Documents from Indiana developer detail secret plan to drive down home prices in an effort to reduce the cost of using eminent domain

Shocking documents released by real estate developer John Neace detail a secret plan

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Photo Credit: Institute for Justice

between his company, Neace Ventures, and the City of Charlestown to use eminent domain to bulldoze the homes of Pleasant Ridge residents who refuse to sell to the developer. The documents indicate the city and developer planned to drive down home values in Pleasant Ridge in an effort to make the city’s eminent domain acquisition cost as low as possible.

 

The documents were obtained by the Institute for Justice as part of its lawsuit challenging the city’s illegal home inspection program. A hearing in the case is set for today, September 1st, at 9 a.m. in Scott County Court.

Download The Key Documents

In September 2016, when a reporter for the News-Tribune asked Charlestown City Attorney Mike Gillenwater about the city’s plan to use eminent domain, he responded: “the city has never uttered those words.” Mayor Hall, for his part, said it was too early to tell and that he didn’t want to speculate about its use. But the reality is that months earlier the city and developer had hatched a plan to use eminent domain to take and bulldoze the homes of “20 to 40” Pleasant Ridge homeowners they anticipated would refuse to sell to the developer. Regarding vacant lots, the city and developer also discussed a “‘wrap around agreement’ to be sure that [they] have the right to buy the lots from the city.” (page 34 of pdf)

“These documents provide concrete evidence that the city and developer have engaged in a secret plan to drive down home prices prior to using eminent domain,” said Anthony Sanders, a senior attorney at the Institute for Justice, which represents homeowners in the Pleasant Ridge neighborhood. “The city not only wants every home to go but wants it done on the cheap, with minimal compensation for property owners who are largely of modest means.”

Prior to commencing its inspection program in 2016, homes in Pleasant Ridge generally appraised for between $30,000 and $60,000. In planning documents, the developer’s “first wave” was to offer $10,000 for each home (page 7 of pdf). To drive down the remaining home values, the city and developer remained publicly independent—despite their very close relationship behind the scenes—so that the transactions forced by the inspection program would arguably be at “arm’s length.” (page 1 of pdf)

“The city has not a single house and if we do buy houses it will be at appraised value,” wrote Mayor Hall on Facebook on January 4, 2017. “I agree if the city buys property, paying less than what they are worth is wrong.” In a later truth-lie post in April, he stressed that “these sales were entered into between a willing seller and a willing buyer, both private citizens. The city has not been involved in any of those sales.” We now know that was not the case.

The reality is that the city and developer planned to rely on the supposed “arms length” transactions as appraisal comps for determining the compensation for homes taken using eminent domain. The boarded up homes would then drive home values lower, according to notes taken during a meeting by Neace’s project manager, John Hampton, who heads Pleasant Ridge Redevelopment, LLC, which is owned by Neace and retired Brigadier General Larry Lunt, who was introduced to Neace by Mayor Hall (page 28 of pdf).

This is most clearly seen in a set of typed notes drafted on July 6th, 2016, after a meeting between the Mayor and Hampton (page 1 of pdf). Prior to the meeting, the Mayor apparently told the developer that the city would indemnify him in case of any lawsuits. During the July 6th meeting, the city attorney explained it could not enter into an indemnification agreement until after the condemnation process had begun. Here are the notes from the developer:

Regarding the indemnity agreement. I talked to [Mayor Bob Hall] and also for a half hour after I left Bob’s office with the city’s attorney Michael Gillenwater. Bob says for all of this to work properly for the condemnation of homes we need to remain independent of the city as we are right now considered a private developer with no contractual relationship with the city which is 100% factual. Once the city starts condemnation proceedings, no purchases from that date forward can be used to determine value, only purchases prior to that point which are all arms length transactions between us and the owners and that is what sets the value for the condemnations. The city only anticipate 20 to 40 holdouts at that point . . . Once a development plan has received final approval we will become the approved developer and we would be able to enter into an indemnification agreement. At that point the plan with us as developer would be in place and then the city would commence condemnation proceeding against anyone remaining that has not agreed to sell. Michael [Gillenwater] said there are only limited things someone can challenge anyway because what we are doing has a “public purpose.”

Any subsequent agreements entered into between the developer and the city remain unknown.

The documents also reveal:

  • Charlestown City Inspector Tony Jackson, who was in charge of enforcing the inspection program, used his position to pitch and secure a contract with Neace to conduct asbestos inspections on the homes Neace was acquiring as a result of the citations Jackson was writing to the properties’ former owners. He even invoiced the developer for the inspections from his city email account (pages 9 – 11 of pdf).
  • The project also has a partner, a retired Brigadier General in the Army National Guard named Larry V. Lunt. Mayor Hall introduced him to Neace (page 28 of pdf).
  • Earlier in the year, Neace manager John Hampton sent a text message to Hall responding to a television story, saying “As long as they keep showing the dilapidated homes in the background we win. I have the information for the reporter at WDRB and the News and Tribune, so I can start feeding them information as I want. Good plan Huh!!!” (page 27 of pdf)
  • This spring, renters reported that the city water utility was removing water meters. There is an email from Hampton to city inspector Tony Jackson with a subject line “homes occupied with no water.” The body of the message lists three homes, and says “anything you can do to get them out would be helpful.” Jackson responds, saying “Ok.” (page 31 of pdf)

For reference, here are Hall’s public statements regarding his plans for Pleasant Ridge:

On July 6th, 2016 John Hampton reported meeting with Mayor Hall. A day later, on July 7th, 2016, the Courier-Journal reported:

Perhaps the clearest sign is a newly formed company, Pleasant Ridge Redevelopment LLC, which was registered, according to the Indiana Secretary of State’s office, on June 13 with John Hampton as manager and John Neace listed as a member.

The Courier-Journal has obtained documents showing that Pleasant Ridge Redevelopment LLC is distributing real estate purchase agreements to at least some landlords.

Charlestown Mayor Bob Hall said he wasn’t aware of the company but did know that a developer had talked to at least four landlords about selling their property…

Hall said right now, there is no official plan for the Pleasant Ridge subdivision.

“I certainly hope we have a plan within the next 60 to 90 days,” Hall said Thursday. “It’s a pretty complicated thing to do.”

On September 28th, 2016, Mayor Hall told WAVE3 TV:

You’re going to have to get all the homes at some point,” Hall said. “Now how you go about doing that is really the question.”. . . Mayor Hall said eminent domain will not necessarily be used in the development process but said he couldn’t rule it out.

In a Facebook comment in January 2017, Mayor Hall wrote:

“Pleasant Ridge- 1) For 3 years we have had public discussion about PR. The election a year ago was all about whether the community supported redevelopment. Results were, those that opposed it were voted out of office. 2) The city has not offered or bought the first house in PR yet. All sales that have occurred has been by private individuals. 3) When the city purchases a house it will get appraisals and pay appraisal price. 4) The city adopted a Plan for Redevelopment of PR.”

Seven minutes later, he wrote:

“The city has not a single house and if we do buy houses it will be at appraised value. I agree if the city buys property, paying less than what they are worth is wrong.”

In February 2017, in response to our lawsuit, Mayor Hall posted on Facebook:

“Also, the city has no agreement with the company that is buying properties, they are buying at their own risk . . . The Company buying these homes has been given the same options either bring them up to code or tear them down. They have chosen submitted a plan and timetable to tear them down. These sales are between two private parties. They fines have still on the properties and the new owners are still responsible for them.”

On March 29, 2017, Mayor Hall posted to Facebook:

“The city is not evicting anybody out of their houses PERIOD. The city has not asked anyone to move. The city has not offered to buy any property in Pleasant Ridge. The city is not involved in the private property sales in any way.”

In April, he reiterated that point on Facebook:

“These sales were entered into between a willing seller and a willing buyer, both private citizens. The city has not been involved in any of those sales.”

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