N.C. General Assembly looks to close eminent domain loophole: The Business Journal of the Greater Triad (Greensboro NC) Area, 7/2/06

By Matt Harrington

The N.C. General Assembly is taking steps to strengthen existing state statutes that outlaw the use of eminent domain for economic development projects in what is a hot-button issue nationally.

As of presstime, the N.C. Senate had not yet passed a modified version of House Bill 1965, which was one of the many proposals put forward by legislators in the year since the U.S. Supreme Court upheld a Connecticut state statute that allowed a city there to take houses for a hotel and convention center.

Pete Brunstetter, R-Forsyth, who serves on the Senate Judiciary Committee, which is crafting the Senate's version of the bill, said North Carolina was one of many states that reacted after the Supreme Court's decision last year.

North Carolina's state statues, similar to Connecticut's, have a loophole that could theoretically allow for eminent domain to be used for private-development projects, he said.

"Most of the states have been scrambling to plug the holes," said Brunstetter, also an attorney for Kilpatrick Stockton and former chair of the Forsyth County Board of Commissioners.

The state's loophole is due to a clause about using eminent-domain powers for urban redevelopment of blighted areas, which are defined as areas where two-thirds of the properties are blighted. The statute says that in such cases, the entire area could be condemned by the local government, as was the case in Connecticut. The Senate bill will try to amend that language to say that only blighted parcels could be taken via eminent domain for a private project.

"The fear that happened was people saying 'Is our statute broad enough to allow for this type of eminent domain action?'" he said.

Brunstetter said it was Sen. Phil Berger, R-Guilford/Rockingham, who found the loophole late Tuesday, while the Senate was considering a bill on the subject. Now that bill has gone back to the Judiciary Committee for further language adjustments. While it was not immediately known when the bill might next be taken up, Brunstetter said he thought it would eventually pass.

"If we're serious about plugging the hole from the (Connecticut) case, this is what we need to do," Brunstetter said.

Berger said he had not heard of any opposition to his amendment yet, but knew that several legislators planned to check with the N.C. League of Municipalities, which published a statement after the Connecticut case last year saying that North Carolina did not have any loopholes in its eminent domain laws.

A call to the League of Municipalities for comment was not immediately returned.

Should a bill pass the Senate, it would then go into a conference committee, where the differences between the House and Senate versions would be resolved and the final bill would go to both the House and Senate for approval.

Berger said another option to close the loophole would be a state constitutional amendment making it clear that the state could never use eminent domain for private projects. Such a bill, proposed by Rep. Paul Stam, R-Wake, is currently in the House, but Berger said he wasn't sure it would be well supported.

The Business Journal of the Greater Triad Area: http://triad.bizjournals.com/triad