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EUGENE, OR-The city of Eugene will pay Portland businessman Michael Kelley $1.2 million in damages plus $2.75 million to buy land the city allegedly blocked him from developing several years ago.

City officials admit no fault in the settlement. The money to cover the bill is coming out of a city’s facilities reserve fund, which is used to renovate government buildings and develop new facilities. The city hopes to replenish the fund by reselling the property.

The lawsuit stems from Kelley’s attempt to build a strip shopping center and an apartment complex in West Eugene in 1997 and 1998. The city required Kelley hand over a right-of-way along a drainage ditch on the shopping mall site. It also required Kelley to build a 60-foot-wide street all the way through the apartment site to provide access to another parcel.

Kelley argued both demands, but ultimately gave the city its easement on the retail property and it off to a developer who built the retail center. Kelley never agreed to the through street on the apartment site, however, the project was never approved and the lawsuit was filed in 1998 based on the 1994 U.S. Supreme Court ruling in Dolan vs. City of Tigard, a case that championed private property rights.

In March of this year, a senior circuit judge in the 9th District shot down most of the city’s legal defenses and denied a request for summary judgment, all but saying the city’s defense didn’t hold up against the state’s constitution, which prohibits the public taking of private property without just compensation. Rather than letting a jury decide and possible award higher damages, the city decided to settle.

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