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June 5, 2017

A decade-old eminent domain case from Telluride could be reshaping Colorado’s local government dynamics and creating an new opening for land disputes to flare.

In 2008, the town of Telluride won a lawsuit that had gone to the Colorado Supreme Court, a divisive battle over development on a 570-acre stretch of private property on the coveted “valley floor” that is the gateway to town. Telluride was seeking to block development on this land and preserve its rural character, but this property was outside of the town limits.

Nevertheless, Telluride moved to condemn the property and designate it as open space, battling construction of multimillion dollar homes and commercial development.

Ultimately, the Colorado Supreme Court ruled in Telluride’s favor, finding that the town did have the right to enact its eminent domain powers — even though this property was outside of the town limits — and condemn the land as open space. So the town was successful in acquiring the valley floor. But this land was still expensive, and Telluride had to pay about $50 million, which the community collected through an intense fundraising effort.

To acquire land in this way, the court ruled, the condemning authority must prove a public purpose and the necessity for achieving the purpose through condemning land for open space.

That landmark decision has implications for other home-rule municipalities in Colorado, and some see it as turning the concept of municipal boundaries on its head. But it took nearly 10 years after the ruling before a municipality would act on this newly defined power.

After nearly a decade, a similar eminent domain case arose between the city of Lafayette and the adjacent town of Erie. These two municipalities abut each other in a highly developed area. Lafayette was attempting to take advantage of the opening the Colorado Supreme Court had given municipalities in the Telluride case. But this time, Lafayette was attempting to condemn as open space a property that was inside the town limits of Erie.

This case involved a dispute over 45 acres of land right on the municipalities’ border. On the Erie side, a major development was underway, but Lafayette was invoking eminent domain in an attempt to create an open space buffer between itself and the Erie development.

Mikaela Rivera, one of the attorneys who represented the “valley floor” property owner against Telluride and Erie against Lafayette, called this an attempt by one municipality to influence development in another using the Telluride decision.

The state Supreme Court’s ruling gave home-rule cities and towns the authority to condemn another’s property, regardless of plans to develop that land, Rivera said.

The big difference here was that Lafayette was not reaching into an unincorporated property but land inside Erie’s town boundary. And it was the first case in which one municipality tried to acquire property from another in this way. Lafayette was trying to control the other side of the street through eminent domain, said Rivera.

Rivera, whose law office also has a branch in Aspen, said she expects to see more municipalities continuing to push the boundaries of the Telluride decision. Importantly, when the state Supreme Court made this ruling, it set no hard limit on how far a municipality can reach to attempt to condemn outside property as open space, she said. There is a practical limitation: The farther out a municipality reaches, the more difficult it will be to prove the necessity to the court. But the Supreme Court decision had no requirement of adjacency or distance, said Rivera.

Rivera and attorney Darrell Waas successfully argued to have the Lafayette-Erie case dismissed. A district court judge determined that Lafayette had no public purpose in pursuing the condemnation. But Rivera said the state Supreme Court’s 2008 decision still leaves the door open for municipalities to try influencing developments in other jurisdictions by condemning outside property as open space.

Local governments will need to be careful in the future when they’re designating open space in this way, making sure that they’re truly using it for open space and not for land use control outside of their borders, said Rivera.

The dismissal of the Lafayette case is also a win for developers, she said. If Lafayette had won, developers would be facing a lot of uncertainty, given that wherever they wanted to build, a nearby (or perhaps not so nearby) jurisdiction could block the development through eminent domain.

The Lafayette case is still not over, as it’s now going to the Colorado Court of Appeals.