Opinion
401258/10
09-07-2011
In the Matter of the Application of the City of New York, to Acquire by Exercise of its Powers of Eminent Domain, Fee Interest in Certain Real Property Known as Tax Block 706, Lots 15, 17, 48, 50, 52 and Tax Block 707, Lots 13, 16 (and adjacent strip), 51,54 and 56; and a Fee Interest and an Estate for a Term of Years in Tax Block 706, Lot 10; all located in the Borough of Manhattan, Required as Part of the NO. 7 SUBWAY EXTENSION—HUDSON YARDS REZONING AND DEVELOPMENT PROGRAM as said property is shown on the current Tax Map of the Borough of Manhattan, City and State of New York.
The City was represented by John R. Casolaro, Esq., of Carter, Ledyard & Milburn LLP. Claimants were represented by M. Robert Goldstein, Esq. and Jonathan Houghton, Esq., of Goldstein, Rikon & Rikon, P.C.
The City was represented by John R. Casolaro, Esq., of Carter, Ledyard & Milburn LLP.
Claimants were represented by M. Robert Goldstein, Esq. and Jonathan Houghton, Esq., of Goldstein, Rikon & Rikon, P.C.
Jane S. Solomon, J.
This condemnation proceeding concerns the Hudson Yards Rezoning and Development Program, covering development of approximately 38 blocks in Manhattan and the south westward extension of the Number 7 subway line from Times Square to Eleventh Avenue and West Thirty fourth Street (Project). The property interests which are the subjects of this decision were taken by the City of New York for the Project by eminent domain. The properties cover a swath of land, not conforming to the street grid, running from 34th Street and 11th Avenue on the southwest towards 41st Street and 9th Avenue on the northeast. Most of the condemned area is identified to an interior boulevard and park anticipated to be central to the contemplated large surrounding developments. Pending are the owners' claims for compensation for the takings.
The M1-5 Properties
All of the properties at issue originally were zoned for manufacturing use and classified as M1-5. In connection with the Project, all of the land surrounding the Claimants' properties was rezoned to a C6-4 mixed-use classification. The C6-4 class allows for a dramatically higher building density than M1-5, and more than is permitted in a C6-3 class, relevant to one Claimant's property discussed below. For property owners and developers the higher the permitted density, the more floors or square footage is allowed; the more square footage allowed, the more space there is to rent or sell; and, inexorably, the more space that can be built, the higher the market value of the land.
Claimants asserted that their properties should have been rezoned to the higher density adopted for the other land in the Project's boundaries, and that, for compensation purposes, their properties should be valued as if they had been rezoned. The City challenged this argument and contended that the properties properly retained their manufacturing designation. Accordingly, because a determination of this threshold issue would form the basis for the valuation analyses to be performed by appraisers for each side, a trial was held to determine whether Claimants are entitled to have their properties valued as if they had been rezoned.
"Spot zoning" is the term for a zoning change which uniquely affects a specific property owner. Claimants argued that rezoning all the land except theirs was reverse spot zoning, namely, that the rezoning (or omission to rezone) served no purpose other than to lower the value of their property and unlawfully deprive them of the just compensation to which they are entitled. The City responded that there was no intent to minimize Claimants' recovery; rather the rezoning was integral to the Project. As the Court of Appeals has stated: "The real test for spot zoning is whether the change is other than part of a well-considered and comprehensive plan calculated to serve the general welfare of the community ....(citation omitted)." (Callard v. Incorporated Village of Flower Hill, 52 NY2d 594, 600 [1981]). As noted in earlier proceedings regarding the Project, a reverse spot zoning claim is "scrutinized under the Equal Protection Clause [based upon] whether there is a rational relationship between the ... disparate treatment of petitioner property owners and a legitimate governmental purpose." (C/S 12th Avenue LLC. v. City of New York, 32 AD3d 1, 9 [1st Dept 2006]). In addition, Claimants contended that, even in the absence of the Project, it was reasonably likely that the subject properties would have been rezoned to C6-4 or otherwise would have received variances in the reasonably near future, while the City responded that it was not at all likely that the Claimants' properties would have been rezoned any time soon without the Project.
All of the trial witnesses were experts, and impressive in their knowledge of the city, its zoning and land use regulations, and the history of development, particularly as it has occurred over the last 40 years west of Sixth Avenue from Lower Manhattan through the Lincoln Center area, while prior uses such as manufacturing and industry shrank in these neighborhoods. Through their testimony all of the known planning studies and reports generated between the construction of the Javits Convention Center and the Project's adoption were received in evidence (See, Hornick & Kersh; "Response to Memoranda," attached to Hudson Yards Rebuttal Zoning Report, dated September 30, 2010, marked as Trial Ex. A [hereinafter, "Rebuttal Report]"). A wealth of information was provided. In the end, the Claimants failed to carry their burden of proof that they were victims of improper zoning decisions, or that their properties would likely have been zoned for a higher density absent the Project (See, Matter of Town of Islip (Mascioli), 49 NY2d 354, 360 [1980]; Matter of City of New York(Broadway Cary Corp), 34 NY2d 535, 536 [1974][A claimant seeking property valued on a new zoning classification must prove that a zoning change was reasonably likely to occur in the "reasonably near future," absent the taking]; see also, In re New York State Urban Development Corp., 308 AD2d 414 [1st Dept., 2003]). The testimony and exhibits established that, notwithstanding efforts and dreams, the Hudson Yards area was stagnant and, but for the Project, it was likely to remain that way for the reasonably near future.
"Reasonably near future" has been defined as "imminent" (Ehlers v. State, 40 AD2d 1067 [3rd Dept., 1972]). Here, for purposes of their valuation arguments, the City defines it as a two to three year prospective period, and the Court agrees.
The City was again persuasive that the Project was part of a well-considered comprehensive plan. Its efforts to reconfigure the Hudson Yards area from its blighted, obsolete and underutilized state began with the construction of the Javits Convention Center, followed by efforts to develop the surrounding area, which did not materialize. Not until the opportunity to expand the central business district with the extension of underground mass transit and the unprecedented expanded zoning which invites large scale development with mixed-use buildings, enhanced by the open space network of the projected park and boulevard intended to provided air, light, greenery and a sense of place and space, did the planners' dreams seem feasible. Indeed, the extent of permitted construction contributes to the revenue required to repay the bonds issued for acquiring the necessary properties and for the subway expansion.
Claimants' strenuous arguments that the rezoning was independent of the condemnation of the properties are unpersuasive. Rather, the court is persuaded that the two events were inextricably intertwined. Absent the Project—-large development enabled by the extended Number 7 subway—-there would have been no rezoning in the relevant period.
Equally apt here are the words of the Appellate Division in C/S 12th Avenue, supra, where it stated:
The rezoning for creation of a mid-block boulevard and park is . . . part of a well-considered and comprehensive plan calculated to serve the general welfare of the community. . . . It will expand the limited amount of public open space in the Project area, create a continuous north-south pedestrian route from a large public square south of 33rd Street to a pedestrian bridge leading to 42nd Street and will permit a connection to the High Line open space to the south.(C/S 12th Avenue LLC., 32 AD3d at 10[citation and internal quotation marks omitted).
The City established that it follows a policy not to rezone land planned to be used as public parks or streets, as it would serve no purpose (Rebuttal Report, p. 21-3). There was no reason to rezone the property taken for the boulevard and park upward from M1-5 as the intended use would have made it exempt from rezoning (Id., p. 21). Claimants did not disprove this evidence factually, nor have they argued its impropriety as a matter of law. Claimants' position that the failure to rezone was inspired by the City's greed in avoiding payment of justly deserved substantial compensation is constructed on speculation and inference, and not supported by evidence.
Finally, the City persuasively disputed the opinions of Claimants' witnesses, particularly that of Mr. Kwartler, that the properties would have received variances for development or been re-zoned in the reasonably near future, even absent the City's public project plan. As expressed by one of the City's witnesses, Philip Schneider:
A planner's belief that ... rezoning might make sense is not sufficient to establish the probability of rezoning in the near future. Instead, concrete evidence, such as frequent granting of nearby zoning changes or variances with few or no denials, or(Schneider, "Hudson Yards Zoning Analysis Phase I Stage 4 & 5 Properties," dated August 1, 2007, marked as Trial Ex. Z, p 15).
pressing developer and community demand for re-zoning is required.
Mr. Schneider provided ample testimony that such rezoning was not likely absent the intervention of a public project and the enhancement of public transportation (Direct Examination of Philip Schneider, December 8, 2010 [transcript p. 786, 833-40]). The opinions of Claimants' experts, Mr. Sillerman and Mr. Goldman, were based on descriptions of broad, general trends in the City's land use policy and examples geographically remote from the subject properties. " [U]se which is no more than a speculative or hypothetical arrangement in the mind of the claimant may not be accepted as the basis for an award'(citation omitted)." (Broadway Cary Corp., 34 NY2d at 536).
Sillerman Report, attached to Trial Ex. 10; Goldman Report, attached to Trial Ex. 11.
The "project influence doctrine" prevents a claimant from being compensated for the enhanced value of a property attributable to its proximity to rezoned areas, or being penalized by adjacency to a use which may be of general benefit but would diminish the market value of its own land. A claimant is to be made whole, but it is entitled neither to a premium nor a punishment. The City claims the protection of this doctrine, while Claimants argue that it is inapplicable because, chronologically, the rezoning preceded the taking. Thus, they want the benefit of the rezoning of the neighborhood. The City counters that the zoning changes would not have occurred absent the impending adoption of the Project. This premise underlies the City's defense to the claims here.
The City uses the term "project influence doctrine" to refer to a body of Federal and New York cases originating in the late 1800's (see, e.g., Kerr v. South Park Commissioners, 117 US 379 [1886]) and evolving through the twentieth century. A discussion of these cases is found in the City's pre trial memorandum and pages 4 through 13 of the Memorandum In Support Of Valuation Methodology, dated September 20, 2010.
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It is well settled that a condemnee may not receive an enhanced value for its property where the enhancement is due to the property's inclusion within a redevelopment plan. ... [A] condemnee is only entitled to compensation for what it has lost, not for what the condemnor has gained.(Matter of Queens West Development Corporation, 289 AD2d 335, 336 [2nd Dept, 2001].) The City established that the taking of Claimants' properties for the park and boulevard enabled the higher density zoning for the remainder of the area which is to be accessible by virtue of the enhanced subway service. This is to the City's benefit and does not support attributing a higher zoning classification to the Claimants' properties.
Further, the record reflects that even Claimants' expert, on cross examination, concedes that the integration of the public improvement with the zoning changes could not be sustainable without improvement in mass transit (Cross examination of Mr. Goldman, December 2, 2010 [transcript, p. 400]), making unpersuasive the Claimants' separation argument.
The Partially Rezoned Parcels
Portions of Block 707, Lots 56, 13, and Block 706, Lots 17, 10 and 55, were partially rezoned to the higher density classification. The owners seek valuation of the taken portions based on the higher zoning. There is no persuasive evidence of any interest in development of these sites, or those nearby, in the years preceding the Project. Neither is there evidence that, absent the extension of the subway, there would be development in the reasonably near future. For these Claimants, especially, the "project influence doctrine" works against their contention. Calculating the value of the taken portions as if they, too, had been rezoned would grant the owners an undeserved windfall.
The Mercedes Benz Property
The City concedes that this Claimant should be compensated as if its property had been rezoned, but to a C6-3 classification. The property, albeit surrounded by a bus depot, Con Ed substation, church and parking lot, is much closer to the development along the 42nd Street corridor. It is likely to have been rezoned upward in the reasonably near future. Nevertheless, Claimant has failed to establish that, absent the Project, it would or could have been rezoned for a higher density than C6-3.
Conclusion
Accordingly, after trial and upon the foregoing, the court concludes that the subject properties shall be valued, for purposes of compensation in eminent domain, as if they were zoned M1-5, except for Block 1069, Lot 1, which shall be valued as if zoned C6-3, and it is
ORDERED that for the purpose of fixing their claims, the valuation of Claimants' properties shall be based on the foregoing, and the parties shall appear in Part 55 on October 4, 2011 at 10 A.M. for the purpose of scheduling further proceedings.
Dated: September , 2011
ENTER:
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J. S. C.