Ohio Public Law Update

    View Author May 2007
    They are all too common in most Midwestern cities and towns – sites that were once productive that now sit vacant or underused, often due to historic environmental contamination. These "brownfields" have long been a serious impediment to municipal growth, deterring investment and encouraging urban sprawl. But that is the past. Spurred on by numerous grant and low-cost loan opportunities, municipalities of all sizes have begun to aggressively market and redevelop brownfields, often through partnerships that successfully leverage private investment and create new jobs.

    Nowhere are the municipal funding alternatives for brownfields redevelopment more promising than in Ohio. This is largely because, in November 2000, Ohio voters passed one of the nation's most aggressive environmental funding measures – the Clean Ohio Fund. This law created a $400 million bond pool to fund grant programs aimed at preserving natural areas and farmland, protecting streams, creating outdoor recreational opportunities, and revitalizing urban areas by returning contaminated properties to productive use. Almost $200 million in grant money was set aside specifically to enable four rounds of municipal-led brownfields redevelopment. The results from the first three rounds of funding are striking: municipalities statewide have refurbished more than 100 brownfields.

    With the application deadline for the final, fourth round of funding now past, many thought that the Ohio brownfields renaissance was over. But, recognizing the value of this program, one of Governor Taft's final acts before leaving office was to sign a bill, approved by lawmakers in late December 2006, that enables the Clean Ohio Fund's redevelopment program to continue. That legislation – House Bill 699 – removed the legislative caps that would have spelled an end to the program after the current round of funding. Specifically, it amended language that had capped the total debt the Clean Ohio Fund could incur at $200 million to provide that the outstanding Clean Ohio Fund debt cannot exceed $200 million. Thus, as the fund's debt is paid off, additional rounds of grant appropriations can be made.

    Of course, the Clean Ohio Fund is just one of many funding sources available to aid municipal redevelopment. In addition to traditional tax increment financing alternatives, several federal agencies including the U.S. Environmental Protection Agency, U.S. Department of Housing and Urban Development and U.S. Department of Transportation all offer grants and low-cost loans to support brownfields redevelopment. Similarly, other state-level programs – like the Job Ready Sites Program – exist. Importantly, environmental laws also increasingly are reflecting the importance of brownfield redevelopment, through recent changes meant to protect against redeveloper liability and enhance the ability of those incurring clean-up costs to recover from those responsible for the contamination. Squire Sanders' public finance and environmental lawyers have substantial experience in all facets of municipal property redevelopment, and have particular expertise in developing creative ways to fund and recover the costs of brownfield efforts.

    Recent Legislation of Interest

    House Bill 5 and Senate Bill 7 have been introduced in the General Assembly to amend eminent domain laws in Ohio. House Bill 5 provides that there be a single statewide definition of blight in the Revised Code for all purposes, which would include a requirement that at least a majority of parcels in the designated area qualify as blighted. To determine whether a property or area is blighted, no person can take into account whether there is a better use for the property or area or whether the property could generate more tax revenues. The Bill also provides that no property taken by eminent domain may be used for any private commercial enterprise, economic development or any other private use unless (1) used by a public utility or common carrier, (2) the private entity use is an incidental area within a publicly owned and occupied project or (3) it is established by a preponderance of the evidence that the specific property is blighted. A public entity may appropriate property for a private use based on a finding that the area is blighted if the public entity adopts a comprehensive development plan describing the public need for the property, which plan must include two studies documenting the public need, and the development of the plan must be publicly funded.

    In addition, the Bill:
    • requires a process for public input and requires submission of an appraisal before exercising eminent domain for all purposes.
    • permits the property owner to repurchase the property if the eminent domain project is abandoned before transfer of title from the governmental entity.
    • permits an appeal to be taken by the property owner before the property may be taken by the public entity.
    • requires that businesses be compensated for lost business and loss of goodwill of up to $5,000.
    • requires that property owners be compensated for actual moving and relocation expenses.
    • requires that property owners be awarded attorneys' fees and costs (including appraisal fees) if the final compensation awarded is greater than 125 percent of the government's original offer, except in quick take cases.
    • changes the burden of proof to put more of a burden on the public entity.

    Although Senate Bill 7 is similar to House Bill 5, among other differences it contains a much stricter definition of blighted property and blighted area. An area qualifies as a blighted area only if 90 percent of the properties in the designated area are blighted properties. The Bill also prohibits a port authority or park board or park or conservancy district from appropriating property unless approved by the legislative authority of the public entity that established the port authority, or for a park board or park or conservancy district, the legislative authority of the public entity in which the property is located.

    In addition, SJR1 is a proposed State constitutional amendment that would restrict the power of a public body to take property by eminent domain, including a prohibition against using anticipated increases in public revenues from a redeveloped property as evidence that the property is blighted. In addition, this proposed constitutional amendment would limit municipal corporations' authority to take private property by eminent domain to the same authority as that of the State, exercised in conformity with laws passed by the General Assembly.

    Recent Decisions of Interest

    In the absence of a statutory provision to the contrary, a contract entered into in violation of R.C. Sections 308.04 and 2921.42 is not void. Morrow Cty. Airport Auth. v. Whetstone Flyers, Ltd., 112 Ohio St.3d 419.

    A board of county commissioners may propose to the electors of the county a sales tax levy under R.C. 5739.026(A)(4) limited to permanent improvements for school districts only, but may not, in the resolution creating the community improvements board to administer the funds generated by the sales tax, restrict the authority of the community improvements board by defining what shall be considered a school district, how much shall go to each district, or what shall be considered a permanent improvement that must be approved if within the monetary limits established. 2007 Op. Att'y General 2007-02. Note of interest: Voters in Medina County approved such a sales tax levy at the May 2007 election; Squire Sanders assisted Medina County in that process.