RICHARD M. GERGEL, District Judge.
This is a land condemnation matter brought by the Plaintiff United States of America (the "Government"). The Government has placed a permanent, restrictive easement on 269.22 acres of the Defendants' (the "Landowners") property located in northern Beaufort County, South Carolina (the "Encumbered Property"). The purpose of the easement is to prohibit any development in the flight path of jets using the U.S. Marine Corps Air Station in Beaufort (the "MCAS"). The sole issue in this case is the appropriate amount of "just compensation" owed to the Landowners for the taking of their property by the Government.
The Government filed its Complaint in Condemnation on July 15, 2016 in the United States District Court for the District of South Carolina, and, on July 22, 2016, it deposited $1,091,000 with the Court as estimated just compensation for the taking.
By order entered on February 8, 2018, United States District Judge Richard M. Gergel appointed a three-person commission to determine compensation pursuant to Rule 71.1 (h)(2) of the Federal Rules of Civil Procedure (the "Commission"). Dkt. Nos. 87 & 93. Following pretrial briefing from the parties, this matter was tried before the Commission on August 14 and 15, 2018. The Landowners elicited testimony from Harold Trask, Jr., John "Donald" Trask, and James Trask (the "Landowner Witnesses"), three owners of the Property; Thomas Harnett, an appraisal expert; and Gregory Ness, an expert in solar development. The Government called Keith Batson, an expert offered for the sole purpose of rebutting Mr. Hartnett's appraisal; Cassandra Norris, a supervisory realty specialist and real estate contracting officer for the United States Navy; Lieutenant Colonel Philip Williams, the former director of operations at the MCAS; Kimberly Statler, the former executive director of the Lowcountry Economic Alliance, via video testimony; and Haywood Newkirk, an appraisal expert.
After consideration of the testimony, the exhibits offered in this case, and the arguments of counsel for both parties, the Commission makes the following Findings of Fact and Conclusions of Law, and Final Determination and Recommendation of Just Compensation.
The subject property is located just outside of downtown Beaufort, and consists of 536.55 acres (the "Property"). Tr. at 29:8-12; 126:14-16, 482:18; Landowners' Ex. 14 at 11, 30; Government's Ex. 1 at 96. Due to its size and proximity to downtown Beaufort, and its undeveloped state, all appraisal experts agree that it is a unique property. Tr. at 92:8-13, 534:10-14. Harold E. Trask, Sr. purchased the Property in 1955 and the Landowners inherited the Property from his estate. Tr. at 26:24-27:1, 30:7; Landowners' Ex. 1 & 2. The family has owned the Property in fee simple since 1955.
The Property is undeveloped land with excellent road access and visibility and, unusual for the South Carolina Lowcountry, few wetlands. Tr. at 97:13-16, 120:10-15, 482:15-19. The Property is located on, and has significant road frontage to, Parker Drive, which is a newly paved two-lane road off of Highway US-21. Tr. at 35:20-21, 36:16-37:3, 99:7-18, 482:12-16. It is located twenty miles or less from Interstate-95 and is situated between two major cities-Charleston and Savannah-both of which have large shipping ports and are home to major aerospace manufacturing companies. Tr. at 120:10-15, 121:13-16. The Property has access to all municipal utilities, including water, sewer and gas, and is bisected by power lines running from an SCE&G sub-station located directly across Parker Drive from the Property. Tr. at 40:9-22.
The Property consists of two parcels totaling 536.55 acres. Tr. at 29:8-12. Landowners' Ex. 14 at 11. The first parcel is zoned S-1 industrial (the "Industrial Parcel") and, at 446.33 acres, is one of the largest industrially-zoned tracts of land in Beaufort County. Tr. at 29:8-12, 92:9-13, 485:21-486:1, 534:10-14; Statler Dep. at 90:21-91:2. The Government's permanent restrictive easement covers 179 acres of the 446.33 acres of the Industrial Parcel. Landowners' Ex. 4 at Schedule C. The second parcel totals 90.22 acres and is zoned T2R residential (the "Residential Parcel").
Across the street from the Property, Parker Drive is lined with industrial properties and businesses, the majority of which are operational and several of which contain newly constructed or re-furbished buildings. Tr. at 37:4-39:25, 40:24-41:25. There are also several residential areas and government buildings surrounding the Property. Tr. at 42:6-18. The Beaufort Commerce Park (the "Commerce Park") sits behind the Property and is connected to Parker Drive by an access road. Tr. at 41:1-2.
Historically, the Property has been used for farming, timber harvesting, surface mining, and recreational hunting. Tr. at 30:7-16, 34:21-23, 201:5-17, 283:7-11. The Landowners have held on to the Property over the years because of its potential for future industrial and residential development. Tr. at 33:1-4. There is limited mining potential on the Property and, in 2015, the Landowners sold one acre of dirt from the Property for approximately $34,000. Tr. at 34:21-23, 283:12-284:12, 306:4-11. No evidence was presented to suggest that the mining value would be any higher than fill dirt. Other viable uses of the Property also existed prior to the taking, such as its use for possible solar development. Tr. at 33:10-17; 34:6-10, 186:23-187:23. Prior to and at the time of the taking, the Landowners were undergoing negotiations with Southern Current, a solar developer, for the placement of a large, utility-scale solar development on the Property. Tr. at 187:3-7. The Landowners have also received interest from other solar developers in building a solar project on the Property. Tr. at 187:7-11. The Property is uniquely well-suited for solar development because it consists of large, contiguous tracts, which allows for flexibility and maneuverability in the layout, and is next to a substation that has little congestion on it. Tr. at 40:9-14, 222: 13-20. With upgrades, the Property could have supported a large utility-scale solar project utilizing a high-capacity transmission connection. Tr. at 221:3-15, 235: 15-239: 11. The interim use of the Encumbered Property for solar development would have produced a substantial revenue stream to the Landowners and allowed them the flexibility to hold the Property until such time as market conditions ripened or to sell the Property subject to the solar leases. Tr. at 188:3-4, 188:9-12, 306:17-25.
It is undisputed that the easement is extremely restrictive and will encumber the land in perpetuity, even ifthe MCAS were to close at some point in the future. Tr. at 107:17-20, 110:1, 388:7-9, 428:8-10, 532:19-22. Under the terms of the easement, the Government has the absolute discretion to forbid, in perpetuity, any activity or use of the Encumbered Property that it deems to be inconsistent with the easement's purposes, including: (1) "limit[ing] the use and development of [the] [Encumbered Property]"; (2) "prohibit[ing] residential development" of the [Encumbered Property]; (3) allowing "low and frequent flights" over the [Encumbered Property]; and (4) "prevent[ing] any improvement, development or use of the [Encumbered Property] that would otherwise be incompatible with the military mission of [the MCAS] Beaufort." Tr. at 428:2-20, 434:18-23; Landowners' Ex. 4 at Schedule E. Although the easement contains a list of restricted uses of the Encumbered Property, it further states that the list in no way limits the "generality" of the easement's restrictions or the Government's discretion to deny any use of the Encumbered Property as inconsistent with the easement's purposes. Landowners' Ex. 4 at Schedule E.
The easement expressly forbids or restricts the following activities and uses:
Landowners' Ex. 4 at Schedule E.
The easement expressly permits the following uses subject to the notice requirements
Landowners' Ex. 4 at Schedule E.
Under the terms of the easement, the Landowners retain all responsibilities and must bear all costs and liabilities "of any kind related to the ownership and maintenance of the [Encumbered Property]." Landowners' Ex. 4 at Schedule E. In other words, the Landowners must pay taxes on the Encumbered Property, manage the Encumbered Property, maintain insurance on the Encumbered Property, protect the property, and ensure compliance with the terms of the easement at their own expense, among other potential costs and responsibilities. Tr. at 50:20-24, 400:9-10.
Cassandra Norris testified that, in her position with the Navy, she is tasked with managing and enforcing this easement. Tr. at 418:10-419:4. On cross-examination, she testified to the following:
Tr. at 428: 15-20. To this end, Norris has sole discretion to decide what uses are permitted under the terms of the easement, including whether or not to approve or deny any construction or new use of the Encumbered Property by the Landowners. Tr. at 428:6-20, 431:17-20, 434:18-23. For example, when questioned by the Commission regarding the Landowners' proposed use of the Encumbered Property for solar development, Norris testified that:
Tr. at 438:22-24. As the easement extends in perpetuity, Norris' successor likewise will have the sole ability to interpret the easement, even if that interpretation differs from that of Norris. Tr. at 428:6-14. In other words, as a practical matter absent a clearly wrongful determination by a single Naval employee, the Landowners' proposed uses of the Encumbered Property, if not absolutely clearly delineated in the easement, can only be pursued at the discretion of a single Naval employee. Obviously, the Landowners' can seek redress in Federal Court if there is a wrongful determination but this is time consuming and can be extremely costly and often it results in opportunities simply disappearing and going elsewhere. Who would want to deal with who may have to seek permission from a third party who is the United States Government.
Thomas F. Harnett, duly qualified as an appraisal expert at trial, testified regarding the fair market value of the taking. Tr. at 88:20-89:3.
With respect to the Industrial Parcel, Hartnett testified that, because there are so few industrial properties of this size in Beaufort County, there were no recent arms-length sales that were comparable in that area. Tr. at 92:8-18. Therefore, Hartnett analyzed three land sales in Berkeley County and one land sale in Charleston County. Tr. at 92: 18-20. All four sales involved undeveloped, industrial land and occurred between 2014 and 2016. Tr. at 92:23-93:25; Landowners' Ex. 14 at 38. The sales ranged in size from 57 to 223 acres and in value from $32,500 to $80,500 per acre (approximately). Tr. at 92:23-93:25; Landowners' Ex. 14 at 38. Harnett testified that he adjusted these values downward by between 15 to 43% to account for their smaller size
With respect to the Residential Parcel, Hartnett selected as sales comparables three undeveloped, residential land sales in Beaufort County that occurred between 2014 and 2015.
Haywood F. Newkirk, a real estate appraiser from Wrightsville Beach, North Carolina, was duly qualified as an expert in real estate appraisal for the Government. Tr. at 475:8-16. Newkirk valued the Property, prior to the taking of the permanent restrictive easement by the Government, at $3,200,325 (or $7,500 per acre) with respect to the Industrial Parcel and $402,960 (or $4,800 per acre)
With respect to the Industrial Parcel, Newkirk identified four sales of industrial properties as comparables for purposes of calculating its pre-taking value.
With respect to the Residential Parcel, Newkirk identified three sales of residential properties in Beaufort County as comparables for purposes of calculating its pre-taking value.
The Landowners presented evidence that the post-taking value of the Encumbered Property is between 0 and 25% of its pre-taking value. Tr. at 50:1-24, 196:22-197:5, 286:8-16; 91: 12-14, 91: 19-20. They also presented evidence that the remaining portion of the Industrial Parcel that is not subject to the easement (approximately 267.33 acres) was devalued by at least 20% of its pre-taking value. Tr. at 51:25-52:16, 58:10-14, 80:7-21; 197:6-11.
All three Landowner Witnesses testified to their opinion that the Government's imposition of the permanent restrictive easement on the Encumbered Property in essence amounted to a total taking of their property rights. Tr. at 50:11-15, 197:4-5, 286:9-12. Specifically, they testified that there are no viable uses of the Encumbered Property remaining and, therefore, it has no post-taking value. Tr. at 49:5-51:11, 194:22-195:8, 197:1-5, 284:19-22, 285:7-20, 286:8-16, 303:20-304:6, 306:9-16. Moreover, because, under the terms of the easement, the Landowners retain all responsibilities, costs and liabilities of ownership, they testified that the Encumbered Property post-taking is actually a burden, with none of the benefits of ownership. Tr. at 50:20-24, 286:11-13.
The Landowner Witnesses testified that there are no viable remammg uses of the Encumbered Property because it cannot be developed. Tr. at 49:9. There cannot be any structures on the Encumbered Property, not even a temporary structure such as a tent. Tr. at 49:9-12. Farming activities involving seeds are prohibited because attracting birds is prohibited under the easement; farming activities involving plowing are prohibited because activities that create dust are prohibited under the easement. Tr. at 49:13-15. The Encumbered Property cannot be leased for any recreational activities, such as fishing or hunting, because all recreational activities must be not-for-profit under the easement. Tr. at 51:1-11. Moreover, the easement prohibits any type of bird or waterfowl hunting. Tr. at 286: 13-14. The Landowners cannot mine the Encumbered Property because the easement prohibits alterations in the natural state and grading of the land, and because the resulting water impoundments could attract birds or create glare. Tr. at 49:15-18, 284:19-285:3. The Landowners cannot grow trees on the Encumbered Property which reach a height of more than120 feet, Tr. at 285:15-16, and any and all controlled bums of timber must abide by the Notification and Approval procedures of the Easement. Notably, controlled bums are allowed but must be conducted when conditions are optimal, Tr. at 303:20-23. It was noted that the Landowners could not have a family reunion on the Encumbered Property because the easement limits the number of people who may be on the Encumbered Property to no more than ten. Tr. at 49:19-25. The property cannot even be used as a cemetery because of the ten (10) person limitation. Unless of course, the rules of the cemetery required a limitation of no more than ten (10) persons who could pay respect to the sacred dead. Obviously, such a restriction would in practicality prohibit its use as a cemetery.
Furthermore, the Government has denied the Landowners' intended use of the Encumbered Property for a solar farm as violate of the easement's restriction on glare. Tr. at 194:22-195:8; Landowners' Ex. 19 at 2. While the Government proffered testimony that solar uses of the Encumbered Property would have been prohibited prior to the imposition of the restrictive easement under the County's Overlay zoning, the Landowners' solar expert, Gregory Ness, testified that the solar project on the portion of the Industrial Parcel unencumbered by the easement has been approved with respect to any glare issues. Tr. at 246:11-14, 337:24-338:1, 525:24-526:1. Thus, while the solar use of the Encumbered Property was denied by the Navy as prohibited by the easement, the solar use of the unencumbered Industrial Parcel was approved because, according to Norris' testimony, such approval on the unencumbered Parcel "has nothing to do with compliance on the easement." Tr. at 431: 1-5.
Landowners also testified that because any use that they might make of the Encumbered Property other than specifically permitted uses is now subject to review and approval by the Government, and the Government has the discretion to deny any such approval as either expressly prohibited under the easement or as "inconsistent with restrictions of (the] (e]asement or incompatible with the [p]urpose of [the] [e]asement," there has been a total taking of the Encumbered Property. Tr. at 50:1-2, 50:11-14, 285:7-13, 286:14-15, 303:25-304:6; Landowners' Ex. 4 at Schedule E.
Finally, the Landowners testified that the remainder of the Industrial Parcel that is not subject to the permanent restrictive easement has been devalued by at least 20% of its "before" value because the easement is taking approximately 80% of the Property's road frontage and the Property's superior road frontage was recognized by the appraiser witnesses as a key factor for the Property's superiority over other industrial sites. Tr. at 51:25-52:16, 58:10-14, 80:7-21; 197:6-11.
Hartnett stated in his report that, in his experience, the value of land encumbered by an easement, assuming that it can still be used for some purposes, generally ranges anywhere from 25 to 40% of the value of the land as if unencumbered. Landowners' Ex. 14 at 46. He testified that this was the most restrictive easement that he had ever seen (emphasis added) and that he therefore de-valued the Encumbered Property in the "after" by 75%, which was the largest percentage within that typical range for easements. Tr. at p. 91:12-14, 91:19-20, 107:17-20, 110: 1. However, Hartnett also testified that he had to strain to find that the Encumbered Property retained 25% of its value because he felt it had very little if any value left after the imposition of the easement. Tr. at 107:25-108:5, 110:1-3. He further testified that he believed that it was unreasonable to conclude that the Encumbered Property had no remaining value and that the imposition of the permanent restrictive easement amounted to a total taking. Tr. at 108: 14-17. Thus, while his value conclusion utilized a 25% remaining value for the Encumbered Property, he testified that "[he would] almost have to agree with [the Landowners] that there's very little, if any, value left."
Hartnett testified that he did not use comparable sales to value the Encumbered Property in the "after" because the wording of easements varies greatly and that such variations have a significant impact on the remaining value of a property. Tr. at 182:20-183:1. Hartnett, for example, testified that property encumbered by an easement with less restrictive language will have more value than a property encumbered by a more restrictive easement. It is not always possible to use comparable sales to value a property covered by an easement. Tr. at 183: 1-4. Hartnett did not find any comparable sales of property containing restrictive easements similar to the easements placed on the Encumbered Property. Tr. at 182:7-9, 183:12.
Newkirk testified that the highest and best use of both the Industrial and the Residential Parcels after the imposition of the restrictive easement is as recreational tracts. Tr. at 527: 19-22. Therefore, Newkirk applied the comparative sales method using sales of recreational tracts and concluded that the Encumbered Property was now worth $3,000 per acre. Tr. at 527:16-18, 530:15-19.
Newkirk utilized four land sales as the basis for his "after" valuation. Tr. at 527:23-528:2; Government's Ex. 1 at 121. Of those four sales, three were hunting properties that he concluded were superior to the Property because of their excellent waterfowl hunting.
Finally, Newkirk testified that the easement did not impact the value of the remaining industrial land not subject to the easement even though the easement took the majority of the road frontage because there was still adequate road frontage remaining to support an industrial use of that property. Tr. at 526:10-16.
The sole issue for determination before the Commission is the appropriate amount of just compensation owed to the Landowners for the Government's taking of the permanent restrictive easement on the Encumbered Property. Any findings of fact contained in the Conclusions of Law are incorporated into and deemed to be Findings of Fact.
The Landowners have a constitutional right pursuant to the Fifth Amendment to the United States Constitution to just compensation for the taking of their property. U.S. Const. amend. V. "[T]he standard upon which compensation is based is `market value,' what it fairly may be believed that a purchaser in fair market conditions would have given." United States v. Miller, 317 U.S. 369, 374 (1943). "In arriving at market value, there should be taken into account all considerations that might fairly be brought forward and given substantial weight in bargaining between an owner willing to sell and a purchaser desiring to buy." US. v. Carroll, 304 F.2d 300, 306 (4th Cir. 1962). "The owner is to be put in as good position pecuniarily as he would have occupied if his property had not been taken." Miller, 317 U.S. at 373. If only part of a landowner's property is taken, "the owner is not confined to recover for the part taken only, but is entitled to recover also for the damages thereby visited upon the area remaining in his title, possession and use." US. v. 97.19 Acres of Land, More or Less, in Montgomery, Washington and Alleghany Counties, Md., 582 F.2d 878, 880 (4th Cir. 1978) (citation and internal quotation marks omitted).
At trial, Mr. Hartnett testified that the before valuation of Parcel 1 Industrial Property was $20,000 per acre and, thus, that the fair market value of Parcel 1, the Industrial Property prior to the imposition of the Government's easement was $3,580,000. We find Mr. Hartnett's testimony and appraisal report to be persuasive and agree with Mr. Hartnett and find that the value of Parcel 1 prior to the imposition of the permanent restrictive easement is $3,580,000 ($20,000 per acre for 179 acres). Mr. Hartnett further testified that the before valuation of Parcel 2 prior to the imposition of the Government's easement was $1,669,070. We agree with Mr. Hartnett and find his testimony and appraisal report of Parcel 2 persuasive and that the value of Parcel 2 prior to the imposition of the permanent restrictive easement is $1,669,070 for the 90.22 acres in Parcel 2.
The Commission finds the defense presentation, comprised of the Landowners' expert's opinions, and accompanying evidence of the pre-taking value of the Property to be compelling. "[T]he opinion testimony of a landowner as to the value of his land is admissible without further qualification. . . . Such testimony is admitted because of the presumption of special knowledge that arises out of ownership of the land." U. S. v. 329.73 Acres ofLand, Situated in Grenada and Yalobusha Counties, State of Miss., 666 F.2d 281, 284 (5th Cir. 1982). The Commission finds no supportable basis for the Landowners' opinion of value. We agree that the Property is a good site with few or no wetlands and excellent road frontage and, with respect to the Industrial Parcel, that it is a unique property in Beaufort County by virtue of its size, absence of wetlands, and proximity to downtown Beaufort. The evidence is compelling that Beaufort County is one of the fastest growing counties in South Carolina and the Commission finds that, as of the date of the taking, the market for industrial and residential property in Beaufort County was improving and was likely to continue to improve in the reasonably near future.
The Commission finds that there were viable, interim uses of the Property, such as for solar development or surface mining, and that such uses of the Property enhanced the market value of the Property as a whole because they are factors that impact the price that a willing buyer would have been willing to pay for the Property. See US v. Carroll, 304 F.2d 300, 306 (4th Cir. 1962) (holding that it was proper for the commission to consider the existence of sod as a factor possibly affecting the determination of the market value of the property as a whole when put to its highest and best use). See also US v. Smith, 355 F.2d 807 (5th Cir. 1966) (holding that, in determining market value of property taken, consideration should be given to all facts and circumstances that would reasonably go into the making of the purchase and sale bargain between a willing buyer and willing seller).
The Commission further finds that Hartnett gave the more compelling expert testimony as to the "before" value of the Property.
With respect to the Residential Parcel, the Commission is further persuaded by Hartnett's testimony that the density classification of the Property has little impact on it's per acre value. Hartnett used his extensive experience and familiarity with property values in Beaufort County as a check of reasonableness and determined that $18,500 per acre for three acres of residential property is well within market value for residential tracts in Beaufort County. Furthermore, the Commission is not persuaded by Newkirk's determination that the highest and best use of the Residential Parcel is for one-to-three home sites on the entire 90-acre parcel. As a result, the Commission finds the size adjustments applied by Newkirk to his residential comparables are inappropriate.
At trial, the Government relied heavily on the purported lack of demand for the Property in its valuation. Through Statler's testimony, the Government pointed to the entitlements and slow historical growth of the Commerce Park as evidence that there is no demand for the Property. On this basis, Newkirk utilized "before" sales comparables that suffered from a lack of demand and that were, in some instances, distressed sales. This approach is of little probative value because of the unique nature of the Property and because of the specific facts and circumstances surrounding the Commerce Park. The Commerce Park is comprised of many, smaller tracts and could not accommodate a large industrial user requiring two-hundred or more acres, which Statler testified is the smallest tract that large industrial users seek to purchase. The Government also argued that the Residential Parcel suffered from a similar lack of demand based on evidence that there was more residential development happening in other areas of Beaufort County. This argument ignores the fact that much of the land adjacent to the Property is subject to conservation easements and, thus, is unavailable for residential development and in fact arguably enhances the Landowner's residential tract.
The Landowners presented evidence that the City of Beaufort is valuing internal lots at the Commerce Park at $30,000-$35,000 per acre and that the recent sale to Oliver's Bush-Hogging sold below market price due to its relationship with the Commerce Park. See United States v. 312.50 Acres of Land, More or Less, Situated in Prince William Cty., Com. of Va., 812 F.2d 156, 157 (4th Cir. 1987) (holding that post-taking contracts of sale are admissible to show value). However, the Commerce Park lots are smaller lots and come with some entitlements, and the Property is a superior property in most respects. Specifically, while the Property has substantial road frontage and access, the Commerce Park sits behind the Property with almost no road frontage and is connected to Parker Drive only by a narrow access road. Unlike the Property, which is high and dry, the Commerce Park also has wetlands issues. The lack of wetlands combined with the larger size of the Property allows industrial users greater flexibility and may well lower the cost of infrastructure, such as roads and utilities.
Although the Landowners make some notable points, the Commission adopts Mr. Hartnett's "before" valuation. Therefore, we recommend that a before value of $20,000 per acre be placed on Parcel 1 and an $18,500/acre value placed on Parcel 2.
The Commission does not agree with the Landowners', the Government's or any of the expert's opinion of the "after" value of the Property and finds that the Encumbered Property has a 9% remaining value after the imposition of the permanent restrictive easement. In particular, the Commission finds that notwithstanding the Notification and Approval provisions of the easement, the ability to grow and harvest timber up to 120' in height has value even though it is somewhat encumbered by the easement. Furthermore, the Commission finds the same to be true for the possibility of mining dirt which has recently been done on a limited basis by the Landowners. The Commission finds that this conclusion is supported by the controlling case law and the weight of the evidence. In the seminal case Lucas v. South Carolina Coastal Council, the United States Supreme Court held that a total taking has occurred where the government has deprived the landowner of all economic value of the property. Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1031 (1992). The Court reasoned that, where a landowner is forced to leave his property economically idle, he has been deprived of the property itself. Id. at 1019. The Government witness Batson argued that property has value "[e]ven if it does nothing but holds the ends of the earth together." Tr. at 392:6-8. However, this view is contrary to the rulings in Lucas. Specifically, that landowners' rights are a "bundle of rights" and that, while reasonable Landowners should expect the possibility that their rights may become restricted to some extent from time to time, a total taking of the landowners' rights has occurred where landowners have been deprived of all economically productive or beneficial uses of their land. Lucas, 505 U.S. at 1027-30. While there may be value to the public of a property's "holding the ends of the earth together," public value is separate and distinct from economic value. Incumbent in a landowner's bundle of rights is the right to possess and exploit his land. See US. v. Causby, 328 U.S. 256, 262 (1946) (explaining that landowners' "bundle of rights" includes their beneficial ownership of the property, which is defined as the owners' right to possess and exploit the land). Here, the Government has eliminated much of the economic uses of the Encumbered Property, and the Landowners have been left with the burdens of ownership, with very few of its benefits. The ability to grow and harvest timber has some value, and in fact the testimony shows several years before the Easement the Landowners planted a significant portion (50-100 acres) of parcel one and almost all of parcel two in trees presumably to make a profit. Likewise, the possibility even though limited to mine the property for dirt has some value.
Furthermore, under the Uniform Appraisal Standards for Federal Land Acquisitions, for purposes of compensation, opinions of market value must be based upon an "economic highest and best use," which means that the use "must contribute to the property's actual market value, and it must be a competitive supply and demand for that use in the private market." By this standard, the weight of the evidence establishes that the growing and harvesting of timber is an economic use of the Encumbered Property and, thus, is appropriate for consideration in determining the "after" value of the Encumbered Property. Likewise, the possibility of mining dirt is an economic use of the Encumbered Property, although the Notice and Approval requirements of the easement will make it very difficult.
Having heard the witnesses' testimony and considered all of the evidence, it is clear to the Commission that the Landowners have been deprived of the vast majority of the economic value of the Encumbered Property. In fact, Batson, the Government's own rebuttal appraisal expert, testified that he wondered "why [this] wasn't just a total taking." The argument by the Government that the Encumbered Property has post-taking value as hunting property is unpersuasive. First and foremost, it is undisputed that the Encumbered Property cannot be used for hunting activities that are "for profit" (emphasis added). Moreover, there is simply no evidence that there would be any market demand for the Encumbered Property for hunting waterfowl because it is prohibited under the terms of the restrictive easement, among other restrictions.
Based on the foregoing, we find the Encumbered Property had some limited remaining use after the imposition of the easement. For example, as mentioned the Landowner can grow timber on the Encumbered Property although the Landowner is subject to the 120' height restriction (ample height for saw timber) as well as the Notification and Approval provisions as to burning and construction of logging roads. Likewise, the Notification and Approval process will make it difficult to exploit any mining potential as potential buyers will in all probability simply go elsewhere. Moreover, approval of uses falls to a single Naval employee and will in perpetuity. Finally, all proposed uses require a 150-day notice and approval period requiring the Landowners to make a written application to the Government, which may be denied if it is determined that such use would be "inconsistent with the restrictions of [the] [e]asement or incompatible with the [p]urpose of [the] [e]asement." The Commission finds that the Government's right to approve or deny any construction on or any new use of the Encumbered Property is a compensable taking and constitutes a deprivation of the Landowners' rights. See Washington Metro. Area Transit Auth. v. One Parcel of Land in Montgomery Cty., Maryland, 549 F.Supp. 584, 589 (D. Md. 1982), ajj'd, 720 F.2d 673 (4th Cir. 1983) (holding that the government's right to review future building plans under the terms of an easement constituted a compensable element of just compensation for the taking, even though the government did not have a right to approve such plans, because there was evidence that the government could nonetheless request the local permitting authority not to issue a building permit if the plans did not meet with the condemning authority's requirements).
Under Lucas, and based upon the evidence presented as to the post-taking value of the Property subject to the easement, and the harshness of the restrictive easement, the Government's taking of the permanent restrictive easement requires the Commission to place a value on the Encumbered Property, "after" the placing of the restrictive easement of 9% of the "Before" value of the Encumbered Property, thereby entitling the Landowners to recovery of 91 % of the full pre-taking value of the Encumbered Property.
The Commission agrees with the Landowners that the portion of the Industrial Parcel not subject to the permanent restrictive easement has been devalued as a result of the Property's substantial loss of 80% of its road frontage. The Government did not introduce any evidence to refute this. Instead, Newkirk merely testified that he did not believe that there were any damages to the unencumbered remainder because there was still sufficient road frontage for it to be viable for industrial uses. However, a property may still be viable as a use, but nonetheless made less valuable. The evidence establishes that road frontage is a key indicator of value and that some industrial uses will reqmre substantial flexibility of access to the property. Moreover, the remainder is further devalued by its loss of size. The Landowners testified that the unencumbered remainder was devalued by at least 20% as a result of the easement. The Commission does not agree with the Landowners contention that the unencumbered remainder was devalued by 20%. This is because the Landowners still have access to the unencumbered parcel and subject to the Notification and Approval provisions may be able to build a road through the Encumbered Parcel to access the Unencumbered Parcel. The Commission finds a more appropriate devaluation of the Unencumbered Parcel to be 10%. Accordingly, the Commission finds that the remaining 267.33 acres of the Industrial Parcel are devalued as a result of the permanent restrictive easement by 10% of their pre-taking value.
Having carefully considered all of the evidence,
THE COMMISSION HEREBY MAKES THE FINAL DETERMINATION OF JUST COMPENSATION AS FOLLOWS:
(1) The Government should pay to the Landowners Three Million, Two Hundred Fifty Seven Thousand, Eight Hundred ($3,257,800.00) Dollars as just compensation for the Encumbered Property (Parcel 1) based upon $20,000.00 per acre for 179.00 acres, with a 9% remaining value;
(2) The Government should pay to the Landowners One Million, Five Hundred Eighteen Thousand, Eight Hundred Fifty Three ($1,518,853 .00) Dollars as just compensation for the Encumbered Property (Parcel 2) based upon $18,500.00 per acre for 90.22 acres with a 9% remaining value.
(3) The Government should pay to the Landowners Five Hundred Thirty Four Thousand, Six Hundred Sixty ($534,660.00) Dollars for the ten (10%) percent diminution in value to the unencumbered property based upon a pre-taking value of $20,000.00 an acre for the 267.33 acres of unencumbered property;
IN ADDITION, THE COMMISSION RESPECTFULLY MAKES THE FOLLOWING RECOMMENDATIONS:
(1) That the Government pay the lawful amount of interest on the net award of just compensation from July 15, 2016 to the date of entry of judgment by the U.S. District Court; and
(2) That U.S. District Judge Richard Mark Gergel conduct an evidentiary hearing with the purpose of awarding attorney's fees and costs to the Landowners, including the costs associated with the trial before the Commission, as the Commission finds the Government's position was not substantially justified and the circumstances entitle the Landowners to an award of attorney's fees and costs.
IT IS SO ORDERED.
