The Federal Highway Administration warned Tuesday that the legislature's recent reform of eminent domain laws violates the Highway Beautification Act and could cost the state about $40 million annually.
Legislators voted by overwhelming margins last week to reform how municipalities can take property by eminent domain, saying the measure was a protection for homeowners against big government.
But the legislation also requires better compensation for a more frequent target of eminent domain proceedings - billboards taken down by the state to make way for transportation projects.
State transportation officials fought unsuccessfully to delete the provision, saying it could drive up the cost of transportation projects, including the Hartford-New Britain Busway, which will require the removal of 10 billboards.
On Tuesday, the department played a new card - a letter from a federal highway official warning that Connecticut could lose 10 percent of its annual federal highway funds. The money ranges from $355 to $440 million.
"I think it is an empty threat," said John Barrett, a co-owner of Barrett Outdoor Advertising and a former president of a state billboard trade group. "Don't be fooled. That's exactly why you got it last minute."
The letter said the new compensation policy runs afoul of a federal law passed during the administration of Lyndon Johnson, when the first lady, Lady Bird Johnson, made highway beautification a pet cause, resulting in federal policies that discourage billboards.
The administration of Gov. M. Jodi Rell, who must decide in coming days whether to sign or veto the bill, asked legislators Tuesday night to consider passing a second bill deleting the billboard language.
Chris Cooper, a spokesman for Rell, declined to say if the governor would veto the bill if the offending provision is not removed.
Rep. Art Feltman, D-Hartford, who wrote the legislative language as co-chairman of the planning and development committee, said he was surprised by the late objection.
Feltman said he is no friend of the industry, which has one owner in the legislature: Sen. John Fonfara, D-Hartford, who runs a billboard company called Face Value.
"It's not a kind of business I admire," Feltman said. "I am a big admirer of fairness."
The focus of legislators during the eminent domain debate last week was on homeowners, like those New London residents whose challenge of a land-taking led to a U.S. Supreme Court decision affirming the right of municipalities to take homes for economic development.
"This goes to the very core of everything that is good and right in this nation," Rep. Shawn Johnston, D-Thompson, said during the House debate. "You work hard, you save some money, you buy a house."
But the billboard industry says it, too, has been victimized by eminent domain. The state traditionally has paid only for the value of the sign, not the lost income, Barrett said.
"This whole bill was about doing the right thing," he said. "That's all we are asking for here."
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