I believe the speed bump the town hit with regard to their eminent domain claim was that the judge threw out their appraisals, and set his own values for the property at a MUCH higher amount.
Any time a government entity take land through condemnation, they have to pay "fair market value" for it as determined by appraisals. The landowner can appeal the value, and in this case they did so very successfully, and the town paid way more than they expected to (or could afford to). A friend involved in town politics told me that the town's appraisal discounted the value of the property by the cost of the dam repair, and the judge chose to use a value that did not take into account the repair cost. This last detail about the valuation makes sense to me, but I haven't been able to verify it.