N.Y. Public Authorities Law § 1020-h: Acquisition of property, including the exercise of the power of eminent domain

* § 1020-h. Acquisition of property, including the exercise of the

power of eminent domain. 1. The legislature hereby expressly finds and

determines:

(a) The acquisition by the authority, through purchase or the exercise

of the power of eminent domain, of either the securities or assets of

LILCO whichever is less expensive for the ratepayers, as the authority

may determine will be just to the ratepayers in the service area, is the

most appropriate means of dealing with the emergency involving the

economy, health and safety of the residents and the industry and

commerce in the service area, notwithstanding the fact that LILCO

presently may be devoted to a public use, since the public use of such

property by the authority is hereby deemed to be superior to the public

use of such property by any other person, association, or corporation.

(b) The authority, prior to exercising its power of eminent domain to

acquire the stock or assets of LILCO, shall enter into negotiations with

LILCO for the purpose of acquiring such stock or assets upon such terms

as the authority, in its sole discretion, determines will result in

rates equal to or less than the rates which would result if LILCO were

to continue in operation.

(c) The situs of all stock issued by LILCO, a New York corporation, is

the state of New York.

(d) The compensation paid by the authority to LILCO shall be just to

the ratepayers in the service area who must pay such compensation.

(e) If the authority determines that it is the stock of LILCO that

should be taken, the proper measure of damages shall be the fair market

value thereof as evidenced by the price of such stock on the exchange on

which they are traded on the valuation date since there is an

established market for such stock that is reflective of its value. In no

event, however, shall consequential or severance damages be awarded if

control of LILCO shall have been taken by the authority.

(f) If the authority determines that it is the assets of LILCO that

should be taken, fair market value would not constitute just

compensation to LILCO since there is an insufficient market in the usual

sense for its assets to ascertain the value thereof from the market. In

determining the compensation payable for such assets, there shall be

taken into consideration the capitalization of LILCO's expected future

earnings.

(g) LILCO has no reasonable expectation of realizing actual earnings

from the Shoreham plant or of giving effect to any earnings or returns

which may have been reflected on the books of LILCO for accounting

purposes. Moreover, it would not be reasonable, under current and

reasonably foreseeable circumstances, to expect that the Shoreham plant

would be reproduced by a public or private utility in LILCO's present

position.

(h) LILCO would have to phase in over a long period of time any rate

increases based on the costs of the Shoreham plant.

(i) The public service commission has imposed a limitation on the

earnings which LILCO may realize on its interest in the Nine Mile Point

nuclear power facility.

(j) The public service commission has imposed on LILCO imprudence

penalties with respect to the Shoreham plant.

(k) In determining just compensation, the following factors shall be

evaluated in deciding whether OCLD or RCNLD or neither constitutes the

proper basis:

(i) LILCO is a regulated utility. Under the laws of the state

providing for the regulation of utilities, LILCO's future earnings are

restricted to the permitted rate of return times LILCO's OCLD.

(ii) LILCO presently is being operated as an enterprise the economic

viability of which is dependent upon extraordinary financial stability

adjustments by the public service commission. Such extraordinary and

unprecedented rate relief was granted by the public service commission

in order to provide cash flow relief to prevent LILCO's bankruptcy with

the expectation that ratepayers would receive the full credit of such in

lower rates, and that the public service commission required such

extraordinary rate relief to be discontinued in the event that LILCO

filed a petition for relief in a voluntary case under the Bankruptcy Act

or if a final order for relief was entered involuntarily under such act.

LILCO's lack of profitability results not from any repressive or other

improper action taken by any governmental entity but from such factors

as mismanagement, imprudent decisions regarding the Shoreham plant and

general inefficiency.

(iii) There is no reasonable probability that, after condemnation of

its assets, LILCO will reproduce them.

(iv) Use of RCNLD may result in an unwarranted windfall to LILCO and

an unjustifiable penalty to the ratepayers who would have to pay it,

since to the extent an award based on RCNLD would exceed an award based

on OCLD, it would reflect to a large extent the effects of inflation

which would not increase the value of the property to LILCO or its rate

base for ratemaking purposes or to the authority for the purpose of

continuing to generate and transmit electric power within the service

area.

(l) Neither consequential nor severance damages are proper if the

authority condemns all the assets of LILCO.

(m) In determining whether LILCO has any going concern value, the

court shall take into consideration the fact that LILCO's continued

operations are dependent upon the extraordinary financial stability

adjustments granted by the public service commission.

(n) Such an acquisition by the authority of the securities or assets

of LILCO serves the public purposes of assuring the provision of an

adequate supply of gas and electricity in a reliable, efficient and

economic manner and retaining existing commerce and industry in and

attracting new commerce and industry to the service area, all of which

are matters of state-wide concern.

2. In furtherance of the legislative findings and determinations set

forth in subdivision one of this section, the authority is hereby

authorized and empowered to acquire, through purchase or the exercise of

the power of eminent domain, all or any part of the securities or assets

of LILCO, as the authority in its sole discretion may determine;

provided, however, that prior to proceeding with any such acquisition

under this title, the board shall determine, in its sole discretion

based upon such engineering, financial and legal data, studies and

opinions as it may deem appropriate, that the rates projected to be

charged after such acquisition and for such reasonable period of time as

the board may determine will not be higher than the rates projected to

be charged by LILCO during such period if such acquisition had not

occurred.

3. The authority also is authorized and empowered, in its discretion,

to make a tender offer or tender offers for all or any portion of the

securities of LILCO at such price or prices as the authority may

determine to be appropriate; provided, however that such tender offer or

tender offers, in the sole judgment of the authority, will result in

rates less than the rates which would result from continued operation by

LILCO.

(a) The authority shall make such offer or offers or any adjustment

thereof prior to acquiring any such securities or any assets of LILCO

through the exercise of the power of eminent domain. The authority may

pay for such securities in cash or by exchanging therefor the

authority's bonds or a combination thereof.

(b) In the case of a tender offer in which a subsidiary of the

authority acquires at least sixty-six and two-thirds percent of LILCO's

common stock, such subsidiary may merge with LILCO and either continue

in existence or dissolve, as it may determine.

(c) The provisions of section five hundred thirteen and article

sixteen of the business corporation law and any other provisions of law

relating to procedures in a corporate takeover, including without

limitation chapter nine hundred fifteen of the laws of nineteen hundred

eighty-five, shall not be applicable to the actions of the authority

pursuant to this title.

(d) In determining whether acceptance of such a tender offer by the

authority is in the best interests of LILCO, the directors of LILCO

shall consider not only the dollar amount of such offer but the

interests of employees, suppliers, ratepayers, creditors (including

holders of LILCO's debt securities), and the economy of the service area

and the state.

4. The authority, should it determine, in its sole discretion, to

acquire the stock or assets of LILCO by the exercise of the power of

eminent domain, shall not take title to nor possession of such stock or

assets prior to a final determination of the amount of compensation to

be paid for such stock or assets nor prior to a determination by the

authority, in its sole discretion that the taking of such stock or

assets will result in rates less than the rates which would result from

continued operation by LILCO. Notwithstanding the provisions of the

eminent domain procedure law, the provisions of subdivisions five and

six shall apply to the acquisition of the stock or property of LILCO by

the power of eminent domain, provided however, to the extent the

provisions herein do not supersede or conflict with the provisions of

such law the provisions of such law shall apply.

5. Procedure for acquisition of LILCO stock. (a) In the event the

authority determines to acquire the stock of LILCO by the exercise of

the power of eminent domain, having first entered into negotiations with

LILCO for the purchase of such stock, the authority need not hold any

public hearing on its intention to condemn such stock or on the question

of the public use of such action, such finding having been made by the

legislature herein. The authority shall commence such acquisition by

serving upon LILCO and filing with the county clerk of the county in

which the principal office of LILCO is located a notice describing the

stock being acquired, the valuation date, as determined by the

authority, and such additional information as the authority may

reasonably deem necessary to facilitate the process of condemnation and

payment. The notice shall state that it is a notice of pendency of an

acquisition proceeding and that the authority will elect whether or not

to pay the amount of such award when it has been finally determined. The

authority also shall cause a copy of such notice (i) to be served upon

the stock transfer agent or agents designated by LILCO for the transfer

and registration of its stock and (ii) to be published in at least five

successive issues of a daily newspaper of national circulation.

(b) Upon receipt of such notice, the stock transfer agent or agents,

at the expense of the authority, shall forthwith serve upon each of the

registered owners of such stock a copy of such notice. Service shall be

deemed sufficient if mailed by certified or registered mail to the

address of each such owner as shown on LILCO's stock transfer books.

Service of the notice upon the stock transfer agent or agents and its

publication shall not be jurisdictional prerequisites to the validity of

the taking. Failure to notify any owner of stock to be taken will not

invalidate any proceedings brought hereunder or any title acquired by

the authority.

(c) Upon filing of the notice described in paragraph (a) hereof, the

authority shall petition a special term of the supreme court in the

judicial district in which LILCO has its principal office for the

acquisition of the stock. Such petition shall be generally in the form

prescribed by the eminent domain procedure law so far as consistent

herewith.

(d) The supreme court in the district in which LILCO has its principal

office shall have exclusive jurisdiction to hear and determine all

claims arising from the acquisition of stock by the exercise of the

power of eminent domain and shall hear such claims without a jury and

without referral to a referee or commissioners. Notwithstanding the

provisions of section nine hundred one of the civil practice law and

rules, upon motion to the court by the authority, the condemnation

proceeding for the acquisition of stock shall be maintained as a class

action, pursuant to remaining provisions of article nine of the civil

practice law and rules, and the owners of the stock shall be deemed a

defendant class on the basis of the following express legislative

findings:

(i) the class of LILCO stock owners is so numerous that joinder of all

members is impracticable;

(ii) the issue of valuation of LILCO stock is common to all LILCO

stock owners and there are questions of law or fact common to the

members of such class which predominate over any questions affecting

only individual members;

(iii) the claims or defenses, if any, of any representative owner of

LILCO stock to acquisition thereof by the authority are typical of the

claims or defenses of the class;

(iv) there are representative parties who will fairly and adequately

protect the interests of the class; and

(v) the prosecution of separate actions by or against individual

members of the class would create a risk of inconsistent or varying

adjudications with respect to the issue of valuation and other issues

common to the class.

(e) The procedure for determining just compensation shall be in the

manner prescribed by the eminent domain procedure law, except to the

extent such procedure is inconsistent with the provisions of this title,

in which case the provisions of this title shall control.

(f) Upon the entry of an award finally determining just compensation

for the stock, the authority shall have sixty days after receipt of

notice of entry of such award within which to elect to proceed with the

taking or to abandon such acquisition as provided in subdivision ten

hereof. Notice of such election shall be served by the authority and by

the stock transfer agent in the manner described in paragraph (a)

hereof. If the authority elects to proceed with the acquisition, it

shall deposit with the supreme court in which the condemnation

proceeding was held an amount equal to the award within one hundred

eighty days after receipt by the authority of notice of entry of such

award. Upon the making of such deposit, the authority shall notify

LILCO's stock transfer agent in writing of such deposit. The sum so

depositied shall be applied as provided in the eminent domain procedure

law. Upon making such deposit and giving such notice to the stock

transfer agent, title to all stock described in the notice of taking

shall immediately vest in the authority and the authority shall have the

immediate right thereto. In the event the authority elects to abandon

the acquisition, the provisions of subdivision ten hereof shall apply.

(g) It shall be a condition precedent to the payment of compensation

for any such securities that such securities be surrendered to the

supreme court or to such other entity, including the issuer's stock

transfer agent, as the supreme court may direct.

6. Procedure for acquisition of LILCO assets. (a) If the authority

shall find it necessary or convenient to acquire any real or personal

property of LILCO, (other than securities), whether for immediate or

future use, then the authority need not determine that such property is

required for public use, since the legislature already has made such

determination in this title which determination shall be binding for all

purposes. The authority need not publish any notice of its intention to

acquire such property or hold any public hearing with respect thereto or

to the public use of such action.

(b) When any real property of LILCO within this state is sought to be

acquired by the exercise of the power of eminent domain, and after the

authority shall have entered into negotiations with LILCO for the

purchase of such property, the authority shall cause a survey and map to

be made thereof and shall cause such survey and map to be filed in its

office and in the office of the county clerk in which such property is

located. There shall be annexed to such survey and map a certificate

executed by the chief engineer of the authority, or by such other

officer or employee as may be designated by the board, stating that the

property or interest therein described in such survey and map is

necessary for its purposes.

(c) Upon filing such survey and map, the authority shall petition a

special term of the supreme court in the judicial district in which the

property is located for the acquisition of such property or interest

therein. Such petition shall describe the property being acquired, the

valuation date, as determined by the authority, and such additional

information as the authority may reasonably deem necessary to facilitate

the process of condemnation and payment. The petition shall state that

the authority will elect whether or not to pay the amount of such award

when it has been finally determined. In all other respects, such

petition shall be generally in the form prescribed by the eminent domain

procedure law, so far as consistent herewith. Such petition, together

with a notice of pendency of the proceeding, shall be filed in the

office of the county clerk of the county in which the property is

located and shall be indexed and recorded as provided by law. A copy of

such petition, together with a notice of the presentation thereof to

such special term of the supreme court, shall be served upon the owners

of such property as provided in the eminent domain procedure law. The

authority may cause a duplicate original affidavit of the service

thereof to be recorded in the books used for recording deeds in the

office of the county clerk of the county in which the property described

in such notice is located, and the recording of such affidavit shall be

prima facie evidence of due service thereof.

(d) Subsequent proceedings shall be conducted generally in the manner

prescribed by the eminent domain procedure law except to the extent the

provisions thereof are inconsistent with the provisions of this title,

in which case the provisions of this title shall control.

(e) In any proceeding involving the valuation of LILCO property taken

by the authority the supreme court shall ascertain and determine just

compensation for the property taken as of the valuation date, giving due

consideration to the applicable findings and determinations of the

legislature set forth in subdivision one hereof.

(f) Should LILCO's property be taken by the exercise of the power of

eminent domain and if LILCO shall have agreed upon the compensation to

be paid therefor in settlement of the proceeding, if, LILCO shall be

entitled to payment of the agreed or awarded compensation within one

hundred eighty days after the date of the agreement upon the amount of

the compensation or of the entry of the award, together with interest

upon the amount of such compensation from the time of acquisition

thereof by the authority to the date of payment of such compensation;

but such interest shall cease upon the service by the authority, upon

the person or corporation entitled thereto, of a fifteen days' notice

that the authority is ready and willing to pay the amount of such

compensation upon the presentation of proper proofs and vouchers. Such

notice shall be served personally or by registered mail and publication

thereof shall be made at least once a week for three successive weeks in

a daily newspaper of general circulation in the county in which such

property or any part thereof is located.

(g) Upon the entry of an award finally determining just compensation

for the property of LILCO, the authority shall have sixty days after

receipt of notice of entry of such award within which to elect to

proceed with the taking or to abandon such acquisition as provided in

subdivision ten hereof. Notice of such election shall be served by the

authority on the owners of such property in the manner described in

paragraph (c) hereof. If the authority elects to proceed with the

acquisition, it shall deposit with the supreme court in which the

condemnation proceeding was held an amount equal to the award within one

hundred eighty days after receipt by the authority of notice of entry of

such award. Upon the making of such deposit, the authority shall notify

LILCO in writing of such deposit. The sum so deposited shall be applied

as provided in the eminent domain procedure law. Upon making such

deposit and giving such notice to LILCO, title to all property described

in the notice of taking shall immediately vest in the authority and the

authority shall have the immediate right thereto. The order setting

forth the award, together with evidence from the clerk of the court of

receipt of the amount of the award, shall be filed in the office of the

county clerk of the county in which the property is located and shall be

indexed and recorded in the same manner as a notice of pendency under

the eminent domain procedure law. The owner or person in possession of

such property shall deliver possession thereof to the authority upon

demand, and in case possession is not delivered when demanded or demand

is not convenient because of absence of the owner or inability to locate

or determine the owner, the authority may apply to the court without

notice for an order requiring the sheriff to put it into possession of

such real property. Such an order shall be executed as if it were an

execution for the delivery of the possession of the property. In the

event the authority elects to abandon the acquisition, the provisions of

subdivision ten hereof shall apply.

7. At any time the authority and its duly authorized agents and

employees may, on reasonable notice and during business hours, (i) enter

upon any real property proposed to be acquired for the purpose of making

the surveys or maps mentioned in this section, or of making such other

surveys, inspections or examinations of real and personal property and

(ii) inspect and make copies of the books and records of the issuer of

such securities, all as the authority may deem necessary or convenient

for the purposes of this title.

8. Upon the acquisition of all the outstanding shares of stock of a

corporate issuer representing all the voting rights and equity thereof,

the authority shall as soon as reasonably practicable take all steps

necessary to assure that the rights and claims of all the holders of any

other stock and debt securities and all other creditors thereof are as

secure as they were immediately prior to the acquisition by the

authority. Nothing herein shall prohibit the authority from taking any

appropriate and prudent action to renegotiate and restructure such debt

or from purchasing the preferred stock and debt securities issued by

such corporation at such prices as the authority may determine. The

authority may also exchange its bonds for any outstanding preferred

stock or debt securities with the consent of the holders of such

preferred stock or debt securities.

9. As soon as practicable after the authority has acquired sufficient

shares of LILCO stock to do so or after it has acquired all the property

of LILCO pursuant to this title, the authority shall forthwith close and

decommission the Shoreham plant and shall investigate and develop

alternative uses, if any, for such plant.

10. If the authority determines, in its sole discretion, that the

total cost of acquisition will result in rates in excess of the rates

which would result from continued operation by LILCO, the authority

shall abandon the acquisition. In such event, the authority shall serve

notice of such abandonment (i) in the case of a stock acquisition, by

causing to be mailed by certified or registered mail a copy of such

notice to each former owner of stock as shown on LILCO's stock transfer

books immediately prior to such acquisition at the address shown on such

stock transfer books and by causing to be published a copy of such

notice in at least five successive issues of a daily newspaper of

national circulation or (ii) in the case of an asset acquisition, in the

same manner as provided for the service of a petition for acquisition in

paragraph (c) of subdivision six hereof. In addition, in the case of an

asset acquisition the authority shall file a copy of the notice of

abandonment with the county clerk of the county in which is located any

real property that was taken and with the clerk of the supreme court in

which the proceeding was instituted.

11. The provisions with respect to the valuation of stock and property

set forth in this section shall apply only to stock or property of

LILCO, as the case may be, acquired by the authority by the exercise of

the power of eminent domain.

* NB There are 2 § 1020-h's