Posted by: Patricia Salkin | April 10, 2019

NE Supreme Court Dismisses Suit Challenging Redevelopment Project

This post was written by Amy Lavine, Esq.

 

The Nebraska Supreme Court considered the validity of a redevelopment project in a case decided in March and determined that the lawsuit was properly dismissed. The case involved a proposal to construct a new commercial grain facility, which would be funded in part by the Falls City Community Redevelopment Authority through tax increment financing (TIF). Salem Grain Co., which operated a competing grain business, challenged the redevelopment contract on the basis that it failed to comply with various requirements of the Community Development Law and the Nebraska Open Meetings Act (NOMA). The court rejected these arguments, however, finding that a conclusive presumption required the project to be deemed consistent with the Community Development Law and concluding that the evidence failed to establish any NOMA violations.

 

Salem Grain alleged numerous violations of the Community Development Law, including charges that: (1) the redevelopment authority’s blight study was insufficient; (2) the redevelopment plan failed to conform to the city’s general plan; (3) there was no quorum of the redevelopment authority when it approved the project; (4) the project relied on an insufficient cost-benefit analysis; (5) the use of TIF bonds was improper; (6) the city council’s adoption of the redevelopment plan was invalid; (7) the redevelopment authority’s adoption of the plan was invalid; (8) the city council improperly renamed a portion of the land included in the redevelopment area; (9) the public comment period regarding the city’s use of community development block grant program funds was insufficient; (10) the redevelopment authority’s TIF authorization was invalid; and (11) the redevelopment plan included lands that were improperly annexed by the city.

 

Salem Grain commenced its lawsuit about two weeks before the redevelopment contract was formally executed, and due to this timing, the court concluded that it was required to apply a conclusive statutory presumption deeming the redevelopment project “to have been planned, located, and carried out in accordance with the purposes and provisions of the Community Development Law.” This presumption effectively precluded any challenges asserted under the Community Development Law, and the court therefore affirmed the dismissal of Salem Grain’s first eleven causes of action without reaching the merits of the allegedly improper actions taken by the city and the redevelopment authority.

 

The conclusive presumption was established by two provisions included in Community Development Law, and the court provided a thorough analysis regarding the legislative history for these sections as well as the rules of construction governing their interpretation. The first section of the law, which was passed in 1951, applied the conclusive presumption in any case involving the validity of redevelopment authority bonds, provided that the bonds recited they were issued for a redevelopment project. A similar provision was added to the Community Development Law in 1997, but this section differed in two primary ways: it encompassed challenges to both redevelopment bonds and redevelopment contracts, and it included a thirty-day window in which challenges could be commenced, with the conclusive presumption only becoming applicable at the end of thirty days after the authorization of redevelopment bonds or the formal execution of the redevelopment contract.

 

It was undisputed in this case that Salem Grain challenged the validity of the project’s TIF bonds as well as the redevelopment contract, and its lawsuit therefore implicated both of the statutory provisions related to the conclusive presumption. The dispositive issue was whether the conclusive presumption applied to bar Salem Grain’s lawsuit, which was filed before the redevelopment contract was formalized. While Salem Grain contended that the 30-day window in fact extended and related back to the filing of its lawsuit, the court rejected this interpretation. First, even if previously-filed lawsuits were found to qualify for the 30-day time period in the 1997 law, there was no similar delay on the conclusive presumption in the 1951 law. The court concluded that the presumption in the 1951 law “necessarily include[d] actions already pending at the time such a redevelopment bond is issued” and to adopt Salem Grain’s interpretation would effectively nullify this provision. Second, there was no legal basis for the court to expand the narrow category of lawsuits that the legislature decided to exempt from the conclusive presumption in the 1997 law. Moreover, Salem Grain’s interpretation was also inconsistent with previous caselaw, which established that “[t]he Legislature has set a specific window of time during which a party can challenge a redevelopment contract…. The only exception is if a suit or other proceeding is initiated within 30 days of the parties’ formally entering into the contract.

 

Although it was not an issue in this case, the court recognized that a different analysis might be required under other circumstances due to the lack of any notice requirement under the Community Development Law for the date a redevelopment agreement is “formally entered into” or the date a bond is “authorized.” By relying on triggering events that might not be included in any public record, the court found that this statutory framework “could present a practical challenge for those wishing to challenge the validity or enforceability of a redevelopment contract or bond within the 30-day window.” The court declined to explain how it would rule on this issue, however, emphasizing instead that “whether the Community Development Law should include some form of public notice when a redevelopment agreement is executed or the issuance of a bond is authorized is a policy matter for the Legislature.”

 

The court also dismissed Salem Grain’s claim that the redevelopment contract should be declared void due to violations of the Nebraska Open Meetings Act (NOMA), finding that the evidence was insufficient to establish that any NOMA violation actually occurred. While Salem Grain alleged that improper “meetings” of the redevelopment authority took place at a dinner event and in an email communication, the court agreed with the redevelopment authority that neither of these events qualified as a “meeting” under NOMA.

 

As the court explained, NOMA “does not apply to chance meetings or to attendance at or travel to conventions or workshops of members of a public body at which there is no meeting of the body then intentionally convened, if there is no vote or other action taken regarding any matter over which the public body has supervision, control, jurisdiction, or advisory power.” With respect to the dinner, which included a presentation by the grain company about its proposed redevelopment plan, members of the redevelopment authority testified that they did not discuss or conduct any business at the event, nor did they use any information from the dinner to support their subsequent decisions regarding the redevelopment project. This evidence, the court concluded, failed to prove that the dinner involved any “briefing, discussion of public business, formation of tentative policy, or the taking of any action” and it accordingly did not constitute a “meeting” under NOMA.

 

The court similarly held that the email communications didn’t qualify as a “meeting” because they weren’t intended as a forum for discussing or conducting public business. The evidence showed that their purpose was rather just to inform the members of the redevelopment authority that Salem Grain had filed a lawsuit and to explain that the redevelopment contract was being amended to include an indemnification provision recommended by counsel. As the court emphasized, the chair wasn’t seeking permission from the other members by sending the emails, as he was already authorized to execute the contract amendment himself without any further approval, and he specifically stated in the emails that he would schedule a special meeting if any of the other members wanted to discuss the matter. “Properly understood, the chairman’s email demonstrates it was sent not to circumvent the requirements of NOMA, but, rather, to adhere to them,” the court concluded.

 

Salem Grain Co. v. City of Falls City, 302 Neb. 548 (3/22/2019).


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