Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-arwd-2_06-cv-02002/USCOURTS-arwd-2_06-cv-02002-0/pdf.json

Nature of Suit Code: 440
Nature of Suit: Other Civil Rights
Cause of Action: 28:1331 Federal Question: Other Civil Rights

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IN THE UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF ARKANSAS

FORT SMITH DIVISION

B & C INVESTMENTS OF

ARKANSAS, INC. PLAINTIFF

VS. CASE NO. 06-2002

CITY OF FORT SMITH, ARKANSAS DEFENDANT

MEMORANDUM OPINION

Plaintiff, B & C Investments of Arkansas, Inc. (hereinafter “B

& C”), brings this action against the City of Fort Smith, Arkansas

(hereinafter “the City”), pursuant to 42 U.S.C. § 1983 and Article

2 § 22 of the Arkansas Constitution. B & C alleges that the City

imposed an assessment on B & C’s property for the cost of a road

improvement project, which assessment B & C asserts constitutes an

unconstitutional taking of its property without just compensation.

The matter is before the Court for decision following a twoday trial to the Court beginning on September 26, 2006, and the

submission of post-trial briefs by the parties. (Docs. 16, 17.) 

The following will constitute the Court’s findings of fact and

conclusions of law pursuant to Rule 52 of the Federal Rules of

Civil Procedure.

BACKGROUND

1. The City adopted an ordinance known as the New Street

Construction Participation Program (hereinafter the “Program”) in

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February of 1987. The ordinance is codified at § 22-131 et seq. of

the Fort Smith Municipal Code. (Joint Ex. 1.) 

2. The Program applies only to streets or street segments

where, prior to the construction in question, no street facility

previously existed. The Program is not mandatory, and a street is

subject to the Program only “if the board of directors shall, by

resolution adopted at the time of authorization of construction,

designate all or a portion of same [street] as an element of the

program.” § 22-132, Fort Smith Municipal Code. (Joint Ex. 1 at pg.

1236.) 

3. Under the Program, “[a]ll properties physically

contiguous to the right-of-way line of new street construction and

properties located within three hundred (300) linear feet from the

nearest portion of the right-of-way line shall be subject to the

participation program . . . .” § 22-149, Fort Smith Municipal

Code. (Joint Ex. 1 at pg. 1237.) 

4. The Program authorizes the City to charge property owners

a pro-rata portion of the cost of new street construction based on

a formula factoring in the front footage and depth of the subject

property on the newly constructed street. See § 22-150, Fort Smith

Municipal Code. (Joint Ex. 1 at pg. 1237-38.) 

5. On February 20, 2001, by Resolution R-42-01, the

governing body of the City of Fort Smith authorized the

construction of the South 79 Street improvements. (Joint Ex. 3.) th

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6. In connection with the construction project, the City

filed an application for condemnation of easements on B & C’s

property. The City settled the condemnation action by paying B &

C $60,000.00. (Joint Exs. 6 - 9.) Another affected property

owner, Chris Whitt, owner of Zero Business Park, Inc., deeded an

easement on his property to the City for the nominal amount of

$1.00. (Def. Ex. 14.) The testimony established that Whitt was in

favor of the construction project because he believed that it would

enhance the value of his property. B & C, on the other hand,

opposed the project.

7. By Resolution R-41-01, the governing body of the City of

Fort Smith designated a portion of the South 79 Street Project as th

“new street construction” subject to the Program. (Joint Ex. 4.)

8. On March 11, 2001, Resolution R-41-01 was published,

designating the properties owned by B & C and Whitt as affected

tracts and stating the estimated pro-rata shares of project costs

attributable to B & C and Whitt. (Id.) 

9. The South 79 Street project was completed in September th

2001. In March 2003, B & C was assessed $152,245.89 for its prorata share of the costs of construction. Whitt was assessed

$124,461.46 for his share of the costs and he paid the assessment

without objection. (Joint Exs. 11, 13.) 

10. Under the ordinances which authorize the Program, the

City may enforce the assessment by requiring that the assessment be

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paid as a condition for the issuance of a building permit.

However, at the request of B & C, the City adopted Resolution R248-03, authorizing B & C to begin development of its property by

posting a bond to secure payment of the assessment in the event

this litigation is unsuccessful. (Def. Ex. 22.) On February 9,

2004, B & C entered into a ten-year ground lease with a developer

(Def. Ex. 35) and the developer has commenced construction on the

property. 

11. B & C instituted the present action, asking the Court to

declare the New Street Construction Program unconstitutional and to

declare the assessment imposed by the City null and void. B & C

asserts various arguments in support of its position, which the

Court will address in turn. 

DISCUSSION

12. Taking Without Just Compensation

* B & C argues that the City, by asserting a special

assessment against its land for the purpose of the construction of

a new street, violated the Fifth Amendment of the United States

Constitution, and the Arkansas Constitution, as both constitutions

prohibit a governmental taking of private property for public use,

or for a public purpose, without just compensation. 

* According to established case law, land owners “may be

subjected to special assessments to meet the expenses of opening

public highways in front of their property . . . such assessments,

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In Norwood, the United States Supreme Court goes further to state 1

“[w]e say ‘substantial excess,’ because exact equality of taxation is not

always attainable; and for that reason the excess of cost over special

benefits, unless it be of a material character, ought not to be regarded by

a court of equity, when its aid is invoked to restrain the enforcement of a

special assessment.” Norwood v. Baker, 172 U.S. at 279. 

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according to well-established principles, resting upon the ground

that special burdens may be imposed for special or peculiar

benefits accruing from public improvements.” Norwood v. Baker, 172

U.S. 269, 278 (1898). However, “the exaction from the owner of

private property of the cost of a public improvement in substantial

excess of the special benefits accruing to him is, to the extent of

such excess, a taking, under the guise of taxation, of private

property for public use without compensation.” Id. at 279.1

(Emphasis added)

* The City insists the assessment does not amount to a

“taking” without just compensation because, in fact, the assessment

does not exceed the special benefits accruing to B & C’s property.

The City introduced evidence at trial indicating that, prior to

including the tract in the Program, the City evaluated, through

appraisal, the value of the special benefits which would accrue to

B & C’s property. 

* Specifically, in October 2000, Calvin Moye prepared an

appraisal report for the City of Fort Smith to determine the value

to be paid to B & C for the easement taken and the enhancement, if

any, in the value of the property attributable to the South 79th

Street Improvement Project. Moye noted that prior to the Project,

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the property was an interior site and that, after completion of the

project, the property would be a corner lot with a traffic light at

the intersection. Moye compared sales of interior lots versus

corner lots from 1997 to 2000 and found a “marked difference in the

per-unit value of interior lots and corner site[s].” (Def. Ex. 23

at pg. 3-7.) Moye estimated the value of B & C’s property prior to

the Project to be $3.50 a square foot and the value of the property

after completion of the Project to be $4.25 a square foot,

resulting in an enhancement of $113,499.00. (Id. at 3-8.)

* In February 2005, Moye prepared a supplemental report

expounding upon his prior appraisal. Moye summarized the

characteristics of the B & C property before and after the street

improvements as follows:

Before the Public Improvements After the Public Improvements

The subject site was an

interior lot with limited and

perhaps no public street

access at the rear

The subject site is a corner

lot with a four-[l]ane access

on one frontage and a three

lane street access on the

other frontage

The subject site had limited

and perhaps no access to

Rogers Ave ...

The subject site has access to

Rogers Avenue via a three-lane

public curbed and guttered

street

The subject site did not have

the advantage of a stop light

at Rogers Avenue, even if

access was available

The subject site has the

advantage of a stoplight at

Rogers Avenue to obtain access

to Rogers Avenue

The subject site did not have

frontage on the west side of

the tract, which was longer

than the Phoenix Street

frontage

The subject site has more than

500 feet of frontage on the

west side of the tract on a

curbed and guttered 3-lane

street

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The subject site did not have

a stoplight on the Phoenix

Avenue frontage

The subject site has a

stoplight on Phoenix Avenue

slowing traffic for the

Phoenix Avenue access and

creating access to the west

frontage along 79 Street th

The subject site had frontage

only on a limited access

street

In addition to the Phoenix

Avenue limited access, the

subject site has frontage on a

street that does not have the

limited access peculiar to

Phoenix Avenue

(Def. Ex. 30 at pg. 3.)

* Moye explained the effect of the changes to the property

as follows:

Before the public improvement, the site ha[d]

approximately 423 feet of frontage along Phoenix

Avenue[,] ... a controlled access street. After the

project was completed, the subject site has approximately

521 feet of frontage along South 79 Street. The th

project allow[ed] the subject site to have additional

vehicular access drives on 79 that were not available th

prior to the intersection improvements.

Though more difficult to quantify, a corner location with

frontage on two streets (with turn-lanes) and stop lights

on the exits to two major streets (Rogers Avenue and

Phoenix Avenue), obviously allows more flexibility when

planning a use or multiple uses for the site. This

flexibility equates to an enhancement of value.

Additionally, ... [t]he extension of 79 Street th

“brought” Rogers Avenue exposure to the site. It would

not have been financially feasible for the ownership of

the subject site to build a three-lane street to the rear

of their property to gain that access. 

(Id. at pg. 2.)

* Moye compared sales of interior lots versus corner lots

on Phoenix Avenue from 1997 to 2004, and estimated that corner lots

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sold for, on average, $1.17 more per square foot. (Def. Ex. 30 at

pg. 4.) Based on this estimation, the B & C property would have

been enhanced in value by $227,208.00 ($1.17 X 194,195 square

feet).

* At trial, Moye identified a study of sales of similar

property, including Mr. Whitt’s property, in which the “primary

corner” was divided off and sold separately for an average of $7.00

a square foot. According to Moye’s studies, B & C’s primary corner

alone had been increased in value by $192,500.00 by the street

improvement project. (Def. Ex. 37.) Moye noted that his

calculations were supported by the aforementioned lease of the

property by B & C to a developer, which lease valued the entire

tract of property, not just the primary corner, at $7.00 a square

foot. (Def. Ex. 35.) Based on the square-footage value set out in

the lease, the value of the B & C property had increased by $3.50

a square foot, or $679,683.00. 

* B & C objected that the lease was irrelevant, as it was

not a sale of the property and it was entered into “years after the

fact.” As pointed out by the City, however, the lease contains an

option to purchase and there was testimony that B & C simply

“didn’t want to sell” at the time it entered into the lease because

of “tax reasons.” (Def. Ex. 47 at pgs. 17-18.) Further, while the

lease was not executed until February 2004, proposals for the

transaction began in June 2003, shortly after the assessment of

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costs to B & C for the street improvement project. (Def. Exs. 31 -

34.) The Court therefore finds that the lease, while not

determinative of the issue, is relevant to show the square footage

value of the B & C property.

* Moye’s appraisal reports and testimony establish that the

enhancement in value of B & C’s property exceeded the assessment

imposed on B & C for the street improvement project. The Court

acknowledges that B & C offered its own appraisal report (Pl. Ex.

4) and the expert testimony of Donald Burris on the enhancement

issue. However, the Court finds Moye’s appraisal reports and

testimony on the issue to be more credible for the following

reasons:

-- Burris testified that when he was asked to prepare the

appraisal, he was “certain” that he would conclude the

property had been enhanced in value and that he was

“surprised” when the sales data he reviewed revealed no

enhancement. Burris’ appraisal, however, included sales

data only up to August 2001, and thus, was based on a

much more limited time period than Moye’s appraisal. The

final assessment of construction costs was not imposed

against B & C until March 2003, and the Court finds the

sales data used by Moye (dating from 1997 to 2004) to be

more comprehensive and relevant. 

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-- Further, the testimony established that one of the sale

values considered by Burris was based on incomplete

information.

-- Additionally, there were other sales made within the

relevant time period that Burris did not consider.

* Based on the foregoing, the Court credits Moye’s

appraisal reports and testimony and concludes that B & C’s takingwithout-just-compensation claim fails because B & C’s property was

enhanced in value beyond the $152,245.89 assessment. 

13. Assessment Based on Formula

B & C next argues that the assessment is unconstitutional

because it is based on a front footage and depth formula set out in

the municipal code and not on the enhancement in value of the

affected property. The Court sees no merit to this argument. Case

law makes clear that it is not constitutionally fatal for the

ordinances authorizing an improvement district, such as the one at

issue here, to fail to expressly limit the assessment of cost to

the extent of enhancement in value accruing to the affected

properties, as this limitation is implied by law. Stiewel v.

Fencing Board of Fencing District No. 6, 70 S.W. 308, 312 (Ark.

1902). 

14. Arbitrary Enforcement of Ordinance

* In its post-trial brief, B & C asserts that “this is the

only instance in which the New Street Construction Participation

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Program has been applied by the City of Fort Smith to its logical

fruition - the collection of money or the filing of assessments.”

(Doc. 16 at pg. 10.) B & C argues that this demonstrates

“arbitrariness in enforcement of the Ordinance.” (Id. at pg. 11.)

* As the City points out, B & C did not plead this legal

theory in its complaint, and thus, it need not be considered by the

Court. See Bediako v. Stein Mart, Inc., 354 F.3d 835, 841 (8 Cir. th

2004). Nevertheless, the Court notes that B & C’s argument in this

regard is without merit, as the City presented testimony indicating

that there were several bases for the application of the Program to

the subject project which did not exist with regard to past

projects.

15. Enforcement of Assessment

* Relying on the principles set forth in Dolan v. City of

Tigard, 512 U.S. 374 (1994) and Nollan v. California Coastal

Comm’n, 483 U.S. 825 (1987), B & C next argues that the “City’s

requirement for payment of an assessment as a condition for future

development constitutes an unconstitutional condition.” (Doc. 16

at pg. 14.) The court first points out that B & C has not been

prohibited from developing the property. As stated above, B & C

was allowed to post a bond to secure payment of the assessment and

the lessee of B & C’s property has begun development of the

property. In any event, the principles set out in Nollan and Dolan

have no application to the facts in the present action.

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* In Nollan, California authorities conditioned the grant

of a building permit on the plaintiff’s acquiescence in the

creation of a public easement across its private beach. The

Supreme Court concluded that the imposition by the government of a

public easement on plaintiff’s property as a condition to the

granting of a building permit constituted a taking which

necessitated the payment of just compensation.

* Similarly, in Dolan, the Supreme Court found

unconstitutional a municipal building permit that conditioned

development of the property on the landowner’s dedication of

easements to the city for a bike path and greenway on a portion of

the property. The Court concluded that this would constitute a

taking requiring compensation.

* These principles have no application to the assessment at

issue here. As discussed above, the Supreme Court has specifically

held that an assessment on private property owners for the costs of

a public improvement does not constitute a taking without just

compensation where, as here, the assessment does not exceed the

special benefits accruing to the private property. See Norwood,

172 U.S. at 278-79. The Court therefore sees no merit to B & C’s

argument regarding the enforcement of the assessment.

16. Compliance with State Public Improvement Statutes

Finally, in a single paragraph in its post-trial brief, B & C

argues that the assessment did not comply with Arkansas statutes

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governing public improvements. (Doc. 16 at pg. 9.) This is yet

another legal theory not pled by B & C in its complaint. The

Court, therefore, need not address it, and, in any event, having

found B & C’s federal claims to be without merit, the Court

declines to exercise supplemental jurisdiction over this state-law

issue. See 28 U.S.C. § 1367(c).

CONCLUSION

17. Based on the foregoing, the Court finds no basis for

declaring the New Street Construction Program, or the assessment

imposed against B & C thereunder, unconstitutional. B & C’s

complaint is therefore subject to DISMISSAL, WITH PREJUDICE, in its

entirety. 

IT IS SO ORDERED this 25 day of January 2007. th

/S/JIMM LARRY HENDREN 

JIMM LARRY HENDREN

UNITED STATES DISTRICT JUDGE

 

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