The Commonwealth Court of Pennsylvania has reversed a lower court’s decision that allowed the General Municipal Authority of the City of Nanticoke to condemn property owned by Nilved Apartments, LLC. The high court found that while the proposed “Nantego Project” aimed at laudable public goals—namely affordable senior housing and public transit improvements—the Authority failed to secure the necessary binding written agreements to guarantee these public benefits would materialize.
The Nanticoke Authority initiated the condemnation in 2022, seeking Nilved’s property as part of the ambitious Nantego Project. This project envisioned a five-story mixed-use building featuring affordable apartments for the elderly, a public transit office, and parking facilities. The Authority claimed its actions were justified under the Pennsylvania Municipality Authorities Act (MAA) and to serve a valid public purpose under state and federal constitutions, despite objections that the true goal was private development.
The Luzerne County Court of Common Pleas initially sided with the Authority, concluding that the project was for a valid public purpose and that the condemnation was not excessive. Nilved Apartments, LLC appealed this ruling, arguing the taking violated the Pennsylvania Property Rights Protection Act (PRPA) because it primarily benefited private entities.
Public Use Analysis: Housing and Transit Pass Muster
The Commonwealth Court, in an opinion authored by Judge Christine Fizzano Cannon, first addressed whether the intended uses fell within the Authority’s statutory power under the MAA.
The planned project included several components: senior housing, public transportation facilities, and a public parking garage. The Court confirmed that public transportation and parking spaces are explicitly authorized uses under the MAA.
The most significant finding regarding the *purpose* came in the area of senior housing. While affordable housing isn’t explicitly listed as a “public use” in the relevant section of the MAA, the Court relied on nearly century-old precedent from the Pennsylvania Supreme Court in *Dornan v. Phila. Hous. Auth.* (1938). That landmark case established that providing affordable housing constitutes a public use, reasoning that judicial definitions of “public use” must evolve with social and economic needs.
“Accordingly, we conclude that the exercise of eminent domain power in furtherance of a project to provide low income housing for seniors constitutes a public use or purpose,” the Court stated.
Furthermore, the Court found that the commercial space planned for the first floor, though less clearly defined, could likely fall under authorized “revenue-producing purposes” or “shopping” provisions of the MAA, or could be considered “incidental” to the overall public project under PRPA exceptions.
PRPA Compliance Hinges on Documentation
Despite affirming the public *purpose* of the components, the Court turned to the more critical issue under the Property Rights Protection Act (PRPA). PRPA generally forbids condemnations intended for private enterprise, requiring that the public be the “primary and paramount beneficiary.”
Nilved argued that the complex web of entities involved—including New Horizons (a nonprofit formed by the Nanticoke Housing Authority) and Nantego Development LP (a partnership involving a private equity investor)—meant the project was ultimately designed to benefit private interests. The final ownership structure involved a private equity investor holding the majority interest in the partnership that would own the building for a 15-year compliance period before selling it.
The Court acknowledged that Pennsylvania law allows private enterprise to be used as a means to achieve a public end, citing federal precedent that public benefit doesn’t require public ownership. However, the Court zeroed in on the lack of concrete security for the public benefit.
The Fatal Flaw: Good Intentions Aren’t Enough
The central reason for reversing the lower court was the lack of binding documentation ensuring the project’s public nature would endure beyond the initial planning stages.
The Authority’s role was limited to acquiring the site and transferring it to New Horizons. However, the Court noted there was *no written agreement* between the Authority and New Horizons cementing New Horizons’ obligations for the Nantego Project specifically. The only written contract identified was between New Horizons and a consultant, United Neighborhood Community Development Corporation.
“Such a project, however, should not be authorized and developed on faith; it must be properly documented by binding written agreements in order to assure that the public purpose goes forward as planned,” the opinion concluded. Because the ultimate owner would be a for-profit entity relying on tax credits, and because the long-term use restrictions were subject to complex and partly unestablished covenants, the Court found the record insufficient to guarantee the public purpose.
The Court held that the lower court’s order must be reversed because the Authority failed to provide the necessary documentation to bind the private entities to the stated public goals. The issue of whether the taking was “excessive” was deemed moot given the primary finding on documentation.
The decision sends a strong message to municipal authorities: while pursuing vital public goals like affordable housing is encouraged, the mechanism used to achieve those goals must be secured by legally enforceable contracts that protect the public interest against potential future shifts toward private gain.