FAYETTEVILLE -- Two banks claim Elkins owes them more than $500,000 for improperly prohibiting them from selling lots in a once-troubled subdivision.
First State Bank and Pinnacle Bank, now known as Central Bank, sued the city in federal court in April 2017 claiming the city didn't have authority to implement a moratorium on sales from Stokenbury Farms Subdivision.
What’s in a class
Arkansas municipalities are divided into three categories based on population. A city of the first class has a population over 2,500. A city of the second class has between 500 and 2,499 population and an incorporated town has 499 or fewer population. Other differences include town council members must be elected at-large whereas cities may elect members from city wards, and towns generally have fewer municipal responsibilities and obligations.
Source: Staff report
Elkins was a city of the second class at the time. It became a city of the first class in November 2017.
The subdivision had drainage issues when the moratorium was ordered, but they have since been rectified.
The banks filed a motion Tuesday in U.S. District Court seeking a partial summary judgment in the case. The motion was filed after the Arkansas Supreme Court was asked by a federal judge to rule on whether Elkins had authority to implement a moratorium under state law. The high court answered the question, saying state law denies cities of the second class the power to issue building permits and to regulate the building of houses, reserving that power for cities of the first class.
The banks are asking a judge to find they are entitled to just compensation because they say the moratorium constituted an unlawful taking of their property and a violation of due process. The banks contend they're entitled to compensation under the Arkansas Private Property Protection Act.
The banks want $525,000 in compensation from the city. That figure doesn't include interest, costs or attorney fees.
The banks contend the moratorium was illegal and cost them at least 20 percent of the value of the lots in the subdivision, according to the motion. Rausch Coleman Homes paid $13,000 for each of 105 residential lots during the moratorium.
Five months later, Rausch Coleman paid $18,000 for each of 39 lots in the Oakleaf Manor Subdivision, which is adjacent to Stokenbury.
Both sets of lots should have had the same value, $18,000 per lot, according to the lawsuit.
Elkins issued a blanket moratorium on all home construction in the subdivision. The lawsuit contends the city took the action "all because it claims there is a risk that citizens may be exposed to mosquitoes and snakes that could be located in two storm water detention ponds adjacent to the subdivision."
The banks didn't own the property the ponds are on, according to the lawsuit.
In a response generally denying allegations in the lawsuit, Elkins contends any action taken in pursuit of the public health and welfare cannot constitute a taking of the property or a violation of due process.
The moratorium was eventually lifted.
The lawsuit contends there's no rational basis for the moratorium, and it contradicts a previous city plan to remedy problems with the ponds after Stokenbury was built out.
NW News on 01/23/2019