Indiana App: Even When Federal Agency Steps Into The Shoes Of A Local Redevelopment Agency, It Has To Follow Local Rules

By Robert Thomas on November 30, 2021

Like a lot of things in Gary, Indiana, the Housing Authority was “troubled.” So troubled, the feds took it over. The Housing Authority received big money from the feds, and was required to agree to an annual contribution agreement, by which the Authority ok’d a HUD takeover in the even of the Authority’s substantial default.

Next up, default. The city dissolved the Housing Authority’s Board of Commissioners, and HUD appointed one of its employees to be the administrator of the Authority and to serve as the Board of Commissioners. Back in business.

Part of the administrator’s … ahem … “Authority’s” business was redevelopment. The Authority decided to take 624 Broadway’s property (which, not surprisingly, included 624 Broadway) to do some mixed-use and affordable housing. The taking was undertaken under Indiana’s eminent domain procedures. Attempts to purchase the property were not successful, so the Authority instituted an administrative taking.

The property owner thought that the Authority wasn’t adhering to the required process, and filed lawsuit which sought to enjoin the taking. The trial court entered summary judgment in favor of the Authority.

In 624 Broadway, LLC v. Gary Housing Authority, No. 21A-CT-653 (Nov. 10, 2021), the Indiana Court of Appeals agreed, but only in part.

The court first concluded that a HUD employee could step into the shoes of the Authority’s Board of Commissioner’s. Federal law preempts Indiana’s requirement that a Board of Commissioners be comprised on seven people. Seven commissioners isn’t one HUD administrator, the property owner argued. Moreover, Indiana law requires Commissioner decisions to be ok’d by the Gary Common Council, and the HUD administrator had not done so before the taking. The court concluded these requirements conflict with federal law, and in this case, Indiana law “must yield the HUD administrator’s authority under the United States Code.” slip op. at 12 (footnote omitted).

Next, the court also rejected the property owner’s argument that the Authority was not authorized by Indiana law to exercise eminent domain for mixed-use development because the statue only authorizes low-income housing. No, the court concluded, a fair reading of the enabling statute’s requirement of low-income housing only means that a part of the project be for low-income housing:

The plain language of section 36-7-18-2 does not restrict a housing authority from providing “safe and sanitary dwelling accommodations for persons of low income” in a mixed-use development, or from otherwise acquiring a specific property when that property is within an area of unsanitary or unsafe housing conditions.

Slip op. at 14.

The court also rejected the owner’s argument that the HUD-helmed Authority violated the Uniform Relocation Act. But as we all are aware, the URA does not recognize a private cause of action. It’s mostly the Pirate’s Code.

Things were not looking good for the property owner.

But hold on! On the fourth claim — that the Authority did not provide the owner with proper notice and a chance to be heard — the court sided with the owner. Although the owner framed the argument as one of due process, the court treated it as a statutory claim because Indiana’s eminent domain statute sets out the requirements for notice and hearing. And if the HUD administrator stepped into the shoes of the Authority, then she also has to live with whatever requirements Indiana law places on the Authority.

Strictly construing the statute (you know, the canon of construction of eminent domain statutes is that they are read strictly “both as to the extent of the power and as to the manner of its exercise,” slip op. at 16-17), the court concluded that the statute’s requirements for published notice at a certain time, along with service on the property owner, mean what they say, and that the record in the case was clear that the Authority didn’t mail notice to the owner, and that it didn’t publish notice within the prescribed time.

The court rejected the Authority’s argument that this was all harmless (the owner apparently found out and showed up):

Further, while the Gary Housing Authority suggests that its failure to serve written notice of the resolutions on Allen was harmless as he still learned of the two meetings and attended, we cannot agree. 624 Broadway moved to continue the October 17 hearing to obtain its own appraisal of the property, which motion the Gary Housing Authority denied. The Gary Housing Authority’s failure to properly serve 624 Broadway and its failure to hold its damages hearing no fewer than thirty days after the date of last publication contributed to 624 Broadway’s inability to obtain its own appraisal of the property prior to the October 17 hearing and to 624 Broadway’s inability to present competing evidence of its damages at that hearing. We cannot say with confidence that, had the Gary Housing Authority complied with Chapter 2, as it was required to do, it would have assessed the same damage award for the property to 624 Broadway.