Friday, May 9, 2014

Eminent Domain and the Fairhope Single Tax Colony

For the original article with more explanation, an example and definition of terms used, click here.

     This is a ruling concerning eminent domain and the distribution of funds to owners and lessees of property condemned by the State of Alabama.
     In 1992, Alabama condemned property for a public easement. The Fairhope Single Tax Colony and the lessee, SouthTrust Bank, had agreed the appraised value of the condemned property was $28,260, plus accrued interest, for the condemned property. The value of the leasehold interest over the duration of the lease was determined by a testifying witness to be $29,809. Since in Alabama the lessee's losses are covered first, FSTC likely wouldn't have gotten much if any had they proceeded with the new trial. Instead, after the Court of Civil Appeals sent it back to the trial court, FSTC and SouthTrust Bank settled out of court and had the settlement sealed. 
Presumably, the formula for distribution of State funds of eminent domain properties concerning owners and lessees is as follows: Take the purchase price plus economic rent less the contract rent subtracted from State funds with the remainder going to the FSTC.
For Example: The State has agreed to pay $10,000 for a piece of land to expand the highway. The tax value on the land is $10,000, therefore the contract rent is $20 per year. The economic rent is $100 per year.
Price of Land + Economic Rent = Total Value  
10000 + 9900 = 19900
Economic Rent x Remainder of Lease = Total Economic Rent  
100 x 99 = 9900

Contract Rent x Remainder of Lease = Total Contract Rent
20 x 99 =  1980

Economic Rent - Contract Rent = Leaseholder Value  
9900 - 1980 = 7920

Leaseholder Value + Purchase Price = Total Leaseholder Value
10000 + 7920 = 17920
State Funds - Total Leaseholder Value = Remainder
10000 - 17920 = -7920

Remainder + Contract Rent = Colony Share
-7920 + 1980 = -5940
     In this simplified example (every case will be fact specific), the Leaseholder Value and Colony Share exceeded what the State had agreed to pay. In this instance, Alabama law states a lessee must be reimbursed first. This means the leaseholder would get $10,000 and the Colony would receive $0. The leaseholder loses $7,920 in property value and the Colony loses $1,980 due to the state only paying $10,000 for a piece of property worth $19,900.    

Summaries of each section are in bold italics.