Unfunded and Delayed Infrastructure Projects: Concerns for Landowners Facing Condemnation

Both Democrats and Republicans support a major infusion of funding into rebuilding the nation’s infrastructure. We’re not just talking about roads, bridges and highways — airports, the smart grid, water systems, electricity grids and school construction could all see a boost under a federal infrastructure package.

The injection of cash couldn’t come at a better time. In the short term, the pandemic may have prompted an acceleration of infrastructure projects, as decreased traffic gave transportation authorities an opportunity to work on roads, highways and bridges with minimal impact. In the long term, though, the public sector is facing declining revenues and budget cuts as a result of the economic downturn. By some estimates, more than $9.6 billion worth of infrastructure projects have been delayed or canceled during the pandemic.¹

The delays may prompt a sigh of relief from property owners whose property was subject to condemnation for public infrastructure projects that have since been put on hold. But before counting their blessings, property owners should consider the cloud that stalled projects cast over their property’s uses and value. Under the project influence rule, most courts won’t consider any diminution or enhancement of value that the project creates for the property. But defining the scope of that influence, and when and where it began, can be particularly tricky when infrastructure projects experience the delays and cancellations that we’re seeing now.

The same concerns come into play for infrastructure projects that are currently in the works but remain unfunded. The value of unfunded future infrastructure projects across the country is even more staggering than the value of projects delayed by the pandemic. The projected investment gap for surface transportation systems through 2039 is almost $2.1 trillion.² These planned but unfunded projects can be just as problematic to property owners as the ones that were funded and put on hold.

Property owners should continue to monitor both delayed and unfunded infrastructure projects that could result in a taking of their property. Even if these projects appear to be shelved, property owners faced with condemnation for drawn out projects typically face more complex legal and valuation issues. The project influence rule can have a big impact on the ultimate award the property owner receives for these takings — if and when they finally go forward.