Feb. 5, 2016 – A business with direct access to a busy rural state highway recently lost its state supreme court fight to obtain more compensation from the Wisconsin Department of Transportation (DOT), which eliminated the business’s direct access.

DOT paid Hoffer Properties LLC (Hoffer) $90,000 after taking a portion of Hoffer’s land by eminent domain to complete a state highway improvement project.

As part of the project, DOT took 0.72 acres of Hoffer’s land to extend an abutting side road that would connect the Hoffer property to the “controlled-access” highway through an indirect access point, forcing visitors to drive 1,000 feet to get there.

Hoffer Properties did not dispute the $90,000 for the loss of 0.72 acres, conceding DOT took the land properly under its eminent domain authority. But the business argued that it was also entitled to just compensation for losing its direct highway access. Hoffer said its property has decreased in value now that its property is only accessible indirectly.

But the circuit court in Jefferson County ruled that Hoffer was not entitled to compensation for that because Hoffer still has other access to the highway.

The court of appeals affirmed. And in Hoffer Properties LLC v. Wis. Department of Transportation, 2012AP2520 (Feb. 4, 2015), the Wisconsin Supreme Court affirmed.

A majority ruled that DOT used police power, not eminent domain power, to eliminate Hoffer’s direct access to the highway. And since Hoffer still has indirect access to the highway, the majority ruled that Hoffer could not receive just compensation.

“We hold that when DOT changes an abutting property owner’s access to a controlled-access highway but other access is given or exists, the abutting property owner is precluded from compensation [under the statute] as a matter of law and no jury determination of reasonableness is required,” wrote Justice Michael Gableman.

DOT Used Police Power

The just compensation statute, Wis. Stat. section 32.09(6)(b), says just compensation must be paid for a “partial taking,” including government takings involving the “deprivation or restriction of existing right of access to highway from abutting land.”

But the statute also says that the government can still “deprive or restrict such access without compensation under any duly authorized exercise of the police power.”

As the majority opinion notes, “a state acts under its police power when it regulates in the interest of public safety, convenience, and the general welfare of the public.”

Hoffer argued that DOT’s action was a “partial taking” requiring compensation, but DOT argued that eliminating direct access was an exercise of police power.

The majority noted that Wisconsin law allows DOT to designate heavily traveled rural highways (more than 2,000 vehicles per day) as “controlled-access highways.” The designation allows DOT to take police power actions with respect to the highway, actions that are in the interest of public safety, convenience, and the general welfare.

Under Wis. Stat section 84.25(5), DOT has authority to determine entrance points on a controlled-access highway, and owners and occupants of abutting lands have no right of entrance to or from the controlled highway “except at places designated.”

“Pursuant to this subsection, abutting property owners lose any right to compensation under Wis. Stat. § 32.09 for a change in access to the highway, provided some access remains, at the moment DOT makes the ‘controlled-access’ designation,” wrote Justice Gableman, noting DOT must follow strict procedures to obtain the designation.

“Hoffer insists that DOT’s authority to regulate does not include the authority to eliminate preexisting direct access points and replace them with more circuitous access to a controlled-access highway,” Gableman wrote. “Hoffer is mistaken.”

No Regulatory Taking

Abutting property owners cannot receive compensation when DOT eliminates direct access to controlled-access highways, but the court said the inquiry does not end there.

“If the access DOT provides to a controlled-access highway deprives the abutting property owner of all or substantially all beneficial use of the property, DOT has taken the property and the change in access may support an inverse condemnation claim pursuant to Wis. Stat. § 32.10,” Justice Gableman wrote.

In such cases, the government’s action would amount to a “regulatory taking,” entitling landowners to just compensation. In this case, however, the majority ruled that DOT’s action did not amount to a regulatory taking, since Hoffer still had highway access.

Finally, Hoffer argued that just compensation must be paid when a jury finds that replacement access is not reasonable. But the majority disagreed.

“[N]o jury is required to determine whether the replacement access is reasonable because in controlled access highway cases reasonableness is not the standard to apply to determine if compensation is due,” Justice Gableman wrote.

Concurrence and Dissent

Justice Shirley Abrahamson, joined by Justice Ann Walsh Bradley, wrote a concurring opinion. She agreed that DOT exercised police power when eliminating Hoffer’s direct access to the state highway because DOT obtained the controlled-access highway designation. Thus, she agreed that DOT was not required to pay just compensation.

But she wrote separately to reject any discussion of inverse condemnation in the context of this case, since the parties’ discussions of it were “cursory.”

Justice David Prosser was the lone dissenter. He said juries should be able to decide whether replacement access is reasonable, as a fact question.

“By transforming a traditional fact question into a question of law, the court justifies depriving property owners of their statutory right to a jury trial and also bars circuit judges from ever finding that alternate access is not reasonable,” he wrote.

“There is a great chasm between reasonable access and access so deficient that it constitutes inverse condemnation. The lead opinion permits government officials to push property owners into that chasm without just compensation,” Prosser wrote.

He concluded: “It is ominous when the check of trial by jury disappears.”