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Steve Lapper

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Eminent Domain -Private-to-Muni??
« on: December 17, 2020, 11:55:11 AM »
Over the years, NGCOA has written many articles and Accelerate posts on the subject of Eminent Domain and how all businesses are vulnerable to its abuse by government officials. Generally, private property is acquired through eminent domain for the betterment of its citizens.
There is now a case taking place in Harrison, New York, that, if approved, would set a precedent that should concern every business owner, especially golf courses. In this case, a private, not-for-profit member-owned golf club is unique from other types of small businesses. Its members cover the costs of operations, and if membership declines, the costs of operations are shared by the remaining members.  Sometimes, a private golf club is coveted by the local government.  What is being considered in Harrison, NY, could have far-reaching consequences to our industry.
The town of Harrison is preparing to start an eminent domain proceeding to acquire Willow Ridge Country Club. Willow Ridge is a private, not-for-profit member-owned club that has lost members over the last few years and seen costs to members increase as a result.  It has sought potential partners to work with the club to allow it to continue at reasonable costs to its members.  Harrison is trying to take the club at this time, claiming, improperly, that it is preventing residential development by so doing and helping the club. Since the property is zoned for one-acre lot residential development, the club could be so developed, but its members desire to keep it as a private country club.
The city became aware of the club members' plans and has created a public relations campaign designed to convince the public that Harrison should acquire the club and convert it to a public golf course. Instead of offering a competitive bid to the owners, city leaders knew they have the capability to take this property through eminent domain. Once this became public knowledge, other proposals the club had received were pulled off the table. This now leaves the club with little options but to ensure they receive fair market value for their facility. In New York, they appraise property based on the highest and best use. That could cost Harrison taxpayers tens of millions of dollars and raise their taxes.
Hopefully, the members will be able to recover the investment. While the community will have a very nice municipal golf operation, the golf industry can only hope this is not a practice others will follow! They have their first public hearing on this matter later this week and we remain hopeful the members of the Willow Ridge CC will succeed in their efforts to cease this action but if not they will be properly compensated for their business and property.
We would like to thank the members of the Willow Ridge Country Club for sharing their story with us.

Received this in my inbox this am. I'd long known about the plight of Willow Ridge, and even spent some time modeling a potential involvement. This is a unique situation in a golf-rich, wealthy neighborhood.


 Multiple parties were interested but as the letter states, were ultimately scared away from a messy and eventually ugly fight with the local Harrison, NY government. Two neighboring private courses (Westchester CC & Apawamis) both were interested in parts of WR, but neither wanted to absorb even a single WR member, diminishing the notion of any merger or takeover.


  Harrison is one of the county's wealthiest neighborhoods. The "dirt" there is quite valuable. Westchester has a dearth of public golf, especially when measured against the number of high-quality private club golf immediately nearby (Fenway, Quaker Ridge, Winged Foot, Wykagyl, Metropolis, etc....) Some county courses exist and are always crowded, but the level of quality isn't comparable.


  While my inclination to oppose any governmental seizure remains very strong, should this kind of eminent domain deserve an endorsement of any measure? Should it be strenuously opposed? Willow Ridge has a number of fervent golfing members, but it was always a course vulnerable to this kind of demise.


 Thoughts from the Treehouse?



 
« Last Edit: December 17, 2020, 01:18:33 PM by Steve Lapper »
The conventional view serves to protect us from the painful job of thinking."--John Kenneth Galbraith

Matt_Cohn

  • Karma: +0/-0
Re: Eminent Domain -Private-to-Muni??
« Reply #1 on: December 17, 2020, 12:14:03 PM »
Can’t see article

Jim_Kennedy

  • Karma: +0/-0
Re: Eminent Domain -Private-to-Muni??
« Reply #2 on: December 17, 2020, 01:42:49 PM »
Just saw a 20 acre lot in Harrison for sale at 20 million, Willow Ridge is 120 +- acres. If the town has to fork over a fair price then it would seem that every member would be doing good at the end of that deal, save for the loss of their club.
"I never beat a well man in my life" - Harry Vardon

Steve Lapper

  • Karma: +0/-0
Re: Eminent Domain -Private-to-Muni??
« Reply #3 on: December 17, 2020, 01:48:57 PM »
It wouldn't work that way, as the club is structured as a non-for-profit...so Uncle Sam and Uncle Mario would be the largest beneficiaries.
« Last Edit: December 17, 2020, 02:04:44 PM by Steve Lapper »
The conventional view serves to protect us from the painful job of thinking."--John Kenneth Galbraith

Jim_Kennedy

  • Karma: +0/-0
Re: Eminent Domain -Private-to-Muni??
« Reply #4 on: December 17, 2020, 01:53:17 PM »
Oops.  ;D
"I never beat a well man in my life" - Harry Vardon

Tom Dunne

  • Karma: +0/-0
Re: Eminent Domain -Private-to-Muni??
« Reply #5 on: December 17, 2020, 03:45:08 PM »
nm
« Last Edit: December 17, 2020, 10:01:10 PM by Tom Dunne »

corey miller

  • Karma: +0/-0
Re: Eminent Domain -Private-to-Muni??
« Reply #6 on: December 17, 2020, 03:54:25 PM »



Isn't a Supreme Court decision the law of the land? it would seem that it therefore becomes incumbent for government leaders to do what is proper for the people they govern.  They should be aggressively using their power to get what is right and let the courts sort it out.  Every local jurisdiction in Westchester County is doing a disservice to it's overtaxed citizens if they do not attempt the same thing.   


Thank goodness for those five Supreme Court justices (including RBG) who followed the law.




Steve Lapper

  • Karma: +0/-0
Re: Eminent Domain -Private-to-Muni??
« Reply #7 on: December 17, 2020, 05:04:26 PM »
Tom & Corey,


   I was hoping this would catch your attention !


   Playing Devils Advocate, would it not be a reasonable use to turn it into a public, township-owned facility?


   It was obvious from my initial (cursory) analysis that at least a public-private operation was the optimum solution for their problem. No private operator found it very feasible to maintain as a solely private club. It has a decent amount of outstanding debt (member and institutional) to service and little hope of attracting a new, sustainable level of private membership. As a public course, it could become a successful & sustainable resource for the area.


    Like the both of you, I loath the idea of seizure, even if the Kelo precedent permits that. As you know it was the whiff of such that led us to keep Paramount CC fully-private and we were fortunate to have the financial wherewithal to put capital in. I think the worst outcome, for all, would be a development of highly-priced single-family residences. And this is from a guy who has built a business doing just that when it makes sense.


   It's a very interesting situation that could well set a legal and ongoing precedent for NFP-chartered private clubs. While good for the game and the public-facility starved community, such a precedent wouldn't bode well for those equity clubs structured that way. Maybe the residual membership could strike a deal with an golf-course operator to take it over and run it, conceding preferred privileges to current members? Let's not forget that pre-Covid 19, a great deal of struggling clubs were quite close to shuttering. I remain fascinated by this case.


 
The conventional view serves to protect us from the painful job of thinking."--John Kenneth Galbraith

B.Ross

  • Karma: +0/-0
Re: Eminent Domain -Private-to-Muni??
« Reply #8 on: December 17, 2020, 05:21:49 PM »
"[size=0px]Two neighboring private courses (Westchester CC & Apawamis) both were interested in parts of WR, but neither wanted to absorb even a single WR member, diminishing the notion of any merger or takeover."[/size][/color]
[/size][/color]
[/size][size=0px]Hmmmm, wonder why this is... No doubt Westchester & Apawamis are held in higher esteem than Willow Ridge, but that's not the only other major difference between the clubs...[/size][size=0px]

corey miller

  • Karma: +0/-0
Re: Eminent Domain -Private-to-Muni??
« Reply #9 on: December 17, 2020, 07:16:24 PM »



Steve


Where did I say I loathe the idea of seizure? We have a Supreme Court decision that allows it and I think all towns, counties are doing a disservice to their constituents if they do not engage in such.  Ideally, the town of Ossining should seize Trump Westchester, by golly they have already attempted to change a law to tax the property out of business.


As for Harrison, is that one of those towns in Westchester like Chappaqua that have been sued because of discriminatory behavior in keeping out minority people?  Perhaps take over the acreage and build high density housing and keep half the course pristine.  A nine hole course could be a great amenity for the town and also serve an excellent public policy cause.


What is the situation with Ridgeway and the city of White Plains?  A few years ago they were blocking the French American school plan that would have left much of the course green.  Or do they prefer not using eminent domain and just make all development difficult if not impossible.


As for Paramount..... Seems to me a success for all but I suspect the management teams was a lot sharper than the typical club committee..:)


Lou_Duran

  • Karma: +0/-0
Re: Eminent Domain -Private-to-Muni??
« Reply #10 on: December 17, 2020, 08:33:49 PM »
I am confused.  It seems that the town/city is going forward with eminent domain to prevent the members from re-purposing the course for single family development.  I am assuming that the zoning which permits homes on lots of one acre (or more?) was granted by the same authority many years ago.


If residential is already entitled and there is demand for home lots, wouldn't that set the value for purposes of determining equitable compensation?  Say that there is enough land for 75 lots after taking out wetlands and putting in streets.  Is $75 Million gross a reasonable number?


The Deepdale case as I recall dealt with the use of the land for higher uses yielding much greater tax revenues to the city.  I don't know that Kelo allows a government to essentially downzone to a use that generates no tax revenues other than on sales.


That the town went on a public campaign which scared away potential suitors, surely the club has some lawyers as members who could economically paper the courts on the grounds of tortious interference.  Sounds like the town might be playing hard ball to drive the price down.


Or maybe it is a defensive strategy appealing to the town's NIMBYs who are active in local government.  As Corey's sardonic (or is it sarcastic) comments suggest, maybe some housing policy from the upcoming Obama third term is in the works- 9 holes of greenbelt surrounding 300+ Section 8 units- makes it uncomfortable for the longtime residents.


BTW, the members may not be able to prevent the town from seizing their property, but I am relatively sure that they can appeal the price to the district court.  This happened when the Texas Rangers with the help of the city of Arlington assembled the land for the original baseball stadium during a horrible real estate market.  Several of the owners sued on the grounds that they were holding their land for future development in better markets and the forced sale grossly undervalued their property.  It has been many years ago, but I think that they were awarded many times the value paid originally by the team and the city.  By then, the ballpark had been a resounding success so there was not a lot of controversy, just a blip in the paper.   



 
« Last Edit: December 17, 2020, 08:36:53 PM by Lou_Duran »

Neil Regan

  • Karma: +0/-0
Re: Eminent Domain -Private-to-Muni??
« Reply #11 on: December 17, 2020, 08:40:48 PM »

Here is a link to a thorough review of a recent book analyzing Kelo.


https://www.city-journal.org/html/seized-9884.html


The history of the use and abuse of eminent domain is long and complicated.
The Kelo decision resulted in a much greater awareness of the potential of eminent domain.
Most likely the average citizen is appalled by Kelo specifically and by countless other examples.
But it also seems obvious that those who would abuse this power have recognized how easily they can do so.




In her dissent Sandra Day O’Connor said that
because it was always possible to claim that redevelopment would increase tax revenues,
under Kelo
 “Nothing is to prevent the State from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory.”
She could have added  “your golf course with my golf course.”


She was correct, but not fully on point.
In fact the ruling lets any government take anything they want from anybody for any reason as long as they say “public benefit“.
They can literally take your clothes and justify it by saying they can make more money by selling your clothes than you were making by wearing your clothes.
The only thing that keeps that sort of thing from happening is decent restraint, not law.
And I hope by now nobody expects our ruling class to exercise decent restraint anymore.


This is not a slippery slope.
This is the bottom.
You own nothing.

Grass speed  <>  Green Speed

Neil Regan

  • Karma: +0/-0
Re: Eminent Domain -Private-to-Muni??
« Reply #12 on: December 17, 2020, 08:44:38 PM »

Addendum


As noted in the review cited above,


“so many of these projects fail to generate the tax and other benefits proponents forecast.
That includes the Fort Trumbull project, where Pfizer eventually pulled out;
 the bulldozed 90 acres now sit denuded of houses and are overrun by feral cats.”
 
—-
Willow Ridge could soon be Wildcat Run.
Grass speed  <>  Green Speed

Tom Dunne

  • Karma: +0/-0
Re: Eminent Domain -Private-to-Muni??
« Reply #13 on: December 17, 2020, 09:46:23 PM »
nm
« Last Edit: December 17, 2020, 10:01:39 PM by Tom Dunne »

archie_struthers

  • Karma: +0/-0
Re: Eminent Domain -Private-to-Muni??
« Reply #14 on: December 18, 2020, 12:35:41 AM »
 ::)


Neil thanks for the inset, quite educational. Scares the hell out of anyone who doesn't  trust the behemoth.

Steve Lapper

  • Karma: +0/-0
Re: Eminent Domain -Private-to-Muni??
« Reply #15 on: December 18, 2020, 06:16:49 AM »
Neil is 100% correct in his assessment of the implications of the Kelo precedent (it does pain me to write that ;D ).


That still doesn't answer my question(s). Is it a net benefit to turn this private club into a public one? If the tax burden of selling (or being paid) for development is so severe, why not convert it into a privately-owned public facility? Does the town owe anything to it's constituents to act in some legal fashion to prevent more development? If the club ran itself into the ground, and the private sector doesn't see a feasible solution for it, should not the town step in?


I don't know the answers for any of these questions, but seek the treehouse's opinions.
The conventional view serves to protect us from the painful job of thinking."--John Kenneth Galbraith

Mike Feeney

  • Karma: +0/-0
Re: Eminent Domain -Private-to-Muni??
« Reply #16 on: December 18, 2020, 07:43:15 AM »
A neighborhood committee, Keep Metacomet Green, has been lobbying, admirably, to make an eminent domain play as well. Alas, Metacomet is now owned by developers, not members.
The City of East Providence is a fiscal mess (as is, the State of Rhode Island).  Funding the cost of "just compensation" (north of $8m) and the ensuing legal battle is beyond out-of-reach. 

Divine intervention needed...but this seems like the weakest Hail Mary pass ever thrown. Oh, how I wish it wasn't so.

https://www.ecori.org/smart-growth/2020/11/13/eminent-domain
 

Mike_Trenham

  • Karma: +0/-0
Re: Eminent Domain -Private-to-Muni??
« Reply #17 on: December 18, 2020, 07:51:09 AM »
I am always curious as to how the financials would work out on a not-for-profit club with declining membership sitting on very valuable land selling out.


Say -


Property Sales Price 75,000,000
Transfer tax 1% -750,000
Realtor 6%  -4,500,000
Existing Debts -10,000,000
Proceeds before other costs = 59,750,000


In Pennsylvania there is a gross up of back property taxes if you have paid taxes as farm land or open space vs developable property.  It was explained to me it’s 10 years back taxes at the higher rate.


How are the member owners taxed on the distribution of proceeds, is it ordinary income or a dividend/capital gain?
Proud member of a Doak 3.

Tim Martin

  • Karma: +0/-0
Re: Eminent Domain -Private-to-Muni??
« Reply #18 on: December 18, 2020, 08:32:38 AM »
A neighborhood committee, Keep Metacomet Green, has been lobbying, admirably, to make an eminent domain play as well. Alas, Metacomet is now owned by developers, not members.
The City of East Providence is a fiscal mess (as is, the State of Rhode Island).  Funding the cost of "just compensation" (north of $8m) and the ensuing legal battle is beyond out-of-reach. 

Divine intervention needed...but this seems like the weakest Hail Mary pass ever thrown. Oh, how I wish it wasn't so.

https://www.ecori.org/smart-growth/2020/11/13/eminent-domain


Brad Faxon-Go to your room!

Steve Lapper

  • Karma: +0/-0
Re: Eminent Domain -Private-to-Muni??
« Reply #19 on: December 18, 2020, 10:05:53 AM »
I am always curious as to how the financials would work out on a not-for-profit club with declining membership sitting on very valuable land selling out.


Say -


Property Sales Price 75,000,000
Transfer tax 1% -750,000
Realtor 6%  -4,500,000
Existing Debts -10,000,000
Proceeds before other costs = 59,750,000


In Pennsylvania there is a gross up of back property taxes if you have paid taxes as farm land or open space vs developable property.  It was explained to me it’s 10 years back taxes at the higher rate.


How are the member owners taxed on the distribution of proceeds, is it ordinary income or a dividend/capital gain?


I'm told, but am NOT a CPA or CFA, that it is ordinary income. I would've thought it would be a capital gain, but because they are an NFP, it fails a test for capitalization?
The conventional view serves to protect us from the painful job of thinking."--John Kenneth Galbraith

corey miller

  • Karma: +0/-0
Re: Eminent Domain -Private-to-Muni??
« Reply #20 on: December 18, 2020, 10:20:37 AM »



Any other Tax Implications anyone is aware of?


Seems that taxing as ordinary income would not be prohibitive in that we all know their should never be a lower capital gains rate anyway.

Lou_Duran

  • Karma: +0/-0
Re: Eminent Domain -Private-to-Muni??
« Reply #21 on: December 18, 2020, 02:18:16 PM »



Any other Tax Implications anyone is aware of?


Seems that taxing as ordinary income would not be prohibitive in that we all know their should never be a lower capital gains rate anyway.


Of course comrade.  And there shouldn't be any billionaires either.  Might be some 1031 play here, but what's to say that 100 years of tax code is still safe?  Something to do with the needs of the many.

John McCarthy

  • Karma: +0/-0
Re: Eminent Domain -Private-to-Muni??
« Reply #22 on: December 18, 2020, 02:54:38 PM »
I am always curious as to how the financials would work out on a not-for-profit club with declining membership sitting on very valuable land selling out.


Say -


Property Sales Price 75,000,000
Transfer tax 1% -750,000
Realtor 6%  -4,500,000
Existing Debts -10,000,000
Proceeds before other costs = 59,750,000


In Pennsylvania there is a gross up of back property taxes if you have paid taxes as farm land or open space vs developable property.  It was explained to me it’s 10 years back taxes at the higher rate.


How are the member owners taxed on the distribution of proceeds, is it ordinary income or a dividend/capital gain?


I'm told, but am NOT a CPA or CFA, that it is ordinary income. I would've thought it would be a capital gain, but because they are an NFP, it fails a test for capitalization?


I'm not a tax guy but my argument is that this is a taking and that no taxes should be paid.  Eminent Domaine arising out of the inherent right of the state/crown etc to take your stuff but they have to pay you for your loss.  Well the club here is being taken and they no longer have the club and money is compensation.  If someone totals your car and gives you it's fair market value you are not taxed on those proceeds.  Same as a personal injury claim.  It would not be gain as nothing is gained. 


Back in the 1980s Elmhurst Country Club was taken by DuPage County as a flood control measure.  It was remodeled within the past few years and now operates as The Preserve at Oak Meadows.
The only way of really finding out a man's true character is to play golf with him. In no other walk of life does the cloven hoof so quickly display itself.
 PG Wodehouse

Bernie Bell

  • Karma: +0/-0
Re: Eminent Domain -Private-to-Muni??
« Reply #23 on: December 18, 2020, 02:59:10 PM »
Golfers, especially those who favor the preservation of old courses, should be reluctant to support the use of eminent domain to take courses away from their owners.  How many times out of 100 will the "public use" (which is generally left to the states to decide and define) be the preservation rather than the destruction of a course?

ChipRoyce

  • Karma: +0/-0
Re: Eminent Domain -Private-to-Muni??
« Reply #24 on: December 19, 2020, 01:26:57 PM »
The original Timber Point Club, which was private when founded, became a public course, under similar circumstances when taken over under eminent domain in the 1960's by New York's Suffolk County.