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California Eminent Domain Report

"…nor shall private property be taken for public use, without just compensation."

ALI-ABA Eminent Domain Conference in Austin this Week

Posted in Events
Kelo House

Susette Kelo’s Infamous Pink House

If you happen to be in Austin this week, stop by and see me at the ALI-ABA Eminent Domain Conference.  It starts Thursday, January 28 and runs through Saturday.  I’ll be speaking Thursday afternoon on the condemnation of privately-held utility companies — an issue that’s certainly been in the press here in California recently.  I’ll be speaking with Christopher Clough of Barron & Adler in Austin, and he’s been “in the trenches” on a number of utility-company condemnation issues in Texas.

Aside from my session, there will be a lot of good presentations, including a national eminent domain update by our friend Robert Thomas, author of inversecondemnation.com on Thursday morning, and an interview with the filmmaker for Little Pink House on Friday afternoon.  (If for some strange reason you’re reading an eminent domain blog but don’t recognize the “little pink house” reference, I’ll leave you with a picture of Susette Kelo’s house from the center of the Supreme Court’s 2005 Kelo v. City of New London decision.)

FTA and FHWA Buy America Updates

Posted in Court Decisions, New Legislation

526598463_750xx3005-1694-0-0Public agencies are routinely facing Buy America requirements in their infrastructure projects.  Some of the most difficult situations involve how to satisfy Buy America obligations with public utility relocations.  The rules continue to evolve, making compliance an ever-moving target.  To help provide some guidance, my colleague, Ann-Therese Schmid, recently provided a Buy America update on Nossaman’s InfraInsight Blog.

In her blog post, Recent Buy America Developments, Ann informs us that in late 2015 the Federal Transmit Administration (FTA) and the Federal Highway Administration (FHWA) have had changes imposed on their Buy America Procedures.  The FTA experienced changes through Congress’ adoption of the FAST Act, and FHWA experienced changes through a recent court decision.

The FAST Act clarified the small purchase threshold, imposed requirements on the Secretary of the Department of Transportation in denying Buy America waivers, and changes some of the thresholds and requirements of domestic content.

The recent court decision clarified two broad Buy America interest waivers for steel and iron products and resulted in the FHWA rescinding a prior memorandum on the subject.

For a more detailed discussion on these topics, check out Ann’s blog post.

Menlo Park Grade Separations – On Track

Posted in Projects
Capture

Ravenswood Avenue Crossing – Menlo Park, CA

The City of Menlo Park is proceeding with two transportation projects.  The first one, an undercrossing to separate bicycles and pedestrians from rail traffic at Middle Avenue, received the green light from the City Council on December 15.   The City has committed $210,000 and has authorized staff to apply for an additional $490,000 in San Mateo County Measure A sales tax funds to pay for preliminary engineering work on the project.  The City estimates that the design and construction of the undercrossing will cost approximately $11 million.

The City’s second project is the Ravenswood Avenue grade separation project.  The Ravenswood crossing, which reportedly has the highest volume of traffic of the four crossings in Menlo Park, was recently the site of a fatal accident when a train struck a car in February 2015.  The City has commenced its search for an engineering consultant to begin the preliminary design of the grade separation.  Based on the preliminary design/engineering and cost estimates, the City will determine whether the separation will be an underpass or a split grade separation.

Either way, the City will likely have to acquire property from adjacent property owners to facilitate the project.  Whether an underpass or a split grade – adjacent properties are often impacted by loss of access or the project’s need for various property interests.

A feasibility study identifying project alternatives and impacts to properties for the various grade separation projects is available on the City of Menlo Park’s dedicated project website.  Click HERE to go directly to the City’s Feasibility Study.  Click HERE to go to the City’s dedicated Railroad Grade Separation website.

Finally, be sure to check back with us often as we will continue to follow these projects and post updates.  In the meantime, should you have any questions, please feel free to contact our office.

Moratoriums Do Not Prohibit Billboard Relocations

Posted in Court Decisions, Valuation

Did_that_billboard_just_changeBecause billboards are typically near public transit, they are routinely impacted by public projects such as street widenings, highway and freeway expansions, and grade separation projects.  When impacted, billboard companies may make claims for (i) the value of the billboard itself (fixtures and equipment), (ii) loss of business goodwill, and (iii) relocation expenses.  Usually the first two items can be addressed through a successful billboard relocation.  But when happens when a moratorium is in place prohibiting new billboards?  Does a moratorium on new billboards prohibit a relocation, thereby forcing the public agency to pay the billboard companies large goodwill claims?  The answer is that despite a billboard moratorium, a relocation may still take place, thereby limiting the agency’s exposure.

The Outdoor Advertising Act provides:

It is a policy of this state to encourage local entities and display owners to enter into relocation agreements which allow local entities to continue development in a planned manner without expenditure of public funds while allowing the continued maintenance of private investment and a medium of public communication.  [All] local entities are specially empowered to enter into relocation agreements on whatever terms are agreeable to the display owner and the . . . local entity, and to adopt ordinance or resolutions providing for relocation of displays.

(Bus & Prof. Code, § 5412.)  A recent unpublished case, City of Corona v. AMG Outdoor Advertising (2016 Cal.App. Unpub. Lexis 147), confirmed that when “the owner of a preban or grandfathered billboard either wants to move it or has to move it because it will be condemned by eminent domain, [the Outdoor Advertising Act and the local entity’s municipal code] authorize the [local entity] to negotiate the terms of the relocation.”

For public agencies constructing public projects that involve the displacement of billboards, don’t just assume a relocation is not possible due to a billboard moratorium.  Check the local municipal code – it is likely that many have exceptions for relocation agreements.  And start working on a relocation agreement early and explore alternatives that can allow the billboard to obtain a new, viable relocation site, thereby minimizing exposure to large claims.

Another Twist in California’s Right of Entry Rules

Posted in Court Decisions, Possession

Eminent domain practitioners have been waiting for nearly two years for the Supreme Court to issue its decision in Property Reserve v. Superior Court.  At issue is the constitutionality of California’s “Right of Entry” statutes, which allow an agency to enter onto private property for certain inspections and testing without filing a condemnation action.  In Property Reserve, the Court of Appeal rejected an agency’s efforts to conduct precondemnation testing and inspections, finding that the statutory procedure essentially amounts to allowing a taking without payment of just compensation.  The Supreme Court granted review, and the case remains pending.

Meanwhile, in November 2015, a different panel of the Court of Appeal issued a ruling on a similar challenge to the “Right of Entry” procedures, coming down in favor of the public agency in Young’s Market Co. v. San Diego Unified School District.  That published decision seemed to give new life to the right of entry statutes, at least pending the outcome of Property Reserve.

But as my partner Brad Kuhn pointed out to public agencies in November, “don’t take too much comfort” from the Young’s Market decision.  And he was apparently wise to suggest caution.  Today, the Supreme Court granted review in the Young’s Market case, meaning that — just like Property Reserve — it is no longer citable precedent.  The Court’s Order granting review specifically ties the two cases together, noting that

Further action in this matter is deferred pending consideration and disposition of related issues in Property Reserve v. Superior Court . . . .

I suspect both cases will be decided together.  Stay tuned for more.

New Right-of-Way Regulations on Indian Lands

Posted in Possession, Right to Take

Every once in a while, infrastructure projects we’re working on involve traversing Indian lands.  For those of you involved in such projects, you should take a look at the Final Rule published by the Department of the Interior, which went into effect last month.  The Federal Register summarizes the Final Rule as follows:

This final rule comprehensively updates and streamlines the process for obtaining Bureau of Indian Affairs (BIA) grants of rights-of-way on Indian land, while supporting tribal self-determination and self-governance.  This final rule further implements the policy decisions and approaches established in the leasing regulations, which BIA finalized in December 2012, by applying them to the rights-of-way context where applicable.

Some highlights include:

  • Simplifying requirements by relying on general statutory authority to grant right-of-way;
  • Clarifying BIA review of right-of-way requirements;
  • Streamlining the process for obtaining a right-of-way on Indian land by (i) eliminating the need for BIA consent for surveying activities; (ii) establishing timelines for BIA review of right-of-way requests; and (iii) requiring compelling reasons for the BIA to disapprove an application; and
  • Clarifying tribal jurisdiction over lands subject to a right-of-way.

imgresThe goal is to provide a uniform system for granting rights-of-way over Indian land, while allowing Indian landowners as much flexibility and control as possible.  The Department of the Interior is even preparing a template grant form with placeholders for conditions and restrictions agreed to by landowners.  While no ceiling is established on compensation,   the Final Rule is meant to ensure that the compensation is “just” for Indian landowners.  The revisions should help modernize and streamline the right-of-way approval process while better supporting Tribal self-determination.

For those of you involved in the potential condemnation or use of eminent domain over Indian lands, this Final Rule does not affect individual property rights protected by the Fifth Amendment.  While the Department was asked to include provisions regarding when Indian land may be condemned for a right-of-way, the Department concluded that the current rule does not provide guidance for condemnation of Indian land, and instead the statutory provisions at 25 U.S.C. 357 govern this process.

While each situation is unique and requires further analysis, generally:  (i) lands allotted in severalty to Indians may be condemned for any public purpose in the same manner as land owned in fee may be condemned, and the money awarded as damages are to be paid to the allottee (see 25 U.S.C. 357); (ii) lands belonging to a tribe cannot be acquired without the consent of the proper tribal officials, and tribes possess the right to prevent the sale of land without the consent of the tribe (25 U.S.C. 324; 25 U.S.C. 476); and (iii) lands may be acquired subject to approval of the Secretary of the Interior (25 U.S.C. 353).  If you have questions when dealing with Native American land, take a look at the new rule or feel free to let me know.

Surface Transportation Reauthorization Bill Looks to Be Moving Forward

Posted in Uncategorized

We’ve been following the status of highway and transportation funding for quite some time, previously noting that Congress kept kicking the can down the road without agreeing on a long-term solution.  Finally, that is no longer the case, as our colleagues on Nossaman’s Infra Insight Blog note that the House and Senate Conference Committees have agreed on a compromise $305 billion five-year surface transportation authorization: the Fixing America’s Surface Transportation (FAST) Act, which is headed to the White House in the next few days.  Check out Billy Moore’s post the Infra Insight Blog for a thorough, detailed discussion of the FAST Act, and where are the money comes from and is going.  But here are a few key take-aways:

  • The bill creates a Council on Credit and Finance responsible for reviewing applications for credit assistance programs, and creates the National Surface Transportation and Innovative Finance Bureau to administer the application process for these programs to reduce project delays.
  • The bill creates a Nationally Significant Freight and Highway Projects (NSFHP) program, which is a new grant program that will provide federal grants of up 60 percent federal money for highway, bridge, rail-grade crossing, intermodal and freight rail projects costing more than $100 million that improve movement of both freight and people, increase competitiveness, reduce bottlenecks, and improve intermodal connectivity.
  • The bill will streamline the environmental review and permitting process to accelerate project approvals and establishes a pilot program to allow up to five states to substitute their own environmental laws and regulations for the National Environmental Policy Act (NEPA) if the state’s laws and regulations are at least as stringent as NEPA.

Government Can Be Estopped from Going Back on Precondemnation Promises

Posted in Court Decisions

When the government promises to do one thing and then does another, it usually has myriad excuses.  Sometimes it claims that its staff (the people with whom the opposing side are typically interacting) cannot bind the agency.  Other times, it claims that it cannot contractually agree to things that take away key government functions (e.g., the government cannot contract away its right to condemn property).  But every once in a while, the government gets stuck, even in the absence of a formal written agreement.

In HPT IHG-2 Properties Trust v. City of Anaheim (November 20, 2015), the Court of Appeal upheld a trial court ruling that the City was estopped from, in effect, going back on a promise to build a parking structure.  The facts are long and convoluted, but essentially boil down to this:  The property’s owner wanted to build a hotel complex on its property, but the City knew that it would need part of the property for an overpass project in the future.  In the end, the City approved the Owner’s plans for its hotel project but, in doing so, the parties also agreed about how the future overpass project would be handled.  In particular, the City agreed that it would pay the Owner for the property it needed for the overpass, and that it would acquire and build a parking structure for the Owner on a adjacent property to replace the parking that would be lost due to the overpass.  In exchange, the Owner designed its project so that it could accommodate the future overpass by, among other things, reducing the project’s overall size.

In implementing this, the Owner and the City agreed to two sets of project “plans” for the hotel project:  (1) an “interim” design that the Owner would build; and (2) a “final” design that incorporated the City’s overpass.  The Owner proceeded to build its hotel project and, years later, the City was ready to build its overpass project.  Everything went well until the City announced that instead of building the parking structure, it would build only a surface lot on the replacement property.  In order to achieve the required number of spaces, the City would disregard its own “Resort Specific Plan Area” landscaping and setback requirements.

Having built its entire project under the restrictive “Resort Specific Plan Area” rules, the Owner was not enthused about its new parking lot.  It wanted the City to comply with its own standards and build the structure that was originally contemplated so that the new parking lot matched the overall project, with extensive setbacks and elaborate landscaping for the new parking lot.

The unpublished opinion is long and fairly complicated, but the bottom line is that the Court agreed with the Owner that the City could not go back on its agreement to build the parking structure.  The Owner had relied on that promise in building its $40 million hotel complex, and it was entitled to have its parking match the project’s overall design even after the City built its overpass.

There’s probably a lot more to this story, but rather than dig into the minutiae, I wanted to offer a comment only tangential to the actual opinion.  While this situation obviously went sideways when the City tried to avoid spending the money on a costly parking structure, the overall concept here reflects good public policy.  Often, an owner’s planned development will conflict with a planned public project, and where the private development is going to take place before (maybe even many years before) the public project, many bad things can happen.

Sometimes, agencies try to delay or even prevent an owner’s development, knowing that the damages associated with taking all or part of the developed property down the road could be massive.  But the courts have (correctly) prevented such tactics, ruling that this can result in a de facto taking of the property.  Other times, the owner rushes ahead with its own project without regard for the future public project, knowing that it can seek damages when the taking occurs.

Here, by contrast, the parties actually worked together, seeking a solution to the Owner’s desire to build a hotel complex on the property, a part of which the City would need for its future overpass.  They designed the project in both an “interim” and “final” configuration, working together to ensure that the Owner’s project fit within the City’s future plans.  This allowed the Owner to proceed with its construction on its schedule, while still providing the means to construct the overpass in the future — without hugely impacting the Owner’s project.

While the plan did not work out exactly as the parties anticipated in this case, I still like the effort to work together, and think that owners and agencies can learn from this example.  My advice:  make sure both parties are very clear on how the “interim” and “final” conditions will work, along with who will pay for what along the way.  In addition, it’s important to consider the possibility that the future public project will never get built, and include provisions for dealing with that potential outcome.

Right of Entry Statutes Are Back in Business – For Now

Posted in Court Decisions

OLYMPUS DIGITAL CAMERA

For decades, California public agencies have utilized a statutory “right of entry” procedure to gain access to private property to conduct investigations and testing before deciding whether to move forward with acquiring the property. (See Code of Civil Procedure section 1245.010 et seq.) That process was thrown into flux in 2014 with the Court of Appeal’s decision in Property Reserve v. Superior Court, which struck down an agency’s efforts to conduct precondemnation investigation and testing, concluding that any significant physical intrusion onto private property constituted a taking for which just compensation must be paid – thereby requiring a formal eminent domain proceeding. But when the California Supreme Court decided to take up Property Reserve, agencies were left scratching their heads, wondering what to do until that decision comes out (likely sometime in 2016). Based on a Court of Appeal decision published this week, Young’s Market Co. v. San Diego Unified School District (Nov. 19, 2015), agencies have at least one answer.

Young’s Market Co. held that Phase II investigations on private property – including soil borings, lead and asbestos testing, among other activities – for a duration of 10 days does not constitute a temporary physical taking of property, and therefore an eminent domain proceeding is unnecessary and these activities may be performed pursuant to the right of entry statutes.

Background

Young’s Market Company owns a two-acre parcel in downtown San Diego adjacent to an elementary school. The property was improved with an indoor go-kart racing center. As part of its investigation to potentially acquire the property, the school district filed a petition for entry to conduct environmental studies, including drilling over 30 boring holes for groundwater and soil sampling and bulk sampling of building materials suspected to contain lead or asbestos. The testing was expected to take 10 business days to complete, and upon completion, the borings would be backfilled with sand and grout and resurfaced with concrete.

The property owner opposed the petition, arguing (i) the right of entry statutes only permitted innocuous or superficial entries on property, and (ii) the school district’s proposal was an unconstitutional taking. The owner argued that the removal of dirt and building materials effected a permanent physical occupation, thereby requiring the district to file a condemnation action and pay just compensation as determined by a jury. The owner alternatively asked for the court to stay the decision until Property Reserve is decided by the California Supreme Court, or require the district to deposit $500,000 toward compensation for lost rent, goodwill, and property.

The trial court granted the school district’s petition for entry, allowing for the testing to move forward upon the district’s depositing $5,000 as the probable amount of compensation.

The Court of Appeal

On a petition for writ of mandate to the Court of Appeal, the Court started by walking through the law on permanent physical takings, temporary physical takings, and regulatory takings — mirroring the discussion in Property Reserve. The Court next discussed the right of entry statutes, which allow for entry onto property for various testing and studies upon a deposit of probable compensation; if damage or interference occurs in an amount above the deposit, the court can enter judgment for any unpaid portion or the owner may recover for such damage through a civil action.

After considering the scope of the proposed testing, the Court concluded that the school district’s activities did not qualify as a taking of property that would require a full eminent domain jury trial to determine just compensation. The Court found no permanent, physical taking, as the testing was limited to ten days and involved the removal of minimal amounts of building surfaces (less than the size of a postage stamp), and the re-filling of two-inch to six-inch diameter borings with sand or grout. The Court likewise found no temporary physical taking, as the duration was short and the intrusion was minimal – with no evidence of substantial disruption to the property’s use or operation.

Conclusion

As we’ve indicated in our prior analysis of Property Reserve, these “right of entry” cases are likely going to be decided on the duration of testing and inspection. According to the Court in Young’s Market Co., 10 days is acceptable. But where does that leave us now?

Public agencies can take a bit more comfort in moving forward with petitions for right of entry. Being able to rely on the Young’s Market Co. decision provides strong support that the statutes are still constitutional and available for pre-acquisition testing and inspections. So if your public agency has had a project on hold pending moving forward with environmental testing, or has had difficulty securing access to private property, you now have the authority you need to proceed to court to secure access, or at a minimum a much stronger negotiating position with private property owners.

But don’t take too much comfort. We’re still awaiting a decision by the California Supreme Court in Property Reserve. That decision could fully support and align with the conclusions in Young’s Market Co., it could go in an opposite direction that would require a different, more substantial eminent domain process with necessary protections for property owners before gaining access for testing and inspections, or it could identify some other standard entirely. We should get that guidance in 2016. But even before then, don’t be surprised if the property owner in Young’s Market Co. petitions the Supreme Court for review, at a minimum asking for the Court to stay this decision until Property Reserve is decided.

While this decision is surely welcome news for public agencies, and perhaps it suggests the direction the California Supreme Court may go with Property Reserve, everyone in the right-of-way industry should remain cautious, as the decision could be short lived.

Caltrans’ Highway 101 Overpass Condemnation Case Ends in Split Decision

Posted in Valuation

untitledFor several years, we’ve been following an eminent domain lawsuit in Marin County involving Caltrans’ acquisition of 34 acres for a $29.7 million interchange project at the Redwood Sanitary Landfill, which would widen the overpass over Highway 101 and install new frontage roads on both sides of the highway to create safer conditions for traffic going in and out of the landfill.  After a 20-day trial, the litigation has finally ended with a jury verdict that appears to be close to a split between the property owner’s appraisal and Caltrans’ appraisal.

According to an article in the Marin Independent Journal, Marin jury awards rancher $3.2 million for land seized in Novato, Caltrans’ appraisal was $575,000, and the owner’s appraisal was $6 million.  The jury returned a verdict at $3.2 million, which equaled about $1.7 million for the part-taken, and $1.5 million in severance damages to the remaining property as a result of the project.

In arguing for severance damages, the property owner claimed that the project would disrupt roads, cattle crossings, pipelines and a quarry operation, and would impact the property’s potential use as a lucrative winery.  (This seems like a potentially inconsistent highest and best use argument, as a property owner arguably should not be able to recover severance damages based on impacts to the property’s current use AND its future highest and best use, although there could arguably be temporary impacts if the current condition is an interim use.  If you’d like more information about highest and best use issues, let me know and I’m happy to discuss in more detail.)

Prior to trial, Caltrans apparently offered $1.8 million as a “final offer”.  Because the jury verdict was significantly above Caltrans’ final offer, the owner may be entitled to litigation expenses, including reimbursement of attorneys’ fees and expert fees, if the owner’s final demand was reasonable.  The owner is filing a motion to recover such fees, so we will see what transpires.  If you’re interested in how courts determine the award of litigation expenses in eminent domain, feel free to read some of our prior posts on the subject.