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Lindley Estes is a business writer for The Free Lance-Star and Fredericksburg.com. This blog is on Fredericksburg-area business. Send an e-mail to Lindley Estes.

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Judge: Not city’s responsibility to maximize land value

A sculpture is surrounded by overgrowth and weeds at the proposed site of the Slavery Museum in Celebrate Virginia South. (Reza A. Marvashti / The Free Lance-Star)

The city of Fredericksburg bears no responsibility to try to enhance the value of the land where the U.S. National Slavery Museum was supposed to have been built, a Circuit Court judge ruled Monday.

Judge Gordon Willis made the ruling in response to Pei Partnership Architects’ formal request for the city to remove restrictions placed on the 38-acre Celebrate Virginia South property when the Silver Cos. donated the land to the museum a decade ago.

Silver stipulated that the land, part of which overlooks Interstate 95, could not be used for any purpose other than an African–American history museum or an educational or charitable purpose. The deed of the gift, filed in court that year, refers to that restrictive-use covenant, but the covenant document itself was not filed until 2009.

With the covenant in hand, Silver officials and their investors at Celebrate Virginia can control the ultimate outcome of the land to a large extent. The company can waive the restriction if it finds a business partner that wishes to purchase the land at auction and build something that would help the overall development. Barring that, a Silver entity itself might repurchase the land at auction.

The U.S. National Slavery Museum has not paid its city property taxes since 2008 and now owes about $332,000 plus attorney fees. The museum’s federal bankruptcy case was dismissed in mid-August after its lawyer said the museum had reorganized and regained its ability to solicit donations, and promised an anonymous donor was prepared to pay off the city’s tax bill “within days.” No such payment has ever happened.

The city is now in the process of auctioning off the 38 acres, where a sculpture surrounded by overgrown weeds is the only physical sign of the project’s onetime existence. The museum, which essentially has ceased all operations, could pay off the tax bill anytime before the auction and end the proceedings.

New York City-based Pei says it is owed close to $6 million for design work it performed for the slavery museum, a projected spearheaded by former Virginia Gov. Doug Wilder. Pei wants the city to remove the restrictions on the property so the land would sell for more at auction, with the architecture firm receiving much of the proceeds.

Willis ruled that it is not the city’s responsibility to try to enhance the value of the property. He made the point that the city could regularly do that on delinquent properties by pushing through rezonings or other value-enhancing measures, but said there is no expectation that the city will do anything beyond selling properties as is.

Willis did not rule on the legality of the restrictive covenant itself. That is a matter that could be adjudicated at a later time, potentially pitting Pei against Celebrate Virginia’s investors, should the request be formally filed.

The city has also started the process of auctioning off much of the undeveloped portions of Celebrate Virginia South due to delinquent taxes. Silver officials have argued that the collapse of the slavery museum project is to blame for much of the development’s struggles. The process leading up to an ultimate auction often takes a full year, and no dates for auction have been scheduled.

Nobody from the museum was at Monday’s court hearing.

“The National Slavery Museum has gone silent,” said Hirschler Fleischer attorney John Walk, who is representing Celebrate Virginia’s investors.

Walk said Monday that what Pei is really seeking is a third-party claim against his client.

Permalink: http://news.fredericksburg.com/businessbrowser/2012/12/10/judge-not-citys-responsibility-to-maximize-land-value/