It does? Not from what I’ve seen. In my area, they took a whole mall from the owner, to give to another private developer, and they paid a fraction of fair market value.
I’m not doubting your story, but I was the responsible official for several local agencies which built public works projects with state and federal funding, and everyone one them them had to be audited to show that the landowners were compensated properly. No one was bullied, coerced, or forced to sell for less than FMV.
We always overpaid if there was any question that our formula or comparable sales may be wrong so we would avoid any problems by the Feds. The main problem is that we would have to pay for the entire project with local funds and repay the federal grants.