Uneconomic Remnant: One Circuit Court Judge’s View

As an eminent domain practitioner, the Wisconsin Supreme Court’s decision in Waller v. American Transmission Company last year left me…unsatisfied. Instead of acknowledging the statutory morass created by the legislature (incidentally, a morass acknowledged by both condemnors’ and landowners’ counsel), the majority decision ignores the procedural problems with the statutes and does nothing to make things easier for either landowners or condemnors. In my opinion, the problems with the decision relate more to the procedural aspects of asserting an uneconomic remnant claim rather than the determination of whether an uneconomic remnant remains after a partial taking. This post will discuss the latter issue, that is, the definition of an uneconomic remnant and a circuit court’s determination of whether one existed after a partial taking.

The Sawyer County Airport is installing an instrument landing system approach to one of its runways. This is a precision approach that gives pilots both course and glide path information. It allows pilots to fly to lower weather minimums. In order to comply with FAA obstruction clearance requirements, the airport had to acquire some land in fee, and acquire avigation easements over several properties in the immediate vicinity of the airport.

The Duffys owned a 10-acre residential parcel immediately adjacent to the airport. The property was heavily wooded, and it contained a house and other outbuildings. The airport acquired 5 acres in fee, and the avigation easement covered about 2.7 acres of the remaining land. All of the trees in the 5-acre fee-taking area were removed, as were almost all of the trees beneath the avigation easement. The project also requires the installation of MALSR lights, an approach lighting system involving both steady burning and sequencing approach lights. The lights only operate when activated by a pilot who intends to fly an approach to the runway. Due to the removal of trees on the Duffys’ property, the MALSR lights, when installed, will be clearly visible from their residence. The approach end of the runway will also be visible, whereas this could not be seen in the before-condition.

Sawyer County’s appraiser found the before-value of the property to be $190,000 and the after-value $100,000. The appraiser found the value of the fee-taking was $20,000. He reduced the value of the remaining acreage 30 percent due to the loss of trees, and another 10 percent due to the visibility of the MALSR lights. The County’s appraiser found the highest and best use of the property to be residential in both the before- and after-conditions.

The landowners’ appraiser, on the other hand, found the highest and best use of the property had changed from residential in the before-condition to limited industrial/commercial use in the after-condition. He opined the property was not suitable for residential use in the after-condition due to the restrictions in the avigation easement and the visibility of the airport and approach lights.

Because this is a project funded in large part by the Federal Aviation Administration, federal law applies as well as state law. In Wisconsin, an uneconomic remnant “means the property remaining after a partial taking of property, if the property remaining is of such size, shape or condition as to be of little value or of substantially impaired economic viability.” See §32.05(3m) and §32.06(3m). On the other hand, federal law defines an uneconomic remnant as one “[that] has little or no value or utility to the owner.” 42 USC § 4651(9).

There is a lot of gray area in these definitions. The court in Waller said a couple things that are helpful in interpreting the Wisconsin statute. First, in talking about the relative before and after property values, it said: “The existence of an uneconomic remnant will not always turn on the percentage of land or the percentage of value taken by the condemnor. The existence of an uneconomic remnant almost always turns on the economic viability of what is left after the taking.” See fn. 25. The court also said:

In conjunction, the two appraisals reveal a picture of a property so dramatically affected by the easements that it has limited residential and industrial use after the taking. In addition, a reduced sound barrier between the residence and Interstate 43 and perceived electromagnetic disturbances that would likely rattle any potential buyer, further diminish the attractiveness and usability of the property. In other words, the size, shape, and condition of the Waller property is of substantially impaired economic viability as either a residential or a light industrial parcel, and it is therefore an uneconomic remnant.

2013 WI 77, ¶100.

But a few questions remain. For example, how little does the value have to be to be of “little value?” Similarly, how much economic viability impairment is “substantial?” What about a property that is impacted less by a taking than the Waller property?

Following the evidentiary hearing, and after closing arguments, the Court issued a verbal decision. This is a summary (paraphrased) of the judge’s comments:

The issue is whether there is any practical value remaining to the property…substantial economic value. There is still a market for the property. The parcel is 5 acres and complies with the minimum requirements of the applicable zoning district. I believe the property retains its residential highest and best use in the after condition. It is clear that the Duffys think there is substantial impairment to the property, but I am quite confident there are others who would want the property. Its close proximity to the airport makes it valuable. In fact, it could be purchased by an aviation aficionado who would want to remove the remaining trees to get a better view of the runway and all of the activities at the airport.

The judge’s decision is remarkable at least for a couple of reasons. First, there was a significant question about whether an objective standard or subjective standard applies to the determination of an uneconomic remnant. In other words, should a factfinder give weight to the landowners’ subjective feelings about the impairment of their property, or should it make an objective, market-based determination of the economic viability of the remaining property? The county argued, and the Court obviously agreed, that an objective standard applies.

Also, the Court clearly thought significant the fact that the property can readily be marketed and sold in the after-condition, even if the selling price is much less than in the before-condition.

While this finding may be appealed, it appears unlikely. It will be interesting to see how other courts interpret the perhaps necessarily imprecise definition of “uneconomic remnant” in Chapter 32.