The state Department of Transportation has run into a tangle of complaints and lawsuits as it begins buying property for the proposed north Spokane freeway.
Some Mead-area property owners say the state is using pressure tactics and is appraisal shopping to low-ball its offers.
The state says it’s trying to safeguard taxpayers from unreasonable property owners while paying a fair price for land.
If the freeway moves ahead as planned, the state says 511 households and 165 businesses would be affected - either by being forced to move or by finding themselves next to the high-speed route.
An assistant attorney general representing DOT acknowledges the agency is getting more appraisals for the first phase of the project than it usually does - and has tried to keep those appraisals secret.
Three Spokane County judges have recently ruled the appraisals must be turned over to landowners facing condemnation suits by the state.
Two of those landowners, north Spokane businessmen Carl Swanson and Lawrence McKinley, say they are supporters of the $1.36 billion freeway project, which would link U.S. Highway 2 north of Spokane with Interstate 90.
At first, both Swanson and McKinley said they were willing to negotiate a fair price and voluntarily relinquish their land near Hawthorne and Market streets in Mead.
But an 18-month battle over the value of their property has left them angry - and in court.
They accuse the agency of violating state law, which says landowners should get the “full amount” of an independent appraisal of the fair market value of their land.
“DOT is another government bureaucracy that is out of control. They are unethical,” McKinley said.
Tim Golden, the agency’s real estate manager in Spokane, said DOT gets multiple appraisals to ensure the state is not paying too much. The agency also gives property owners up to $750 to get their own appraisal to counter state offers, he said.
The DOT is starting the project at the north end, where the freeway will connect with Highway 2.
The state acquires land by identifying what parcels it needs, getting two or more appraisals and then making an offer to the landowner. If a deal can’t be negotiated, the state then files a condemnation lawsuit to take the property at a price set by the court.
If the state goes to court, it can get control of the property by paying what it thinks the land is worth into a court account pending outcome of the case.
“We are trying to safeguard the taxpayer as well as the property owner. If you have unrealistic expectations as to what your property’s worth, you’ll be disappointed,” Golden said.
But Bob Dunn, attorney for Swanson and McKinley, said DOT isn’t watching the public purse when it racks up big legal bills on condemnation suits.
“Not one of my clients wants to be in a condemnation suit. They are forcing these things into court,” Dunn said.
Swanson, 72, runs a trucking business with $6 million in annual revenues that employs 30 people. McKinley, 61, has a $2 million-a-year landscaping, trucking and fuel oil business with up to 18 workers.
Their adjacent properties, 17-1/2 acres in all, are part of a triangular parcel destined for an interchange near Hawthorne and Market.
The state’s condemnation lawsuits are scheduled for trial this spring.
Swanson and McKinley aren’t the only ones complaining. Others in the freeway’s path in north Spokane are upset with DOT.
In its files, the transportation agency refers to them as “Problem NSC” cases. NSC is shorthand for the project’s official name: North Spokane Corridor. The agency was unable last week to provide the exact number of property owners disputing the state offers.
Some of the landowners complain that DOT withholds relocation money until after a move is over, causing a financial hardship.
Robert Bass rented a building at Market and Stoneman for his linoleum and carpet business, Great Northern Interiors.
The DOT wanted the property, and Bass thought he had a deal with the state to pay him to relocate before he moved. But he had to get a high interest loan to move to his new location on East Mission last year.
“I didn’t have the relocation money (from DOT) until after I relocated. I didn’t get a lawyer, and I had to use somebody else’s money to make the move. DOT dragged this out, and I lost money,” he said.
DOT discounts moving costs by 5 to 10 percent for people who decide to move themselves instead of using a DOT-approved moving company, said relocation supervisor Dave McCoury.
That’s because the state doesn’t want to pay profit or overhead for a self-move, he said. DOT usually makes only a partial payment before the move.
“You have to move to get all the money, but we can give some money up front,” McCoury said.
Business owner Robert Beal said DOT uses aggressive tactics and won’t put precondemnation offers in writing.
“If I treated my customers like the state treated me, I wouldn’t have any customers. They lied to me and misled me,” said Beal, who builds Chevron and Texaco gas and convenience stores in the Spokane area, employing 70 people.
Beal said DOT offered him less than he’d paid a year earlier for his North Market property and never put its offer in writing.
“I expect honesty in business. We are the taxpayers and they are working for us,” Beal said.
The state filed suit to condemn his land but later dropped the case.
The DOT decided the property wasn’t needed and money for the freeway was running low after the Legislature failed last year to pass a transportation budget, Golden said.
“They tied my property up a year and half total. I suspect they’ll try to condemn it again,” Beal said.
Is the state playing fair?
Most complaints center on whether DOT is offering property owners a fair price for taking land under the state’s eminent domain powers.
The oldest property owner battling DOT was 95-year-old Phillip Costich, who died the week of Jan. 13.
In the early 1970s, the World War II fighter pilot bought land next to McKinley’s and Swanson’s properties in Mead.
He lived there in a mobile home and collected a mountain of industrial junk, including two dismantled buildings from Ritzville and thousands of nails.
DOT filed a condemnation suit against Costich and moved his hoard from Hawthorne and Market to a 29-acre former chicken farm north of Deer Park.
In the suit, Costich said he was shorted $5,000 on the $198,000 property deal when DOT’s in-house appraiser assessed his property at 5 cents a square foot less than he’d assessed Swanson’s and McKinley’s land next door.
Costich was unhappy to move so far from his neighborhood and the local Veterans Affairs hospital, he said in a recent deposition requested by John Salmon, an assistant attorney general representing DOT. But he couldn’t find property closer that would meet his storage needs.
His trial will proceed on behalf of his heirs, Dunn said.
DOT’s multiple appraisals will be an issue in Costich’s case, as well as the condemnation trials involving McKinley and Swanson.
DOT obtained more than one appraisal for several of the properties it was interested in near Hawthorne and Market, documents show. The state set a vacate deadline of July 1, 2001, for the triangle of land.
The multiple appraisals came as a surprise to McKinley, the Mead businessman. He said he didn’t know the various prices the state had obtained for his 15 acres when he began dickering with DOT 18 months ago.
DOT notified McKinley of the appraisals but didn’t disclose the amounts, as is agency policy, Golden said.
The offer from DOT to the property owner, called a determination of value, comes after DOT reviews all the appraisals.
DOT settles most land deals with property owners, making the appraisals moot, Golden said.
“However, if we reach an impasse and we file the condemnation paperwork, from that point forward, anything prepared for court is discoverable,” Golden said.
A July 2000 independent appraisal of McKinley’s land conducted for DOT said it was worth $1,165,000.
A month later, the state received a second appraisal for $667,000.
In December 2000, DOT’s McCoury offered $766,000 for the property, documents show.
“He said we’d have to decide within 24 hours. He refused to put the offer in writing,” McKinley said.
McCoury denies he gave McKinley only 24 hours. He said his offer was open-ended.
In a 1999 DOT memo, the agency’s property agents in Spokane were told not to put their offers in writing.
If offers are written down, the state could be held to those offers in condemnation proceedings, warned then-DOT real estate manager Linda Anderson.
She has since left the agency and Golden replaced her.
Asked whether the no-written-offer policy is still in place, Golden replied, “I haven’t rescinded it.”
DOT uses verbal offers, which must be approved in Olympia, to head off condemnation proceedings when the agency and a property owner are still far apart in negotiations, he said.
McKinley turned down McCoury’s $766,000 offer. The state then filed a condemnation action.
“We tried to negotiate in good faith, and they threatened us with the attorney general. We never hired lawyers until they condemned our property,” McKinley said.
Last February, McKinley hired Dunn’s firm, which represents seven property owners in the path of the freeway, including the three condemnation cases headed for trial this spring.
The lawyers obtained the multiple DOT appraisals through the pre-trial discovery process - over the objections of the Washington attorney general’s office.
The state hadn’t released the appraisals before until Dunn started asking.
“We didn’t ask for these two years ago. But the more we got into these cases, we realized they have these internal appraisals and we have a right to see them,” Dunn said.
In-house appraisers questioned
Last August, McKinley and his business partner got $591,941 from DOT in exchange for the state’s right to immediately occupy their property.
That gives the state possession of the land while a jury determines the final value in the condemnation trial.
In Swanson’s case, DOT obtained an initial $200,000 appraisal for his 2-1/2 acres and a second one for $175,000. The agency then discounted the appraisal to $143,000, using a DOT in-house appraiser, Gary Bruner.
Last June, 12 days before the state wanted access to his land, the state paid Swanson $166,000 for “immediate use and possession” pending his condemnation trial.
He was also paid $47,969 to move to his new property at 9902 N. Market.
DOT considers its in-house appraiser an independent analyst assigned to review the other appraisals, Golden said.
The DOT’s practice of using an in-house appraiser violates state law, which says appraisals in eminent domain cases should be independent, Dunn said.
“This guy (Bruner) has worked for the state for 31 years. How in the world can he be independent?” he said.
Swanson’s case is scheduled for trial March 18 before Spokane County Superior Court Judge Kathleen O’Connor.
In a Jan. 11 ruling, O’Connor denied a state motion to quash his lawyers’ requests to subpoena Bruner.
O’Connor said Bruner is a state employee and can be questioned to determine why he lowered the offer, O’Connor said.
“My view is that from a public policy standpoint, all the power is on the side of the state,” O’Connor said.
State law requires a process of determining market value that is “fair to both sides and allows the landowner to receive fair compensation,” O’Connor noted.
Meanwhile, other citizens dealing with DOT along the north Spokane freeway route should beware, McKinley said.
“Most citizens are never involved with the bureaucracy. They tend to believe the state, or are scared and overwhelmed. They don’t have the know-how to fight back,” he said.
DOT’s Golden promises a fair process.
“We try to go above and beyond. We follow all the correct procedures,” he said.