The Commonwealth Court of Pennsylvania has reversed a lower court’s decision, halting the General Municipal Authority of the City of Nanticoke’s (the Authority) plan to condemn property for the ambitious “Nantego Project.” The court found that while the project’s goals—providing affordable senior housing and public transit—are laudable public purposes, the Authority failed to secure binding written agreements demonstrating how these goals would be legally guaranteed, rendering the taking improper at this stage.
The case centers on the Authority’s attempt to use eminent domain to acquire land owned by Nilved Apartments, LLC (Condemnee) to facilitate the construction of a five-story mixed-use building. The lower court had sided with the Authority, concluding the taking served a valid public purpose under the Pennsylvania Municipality Authorities Act (MAA). However, the Commonwealth Court disagreed, emphasizing that good intentions alone are insufficient when exercising the state’s power of eminent domain.
The Ambitious Nantego Project
The proposed Nantego Project was designed to include several elements intended to serve the public good in Nanticoke. The plan featured affordable apartments for low-income senior citizens on the upper three floors, a public parking garage on the second floor, and a public transportation office alongside some commercial rental space on the first floor. Additionally, part of the condemned land was slated for conveyance to the Pennsylvania Department of Transportation (PennDOT) for street improvements, specifically a “bus cut out” to improve pedestrian safety for transit users.
The Authority relied on several sections of the MAA to justify the taking, claiming authority for public buildings, transportation facilities, and industrial development. The Condemnee, however, challenged the taking on several grounds: arguing it served a private purpose, violated the Pennsylvania Property Rights Protection Act (PRPA), and was excessive.
Affordable Housing Deemed a Public Use
A key legal hurdle involved whether affordable senior housing qualified as a “public use” under the MAA, especially since the property would ultimately be transferred to a private developer entity.
The Commonwealth Court resolved this by looking back nearly a century. Citing the 1938 Pennsylvania Supreme Court case *Dornan v. Phila. Hous. Auth.*, the court confirmed that providing affordable housing constitutes a legitimate public use, noting that judicial interpretation of “public use” must evolve with societal needs.
The court found that the components related to public transportation and parking were explicitly authorized under the MAA. While the commercial space on the first floor raised some ambiguity, the court found that this use likely fell under an exception in PRPA as an “incidental area” within a larger public project.
The Critical Flaw: Lack of Binding Agreements
Despite agreeing that the stated goals—senior housing, transit, and parking—constitute a public purpose, the court ultimately sided with Nilved Apartments, LLC, due to serious deficiencies in the documentation binding the project partners.
The court noted the complexity and uncertainty surrounding the project’s execution. The Authority’s role was limited to acquiring the site control and then transferring the property to New Horizons, a private non-profit corporation formed by the Nanticoke Housing Authority (NHA). New Horizons, in turn, was setting up a complex partnership structure (Nantego Development LP) involving a private equity investor who would own the majority stake for a 15-year compliance period tied to tax credits.
The Condemnee strongly argued that because the ultimate ownership and management would rest with private entities, and because the Authority had no written role beyond site acquisition, there was no guarantee the public purpose would be realized.
The Commonwealth Court agreed with this assessment. While acknowledging that using private enterprise for public projects is permissible (citing *Berman v. Parker*), the court stressed that such arrangements cannot be based merely on faith.
“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 Court stated.
The court found that the only written agreement identified was between two consulting non-profits (New Horizons and United Neighborhood Community Development Corporation). Crucially, there was no written agreement cementing New Horizons’ obligations to the Authority or the City regarding the Nantego Project’s long-term use restrictions. Because the project’s final structure depended on securing low-income housing tax credits from a private investor, the court concluded that the lack of binding documentation meant the public purpose was not adequately secured.
Reversal and Next Steps
Because the Condemnee successfully challenged the validity of the taking based on the lack of legally binding assurances for the project’s public use, the Commonwealth Court reversed the lower court’s order that had overruled the preliminary objections. The court declined to address the Condemnee’s argument that the taking was excessive, as that issue is moot unless the taking is deemed proper in the first place.
This ruling sends a clear message to municipal authorities: when using eminent domain to facilitate complex public-private partnerships, the courts require concrete, documented commitments to ensure that the public benefit remains the “primary and paramount beneficiary” of the action.