Eminent Domain Sets Sail at Yacht Club

​We’ve blogged about bridges and buildings, and now we can blog about yachts in upstate New York!  The Oswego Yacht Club building is facing potential eminent domain proceedings by Oswego City officials after the club mounted a legal challenge to the City’s lease termination effort.
 
The Oswego Common Council terminated a lease agreement between the City and the Oswego Yacht Club (“OYC”) in late summer.  According to Oswego Mayor Billy Barlow, City officials voted to break the lease because they decided that the use of the pier and the building had “drastically changed,” and it was no longer sensible to use the building as a private club.
 
The Oswego Mayor has often called the International Pier underutilized, and he said that revamping the parcel is an important part of the city’s waterfront redevelopment plan.
 
The City’s efforts began after it received a $6.5 million grant awarded to Oswego as part of the State’s Lake Ontario Resiliency and Economic Development Initiative (REDI), in an effort to transform the pier from its current status as a gravel drive to a “pedestrian-oriented boardwalk.”
 
The International Pier contains a single building that, for more than a decade, has housed the Oswego Yacht Club (which first signed its lease for the premises in 2009 when the Port Authority of Oswego owned the property). The city of Oswego took possession of the property in 2012 and inherited the lease, which under its current extension would run through March 2025.
 
In August, the City voted to terminate that lease agreement.  This was done despite significant objection from OYC members, including Commodore Phil McBrearty, who told City Council members in August that the organization did not believe there was “legal justification for termination of the lease.”
 
The Mayor says that removing the Oswego Yacht Club from the building is necessary to accomplish the goals of the City’s multi-million-dollar waterfront redevelopment.
 
City officials cited a clause that allowed for the lease termination if the property were partially destroyed, which the City argued would occur with the redevelopment of the International Pier.  The Yacht Club, however, has challenged this assertion by pointing out that: (1) the property is not currently demolished; and (2) the city is speculating that the premises will be “voluntarily” demolished (by the city at some point in the future).
 
There is still a pending lawsuit as to whether or not the City has the right to terminate the lease. Regardless, the City plans to start an eminent domain proceeding in order to take back its own property, and to continue with the construction and redevelopment of the International Pier.
 
As we have informed you in the past, eminent domain is the government’s power to take private property for a public use. Governments, however, are required to provide property owners with just compensation when taking property via eminent domain. In this eminent domain case, the issues at hand would possibly be the valuation of the unexpired term of the lease and/or any trade fixtures that the Yacht Club is entitled to compensation for (assuming the lease allows it).
 
In most cases, eminent domain is used to acquire private property for a public use. In this case, however, the City would be repossessing a City-owned building that was leased to a private entity.  Although this has happened in other cases in past years, it is not a very common occurrence in the world of eminent domain.
 
According to Court filings, the OYC has said that “monetary damages are not an adequate remedy for the city’s breach” of the lease.  It claims that the property “offers unique access to Oswego’s only deep-water marina,” and that the “location is critical for maintaining OYC’s public presence and recruiting new members.” “OYC’s monetary damages from the City’s unilateral attempt to terminate the lease are difficult, if not impossible to calculate.”
 
In terms of what and when we will be hearing next, it seems that the full Common Council is likely to vote on the matter at the body’s meeting on October 13th.  We will watch for eminent domain proceedings to be filed in New York State Supreme Court (the same venue where OYC’s lawsuit is currently pending against the City).
 
This is certainly an interesting case with many eminent domain issues.  Clearly, the OYC is not quite ready to abandon ship.