The Portland City Council will hold a public hearing Wednesday on a proposal to reclaim by eminent domain a vacant lot in Bayside that was part of the defunct Midtown project, so the city can proceed with building a parking garage on the site.

In exchange for the land, the city plans to pay three limited liability companies with an interest in the roughly 6,300-square-foot parcel only $10 each, citing an appraisal that claims Lot 6, 59 Somerset St. has “a negative fair market value.”

The proposed seizure comes as the city is embroiled in a lawsuit over the failed redevelopment of 3.25 acres along Somerset Street into housing and retail space. That $85 million project fell apart in March, 2018, after seven years of work and three years after it was approved, when the Florida-based developer, Federated Cos., did not pull permits and its site plan approvals expired.

The lawsuit, which accuses Portland of breaching its contract – a charge the city strongly denies – is ongoing, despite two court-ordered settlement conferences in May and June.

Although the project approvals have expired, Portland taxpayers continue to pay interest on an $8.2 million federal loan meant to help finance a public parking garage on the site. As of July, the city had paid more than $784,000 in interest, including nearly $633,000 in interest towards the garage, according to the city’s finance director.

Russell Pierce, an attorney at Portland law firm Norman Hanson & DeTroy who was hired to handle the eminent domain case, said the ongoing legal battle will not impact the city’s ability to reclaim the lot.

“The litigation will continue; but the litigation does not divest the City of its sovereign right and responsibility to reclaim the land for its intended public purpose of construction of a parking facility,” Pierce said in an email. “Without revealing the substance of settlement negotiations, which I am not permitted to do under the court rules, I can tell you that the City feels we fully explored in good faith all possible avenues for resolution and made extraordinary efforts to seek a resolution.”

The city advanced Federated and/or its affiliates $999,999 to facilitate the garage construction, according to the condemnation order.

Neither Jonathan Cox, chairman of Federated Cos.; Patrick Venne, of Redwood Development Consulting; nor the attorneys representing them in their case against the city, responded to email requests seeking a comment or interviews last week.

City Councilor Nicholas Mavodones said it’s rare for Portland, or any municipality, to invoke eminent domain. He recalled the city using it years ago to seize land on outer Congress Street to build a new road to the airport.

Mavodones said he plans to support the proposal on Wednesday, noting that it was “paramount” to previous councils to build a garage in Bayside to accommodate future housing and retail development. And he doesn’t necessarily view the garage as conflicting with the city’s climate goals, which calls for a reduction of carbon emissions from vehicles.

“I do think it’s justified and I do plan to support,” he said. “There will always be a need for parking in the city. I don’t personally look at it as conflicting as those (climate) goals. Housing could be built down there and some additional businesses.”

Eminent domain allows a municipality to seize private property for public use. It’s typically used to acquire land to build public facilities, like schools or fire stations, or accommodate infrastructure projects, like running utility lines or building new roads. Often times, municipalities threaten to use eminent domain to compel a voluntary sale. And when it is invoked, it can produce a strong public reaction, often ending up in court.

When seizing land by eminent domain, a municipality must pay the owner a fair market value.

In this case, the city plans to pay three limited liability companies – two controlled by Federated Cos. and one called Redwood Development Consulting, which holds a ground lease – only $10 each for the property. The city’s order of condemnation states that an appraisal conducted by the city determined that the land has “a negative fair market value in light of encumbrances against the property and restrictions regulating its development.”

“The Ten ($10.00) Dollars payments … are therefore in excess of the condemnation value required to be paid according to law for the eminent domain taking of the noted interests in Lot 6,” the order states.

The Press Herald requested a copy of the appraisal, but did not receive the 147-page document until Friday afternoon.

Based on past instances, appraisals in eminent domain cases can vary greatly.

When the city seized property easements by eminent domain near the eastern waterfront in 2005 to facilitate construction of a public road and parking garage, the city’s appraisal claimed the easements were worth only $5,000. However, an appraisal conducted by the owners claimed they were worth nearly $2 million. The dispute ended up in court, which decided after six years of wrangling that the city needed to pay $795,000, plus interest.

Pierce said Maine’s law specifically allows municipalities to invoke eminent domain to seize property to build parking garages and those parking garages may be revenue-producing for a municipality.

The lack of structured parking has been identified by city officials as a hindrance to development over the years, including the city’s New Vision for Bayside, adopted in 2000.

“The Legislature has made the need for parking facilities a public necessity,” Pierce said, “and alleviating traffic congestion and parking issues is a priority and policy across Maine – Portland’s parking stresses are an example of that.”

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