain code.                                                                        
                                                                                                                                
CHAIRMAN TAYLOR asked if there were  any further questions for Mr.                                                              
Tillinghast.  There were none.  He  asked if there was anyone else                                                              
who wished to testify on SB 278.  There was nobody.                                                                             
                                                                                                                                
He  moved   Amendment  1  to  place   a  period  after   the  word                                                              
"negotiation" on page 1 line 14 and  delete the following language                                                              
through line 5 on page 2.                                                                                                       
                                                                                                                                
There being no objection, Amendment 1 was adopted.                                                                              
                                                                                                                                
CHAIRMAN  TAYLOR  shared  Mr.  Cummings'   and  Mr.  Tillinghast's                                                              
concerns about placing  an example in statute  because the example                                                              
would become a  mandated opportunity for litigation.   He asked if                                                              
Mr. Cummings wished to provide further testimony.                                                                               
                                                                                                                                
MR. CUMMINGS  said the difficulty  with putting SB 278  in statute                                                              
was that there would still be litigation  whether or not the State                                                              
was reasonable and  diligent in its negotiations.   He said SB 278                                                              
would simply  provide a mechanism  to delay projects,  which would                                                              
cost the State money.  He said it  wouldn't result in changing the                                                              
way the State did business.                                                                                                     
                                                                                                                                
MR. CUMMINGS  thought many  people wanted the  State to be  in the                                                              
business  of trading land.   He  said SB  278 wouldn't compel  the                                                              
State to trade  land with property owners.  He  said DOTPF already                                                              
had the  ability to  purchase land for  the purposes  of exchange.                                                              
He said  there would  need to be  provisions regarding  what would                                                              
trigger a land trade  or how land trades should work  if the State                                                              
were going to do more land trades.                                                                                              
                                                                                                                                
He  said the  main argument  for  SB 278  was that  it would  give                                                              
property owners a  way to defend themselves.  He  said the process                                                              
DOTPF used was imminently  fair.  He felt SB 278  would only delay                                                              
projects.                                                                                                                       
                                                                                                                                
CHAIRMAN TAYLOR asked  if it was correct that 23  other states had                                                              
similar statutes.                                                                                                               
                                                                                                                                
MR. CUMMINGS said he wouldn't be  surprised.  He said most states'                                                              
eminent domain  codes weren't  as liberal  as Alaska's  because of                                                              
the way interest was paid and costs and fees were reimbursed.                                                                   
                                                                                                                                
CHAIRMAN  TAYLOR asked  what percentage  of property takings  each                                                              
year ended up in some form of litigation.                                                                                       
                                                                                                                                
MR. CUMMINGS said between 2% and 5%.                                                                                            
                                                                                                                                
CHAIRMAN  TAYLOR  said  95% to  98%  of  the  time DOTPF  and  the                                                              
property  owner were  able  to come  to  some  sort of  reasonable                                                              
agreement.                                                                                                                      
                                                                                                                                
MR. CUMMINGS said  that was correct.  He said  the biggest problem                                                              
the State faced was the lack of time  available to pull everything                                                              
together.                                                                                                                       
                                                                                                                                
SENATOR THERRIAULT  asked if  SB 278 would  change the  process in                                                              
which DOTPF  appraised the  land and went  to the property  owners                                                              
with proposals.                                                                                                                 
                                                                                                                                
MR. CUMMINGS  said the State  would still appraise  everything and                                                              
make  offers to  the property  owners.   He said  the State  hired                                                              
someone who was competent to do the  work and had familiarity with                                                              
the  engineering  principles  involved.   He  said  the  appraiser                                                              
needed to  be able  to predict the  impact of  the project  on the                                                              
physical features  of the  property.  The  State then  invited the                                                              
property owner to make a counter offer.                                                                                         
                                                                                                                                
SENATOR THERRIAULT said perhaps there  were situations that he was                                                              
not aware  of but he  felt that the  existing process  worked well                                                              
for the  most part.   He wondered  what would  be modified  in the                                                              
process if SB 278 passed that would cause automatic delay.                                                                      
                                                                                                                                
MR.  CUMMINGS  said  SB  278  would   allow  people  to  answer  a                                                              
condemnation complaint  by saying they didn't think  the State was                                                              
reasonable and diligent  in its negotiations.  He  said they could                                                              
already question  the authority and  necessity for the  taking and                                                              
whether it  was accomplished consistent  with the  greatest public                                                              
good and  the least  private injury.   He  said these things  were                                                              
only  tangentially   related  to  the  process   and  could  delay                                                              
projects.   He said all  of those things  would have to  be proved                                                              
before  construction got  started.   He said  the State  currently                                                              
condemned  the property  and did  a quick-take.   He  said if  the                                                              
property  owner  was  entitled  to  extra  money,  that  would  be                                                              
resolved  after construction  had been  started.   He said  SB 278                                                              
would require  everything  to be settled  before construction  was                                                              
started.                                                                                                                        
                                                                                                                                
SENATOR  COWDERY asked  what happened  when a  property owner  had                                                              
agreed to a strip taking and later  discovered that their driveway                                                              
was at a 16% grade.                                                                                                             
                                                                                                                                
MR.  CUMMINGS  said that  depended  on  how  the change  in  grade                                                              
occurred.  The State would give them  more money if the change was                                                              
not part  of the original design  when they signed  the agreement.                                                              
However, the property  owner would be stuck with  it if the change                                                              
had been explained during the negotiations.                                                                                     
                                                                                                                                
SENATOR  COWDERY thought  most property  owners  weren't aware  of                                                              
what a 16% grade  meant in their driveway until after  they saw it                                                              
because they weren't engineers.                                                                                                 
                                                                                                                                
MR. CUMMINGS  said the  State brought  the right-of-way  plans and                                                              
design  plans with them  when they  negotiated  a settlement.   He                                                              
said right-of-way plans showed each  taking in the project and the                                                              
property owner's  taking.   The design plans  showed the  grade of                                                              
the centerlines and what the slopes would be like.                                                                              
                                                                                                                                
SENATOR COWDERY  asked if  they showed the  grade of  the driveway                                                              
before and after the project.                                                                                                   
                                                                                                                                
MR. CUMMINGS said they did.                                                                                                     
                                                                                                                                
SENATOR COWDERY said he didn't think so.                                                                                        
                                                                                                                                
MR. KAUZLARICH  said Senator  Cowdery had  mentioned working  with                                                              
the Municipality  of Anchorage  on some projects.   He  said DOTPF                                                              
participated  in   a  project  in  Anchorage  by   overseeing  the                                                              
relocation efforts and the review  appraisal efforts.  He said the                                                              
Municipality   of  Anchorage   employees  were   perhaps  not   as                                                              
sophisticated  as DOTPF  employees in doing  the negotiations  and                                                              
there were some communication problems.                                                                                         
                                                                                                                                
He said  the property  owner was  presented with  a set  of cross-                                                              
sections that  showed the  existing grade of  the land as  well as                                                              
the  resultant grade.   He  said  the right-of-way  agent and  the                                                              
property owner discussed what would happen to the property.                                                                     
                                                                                                                                
SENATOR  COWDERY asked  how many property  owners would  recognize                                                              
and understand what a change of grade  would do to their property.                                                              
                                                                                                                                
MR. KAUZLARICH said not very many.   He said part of the right-of-                                                              
way agent's job was to ensure that  the property owner understood.                                                              
He said if  the property owner came  back after the fact  and said                                                              
they had no idea this would happen  to their property, DOTPF would                                                              
take another look at it.                                                                                                        
                                                                                                                                
CHAIRMAN  TAYLOR asked  if there  was anybody  else who wished  to                                                              
testify on SB 278.  There was nobody.                                                                                           
                                                                                                                                
SENATOR  COWDERY  moved  CSSB  278(JUD)   out  of  committee  with                                                              
attached fiscal note and individual recommendations.                                                                            
                                                                                                                                
There being  no objection,  CSSB 278(JUD)  moved out of  committee                                                              
with attached fiscal note and individual recommendations.                                                                       

Document Name Date/Time Subjects