Two Decisions out of San Diego Remind Us to Follow the Rules

We don’t often see multiple takings-related cases in one week, but last week we saw three.  The California Supreme Court’s decision in Property Reserve was obviously the most important, but the Fourth Appellate District Court of Appeal in San Diego also issued two decisions in the same week.  Although both of these opinions are unpublished and cannot be cited, they act as a reminder for property owners to be mindful of some basic principles of eminent domain law.

The first case, SANDAG v. Vanta, addresses some of the limits on the principle of “just compensation” and, in particular, the proper determination of damages to the owner’s remaining property (“severance damages.”)  The agency sought to acquire about one-fifth of the owner’s property, including all of the area available for legal access to the abutting street.  The agency also offered to provide a “replacement easement” over adjoining property to provide access to the owner’s property.  Vanta claimed that when he decided to develop the access, it would be more expensive to develop access on the replacement easement than on the area taken by the agency.  His  expert  added this increased “cost to cure” a part of the property’s  severance damages, which already included the diminution in value of the remaining property. Before trial the agency moved to exclude evidence of the alleged cost to develop access, arguing that the owner was not entitled to both the diminution in value and the costs to cure.  The trial court agreed and excluded the evidence.  The Court of Appeal affirmed, noting that the owner did not have any evidence that it had plans to develop the access area in the before condition which meant any increased costs were purely  speculative.  The Court also analyzed the propriety of claiming both diminution in value and cost to cure:

In short the cost to cure is a proper measure of severance damages ‘only when it is not greater than the decrease in the market value of the property if left as it stood.’…Vanta was not entitled to recover both the diminution in value of the remaining property and the cost of ‘curing’ his loss of direct access…by developing access [] over the replacement easement; he was entitled to recover one or the other, whichever was less.

The Vanta opinion reminds us that not every possible damage is compensable in an eminent domain action.  Future harm (such as increased costs of development) must be more than a remote possibility.

The same Court of Appeal also issued another opinion in SDMU LLP v. County of San Diego.  This inverse condemnation case involved a development project that had initially been approved in 1990.  The project then went through a series of stops and starts, with issues arising regarding the completion of off-site improvements and related payments.  During that time, the developer and the County had entered various agreements.  One agreement obligated the developer to make payments as homes in the Lakeview portion of the project were completed.  When the contractor stopped work on the improvements, the County began withholding building permits for the Mountaintop portion of the development.  Apparently, the Lakeview and Mountaintop portions were being managed by their respective entities, who were both related to the developer.  The Lakeview and Mountaintop companies brought inverse condemnation actions against the County, challenging the payments for off-site improvements and the withholding of building permits.

The trial court dismissed both of the actions on a threshold consideration.  To state a claim for inverse condemnation, a plaintiff must show that it lost property and/or money.  Here, the payments for the offsite improvements were the developer’s obligation, not the obligation of the Lakeview company.  So if anyone had a right to challenge the payments made to the County, it was the developer, not Lakeview.  Similarly, The Mountaintop company claimed that it should not have its building permits conditioned on completion of the offsite improvements.  The Court found that the conditions did not require Mountaintop to convey any property (i.e., a dedication) or pay any money to the County (i.e., an exaction) and therefore Mountaintop had not lost any compensable property right.  As with Lakeview, had the developer challenged the obligation to construct the improvements, it could have potentially stated a claim.

The Mountaintop discussion is more interesting to me.  On these facts, the opinion makes sense.  The entities are related and it is all the same project.  The developer should not be able to get around its obligations by having a related entity seek the actual permits.  But looked at more broadly, the Court’s reasoning suggests that an agency can place any number of conditions on permits and approvals as long as the applicant is not required to actually pay any money or convey property (but someone else must).  In any event, the decision should make property owners think carefully over who is the proper party to bring a challenge to a regulation.  It may not always be the one you think.

California’s Precondemnation Right of Entry Statutes Upheld — With a Slight Judicial Tweak

For the last two-plus years, we have been waiting for guidance from the California Supreme Court on whether public agencies could utilize the statutory “right of entry” procedure to gain access to private property to conduct investigations and testing. Such activities are routinely part of the environmental approval process for public works projects, and if agencies are forced to go through a regular condemnation proceeding, projects could be delayed for many months or even years.  Today, the Supreme Court issued its decision in Property Reserve v. Superior Court, holding the right of entry process constitutional, with one reform — which the Court modified on its own by providing for a jury trial on the amount of just compensation.  Below is a short summary of the 73-page opinion; be on the lookout for a more detailed e-alert.

Property Reserve Background & California’s Right of Entry Procedure

The California Department of Water Resources sought to conduct environmental and geological studies and testing on more than 150 privately owned parcels of land that the state, in the future, might seek to acquire for the Sacramento-San Joaquin Delta twin tunnels project. The Department filed petitions to enter the properties and undertake studies and testing to determine the suitability of each property and to comply with environmental laws for the project.

By way of background, California’s right of entry statutes provide that a public agency may enter upon property “to make photographs, studies, surveys, examinations, tests, soundings, borings, samplings, or appraisals or to engage in similar activities reasonably related to acquisition or use of the property for that use.” (Code Civ. Proc., sec. 1245.010.)  In order to secure such entry, the agency must obtain the owner’s consent or obtain an order from the court.  If the agency is required to petition the court for approval, the court may determine (i) the nature and scope of the activities reasonably necessary, and (ii) the amount the agency must deposit as the probable amount of compensation for the entry.  If the agency causes damage or substantial interference with possession and use of the property, the owner may recover for such damage in a civil action or by application to the court.

The trial court permitted some investigations but not others, particularly finding that the requested geologic testing (which involved drilling and re-filling deep holes) required a classic condemnation action. On appeal, the Court restricted the proposed precondemnation testing even further, effectively finding that almost all precondemnation rights of entry constituted a taking requiring a condemnation action.  After making its way through the trial court and the Court of Appeal, the importance of the decision garnered enough attention to peak the Supreme Court’s interest.  The California Supreme Court reversed, holding that the right of entry procedure is constitutional once it is reformed to provide the right to a jury trial, which the Court revised on its own initiative.

Supreme Court’s Findings

The Supreme Court starts by initially concluding that the right of entry process and its broad scope of allowed activities covers the testing and investigations the Department proposed to undertake. The Court explained that the Legislature established the right of entry statutes to provide a mechanism to meet the unquestioned need for precondemnation entry and testing while avoiding the ill-advised and premature condemnation of private property.  The question, then, became whether the right of entry procedures conflict with the takings clause.

The Court explained that the right of entry procedure requires (i) the institution of a legal proceeding, (ii) a limitation on the entry to only those activities reasonably necessary to accomplish the investigation, (iii) a deposit into court the probable amount of compensation, and (iv) a process to obtain additional compensation for any losses. With the exception of a jury determination on compensation, there was no conflict with the takings clause.  Instead, the statutes simply provide the benefit of a more expeditious and streamlined procedure for obtaining recovery for any damage that may result from entry and testing activities.

In order to address the missing element of a jury determination on value, the Court concluded that the appropriate remedy “is to reform the precondemnation entry statutes so as to afford the property owner the option of obtaining a jury trial on damages . . . .” The Court reformed the statute accordingly.

Conclusion

The decision is a significant victory for public agencies. Such rights of entry are a necessary component to keep public projects on schedule while still complying with the maze of environmental laws that govern their approval.  Property owners are also now afforded their day in court — before a jury — should there be a disagreement about compensation; that day will just be on an expedited basis.  Stay tuned for a more detailed analysis.

Can Technology Preserve Government Rights of Entry?

As we await the California Supreme Court’s decision in the Property Reserve case (see related posts here and here), many government agencies are faced with the question of what they will do if the justices deem the current right of entry procedures unconstitutional.  Perhaps technology can come to the rescue.

Many in the real estate industry are embracing technology and drones in particular.  The builderonline.com article “Here’s How Drones Will Impact Real Estate Listings” discusses how drone photography will play a significant role in marketing, appraisals and inspections.  Perhaps not surprisingly, appraisers in particular are among the first to incorporate drones in their work.  According to the Forsythe Appraisals article “A View from the Clouds: The Appraisal Industry and Drones:”

Drones provide unique perspectives on properties, giving appraisers more information to use for a credible appraisal report.

So can drones or other devices eliminate the need for rights of entry?  Perhaps. It is easy to see how drone photography can assist with visual inspections, but what about the environment below the surface?   The scientists are on it.  NASA and JPL are working on an airborne water quality sensor, which can be used to monitor water clarity, turbidity and chlorophyll concentrations, all without taking physical samples.  And there are several studies that explore how remote sensing can be used on land, including urban areas.  The work appears to be largely academic so far, but no doubt practical applications will not be too far away.  (For those who’d like to “geek out” on this stuff, you can read these academic papers from the US National Library of Medicine, the University of Nottingham, and Denmark.)  Even if this type of sensing does not eliminate the need for physical inspections, there is certainly the potential for less invasive testing, which was a huge issue in Property Reserve.

Government May Use Eminent Domain to Save Mobile Home Park from Closure

Santa Clara County, the City of Palo Alto, and the local Housing Authority have come together to acquire the Buena Vista mobile home park from its current owner, the Jisser family, in an effort to save the mobile home park from closure. According to the Silicon Valley Business Journal, the mobile home park contains the homes of 400 or so mostly low-income residents.  The Jisser family has been trying to close the mobile home park since 2012 to prepare for future redevelopment of the site.  If the Jisser family refuses the government’s latest offer to purchase the mobile home park, the trio of government entities may use the power of eminent domain to acquire it.  Supervisor Joe Simitian said “the Housing Authority is the one governmental entity in Santa Clara County that is actually responsible for creating and providing affordable housing . . . and they can use all the tools and resources at their disposal (including the power of eminent domain) to move forward with funding, acquiring, improving and preserving the Park as affordable housing in perpetuity.”

Before the dissolution of redevelopment agencies in California, private property had been acquired by the government for private redevelopment and revitalization. However, today, eminent domain is mostly used to acquire property for public works projects, such as transportation projects and public utilities.  Using eminent domain to acquire the mobile park home for continued use as a mobile park by private citizens may bring criticisms from private property-rights activists.  The Pacific Legal Foundation represents the Jisser family and has called the proposal to use eminent domain “outrageous” and “a shockingly immoral and unconstitutional threat.”  The government agencies will argue that keeping the affordable housing for the many low-income residents is a public use for which eminent domain may be used.  The President of the Buena Vista Residents’ Association said in a news release about the potential acquisition:  “We’re encouraged, excited, and thankful for everyone involved for coming up with a plan to preserve the Park and help the 400 Buena Vista Residents stay in Palo Alto.”

If this case does go to eminent domain, the owner of the property will most likely challenge the government’s right to take the property and the public use of the property. We will keep an eye out on this interesting case over the Buena Vista mobile home park and provide updates.

November Preview? Local bond & tax measures fared well in June

When a third of California’s registered voters turned up to vote this month, most of them got the chance to consider one of the 89 local bond and tax measures on their ballots.  School construction bonds made up over half of these measures, and nearly all of those passed, including $850 million for Long Beach Community College District and $950 million for Chabot Las-Positas Community College District.  Other Districts with big bond victories included:

  • $245 million for Livermore Unified
  • $265 million for Marin Community College
  • $283 million for Dublin Unified
  • $300 million for Montebello Unified
  • $319 million for Irvine Unified
  • $485 million for State Center Community College

And a slim majority of non-school tax measures passed as well.  Michael Coleman has a great breakdown of the local measure results on his California City Finance website.  From Coleman’s website, it appears voters favored libraries and schools over police, fire and emergency services.  Can this tell us anything about the several California counties considering transportation sales tax initiatives for the November ballot?  (If you want to know if your county is one of them, check the Center for Transportation Excellence’s elections website.)  Perhaps.

In the nine-county Bay Area, voters approved Measure AA — a $12 per parcel tax for Bay conservation and clean up.  As Joel Fox states in his article “Election Prediction Record Not Bad – What do Results Mean,” “the success of the Bay Area’s Measure AA will prompt additional efforts to put regional measures on future ballots.”  On the other hand, sales tax measures requiring two-thirds approval fared poorly — only one of 6 passed.  Nevertheless, we can expect to see at least twice as many local measures on the ballot in November.  So stay tuned!

City of Perris v. Stamper Oral Arguments Tomorrow

Eminent domain fans!  Take heed: The City of Perris v. Stamper case (S213468) will finally be heard by the California Supreme Court tomorrow at 9:00 a.m. in San Francisco.  I recapped the issues that are going to be addressed in my prior post about the oral arguments.SC-Webcast-Button_efffb6ff-772f-4b5d-822d-a31e646333e2-prv

Remember – the California Supreme Court now broadcasts its oral arguments live on the web!  Go to the CA Supreme Court’s website (http://www.courts.ca.gov/supremecourt.htm) and there will be a blue box on the right that will launch the web viewer!  I hope you tune in!

 

Next Stops for the Alameda Corridor East – Montebello, Maple and Turnbull Canyon Grade Separations

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At some time or another, most of us have experienced sitting in our cars at a railroad crossing waiting for what seems like the longest freight train in the world go by. And it always seems to happen when you’re late for an appointment or for once trying to make it home in time for dinner.  If you live or work in the San Gabriel Valley, sitting in traffic waiting for the freight-train to go by is likely a daily occurrence.

With vehicle and rail traffic projected to increase, in 1998, the San Gabriel Valley Council of Governments (SGVCG) decided to do something about the safety and traffic concerns caused by the poorly designed and outdated intersections where cars, pedestrians and train traffic meet. SGVCG which is made up of 31 cities, created the Alameda Corridor East Construction Authority (ACE), and tasked it with addressing and mitigating the safety impacts of the increasing rail traffic at the various intersections.

Of the various safety improvements, grade separation projects[1] have been the most effective projects to eliminate train-vehicle and train-pedestrian conflicts and to relieve congestion.  However, the benefits of these projects to the overall community have come at a hefty price tag to some of the adjacent property and business owners who have had their properties and businesses forcibly acquired by ACE by or under the threat of eminent domain to make way for the grade separations.

In particular, there are three grade separation projects on the horizon. The Montebello Boulevard and Maple Avenue projects in the City of Montebello and the Turnbull Canyon Road grade separation project in the City of Industry.  In a February 25, 2015 article, the Whittier Daily News reported that the two new proposed grade separations in the City of Montebello were approved by the Montebello City Council.  The new $142 million grade separation projects will create underpasses at the Union Pacific Railroad and Montebello Boulevard and Maple Avenue.  In a more recent article published yesterday, the Whittier Daily News reported that at an open house earlier this week, ACE revealed a preliminary design plan which shows the affected parcels for the Montebello Boulevard project.  One of the affected parcels is located at 439 Montebello Way.  The acquisition of this parcel will result in the displacement of multiple businesses including Otani Radiator and Auto Repair, a family business owned by brothers Louie and Leonardo Ramirez.  After operating at its current location for over 25 years, if the project proceeds as currently designed, Otani will be forced to vacate and relocate its home of over two decades.  ACE’s new study for the Montebello Boulevard project identifies up to six full acquisitions and approximately 23 properties where at least a portion of the parcel will be acquired, meaning the impacts to property and business owners can be wide spread.  No specific information appears to be available yet on the Maple Avenue project.

The Montebello City Council will further discuss the Montebello Boulevard and Maple Avenue projects at its July 13 City Council meeting. As indicated, in addition to the Montebello projects, ACE is also in the preliminary planning stages for a grade separation project at Turnbull Canyon Road in the City of Industry.  Regardless of which properties the designs affect, the projects are likely to adversely impact multiple property owners, occupants and business operators.

We’ve represented and continue to represent property and business owners against ACE to ensure they are receiving the maximum compensation and benefits they are entitled to. We will continue to monitor the progress of these projects, so be sure to check back often.  Alternatively, please feel free to contact me and I’m happy to provide you with further updates and discuss your particular matter with you.

A complete list of completed, under construction and upcoming ACE grade separation projects, including a map of where the projects are located, can be found on ACE’s website under the projects tab here. Some of the most notable ACE grade separation projects include:

Completed Grade Separations

  • Baldwin Avenue, El Monte
  • Ramona Boulevard, El Monte
  • Orange Avenue, City of Industry
  • Sunset Avenue, City of Industry
  • Nogales Street North, City of Industry and West Covina, and
  • Brea Canyon Road, Diamond Bar and City of Industry

Under Construction

  • San Gabriel Trench, San Gabriel
  • Puente Avenue, La Puente
  • Nogales Street South, City of Industry, and
  • Fairway Drive, Walnut

In Design/Planning

  • Maple Avenue, Montebello
  • Montebello Boulevard, Montebello
  • Durfee Avenue, Pico Rivera
  • Turnbull Canyon Road, City of Industry
  • Fullerton Road, City of Industry

[1] Grade Separations are projects wherein the alignment of the roadway and the railroad right-of-way are separated by constructing an overhead or underpass structure allowing cars and trains to cross at different heights so that they do not disrupt the flow of traffic.

Oakley to Condemn Century-Old Building for Street Widening Project

As cities become more dense and urbanized, it is common for infrastructure to get outdated or insufficient to handle increased demand.  We see this with roads, highways, schools, and even utilities.  When new infrastructure is needed, many times eminent domain becomes necessary to acquire property in the way of the proposed new project.  But sometimes those properties are historical or, given their longstanding presence, have sentimental meaning to the community.

Such a situation is currently playing out in the City of Oakley.  According to an article in the Mercury News, Oakley invokes eminent domain in quest to demolish century-old building, the City recently adopted a resolution of necessity in order to acquire — or at least partially acquire — the century-old building located at 3530 Main Street in order to make way for a street-widening project.  The building frontage is needed to widen the street, and the entire property may ultimately be needed for a proposed new train station for a passenger line that would run between Oakley and Oakland.

The property has a story that tugs at your heart-strings.  It was originally purchased in 1912 by an Italian immigrant named Venanzio Del Barba, who earned enough money to buy and open a general store after years of working on the railroad and farming.  In the 104 years since, the Del Barba family has held onto the property, weathering the storm through the Great Depression, the Great Recession, and two World Wars.

Having appeared at many city council, board of directors, or board of supervisors meetings over the years, I can tell you that these are the hardest acquisitions for local agencies.  And you hope for alternative, creative solutions.  Which may be a possibility in Oakley.  City Council members asked City staff to find a “creative compromise” with the family, perhaps a solution where the front of the building could be shaved off and partially re-built with a similar façade.

Despite the requests for compromise, the City has proceeded with filing an eminent domain lawsuit.  In the condemnation litigation, there could be an interesting dispute on fair market value.  The City has valued the property at $145,000 — more than $100,000 less than what the property was appraised at in 2010.  (This seems surprising given the market has significantly improved in that time.)  Moreover, similar buildings on Main Street have been recently listed for sale in the $450,000 – $500,000 range.  And in addition to the valuation dispute, it sounds like the owners could have a potential pre-condemnation damages claim for loss of rents, as they’ve been unable to find tenants for the building since the City made it clear it was planning to acquire the property.

As for the historic significance of the building, I consulted with Joseph Haney, an attorney at Haney & LaBriola, who specializes in real estate transactional matters and handles historic preservation issues.  Mr. Haney indicated:

This situation shows the limits of California’s historic preservation laws which are primarily procedural in nature.  CEQA requires a review of historic resources impacted by a project, but it does not compel preservation.  The City’s Environmental Impact Report did identify the significant impacts from destruction of the historic buildings, however, that finding was ultimately outweighed by other concerns.

We’ll continue to follow this one and see if a solution can be reached.

Preparing for the Future – SCAG Adopts 2016 RTP/SCS

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The Southern California Association of Governments (SCAG) is the nation’s largest regional planning agency and is governed by an 86-member Regional Council, made up of elected officials from among the six counties and 191 cities who are members.  SCAG develops  a variety of policy and planning initiatives to create a sustainable Southern California region.  Every four years, SCAG must develop a Regional Transportation Plan, which sets out a vision for the next 25 years. SCAG adopted the most recent plan last month.  In the 2016 Regional Transportation Plan/Sustainable Communities Strategy (RTP/SCS), SCAG sets out a long-range vision for transportation throughout Southern California that is consistent with the region’s environmental, economic and public health goals.  The “Interactive Executive Summary” provides a good summary about the plan, including the overarching strategy, the financial realities, and how SCAG intends to measure the success of its goals.   And those goals are quite lofty.  The RTP/SCS plans to accomplish:

  • A 20% reduction in greenhouse gas emissions by 2040
  • Improvements in regional air quality
  • A 4% increase in work trips made via transit, carpooling or active transportation (walking, biking etc.)
  • A 7% decrease in per capita vehicle miles traveled and 17% fewer vehicle hours traveled per capita
  • A one-third increase in travel on public-transit
  • A 22% decrease in daily delay per capita

But there are challenges.  As described in the RTP/SCS, the region is expected to add 4 million residents by 2040.  The population will also be older, with fewer working adults.  This means we will need to provide more transit options for seniors, while also facing a decrease in tax revenue as there are fewer people in the labor force. And while the common view is that Millennials want a more urban, transit-friendly lifestyle, many people will still live in the suburbs and commute alone in their vehicles.  Finally, while there will be an increased demand for an integrated and larger transit network, the existing infrastructure must also be repaired and maintained while SCAG reports funding is “scarce and insufficient.”

To meet these challenges and accomplish the goals, the RTP/SCS identifies $556.5 billion in transportation investments over the next 25 years, with about half of that going towards maintenance of the existing system.  $56.1 billion is marked for capital transit improvements throughout the area.  The RTP/SCS calls for significant expansions of the Metro subway and light-rail systems in LA County, a streetcar system linking destinations in Orange County, and wider Bus Rapid Transit service that will connect the entire region as well as new Metrolink services in the Inland Empire.   While the RTP/SCS does not implement funding, including these and other projects in the plan allows project sponsors to qualify for Federal funding.

In her recent article “There are 7 Good Reasons to Invest in Southern California’s Transportation System,” Duarte Council member and SCAG 2nd Vice President Margaret Finlay summed it up well:

[T]ransportation is about more than mobility. It truly is a quality-of-life issue, impacting our prosperity — and our health…Investing in our transportation system is no longer optional.

Update: California Supreme Court Oral Arguments

Today, the California Supreme Court heard oral arguments in the Property Reserve v. Superior Court case.  Today was also the day the Court began showing live webcasts of oral arguments online, so I was able to not only hear the arguments but see the Justices and attorneys in action.  If the Court provides a link to the oral arguments, I will include that in another post.

My initial reaction from the oral arguments – all of the Justices were very engaged in the arguments and the Court hammered both sides pretty soundly.  If I had to pick a winner, I think they went easier on the State.

The Court did seem concerned about activities taking place on properties under the Right of Entry statutes and whether the activities constituted a taking but it also seemed like the State was able to waylay some of those concerns by saying the Right of Entry statutes, as drafted, protect property owners and offer them avenues to obtain compensation for the entry and a jury trial on the amount of damages, if they so choose.

The Court seemed to like the notion that the statutes already provide an expedited eminent domain proceeding because the Justices spent considerable time grappling with the idea of denying owners their rights under Article I, Section 19 of the California Constitution and finding how the Right of Entry statutes are reflective of constitutional rights.  The Chief Justice and Justice Liu asked the million dollar question: What is at stake if agencies cannot get onto properties to complete their precondemnation investigations — would public projects stop, would they be endlessly delayed, would they cost way more to build, and if we take away this course of action, what happens?

The Petitioners argued that they are not challenging the constitutionality of the Right of Entry statutes, but are merely saying that if an interest in property is obtained by an agency using the statutes, then it is a taking deserving of all of the trappings of an eminent domain case.  The Court seemed skeptical that such a line could be drawn.  At one point, I thought one of the Justices was going to call them on splitting hairs…

The Justices tried to force petitioners to define the line between what constitutes a taking versus a non-compensable entry, but petitioners dodged those traps, for the most part.  The glaring omission in the argument is that there appeared to be no middle ground – if the Court strikes down the Right of Entry statutes (which petitioners say they aren’t requesting), and at the same time, we can’t expect agencies to go through double-condemnation (one for testing and one for the actual project) to get a project off the ground, what is an agency to do?  The petitioners want the Court to require agencies to acquire an investigatory easement before proceeding with testing but isn’t that the exact double-condemnation situation that everyone recognizes creates the problem?

It was definitely interesting, for me, anyway. I can’t say with any certainty how the Court will rule on the matter, but based on the oral arguments, the Court is definitely wrestling with the issues.  We should hopefully see a decision within the next 90 days!

As a side note, unfortunately the City of Perris v. Stamper oral arguments were continued and will not take place on May 5.  The hearing is being rescheduled for the late May calendar.  We will let you know the date when it is set by the Court.

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