Housing Redevelopment Strategies in the Wake of Katrina and Anti- K elo Constitutional Amendments: Mapping a Path Through the Landscape of Disaster
David A. Marcello
53 LOY. L. REV. 763 (2007)
Tulane University School of Law Public Law and Legal Theory Research Paper Series Research Paper No. 07-17 Fall 2007
This paper can be downloaded without charge from the Social Science Research Network electronic library at: http://ssrn.com/abstract=1124960
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HOUSING REDEVELOPMENT STRATEGIES IN THE WAKE OF KATRINA AND ANTI-KELO CONSTITUTIONAL AMENDMENTS: MAPPING A PATH THROUGH THE LANDSCAPE OF DISASTER
David A. Marcello* INTRODUCTION .................................................................................... 766 I. EXPROPRIATION ........................................................................ 771 A. CONSTITUTIONAL FRAMEWORK: EXPROPRIATION OF PROPERTY ............................................................................... 772 B. AMENDMENT 5: “PUBLIC PURPOSE” FOR EXPROPRIATING PROPERTY .................................................... 774 C. AMENDMENT 6: RESTRICTIONS ON DISPOSING OF EXPROPRIATED PROPERTY ................................................ 776 D. LIMITED EXPROPRIATION SCENARIO FOR NORA................... 781 E. NEED FOR A DEFINITIVE RULING ON THIRD-PARTY DISPOSITIONS .......................................................................... 782 1. NORA’S INTERPRETATION OF AMENDMENT 5 ................. 783 2. NORA’S INTERPRETATION OF AMENDMENT 6 ................. 786 II. BEYOND EXPROPRIATION: ADDITIONAL REDEVELOPMENT STRATEGIES FOR NORA ....................... 789 A. TAX SALES AS A MEANS OF ACQUIRING PROPERTY............... 790 1. CONSTITUTIONAL AND STATUTORY FRAMEWORK FOR TAX SALES OF PROPERTY ................................................. 790 2. “ADJUDICATED” PROPERTIES ........................................... 793 B. REDEVELOPMENT OF ROAD HOME PROPERTIES ..................... 802 1. LAND BANKING ................................................................. 803 2. PROBLEMS IN IMPLEMENTING THE ROAD HOME .............. 805 3. LIMITED IMPACT ON HOUSING REDEVELOPMENT ............ 810 4. INTERACTION WITH APPLICANTS ...................................... 812 5. CONCLUSIONS ABOUT THE ROAD HOME .......................... 815 C. NORA’S ACQUISITION OF PROPERTY AS A BIDDER AT PUBLIC AUCTIONS................................................................... 817 III. CODE ENFORCEMENT: A POWERFUL BUT 763
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UNDERUTILIZED STRATEGY FOR REDEVELOPMENT...... 817 A. ADMINISTRATIVE ENFORCEMENT OF CODE VIOLATIONS ...... 819 B. ADVANTAGES OF CODE ENFORCEMENT OVER TAX SALES AND EXPROPRIATION .............................................................. 821 C. ENHANCED CODE ENFORCEMENT OPTIONS: ACT 115 OF 2007 ........................................................................................ 822 D. CODE ENFORCEMENT AS A PRIMARY REDEVELOPMENT STRATEGY ............................................................................... 824 IV. MANMADE MESS, MANMADE SOLUTIONS ......................... 827 A. EXPROPRIATION ...................................................................... 828 B. ADJUDICATED PROPERTIES ..................................................... 829 C. ROAD HOME AND CODE ENFORCEMENT PROPERTIES ............ 831 D. BEST OPTION: CODE ENFORCEMENT ...................................... 831 E. TRANSPARENCY ...................................................................... 832 V. CONCLUSION .............................................................................. 833 APPENDIX............................................................................................... 835
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“Mapping a Path”: A Reader’s Guide
Most readers will benefit from the Introduction (pages 766-771) and Parts IV (pages 827-833) and V (pages 833-838). In addition, the four “semantic sidebars” at pages 773, 774, 791, 820 convey important terminology for the general reader. Readers interested in Expropriation should review Part I (pages 771-789). Within Part I, pages 782-789 provide a close textual analysis that will be of interest to readers who want to understand the legal interpretations of Amendments 5 and 6. Part II (pages 789-817) covers two discrete subject areas—Tax Sales and the Road Home. Tax Sales (pages 790-802) are a technical subject area that may not interest all general readers. The Road Home (pages 802-817) will interest readers seeking a history of the program’s poor implementation. Part III (pages 817-827) presents code enforcement as the most promising redevelopment engine for New Orleans’ thousands of decimated properties and is in many ways the “core” of the article. The footnotes also tell several interesting stories: Expropriation—NORA’s leaders have signaled mixed intentions in their proposed use of expropriation, ranging from caution (notes 72, 74, 76) to unbridled optimism (note 120). With a “test case” pending (note 108), NORA continued to expropriate properties in 2007 (note 78) and increased its pace of expropriation suits in 2008 (note 120). NORA-NOLA Coordination—NORA and the City (“NOLA”) executed their first Cooperative Endeavor Agreement (CEA) in December 2006 (note 16). Six months later, they announced that they needed to renegotiate the CEA to cover additional, unanticipated responsibilities (note 122). Neither of the NORA-NOLA CEA’s establishes adequate performance standards (note 353). NORA’s Poor Track Record—NORA’s earlier ventures into land banking (note 209) and expropriation (note 210) were not successful. As NORA plans to take over the maintenance of thousands of properties, concerns persist about its ability to perform adequately (notes 252-253). Road Home—The Road Home program has been inhospitable to applicants (note 256) and drawn withering press criticism (notes 259-260, 268). The Office of Community Development acted more as an apologist for the program’s deficiencies than as an advocate for recipients (note 269). Code Enforcement—New Orleans has failed to address blight adequately (note 273) and has never fully implemented code enforcement by conducting code lien auctions (notes 275-276, 280). Improvident Legislation—improvident and ill-considered ordinances were enacted to address “Post-Disaster” problems (notes 277, 331, 348); those problems could have been better addressed via code enforcement. One final observation regarding “improvident legislation”: The City terminated most code enforcement hearings in September 2007 in order to rewrite the ordinances governing that process. Proposed new ordinances were to be presented for Council consideration in February 2008 and followed by renewed code enforcement in June 2008. As this Article went to the printers at the end of February 2008, the proposed new ordinances still had not been released for public review and comment, and press reports said that code enforcement might not be reinstated for another three to six months (note 333), which means that when the third anniversary of Katrina arrives, the City will have been deprived of code enforcement for almost an entire year.
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In August and September of 2005, Louisiana suffered a devastating 1 one-two punch from Hurricanes Katrina and Rita. Both storms battered South Louisiana within less than four weeks, causing nearly 1,500 deaths, destroying more than 200,000 homes and 18,000 businesses, and leaving in 2 their wake approximately $25 billion in insured losses. “Hurricane Katrina and the flooding that followed forced some 770,000 people from their homes along the Gulf Coast,” provoking “the largest internal migration 3 since the Dust Bowl of the 1930s.” Not long after, “Hurricanes Rita and Wilma also slammed the Gulf area,” and in “one terrible season of storms, 4 an estimated 300,000 homes had been destroyed or made unlivable.” Against this backdrop of physical devastation, Louisiana’s voters could not have chosen a worse time—one year later—to saddle the state and its political subdivisions with comparably devastating constitutional 5 6 restrictions on the power of expropriation. This “second storm” of
* David A. Marcello, Executive Director, The Public Law Center, New Orleans, Louisiana: © 2007. This Article evolved out of a dialogue convened by Larry Ottinger, Executive Director of the Fannie Mae Foundation, among a group of national and local housing experts. Among this group, I am particularly indebted to Dean Frank Alexander of Emory Law School and Professor John Lovett of Loyola University New Orleans College of Law. In addition, I have benefited since the mid-1990’s from generous commitments of time and informed assistance by Harry Holladay, a real estate attorney at the firm of Chaffe McCall in New Orleans, and from the lawyers at First American Title Company. I also gratefully acknowledge the insights and research assistance of L. Kate Mitchell, John R. Kramer Public Interest Fellow at The Public Law Center (TPLC) during 2006-07; her engagement with housing issues in New Orleans was made possible by a grant from the Fannie Mae Foundation. 1. See DOUGLAS BRINKLEY, THE GREAT DELUGE: HURRICANE KATRINA, NEW ORLEANS, AND THE MISSISSIPPI GULF COAST (William Morrow 2006); Peter Applebome & Ralph Blumenthal, With Storms Behind Them, Gulf Residents Begin Piecing Their Lives Together, N.Y. TIMES, Sept. 27, 2005, at A19; Jere Longman & Michael Brick, Rage and Ruin in Town Jarred by Rita’s Punch, N.Y. TIMES, Sept. 26, 2005, at A1. 2. See LOUISIANA’S MEDIA CTR., LOUISIANA RECOVERY AUTHORITY (LRA), HURRICANE KATRINA ANNIVERSARY DATA FOR LOUISIANA 3 (2006), available at http://www.lra.louisiana. gov/assets/LouisianaKatrinaAnniversaryData082206.pdf (last visited Feb. 27, 2008). See also Press Release, Louisiana Recovery Authority, Governor Blanco, Lieutenant Governor Landrieu, LRA, LED Propose Plans to Reallocate $100 Million of Relief Funds to Pilot Grant Program for Small Businesses (Dec. 7, 2006), available at http://lra.louisiana.gov/pr120706smallbus grants.html (last visited Feb. 27, 2008). 3. See FANNIE MAE, HELPING THE GULF COAST RECOVER 2 (2007), available at http://ww w.fanniemae.com/media/pdf/FannieMaeGulfCoastReport_final.pdf (last visited Feb. 27, 2008). 4. Id. 5. Amendment 4 of the 2006 Louisiana Acts amended Louisiana Constitution article VI, section 42(A) and added Louisiana Constitution article I, section 4(G). See LA. CONST. art. I, § 4(G), art. VI, § 42(A); 2006 La. Acts 853. Amendment 5 of the 2006 Louisiana Acts amended Louisiana Constitution article I, section 4(B) and Louisiana Constitution article VI sections 21(A), (D). See LA. CONST. art. 1, § 4(B), art. VI, §§ 21(A), (D); 2006 La. Acts 851. Amendment 6 of
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constitutional destruction arose as part of a national reaction to the United 7 States Supreme Court’s decision in Kelo v. City of New London. That 8 negative national reaction was fueled by a national organizing effort, but 9 Louisiana, more than most other states, exhibited a relentless determination 10 to embed anti-Kelo expropriation restrictions in its constitution. These recent constitutional amendments severely restricted the 12 ability of the New Orleans Redevelopment Authority (NORA) to use
the 2006 Louisiana Acts amended Louisiana Constitution article I, section 4 by adding section 4(H). See LA. CONST. art. I, § 4(H); 2006 La. Acts 859. 6. Former Dean Frank Alexander of Emory Law School used this term to describe the recent amendments as the constitutional equivalent of the storm damage caused by Hurricane Katrina. See Frank S. Alexander, Louisiana Land Reform in the Storms’ Aftermath, 53 LOY. L. REV. 727, 729 (2008). 7. Kelo v. City of New London, 545 U.S. 469 (2005). See also EMINENT DOMAIN USE AND ABUSE: KELO IN CONTEXT (Dwight H. Merriam & Mary Massaron Ross eds., Am. Bar Ass’n 2006). 8. See Castle Coalition, http://www.castlecoalition.org (last visited Feb. 27, 2008) (a website established by the Institute for Justice to coordinate opposition among Kelo opponents). 9. To compare legislative changes in Louisiana and other states since the 2005 Kelo decision, see CASTLE COALITION, 50 STATE REPORT CARD: TRACKING EMINENT DOMAIN REFORM LEGISLATION SINCE KELO (2007), available at http://www.castlecoalition.org/pdf/publications/ report_card/50_State_Report.pdf (last visited Feb. 27, 2008). See also National Conference of State Legislatures, http://www.ncsl.org/programs/natres/EMINDOMAIN.htm (last visited Feb. 27, 2008) (providing links to 2005, 2006, and 2007 state legislation regarding eminent domain); Amanda W. Goodwin, Rejecting the Return to Blight in Post-Kelo State Legislation, 82 N.Y.U.L. REV. 177 (2007). 10. In the 2006 1st Extraordinary Session, held within six months after Katrina, legislators introduced six proposed constitutional amendments designed to curb the state’s use of expropriation (House Bills 24, 34, 35, 39, and Senate Bills 10 and 53); none passed out of the chamber of origin. See Louisiana State Legislature, Session Info, http://www.legis.state.la.us/. Two months later in the 2006 Regular Session, legislators renewed their assault on expropriation by introducing eighteen proposed constitutional amendments (House Bills 28, 29, 30, 82, 84, 131, 148, 239, 330, 640, 707, and Senate Bills 1, 4, 8, 21, 27, 294, 297); three received the requisite two-thirds vote in the House and Senate to make it onto the ballot, where all three received voter approval and were added to the constitution as Acts 851, 853, and 859. See S.B. 1, 2006 Legis., Reg. Sess. (La. 2006), available at http://www.legis.state.la.us/billdata/streamdocument.asp?did=4 07125; S.B. 27, 2006 Legis., Reg. Sess. (La. 2006), available at http://www.legis.state.la.us/billda ta/streamdocument.asp?did=407126; H.B. 707, 2006 Legis., Reg. Sess. (La. 2006), available at http://www.legis.state.la.us/billdata/streamd ocument.asp?did=407054. 11. Constitutional amendments 4, 5, and 6 were approved by Louisiana voters on September 30, 2006. See Louisiana Secretary of State, Official Election Results; Results for election Date: 9/30/06, http://www400.sos.louisiana.gov:8090/cgibin/?rqstyp=elcms4&rqsdta=093006 (last visited Feb. 27, 2008). 12. NORA began in 1968 as an urban renewal entity named the Community Improvement Agency (CIA). See 1968 La. Acts 170. In 1994, the agency underwent a substantial reorganization and the name changed to NORA. See 1994 La. Acts 65, 135, 3d Extraordinary Sess. The 2004 Louisiana Acts 349, codified all the previous Acts creating the CIA and NORA. See LA. REV. STAT. ANN. §§ 33:4720.51-.72 (2007). For additional information on the history of this agency, see City of New Orleans, New Orleans Redevelopment Authority, http://www.
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expropriation in addressing the redevelopment needs of Orleans Parish. Despite this harsh new constitutional reality, NORA signaled its determination to make expropriation the centerpiece of its redevelopment strategy: NORA’s Board Chair identified “quick take” authority as his “top priority” and “said NORA will never be able to fulfill its mission without 14 that authority.” In the current constitutional environment, an aggressive reliance on expropriation would be woefully ill-founded, for reasons that will be made clear in the next section of this Article. Expropriation is not the only redevelopment strategy beckoning for 15 NORA’s limited resources. Adjudicated properties present another alluring choice for NORA, and the City of New Orleans is its enthusiastic 16 enabler, proposing to place into NORA’s hands thousands of adjudicated properties—just as it did for developers in 2006, with little discernible effect in returning significant numbers of those properties to commerce by 17 more than one year later. New Orleans has a long history of failed attempts to use adjudicated properties as a vehicle for rehabilitating large 18 19 numbers of dilapidated properties. The City cannot afford to write
Cityofno.com/Portals/Portal57/portal.aspx?portal=57&tabid=10 (last visited Feb. 27, 2008). 13. See LA. REV. STAT. ANN. §§ 33:4720.56, .58-.59 (2007) (describing expropriation powers granted to NORA). 14. Frank Donze, Agency Tackles a Handful of Properties: Strapped for Funds, NORA Limits its Sights, TIMES-PICAYUNE, May 6, 2007, at A11. “Quick take” authority empowers the state or a political subdivision to expropriate property immediately by filing a petition, depositing funds into the registry of the court equal to the appraised value of the property, then applying for an ex parte order of the court vesting ownership in the governmental entity. The property owner can contest the amount in ongoing court proceedings, but has only a limited window of opportunity within which to challenge the immediate transfer of property ownership to the expropriating authority. See, e.g., LA. REV. STAT. ANN. §§ 19:136.2-.8 (2007). 15. See infra Part II.A.2 regarding tax adjudicated properties. 16. See COOPERATIVE ENDEAVOR AGREEMENT BETWEEN THE CITY OF NEW ORLEANS AND NEW ORLEANS REDEVELOPMENT AUTHORITY 3 (Dec. 11, 2006) (regarding “Services to be Performed by Contractor”) (on file with Loyola Law Review) [hereinafter NOLA-NORA CEA I]. 17. See infra Part II.A.2 for discussion of the City’s program for Sale of Adjudicated Properties (“SOAP”). 18. “The challenge of blight and abandonment is not new to New Orleans; headlines from the Times-Picayune ten years ago claimed the city had over 37,000 vacant properties.” NAT’L VACANT PROPERTIES CAMPAIGN, NEW ORLEANS TECHNICAL ASSESSMENT AND ASSISTANCE DRAFT REPORT: RECOMMENDED ACTIONS TO IMPROVE THE PREVENTION, ACQUISITION, AND DISPOSITION OF NEW ORLEANS’ BLIGHTED, ABANDONED, AND TAX ADJUDICATED PROPERTIES 4 (Oct. 28, 2004) (on file with Loyola Law Review) [hereinafter VACANT PROPERTIES DRAFT REPORT]. The Vacant Properties Draft Report also points out that the “process for acquiring tax delinquent properties through adjudication can be confusing, time-consuming, and does not provide clear title to purchasers . . . .” Id. 19. References to the “City” with an upper-case “C” are references to municipal government—the elected officials and public employees responsible for making public policy choices and administering the daily operations of local government. References to the “city” with
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another chapter of failure in that long history. The City’s most promising redevelopment strategy is one of the most mundane options available. Code enforcement has been an established weapon in the municipal enforcement arsenal since cities first enacted 20 housing and building codes. Code enforcement has never been fully deployed in New Orleans’ war on deteriorated housing; it’s long past time to implement an aggressive and effective code enforcement strategy. Each of the three preceding paragraphs addressed a single strategy for housing redevelopment—expropriation, adjudicated properties, and code enforcement. This Article maintains strict separation among these and the other redevelopment strategies that it considers. Each strategy derives legal authority from separate statutory and constitutional sources, and accordingly, each has different legal implications in the redevelopment marketplace. The conversation about housing redevelopment strategies 21 becomes terminally confusing when participants use terms imprecisely or 22 carelessly combine terms. We must understand at every moment which of several discrete redevelopment strategies is under consideration, pay attention to its legal origins and how it differs from other legal strategies, and adhere to the semantic distinctions that help to keep our meanings clear. In aid of these objectives, semantic “sidebars” appear in boxed text at various points, clarifying how certain terms are used in this Article. This Article expresses concern about where the City of New Orleans
a lower-case “c” are references to the geographic area and residents located within the boundaries of Orleans Parish (coterminous with the boundaries of the City of New Orleans). 20. “Building and housing codes have existed for centuries, but . . . [t]heir modern history in the U.S. began with the adoption of the Tenement House Act for the City of New York in 1901.” JULIAN CONRAD JUERGENSMEYER & THOMAS E. ROBERTS, LAND USE PLANNING AND DEVELOPMENT REGULATION LAW 302 (West Group 2003). See also OSBORNE M. REYNOLDS, JR., HANDBOOK OF LOCAL GOVERNMENT LAW 403-04 (West Publ’g Co. 1982) [hereinafter REYNOLDS]. 21. See, e.g., the semantic sidebar at p. 773, recommending the consistent use of “blight” or “blighted” exclusively as terms of art to describe properties that have been so designated in an administrative hearing process and the use of more generic words (such as “deteriorated” or “dilapidated”) to describe rundown properties. See also the semantic sidebar at p. 820, recommending that “adjudicated” be used exclusively as a term of art to describe properties “bid in” to the city at a tax sale and avoiding the term “adjudication” as it is used in the Administrative Procedure Act when referring to a contested administrative hearing process: “‘Adjudication’ means agency process for the formulation of a decision or order.” LA. REV. STAT. ANN. § 49:951(1) (2007); see also id. § 49:951(3) (which lends essential substance to the meaning of “adjudication” by defining the terms “decision” and “order”). 22. Compare the semantic sidebar at p. 773 regarding “blight” or “blighted” property with the semantic sidebar at p. 791 regarding “abandoned” property. Though frequently linked through casual use of the phrase “blighted and abandoned property,” the terms actually describe separate categories that have different legal implications.
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is headed in its recovery and redevelopment process. Two-and-a-half years after Katrina, the conversation about spending priorities remains relevant. 23 Substantial sums of recovery money have not yet begun to flow, and the City’s palette of priorities is still rich with choices. Two-and-a-half years 24 from now, many of those critical choices will have been made and much 25 of the available money expended. How well or poorly the City of New Orleans chooses its priorities will have everything to do with how well or poorly the city recovers from its post-Katrina devastation. This Article attempts to map a path through that landscape of disaster by examining in turn each of the redevelopment strategies at the City’s disposal. To lend an element of concreteness to its observations, the Article uses New Orleans as its “laboratory,” but most observations are equally relevant to other cities grappling with their own redevelopment 26 challenges. The Article begins with an analysis of expropriation in Part I; then moves beyond expropriation to assess a range of redevelopment strategies for NORA in Part II; continues with an analysis of the City’s own historically underutilized powers of code enforcement in Part III; makes several recommendations for targeted redevelopment efforts in Part IV; and concludes in Part V with a cri de coeur for public officials to open their minds and their ears to hear and heed the concerns of engaged citizens. A particularly helpful and thought-provoking memorandum by former Dean
23. The Public Affairs Research Council (PAR) examined the flow of federal funds into Louisiana and Mississippi by comparing “the amounts approved for spending in the Community Development Block Grant (CDBG) and Public Assistance programs to the amounts actually spent by the two states as of August 2007,” and concluded that “much of it remains tied up in the bureaucratic process, and frustration with the pace of the recovery mounts.” See JENNIFER PIKE, NELSON A. ROCKEFELLER INST. OF GOV’T & PUB. AFFAIRS RESEARCH COUNCIL OF LA., GULFGOV REPORTS: SPENDING FEDERAL DISASTER AID; COMPARING THE PROCESS AND PRIORITIES IN LOUISIANA AND MISSISSIPPI IN THE WAKE OF HURRICANES KATRINA AND RITA 4 (2007), available at http://www.rockinst.org/WorkArea/showcontent.aspx?id=12268 (last visited Feb. 27, 2008). “Much of the federal disaster aid spent” since the storms was “used to address initial emergency needs like clearing debris, providing shelter, and repairing roadways,” while the projects essential to long-term recovery of people’s lives and livelihoods “like replacing housing stock and public buildings, providing gap funding for recovering businesses, and repairing damaged infrastructure are barely underway.” Id. 24. This timeframe roughly coincides with the May 2010 inauguration of new municipal leadership. 25. C. Ray Nagin, Mayor of New Orleans, announced in January, 2008 that federal funds had been released: “‘The check is no longer in the mail,’ Nagin said last week, referencing hundreds of millions of dollars that have been allocated in the last six months. ‘It’s available to us . . . .’” Clancy DuBos, A Smart Move, GAMBIT WEEKLY, Jan. 15, 2008, at 17, available at http://www.be stofneworleans.com/dispatch/2008-0115/politics.php. 26. For example, Act 417 of 2007 enacted Louisiana Revised Statutes section 33:4720.101 established the East Baton Rouge Redevelopment Authority to address redevelopment needs in Louisiana’s Capital City. See LA. REV. STAT. ANN. § 33:4720.101 (2007).
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Frank Alexander of Emory Law School is appended for the reader’s 27 convenience and is periodically discussed throughout the Article. I. EXPROPRIATION NORA was chosen to serve as the principal redevelopment engine 28 within Orleans Parish in large part because of its expropriation powers. 29 30 Expropriation is Louisiana’s expression of the power of condemnation 31 or eminent domain. The Eminent Domain Clause in the Fifth Amendment of the United States Constitution provides that “private property [cannot] be 32 taken for public use, without just compensation.” Different states may define “just compensation” differently, all in conformity with Fifth Amendment constitutional guarantees, but it is generally regarded as “a fair payment by the government for property it has taken under eminent domain” and usually means the “property’s fair market value, so that the 33 new owner is no worse off after the taking.” Louisiana’s Constitution already conferred on property owners a generous definition of “just 34 compensation” that guaranteed reimbursement to “the full extent of loss.” The recent constitutional amendments expanded that generous definition of “loss,” which now must “include, but not be limited to, the appraised value of the property and all costs of relocation, inconvenience, and any other 35 damages actually incurred by the owner because of the expropriation.” In Louisiana, political subdivisions
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derive their powers of
27. See Memorandum from Frank Alexander, Dean, Emory Law School to David Marcello, Executive Director, The Public Law Center, Tulane University New Orleans, & John Lovett, Professor, Loyola University New Orleans, College of Law (Dec. 16, 2006) (on file with Loyola Law Review and appended to this Article) [hereinafter Alexander Memorandum]. 28. Gordon Russell, Agency to Take Over Abandoned Flooded Home; Little-Known Office gets High-Profile Job, TIMES-PICAYUNE, Dec. 12, 2006, at B1. 29. Expropriation is defined as a “governmental taking or modification of an individual’s property rights, esp. by eminent domain; CONDEMNATION.” See BLACK’S LAW DICTIONARY (8th ed. 2004). 30. Condemnation is defined as the “determination and declaration that certain property (esp. land) is assigned to public use, subject to reasonable compensation; the exercise of eminent domain by a governmental entity.” Id. 31. Eminent domain is defined as the “inherent power of a governmental entity to take privately owned property, esp. land, and convert it to public use, subject to reasonable compensation for the taking.” Id. 32. U.S. CONST. amend. V. 33. See BLACK’S LAW DICTIONARY (8th ed. 2004). 34. LA. CONST. art. I, § 4(B)(5). 35. Id. 36. Under the Louisiana Constitution, a “political subdivision” is defined as “a parish, municipality, and any other unit of local government, including a school board and a special district, authorized by law to perform governmental functions.” Id. art. VI, § 44(2).
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expropriation from constitutional and statutory sources. NORA is a 39 political subdivision of the state and a separate political entity from the 40 City of New Orleans, so NORA does not directly enjoy the benefits of the 41 42 City’s “sweeping powers” under its Home Rule Charter. As a political subdivision, NORA must use its expropriation powers in conformity with the new constitutional constraints, among which the most consequential are 43 those imposed by Amendments 5 and 6 of the Louisiana Constitution. A. CONSTITUTIONAL FRAMEWORK: EXPROPRIATION OF PROPERTY The Louisiana Constitution establishes the following framework for “Acquisition of Property” by political subdivisions: “Subject to and not inconsistent with this constitution and subject to restrictions provided by general law, political subdivisions may acquire property for any public 44 purpose by purchase, donation, expropriation, exchange, or otherwise.” Under this general grant of authority, NORA may expropriate property for “any public purpose” as long as it does so consistently with the constitution
37. See LA. CONST. art. VI, §§ 21, 23 (defining “Assistance to Local Industry” and “Acquisition of Property”). 38. See, e.g., LA. REV. STAT. ANN. §§ 33:4720.56(3), .58-.59 (2007) (establishing NORA’s expropriation powers). 39. See id. §§ 33:4720.55(A)-(B) (2007) (creating “a public body corporate and politic known as the New Orleans Redevelopment Authority . . . which shall be a political corporation of the state . . . .” ). 40. The City of New Orleans is directing many valuable assets into NORA’s ownership. See Frank Donze, Taking a Bite out of Blight; After a Slow Start, the Agency with a Lead Role in N.O.’s Recovery is Taking on a Few Dozen Abandoned Lots, TIMES-PICAYUNE, Jan. 22, 2008, at A1 (noting the City’s significant funding and budgetary concessions to NORA). See also NOLANORA CEA I, supra note 16, at 3. Municipal officials may wish to consider the possibility that further statutory restructuring by the state legislature could result in diminished City control over the agency’s use of those assets. 41. State v. Reuther, 81 So. 2d 387, 388 (La. 1955). 42. The “Preamble” of the Home Rule Charter of the City of New Orleans provides that “the City of New Orleans intends to possess and exercise the broadest rights, powers, privileges, and authority of self-government permitted under the Constitution and laws of the State . . . .” Home Rule Charter of the City of New Orleans, pmbl., at 1 (amended 1996). 43. Amendment 5, Act No. 851, Senate Bill No. 1, amended Louisiana Constitution article I, section 4(B) and article VI, sections 21(A) and (D); the amendment narrowly defined the permissible “public purpose” for which property may be expropriated. See LA. CONST. art. I, § 4(B), art. VI §§ 21(A), (D); Louisiana State Legislature, Session Info, http://www.legis. state.la.us/billdata/streamdocument.asp?did=407125 (last visited Feb. 27, 2008). Amendment 6, Act No. 859, House Bill No. 707, amended Louisiana Constitution article I, section 4 by adding section 4(H), which imposes severe new restrictions on third-party transfers of expropriated property. See LA. CONST. art. I, § 4(H); Louisiana State Legislature, Session Info, http://www. legis.state.la.us/billdata/streamdocument.asp?did=407054 (last visited Feb. 27, 2008). 44. LA. CONST. art. VI, § 23 (emphasis added).
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and other restrictions provided by law.
NORA derives its statutory authority for expropriation from two sources. NORA may expropriate property located within a community 46 improvement area, and NORA may expropriate property that has been 47 48 declared “blighted” by an administrative hearing officer. The “blight” designation has as a practical matter been NORA’s only expropriation mechanism because the agency has never established a community improvement area.49
“Blight” or “Blighted” The words “blight” and “blighted” are used exclusively in this Article as terms of art to describe properties that have been through an administrative hearing and have been declared “blighted” by the hearing officer, pursuant to LA. REV. STAT. ANN. §§ 13:2575-2576 (2007). NORA statutes define “blighted property” in terms of the administrative hearing officer’s declaration: “For the purposes of this Section, ‘blighted property’ shall include those commercial or residential premises, including lots which have been declared vacant, uninhabitable, and hazardous by an administrative hearing officer acting pursuant to R.S. 13:2575 and 2576 or other applicable law.” LA. REV. STAT. ANN. § 33:4720.59(B) (2007). When a more generic reference is intended to describe rundown properties, this Article uses terms such as “dilapidated” or “deteriorated.”
Most of the new language added by Amendments 5 and 6 was inserted into the constitution at article I (“Declaration of Rights”), section 4 (“Right 50 to property”). By their placement, the new constitutional provisions seem intended to protect private property rights. NORA’s use of its expropriation powers must not conflict with these new property rights guaranteed in article I, section 4.
45. See, e.g., LA. REV. STAT. ANN. §§ 33:4720.56, .58-.59 (2007). 46. Id. §§ 33:4720.56(3)-(4). 47. See the semantic sidebar at page 773 regarding the words “blight” and “blighted” as used in this Article and as defined by NORA statutes. 48. LA. REV. STAT. ANN. § 33:4720.59 (2007). See the semantic sidebar at page 774 regarding “Administrative Hearing Process: ‘Blight’.” 49. In its almost forty years of existence before Hurricane Katrina, NORA never exercised its statutory authority to establish a community improvement area. See JULIAN GROSS ET AL., PARTNERSHIP FOR WORKING FAMILIES & BRENNAN CTR. FOR JUSTICE AT NYU SCHOOL OF LAW, FACTSHEET: NEW ORLEANS REDEVELOPMENT AUTHORITY 2 (2005), available at http:// californiapartnership.org/downloads/Factsheet_New_Orleans_Redevelopment_Agency.pdf (last visited Feb. 27, 2008) (noting that “[d]espite the large number of abandoned properties and widespread urban blight in pre-Katrina New Orleans, it appears that NORA has never yet declared a community improvement area”). 50. LA. CONST. art. I, § 4.
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Administrative Hearing Process: “Blight” Louisiana Revised Statutes section 13:2575 was originally enacted in 1987 (La. Acts No. 514) to establish an administrative hearing process by which properties that were out of compliance with health, housing, environmental, fire, and other codes could be fined and ordered to comply with code requirements. Ten years later, Act 101 of 1997 added section 13:2576, which provided authority for the hearing officer to render a finding of “blight”—a task that had previously fallen to the City Council, which no longer wanted to be burdened by it. See S.B. 1367, 1997 Leg., Reg. Sess., § 8.1(D)(3), at 3 (La. 1997), available at http://www.legis.state.la.us/leg_docs/97RS/CVT122 /OUT/0000C2QV.PDF. The finding of “blight” is a precursor to expropriation by NORA: “After hearing all of the information and evidence presented, the hearing officer shall certify by order those properties which are determined to be blighted and shall authorize the authority to acquire said properties if the authority finds that such acquisition is necessary and feasible.” See S.B. 1367, 1997 Leg., Reg. Sess., § 8.1(D)(3), at 3 (La. 1997). Sections 2575 and 2576 now serve two distinct legal purposes. Their primary purpose is to establish an administrative process in which the hearing officer imposes fines and orders corrections in support of code enforcement; this process can ultimately lead to seizure and sale of a noncompliant property. See infra Part III for discussion of code enforcement. The same hearing officer is empowered to make a finding of “blight”; this finding can lead to expropriation by NORA. Code enforcement and expropriation are two separate legal strategies, even though a single hearing officer serves both masters.
B. AMENDMENT 5: “PUBLIC PURPOSE” FOR EXPROPRIATING PROPERTY The new constitutional language added by Amendment 5 provides that a permissible “public purpose” is the “removal of a threat to public health 51 or safety caused by the existing use or disuse of the property.” NORA may, consistently with this new language, expropriate properties that present “a threat to public health or safety.” Within the boundaries of Orleans Parish are tens of thousands of properties that constitute an immediate threat to public health and safety.52 NORA must base its use of expropriation exclusively on the “removal of a threat to public health or safety” because new constitutional language explicitly prohibits consideration of “economic development, enhancement
51. LA. CONST. art. I, § 4(B)(2)(c). The anti-Kelo thrust of Amendment 5 was directed at takings for purposes of economic development; it specifically preserves authority for takings based on public health or safety. 52. See BUREAU OF GOVERNMENTAL RESEARCH, MENDING THE URBAN FABRIC: BLIGHT IN NEW ORLEANS—PART I: STRUCTURE & STRATEGY 1 (2008), available at http://bgr.org/BGR_ blight_report_1.pdf (last visited Feb. 27, 2008) [hereinafter MENDING THE URBAN FABRIC]. “BGR is a private, non-profit, independent research organization dedicated to informed public policy making and the effective use of public resources for the improvement of government in the New Orleans metropolitan area.” Bureau of Governmental Research Home Page, http://bgr.org/.
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of tax revenue, or any incidental benefit to the public” in seeking a “public 53 purpose” for taking property. Alternatively stated, NORA clearly has the power to expropriate property that is “a threat to public health or safety”; it may not and need not invoke other, prohibited purposes in order to justify its use of expropriation. Further support for this view is found in new constitutional language: 54 “Property shall not be taken . . . except for public purposes . . . .” This overtly prohibitory language imposes no additional limitation on NORA’s exercise of expropriation powers to remove a threat to public health or safety, because the constitution explicitly recognizes that a “threat to public health and safety” is a permissible “public purpose” for taking property. The next sentence of this new constitutional language continues in a prohibitory vein, providing that “property shall not be taken or damaged by the state or its political subdivisions: (a) for predominant use by any private person or entity; or (b) for transfer of ownership to any private person or 55 entity.” These two limitations restrict the permissible disposition of 56 expropriated properties. They prohibit a taking of property if the public purpose is to make it available for “predominant use” by or a “transfer of ownership” to any private person or entity. These restrictions do not, however, prohibit the taking of property when the public purpose is the “removal of a threat to public health or safety,” which is explicitly 57 authorized by the new constitutional language. It bears repeating that the “removal of a threat to public health or safety” is, standing alone, an adequate public purpose for expropriating property. This single, sufficient basis for taking property is not diminished by the limiting language quoted in the three preceding paragraphs. NORA need not and should not justify its taking of property by reference to the property’s potential later use or disposition. “The removal of a threat to public health or safety” is a sufficient public purpose to support a taking. How might the expropriation process play out in practice? If a building is in danger of collapsing into the street or onto the sidewalk and 58 thereby presents a threat to public health or safety, NORA might
53. LA. CONST. art. I, § 4(B)(3). 54. Id. § 4(B)(1) (emphasis added). 55. Id. 56. See infra Part I.C (providing more detail regarding the restrictions on disposing of expropriated property). 57. LA. CONST. art. I, § 4(B)(2)(c). 58. Expropriation is not the only conceivable response to public health and safety threats; they can also be addressed through “a reasonable exercise of the police power.” See id. § 4(A). Public
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expropriate the property for the public purpose of eliminating that threat. After expropriating it, NORA might deal with the threat of collapse in any of several different ways, including (a) demolishing the structure and clearing the site; (b) stabilizing the building and boarding it up to prevent unauthorized entry; or (c) rehabilitating it and rendering it safe for 59 occupancy. Any one of these actions would be sufficient to remove “a threat to public health or safety caused by the existing . . . disuse of the 60 property.” All of these actions provide sufficient “public purpose” on the “front end” of the expropriation process to justify the taking of property for “removal of a threat to public health or safety.” What may be done with the building on the “back end” of the expropriation process—upon disposition—is governed by new constitutional provisions added by Amendment 6. C. AMENDMENT 6: RESTRICTIONS ON DISPOSING OF EXPROPRIATED PROPERTY Amendment 6 established in the constitution a detailed and comprehensive regime governing the disposition of expropriated property:
(1) Except for leases or operation agreements for port facilities, highways, qualified transportation facilities or airports, the state or its political subdivisions shall not sell or lease property which has been expropriated and held for not more than thirty years without first offering the property to the original owner or his heir, or, if there is no heir, to the successor in title to the owner at the time of expropriation at the current fair market value, after which the property can only be transferred by competitive bid open to the general public. After thirty years have passed from the date the property was expropriated, the state or political subdivision may sell or otherwise transfer the property as provided by law. (2) Within one year after the completion of the project for which the
health and safety have long been recognized as two of the pillars that customarily support an exercise of the police power. See generally REYNOLDS, supra note 20, at 356-62 (discussing Village of Euclid v. Ambler Realty, 272 U.S. 365, 395 (1926), an early Supreme Court case upholding the use of police powers to support a zoning regime as long as there is a “substantial relation to the public health, safety, morals or general welfare of the community”). Reynolds also cites the Louisiana Supreme Court’s decision thirty years later in City of New Orleans v. LaNasa, 88 So. 2d 224, 226 (La. 1956), for the exact language and legal proposition quoted above. See REYNOLDS, supra note 20, at 356-62. 59. NORA may “hold, improve, clear, or prepare for redevelopment any of such property” acquired to undertake and carry out community improvement projects. See LA. REV. STAT. ANN. § 33:4720.56(3) (2007). NORA may also “hold, clear, manage, and dispose of” blighted property. See id. § 33:4720.59(A). 60. LA. CONST. art. I, § 4(B)(2)(c).
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property was expropriated, the state or its political subdivision which expropriated the property shall identify all property which is not necessary for the public purpose of the project and declare the property as surplus property. (3) All expropriated property identified as surplus property shall be offered for sale to the original owner or his heir, or, if there is no heir, to the successor in title to the owner at the time of expropriation at the current fair market value, within two years after completion of the project. If the original owner, heir, or other successor in title refuses or fails to purchase the surplus property within three years from completion of the project, then the surplus property may be offered for sale to the general public by competitive bid. (4) After one year from the completion of the project for which property was expropriated, the original owner or his heir, or, if there is no heir, the successor in title to the owner at the time of expropriation may petition the state or its political subdivision which expropriated the property to have all or any portion of his property declared surplus. If the state or its political subdivision refuses or fails to identify all or any portion of the expropriated property as surplus, the original owner or the successor in title may petition any court of competent 61 jurisdiction to have the property declared surplus.
According to subparagraph 1, the state or its political subdivisions may not sell or lease expropriated property that has been held for less than thirty years without first offering it for sale to the original owner, the heirs, or successors in interest at its then-current fair market value. Only if the original owner, heirs, or successors decline to purchase the property may it be offered for sale to others, and then only to the general public through a 62 competitive public bid. Subparagraphs 2, 3, and 4 reach a similar result with regard to 63 “surplus” takings. The expropriating entity must identify “surplus 64 property” and must offer the previous owner, the heirs, or a successor in 65 interest the right to reacquire that surplus property. The original owner, heirs, or successors can compel the expropriating entity to identify surplus
61. LA. CONST. art. I, § 4(H) (emphasis added). 62. Id. 63. See MELVIN G. DAKIN & MICHAEL R. KLEIN, EMINENT DOMAIN IN LOUISIANA: AN ANALYSIS OF EXPROPRIATION LAW AND PRACTICE 366 (Indianapolis, Bobbs-Merrill 1970) (discussing “necessity” takings). 64. LA. CONST. art. I, § 4(H)(2). 65. Id. § 4(H)(3).
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property. Thus, subparagraphs 2, 3, and 4 arrive at the same destination for surplus takings as subparagraph 1 does for expropriations generally: An offer to dispose of surplus property must first be made to the original owner, heirs, or successors, followed by a competitive bid process offering the property for sale to the general public. In light of these new constitutional restrictions on third-party transfers of expropriated property, NORA should use expropriation sparingly and only for well-defined strategic objectives. Expropriation remains a useful tool, for example, to acquire properties that will be held in public use for a period of thirty or more years—e.g. for parks and green space, drainage, public buildings, streets, or utilities. NORA could also use expropriation to motivate an owner’s consensual sale of storm-damaged property in return for a fair negotiated price, which the owner might accept in preference to a 67 threatened taking of the property at its much-reduced post-Katrina value. And of course, NORA could use expropriation to rehabilitate an individual property with the intention of offering it for purchase by the original owners, their heirs, or successors, and if not purchased by them, offering it for sale to the general public through a competitive bid process. NORA should not, however, plan on using expropriation to assemble many small parcels into a large tract of land with the intention of clearing the site, making infrastructure improvements, and transferring the consolidated property to a developer for a coordinated buildout. New constitutional language in Amendment 6 requires that before offering the consolidated tract to a developer, NORA must first offer each small parcel of expropriated property for sale to the original owner, the owner’s heirs, or 68 successors in interest at its then-current fair market value. Coordinated redevelopment plans would be easily undermined if only a few of the original property owners decided to buy back their expropriated land—and it is easy to imagine why many of them might make that decision. Who would not want to own a parcel of land located within a consolidated tract
66. LA. CONST. art. I, § 4(H)(4). 67. This use of expropriation has some potential for abuse, and it should not be employed as a coercive strategy. Expropriation proceedings may settle before their ultimate judicial conclusion for numerous reasons. For example, the owner of a devastated post-Katrina property might take the initiative in negotiating a more favorable price than the courts would award as just compensation; NORA, in turn, might agree to pay more than just compensation because that’s a cheaper and quicker alternative than litigating the matter to conclusion. Is the property owner being “abusive” in extracting from NORA more money than the property may be worth in an expropriation? Or is the property owner being “abused” and is NORA getting the better of the deal by acquiring property that can be resold sooner than thirty years? Perhaps neither characterization constitutes an “abuse” of the expropriation process. Rather, they simply describe a negotiated resolution from which both parties derived some benefit. 68. LA. CONST. art. I, § 4(H)(1).
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targeted for redevelopment? And if the original property owner prefers not to rush back into ownership, might someone else purchase from that prior owner the right to exercise a buyback option on the parcel of land in hopes of making a profit from the proposed redevelopment? NORA will subject itself and its prospective developers to an impossibly complicated marketplace of fragmented ownerships if it uses expropriation on the front end to assemble large tracts of land for redevelopment, then attempts on the back end to deliver those tracts to a developer. Newspaper articles have reported that just such an approach may figure prominently in NORA’s plans for redevelopment, since the agency’s 69 “top priority will be securing the authority to ‘quick take’ blighted land.” In response to the agency’s entreaties, the New Orleans City Council passed 70 an ordinance to accomplish that objective. Expediting the expropriation process with “quick take” authority may simply aid and abet NORA in accumulating a large inventory of properties that cannot easily be introduced back into commerce, creating a kind of “roach motel” effect: 71 “They check in [to NORA], but they don’t check out.” An exchange of emails with the NORA Board Chair gave some comfort that NORA did not intend to use expropriation in assembling large tracts of land for subsequent transfer to a third party, but would only use expropriation selectively to get rid of crack houses and other public 72 nuisances on a single-house basis. The NORA Chair suggested in the same email exchange, however, that “if an abandoned house were taken on grounds of public health and safety, it would fall outside the strictures of 73 the amendments.” No such “health and safety” exception appears on the 74 face of the relevant constitutional provision. Two weeks later, NORA’s
69. Donze, supra note 14, at A11. 70. See New Orleans, La., Ordinance 26,489 (MCS 22643) (May 3, 2007). 71. Black Flag’s Roach Motel attracted roaches into the product and trapped them there, giving rise to the 1980’s advertising tagline, “Roaches check in . . . but they don’t check out!” See BlackFlag.com, Products, “The Original” Roach Motel, http://www.blackflag.com/_dynamo/ download.php?docid=43 (last visited Feb. 27, 2008). 72. See E-mail from Herschel T. Abbott, Jr., Chair of the New Orleans Redevelopment Authority Board of Directors, to David A. Marcello, Executive Director of The Public Law Center (May 25, 2007, 09:48:00 CST) (on file with Loyola Law Review). Mr. Abbott provided the following assurances:
I want to use quick take to get rid of crack houses and other public nuisances. This would be on a single house basis. Neither I nor NORA has thought that large tracts could be assembled using expropriation for the reasons you point out. We had intended to use it selectively, as you suggest, to show recalcitrant property owners the wisdom of being reasonable. Even then it must be a part of the development that remains in public ownership.
Id. 73. Id. 74. In the same e-mail exchange, I offered the following response:
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Executive Director spoke approvingly of an additional legal theory—that NORA could avoid the constitutional limitations on third-party transfers by creating a community improvement district and maintaining it for thirty years or more, thereby providing a sufficient public purpose to dispose of 75 expropriated property without regard to the constitutional limitations. These indicia from the agency’s Chair and Executive Director suggest that NORA may yet decide to pin its hopes for the use of expropriation on an untested legal theory that urges recognition of a “public purpose” exception to the restrictions imposed by Amendment 6. This critical legal theory—so central to NORA’s redevelopment planning—remained a matter mostly of wishful speculation in May 2007, since NORA apparently had prepared no legal memoranda or opinions on the proper interpretation of the 76 new constitutional provisions restricting its use of expropriation. Until the Louisiana Supreme Court renders a definitive ruling to the contrary, the plain language of the amendment prohibits third-party dispositions of expropriated property without first offering the property to the original owners, their heirs, or successors in interest. Under current constitutional constraints, expropriation is not a wise strategy for assembling tracts of 77 78 land to fuel large-scale redevelopment in Orleans Parish.
You need a public purpose to take the properties, and that’s no problem in a city with tens of thousands of decimated buildings. You’ve got ‘public purpose’ (health and safety threats) in abundance. But Art. I, Sec. 4(H) says nothing about a public purpose ‘escape clause’ with regard to back-end distributions of expropriated properties.
E-mail from David A. Marcello, Executive Director of The Public Law Center, to Herschel T. Abbott, Jr., Chair of the New Orleans Redevelopment Authority Board of Directors (May 25, 2007) (on file with Loyola Law Review). 75. See Interview with Joseph E. Williams, Executive Director, NORA, in New Orleans, La. (June 6, 2007) [hereinafter Williams Interview]. 76. “I am not aware of any memorandum or opinion of counsel on this issue.” E-mail from Herschel T. Abbott, Jr., Chair of the New Orleans Redevelopment Authority Board of Directors, to David A. Marcello, Executive Director of The Public Law Center (May 25, 2007, 05:29:00 CST) (on file with Loyola Law Review). NORA’s Executive Director, Joseph E. Williams, subsequently confirmed that NORA had no legal analysis of the new constitutional provisions. See Williams Interview, supra note 75. 77. Such use of expropriation invites litigation challenges; more than 60% of expropriation cases contested during the 50-year period from 1954 through 2003 involved the use of expropriation to assemble large tracts of land. See Thomas W. Merrill, The Economics of Public Use, 72 CORNELL L. REV. 61, 98 (1986) (surveying cases from 1954 through 1985); Corey J. Wilk, The Struggle Over the Public Use Clause: Survey of Holdings and Trends, 1986-2003, 39 REAL PROP. PROB. & TR. J. 251, 262 (2004) (surveying cases from 1986 through 2003). 78. An analysis of records at the Civil District Court of Orleans Parish indicated that between them, the City and NORA filed twenty-eight expropriation proceedings in 2007, seeking to acquire a total of ninety-five properties. See NORA Case Nos. (and the number of properties sought): 2007-165 (1), 2007-201 (1), 2007-766 (1), 2007-827 (2), 2007-828 (1), 2007-1159 (1), 2007-1276 (1), 2007-1512 (1), 2007-1513 (1), 2007-2141 (1), 2007-2250 (1), 2007-2251 (1), 2007-2530 (1), 2007-2623 (2), 2007-3361 (1), 2007-4195 (1), 2007-12959 (1), 2007-13264 (1),
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The 2006 constitutional amendments left NORA with limited options in its use of expropriation powers. NORA can use expropriation to acquire 79 property that presents “a threat to public health or safety.” NORA must base its use of expropriation exclusively on the need to remove public health or safety threats and should document how those threatening 80 conditions are “caused by the existing use or disuse of the property.” NORA need not, and indeed must not, invoke “economic development, enhancement of tax revenue, or any incidental benefit to the public” as a 81 basis for its taking of property. “The removal of a threat to public health 82 or safety” affords sufficient public purpose for the expropriation. When property is expropriated by NORA, the owner must receive just 83 compensation “to the full extent of the loss.” Once it has acquired the property, NORA can remedy threatening conditions in whatever manner it deems appropriate within the sound exercise of its administrative discretion, which might mean demolishing the building and clearing the site, boarding up the building, or rehabilitating it for future occupancy. These actions would remove the “threat to public health or safety caused by the existing use or disuse of the property” and would vindicate the public purpose for which the property was expropriated under Amendment 5. When it becomes necessary or appropriate to dispose of the property, however, NORA faces explicit limitations under Amendment 6. NORA has only two options:
1) Offer the property to the original owner, the heirs, or successors in interest at its then-current fair market value. 2) If the original owner, heirs, or successors decline to purchase the 84 property, offer it to the general public via a competitive bid process.
This literal, “strict textualist” interpretation
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of the new amendments
2007-13581 (1), 2007-14398 (1), 2007-15157 (1), 2007-14670 (1), and 2007-14399 (1); City Case Nos. (and the number of properties sought): 2007-5638, 2007-5639 (14), 2007-5794 (13), 200712569 (28), and 2007-14357 (11). 79. LA. CONST. art. I, § 4(B)(2)(c). 80. Id. 81. Id. § 4(B)(3). 82. Id. § 4(B)(2)(c). 83. Id. § 4(B)(5). 84. Id. § 4(H)(1). 85. See Alexander Memorandum, supra note 27, at ii. An alternate term of interpretation for the “strict textualist” reading might be the “plain meaning” rule: When language is plain and unambiguous and does not lead to absurd consequences, it will be given effect as written. See,
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preserves NORA’s power to expropriate properties that present a public health or safety threat and then to remove the threat by repairing or demolishing them. This reading of Amendments 5 and 6 reconciles NORA’s continued use of expropriation with the two new constitutional imperatives that safeguard private property owners—full compensation for their loss, and a right of first refusal to buy back the property. E. NEED FOR A DEFINITIVE RULING ON THIRD-PARTY DISPOSITIONS Dean Frank Alexander’s memorandum identified another problem with regard to third-party dispositions of expropriated property:
I strongly suspect that until there is a final and binding ruling on these questions from the Louisiana Supreme Court, title insurance companies will be extremely reluctant to insure clean title in a transferee (or a transferee’s mortgagee) from NORA of a blighted 86 property acquired by expropriation.
This “strong suspicion” seems very well founded. New constitutional language added by Amendment 6 will cast a substantial cloud on title whenever a public body proposes to transfer expropriated property to a third party in less than thirty years. Title companies are likely to demand a definitive court ruling on the proper application of Amendment 6 before they agree to insure title on the transferred property. Dean Alexander has suggested an alternative to the “strict textualist” reading of Amendments 5 and 6. He calls it a “policy based” interpretation, and it consists of three parts:
First it would place great weight on the constitutional reaffirmation of expropriation for health and safety. Second, it would invoke (or create) a relatively narrow definition of blight for purposes of health and safety. Third, it would conclude that acquisitions for “public purpose” for narrow blight expropriation are not constrained by the 6th amendment. For a Supreme Court to adopt such an argument would be a pretty creative act of constitutional interpretation but it is 87 plausible.
Creative? Yes. Plausible? Perhaps. Persuasive? That remains to be
e.g., Malone v. Shyne, 06-2190, p. 7 (La. 9/13/06); 937 So.2d 343, 349; Ocean Energy, Inc. v. Plaquemines Parish Gov’t., 04-0066, p. 7 (La. 7/6/04); 880 So.2d 1, 7; E. Baton Rouge Parish Sch. Bd. v. Foster, 02-2799, p. 16 (La. 6/6/03); 851 So.2d 985, 996. 86. Alexander Memorandum, supra note 27, at ii. 87. E-mail from Frank Alexander, Professor, Emory Law School, to David A. Marcello, Executive Director of The Public Law Center (June 4, 2007, 09:02 CST) (on file with Loyola Law Review ).
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decided by a court. By what methods might a definitive court ruling be secured? One of NORA’s legal advisers suggested a test case patterned after the litigation that upheld two post-Katrina acts giving insurance policy holders two years 89 rather than one year in which to pursue their claims against insurers. The insurance test case moved quickly through the courts pursuant to the 90 Supreme Court’s exercise of its supervisory authority, but that expedited procedure owed much to the impending one-year anniversary of the 91 storms and to the legislature’s explicit request in the two acts for 92 expedited treatment in the courts. NORA’s test case might combine an expropriation and a declaratory judgment in a single proceeding, but neither the urgency of a prescription deadline nor an express legislative request for expedited treatment would be present to provide a similar impetus for speedy resolution in NORA’s case. The quest for judicial interpretation of Amendments 5 and 6 will likely move at a much slower pace than the insurance test case, and a successful outcome remains very much in doubt. NORA’s legal theories have only recently departed the realm of oral rendition and assumed written form reviewable by the public. As best we can construct them, NORA advanced three discrete legal arguments at various times in 2007 and early 2008. Two concerned the proper interpretation of Amendment 5, and the third proposed an interpretation of Amendment 6. We will first analyze significant constitutional changes made to the definition of “public purpose” by Amendment 5 and examine NORA’s two theories of interpreting Amendment 5. We conclude with an analysis of NORA’s third legal argument, which interprets Amendment 6. 1. NORA’S INTERPRETATION OF AMENDMENT 5 Amendment 5 redefined the acceptable “public purposes” for which property may be expropriated, but much of what it added did not disturb prior law. “Continuous public ownership of property” is addressed and 93 approved in six utterly unexceptional subsections. The general standard
88. Alexander Memorandum, supra note 27, at ii-iii. 89. See State v. All Prop. & Cas. Ins. Carriers Authorized & Licensed to do Bus. in La., 062030 (La. 8/25/06); 937 So.2d 313. 90. Id. at 316-18 (providing “Facts and Procedural History” of the insurance test case). 91. The Louisiana Attorney General filed a writ of certiorari with the Louisiana Supreme Court on August 17, 2006—less than two weeks before the August 29 one-year anniversary of Katrina—urging the court to expedite matters “in contemplation of the expiration of the former prescriptive period for citizens to file claims against their insurers.” Id. at 318. 92. See id. at 317 n.2. 93. LA. CONST. art. I, § 4(B)(2)(b) (dealing with, inter alia, public buildings, roads and bridges, drainage, parks, public utilities, public ports and airports).
88
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for expropriation remains the same as before the amendment—property 94 may only be taken “for public purposes and with just compensation paid.” Amendment 5 did add new language explicitly approving as a public purpose the “removal of a threat to public health or safety caused by the 95 existing use or disuse of the property.” And perhaps most significantly, Amendment 5 explicitly prohibited expropriations for either of two reasons: “(a) for predominant use by any private person or entity; or (b) for transfer 96 of ownership to any private person or entity.” These two explicit prohibitions expressed the legislature’s (and the approving voters’) hostility to “Kelo-style” takings for purposes of third-party transfer. Amendment 5 also prohibited consideration of “economic development, enhancement of tax revenue, or any incidental benefit to the public” in seeking a public 97 purpose for expropriation. Thus, the significant new provisions of Amendment 5 may be summarized as follows: A public entity may take property for purposes of removing “a threat to health or safety,” but it may not take property simply for transfer to a third party—even if that transfer supports economic development, enhanced tax revenue, or other incidental public benefits. NORA has advanced two arguments to avoid the restrictive implications of Amendment 5. Neither stands up well to constitutional analysis. First, NORA has suggested that if property is “taken on grounds of public health and safety, it would fall outside the strictures of the 98 amendments” because the “removal of a threat to public health or safety” is undeniably a “public purpose” under the constitution. The latter half of that sentence is unquestionably true; a threat to “public health or safety” is explicitly approved by constitutional edict as an appropriate public purpose for the taking of property. But there is no support for the questionable conclusion in the first half of the sentence that property taken for a valid public purpose can be alienated without regard to constitutional restrictions on the disposition of expropriated property. NORA’s second legal argument suggests a variation on the same 99 theme: Property expropriated within a community improvement district
94. 95. 96. 97. 98. 99.
LA. CONST. art. I, § 4(B)(1). Id. § 4(B)(2)(c). Id. § 4(B)(1). Id. § 4(B)(3). Herschel T. Abbott, Jr. E-mail, supra note 72. LA. REV. STAT. ANN. §§ 33:4720.56(3)-(4) (2007).
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may be transferred if the district is maintained for thirty years, because the existence of the district supplies an ongoing “public purpose” that 100 Both of overcomes the constitutional restriction on third-party transfers. NORA’s legal arguments rely on “a threat to public health or safety” as a “public purpose” that supports the front-end taking of property. Authority for the front-end taking is not at issue, however; what NORA lacks is constitutional authority to support its back-end disposition of property to a third party in less than thirty years’ time. Dean Alexander analyzes the two explicit prohibitions on thirdparty transfers in Amendment 5 in terms of dominant or secondary purpose for an expropriation: “An alternative policy-based interpretation of [Amendment 5] would construe the key word ‘for’ in the limiting clauses as indicative of prohibited dominant purposes of the expropriation, and not as a limitation on subsequent use when the dominant purpose for acquisition is 102 public health and safety.” With all due respect to Dean Alexander, this focus on dominant and subordinate purposes for expropriation introduces a needless complication. If the expropriating entity has a public purpose based on “a threat to public health or safety,” then references to the two prohibited purposes are of no legal consequence; health or safety threats alone provide a wholly satisfactory public purpose for the taking. Conversely, if the health or safety threats are lacking, the two prohibited purposes provide no support whatsoever for the taking. Why bother to introduce the two prohibited purposes into the analysis? They add nothing but a spurious dust cloud of “ambiguity” that does not really exist. Amendment 5 clearly prohibits a taking for certain questionable 103 “public” purposes related to the property’s later disposition (e.g., for use by or transfer to a private person or entity). But the interpretation of “for” in the language added by Amendment 5 is not the principal limitation on transfers of expropriated property. Amendment 6 added an entirely new 104 and very comprehensive provision that prohibits a transfer of expropriated property held for less than thirty years without first offering it for sale to the original owner, heirs, or successors. A favorable 105 interpretation of “for” as it is used in Amendment 5 does not elude the
100. Williams Interview, supra note 75. 101. LA. CONST. art. I, § 4(B)(1)(a) (“for predominant use by any private person or entity”); § (B)(1)(b) (“for transfer of ownership to any private person or entity”). 102. Alexander, supra note 6, at 741. 103. By new constitutional edict, the two prohibited purposes are no longer “public” in nature, and therefore, they no longer supply the front-end justification that supports a taking of property. See LA. CONST. art. I, § 4(B)(1). 104. Id. § 4(H). 105. Id. § 4(B)(1)(a)-(b).
101
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In his earliest and most expansive blanket prohibitions in Amendment 6. exploration of Section 4(H), even Dean Alexander could not entirely 107 overcome the obstacles erected by Subsection 4(H)(1). 2. NORA’S INTERPRETATION OF AMENDMENT 6 NORA’s third legal argument places great emphasis on the repeated references to the “completion of the project” in subsections 2, 3, and 4 of 108 Amendment 6. The three subsections establish a procedure whereby surplus property taken for a “project” must be identified and offered to the original owner, heirs, and successors. NORA argues that subsection 1 must also be read to apply only to surplus takings of property for a project, but several factors render this argument unpersuasive. First, the word “project” never appears in subsection 1, nor does subsection 1 mention “surplus” property. Both words—”project” and “surplus”—appear repeatedly in each of the subsections 2, 3, and 4, so their absence from subsection 1 is meaningful. Subsection 1 stands apart as a general prohibition on the transfer of expropriated property—any expropriated property, not just surplus property—without first offering it to the original owner, heirs, or successors. Subsection 1 also stands apart from subsections 2, 3, and 4 in its treatment of the all-important “dispositional” alternatives. Subsection 1 broadly prohibits a third-party disposition of expropriated property by whatever means (sale or lease) in less than thirty years after the expropriation. Subsections 2, 3, and 4, on the other hand, establish a specific procedure for identifying surplus property and affirmatively mandate that an offer of “sale” must be made to the original owner, the heirs, or successors within a three-year time period. Subsection 1 differs 109 from subsections 2, 3, and 4 in the dispositional alternatives and in the
106. LA. CONST. art. I, § 4(H)(1). 107. “That still leaves, however, the question of whether Sec. 4(H)(1) is applicable to expropriations based on Sec. 4(B)(2)(c).” Alexander Memorandum, supra note 27, at ii. 108. See Memorandum in Opposition to Curator’s Exception of Unconstitutional Expropriation, New Orleans Redev. Auth. v. Kittoria Johnson, No. 2007-3102, slip op. at 18-19 (Civil Dist. Court for the Parish of Orleans Jan. 8, 2008). The Johnson proceeding is NORA’s “test case.” It involved a “quick take” expropriation in which the lead plaintiff was cited and served but filed no answer within the abbreviated time constraints, and accordingly, “[a]ny defense on the merits she might have raised by so doing is accordingly now foreclosed to her.” Id. at 2, n. 1. Her husband and co-owner, “believed to be deceased,” is represented by a curator. Id. at 2. The curator, Keith Doley, filed an Exception to the expropriation. Id. at 1. 109. Compare LA. CONST. art. I, § 4(H)(1) (requiring in prohibitory language that “the state or its political subdivisions shall not sell or lease property”) with id. § 4(H)(3) (requiring affirmatively that surplus property must “be offered for sale”).
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timetables after expropriation, lending further support to the view that subsection 1 operates independently of the other three subsections. The legislative history of Act 859 also militates against NORA’s preferred interpretation of Amendment 6. The Senate Committee on 112 Judiciary A changed the title of Reengrossed House Bill 707 and specified two separate purposes: (1) “to prohibit, except in limited instances, the transfer or lease of property expropriated by the state or its political subdivisions to any person without first offering the property to the original owner”; and then, separately, (2) “to provide that unused expropriated property be declared surplus property to be first offered to the 113 original owner prior to sale to the general public by competitive bid.” 114 Stating two separate purposes in the bill’s title would not have been necessary if the intent had simply been to prohibit in one stroke third-party dispositions of project-related surplus property. The first purpose specifies that third-party transfers of property are prohibited in less than thirty years, except in limited instances (which are all enumerated in the first sentence of subsection 1). The second purpose speaks without limitation about “unused expropriated property,” requiring that it “be declared surplus property” and offered for sale to the original owner within a period of one to three years. Both the plain language and the legislative history of Act 859 refute NORA’s suggested interpretation of subsection 1. The legislative history of Act 859 also undercuts an earlier argument by NORA regarding the power of “health or safety” expropriations under Amendment 5 to overcome the thirty-year constitutional restriction on 115 third-party transfers found in Amendment 6. When HB 707 left the
111
110. Compare LA. CONST. art. I, § 4(H)(1) (restricting a transfer of expropriated property for thirty years) with id. §§ 4(H)(2)-(4) (requiring identification of surplus property and an offer of sale over a period of one to three years). 111. Act 859 became Amendment 6 upon approval by Louisiana voters on September 30, 2006. See Louisiana Secretary of State, Official Election Results; Results for election Date: 9/30/06, http://www400.sos.louisiana.gov:8090/cgibin/?rqsty p=elcms4&rqsdta=093006. 112. HB 707 was enacted by the Legislature and signed into law by the Governor as Act 859. See H.B. 707, 2006 Leg., Reg. Sess. (La. 2006). Act 859 later became Amendment 6 when approved by voters on September 30, 2006. See Louisiana Secretary of State, Official Election Results; Results for election Date: 9/30/06, http://www400.sos.louisiana.gov:8090/cgibin/?rqstyp= elcms4&rqsdta=093006 (last visited Feb. 27, 2008). 113. Amendment No. 2 was proposed by the Senate Committee on Judiciary A and adopted on June 7, 2007 by the Senate. See SENATE COMMITTEE ON JUDICIARY A, LOUISIANA STATE LEGISLATURE, SENATE COMMITTEE AMENDMENTS, at 1, ll. 3-9, available at http://www.legis. state.la.us/billdata/streamdocument.asp?did=407054 (last visited Feb. 27, 2008) (emphasis added). 114. Article III, section 15(A) of the Louisiana State Constitution requires that “[e]very bill shall contain a brief title indicative of its object.” LA. CONST. art. III, § 15(A). 115. See infra Part I.E.1 (discussing “NORA’s Interpretation of Amendment 5”).
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House of Representatives in its Reengrossed form, it provided that “a public purpose shall be limited” to three paramount public purposes:
a general public right to a definite use of the property taken, the use of the property taken for utility or other common carrier, or the removal of a threat to public health or safety with the existing use of the property taken. “Public purpose” shall not otherwise include transfer 116 of ownership to a private entity or individual.
Had the language in the last sentence been retained in Act 859, it would have established a clear exception to the prohibitions against third-party transfers: Transfers to a private entity or individual would have been permissible for specified purposes (including “health or safety” threats); otherwise, they would have been prohibited. This entire provision was removed, however, by amendments adopted in the Senate Committee on 117 118 Judiciary A —a deletion accepted by the full Senate and ultimately 119 retained in the Conference Committee Report approved by the House and the Senate. This legislative history reveals some weakness in NORA’s argument that “public health or safety” threats under Amendment 5 not only afford a sufficient basis for front-end taking but also override the back-end restrictions on disposition of property found in Amendment 6. Regardless of whether they adhere to a “strict textualist” or a “policy 120 based” interpretation, most analysts agree the new constitutional
116. H.B. 707 (Reengrossed), 2006 Leg., Reg. Sess. (La. 2006), at 2, ll. 9-13, available at http://www.legis.state.la.us/billdata/streamdocument.asp?did=390574 (last visited Feb. 27, 2008) (emphasis added). 117. See Louisiana State Legislature, Senate Committee Amendments: Amendments proposed by S. Comm. on Judiciary A to Reengrossed House Bill No. 707 by Rep. Farrar, at Amendment No. 4, available at http://www.legis.state.la.us/billdata/streamdocument.asp?did=397526 (last visited Feb, 27, 2008). 118. See Louisiana State Legislature, HB707 - 2006 Regular Session (Act 859), http://www.le gis.state.la.us/billdata/History.asp?sessionid=06RS&billid=HB707 [hereinafter H.B. 707 History] (providing history of H.B. 707). 119. See Louisiana State Legislature, Conference Committee Report: House Bill No. 707 by Representative Farrar, at 1, http://www.legis.state.la.us/billdata/streamdocument.asp?did=403543 (last visited Feb. 27, 2008) (recommending deletion of the “otherwise” provision); H.B. 707 History, supra note 118 (noting House and Senate adoption of the Conference Committee Report on June 19, 2006). 120. NORA’s Director of Real Estate Strategy expressed a different view at Loyola University’s January 18, 2008 conference on housing redevelopment, stating that he saw “no problem with the transferability of blighted property.” See DVD: Revitalizing Community Assets: A Conference on Blighted, Abandoned and Tax Adjudicated Property and Land Use Planning in Post-Katrina Louisiana, held by the Loyola Law Review and the Center for Environmental Law and Land Use (Jan. 18, 2008) (on file with Loyola Law Review) [hereinafter Revitalizing Community Assets DVD] (comments by Ommeed Sathe). NORA needs more than unbridled optimism in determining its expropriation strategy. For the agency’s most substantial statement of
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language presents substantial constitutional questions that must be resolved by a definitive court ruling before NORA begins aggressively expropriating properties intended for transfer to a third party. Despite cautionary advice from numerous sources, however, NORA officials continued in early 2008 to “say they will need millions of dollars in the future to purchase—and when necessary, to take forcibly through expropriation—thousands of 121 blighted properties that have been left to crumble.” NORA cannot rely on the courts to save it after the fact—a deus ex machina jurisprudential salvation to extricate the agency’s expropriated properties from the “roach motel.” NORA needs to pursue test case litigation before initiating widespread use of expropriation. Expropriated property that is intended for later transfer to a third party must include as part of its redevelopment cost the delay, considerable uncertainty, and legal fees required to obtain a definitive court ruling that will be essential in securing title insurance on the property. II. BEYOND EXPROPRIATION: ADDITIONAL REDEVELOPMENT STRATEGIES FOR NORA Thus far, this Article has focused on the effect that Amendments 5 and 6 will have on NORA’s use of expropriation in the redevelopment process. But expropriation is not the only power that NORA should consider in devising a redevelopment strategy for New Orleans. At least four viable options for redevelopment are available to NORA. Having already considered the first of these, (1) expropriation, this Article will now address (2) tax adjudicated properties, (3) Road Home properties, and (4) properties acquired by NORA as a bidder at public auctions. As we move from expropriation to consideration of tax sales as a means of acquiring property for redevelopment, we must note that expropriation and tax sales are two discrete acquisition methods, governed by different laws with little common ground—a point made explicitly in Dean Alexander’s memorandum.
its legal position, see Memorandum in Opposition, supra note 108 (filed in NORA’s test case). That case awaits trial at the district court level and will thereafter presumably be followed by an appeal to the Fourth Circuit Court of Appeal and writs to the Louisiana Supreme Court. Meanwhile, NORA continues to expropriate property at a rapidly escalating pace, filing about half as many expropriation cases in the first month-and-a-half of 2008 as they did in all of 2007. See Civil District Court of Orleans Parish Case Nos. 2008-706, 2008-770, 2008-771, 2008-773, 2008919, 2008-920, 2008-1105, 2008-1318, 2008-1366, 2008-1610, and 2008-1611. 121. Frank Donze Taking a Bite out of Blight: After a Slow Start, the Agency with a Lead Role in N.O.’s Recovery is Taking on a Few Dozen Abandoned Lots, TIMES-PICAYUNE, Jan. 22, 2008, at A1 (emphasis added).
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The Alexander memorandum identified two important responsibilities 122 consigned to NORA by the initial operating agreement between NORA and the City of New Orleans (which is referred to as “NOLA” below):
(1) expropriation of “blighted” properties, and (2) processing of tax adjudicated properties currently held by NOLA, either in terms of clearing title or in terms of dispositions or both. These two functions have little if any overlap in terms of the law and none with respect to 123 the recent constitutional amendments.
Alexander is correct. Expropriated and adjudicated properties fall into two separate categories. They are acquired by separate legal procedures. They present distinct legal challenges. For example, the 2006 constitutional am124 endments complicated third-party transfers of expropriated properties, but had no legal impact on adjudicated properties. Likewise, the main challenge for adjudicated properties (delay imposed by the constitutional 125 redemptive period ) is of no legal relevance to expropriated properties. Before comparing the relative advantages and disadvantages of expropriated and tax adjudicated properties, we must first understand the legal procedures governing tax sales of property: What happens when taxdelinquent property is seized and put up for auction? 1. CONSTITUTIONAL AND STATUTORY FRAMEWORK FOR TAX SALES When past-due real estate taxes accrue on a property, the City may assert tax liens and, after proper notice to the owner and other interested 126 parties, may seize and advertise the property for sale at a public auction. A successful bidder at a tax sale (one who exceeds the minimum bid and
122. See NORA-NOLA CEA I, supra note 16, at 3. In May 2007, only six months after CEA I was executed, the City announced its intention to renegotiate the CEA with NORA due to additional, unanticipated responsibilities that the City sought to confer on the agency. See Michelle Krupa & Frank Donze, NORA, City Hall Lock Horns; $600,000 Withheld from Recovery Agency, TIMES-PICAYUNE, June 13, 2007, at A1. Six months later in December 2007, the City and NORA executed a new CEA incorporating much new verbiage about the Citywide Strategic Recovery and Redevelopment Plan and the Citywide Recovery Implementation Strategy. See COOPERATIVE ENDEAVOR AGREEMENT BETWEEN THE CITY OF NEW ORLEANS AND NEW ORLEANS REDEVELOPMENT AUTHORITY FOR TARGETED AREA LAND ASSEMBLY (Dec. 10, 2008) (on file with Loyola Law Review) [hereinafter NOLA-NORA CEA II]. 123. Alexander Memorandum, supra note 27, at ii. 124. See LA. CONST. art. I, § 4(H)(1) (imposing thirty-year restriction on third-party transfer of expropriated property). 125. Id. art. VII, § 25. 126. LA. REV. STAT. ANN. § 47:2180 (2007).
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outbids all other bidders ) obtains title to the property. Title passes directly from the original tax-delinquent property owner to the new owner 128 The tax sale’s direct and immediate who bid successfully at the auction. passage of title from the original to the new owner without a public entity serving as the intermediary has several advantages: (a) the public sector does not need to expend public funds for the property, as it would if paying just compensation for an expropriation; (b) the property never winds up in 129 public ownership and therefore avoids some potential liability problems; and (c) the public entity avoids the challenge of having to dispose of properties in its ownership portfolio.
Abandoned Property When applied to immovable property, the term “abandoned property” generally consists of two elements: (1) property that has been “adjudicated to a municipality for nonpayment of taxes”; and (2) property that is “vacant or not lawfully occupied.” See, e.g., LA. REV. STAT. ANN. §§ 33:2891.1(2), 4720.12 (2007). The term “vacant or not lawfully occupied” is also defined at several places in the revised statutes, and these definitions are admirably consistent with each other. See LA. REV. STAT. ANN. §§ 19:136.1(1), 33:2891.2(4), 4720.12(1) (2007). But the meaning of “abandoned property” becomes confused by additional definitions that are inconsistent with the term as it is generally used (to encompass the two concepts of “adjudicated” and “vacant or not lawfully occupied”). For example, Louisiana Revised Statutes section 19:136.1(1) defines “abandoned property” exclusively as “vacant or not lawfully occupied” and makes no mention of adjudication to a municipality for nonpayment of taxes. Louisiana Revised Statute section 33:4720.26 confuses matters further by attempting to define a couplet, “abandoned or blighted property,” first retaining the two elements of (1) adjudication “for non-payment of taxes” and (2) “vacant or not lawfully occupied” (presumably descriptive of “abandoned” property), but then adding a reference to property “acquired by a political subdivision by other means . . . and which can be used presently for housing or can be revitalized for housing” (which is presumably meant to describe the other term, “blighted” property). If this is confusing, dear reader, don’t blame me. Dean Frank Alexander said it well: “[T]he definitions of abandoned or blighted are under-inclusive with regard to the inventory of tax delinquent properties and are not consistent with one another.” See Frank S. Alexander, La. Land Reform in the Storms’ Aftermath, 53 LOY. L. REV. 727, 752 (2008). My own conclusion is that “blight” or “blighted,” when used as terms of art rather than as generic descriptions of dilapidated property, do enjoy a relatively consistent definition in the Revised Statutes. “Abandoned” property, however, remains a moving target.
127. See, e.g., LA. REV. STAT. ANN. § 33:2868(A) (2007). 128. By contrast, a third-party transfer of expropriated property passes title from the original owner to the expropriating authority, requiring a separate transaction to transfer title from the expropriating public entity to a third-party purchaser. 129. Some tax-delinquent property “sales” do create potential exposure for public entities— specifically, the failed tax sales that result in an “adjudication” of property to the state or a political subdivision. See, e.g., LA. REV. STAT. ANN. § 33:4720.19 (2007) (attempting to displace liability onto the tax-delinquent owner of “adjudicated” property, notwithstanding that the property has been “bid in” to the state or a political subdivision). See infra Part II.A.2 (discussing “adjudicated” properties).
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Properties sold at tax sales come with one very substantial obstacle to their redevelopment—the constitutional right of redemption:
(B) Redemption. (1) The property sold shall be redeemable for three years after the date of recordation of the tax sale, by paying the price given, including costs, five percent penalty thereon, and interest at the rate of one percent per month until redemption. (2) In the city of New Orleans, when such property sold is residential 130 or commercial property which is abandoned property as defined by R.S. 33:4720.12(1) or blighted property as defined by Act 155 of the 1984 Regular Session, it shall be redeemable for eighteen months after the date of recordation of the tax sale by payment in accordance with 131 Subparagraph (1) of this Paragraph.
The general rule is that property sold at a tax sale remains subject to 132 redemption for a period of three years. In New Orleans, however, property that is abandoned or that has been declared blighted is subject to 133 134 By clear constitutional and an eighteen-month redemption period. 135 statutory mandate, the redemption period only begins running from the date when a tax deed has been recorded. Regardless of whether the redemption period plays out over eighteen months or three years or even longer (a possibility for purposes of establishing clear title to the 136 property), the essential and disabling fact about tax sales is that they
130. The meaning of “abandoned” property is made clear in this context by reference to a statutory definition (appearing, oddly, in a constitutional provision). The term’s meaning is far from clear, however, as measured by other statutory definitions. See the semantic sidebar at page 791 regarding “‘Abandoned’ Property.” 131. LA. CONST. art. VII, § 25 (emphasis added). The redemption period begins running only after evidence of the tax sale has been recorded on the real property records. Id. 132. Id. § 25(B)(1). 133. Id. § 25(B)(2). 134. Id. § 25(B). 135. See, e.g., LA. REV. STAT. ANN. §§ 47:2180(D), 2183(A) (2007). 136. A suit to annul for failure to give proper notice may be brought up to five years after the date of recordation of the tax deed. See LA. CONST. art. VII, § 25(C). See also Jamie Land Co., Inc. v. Touchstone, 06-2057, p. 8 (La. App. 1 Cir. 6/8/07); 965 So. 2d 873, 877 (holding that deficient notice renders a tax sale null and void). Moreover, the five-year prescriptive period is interrupted if the tax debtor maintains corporeal possession of the property. See LA. REV. STAT. ANN. §§ 47:2226, 2228 (2007). Further delays may result if a suit to quiet title or a monition proceeding is required in order to obtain title insurance. See LA. CONST. art. VII, § 25(D); LA. REV. STAT. ANN. §§ 13:4941, 47:2228 (2007). At the very last, after a great many “process” delays have already been implemented, an additional sixty-day notice of the right of redemption may be required, potentially leading even at that late stage to redemption of the property by a tax debtor. See LA. REV. STAT. ANN. §§ 33:4720.12(2), .26(2), .31(A), .31(C). See also id. § 47:2261.
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Most new purchasers will not impose a constitutionally protected delay. spend money to rehabilitate property that the earlier owner could still reclaim by paying the delinquent taxes. The preceding paragraphs describe problems that arise when property is put up for auction at a tax sale and is purchased by a successful bidder. Further complications arise when the property fails to sell at auction and becomes an “adjudicated” property:
[Louisiana’s] property tax foreclosure laws are among the most complex, lengthy, and convoluted of any state in the country. Properties sold at tax auctions are subject to multi-year rights of redemption and inevitably fail to convey marketable and insurable title because of the lack of judicial process and the inadequacy of constitutionally required notice to interested parties. Properties not purchased by private third parties at the tax auctions default to the local government as “adjudicated” properties. They are then subject to even more statutory procedures and time periods before they can be 138 conveyed to third parties.
Tax sales of property—particularly “adjudicated” properties—produce complicated title problems that render them unsuitable for a redevelopment strategy dealing with the massive numbers of housing units damaged by Katrina and Rita. 2. “ADJUDICATED” PROPERTIES “Adjudicated” properties are tax-delinquent properties that were seized for nonpayment of real estate taxes and put up for public auction, but 139 140 then failed to secure a minimum bid and were “bid in” to the City. Adjudicated properties are, in effect, the products of a failed tax sale. After 141 “adjudication,” properties are still subject to the 18-36 month redemptive
137. Louisiana’s legislators and voters are not likely to remove or reduce this constitutional redemption period. See discussion infra at Part IV.B (noting the political obstacles to changing the redemption period). 138. Alexander, supra note 6, at 733 (footnote omitted). Dean Alexander concludes that “statutory treatment of ‘adjudicated properties’ . . . is far more cumbersome and restrictive than are the rights of the original purchasers at tax sales” and the statutes “significantly limit and restrict the ability of local governments to return these properties to productive use.” See Alexander, supra note 6, at 754. His recommended solution is “to eliminate entirely the concept and terminology of ‘adjudicated’ property.” See Alexander, supra note 6, at 754. 139. See, e.g., LA. REV. STAT. ANN. §§ 47:2189(B)(3), 4(a) (2007). 140. See id. § 47:2186 (providing that any property not sold at a tax sale will be adjudicated to the state: “The bid to be accepted in tax sales shall be at least equal to the taxes, costs and interest; otherwise, the tax collector shall bid in the property for the state.”). 141. Do not confuse this use of “adjudication” with references to an “administrative adjudi-
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period, or even longer periods depending upon how long they have been held by the City and whether the City filed any documentation of the 142 Acquiring physical possession of an adjudication in the public record. 143 adjudicated property requires additional action. In most cases, none of the troubling title problems associated with such properties will have been resolved when they are transferred to a potential developer—and this is true whether they are transferred to a private (profit or nonprofit) developer or to a public developer, such as NORA. We might fairly ask, “What has the City transferred when it transfers an adjudicated property to a potential developer?” The most recent foray into these troubled waters (the “SOAP” program, discussed below) suggests that the City simply “outsourced” to private developers the considerable title clearance problems associated with adjudicated properties. New Orleans Mayor C. Ray Nagin’s experience with adjudicated properties described an arc from soaring optimism in November 2003, when the City first announced its Sale of Abandoned/Adjudicated Property 144 (SOAP) program, through disappointing denouement four years later. Few properties had actually been rehabilitated by the time Hurricane Katrina struck in August 2005, nearly two years after SOAP had been announced by City Hall. In May 2006, the City renewed its commitment to SOAP and ambitiously promised to move 2,500 adjudicated properties 145 through the program. Three months later in August 2006, the City
cation,” which simply means “hearing.” See the semantic sidebar at page 820 regarding “Adjudicated” and “Adjudication,” which this Article uses exclusively to describe properties that failed to sell at a tax sale. 142. Numerous statutes provide that the redemption period does not begin to run until the taxdelinquent owner is dispossessed, which generally involves recordation of the adjudication. See, e.g., LA. REV. STAT. ANN. §§ 47:2221, 2226, 2228, 2228(i) (2007). 143. See id. §§ 33:2862, 47:2183. 144. Mayor Nagin heralded the program for “encouraging investment in our communities and placing abandoned properties back into commerce.” See Press Release, City of New Orleans, Mayors Office of Commc’ns, Abandoned Property Program Brings City $1.1 Million (Nov. 17, 2003), available at https://secure.cityofno.com/SystemModules/PrintPage.aspx?portal= 35&load= ~/PortalModules/ViewPressRelease.ascx&itemid=583 (last visited Feb. 27, 2008). The City also implemented a Donation of Abandoned Property (DOAP) program that introduced another element of delay into the redevelopment process by requiring developers to obtain an additional release from the City’s 270-day redevelopment obligation. Telephone Interview with Scott R. Simmons, Attorney, in New Orleans, La. (Jan. 30, 2008). 145. Mayor Nagin assured post-Katrina New Orleans that SOAP would present the City with “an excellent opportunity to utilize its adjudicated/abandoned property to jump-start redevelopment activities throughout the City with a systematic approach.” See Press Release, City of New Orleans, Mayors Office of Commc’ns, City Seeking Applications to Purchase Adjudicated/Abandoned Property: 2,500 Adjudicated Residential Properties to Be Put Back Into
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announced that it had “awarded” 2,000 adjudicated properties to developers, but most developers didn’t actually receive any properties until 146 In April 2007 the newspaper reported that “a bureaucratic months later. problem with closing on the properties has slowed a plan that was supposed 147 to speed up the recovery.” By May 2007, one year after the City’s ambitious goal of 2,500 properties was announced with bubbly optimism, the newspaper reported that the SOAP program had “not yet yielded a 148 single home.” Participants in the City’s August 2006 SOAP “auction” of adjudicated properties gave informed answers when The Times-Picayune interviewed them nine months later about the problems they had encountered and their 149 progress (or lack thereof) in redeveloping the adjudicated properties. The newspaper reported that “only 81 of the parcels have made it into the hands 150 of developers, and not a single housing unit has been completed.” Originally touted in August 2006 by Mayor Nagin as a “speedy response” to the city’s housing problems, “the program for returning what are called ‘adjudicated properties’ to commerce has proved to be far more complex— 151 and thus far slower—than the mayor envisioned.” Some problems are endemic to the adjudicated properties process and will likely recur whenever that process is relied upon as a housing redevelopment strategy. For example, almost 500 properties were “reclaimed by the same owners who allowed them to slip into delinquency,” and “there’s no real reason to expect that the owner, his debt settled, will suddenly rehabilitate a property that he allowed to languish,” so “the city will once again have to seize some of the temporarily redeemed 152 properties if nothing is done to improve them.” If the City simply seizes these properties under the same tax delinquency enforcement process, then the same cycle of seizure and redemption will likely be repeated with no
Commerce (May 23, 2006), available at http://www.cityofno.com/portal.aspx?portal=1&load=~/ PortalModules/ViewPressRelease.ascx&itemid=3596 (last visited Feb. 27, 2008). 146. Gordon Russell & Michelle Krupa, Blighted Hope: A Grand Plan to Convert About 2,400 Decrepit Properties into Affordable Housing Has Not Yet Yielded a Single Home, TIMESPICAYUNE, May 6, 2007, at A1. 147. Local News: Red Tape Tying Up Plans for Recovery: Adjudicated Properties Cannot be Sold, Preventing New Homes from Being Built (WWL-TV television broadcast Apr. 14, 2007), available at http://www.wwltv.com/local/stories/wwl041407khadjudicated.ca52117.html (last visited Feb. 27, 2008). 148. Russell & Krupa, supra note 146, at A1. 149. Russell & Krupa, supra note 146, at A1. 150. Russell & Krupa, supra note 146, at A1. 151. Russell & Krupa, supra note 146, at A1. 152. Russell & Krupa, supra note 146, at A1.
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that actually returns reason to expect a more favorable outcome adjudicated properties to commerce. This Article recommends instead that 154 the City should seize and sell properties through code enforcement; the disabling redemptive period would thereby be entirely avoided, and properties could be immediately redeveloped and returned to productive uses. Title problems present another unfortunate roadblock that is endemic to the adjudicated properties process. Clearing title to adjudicated properties presents “a task far more complex than the routine title clearance that accompanies a typical home sale” because the properties are often burdened with “tax or other liens” and compromised by unopened 155 “successions with multiple heirs.” Complicating the task still further is the fact that “City real estate records were in a shambles even before 156 Katrina.” Some problems reported by developers are not endemic to adjudicated properties but must instead be attributed to deficiencies in how the City administered the SOAP program. For example, developers criticized the City’s slow pace in identifying and transferring properties to them:
The program wasn’t quite ready for prime time when it was unveiled. Though the mayor announced the award of about 2,000 properties to 22 developers on Aug. 1, several builders said nearly two months passed before they could even determine the addresses of the 157 properties they had been assigned . . . .
Nor had properties been properly screened: “Though the list was supposed to have been scrubbed by the city, many entries on it were unsuitable for 158 development, including occupied buildings and inaccessible lots.”
153. This strategy sounds disturbingly like the facetious “definition of insanity” popularly attributed to Benjamin Franklin, Albert Einstein, and others: “Doing the same thing over and over and expecting different results.” See http://www.quotationspage.com/quote/26032.html (last visited Feb. 27, 2008). 154. See infra Part III for a detailed discussion of code enforcement. 155. Russell & Krupa, supra note 146, at A1 (“In some cases, title abstractors have had to look back eight decades to find a sale.”) 156. Russell & Krupa, supra note 146, at A1. 157. Russell & Krupa, supra note 146, at A1. 158. Brad Powers, Executive Director of Jericho Road, the Episcopal Church’s nonprofit housing redevelopment arm, observed further that “No one had filtered the list.” Russell & Krupa, supra note 146, at A1. Craig Guidry, Asset Manager for Alexandria Land & Development, which received unbuildable lots, complained that if the City would “take those out of the realm (sic) before you start the titling process, you wouldn’t have to waste your time.” Russell & Krupa, supra note 146, at A1.
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The City’s process for awarding properties was characterized as “opaque,” and “some of those who were shut out complained that it was 159 impossible to tell how the city made its awards.” The City represented that “organizations with strong finances and long track records of development would get first dibs,” but wound up awarding properties to groups that had “little experience in the development field. Some did not submit financial information, while others presented records that did not 160 necessarily demonstrate a capability to manage a major project.” Habitat for Humanity’s Executive Director, Jim Pate, identified a disconnect between what the City initially suggested and what developers actually discovered about the readiness of these adjudicated properties for redevelopment:
“The mistake among some developers was in believing that the distributed parcels would be ready for development,” said Habitat for Humanity’s Pate. “It was unclear to almost everyone . . . that we would have to do full-blown title searches and noticing,” said Pate, noting that the breezy way in which the program was unveiled contributed to the misunderstanding. “I think they thought they were 161 going to get clear title, then off to the races.”
Instead, developers learned that in dealing with adjudicated properties, “title remains cloudy until an attempt is made to notify the original owner” by sending a letter and publishing “newspaper advertisements that give the 162 former owner 60 days to respond before the title can be cleared.” Some developers provided the requisite notices but nonetheless lost properties to the original owners, who were able to redeem them even after the 60-day period because the City failed “to complete a series of final steps, the last of which is the mayor signing papers to complete the transfer. In several cases, a month or more has passed between the end of the 60-day period 163 and the actual transfer, a lag developers say is too long.” The City now proposes to rid itself of these troublesome adjudicated 164 properties by consigning them to NORA. NORA has wisely limited its
159. Russell & Krupa, supra note 146, at A1. 160. Russell & Krupa, supra note 146, at A1. 161. Russell & Krupa, supra note 146, at A1. 162. Russell & Krupa, supra note 146, at A1. See also LA. REV. STAT. ANN. § 33:4720.17 (2007). 163. Russell & Krupa, supra note 146, at A1. An attorney conducting title work for Jericho Road, Habitat for Humanity, and ACORN experienced delays of 3-4 months after expiration of the 60-day period while waiting for the Mayor’s signature. Telephone interview with Scott R. Simmons, Attorney, in New Orleans, La. (January 30, 2008). 164. See NORA-NOLA CEA I, supra note 16, at 3.
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initial goals with regard to redevelopment of adjudicated properties, targeting a modest thirty properties as contrasted with the overly ambitious 165 But “NORA is unlikely to 2,500 announced by the City a year earlier. avoid the same obstacles as the current crop of private developers because future property titles will be no less cloudy, and many requirements of the 166 adjudication process cannot be compressed” under the current constitutional regime. NORA’s Executive Director acknowledged that the “largest expense looming for the agency is the cost of clearing title to its properties;” at the time of his acknowledgment, NORA’s entire available operating funds constituted less than one-third of the funds that would be needed to clear 167 title to its inventory of 1,550 properties. Thousands more properties are slated to come NORA’s way in the next several years. Is clearing title to adjudicated properties really the best use of NORA’s limited resources, given the troubling combination of endemic and administrative problems so vividly demonstrated by the City’s SOAP program? NORA was acutely aware of the title problems presented by adjudicated properties when it had multiple bills introduced in the 2007 session, seeking “an expedited procedure to quiet title” on adjudicated 168 SB 122 passed as Act 256, and is now likely to face litigation properties. challenging the constitutional validity of its various provisions. Section C of the legislation, for example, purports to authorize by statute the entry of a court order “vesting absolute title in the authority, without right of 169 redemption for each parcel of property listed” in the petition. A property owner’s right of redemption is, of course, constitutionally protected in 170 Louisiana, so the legal efficacy of these statutory and judicial directives
165. Donze, supra note 14, at A11. 166. Russell & Krupa, supra note 146, at A1. 167. Donze, supra note 14, at A11. 168. Duplicate bills introduced in the 2007 Regular Session, proposed to establish an in globo proceeding for NORA to quiet title on adjudicated properties. See Louisiana State Legislature, Session Info, 2007 Regular Legislative Session, http://www.legis.state.la.us/ (last visited Feb. 27, 2008). H.B. 694 emerged from the House and was considered in the Senate Local and Governmental Affairs Committee on June 7, 2007, but moved no further in the legislative process. See H.B. 694, 2007 Leg., Reg. Sess. (La. 2007); see also Louisiana State Legislature, Senate Committee on Local and Municipal Affairs, Agenda: June 7, 2007, http://www.legis.state.la. us/billdata/agenda.asp?meeting_id=10565 (last visited Feb. 27, 2008) (noting that H.B. 694 was considered on June 7, 2007). S.B. 263 was withdrawn from the files of the Senate. See Louisiana State Legislature, Session Info, 2007 Regular Session, SB 263, History, http://www.legis.state.la. us/billdata/History.asp?sessionid=07RS&billid=SB263 (last visited Feb. 27, 2008). SB 122 ultimately emerged from the process as Act 256. See S.B. 256, 2007 Leg., Reg. Sess. (La. 2007). 169. S.B. 256, 2007 Leg., Reg. Sess. (La. 2007). 170. LA. CONST. art. VII, § 25(B).
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will ultimately depend on whether the constitutional redemptive period has in fact run its course. The legislation was patterned after similar legislation 171 172 where redemptive periods are established by statute. in Michigan, Michigan’s legislature had more latitude to extinguish redemptive rights by statute than is the case in Louisiana, where redemptive periods are 173 established by the state constitution. Moreover, the Michigan legislation relied on a comprehensive tax foreclosure system that was enacted in 174 1999, while Louisiana has not yet achieved comparable reform of its tax 175 adjudication system. An additional constitutional question concerns section K(3) of the new law, which authorizes and directs the district court to specify that “all liens against the property, including any lien for unpaid taxes or special 176 The City of New Orleans has assessments are extinguished.” traditionally maintained that property taxes imposed by the constitution 177 cannot be waived or extinguished by mere statute. Moreover, the constitution explicitly denies the legislature any “power to release, extinguish, or authorize the releasing or extinguishing of any indebtedness, liability, or obligation of a corporation or individual to the state, a parish, or 178 a municipality.” What will the courts say about the bill’s contrary proposition? Can property tax debt be extinguished based simply on 179 statutory authority? Like expropriation, these new provisions regarding adjudicated properties must first undergo challenge through a constitutional test case before they can be relied upon to process large numbers of
171. MICH. COMP. LAWS ANN. § 124.759 (2007). 172. Id. § 125.1449j. 173. Compare id. § 125.1449j with LA. CONST. art. VII, § 25(B). 174. See 1999 Mich. Pub. Acts 123 (H.B. 4489). 175. The Louisiana Law Institute has initiated a study of tax-adjudicated properties, pursuant to H.C.R 69 of 2006. See H.C. Res. 69, 2006 Leg., Reg. Sess. (La. 2006), available at http://www. legis.state.la.us/billdata/streamdocument.asp?did=398583 (last visited Feb. 27, 2008). 176. See H.B. 262, 2006 Leg., Reg. Sess. (La. 2006) (detailing Act 256 of the 2007 Regular Legislative Session). 177. Louisiana Revised Statutes section 33:2880(A)(2) attempts to solve the problem of removing tax debt by stripping it as an in rem burden on the property, but maintaining it as an in personam obligation of the original property owner. See LA. REV. STAT. ANN. § 33:2880(A)(2) (2007) (“Any taxes, charges imposed pursuant to R.S. 33:1236, and paving or other local assessments remaining past due and unpaid after the application of the sales proceeds shall remain the responsibility of the previous owner of the property.”). But see id. § 47:2190(B)(2) (“Should the amount so received be insufficient to pay the taxes and interest due the state . . . , then, and in that event, the said property adjudicated hereunder shall be burdened with the obligation to pay the deficiencies of such taxes, interest, paving liens, reasonable maintenance or demolition costs, and interests, as may be due by the state . . . .”). 178. See LA. CONST. art. VII, § 15 (emphasis added). 179. Some constitutional support for the waiver of taxes exists. See id. §§ 14(B)(7)-(8). These constitutional arguments will nonetheless need to be tested in court, producing further delay.
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properties for rehabilitation. NORA faces severe restrictions on its authority to dispose of expropriated properties, thanks to the recent constitutional constraints on third-party transfers. By contrast, adjudicated properties may be transferred in an abundance of ways. Some laws authorize transfers to encourage 180 homeownership. Others encourage acquisition by an adjoining property 181 182 Some laws rely on public sales. Others allow for an exchange owner. 183 184 of property. Some authorize donations of adjudicated properties. Two 185 are central to the SOAP program. Two other provisions are in conflict with each other, defining different periods to confirm city ownership after 186 recordation of a tax deed. The City can even assert ownership, three years after adjudication, by declaring in the manner of an expropriation that 187 Despite this the adjudicated property is needed for a public purpose. multiplicity of dispositional alternatives, no single one of them has yet solved the underlying problem of delivering clean and merchantable title to 188 adjudicated properties. It’s as if the legislature were throwing darts at a moving target. An apparent virtue—the multitude of dispositional alternatives—bespeaks instead a frenzied and unsuccessful effort to overcome the principal vice of adjudicated properties: title problems 189 associated with the constitutional redemption period.
180. LA. REV. STAT. ANN. §§ 33:2864.1, 2879, 2880 (2007). See also NEW ORLEANS, LA., CODE §§ 150-76, 150-77 (1956). 181. LA. REV. STAT. ANN. § 33:4720.41 (2007). 182. See id. §§ 33:2861, 33:4712, 47:2189. 183. See id. § 33:4712 (“A municipality may sell, lease for a term of up to ninety-nine years, exchange, or otherwise dispose of, . . . any property, . . . which is, in the opinion of the governing authority, not needed for public purposes.”) (emphasis added). 184. LA. CONST. art. VII, § 14(B)(6); LA. REV. STAT. ANN. §§ 33:4717.3, 33:4720.29 (2007). 185. LA. REV. STAT. ANN. §§ 33:4720.11, .25 (2007). See also City of New Orleans, Blighted and Abandoned Property, http://www.cityofno.com/portal.aspx?portal=57&tabid=2 (last visited Feb. 27, 2008) (confirming the SOAP program’s reliance on the two statutory provisions). 186. Compare LA. REV. STAT. ANN. § 33:2877 (2007) (providing for city ownership three years after recordation of the tax deed) with id. § 33:2891.1 (2007) (providing for city ownership five years after recordation of the tax deed). 187. See, e.g., id. §§ 33:2877, 47:2258 (2007). 188. Some provisions purport to deliver such clean and merchantable title. See, e.g., id. § 33:2870 (2007) (“All sales under authority of R.S. 33:2861 through 2876 shall vest in the purchaser an absolute and perfect title to the property conveyed in the deed of sale, without any claim thereto by the former owner, and free of all mortgages, liens, privileges, and encumbrances whatsoever . . . .”). Whether these provisions will pass constitutional muster remains an open jurisprudential question. 189. The Louisiana Legislature has initiated a process that may yet yield reforms. Specifically, HCR 69 of the 2006 Regular Legislative Session called upon the Louisiana Law Institute “to study and make recommendations relative to organizing and improving the procedures for the sale of tax adjudicated properties and to recommend procedures that will ensure merchantable title of tax
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Title problems can be solved and adjudicated properties can succeed when they are employed as part of a small-scale redevelopment program. 190 Jericho Road Episcopal Housing Initiative was awarded a modest number 191 of adjudicated properties in the August 2006 SOAP auction, and after some delay in actually receiving the properties from the City, redeveloped 192 five of them and had 8-10 more under construction one year later. Jericho Road’s success stands out, because no other participant in the SOAP auction showed greater progress a year later in rehabilitating properties. Jericho Road has demonstrated that adjudicated properties can be brought back into commerce when addressed on a relatively small 193 scale. But this Article aspires to offer observations about how the City
adjudicated properties.” See H.C. Res. 69, 2006 Leg., Reg. Sess. (La. 2006), available at http://www.legis.state.la.us/billdata/streamdocument.asp?did=398583 (last visited Feb. 27, 2008). In response, the Council of the Louisiana Law Institute met on August 24-25, 2007 to consider a report on “Tax Sales and Adjudicated Property” prepared by the Adjudicated Property Committee. See Louisiana State Law Institute, Meeting Minutes, The Meeting of the Council (Aug. 24-25, 2007) (on file with Loyola Law Review). The Council approved the Committee’s proposal in December 2007. See E-mail from H. Mark Levy, Louisiana Law Institute, to Christopher Hannan, Editor-in-Chief, Loyola Law Review, Loyola University New Orleans, College of Law (Feb. 19, 2008, 09:52:39 CST) (on file with Loyola Law Review). The Committee plans to submit the proposed statutory revisions to the legislature for the 2008 Regular Session. Id. See also Louisiana Law Institute, Adjudicated Property Committee, Revision of the Louisiana Revised Statutes: Tax Sales and Adjudicated Property; Prepared for the Meeting of the Council, Aug. 2425, 2007, New Orleans (Aug. 14, 2007) (on file with Loyola Law Review) (providing preliminary draft of proposed Revised Statutes sections). 190. According to its Mission and Background statements, Jericho Road aspires to build “quality homes for low income families in the City of New Orleans,” help first time homebuyers, develop up to 150 homes in Central City, then enter into larger low-income housing collaborations with faith-based, nonprofit, and business partners. See Jericho Road Episcopal Housing Initiative, Program Information, at 1 (May 3, 2006), available at http://www.edola.org/pdf/JerRoad Mission.pdf (last visited Feb. 27, 2008); Jericho Road Episcopal Housing Initiative, http://www.jerichohousing.org/ (last visited Feb. 27, 2008) (providing detailed information about Jericho Road). 191. See Jericho Road Episcopal Housing Initiative, Jericho Road Wins Approval for New Orleans Targeted Neighborhood Development (Aug. 1, 2006), available at http://www.ccc nola.org/NEWS.htm (last visited Feb. 27, 2008). 192. E-mail from Professor John Lovett, Loyola University New Orleans School of Law to David A. Marcello, Executive Director of the Public Law Center (Aug. 24, 2007 15:31 CST) (on file with the Loyola Law Review). By January 18, 2008, Jericho Road’s Executive Director, Bradford M. Powers, was able to report that more than forty properties had been completed or were nearing completion. See Revitalizing Community Assets DVD, supra note 120 (comments by Bradford M. Powers). 193. Jericho Road’s success was not without a price. The attorney who cleared title to each property and secured title insurance estimated an average cost of $3000 per property. See Interview with Scott R. Simmons, Attorney, in New Orleans, La. (Aug. 20, 2007). Jericho Road’s demonstrated success with adjudicated properties could be applied with equally good effect (and considerably fewer title-clearing costs) to properties purchased at a code lien auction.
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should allocate scarce resources on a large-scale or “systemic” level, and maintains that adjudicated properties are not the best vehicle for addressing New Orleans’ tens of thousands of damaged properties. The problem lies in perceiving “adjudicated properties” as a global rehabilitation strategy, when in fact each adjudicated property is an individual minefield of title clearance challenges. Every one of the thousands of adjudicated properties has its own unique history of prior ownerships, unopened successions,194 threatened redemptions, absentee owners, or other costly and timeconsuming title clearance challenges. Every one of those properties requires its own title search, and some may require a suit to quiet title before rehabilitation efforts can get underway. Then regrettably, after all the title-clearing expenses are incurred in the early stages, an original taxdelinquent property owner can still whisk the property out of the rehabilitation process with a late-stage redemption. NORA should conduct a very careful assessment before investing major resources into redevelopment of adjudicated properties, because NORA might decide to pursue other, more fruitful and cost-efficient strategies. Adjudicated properties cannot be redeveloped (with all of the investment cost that entails) if they are still burdened with title problems at the end of the redevelopment process. Someone, whether it’s the City in the first instance when property is “adjudicated” to it, or a private developer who receives it in transfer from the City, or NORA if it accepts the proposed massive transfer of adjudicated properties—someone is going to have to do the laborious work of clearing title to each one of those properties. These costs and substantial time delays must be figured into the cost-benefit equation before undertaking the redevelopment of adjudicated properties. The two categories of property considered thus far—those acquired (1) by expropriation and those that were (2) tax adjudicated—both pose very daunting redevelopment challenges. We next consider a third category, (3) the Road Home properties, that have been promised but are not yet forthcoming in substantial quantities. B. REDEVELOPMENT OF ROAD HOME PROPERTIES The State of Louisiana chose to administer its post-Katrina federal housing recovery funds through the Road Home Program, which was created by Governor Kathleen Blanco, the Louisiana Recovery Authority
194. An estimated 15% of property titles may have record owners that do not correspond to current possessors, amounting to as many as 100,000 “non-merchantable” or problem titles in Louisiana. See Malcolm A. Meyer, Louisiana Heirship Property: Solutions for Establishing Record Title, 55 LA. BAR J. (forthcoming Feb. 2008).
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(LRA), and the Office of Community Development (OCD) with the 195 The OCD website described the approval of the Louisiana Legislature. Road Home as “the largest single housing recovery program in U.S. 196 history.” OCD opted to “privatize” the administration of the Road Home 197 Program under a contract with ICF International. The Road Home offered eligible homeowners an opportunity to receive up to $150,000 in compensation for their losses and gave homeowners three compensation options: (1) repair and stay in their homes; (2) sell to the Road Home and purchase another home in Louisiana; or (3) 198 sell the home and choose not to remain a homeowner in Louisiana. Homeowners who chose the third option faced up to a 40% reduction in pre-storm value, a penalty that sought to encourage continued 199 homeownership in Louisiana. “Road Home” properties acquired as a result of Options 2 and 3 will 200 come to the state in a negotiated transfer from property owners, who receive Road Home monies and in turn surrender their title to the Road 201 These properties will come into ownership of the Home Corporation. 202 Road Home Program with far fewer burdens than those encumbering expropriated or tax-delinquent properties, thereby making the Road Home properties far more attractive targets for redevelopment. 1. LAND BANKING The Road Home Program intends to transfer these properties to the City, which in turn has announced its intention to place them with NORA in 203 a “land bank” for redevelopment. A land bank that consists of properties
195. See Louisiana Office of Community Development, Disaster Recovery Unit, Housing: The Road Home, http://www.doa.louisiana.gov/cdbg/DRHousing.htm (last visited Feb. 27, 2008). 196. Id. 197. For a description of ICF International, see the company’s website. ICF International, http://www.icfi.com/ (last visited Feb. 27, 2008). 198. The Road Home, Homeowners, Frequent Questions, http://www.road2la.org/homeowner/ faqs.htm (last visited Feb. 27, 2008). 199. Id. 200. David Hammer, Road Home Seldom Leading out of State; Most Plan to Use Grants to Rebuild, Not to Relocate, TIMES-PICAYUNE, Jan. 19, 2007, at A1. 201. The Road Home program was established as a nonprofit corporation, separate from state government but subject to the Public Records Law, Open Meetings Act, and Code of Governmental Ethics. LA. REV. STAT. ANN. §§ 40:600.61-.68 (2007). 202. See the Road Home website for eligibility criteria, a current accounting of applications received and funds disbursed, answers to Frequently Asked Questions, policies and procedures, and other useful information. The Road Home, http://www.road2la.org/default.htm (last visited Feb. 27, 2008). 203. Laura Maggi, Lawmakers Provide Directions to Road Home Land Bank, NORA to Handle
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acquired through the Road Home Program presents far more promising opportunities for redevelopment than would a land bank consisting of expropriated and adjudicated properties. NORA will not have to deal with the 18-36 month redemptive period, for example, as it would for 204 Nor will NORA be constrained by a thirty-year adjudicated properties. restriction in its resale of Road Home properties, as would be the case in 205 disposing of expropriated properties. NORA will simply need to repair Road Home properties and offer them for resale, enjoying some confidence that in most cases the title transaction handled by the Road Home Program will deliver to NORA a property on which title insurance can be secured by 206 a subsequent purchaser. Taken as a whole, these considerations make category #3 Road Home properties a higher priority and more inviting prospect for “land banking” and redevelopment than the costly and timeconsuming (#1) expropriated and (#2) tax adjudicated properties. “Land banking” sounds like a superb redevelopment strategy, and it 207 can be —but not if it consists mostly of consolidating the ownership of 208 many troubled properties in a single public agency like NORA. This is
Properties, TIMES-PICAYUNE, June 19, 2006, at A2. 204. The three-year redemption period (eighteen months for abandoned and blighted properties) imposed by article VII, section 25 of the Louisiana State Constitution erects a major roadblock to the redevelopment of properties acquired at a tax sale, because most new owners will put off making any improvements to the property until expiration of the redemption period. See LA. CONST. art. VII, §§ 25 (B)(1)-(2). 205. Article I, section 4(H) of the Louisiana State Constitution requires that expropriated property held for less than thirty years must be offered for sale to the original owner, the owner’s heirs, or successors-in-interest and may thereafter be offered for sale only by competitive public bid. Id. § 4(H)(1). These restrictions undermine the use of expropriation to assemble large tracts of land, clear the site, make infrastructure improvements, and return the expropriated properties to the private sector for redevelopment. 206. The Road Home’s Program Policies are protective of clear title, requiring “a full title search to establish ownership” for Option 2 and 3 applicants; ordering a “full title search” and “a title insurance policy” from the title company completing the title search; and cautioning applicants in “2.7 Title Clearance” that the applicant “is responsible for clearing up title issues prior to closing.” THE ROAD HOME, LOUISIANA RECOVERY AUTHORITY, THE ROAD HOME HOMEOWNER POLICIES: VERSION 5.1 (2008), available at http://www.road2la.org/Docs/policies/ Homeowner_Program_Policies_1-4-08_v5.1.pdf (last visited Feb. 27, 2008). 207. See, e.g., EDWARD J. BLAKELY & TED K. BRADSHAW, PLANNING LOCAL ECONOMIC DEVELOPMENT: THEORY AND PRACTICE 181-82 (Sage Publications 3d ed. 2002) (noting the usefulness of land banking and particular modes of land banking that have succeeded in some communities); FRANK S. ALEXANDER, FANNIE MAE FOUND. & LOCAL INITIATIVES SUPPORT CORP., LAND BANK AUTHORITIES: A GUIDE FOR THE CREATION AND OPERATION OF LOCAL LAND BANKS (2005), available at http://www.lisc.org/content/publications/detail/793/ (last visited Feb. 27, 2007); Frank S. Alexander, Land Bank Strategies for Renewing Urban Law, 14 J. Affordable Housing & Cmty. Dev. Law 140 (2005). 208. The Bureau of Governmental Research associated land banking with precisely such troubled properties, characterizing it as “generally the only feasible approach” in “non-functioning
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not the first time NORA has announced its intention to “land bank” 209 Earlier efforts yielded little progress in properties for redevelopment. 210 Consolidation is the relatively easy part of the rehabilitating properties. “land banking” process. What’s more challenging is the ability to rehabilitate those decimated properties, release them from public ownership, and return them to productive private purposes. We should evaluate the efficacy of “land banking” not by the boldness of its front-end acquisition strategies, but rather by its ability on the back-end to move those properties out of public ownership and back into private commerce. Creating a “land bank” that consists mostly of expropriated and adjudicated properties may prove to be a formula for failure rather than a successful strategy for returning rehabilitated housing to the private sector. 2. PROBLEMS IN IMPLEMENTING THE ROAD HOME Despite obvious advantages in how they are acquired, the Road Home properties have encountered their own considerable challenges on the road to redevelopment because of the program’s troubled administration and its excruciatingly slow progress in processing applications submitted by Louisiana homeowners. ICF International took over operation of the Road 211 Home Program in June 2006. An in-depth article by The Times-Picayune
areas with only scattered residents or businesses.” See Letter from Janet R. Howard, President of the Bureau of Governmental Research, to Dr. Edward J. Blakely & Ezra Rapport, Office of Recovery Management (Dec. 11, 2007), available at http://bgr.org/NORA%20&%20blight/Letter %20to%20ORM%2012-11-07.pdf (last visited on February 27, 2008) [hereinafter BGR-ORM Letter]. 209. NORA instituted “land bank” expropriations for “REALM” (its Real Estate Acquisition Landbank Mechanism) before the damaging constitutional amendments adopted in 2006. See Memorandum from Kristine B. Kendrick to the Am. Bar Ass’n Forum on Affordable Housing & Cmty. Dev. Law, Land Banks and Land Assembly: Survey of Law Used to Acquire and Rehabilitate Abandoned and Blighted Property in the City of New Orleans, at 14 (May 26-27, 2005) (on file with Loyola Law Review) [hereinafter Kendrick Memorandum]. A recent article in Preservation in Print, the magazine of the Preservation Resource Center of New Orleans, noted NORA’s inability to successfully implement the REALM land banking program, even before the restrictive amendments:
NORA’s Real Estate Acquisition and Land-banking Mechanism, or REALM, was designed to simplify the process of getting blighted properties into the hands of developers, nonprofits, and individuals committed to renovating and bringing them back into commerce. The current list of properties is said to amount to about 300 parcels. In the past, some of these have been transferred to owners who have let high profile properties deteriorate, while others were not transferred at all, contributing to neighborhood decline.
Louisiana Landmarks Society, Endangered Sites in New Orleans, PRESERVATION IN PRINT, Nov. 2007, at 37, 37 (emphasis added). 210. NORA has historically “had a poor record. In the five years before Katrina, it undertook between 113 and 268 expropriations annually . . . . As of mid-2007, almost half of the properties had not been redeveloped.” See MENDING THE URBAN FABRIC, supra note 52, at 3. 211. See Jeffrey Meitrodt, Understaffed and Overwhelmed: The Firm Administering Louisiana’s Road Home Program Has Consistently Underestimated the Magnitude of the Task,
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newspaper eight months later detailed just how quickly concerns had arisen among state officials about the company’s ability to perform, then how consistently those concerns were vindicated by the company’s poor 212 performance. The public became aware of problems on August 21, 2006, when ICF opened its phone lines to accept grant applications, and the system—staffed to handle up to 6,000 calls per day—crashed under the weight of 32,000 213 calls in the first three days of operation. Telephone staffing problems persisted: “Of 100,000 calls made to the state’s toll-free help line by Oct. 1, more than 26,000 were terminated because people hung up before an agent was available, a rate more than five times the acceptable level spelled out in 214 the West contract.” Nor were in-person appearances more successful. In October, ICF said applicants would have to wait at least a month to book appointments at six of the program’s ten centers; by November, two-month 215 waits were common. In addition to insufficient staffing, ICF operations 216 and by the were plagued by multiple verification requirements complexity of coordinating activities among more than a dozen 217 subcontractors. ICF closings proved painfully slow in delivering money to homeowners. By October 2006, more than 53,000 homeowners had 218 applied, but only eleven had received their money. By mid-November, the pool of applicants had grown to 77,000, but only twenty-eight recipients 219 Mid-December data revealed that out of 89,000 had their checks.
Records Show, TIMES-PICAYUNE, Jan. 28, 2007, at A1. 212. Meitrodt, supra note 211, at A1 (noting that “hundreds of e-mail messages and documents [showed] state officials fretting privately over the company’s bungled efforts almost from the moment its $756 million contract kicked in in June” and finding that “ICF [made] critical misjudgments almost every step of the way, typically by failing to bring sufficient staff resources to bear as applicants move through the process”). 213. Meitrodt, supra note 211, at A1. 214. Meitrodt, supra note 211, at A1. 215. Meitrodt, supra note 211, at A1. 216. State officials “were so worried about designing a fraud-proof program that it is now loaded down with ‘excessive’ verification requirements, such as multiple identification checks and title searches for homeowners who have already furnished up-to-date mortgage and title records.” Meitrodt, supra note 211, at A1. As a result, “the screening process is more stringent in Louisiana, which has 10 levels of verification, than in Mississippi, which has four . . . .” Meitrodt, supra note 211, at A1. 217. Meitrodt, supra note 211, at A1. 218. Meitrodt, supra note 211, at A1. See also THE ROAD HOME, THE ROAD HOME: WEEK 16 SITUATION & PIPELINE REPORT 1 (2006), available at http://road2la.org/Docs/pipeline/Week% 2016%20Combined%20Report.doc (last visited Feb. 27, 2008) (noting that as of October 23, 2006, only fifteen closings out of 75,553 applications had been completed). 219. Ed Anderson, Faster Work Vowed on Grants: Blanco Dissatisfied with Road Home Pace,
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applicants, eighty-five had closed on their award amounts—fewer than 220 State legislators were so incensed that they unanimously .001%! 221 222 and Senate resolutions calling on the approved separate House Division of Administration to immediately terminate the ICF contract and 223 to pursue all legal avenues for recouping funds paid to ICF. Both chambers also approved by unanimous votes a concurrent resolution calling 224 for state and federal authorities to investigate ICF. The company’s attempts to placate authorities only exacerbated the frustration. Immediately after approval of the legislative resolutions in midDecember, a senior company official personally assured the Louisiana 225 Recovery Authority (LRA) that ICF would be handing out 500 grants per day by January, then had to back off that commitment twenty-five days later after only sixty-eight more closings (an average of 2.7 per day) brought the “grand total” of approvals to 153 out of 97,167 homeowner 226 applications. By late January, ICF had “issued grant money to fewer than 250 of about 100,000 applicants” and was “being decried as a fiasco 227 comparable in its ineptitude to FEMA itself.” The Times-Picayune reported that for January, the company had averaged approximately “seven closings a day, and ICF doesn’t expect to reach 500 closings a day until
TIMES-PICAYUNE, Nov. 16, 2006, at A3. See also THE ROAD HOME, THE ROAD HOME: WEEK 20 SITUATION & PIPELINE REPORT 2-3 (2006), available at http://road2la.org/Docs/pipeline/Week %2020%20Combined%20Report%20FINAL.doc (last visited Feb. 27, 2008) (noting that as of November 16, 2006, only thirty-two closings out of 78,382 applications had been completed). 220. Bill Barrow, ICF May Let Cash Flow as Appeals Ironed out: Ideas for Improving Road Home Aired out at Governor’s Mansion, TIMES-PICAYUNE, Dec. 20, 2006, at A1. See also THE ROAD HOME, THE ROAD HOME: WEEK 24 SITUATION & PIPELINE REPORT 1 (2006), available at http://road2la.org/Docs/pipeline/Week%2024%20Combined%20Report%20(FINAL).doc (last visited Feb. 27, 2008) (noting that as of December 14, 2006, only eighty-five closings out of 88,414 applications had been completed). 221. See H. Res. 17, 2006 Leg., 2d Extraordinary Legis. Sess. (La. 2006). 222. See S. Res. 26, 2006 Leg., 2d Extraordinary Legis. Sess. (La. 2006). 223. Ed Anderson, Recovery Company Dismissal Sought: House, Senate Pass Separate Resolutions, TIMES-PICAYUNE, Dec. 16, 2006, at A1. 224. H.C. Res. 34, 2006 Leg., 2d Extraordinary Legis. Sess. (La. 2006). 225. LA. REV. STAT. ANN. § 49:220.1 (2007). 226. David Hammer, Recovery Grants Forecast Retracted: ICF Official Backs Off 500-a-Day Estimate, TIMES-PICAYUNE, Jan. 11, 2007, at A1. See also THE ROAD HOME, THE ROAD HOME: WEEK 29 SITUATION & PIPELINE REPORT 1 (2007), available at http://road2la.org/Docs/pipeline/ Week%2029%20Combined% 20Report.pdf (last visited Feb. 27, 2008) (noting that as of January 23, 2007, only 169 closings of 97,776 applications had been completed). 227. Meitrodt, supra note 211, at A1. See also THE ROAD HOME, THE ROAD HOME: WEEK 30 SITUATION & PIPELINE REPORT 1 (2007), available at http://road2la.org/Docs/pipeline/Week %2030%20Combined%20Report.pdf (last visited Feb. 27, 2008) (noting that as of January 30, 2007, only 215 closings out of 100,273 applications had been completed).
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In February 2007, ICF and LRA officials were embarrassed by disclosures that they had been giving “dead wrong” information to homeowners because they “apparently misunderstood the assignment policy 229 from the beginning.” A month later, the Louisiana Legislative Auditor issued a report that “found the counselors at Road Home housing centers often don’t have formal procedures and give out inconsistent information 230 when they meet with homeowners . . . .” By the end of March 2007, 5,444 applicants out of 120,680 had held their grant closings—up significantly over the January figures but still less than half of the state’s 231 goal for that month. Affixing her name to the extraordinarily troubled “Governor Kathleen Babineaux Blanco Road Home Program” undoubtedly contributed to the incumbent’s decision that she would not seek a second 232 term in the fall 2007 elections. When would the Road Home Program finally begin to acquire and transfer sufficient numbers of properties to make a dent in the disaster landscape of New Orleans? That answer remained elusive as Katrina’s second anniversary drew near. Repeated efforts to “tweak” the program 233 into efficient operation were not encouraging, at least in part because as originally drafted, the ICF contract contained no provision for performance 234 goals regarding processing of applications or any penalties for poor
228. Meitrodt, supra note 211, at A1. 229. David Hammer, Policy Snarl adds to Road Home Detours: Officials Do About-Face on Transfer of Grants From Owners to Buyers, TIMES-PICAYUNE, Feb. 27, 2007, at A1. 230. David Hammer, Audit Finds Uneven Road: Counselors Give out Inconsistent Info, TIMESPICAYUNE, Apr. 3, 2007, at A1 [hereinafter Uneven Road]. For the specific findings of the audit, see STEVE THERIOT, LOUISIANA LEGISLATIVE AUDITOR, ROAD HOME PROGRAM PRE-CLOSING PROCESS: PERFORMANCE AUDIT (Audit Control # 40070006) 3-7 (2007), available at http://app1.lla.state.la.us/PublicReports.nsf/586D89F06776B0DC8625730C006EF43D/$FILE/000 011F1.pdf (last visited Feb. 27, 2008) (noting that “[p]re-closing does not have sufficient procedures that detail how advisors should review and prepare pre-closing files,” and that advisors have difficulty keeping up with Road Home policy updates from day to day). 231. Uneven Road, supra note 230, at A1. 232. Editorial, Governor Puts the State First, TIMES-PICAYUNE, Mar. 22, 2007, at B6. 233. Bruce Alpert & Coleman Warner, State Yields to Feds: Road Home to Give Cash Upfront; Original Rules of Program Violated HUD’s Regulations, TIMES-PICAYUNE, Mar. 21, 2007, at A1; Barrow, supra note 220, at A1; David Hammer, Road Home Shifts Stance on Funding Appraisals: Some Homeowners Have Footed the Bill, TIMES-PICAYUNE, Feb. 21, 2007, at A1. 234. Meitrodt, supra note 211, at A1. See also OFFICE OF CMTY. DEV., DIV. OF ADMIN., STATE OF LOUISIANA, CONTRACT [BETWEEN ICF EMERGENCY MANAGEMENT SERVICES, LLC AND THE STATE OF LOUISIANA, DOC. NO. B 0390469.3], Exhibit A: Statement of Work; Scope of Services, at 2(a)(1)-(15) (June 30, 2006) (on file with Loyola Law Review) [hereinafter ICF Contract].
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performance. Penalties and performance standards ultimately were added to the contract, but without consulting the LRA, whose housing chairman criticized the new standards as “ambiguously worded” and characterized the 236 penalties as “light.” A newspaper editorial agreed, calling upon the governor to “replace the recent agreement with meaningful parameters and real fines” and asserting that “so-called penalties included in last week’s agreement are an outright capitulation to ICF and a disservice to homeowners waiting for rebuilding aid more than nineteen months after 237 Hurricane Katrina.” By the beginning of May 2007, the Road Home Program had distributed 10,000 grants and paid out nearly $750,000,000, leaving approximately 120,000 applicants in the pipeline and leading to recognition by the Blanco administration that the program lacked sufficient funds to 238 compensate all affected homeowners. As a result of the projected revenue shortfall, the Road Home announced at the end of May that it would give homeowners only two more months, until July 31, 2007, to 239 apply and would then stop accepting applications. Soon thereafter, the
235. David Hammer, Rental Road Home Gets Rolling: Officials Promise it Will Work Quickly, TIMES-PICAYUNE, Jan. 31, 2007, at A1. See also ICF Contract, supra note 234, §§ 1.2.2-1.2.6 (providing performance measures and language regarding acceptance of deliverables, but no actual penalties for failure to meet these goals). 236. David Hammer, Penalties for ICF Tardiness ‘Seem Light,’ LRA Says: Agency Was Never Consulted About Deal, TIMES-PICAYUNE, Apr. 19, 2007, at A4. 237. Editorial, Setting the Bar Too Low, TIMES-PICAYUNE, Apr. 22, 2007, at B6 (providing the following observation: the new performance standard of 10,000 closings per month “should improve the Road Home’s pathetic pace but could still leave some applicants waiting for their grant until March 2008. The Blanco administration cannot truly think that’s fast enough”). The likely closing date will actually be almost half a year later, sometime in August or September 2008: “Even at that rate, the last grants won’t be delivered until September 2008—three years after Katrina hit. That’s already way too long, and ICF and the state need to substantially accelerate the Road Home’s pace.” Editorial, A Must-Reach Benchmark, TIMES-PICAYUNE, Dec. 9, 2007, at B6. 238. “If the Road Home keeps paying out homeowner grants at the current rate—and all the remaining applicants qualify for compensation—the state aid program could be more than $3 billion short, state officials said.” David Hammer, Road Home Going Broke, Blanco Aide Says: At This Rate, Looming Shortfall Will Reach Billions of Dollars, TIMES-PICAYUNE, May 2, 2007, at A1 (quoting the Governor’s liaison to the Road Home Program: “There’s no question we’re going to run out of money”). See also THE ROAD HOME, THE ROAD HOME: WEEK 44 SITUATION & PIPELINE REPORT 4 (2007), available at http://road2la.org/Docs/pipeline/Week%2044%20Co mbined%20Report.pdf (last visited Feb. 27, 2008). 239. David Hammer, Road Home Closing Door July 31: Deadline to Apply Set as Shortfall Looms, TIMES-PICAYUNE, May 30, 2007, at A1. As June approached, the newspaper reported, “more than 140,000 homeowners had applied. If the daily application rate stays the same through July 31, the program will have recorded more than 156,000 applications before the cutoff.” Id. at A5. The newspaper also reported that the Louisiana Recovery Authority had “used some creative budgeting to set the shortfall at $2.9 billion” and that if “FEMA money doesn’t come through, the
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Louisiana Legislative Auditor estimated that the Road Home deficit totaled 240 $5 billion adding to the pressure from local, state, and federal officials that ultimately forced Governor Blanco to commit $1 billion in surplus state 241 funds as a first step in closing the funding gap. Four months later as state leaders prepared to seek additional funding from federal officials, the 242 estimated shortfall had increased to $6.6 billion. The Road Home finally obtained the necessary funds to overcome its shortfall when Congressional negotiators agreed in November 2007 to add 243 Slightly more $3 billion to a Department of Defense appropriation bill. than one month before she was due to leave office, Governor Blanco 244 announced that, “The Road Home is fully funded.” The program traveled a troubled fiscal road from June 2006, when it was originally designed “to cover 114,000 storm-ravaged homeowners at a cost of $7.5 billion,” until arriving at the end of 2007, when “the highest-cost scenario is that 159,417 homeowners will get grants, at an average of $65,688 per grant, for a total 245 program cost of $11.1 billion . . . .” Notwithstanding the heartening progress on funding, the Road Home Program found itself by December 2007 only at the mid-point in its distribution of grants. With approximately 80,000 applications processed and roughly 80,000 more to be processed (at an average rate of 10,000 closings per month), the program is not likely to 246 achieve closure until August 2008 or later. 3. LIMITED IMPACT ON HOUSING REDEVELOPMENT Even as the Road Home Program began to produce properties for
shortfall would be at least $4.7 billion.” Hammer, supra note 239, at A1. 240. See Bill Barrow, Road Home Gap Hits $5 Billion: State Feeling Pressure to Kick in Money, TIMES-PICAYUNE, June 1, 2007 at A1. See also STEVE J. THERIOT, OFFICE OF LOUISIANA LEGISLATIVE AUDITOR, ROAD HOME PROGRAM: ANALYSIS OF ROAD HOME PROGRAM FISCAL SHORTFALL (2007), available at http://app1.lla.state.la.us/PublicReports. nsf/42D303A7BAB099DE862572F0004785B0/$FILE/000010F6.pdf (last visited Feb. 27, 2008). 241. David Hammer, Governor Offers Cash for Gap in Road Home: Up to $700 Million in State Money Floated, TIMES-PICAYUNE, June 3, 2007, at A1. The LRA followed the Governor’s lead by reallocating “$577.5 million in federal block grants, previously slated for infrastructure repairs, to the beleaguered Road Home program, boosting to $1 billion the state’s contribution to addressing a shortfall now estimated at $4.4 billion.” Michelle Krupa, LRA Feeds Road Home Kitty: $1 Billion Figure is Key for Congress, TIMES-PICAYUNE, June 26, 2007, at A1. 242. David Hammer, Road Home Shortfall $1 Billion: State Says it Could Reach $6.6 Billion, TIMES-PICAYUNE, Sept. 22, 2007, at A1. 243. David Hammer, Road Home Bailout Tucked in Defense Bill: $3 Billion Would Keep Program Afloat longer, but Hurdle Looms, TIMES-PICAYUNE, Nov. 7, 2007, at A1. 244. David Hammer, Road Home Program Can Afford Its Grants: About 6,000 Fewer Applicants Than Expected Meet Deadline, TIMES-PICAYUNE, Dec. 8, 2007, at A1. 245. Id. at A1. 246. Hammer, supra note 244, at A1.
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redevelopment, they remained insufficient to provide NORA with broadbased redevelopment opportunities, because far more homeowners chose to retain their homes and rebuild rather than sell them to the state:
Though more than 140,000 applications have been submitted to the Road Home program, as of June 7, only 47,645 applicants had reached the point where they had designated which option they would pursue. The vast majority of those applicants opted for Option 1, which allows them to keep their home and rebuild it. Only 5,657 said they planned 247 to pursue Option 2 [sell, but stay in Louisiana].
Four months later, the percentage of homeowners choosing Option 2 had 248 declined from June’s 11.8% to just 8.75% by mid-October. Orleans 249 Parish reflected a modestly higher 11.3% who selected Option 2. The Road Home Program does not control how many homeowners will elect to sell their properties under Option 2 and accordingly cannot assure that large numbers of homes will ever be acquired by the Road Home and transferred 250 to NORA. As the end of 2007 drew near, the Road Home estimated that “6,000 to 9,000 buyouts could be in Orleans Parish when the Road Home 251 process is done,” thus delivering into local control only a small percentage of the damaged homes in New Orleans. Ironically, the relatively few properties that did come under control of the Road Home Program by Katrina’s two-year anniversary languished in a state of limbo, awaiting transfer to the City and adding to perceptions of housing distress in New Orleans because they were not properly 252 maintained. When Road Home properties are finally transferred to the
247. Kim Quillen, Option 1 Getting the Most Attention, TIMES-PICAYUNE, June 24, 2007, at E1. 248. See THE ROAD HOME: WEEK 67 SITUATION & PIPELINE REPORT 1 (2007), available at http://www.road2la.org/Docs/pipeline/Week_67_Combined_Report.pdf (last visited Feb. 27, 2008) (indicating that 8,795 homeowners had selected Option 2 out of 100,274 total benefit options selected). 249. According to the Road Home Program Update as of October 11, 2007 (under the heading “Options Selections of Applicants by Parish of Damaged Residence”) 3,414 homeowners in Orleans Parish had elected Option 2 out of a total 40,444 Orleans homeowners who had selected a benefit option. Id. at 32. 250. Adding Option 3 (people who choose to sell and move out of Louisiana) increases to 11% the statewide percentage of homeowners transferring ownership to the Road Home Program. Id. at 33. 251. David Hammer, N.O. Airs Plans for Road Home Lots: 10-Year Strategy May Cost Millions, TIMES-PICAYUNE, Nov. 28, 2007, at A1 [hereinafter 10-Year Strategy]. 252. David Hammer, Road Home to Tidy up Sites: Maintenance Woes Grow with Buyouts, TIMES-PICAYUNE, Aug. 15, 2007, at A1. The agency’s track record does not inspire confidence: “NORA has historically not cleaned up and maintained the blighted property under its control.” MENDING THE URBAN FABRIC, supra note 52, at 2.
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City, the process of maintaining them and ultimately putting them back into commerce will become a local responsibility “that could take 10 years and 253 cost more than $15 million a year.” 4. INTERACTION WITH APPLICANTS The Road Home’s pace of progress two years after Katrina might 255 fairly be described as—at best—rather too deliberate, and its interaction 256 with the public is still not user-friendly. One of the program’s most
253. 10-Year Strategy, supra note 251, at A1. See also Letter from Janet R. Howard, President of the Bureau of Governmental Research, to Joseph Williams, Executive Director of the New Orleans Redevelopment Authority (Dec. 3, 2007), available at http://www.bgr.org/NORA%20 &%20 blight/Letter%20to%20NORA%2012-3-07.pdf (last visited Feb. 27, 2008) [hereinafter BGR-NORA Letter] (quoting: “NORA estimates that it will cost approximately $150 million over nine years just to maintain the LLT [Road Home] properties and perform demolitions where appropriate” and expressing concern that is was “not clear where these funds will come from”). 254. More than twelve months after the Road Home Program was publicly launched, it met its first contractually mandated goal of 50,000 closings on August 31, 2007. See David Hammer, Road Home Hits Contract Benchmark for First Time: ICF Cranks Out 50,000 Closings, but Logjams Still Dog Program, TIMES-PICAYUNE, Sept. 3, 2007, at A1. 255. In response to the relentless drumbeat of criticism, two separate consultants were hired to review the troubled implementation process and recommend improvements: KPMG was retained by the Office of Community Development in July 2007 for up to $376,142, and the LRA contracted with the RAND Corporation in August 2007 for $49,000. See id.; see also Press Release, Louisiana Recovery Authority, LRA Contracts with Nationally Recognized Firm to Conduct Independent Review of Road Home Operations: RAND Corporation to Begin Work in Louisiana Immediately (Aug. 24, 2007), available at http://lra.louisiana.gov/pr082407rand.html (last visited Feb. 27, 2008). 256. Notes from the Microcosm: I accompanied a 75-year-old Road Home recipient to her May 17, 2007 closing. The “closer” presented us with seventeen legal-size pages printed in type too small to be read by my client, flipped through them with a peremptory description of the contents, then asked for her signature, all within five minutes of our arrival. When we asked why a 30% penalty was imposed on her benefits and what right of appeal she would have after signing the documents, we were invited to step out and review the documents while the closer met with other recipients. We did so and concluded that my client would have ninety days after the closing to pursue an appeal. We returned to the meeting at our next opportunity, half an hour later. The closer presented multiple pages for my client to sign, then checked off two boxes and presented for signature a final document entitled “Acknowledgment Form: Receipt of Instructions for Filing an Appeal.” The first box acknowledged that this was my client’s first closing on a Road Home grant, which was accurate and was of no moment. The second box (checked by the closer without consulting my client) read, “I do not anticipate any challenge to my current award.” We pointed out that she did have questions about how her grant had been calculated, and the closer asked, “Do you want to meet with a Road Home representative or complete this closing?” When I stated that she had the right to do both—complete the closing and pursue an appeal if she chose to do so—the closer grudgingly scratched out the checkmark in the second box and instead checked the fifth, more appropriate box: “I have a concern about my award calculation and would like to have my grant amount reviewed by the Resolution Team.” See The Road Home, Acknowledgment Form: Receipt of Instructions for Filing an Appeal (on file with Loyola Law Review). After the closing, we met with a member of the Road Home Resolution Team who
254
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aggravating features (and one of its most disturbing aspects from a due process perspective) was its relentless refusal to communicate in writing with applicants:
Some applicants report that they spent months in the Road Home’s dispute resolution process, handled entirely over the phone, and suddenly found out the program considered their case resolved, without ever notifying them or explaining the resolution—or seeking 257 their agreement.
When the Chair of LRA’s Housing Committee called it “unacceptable not to provide written statements of dispute resolutions and grant commitments,” the state agreed to change its procedures—but then announced that the “new Road Home policy guaranteeing written notification of ‘critical changes’ to a homeowner’s application wouldn’t 258 take effect” until sometime in the following year. Newspaper 259 260 editorials and op-ed writers so strenuously excoriated the program’s
answered all of our questions satisfactorily. Astoundingly, an applicant who was accompanied by counsel, who insisted on time to review the documents, and who clearly had questions about her grant award, faced an attempt by the closer to waive her appeal rights with a “routine” checkmark and without even a hint of consultation! What happens to people who go in without a lawyer or who don’t speak up when confronted with documents they don’t understand? The Macrocosm was no better. A newspaper article published a month-and-a-half later reported on the ill effects of “a state contractor’s marathon effort to close 900 grants in a single day,” when “scores of applicants, including elderly people in wheelchairs and parents with young children, lingered for hours in a line that spilled outside the New Orleans Marriott Metairie at Lakeway under what was at times a blazing sun.” See Daniel Monteverde, Hundreds Wait in the Heat for Road Home Closings: Contractor Tries to Give out 900 Grants in a Single Day, TIMESPICAYUNE, July 1, 2007, at A1. An ICF spokeswoman stated that “the large-scale closing was not an attempt by the company to meet its June quota of 10,000 scheduled closings” and that “so many closings were scheduled for Saturday simply to get money into more applicants’ hands.” Id. But “an eastern New Orleans resident who waited in line with his father for more than two hours” questioned the wisdom and necessity of that strategy: “It’s been two years since Katrina,” he said. “What’s another four or five days, or a week or two?” Id. 257. David Hammer, Road Home Fails to Provide Letters: Omission Persists Despite LRA’s Prodding, TIMES-PICAYUNE, Nov. 29, 2007, at A1. 258. Id. 259. One editorial stated the case as follows:
No credible organization would conduct even cursory transactions without a paper record. Yet the Road Home program wants Louisiana homeowners to forego written notices when it comes to grant disputes and simply take the word of a program staffer over the phone. That’s an unacceptable position that seems conveniently designed to skirt accountability. . . . This can’t continue.
See Editorial, Put it in Writing, TIMES-PICAYUNE, Nov. 30, 2007, at B6. 260. Columnist Jarvis DeBerry provided the following commentary:
Committing things to the printed page happens not to be the Road Home’s way . . . . Giving applicants written notification of their status or a detailed explanation of how their disputes have been resolved would take too much time and delay the disbursement of money,
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exclusive reliance on oral communication that, at the end of 2007, state officials announced an immediate change in Road Home procedures:
Responding to pressure from housing advocates, the state Office of Community Development and the Louisiana Recovery Authority said Road Home will begin sending important decisions and notices to applicants in writing starting Jan. 1. Previously, many applicants complained that program staffers designated many disputed cases as “resolved,” without telling them or explaining the reasons. In the new year, Road Home will have to put in writing all grant award commitments; details about dispute resolution decisions; any requested information about an application’s status; details of any information found to be missing from an application; and all supporting documentation used to determine pre-storm values and estimated costs 261 of damage.
A newspaper editorial celebrated implementation of the “written communication” policy while also bemoaning the delay in adopting it: “It’s unfortunate that state officials had to be browbeaten into correcting what 262 most everyone else saw as flaws in the Road Home.” Even as the Road Home met its benchmark of 90,000 closings by the end of 2007, a newspaper editorial hammered the “maddening bureaucracy” that had “applicants trapped in Road Home purgatory” and added “[r]eaching the benchmark indicates that the Road Home is less awful now than when it was handing out only a few thousand grants a 264 265 month.” Continued complaints from applicants led to the institution of a caseworker system in January 2008, assigning approximately 500 Road Home employees to serve as dedicated case managers for “applicants who have been stuck in the homeowner assistance program for more than 90 266 days.” State officials responsible for monitoring ICF’s compliance
those officials claim. Perhaps if Gutenberg were printing the notices. But we live in a computerized age. Just about everything that’s knowledge can be printed—and quickly. The problem—for ICF, at least—is that which is printed is less easily denied.
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See Jarvis DeBerry, Talk is Cheap, TIMES-PICAYUNE, Dec. 2, 2007, at B9. 261. David Hammer, La. Road Home Makes Changes: Decisions in Writing Have Been Key Issue, TIMES-PICAYUNE, Dec. 22, 2007, at A1. 262. Editorial, Common Sense Wins, TIMES-PICAYUNE, Dec. 28, 2007, at B6. 263. David Hammer & Darran Simon, Road Home Meets Target for Closings: Agency Hopes to be 90% done by the Middle of this Year, TIMES-PICAYUNE, Jan. 1, 2008, at A1. 264. Editorial, Right These Wrongs, TIMES-PICAYUNE, Jan. 1, 2008, at B6. 265. David Hammer, New Orleans Resident Left Wondering if Promises Made in the Wake of Katrina Will Ever Be Kept, TIMES-PICAYUNE, Dec. 30, 2007, at A1. 266. David Hammer, Road Home Will Add Case Workers: Customer Service Now is Focus for LRA, TIMES-PICAYUNE, Jan. 5, 2008, at B1.
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claimed that “the new customer service effort would satisfy a contractual requirement for an ombudsman,” but the Chair of LRA’s Housing Task Force disagreed: “You call it an ombudsman’s program, but it’s really just a 267 Another task force member observed that case-management program.” “the contract calls on ICF to develop a true ombudsman program and case management is a basic service the program should have offered from the 268 beginning.” 5. CONCLUSIONS ABOUT THE ROAD HOME We cannot fairly attribute problems encountered in implementing the Road Home Program exclusively to state government or to its chosen private contractor, ICF International. The program suffered from a political dynamic that had a Democratic Governor of Louisiana and Mayor of New Orleans beseeching a Republican President, Congress, and Recovery Czar for billions of dollars needed to recover from the federal levee disaster that generated flooding in the first place. The unavoidable size and complexity of the housing recovery program, inadequate staffing and financial projections, even the partisan sniping—all might be anticipated as problems likely to occur in many other jurisdictions in the United States or even around the globe after a disaster comparable in size to the devastation inflicted by Katrina and Rita. But the relentless inability of the contractor ICF to staff and administer the program competently after a year and a half, the state’s failure to impose adequate penalties and performance standards in its contract with ICF, the tendency of state officials in the Office of Community Development to align themselves in solidarity with ICF rather 269 than to assert vigorously the interests of program applicants —all of these were avoidable and must, to that extent, be laid at the door of Louisiana officials. They constitute vivid examples of what “not to do” in administering a recovery program through a private contractor.
267. Id. at B1. 268. Id. An editorial in the Times-Picayune on January 8, 2008 concurred:
The program’s contract mandated the creation of an ombudsman by the time the program began processing cases, but the State and ICF have not hired one . . . . [C]ase management is a basic service that not only should have been offered from the start but will also be provided by ICF employees. What applicants need is an independent advocate, as called for in the program’s contract.
See Editorial, The Road to Service, TIMES-PICAYUNE, Jan. 8, 2008, at B6. 269. See Editorial, Road Home Oversight is Weak, TIMES-PICAYUNE, Feb. 11, 2008, at B4 (characterizing OCD’s director as “a constant apologist for ICF’s mistakes” and accusing OCD of “seeing itself more as a partner with the firm, than as an advocate for the people the program is supposed to serve”).
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As for the appropriateness of contracting with a private firm to administer such an extensive program of humanitarian assistance and rebuilding of homes, Louisiana’s experience does not constitute a proper “test” of the proposition. In a properly elaborated privatization process, the contract for services would be far more rigorous than Louisiana’s contract with ICF International and would include specific performance standards, substantial and escalating penalties, plus formal opportunities for citizen complaints and citizen participation in periodic evaluations of the contractor’s performance. Given the considerable inadequacies of government that were demonstrated repeatedly in the aftermath of Katrina, we’ve no reason to believe direct government administration of the Road Home program would have produced better results. On the other hand, it’s hard to imagine much worse results than the private contractor ICF inflicted on Louisiana’s damaged and displaced citizens. The verdict with regard to “privatization” as a strategy for disaster recovery might best be characterized as a “hung jury.” The Road Home properties remain good targets for redevelopment, but they will not provide sufficient numbers of properties to have a major impact on housing recovery in New Orleans. NORA has other means by which it might obtain significant numbers of properties that can be made immediately available for redevelopment. Having considered the relative merits of (1) expropriated, (2) tax adjudicated, and (3) Road Home properties, let’s next turn our attentions to (4) properties acquired as a bidder at public auctions—more specifically, properties auctioned as a consequence of code enforcement proceedings. Note that NORA is responsible for implementing each of the first three property-acquisition 270 271 methods, either by legislative authorization or contractual assignment. As to the fourth method, however, NORA is not an implementer but a 272 potential beneficiary; code enforcement is entirely a City responsibility.
270. See LA. REV. STAT. ANN. §§ 33:4720.56(3)-(4), 33:4720.59 (2007) (conferring statutory authority on NORA for expropriations) and New Orleans, La., Ordinance 26,489 (May 3, 2007) (delegating authority for “quick take” expropriations to NORA). 271. See NORA-NOLA CEA I, supra note 16; NORA-NOLA CEA II, supra note 122. 272. The City has periodically reshuffled responsibility for code enforcement among its agencies, originally splitting responsibility between the Department of Health and the Division of Housing and Neighborhood Development (DHND); later renaming and reorganizing DHND as “Neighborhood One”; and most recently consigning responsibility for code enforcement to the Office of Recovery Management (ORM), which was itself recently renamed the Office of Recovery and Development Administration (ORDA). See MENDING THE URBAN FABRIC, supra note 52, at 2-3 (summarizing the various City departments responsible for code enforcement).
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C. NORA’S ACQUISITION OF PROPERTY AS A BIDDER AT PUBLIC AUCTIONS Why would NORA choose to acquire properties by bidding on them at a public auction, when it could get many of those same properties through other means that don’t require an expenditure of funds up front? One answer can be found in the “transactional costs” of property acquired through other means—lawyers’ fees, time delays in the courts, the cost of clearing title in order to get title insurance, and similar poorly “hidden” expenses. The most significant cost may be the overall lack of progress in 273 rehabilitating properties and returning them to commerce. Buying the property outright at public auction would give NORA clean title to properties that could immediately be available for redevelopment and that could easily be turned back to nongovernmental users, who would use them in ways that contribute to the city’s economic rebirth. NORA might participate as a bidder in many different types of auctions, including judicial foreclosures by lenders responding to a lapse in 274 mortgage payments. The next section of this Article focuses on one such auction—code lien enforcement—as a most promising method by which NORA might acquire property for immediate redevelopment. III. CODE ENFORCEMENT: A POWERFUL BUT UNDERUTILIZED STRATEGY FOR REDEVELOPMENT A vigorous and successful program of code enforcement would have multiple benefits—not just furnishing NORA and other bidders with a supply of immediately useful properties, but also inducing large numbers of property owners to repair their deteriorated properties in preference to a 275 forced sale. Code enforcement is potentially the most powerful and
273. BGR noted in a letter to NORA that “New Orleans has failed to successfully address even the more limited pre-Katrina blight despite almost 40 years of effort.” BGR-NORA Letter, supra note 253. 274. See LA. CODE CIV. PROC. ANN. art. 2638 (2007). 275. The Vacant Properties Draft Report recognized the dual benefits of an aggressive code enforcement program, which it characterized as a “two-prong approach”:
In this first prong, the City employs a combination of carrots and sticks to encourage responsible property owners to take the necessary steps to repair their properties and prevent blight from evolving into abandonment. In the second prong, the City acquires nuisance properties because they are causing serious harm and the owners cannot be found or have failed to take reasonable actions.
VACANT PROPERTIES DRAFT REPORT, supra note 18, at 16. Thus, if the “first prong” (aggressive code enforcement) fails to induce property owners to repair their properties, the “second prong” (a public auction) removes the property from a negligent owner’s hands and transfers it to a new purchaser, whether private or public (e.g. NORA). VACANT PROPERTIES DRAFT REPORT, supra note 18, at 16. The beneficial effects of aggressive code enforcement (the “first prong”) were
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productive redevelopment strategy in the City’s arsenal, but its full potential 276 The City chose to pursue instead a has never been adequately explored. series of ill-conceived and ultimately counterproductive “Post-Disaster 277 Procedures” after Katrina despite the availability of an efficient and costeffective administrative code enforcement mechanism that had been
demonstrated even by the poorly functioning “Good Neighbor” program; its “biggest impact came simply from official pressure: Nearly 6,900 properties were ‘abated,’ meaning owners either rectified problems before a follow-up inspection or demonstrated compliance during an administrative hearing.” Michelle Krupa, N.O. Blight Program Quietly Slinks Away: Good Neighbor Initiative Ignored 17,000 Resident Complaints, TIMES-PICAYUNE, Feb. 3, 2008, at A1 [hereinafter N.O. Blight Program]. 276. Louisiana has addressed “the problem of ‘blighted’ property through two primary governmental powers: enforcement of delinquent ad valorem taxes (and adjudicated properties) and expropriation,” while the more common method “used by local governments across the United States to deal with these properties is police power enforcement of housing and building codes or legally defined public nuisances. Such powers are present in Louisiana but are largely in the distant background of local government attempts to transform blighted properties into productive uses.” See Alexander, supra note 6, at 745. 277. In the two years after Katrina, New Orleans experimented with several unsuccessful strategies based on the police power. An April 2006 ordinance attempted to compel gutting and mold remediation of vacant properties by declaring them all “public nuisances;” unfortunately, the poorly drafted measure failed to provide the most fundamental safeguards of procedural due process, exempted a large swath of heavily damaged structures as “hardship cases,” and included sentence fragments that gestured incoherently toward “notices” and “hardship cases and possible exceptions.” See New Orleans, La. Ordinance 22203 (April 20, 2006) (enacting NEW ORLEANS, LA., CODE ch. 26, art. IV, div. 12, § 261 (2007)). Four months later, the “Good Neighbor” program was revamped in reaction to the inadequacies of the April ordinance; the new program actually weakened rather than toughened administrative procedures for taking action against vacant and dilapidated property. See New Orleans, La., Ordinances 22355, 22356 (August 20, 2006) (amending and enacting NEW ORLEANS, LA., CODE ch. 26, art. IV, div. 12, §§ 261-262 (2007)). Another initiative five months thereafter led to approval of the Imminent Health Threat or “Tear Down” program. Id. (§ 26-263, enacted by New Orleans, La., Ord. No. 22499 on February 1, 2007). This new program proved “inconsistent, with some sound buildings being condemned, while some unsound buildings mysteriously escape condemnation.” BGR-ORM Letter, supra note 208. Seven months later and approximately two years after Katrina, the City slapped another band-aid on its troubled “Tear Down” program. See New Orleans, La., Ordinance 22763 (August 15, 2007). The City’s action failed to avert another lawsuit by housing advocates, who challenged the inadequacies of the City’s demolition procedures. See Joshua v. City of New Orleans, No. 07-4205 (E.D. La. Aug. 20, 2007). The “Tear Down” program proved so unpopular that the City Council introduced an ordinance in January 2008 to thoroughly rethink and rewrite demolition provisions. Bruce Eggler, Council Urges Demolition Changes: Review Committee Could Get Facelift, TIMES-PICAYUNE, January 25, 2008, at B1. See also New Orleans, La., Ordinance 26,870 (Jan. 24, 2008). Misbegotten measures like these “Post-Disaster Procedures” give “code enforcement” a bad name, even though these programs had nothing to do with “health, housing, and environmental” (HH&E) code enforcement: The various “Post-Disaster Procedures” are established in the City Code at Chapter 26 (“Buildings, Building Regulations and Housing Standards”), while HH&E violations are enforced under City Code Chapter 6 (“Public Health, Housing and Environmental”). The City’s existing HH&E administrative code enforcement mechanism could have served housing redevelopment objectives far more effectively than these underperforming programs.
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operating successfully for many years before the storm.
A. ADMINISTRATIVE ENFORCEMENT OF CODE VIOLATIONS Properties that are out of compliance with health, housing, fire, environmental, or historic codes may be fined in an administrative 279 hearing and may ultimately be forced to public auction.280 A city or parish can implement the “health, housing, and environmental” (HH&E) code enforcement process by adopting an ordinance to establish an 281 282 administrative hearing procedure pursuant to state enabling legislation. 283 The City of New Orleans has used such administrative hearings since the 284 1980s to assess fines and liens against owners whose properties do not 285 comply with various municipal codes. The administrative process must provide notice to the property owner at least fifteen days in advance of the hearing, delivered by certified or 286 registered mail or by personal service. The hearing must comply with the
278. LA. REV. STAT. ANN. §§ 13:2575-76 (2007). 279. Id. See the semantic sidebar at page 774 regarding “Administrative Hearing Process: ‘Blight’” for a description of the two separate functions performed by an administrative hearing officer acting pursuant to Sections 2575 and 2576. 280. Remarkably, in more than two decades of conducting “health, housing, and environmental” (HH&E) code hearings, the City has never once succeeded in moving even one of the noncompliant properties onto the auction block: “The City Attorney’s Office can also use lien foreclosure, although it has never done so successfully.” See MENDING THE URBAN FABRIC, supra note 52, at 3. 281. LA. REV. STAT. ANN. § 13:2575(B) (2007). New Orleans implemented the enabling provisions of section 13:2575 in chapter 6 of the City Code, which authorizes hearing officers to hear and decide HH&E violations involving, inter alia, minimum housing standards; vacant structures; nuisances; noncompliance with zoning, building code, and other code requirements; blighted property; and historic preservation. See NEW ORLEANS, LA., CODE, ch. 6, art. II, § 34 (2007). 282. Chapter 8-C of title 13 is entitled “Administrative Adjudication of Public Health, Housing, Fire Code, Environmental, and Historic District Violations.” LA. REV. STAT. ANN. §§ 13:2575-76 (2007). A semantic distinction may be in order at this point in order to avoid confusion associated with the term “administrative adjudication.” See the semantic sidebar regarding “Adjudicated” and “Adjudication” at page 820. 283. During the latter half of 2007, the City reassigned responsibility for code enforcement from the Neighborhood One Housing Division to the Office of Recovery Management (ORM), later renamed the Office of Recovery and Development Administration (ORDA). ORDA is a City agency, so code enforcement remains a City responsibility, as opposed to expropriation, adjudicated properties, and Road Home acquisitions, which have all been consigned to NORA. 284. Louisiana Revised Statutes section 13:2575 was first enacted by Act 514 in 1987. See LA. REV. STAT. ANN. § 13:2575 (2007). 285. A semantic distinction may be in order at this point to avoid confusion. See the semantic sidebar at page 820 regarding “Adjudicated” and “Adjudication.” 286. LA. REV. STAT. ANN. § 13:2575(D) (2007). See also NEW ORLEANS, LA., CODE, ch. 6, art. II, § 37 (2007) (regarding “Procedures for hearing”).
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rules of evidence in the Administrative Procedure Act, and the property owner has the right to be represented by counsel and to present evidence 288 The hearing officer may administer oaths, compel the and testimony.
“Adjudicated” and “Adjudication” This Article uses the terms “adjudicated” or “adjudication” exclusively to describe properties that were put up for a tax sale at which no minimum bid was received and that were thereupon “bid in” (“adjudicated”) to the City, as discussed supra Part II-C. That use of the term “adjudication” differs from the term “administrative adjudication” in reference to code enforcement procedures. The Chapter authorizing code enforcement is entitled “Administrative Adjudication of Public Health, Housing, Fire Code, Environmental, and Historic District Violations.” LA. REV. STAT. ANN. §§ 13:2575-2576 (2007). This use of “administrative adjudication” refers to an agency hearing enforcing compliance with health, housing, and environmental (HH&E) codes. Sections 2575 and 2576 create an administrative proceeding at which a hearing officer determines if property is out of compliance with HH&E codes. The hearing officer may levy a fine against property that is out of compliance, and in due course, the property may be seized and sold at a code enforcement auction. HH&E code enforcement is referred to in this memorandum exclusively as “code” or “code lien” enforcement and is never characterized as “adjudication.” That term is used exclusively to describe properties that were the product of a failed tax sale.
attendance of witnesses or production of documents, levy fines, order violations corrected within a stipulated time, and take measures enforcing their correction, including the recordation of orders or liens in the parish 289 mortgage office. The hearing officer must issue an order within thirty 290 days, and the property owner has thirty days thereafter to seek judicial 291 review of the administrative decision. By recording an administrative hearing officer’s order or judgment, 292 the municipality or parish obtains a high-ranking lien or privilege that has 293 A the effect of a judicial mortgage against the immovable property. municipality with a population of 450,000 or more may file suit against the property owner and obtain a money judgment that may “be enforced in
287. LA. REV. STAT. ANN. §§ 49:950-987 (2007). 288. Id. § 13:2575(E). 289. Id. § 13:2575(B). 290. Id. § 13:2575(F). 291. Id. § 13:2575(H). 292. “The lien and privilege shall have ranking as provided by R.S. 9:4821(1).” See id. § 13:2575(C)(1). The code lien thus created attains a very high priority, “first in rank and concurrent” with other first-rank liens regardless of their dates of recordation. Id. § 9:4821(1). This ranking places the code lien ahead of laborer’s liens under section 9:4802(A)(2), mortgages (even prior recorded mortgages), and vendor’s privileges for contractors and subcontractors, making it a very powerful enforcement device in the City’s arsenal. Id. § 9:4821. 293. Id. § 13:2575(C)(1) (“The recordation shall have the effect of a judicial mortgage against the immovable property described therein.”).
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accordance with all laws relative to the enforcement of such judgments.”
An additional statutory remedy directs that “[a]ny liens placed against such immovable property shall be included in the next annual ad valorem 295 tax bill and shall be paid along with such taxes . . . .” Despite their inclusion on the ad valorem tax bill, these liens remain “code” liens, not 296 subject to the right of redemption that applies to tax liens. The liens are 297 independently of their also subject to enforcement by other means, 298 inclusion on the annual ad valorem tax bill. B. ADVANTAGES OF CODE ENFORCEMENT OVER TAX SALES AND EXPROPRIATION Code enforcement differs in important respects from the process for enforcing payment of delinquent taxes. When auctioning property that is out of compliance with health, housing, environmental, and other codes, the state and its municipalities are free to provide a different procedure that is not subject to the constitutionally compelled redemptive period for tax 299 sales. The City’s authority to enact and enforce compliance with various
294. LA. REV. STAT. ANN. § 13:2576(A)(1)(b) (2007). 295. Id. § 13:2575(C)(2). 296. Failure to pay the code liens subjects the property to:
[T]he same provisions of law as govern tax sales of immovable property, except that in municipalities with populations in excess of four hundred fifty thousand according to the latest federal decennial census, when the immovable property has been declared blighted or a public nuisance by an administrative hearing officer acting in accordance with this Section, the property owners and other parties having interests in the property shall not have a right of redemption.
Id. (emphasis added). 297. Id. § 13:2576(A) (providing that failure to pay the liens subjects them to enforcement “pursuant to the following provisions, in addition to those provided for in R.S. 13:2575”). Six subsections provide, inter alia, for the following additional remedies: seizure and sale pursuant to a writ issued by the clerk of court; a money judgment secured by ordinary proceeding and enforceable in accordance with all laws applicable to the enforcement of such judgments; payment of the municipality’s costs out of the proceeds of a sale; the application of any remaining proceeds against outstanding taxes, charges, liens, mortgages, privileges, and other encumbrances; and retention of any “past due and unpaid ad valorem taxes [as] the personal obligation of the tax debtor.” See id. 298. See id. § 13:2575(C)(2). “In addition, in municipalities with populations in excess of four hundred fifty thousand according to the latest federal decennial census, failure to pay the liens shall also cause such liens and privileges to be subject to enforcement in accordance with R.S. 13:2576.” Id; see also id. § 13:2576(A) (providing that in municipalities with a population of 450,000 or more, multiple remedies are “enforceable pursuant to the following provisions, in addition to those provided for in R.S. 13:2575”). 299. Compare LA. CONST. art. VII, § 25 (referring specifically to “Tax Sales” in establishing the right of redemption) with LA. REV. STAT. ANN. § 13:2575(C)(2) (2007) (providing that “in municipalities with populations [greater than 450,000], when the immovable property has been declared blighted or a public nuisance by an administrative hearing officer acting in accordance
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municipal codes derives from different constitutional sources, including the 300 authority to use a “reasonable exercise of the police power,” the power to 301 enact land use regulations and building codes, and the rights guaranteed 302 to home rule jurisdictions such as New Orleans. Statutes governing code enforcement need not rely upon or refer to the procedures for sale of taxdelinquent properties, nor must they provide any right of redemption. Code enforcement auctions have the potential to pass clear title to the successful purchaser, enabling a new owner to begin repairs on the property 303 And unlike properties that NORA acquires through without delay. expropriation, property purchased at a code lien auction can be transferred to a third-party purchaser without offering a right of first refusal to the original property owner. The Alexander Memorandum asserts an unambiguous preference for code enforcement over expropriation as a redevelopment strategy:
It seems to me that the very emphasis on NORA expropriation in 2006 and 2007 is perhaps misplaced. If there were 27,000 vacant and largely substandard properties in New Orleans pre-Katrina, and there are over 100,000 such properties today, then the emphasis should instead be on enforcement of housing and building codes, and the more general “nuisance abatement” codes. Such enforcement may then result in public nuisance abatement liens which can be levied against 304 the property.
Properties purchased by NORA at the conclusion of a code enforcement process would come to NORA with clear title, no redemptive period, and immediate opportunities to redevelop and dispose of property—clear advantages over both expropriated and tax adjudicated properties. C. ENHANCED CODE ENFORCEMENT OPTIONS: ACT 115 OF 2007 The 2007 legislative session enhanced code enforcement options for
with this Section, the property owners and other parties having interests in the property shall not have a right of redemption”). 300. LA. CONST. art. I, § 4(A). 301. Id. § 17; see also LA. REV. STAT. ANN. § 33:4771 (2007). 302. LA. CONST. art. VI, §§ 4-6. 303. Louisiana Revised Statutes section 13:2575(C)(2) specifically exempts code enforcement properties from the redemptive period, while sections 13:2576(A)(5)-(6) apply the proceeds of a code enforcement sale to pay liens on the property and strips away any remaining encumbrances, which become the personal obligation of the tax debtor. See LA. REV. STAT. ANN. §§ 13:2575(C)(2), 2576(A)(5)-(6) (2007). 304. See Alexander Memorandum, supra note 27, at ii (emphasis added).
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Section 2575 already provided for recordation of an the City. administrative hearing order, giving rise to a lien and privilege that had “the 306 One effect of a judicial mortgage against the immovable property.” “effect of a judicial mortgage” is legal authority to secure a writ of seizure and sale from the clerk of court, and the recent amendments made this authority explicit by providing for “application of the municipality or parish to the clerk of the district court for issuance of a writ in accordance with 307 Article 2253 of the Code of Civil Procedure” immediately after 308 recordation of the administrative order. Section 2576 already provided for enforcement of the lien and privilege by ordinary proceeding, resulting in a money judgment against the property owner and the issuance of a writ of fieri facias directing the sheriff 309 New language now to seize and sell the property at a public auction. establishes dual enforcement options, preserving the suit via ordinaria to 310 secure a personal judgment (in personam) against the property owner and also providing for enforcement exclusively against the immovable property 311 (in rem) through a writ to seize and sell the property. These dual remedies are nonexclusive and may be pursued independently of each other, 312 in addition to other remedies provided by law. Under the new enforcement option, the City may apply directly to the clerk for a writ, eliminating the need to file an ordinary proceeding and avoiding the entry of a personal judgment against the property owner. For some post-Katrina property owners, this in rem option will be an appealing alternative, because it allows them to walk away from their devastated
305. See H.B. 796, 2007 Leg., Reg. Sess. (La. 2007). For the history of HB 796, now Act 115 of the 2007 Regular Legislative Session, see Louisiana State Legislature, Session Info, 2007 Regular Session, HB 796 (Act 115), History, http://www.legis.state.la.us/billdata/History.asp?sess ionid=07RS&billid=HB796 (last visited Feb. 27, 2008). In addition, Act 193 of the 2007 Regular Session removed the population criterion of “ninety thousand or more” from Louisiana Revised Statutes section 13:2575(B)(1), and thereby extended the powers and protections of this administrative code enforcement process to municipalities statewide. See H.B. 559, 2007 Leg., Reg. Sess. (La. 2007). 306. LA. REV. STAT. ANN. § 13:2575(C)(1) (2007). 307. Act 115 added new language to Section 2575(C)(1). See H.B. 796, 2007 Leg., Reg. Sess. (La. 2007), available at http://www.legis.state.la.us/billdata/streamdocument.asp?did=445245 (last visited Feb. 27, 2008). 308. Act 115 also added new language to section 2576(A)(1)(a). Id. 309. LA. REV. STAT. ANN. § 13:2576(A)(1) (2007). 310. Id. § 13:2576(A)(1)(b). 311. Id. § 13:2576(A)(1)(a). 312. See Louisiana Revised Statutes section 13:2575(C)(1) added by Act 115 of the 2007 Regular Session: “The remedies established in this Chapter are nonexclusive and may be pursued independently of each other and in addition to other remedies provided by law.” See id. § 13:2575(C)(1).
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properties without in personam liability. D. CODE ENFORCEMENT AS A PRIMARY REDEVELOPMENT STRATEGY A properly staffed code enforcement office could move relatively quickly to process large numbers of noncompliant properties, moving them 313 into the hands of new owners who might begin rehabilitating them. Even after the storms, understaffed code enforcement personnel demonstrated their ability to prepare and process one hundred properties per day for 314 HH&E administrative hearings. Before Katrina, the Department of Health conducted two such settings per week; they were down to two 315 settings per month after the storms. The HH&E code enforcement process begins with an inspection followed by the inspector’s report and photographs of deficient conditions on the property. Three types of notice inform owners and others of the administrative proceeding: a letter addressed to the property owner or owners as identified on records of the assessor; posting of notice on the property; and publication of newspaper ads listing the municipal address of 316 subject property. At the hearing, an employee presents the City’s case, which may include documentary evidence and testimony from city inspectors. Only one in every four or five property owners show up to contest the 317 proceedings. The hearing officer renders a decision within thirty days of 318 the hearing, and the property owner has thirty days within which to seek 319 A single employee in the judicial review of the administrative order. Health Department is assigned to record administrative hearing orders in
313. New Orleans might look no further than Jefferson Parish to find code enforcement systems that have been technologically enhanced to address housing problems. See Allen Powell, II, Code Inspectors Go High Tech: Digital System May Cut Time, Paperwork, TIMES-PICAYUNE, Sept. 7, 2007, at B1. Additional expertise may be available from national and state code enforcement professionals, who have established organizations that serve as informational clearinghouses and offer certification and training. See, e.g., Am. Ass’n of Code Enforcement, http://www.aace1.com (last visited Feb. 27, 2008); Cal. Ass’n of Code Enforcement Officers, http://www.cace1.org (last visited Feb. 27, 2008). 314. See, e.g., TIMES-PICAYUNE, Aug. 20, 2007, at A6 (providing public notice of the Administrative Adjudication Docket, which listed the addresses of 100 houses that were all scheduled for hearings on August 21, 2007). 315. Telephone interview with Wes Taylor, Chief of Envtl. Health, City of New Orleans Dep’t of Health, in New Orleans, La. (June 1, 2007) [hereinafter Wes Taylor Interview]. 316. Telephone Interview with Nolan Lambert, Dep’t of Law, Deputy City Attorney and Administrative Hearing Officer (June 1, 2007). 317. Id. 318. LA. REV. STAT. ANN. § 13:2575(F) (2007). 319. Id. § 13:2575(H).
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the mortgage office.
Recording a copy of the administrative order in the mortgage office gives rise to a lien and privilege that secures all fines, costs, and penalties assessed against the property and that has the effect of a judicial mortgage 321 against the property. The City may then institute a suit by ordinary proceeding, which is tried by preference over all other civil suits in both lower and appellate courts and which may ultimately result in a personal 322 judgment against the property owner. This money judgment may be enforced in accordance with laws governing the enforcement of such 323 324 judgments, including possible seizure and sale of the property. With the passage of Act 115 in the 2007 legislative session, the City obtained an alternative enforcement mechanism that does not require the delay and expense of a lawsuit and that does not result in a money judgment against the property owner. After recording the hearing officer’s order, the 325 City may apply directly to the clerk of district court for issuance of a writ 326 in accordance with Article 2253 of the Code of Civil Procedure that applies exclusively against the immovable property. Acting pursuant to the writ issued in accordance with article 2253, the sheriff will take possession of the property for the City. The City will then 327 328 proceed to give all necessary Mennonite notices in the proper manner and advertise the property for sale at a public auction. The highest bidder obtains merchantable title to a property that has been stripped of all 329 encumbrances —in stark contrast to the tax deed issued after a sale of tax-
320. Wes Taylor Interview, supra note 315. 321. LA. REV. STAT. ANN. § 13:2575(C)(1) (2007). 322. Id. §§ 13:2576(A)(1)-(2). 323. Id. § 13:2576(A)(1). 324. LA. CODE CIV. PROC. ANN. art. 2638 (2007). 325. See Act 115, 2007 Leg., Reg. Sess. (La. 2007) (adding the following language to Louisiana Revised Statutes section 13:2575(C)(1): “[M]ay be enforced against the immovable property described therein upon application of the municipality or parish to the clerk of the district court”; and adding the following language to LA. REV. STAT. ANN. § 13:2576(A)(1)(a): “Apply to the clerk of the district court for issuance of a writ. . . .”). 326. LA. CODE CIVIL PROC. ANN. art. 2253 (2007). 327. Mennonite Bd. of Missions v. Adams, 462 U.S. 791 (1983) (requiring notice to parties with an ascertainable property interest). 328. Jones v. Flowers, 547 U.S. 220 (2006) (requiring that a failed attempt to give notice by certified mail be followed by further efforts—such as regular U.S. mail—to provide notice to the party). 329. Specifically, subsections 5 and 6 of Louisiana Revised Statutes section 13:2576(A) state:
(5) After payment of costs incurred in the enforcement of this Chapter, the remaining proceeds of any judicial sale shall be credited and applied in satisfaction of all outstanding taxes, charges, assessment liens, mortgages, privileges, and other encumbrances secured by
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delinquent property, which remains subject to a redemption period.
Implementation of the new in rem enforcement mechanism should proceed cautiously at first, without taking on large numbers of properties and property owners until the procedures have been properly tested and established. An improvident use of code enforcement right at the outset might run the risk of igniting a firestorm of opposition comparable to the 331 anti-Kelo backlash. To foster greater public acceptance of code enforcement within neighborhoods, the City should work closely with recognized neighborhood associations, establishing a dialogue with neighborhood representatives about which deteriorated properties should be targeted for code inspections and enforcement. One final and very appealing feature of code enforcement is that the City can control its own destiny. Code enforcement is uniquely a 332 responsibility of the City of New Orleans and does not depend on an
the property in the order of their priority as provided by law. (6) Any past due and unpaid ad valorem taxes remaining after applying the proceeds of the judicial sale as provided by Paragraph (A)(5) of this Section shall become, be, and remain the personal obligation of the tax debtor.
See LA. REV. STAT. ANN. §§ 13:2576(A)(5)-(6) (2007). 330. See supra Part II.A.2 for further discussion of tax adjudicated properties. 331. The City’s enforcement of its “Tear Down” law is a good model of how not to do it. Angry homeowners and housing advocates sent a letter to the Mayor in May 2007, calling upon the City to provide for homeowner appeals or face a lawsuit. See Michelle Krupa, N.O. TearDown Law is Raising Questions: Standards, Process Aren’t Clear, Some Say, TIMES-PICAYUNE, May 8, 2007, at B1. Three months later the City Council passed an ordinance imposing safeguards, but only after the City had demolished properties that were gutted or under renovation, some of them demolished without prior notice to the owners. See Bruce Eggler, Contrite City Promises Better Demolition: N.O. Council OKs Safety Guards, TIMES-PICAYUNE, Aug. 16, 2007, at A1. The lawsuit that was threatened in May materialized on August 20, 2007, when several property owners filed suit against the City in federal court, alleging that “the city illegally demolished their gutted, salvageable homes” and “a lower 9th Ward pastor [said] the city wrongly knocked down his church.” See Michelle Krupa, 5 Homeowners Sue Nagin, City for Demolitions: Corps Says Dozens of Homes Mistakenly Ruled Health Threats, TIMES-PICAYUNE, Aug. 23, 2007, at A1. On January 25, 2008, the court approved at the parties’ request a consent decree, which is to remain in effect for one year. See Consent Decree, Joshua v. New Orleans, No. 07-4205 (E.D. La. Jan. 25, 2008). 332. Section 4-702 of the New Orleans Home Rule Charter empowers the Department of Safety and Permits to “enforce the zoning and building code ordinances and all state and municipal laws and regulations under which permits are required”; to issue permits, to make inspections “when prerequisite for the issuance of a permit”; to “[r]evoke, suspend or cancel any permit” in case of code violations; to inspect “substandard structures and authorize demolition of property when hazardous to the public health, safety, or welfare”; and to perform “such other duties as are required” by the Charter. See NEW ORLEANS, LA., CHARTER § 4-702 (2004). Section 4-1201 of the Charter provides that the Department of Health may also “enforce local health and sanitary regulations” and conduct health inspections. Id. § 4-1201. The Louisiana Constitution preserves the distribution of powers, functions, and duties for a pre-1974 home rule jurisdiction, such as New Orleans, and prevents statutory restructuring, reorganization, or redistribution of its powers
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alphabet soup of agencies—NORA or LRA or FEMA—for its success. Eventually, code enforcement should be the primary—and perhaps the overwhelmingly dominant—engine of redevelopment in New Orleans. Unfortunately, as this Article went to press at the end of February 2008, the City seemed to be marching backwards on code enforcement. Most HH&E code hearings had been suspended six months before, and the City had no plans to renew hearings for months to come, nor any announced timetable to attempt a first-ever code auction, despite the presence of thousands of properties that had already been through code hearings and were eligible for code auctions.333 IV. MANMADE MESS, MANMADE SOLUTIONS Katrina was an extraordinary act of nature, but what it precipitated 334 was the most extraordinary manmade—not “natural” —disaster in the history of New Orleans. Long before Katrina ever made landfall, design 335 336 failures by the Corps of Engineers, Congressional funding failures, and
and functions. LA. CONST. art. VI, §§ 4, 6. 333. See David Marcello, Whatever Happened to the Health Code?, TIMES-PICAYUNE, Feb. 16, 2008, at B7. See also Frank Donze, Revised Blight Strategy Unveiled: Computer Tracking, New Hires Planned, TIMES-PICAYUNE, Feb. 19, 2008, at A1 (quoting Nagin aides as saying “it likely will be three to six months before the new tracking system is up and running” and describing a 40-step administrative enforcement process that one Councilmember called “rather convoluted”). 334. At the request of the Corps of Engineers, the American Society of Civil Engineers convened the Hurricane Katrina External Review Panel (ERP) to conduct an in-depth peer review; the ERP concluded that “much of the destruction was the result of engineering and engineeringrelated policy failures.” See AM. SOC’Y OF CIV. ENG’R, HURRICANE KATRINA EXTERNAL REVIEW PANEL, THE NEW ORLEANS HURRICANE PROTECTION SYSTEM: WHAT WENT WRONG AND WHY 47 (2007), available at http://www.asce.org/files/pdf/ERPreport.pdf (last visited Feb. 27, 2008) [hereinafter ERP REPORT]. 335. The Corps based its design on a “standard project hurricane (SPH)” that used “meteorological parameters at the low end of the range of 101 to 111 mph,” then failed to adapt its overly optimistic initial assumption in a succession of additional failures:
• Did not evaluate the hurricane protection system for the effects of a more severe storm; • Did not update its SPH meteorological parameters when the National Weather Service issued revised numbers in 1979; and • Did not improve previously designed and constructed components of the hurricane protection system to match updated design criteria.
Id. at 65-66. Despite widespread recognition that “the entire New Orleans region is subsiding,” the Corps’ “designers and engineers did not build in an allowance for subsidence;” as a result, some “levees and floodwalls [were] up to 3 ft. (0.9 m) lower than the original design.” Id. at 67. The ERP Report concluded that “questionable engineering decisions were made for the New Orleans hurricane protection system. Margins of safety were too low in designing the levees. Improper datums were used in construction. The standard project hurricane was not updated.” Id. at 71. 336. The ERP Report summarized shortcomings of the federal funding process as follows:
Because of the Congressional budgeting process, the stream of funding for the New Orleans
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the fragmentation of responsibility among parochial levee protection 337 laid the awful groundwork (literally) for catastrophic levee bodies failures and consequential losses in life and property. Manmade 338 miscalculations before, during, and after the storm accounted for much of New Orleans’ misery, and manmade mistakes will inflict additional, inexcusable damage on New Orleans if governmental entities and public officials make the wrong strategic choices about where to spend limited 339 housing recovery resources. Human error accounted for much of Katrina’s devastation; human wisdom can ameliorate some of the mess and misery left behind. Each of the following recommendations represents a policy judgment that must be made by public officials. Each should be the subject of debate, deliberation, and decisions reached in an open forum, where all stakeholders have an opportunity to participate in the policymaking process. As a community, New Orleanians must “own” the strategies implemented by our public bodies and officials, because as a community, we will most assuredly own the consequences. A. EXPROPRIATION NORA should use expropriation sparingly and only for certain welldefined strategic objectives, such as the following: (a) to assemble tracts of
hurricane protection system was irregular, at best. If a project was not sufficiently funded, the Corps was often required to delay implementation or to scale back the project. This ‘pushpull’ mechanism for the funding of critical life safety structures such as the New Orleans hurricane protection system is essentially flawed.
ERP REPORT, supra note 334, at 72. 337. The ERP Report explained that:
The [Corps] acts as the ‘engineer’ on behalf of the levee districts. However, the [Corps’] position is that it cannot do anything that a local sponsor (in this case, a levee district) does not approve. Several key [Corps] attempts to implement system-wide solutions were often met by fierce local opposition and were not approved.
ERP REPORT, supra note 334, at 70-71. 338. Consider just a few examples: fatally delaying a mandatory evacuation order; heedlessly directing thousands to the Superdome and the Convention Center as shelters of last resort without providing adequately for their food, water, medical, and sanitation needs; repeatedly promising FEMA resources, then delivering meagerly or not at all. 339. Two years after Katrina, housing remained the central challenge to recovery:
By far, the one issue that dominates the recovery is housing—that is, the lack of it . . . . Without adequate housing, workers and their families cannot return. Without workers, businesses cannot reopen in any great number. Without the businesses and their employees, these communities will continue to struggle financially and will remain dependent on the largesse of the state and federal governments to keep running.
See KAREN ROWLEY, NELSON A. ROCKEFELLER INST. OF GOV’T & PUB. AFFAIRS RESEARCH COUNCIL OF LA., GULFGOV REPORTS: A YEAR AND A HALF AFTER KATRINA AND RITA, AN UNEVEN RECOVERY 3 (2007), available at http://www.rockinst.org/WorkArea/showcontent.aspx ?id=9920 (last visited Feb. 27, 2008).
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land that will remain in public ownership for a period of thirty or more years and will be used for undeniably public purposes—e.g., parks and green space, drainage, public buildings, streets and utilities; (b) to motivate an owner’s consensual sale of storm-damaged property in return for a fair negotiated price, in preference to the threatened expropriation of that property at its much-reduced post-Katrina value; (c) to rehabilitate property with the intention of offering it for purchase to the original owner or successors, and if not purchased by them, offering it for sale to the general public through a competitive bid process. Expropriation is not currently a good strategy for large-scale redevelopment, because assembling many small parcels of land and offering them as a consolidated tract to developers will run afoul of the severe constitutional restrictions on transferring expropriated properties to third parties in less than thirty years. An aggressive and ill-conceived use of expropriation runs the risk of saddling NORA with large numbers of properties that cannot be transferred—the “roach motel” effect. NORA must not rely on the courts to rescue the agency after-the-fact from an improvident use of expropriation. Instead, before starting to accumulate large numbers of properties through expropriation, NORA should pursue a test case to final judgment in the Louisiana Supreme Court, then be guided accordingly. B. ADJUDICATED PROPERTIES NORA should beware the seductive charms of adjudicated properties. Several decades of city officials have heard their siren’s song and invested much time and money in adjudicated properties as a central strategy for restoring and redeveloping New Orleans’ housing stock. Those earlier efforts have repeatedly met with failure and disappointment. Adjudicated property is no easier to develop on a large scale nor any more promising of successful rehabilitation today than it was ten or twenty years ago. It’s time to recognize the history of failure and invest energies elsewhere, in approaches that might offer more opportunities for success. For purposes of completeness, I include two options that NORA might consider. I cannot recommend either one, however. The first seems infeasible; the second, inadvisable. “Change the Constitution!”: Tax sales and tax adjudicated properties could become a more viable redevelopment tool if the Louisiana 340 Constitution were amended to eliminate the 18-36 month redemption
340. LA. CONST. art. VII, § 25(B).
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period or to shorten it drastically to, say, thirty days. Note, however, that the current redemption period applies statewide and would need the 342 No such proposed approval of voters in a statewide referendum. 343 constitutional amendment was introduced in the 2007 legislative session, and the earliest opportunity for voter consideration of such a measure would not likely occur until the Fall 2008 elections. Over and above timing considerations, the political prospects for such a measure seem dim in the current overheated public dialogue about private property rights. “Just do it!”: NORA could simply begin rehabilitating taxdelinquent properties immediately after acquiring them at a tax sale—and prepare to suffer any consequences later. If a prior property owner attempted to redeem the rehabilitated property, NORA could simply regard as a “cost of doing business” the legal fees and other transactional expenses associated with fighting such battles. In practice, very few property owners may try to “come back” against NORA. Many who do make the attempt could decide to settle for some reasonable payment and sign over their 345 property interests in a quitclaim. Those who battle further may ultimately lose in the courts. When such suits do succeed, NORA can claim 346 And if NORA reimbursement for some or all of its rehabilitation costs. sometimes has to absorb substantial losses on a property, those amounts could be held in a reserve fund. This strategy is only viable for a “big player” in the redevelopment arena, since costs can be budgeted in advance
341. The Vacant Properties Draft Report included constitutional reform among its “recommended action steps” but also acknowledged the political challenges facing such a proposal:
The most significant, yet also perhaps the most difficult to accomplish, would be a constitutional amendment to reduce the right of redemption to 18 months in all cases, or shift the 18 months “grace period” to the period of time preceding the date of tax sale and couple this with statutory procedures for Mennonite-quality notice to be given of the pending tax sale. These reforms would shorten the time it takes to acquire tax delinquent properties significantly.
344
See VACANT PROPERTIES DRAFT REPORT, supra note 18, at 9-10. 342. LA. CONST. art. XIII, § 1(C). 343. This finding is based on a search of the Louisiana State Legislature’s public website. See Louisiana State Legislature, http://www.legis.state.la.us/ (last visited Feb. 27, 2008). 344. The advertising slogan “Just do it!” was coined by the Nike Corporation, manufacturer of sportswear and sports equipment. See CTR. FOR APPLIED RESEARCH, MINI-CASE STUDY: NIKE’S “JUST DO IT” ADVERTISING CAMPAIGN 1 (1999), available at http://www.cfar.com/Documents/ nikecmp.pdf (last visited Feb. 27, 2008). 345. A “quitclaim deed” conveys a grantor’s interest in property. See BLACK’S LAW DICTIONARY (8th ed. 2004). 346. NORA would be entitled to reimbursement for the value of its improvements to property purchased at a tax sale but later redeemed by the original owner. See LA. REV. STAT. ANN. § 47:2222(D) (2007). Also, NORA might have a claim for the costs of any repairs, rehabilitation, maintenance, removal, or demolition not included in the value of the improvements. See id. § 47:2222.1.
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and absorbed over many other transactions. NORA promises to be such a big player. But this strategy, if adopted, should only be implemented with a realistic budget and sufficient reserve funds set aside to resolve the conflicts that will inevitably arise. C. ROAD HOME AND CODE ENFORCEMENT PROPERTIES NORA’s two best redevelopment opportunities are properties acquired through the Road Home Program and properties acquired by NORA as a bidder at code lien auctions. NORA’s ability to obtain both types of properties depends upon programs administered by others—i.e., the Road Home Program and its contractor, ICF; and the City of New Orleans, which can seize and force the sale of properties that are out of compliance with 347 If the Road health, housing, environmental, and other municipal codes. Home and the City can process significant numbers of properties, NORA can acquire them through Road Home transfers or successful bids at a code lien auction. Both types of properties would arrive in NORA’s hands ready for rehabilitation and subsequent resale to third parties, free from the myriad problems that burden expropriated or tax adjudicated properties. D. BEST OPTION: CODE ENFORCEMENT The City of New Orleans needs to implement an aggressive program of code enforcement that will either force property owners to rehabilitate their properties or will force the sale of noncompliant properties at public auction and thereby place new owners (including NORA) in a position to rehabilitate them. Ultimately, code enforcement offers some hope of processing large numbers of properties in reasonably brief time frames, but it would be a mistake to try implementing the strategy on a massive scale 348 all at once. Instead, the City should first approach code enforcement as a
347. LA. REV. STAT. ANN. §§ 13:2575-76 (2007). 348. Systemic breakdown results when the City takes on massive challenges for which it is not well equipped. For example, “nearly a year after inspectors fanned out across the city to enforce the ordinance under Mayor Ray Nagin’s Good Neighbor Program, a review of more than 17,000 properties identified through mid-July reveals a laggard and inconsistent process . . . .” See Michelle Krupa & Richard Russell, Doubt Next Door: With Inspections Taking Months and Blatant Offenders Overlooked, the City’s Mechanism to Get Blighted Houses in Order has not Exactly Run Like Clockwork, TIMES-PICAYUNE, Aug. 26, 2007, at A1. The shortfall in performance has a debilitating effect on public confidence: “You think that there’s a system that’s supposed to do something, and you do what you need to do for that system, and that system still doesn’t work.” Id. The Nagin administration quietly killed off the Good Neighbor program in September 2007, though Mayor Nagin continued to tout its virtues more than a month after its demise in an October 24 op-ed, when he asserted, “The Good Neighbor Plan is working” and commended citizens for doing their part by filing complaints. N.O. Blight Program, supra note 275, at A1. The City received 17,000 citizen complaints that were never linked to its enforcement system nor acted upon by the Good Neighbor Program, leading one Councilmember to say of the
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“test case,” selecting properties that are likely to move successfully through the administrative process and the courts, even if a disgruntled property owner decides to challenge the process. An ill-considered use of code enforcement before administrative and legal personnel and procedures are comfortably established will provoke a damaging backlash from property owners. Some opposition might be minimized through close coordination between municipal code enforcement personnel and neighborhood groups. E. TRANSPARENCY NORA’s discussion of its redevelopment strategy must take place “in 349 the sunshine” and must involve numerous “outsiders” in the dialogue.350 Community organizations, neighborhood associations, faith-based groups, universities, business, labor, nonprofits, developers—all these and more must be afforded genuine access to the developing policies, because all of 351 their interests will be significantly affected by whatever policy emerges. At the end of this transparent policy making process, NORA should embody its understandings in a series of coordination agreements with other public and private players in the redevelopment landscape. These 352 cooperative endeavor agreements (CEA’s) will assure that everyone is on the same page and coordinating activities in the most efficient and productive ways. CEA’s will also introduce a vital element of
Nagin administration, “They lied to me repeatedly.” N.O. Blight Program, supra note 275, at A1. 349. The Louisiana Constitution safeguards public access to information at article XII, section 3: “No person shall be denied the right to observe the deliberations of public bodies and examine public documents, except in cases established by law.” See LA. CONST. art. XII, § 3. Louisiana’s Open Meetings or “Sunshine” Act, proclaims as “essential to the maintenance of a democratic society that public business be performed in an open and public manner and that the citizens be advised of and aware of the deliberations and decisions that go into the making of public policy.” See LA. REV. STAT. ANN. § 42:4.1 (2007). The public’s right of access to government documents is set forth in the state’s Public Records Act. Id. §§ 44:1-44:23. The City of New Orleans protects the public’s right of access to public documents in the City Code of Ethics: “When citizens make a request to review public documents, city officials and employees should respond with courtesy and as expeditiously as possible within the requirements of the state Public Records Law.” NEW ORLEANS, LA., CODE ch. 2, art. VII, div. 3, § 773 (2007). Courtesy is in the eye of the beholder, but “as expeditiously as possible” is a legally ascertainable standard that can be enforced by the City’s Ethics Review Board against employees who commit the ethical violation of failing to produce public records on a timely basis. Id. § 719. 350. The Bureau of Governmental Research concurred: “NORA’s activities should incorporate meaningful public participation.” MENDING THE URBAN FABRIC, supra note 52, at 5. 351. The arguments in favor of a transparent and collaborative decision-making process are both normative and functional. Outcomes produced by such a process are not only fairer; they also work better. See Alejandro Esteban Camacho, Mustering the Missing Voices: A Collaborative Model for Fostering Equality, Community Involvement and Adaptive Planning in Land Use Decisions (pts. 1-2), 24 STAN. ENVTL. L.J. 3, 269 (2005). 352. See LA. CONST. art. VII, § 14(C); LA. REV. STAT. ANN. § 33:9031 (2007).
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accountability into the picture, since (if properly drafted) they will identify each party responsible for action and will establish objective benchmarks for measuring success or for identifying troubled areas where further assistance may be needed.353 Finally, a coordinating council should be established to promote a dialogue among NORA representatives, city housing personnel, city code enforcement staff, city tax-lien enforcers, and the host of nongovernmental stakeholders such as nonprofits, neighborhood groups, and others. V. CONCLUSION Katrina’s devastation was beyond imagining, and it unleashed an unimaginably energetic response among citizens. Thousands of people attended hundreds of community forums and planning meetings in initial and sustained bursts of civic enthusiasm. Numerous residents began rebuilding their damaged neighborhoods as soon as the floodwaters receded, despite the lack of guidance from local government. Many of the most impressive recovery efforts to date have been the proud achievement of neighborhood groups, nonprofits, the business community, philanthropists, and volunteers from all across the country. Local government inevitably plays a vital (if frequently 354 disappointing ) role in the recovery process. Local government must, at a minimum, support its engaged citizenry by making informed public-sector choices about recovery priorities. This Article suggests several specific priorities that merit consideration and strongly recommends against other strategies that seem ill-advised. NORA and the City may not like or agree with all that this Article has to say, but they will not lack for clarity in what it recommends, and why. If they wade into tempestuous waters and find themselves drowning under too many demands with too few resources, it will not be for lack of adequate warning. Lawyers and staff for both NORA and the City participated in the series of phone conferences between November 2006 and January 2007 that gave rise to this Article. An earlier, memorandum version of this Article was distributed to City and NORA representatives in
353. The current NOLA-NORA CEA I and II do not satisfy these accountability goals: “These agreements do not spell out a cohesive strategy or procedures. They do not provide for performance standards with remedies if NORA fails to meet the standards.” MENDING THE URBAN FABRIC, supra note 52, at 6. 354. Poll results rated the lack of confidence in New Orleans’ municipal government leadership as the #1 problem in citizens’ perceptions, exceeding crime and other community problems. See John Pope, Government Tops Crime in Causing Malaise; UNO Poll Shows Dissatisfaction with Leadership in New Orleans, TIMES-PICAYUNE, May 10, 2007, at B1.
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February 2007, and repeated drafts followed thereafter. Throughout the second quarter of 2007, specific concerns about expropriation and adjudicated properties were conveyed to NORA and City representatives in emails, phone conferences, and face-to-face meetings. During October 2007, NORA’s lawyers attended a day-long conference that convened various national and state housing lawyers who thoroughly discussed the challenges and opportunities associated with expropriation, code 355 Finally, a enforcement, and tax-delinquent, tax-adjudicated properties. prepublication copy of this Article was distributed to NORA and City representatives, accompanied by an oral presentation at the January 18, 2008 conference conducted by Loyola University New Orleans College of 356 Law. This Article was prepared with the hope that it might help NORA and the City make informed decisions in selecting appropriate housing redevelopment strategies. Those of us in the nonprofit community who work for the recovery of New Orleans nurture the hope that our efforts will 357 elicit a positive response from the public sector. We labor on, despite deep disappointments experienced in the two-and-a-half years since Katrina blew through town and left misery and devastation in its wake. This Article is a statement about how we might move forward as gauged from the beginning of 2008. We’ll assess in one year, two years, ten years, or later whether this Article got it right or wrong. But more importantly, we’ll assess how well the City and NORA fared in their choices, their priorities, and their expenditure of the available resources.
355. See BATON ROUGE AREA FOUND., LEGAL LAND ISSUES (2007) (summarizing discussions of the October 2, 2007 meeting) (on file with Loyola Law Review). 356. Revitalizing Community Assets: A Conference on Blighted, Abandoned and Tax Adjudicated Property and Land Use Planning in Post-Katrina Louisiana, held by the Loyola Law Review and the Center for Environmental Law and Land Use at Loyola University New Orleans College of Law, New Orleans, LA (Jan. 18, 2007). 357. It’s best not to dwell on the negative associations of a website that proudly embraces the domain name “City of NO” (see http://www.cityofno.com) and a seat of government located on “Perdido” Street (En espanol, “perdido” means “lost.” New Orleans’ City Hall is located at 1300 Perdido Street.).
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Professor of Law Emory Law School Atlanta, GA 30322 404.727.6982 falexander@law.emory.edu
MEMORANDUM
TO: David A. Marcello, Public Law Center, School of Law, Loyola University John Lovett, Professor of Law, School of Law, Loyola University FROM: Frank S. Alexander DATE: December 16, 2006 RE: Reflections on Refractions: Parsing the Implications of Amendments #5 and #6
In accordance with the telephone conference call this week on the interpretation of the recent amendments to the Louisiana Constitution, I am happy to share with you these modest reflections on the various interpretative refractions of the amendments themselves. I share these thoughts with two significant caveats. First, these are very preliminary in nature and in need of correction and refinement based upon more extensive research and the wisdom of others. Second, these are only suggestions as to options under Louisiana, and they need to be corrected and revised by those of you who are the experts in Louisiana law. PRELIMINARY OBSERVATIONS The threshold question it seems to me is one that was posed in our conference call but not completely answered. That is, “What is the nature and extent of NORA’s expropriation activities for next two to four years?” My understanding is that NORA historically has engaged primarily in reactive expropriation, electing to acquire a parcel of land in response to a request for “blighted” designation that is presented usually by an adjoining owner or CDC and processed by the City Council. In such instances there is always an ultimate transferee in place at the time of the request. NORA has not, at least thus far, engaged in either widespread expropriation of “blighted” properties on the grounds that they are a threat to public health or safety, or in large scale expropriation for “urban renewal” projects. It seems to me that the very emphasis on NORA expropriation in 2006 and 2007 is perhaps misplaced. If there were 27,000 vacant and largely substandard properties in New Orleans pre-Katrina, and there are over 100,000 such properties today, then the emphasis should instead be on
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enforcement of housing and building codes, and the more general “nuisance abatement” codes. Such enforcement may then result in public nuisance abatement liens which can be levied against the property. A second point which was made clear in the conference call, but which needs to be reiterated, is that under the recent agreement between NOLA and NORA it appears that NORA will now have two dominant functions: (1) expropriation of “blighted” properties, and (2) processing of tax adjudicated properties currently held by NOLA, either in terms of clearing title or in terms of dispositions or both. These two functions have little if any overlap in terms of the law and none with respect to the recent constitutional amendments. The third observation is that constitutional Amendments #5 and #6 raise two distinct questions for NORA expropriations. The first question is “What are NORA’s rights with respect to properties acquired by it under §4(B)(2)(c)?” Unless there is a separate constitutional provision applicable to NORA, its expropriation of “blighted” property must fall within the language of “removal of a threat to public health or safety caused by the existing use or disuse of the property.” Because Amendment #5 also contains the express prohibitions on expropriations for predominant private use and on expropriation for subsequent transfers to private entities, the question arises about what rights NORA has with respect to further disposition of such properties. A strict textualist interpretation of (2)(c) is that this clause is part of the definition of “public purpose” which is the point of (2). All expropriations for “public purposes” are limited by 4(B)(1) and its clauses (a) and (b). The problem with this strict textualist approach is that it creates the entirely anomalous situation where NORA can expropriate blighted properties, but never transfer them to any third party. The second question flows from the first. If a plausible policy based interpretation of Amendment #5 is that NORA can expropriate blighted property, and can dispose of it to third parties, is such a disposition subject to the constraints of Amendment #6? On its face Amendment #6, in §4(H)(1), applies to all expropriated property interests. The following subsections, §§4(H)(2), (H)(3) and (H)(4) all contain references to “project” and “surplus”, providing an argument that these particular subsections are not applicable to blighted property acquisitions. That still leaves, however, the question of whether §4(H)(1) is applicable to expropriations based on §4(B)(2)(c). FRAMING THE QUESTION IN LITIGATION In the absence of future constitutional amendments clarifying these issues it will be up to the Louisiana courts to present the authoritative
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interpretation. I strongly suspect that until there is a final and binding ruling on these questions from the Louisiana Supreme Court, title insurance companies will be extremely reluctant to insure clean title in a transferee (or a transferee’s mortgagee) from NORA of a blighted property acquired by expropriation. One possible approach would be to anticipate a form of litigation in which the issues could be presented fully and squarely for decision. The two forms of action which seem most plausible are a Declaratory Judgment Action (La. Code. Civ. Proc. Ann. §1871) or a form of a quiet title action (La. Code. Civ. Proc. Ann. §3654). My quick glance at the statutes suggests that NORA could be a moving party in a Declaratory Judgment Action in which the constitutional questions are presented separately or together in the form of “Does either Amendment #5 or Amendment #6 constraint NORA’s ability to transfer blighted properties acquired by expropriation in accordance with La. Rev. Stat. §4720.55 et seq.?” (This latter citation is to the general enabling statute for NORA). There is precedent for declaratory judgment actions on the interplay of constitutional issues and statutes. See, Babineaux v. Judiciary Commission, 341 So.2d 396 (La. 1977). One possible concern with proceeding solely with a Declaratory Judgment Action without the addition of other (potentially adverse) parties is the possibility that the question will not be framed adequately, or be capable of being appealed in order to obtain a ruling from the Supreme Court. It would be essential to structure the action in a manner adequate to demonstrate that the issues are vital legal questions, Snell v. Sec. of H.E.W., 275 F. Supp. 645 (E.D. La. 1967), that would not result simply in an advisory opinion. La. Sup. Ct. Comm. on Bar Admin. v. Roberts, 779 So. 2d 726 (La. 2001), American Wate & Pollution Control Co. v. St. Martin Parish Police Jury, 627 So. 22d 158 (La. 1993). A basic difficulty with a pure NORA based Declaratory Judgment Action will be the joinder of parties necessary to present the clear case of constitutional applicability. One potential approach would be to combine a Declaratory Judgment Action with the equivalent of a Quiet Title Action. I defer to the Louisiana experts on the wonderful nuances between a petitory action, a jactitory action and an action to remove cloud on title. There may well be procedural quirks here and potentially relevant issues related to the burden of proof, but it seems that La. Code Civ. Proc. §3654 expressly contemplates the combination of declaratory judgments in such actions under §3651. The optimum scenario – from my own distant perspective – in which to raise and resolve these constitutional questions would be a fact pattern
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involving a contract or agreement between NORA and a third party transferee for the transfer of property (acquired by NORA through expropriation) on terms authorized by the NORA statute. It may be helpful to have two such contracts – one with NOLA or HANO to transfer property to be used for a public green space or for public housing, and one to a private third party not-for-profit developer. Potentially either NORA or the transferees could be the moving party in the litigation. The former owner at the time of expropriation would be a proper party defendant. I would recommend also potentially adding as a party a tax payer resident of the City for purposes of pressing the question of fair market value dispositions. If this approach seems effective and feasible then the task for NORA is to identify one or two parcels of property, the transferees willing to contract for the parcels, and the former owner at the time of expropriation. As suggested at the outset, this memorandum is designed solely to present preliminary legal analysis that can be the basis for future reflection on the interpretive refractions of the challenges posed by constitutional Amendments #5 and #6.