Development group nixes eminent domain from action plan

A Fort Smith group preparing to take advantage of a federal development tax credit program has decided to remove the use of eminent domain in development projects.

The Fort Smith Housing Authority is preparing to establish itself as a Community Development Entity (CDE) to bring the development potential of New Markets Tax Credits to the region. New Markets Tax Credits were created by Congress in December 2000 for the purpose of funding commercial, retail and residential projects in low-income regions. (Link here for a more detailed explanation of the program.)

Fort Smith Mayor Ray Baker and City Director Bill Maddox raised objections during a June 1 city board meeting about the use of eminent domain by the proposed CDE. Maddox gained an agreement from Ken Pyle, director of the Fort Smith Housing Authority, that the CDE would follow the city’s ordinance on eminent domain.

The city ordinance, approved July 17, 2007, said eminent domain will not be used to take private property not in a “nuisance or blighted condition” and give the property to another private entity.

The board then voted 6-1 to approve a resolution in support of the Housing Authority becoming the New Markets Tax Credit redevelopment agency for Fort Smith. City Director Andre Good was the only dissenting vote.

On Friday (June 4), Pyle sent a note to the city board and staff saying the CDE would abandon the use of eminent domain. Instead, if eminent domain is necessary, the CDE would bring the issue to the city board for a decision.

“After the meeting I shared your concerns with our consultants and development team. The consensus is that there is no need for the use of eminent domain by the Redevelopment Agency for the New Markets Tax Credit program to be successful,” Pyle noted in the statement. “We will be writing the Redevelopment Plan to explicitly remove the use of eminent domain by the Redevelopment Agency when executing a project.”

Continuing, Pyle wrote: “Should eminent domain be required in order to move forward with a worthy project, we would bring our request to you, the City Board of Directors, and ask that you take the actions necessary to obtain the property in question via eminent domain. The decision would be entirely in your hands.”

Pyle listed several reasons why the CDE decided to remove eminent domain from its action plan. Those reasons include:
• The need for eminent domain in any given project should seldom arise, but eminent domain is one of the ways to encourage cooperation in the negotiations. Whether the power is with the city or the CDE will make no difference;

• The effort should be a positive force for economic development and redevelopment of the eligible areas of the city. The CDE must have the full support of the citizens and board of directors to be credible when applying for the New Markets Tax Credits; and,

• Most other CDEs across the country, including Arkansas Capital Corporation and US Bank do not have eminent domain and are very effective at deploying their New Markets Tax Credits.