It’s billed as the largest construction project in Nevada history.
The $1.5 billion Project Neon involves road improvements along a 3.7-mile stretch of Interstate 15 to bring better access to downtown and the area’s medical district.
Since it was announced in 2006, Project Neon also has become known for its eminent domain battles, as landowners affected by the proposed changes aim to get “just compensation” for their land under state eminent domain law.
The Nevada Department of Transportation toes the line between being a steward of taxpayer dollars and offering a fair deal to property owners. But two of the biggest eminent domain attorneys in town argue the transportation agency is dragging out the process far too long, further harming landowners.
The project
Project Neon calls for several braided ramps, similar to ones along the U.S. 95 interchange at Rancho Drive, as well as a high-occupancy vehicle flyover ramp that will connect car-pool lanes from U.S. 95 to I-15’s express lanes. The changes require redesigns along Martin Luther King Jr. Boulevard and a complete reconstruction of the I-15 and Charleston Boulevard interchange.
To get it all done, the state must purchase dozens of parcels using eminent domain, a point of contention among owners. Eminent domain is a government’s right to appropriate private property for public use. Landowners have no recourse to stop the sale, but they get paid for their land — the appraised fair market value plus the cost of moving. Landowners can appeal if they think the price is too low.
Coming up with the right price isn’t easy.
“The state has a limited amount of money for acquisition,” state transportation board member Frank Martin said in August.
The goal is to have all price disputes resolved by 2016, when construction is set to begin. NDOT Director Rudy Malfabon thinks it can be done.
“We are confident the state will acquire the primary parcels that will allow construction to commence in early 2016, although land acquisition will occur throughout the course of the 3 1/3-year-long project,” Malfabon said.
Project Neon is expected to reduce travel time by 28 percent and create $110 million in annual savings through improved productivity, Malfabon said.
Landowner perspective
For the past 15 years, local attorneys Brian Padgett and Kermitt Waters have worked on behalf of landowners facing eminent domain.
Padgett recently argued a case for Ad America before the state Supreme Court. Ad America owns four parcels in the downtown area financed under one loan. Three of the four are set to be taken under eminent domain, and as a result have low vacancy rates — 30 to 40 percent, Padgett said. That jeopardizes the fourth parcel, which has high occupancy.
The landowner is on the verge of foreclosure and is waiting for a Supreme Court decision, which could take up to a year.
“It’s a situation where these landowners have a hard time filling apartments, offices and industrial buildings,” Padgett said. “As a result, they’re hanging on by their fingernails. The landowners have become involuntary custodians of their own properties.”
Malfabon called the acquisition of property through eminent domain “a very meticulous process” that requires in-house counsel, right-of-way expertise and outside experts including appraisers, engineers and consultants. Malfabon said the agency is moving as quickly as it can.
“NDOT is managing the acquisition of parcels as best as possible with the resources available, and we respectfully request the patience of affected property owners as we diligently pursue the acquisition process in manageable stages,” he said.
Valuation differences
Waters said zoning issues play a huge role in price gaps between NDOT’s offers and what landowners have in mind. Sometimes an appraisal uses existing zoning, which may not be the highest and best use.
“If it’s a home next to a casino, then the highest and best use is not a home,” Waters said.
Malfabon said NDOT has kept an open mind during the process.
“Our goal is to reach an agreement with each owner,” he said. “When the owner makes a counteroffer that is supported by the market data, we will reconsider the original offer amount. However, there is little the state can do when owners either refuse to participate in the process or make unrealistic demands that are not supported by the market data.”
Waters and Padgett say landowners need to be “made whole.” They note that just compensation is defined as a “sum of money, necessary to place the property owner back in the same position monetarily, without any governmental offsets, as if the property had never been taken.” Compensation can include interest and attorneys’ fees.
Negotiations have yielded wildly different outcomes. In one recent settlement, Waters’ client received $3 million, more than triple NDOT’s initial $700,000 offer. Another received 37 times the amount initially offered.
“Unless you can get back to the same type of property, you’re not made whole. You’re just helping them finance that project for the government,” Waters said.
Early on, Waters went to trial with just about every case. Now, more are being settled before they go to court.
Malfabon said NDOT had done its best to be fair by using independent appraisers and allowing owners to accompany the appraiser when he or she visits the property. Landowners also are encouraged to bring forth relevant information concerning the value of the property. Owners are provided a copy of the appraisal when presented with an offer. They then have the opportunity to make a counteroffer, too.
Future
NDOT has approximately $250 million budgeted for land acquisitions related to Project Neon. About $100 million comes from revenue-backed bonds and the rest from federal and state fuel tax revenue.
Malfabon estimated about 100 more parcels still need to be acquired. Offers have been made to 39 landowners. Twenty-one parcels are in the appraisal process. Agreements have been made with 18 property owners and negotiations are underway with 21, Malfabon said.
How the process is going depends on whom you ask. Malfabon has a much more upbeat take than many.
“We’re more than halfway through assembling the project parcels,” he said. “The acquisition process, generally speaking, has been smooth thus far.”