Assigned to GOV                                                                                                 FOR CAUCUS & FLOOR ACTION

ARIZONA STATE SENATE

Forty-seventh Legislature, Second Regular Session

AMENDED

FACT SHEET FOR H.B. 2736

eminent domain; appraisal; taxes

Purpose

            Expands the courts ability to award fees and other expenses and the property owner’s ability to receive appraisals at the government’s cost in condemnation actions and prohibits a governmental entity from selling or leasing property taken through eminent domain for ten years. 

Background

            Eminent domain is the power of the government to acquire private property for a public purpose.  Both the Arizona Constitution and the United States Constitution guarantee the payment of “just compensation” to the property owner for any private property taken by the government (Article 2, Section 17, Constitution of Arizona; Article V, United States Constitution). 

            The acquisition of private property generally occurs by way of a lawsuit in which the government agency asks the court to award the government immediate possession of the property and to determine the amount of compensation to be paid to the owner for the property.  On completion or settlement of the trial and payment of compensation, the government agency acquires title to the property.

            In Arizona, the power of eminent domain is authorized by the Constitution or state statute for many different public bodies, including state government, city, town and county governments, school districts and certain utilities and special taxing districts.

            In 2005, the U.S. Supreme Court ruled 5-4 that private property may be condemned to make way for private development.  The majority opinion for Kelo v. City of New London held that private economic development aimed at generating tax revenues is a “public use” under the Takings Clause of the Fifth Amendment.  The Court stated that the decision did not preclude states from placing further restrictions on the power of the government to take private property.

            There may be a fiscal impact to the Arizona Department of Transportation and the other condemning authorities associated with this legislation as a result of a greater award of fees, expenses and appraisal costs to be paid by government entities to property owners in actions for condemnation.

Provisions

Just Compensation

1. Requires the compensation for property taken by eminent domain to include a refund of any property taxes paid by the property owner during the condemnation process, if the property is nonrevenue producing.

2. Requires the court to award fees and other expenses to the property owner if the owner’s appraisal exceeds the governmental entity’s appraisal by ten percent.

3. Removes the exemption for real property acquired for public safety, transportation, flood control or utility purposes from statutes relating to the ability to obtain a second appraisal paid for by the government, and the court’s ability to award fees and other expenses to the property owner in condemnation actions.

4. Prohibits the governmental entity from charging any fees related to the owner’s relocation costs, including permit fees, if the property acquired includes a business and the owner relocates the business within one year after condemnation. 

5. Allows the bond or money deposited by the government for use by the property during the condemnation process to include any property taxes paid during the process.

6. Requires the court to make the final order of condemnation within 180 days after the commencement of the condemnation action.

Appraisal

7. Expands the pool of property owners who are entitled to a second appraisal in a proposed condemnation action from the owner-occupant of a residential property to any property owner.

8. Requires the governmental entity’s appraisals to include the property’s good will value.

9. Requires the appraisal to be obtained from a state licensed or state certified appraiser and removes the requirement that the appraiser be on an approved list maintained by the governmental entity.

Miscellaneous

10. Prohibits a governmental entity from selling, leasing or transferring real property acquired through eminent domain for ten years following acquisition.

11. Makes technical and conforming changes.

12. Becomes effective on the general effective date. 

Amendments Adopted by Committee

· Removes the limitation on the property owner receiving a second appraisal and clarifies that any government must waive future fees relating to the relocation of the business if the business is taken through eminent domain.

House Action Senate Action

FMPR             2/13/06     DP     5-0-1-0                     GOV               3/30/06     DPA     4-0-2

3^rd Read           3/15/06              31-23-5-0-1

Prepared by Senate Research

March 31, 2006

NS/ac