After decades of inaction, it appears that the time for action on infrastructure has finally come now that the presidency and both houses of Congress are controlled by Democrats.
Common ground and disagreements
Democrats and Republicans agree that additional federal monies are required to fund traditional infrastructure improvements such as roads, bridges, public transit, railroads, water storage, ports, airports, inland waterways, broadband infrastructure and drinking and wastewater systems.
However, the parties sharply disagree about how much to spend on infrastructure and how to pay for it. They also disagree about whether additional “human infrastructure” items, such as child care, research and development, and job training should be included.
Earlier this year, the parties proposed competing infrastructure packages, with Democrats advocating President Biden’s expansive American Jobs Plan (AJP) and Republicans proposing the narrower Republican Roadmap.
The $2.3 trillion AJP provides for significant spending in areas where the power of eminent domain is available to acquire necessary property rights, including:
- $621 billion for transportation infrastructure and resilience;
- $111 billion to upgrade and modernize drinking and wastewater systems;
- $100 billion for high-speed broadband;
- $100 billion for power grid modernization and resiliency;
- $100 billion to upgrade and build new public schools; and
- $12 billion for community colleges, including facilities.
The Republican Roadmap is not as far-reaching, proposing:
- $454 billion for transportation infrastructure;
- $65 billion for broadband infrastructure;
- $49 billion for water infrastructure;
- $35 billion for drinking and wastewater systems; and
- $14 billion for water storage.
The Roadmap is also different in that the AJP proposes new money, while the Roadmap generally adjusts already programmed funds up slightly.
The competing infrastructure packages have recently translated into legislative action. On June 24, the Biden administration and Senate Republicans agreed on a Bipartisan Infrastructure Framework, which involves spending $1.2 trillion over eight years, with $579 billion in new spending—$312 billion of which is for transportation and $266 billion for items such as water and broadband. As of this writing on July 26, the Senate is in the process of reducing the broad provisions of the Framework to a bill that will go to the Senate floor.
Additionally, Democrats are preparing to advance a separate $3.5 trillion infrastructure plan through the budget reconciliation process, which the Senate Parliamentarian has authorized notwithstanding that procedure’s typical limitation to once per year and its recent use to pass the American Rescue Plan Act. The Reconciliation Package focuses on climate change and “human infrastructure,” and Senate Democrats agreed on its broad contours on July 13.
In another recent development, the House of Representatives passed the $759 billion Invest in America Act on July 1, which proposes a 50 percent increase over current infrastructure spending levels. Among other things, the House bill provides:
- $343 billion for roads, bridges, and safety;
- $109 billion for transit;
- $168 billion for wastewater and drinking water; and
- $95 billion for rail (including $32 billion for Amtrak).
The problem of unprepared businesses
Regardless of what form infrastructure legislation ultimately takes or the manner in which it is passed, there is no doubt that significant increases in infrastructure spending are imminent. Also imminent is a corresponding increase in eminent domain activity to acquire the necessary property rights. Most businesses are not ready.
For the most part, businesses do not devote a lot of resources to eminent domain. The business folks are too busy running the company to worry about it, and in-house legal departments do not pay much attention to it, either. After all, it’s fairly rare from a historical perspective for a typical business to be impacted by eminent domain.
Eminent domain is often treated as “found money,” rather than a traditional “cost” to the business. After all, the business will recover something no matter how things turn out, since the condemning authority is legally required to provide some measure of compensation. That can be a pleasant break from the business having to actually pay money out to claimants. And while some businesses may use real estate counsel on a regular basis, eminent domain is real estate litigation, a niche practice area requiring a specialized skill set, and most real estate lawyers are not equipped for it.
The result? Rather than considering a legal challenge to the taking or seeking to maximize its monetary recovery, the business tries to push the condemning authority for a little more than is initially offered and focuses on how the changes to the property can be “worked around.” Matters fall through the cracks, and money—often significant money—is left on the table!
It is time to change how businesses think about eminent domain. Real estate is one of the most valuable assets many businesses own, and the exercise of eminent domain to take all or part of that real estate will have a very real impact on the business in the long run.
A property owner should never blindly rely on the condemnor’s appraisal, which tends to understate the amount of just compensation due. For a taking of any significant magnitude, especially one involving loss of parking or an impairment of access, the business should obtain its own appraisal. Only then will it have a full picture of the property’s value, both before and after the project.
Additionally, most condemnors will not seriously entertain a counter from a property owner unless it is supported by an appraisal. Although a typical appraisal will cost a mere $5,000 to $10,000, it can often lead to an exponential increase in compensation. Nevertheless, many businesses balk at the cost. That mentality has to be overcome if a business is going to successfully navigate an eminent domain taking.
Large brick-and-mortar retailers—the businesses likely to be most impacted by an across-the-board increase in infrastructure spending—should also audit how eminent domain matters are handled. Who receives notices from condemnors? What happens once notice is received?
If the response is not consistent, systematize it and train personnel to follow the protocol. If that seems daunting, qualified eminent domain counsel should be consulted. Smaller businesses should designate a point person and formulate a response plan. And all businesses should consider lining up qualified eminent domain counsel ahead of time.
In many states, including Ohio, a condemnor can file an eminent domain lawsuit shortly after sending written notice communicating its intent to acquire the property. A business may find it difficult to complete an appropriate search for counsel by the time its pleading is due in court, and a failure to take timely—and informed—action risks losing valuable rights.
Jeremy S. Young is a shareholder and member of the Business Litigation Group at Roetzel & Andress in Columbus, Ohio. He focuses his practice primarily on infrastructure and real estate-related issues and disputes, particularly those involving eminent domain and easements. He has represented some of the nation’s largest retail pharmacies, auto parts stores, grocery stores, discount retailers, gas stations, and pipeline companies. He can be reached at [email protected].