California Eminent Domain Report : a blog following condemnation, inverse condemnation, and regulatory takings written by attorneys with Nossaman LLP.

Marc Scribner of the Competitive Enterprise Institute published this week an article about the economics of eminent domain for economic development (i.e., for redevelopment purposes) entitled "This Land Ain’t your Land; this Land Is my Land."  I found the piece interesting, despite the fact that it seemed the author started from the conclusion "eminent domain is bad" and worked backwards crafting an analysis to get there. 

Ultimately, however, Mr. Scribner does provide some interesting insight.  He does not simply come out and say eminent domain for economic development is unconstitutional or that it qualifies as eminent domain abuse (though it seems clear that is how he really feels about it).  Instead, his article purports to analyze whether using eminent domain for economic development makes economic sense in the long run.  And this is where the piece creates some interest. 

Mr. Scribner claims that the mere fact that eminent domain for economic development is possible has a chilling effect on entrepreneurship, especially in lower income areas where an entrepreneurial spirit may be most needed.  The reasoning behind this is somewhat complicated, but relies in large part on the idea that the government is simply incapable in most cases of accurately assessing the various economic forces at play:

An increase in the discretionary use of eminent domain for economic development would lead to a decrease in entrepreneurship. As local officials lack the knowledge and expertise to effectively promote private development, their political missteps can keep their localities in poverty by undermining entrepreneurship, and forgo the wealth it would have created.

In the end, Mr. Scribner and I part ways on his conclusion that eminent domain should never be used for redevelopment purposes.  I think that in some cases, the open market simply cannot adequately address truly blighted situations, and having the government step in -- even when eminent domain is required -- can trigger revitalization and economic growth. 

That said, the forces Mr. Scribner identifies no doubt exist, and suggest the government should go down such a path only after careful thought and analysis.  Had local officials in New London, Connecticut, viewed the issue as Mr. Scribner views it, the string of events leading to the infamous Kelo decision might have played out differently.  

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In the past, we've reported on the San Francisco Redevelopment Agency's condemnation of the historic Hugo Hotel.  It now appears that city officials in Ukiah may utilize a similar playbook and reinstate the redevelopment agency's power of eminent domain in order to acquire the historic 119-year old Palace Hotel.  According to a Press Democrat article, "Ukiah seeks new life for Palace Hotel," the city may turn to eminent domain after decades of unsuccessfully nudging the hotel's Marin County owners to rehabilitate the historic vine-covered building in the heart of downtown. 

Nearby residents recall the Palace Hotel serving as a hub of activity in the 1970's and 1980's when it housed a restaurant, a bar, and a popular music venue attracting well known acts.  But the Hotel has been sitting vacant since 1988.  According to the article, in 1994, more than 200 downtown merchants and customers signed a petition demanding that the city have the building either cleaned up or torn down.

The property appraised in 2006 for $309,000, but the owners purportedly want over $1 million.  A study commissioned by the city concluded it would cost $4.5 million just to tear the Palace Hotel down.  Like any redevelopment, the proposed use of eminent domain is drawing a wide range of opinions.

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The City of Placentia has a large redevelopment area, and ambitious plans to redevelop an industrial neighborhood in south Placentia.  But the City has responded to the outrage over eminent domain and, in particular, eminent domain for redevelopment purposes.  The City apparently has no power to condemn property for private redevelopment. 

Yet, this lack of authority has not stopped some property owners in the redevelopment area from complaining that the "threat" of eminent domain has decimated their property's value.  According to a February 17 Orange County Register article by Adam Townsend, "Businessman: City plans could scare land buyers," at least one owner complained to the City Council on Tuesday that "stymied redevelopment plans and past mentions of eminent domain by city officials have decimated the industrial real estate market in south Placentia." 

Mayor Joe Aguirre responded:

"I just want to make clear that I was at the forefront of opposing eminent domain for [re]development." Aguirre said. "This city does not have that power, and we're not attempting to get that power."

The City believes that the hope of future redevelopment (presumably accomplished without the use of eminent domain) actually enhances the value of properties in the redevelopment area, and that the downturn in the real estate market -- not any "threat" of eminent domain -- is to blame for any problems owners are facing. 

Which side is right?  Probably both.  On the one hand, the public is in such fear of eminent domain these days that the mere mention of redevelopment plans and a redevelopment area is likely to evoke images of Mrs. Kelo's quaint pink house being run over by a bulldozer.  This could impact at least some market participants, regardless of whether that ever happened (it didn't; the house is now a historic building) or whether there is any real risk of it happening in Placentia (apparently, there isn't).

On the other hand, if the area truly does suffer from blight, the hope that it may someday be redeveloped to a better use may well have a positive impact on other market participants. 

In the meantime, getting beyond the current economic crisis and seeing real estate prices rising should help, regardless of which of the two competing forces one believes is really at play. 

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I mentioned in an article last week that many redevelopment agencies are facing budget issues; the city of Imperial Beach is facing a similar, but slightly different, problem:  after investing over $8 million in bond money for redevelopment of the Miracle Shopping Center, the economic climate has made it impossible for the city to find an interested developer. 

Nevertheless, the city decided to raise more funds, and purchase the shopping center anyway, hoping the city's ownership would make the site more attractive to developers.  With city ownership now in place, the eminent domain process begins.

According to a San Diego Union Tribune article, "2 shopping center tenants won’t budge," two tenants of the Miracle Shopping Center have refused the city's $63,357 offer, which is meant to cover relocation costs, along with the value of fixtures and equipment in the stores.  The owners, meanwhile, have demanded $1.4 million.  The city council this week voted to approve the adoption of a resolution of necessity, the first step in filing the condemnation lawsuit. 

Four shops have already relocated, one plans to close down, and the city believes it can work out deals with the other eight tenants. 

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For years, Cathedral City has been acquiring property by eminent domain as part of its 23-acre Eastside Downtown Area redevelopment plan, which seeks to redevelop downtown Cathedral City into a 39-unit commercial center.  Our firm has also been involved in the project for years, having assisted several property owners impacted by the redevelopment agency's plans. 

According to a January 26 Desert Sun article, "Cathedral City council votes to pay $535,000 in eminent domain land deal," Cathedral City recently approved a $535,000 settlement with one of the final remaining landowners whose property is being condemned (the property consists of two parcels housing an apartment complex).  Two eminent domain actions remain pending.

While Cathedral City has been busily acquiring property for several years, anyone looking forward to the new redevelopment project should not get too excited.  Many redevelopment agencies are facing budget issues, and Cathedral City is no different.  According to the article:

The city is a long way from seeing the 23-acre project planned for the area come to fruition because of an $11.45 million loss of redevelopment funds to the state to help balance the state budget . . . .

Despite the fact that no actual redevelopment is imminent, the City apparently intends to evict tenants from the recently acquired apartment building.  This is unusual, as condemning agencies routinely allow tenants to remain on acquired property until construction is ready to proceed. 

If the City does evict the tenants now, it will have to pay them relocation assistance, but that will likely be of little comfort to some, including "the owner's 93-year-old mother, who's lived at the same apartment for 35 years."   One can only wonder how the public interest would be served by evicting a 93-year old woman so that her apartment of 35 years can sit vacant while the City waits for funds to move forward with its project . . . someday. 

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In November, we reported that the Barstow City Council would be deciding whether to reinstate the redevelopment agency's power of eminent domain.  According to a January 20 Desert Dispatch article, "Eminent domain issue sparks fear among residents," the City Council has decided to table the issue until May. 

According to the article, the redevelopment agency sees its eminent domain power as a necessary tool to remove blight in the area northwest of Interstate 15 near the outlet malls.  But like most redevelopment efforts, the issue is drawing much public debate.

At the City Council meeting this month, at least 16 residents spoke against the Council's reinstituting the redevelopment agency's ability to utilize eminent domain.  While the City Council pointed out the redevelopment agency could not use eminent domain to acquire owner-occupied homes (a result of the passage of Proposition 99), residents were also concerned about the use of eminent domain on churches. 

In order to address the residents' concerns, the City Council plans to hold a public forum on eminent domain issues within 30 days. 

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The City of Rosemead has a vision of its future that transforms the city into "a small town in the heart of a metropolis."  That, according to San Gabriel Valley Tribune reporter Rebecca Kimitch, is the goal of the city's new strategic plan.  Ms. Kimitch's article, "Rosemead defines itself as small town in the big city," explains:

The to-do list is ambitious: landscape medians and plant trees along sidewalks; demolish dilapidated vacant buildings; develop new neighborhood parks; remove graffiti; expand community classes and develop a community computer lab; create a civic center at City Hall and the surrounding city facilities.

To accomplish its ambitious goals, the City plans to reinstate its power of eminent domain -- at least with respect to commercial properties -- in its "redevelopment project area 1."  That redevleopment area was adopted initially in 1972, and it consists of more than 500 acres located generally along the Garvey Avenue and San Gabriel Boulevard corridors. 

As is often the case in the current political climate, the City apparently has no immediate plans to wield its newly reinstated eminent domain authority, but believes that having the power to condemn is key to the plan's success:  "City officials say they need the power as a negotiating tool to redevelop blighted areas of the city."

Time will tell whether Rosemead realizes its vision of the future -- and whether Rosemead resorts to condemnation in an effot to make that vision a reality. 

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I previously reported on a political discussion taking place in a San Diego community, San Ysidro, with respect to whether the city should reinstitute its expired power of eminent domain.  While San Ysidro contemplates this issue, another San Diego community -- this time Chula Vista -- is in the process of drafting its five-year redevelopment plan, which could include expansion.

Like San Ysidro, Chula Vista recognizes the public concern over the city's wielding its condemnation power, especially for redevelopment purposes.  Chula Vista, therefore, has sought public input before it drafts the new redevelopment plan.  

According to a San Diego Union Tribune article by Tanya Sierra titled "Public opinion sought on redevelopment plan -- Subject has been a sore one in past," the redevelopment area in Chula Vista currently encompasses Third Avenue, Broadway, Main Street, and the bayfront, but city officials do not know what the expansion area will include until they hash it out with residents.

Despite seeking public input, the city's announcement of potential expansion of the redevelopment area did not go over too well with community members that turned up at the council meeting to oppose the proposal.  Part of the anger stems from how the redevelopment agency is being run, including the amount of funds devoted to administrative costs and salaries.  The city has responded by stating only three professional staff remain at the agency.

A concluding comment by councilmember Rudy Ramirez likely sums up the problem for most residents:

I’m convinced we’re falling far short of what we could be doing,” he said. “For me, redevelopment is a political, public process because you’re moving into neighborhoods and effecting change and changing people’s lives. We haven’t yet developed that sensitivity.”

Stay tuned in the coming months for how Chula Vista addresses these issues.

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Sierra Madre will allow its citizens to decide whether the city can use the power of eminent domain for private purposes.  According to a Pasadena Star-News article, "Sierra Madre resident[s] will vote on eminent domain," the city council agreed to put a proposed measure on the April 2010 ballot which would prevent the city from (1) condemning property and turning it over to a private developer, and (2) funding or cooperating with any other city agency using eminent domain (such as the Redevelopment Agency).

According to the article, City councilman John Buchanan is quoted as saying:

Taking one person's private property to hand it to another is morally questionable, to say the least.

Wondering why the city does not simply pass an ordinance prohibiting the use of eminent domain for private purposes if the board members are against such use?  The answer, apparently, is that the board considered doing so in reaction to Kelo, but ultimately determined such an ordinance could be overturned by future city councils.  If the measure is passed by the voters, it would be much harder to overturn.

Sierra Madre is not the first city to consider prohibiting the use of eminent domain for private purposes.  In fact, its proposed measure is modelled after the City of Yorba Linda's 2008 Measure BB, which was passed with nearly 80 percent approval.  And in 2007, Arcadia voters banned the use of eminent domain in the city's downtown redevelopment area.

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Everyone knows the sad tale of America's automotive industry:  companies operating only through government subsidies and dealerships shutting their doors across the country.  So when the City of Vista came up with a plan to "create a second downtown car dealership and boost sales tax revenue," one would think the public would embrace it. 

But like many bold plans, this one has a wrinkle.  While most of the property needed to facilitate the plan is available for purchase, including the existing North County Ford site, one additional parcel is needed.  

According to North County Times reporter Cigi Ross, in her December 5 article, "VISTA: City plans to buy North County Ford property,"  the plan requires the acquisition of the Riviera Motel, whose owner does not want to sell.  In fact,

[the owner] accused the city of trying to steal his land and give it to the rich.

Last month, we told you the City was seeking to purchase the motel property.  Having apparently failed in those efforts, the City Council plans to vote today on whether to proceed with the purchase of the other properties needed at a cost of around $15 million -- and on "whether to try to seize the motel through eminent domain."  

For anyone who thinks this is just the kind of thing the post-Kelo eminent domain reform was designed to protect against, it is worth noting that California's primary reform act -- 2008's Proposition 99 -- deals only with protecting certain single-family residences.  Assuming the City of Vista demonstrates that the public interest and necessity require the project -- and that the motel property is necessary for that project -- it is unlkely any significant barriers will exist to the City's exercise of eminent domain to acquire the property should the City choose to proceed.

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The City of Claremont voted 4-1 to extend its redevelopment agency's eminent domain authority for another 12 years.  In a November 29 Inland Valley Daily Bulletin article, Claremont renews its eminent domain power, reporter Wes Woods, II writes that the the City's redevelopment agency amended its redevelopment plan to prevent its eminent domain authority from lapsing in December. 

The use of eminent domain is often controversial, but especially so when it is for redevelopment purposes.  And, when redevelopment requires condemnation of residential property, the public tends to express real outrage.  In this case, however, residential properties are not at risk.  According to Councilman Sam Pedroza, "there are no residential units that are within our eminent domain powers." 

Also of significance is that the extension does not guarantee that any eminent domain will occur; it just preserves eminent domain as an option for 12 more years:

Councilwoman Linda Elderkin said she felt eminent domain was an important tool to have for redevelopment and economic development in Claremont.

Though some apparently object to the extension itself, perhaps we should wait to condemn Claremont for its condemnation authority until such time as it actually condemns. 

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It seems most commentators on eminent domain generally, and on the use of eminent domain for redevelopment purposes in particular, adopt an extreme stance.  The loudest voices, especially in the "post-Kelo" world, tend to be property-rights advocates who denounce virtually any use of eminent domain, especially for redevelopment purposes. 

A good example of this appears in a recent San Diego News Network article by Brian Peterson, president of the Grantville Action Group:  "What we Learned at a Redevelopment Conference:  Don't do E-mail."  The article summarizes two "redevelopment conferences" hosted by the Municipal Officials for Redevelopment Reform, an organization described as a "state-wide, anti-redevelopment abuse organization[]."   The article contains some very good advice regarding making a record of potential abuses and, specifically, advises owners facing condemnation to present their arguments to the condemning agency in writing. 

The article correctly notes that detailed written comments will typically have greater impact than oral comments, made under the constraints of a public hearing -- which may allow a speaker only about three minutes to state his or her case. 

Though the article does not expressly state it, I would strongly advise any landowner facing eminent domain who wants to challenge the project to make sure he or she has an experienced eminent domain attorney participate in preparing the written submission.  It is far too easy to make a procedural error even at this early stage that could impact the likely success of a subsequent right-to-take challenge. 

The article also warns that emails are suspect, citing anecdotal evidence that emails may routinely go unread:

For a while now, there has been the suspicion, and some evidence, that City Council offices are not opening all constituent e-mails.

It is the article's "big picture," however, that causes me concern.  The article claims "there have been 346 abuses of eminent domain in California" since the Kelo decision, and it implies that a primary reason for this is because "California is one of the few states to not reform eminent domain in any meaningful way following Kelo." 

I don't know what the 346 examples of "abuse" are, though I am confident that many of them would qualify as abuse under any reasonable definition.  I am equally confident, however, that many examples of eminent domain -- including eminent domain for redevelopment purposes -- yield massive benefits for the public, and should be applauded, not condemned.  

In the end, we would all be better off if those with extreme viewpoints on this issue (on both sides of the debate) would step back and analyze each individual situation on its own merits: 

• Redevelopment agencies would be well served to examine more closely whether eminent domain is really necessary, and whether the public benefit to be gained really is substantial enough to warrant throwing someone out of their home or business; AND
• Property rights advocates should pause to examine the benefits a redevelopment project will generate and decide whether those benefits could be obtained without the use of eminent domain (often, they cannot) before claiming another "abuse" has occurred. 

Ultimately, if redevelopment agencies choose their projects wisely, and use eminent domain only when truly necessary, the real debate should focus on ensuring owners receive proper compensation for their properties and businesses, not on trying to stop the projects.  And, to the extent California requires more eminent domain reform, the place to look may well be in the rules regarding how compensation is derived, not in the circumstances in which the government can condemn. 

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The City of Corona has announced plans to extend its eminent domain authority in a downtown area which Corona feels is blighted.  The planned extension could impact businesses in the area, but Corona is carving out residential properties.  According to Riverside Press-Enterprise reporter Leslie Parrilla, in her November 16 article, "Public hearing on eminent domain area":

Hundreds of businesses are in the Main and Sixth Street area covered by the action. Not included would be residential properties within the Merged Redevelopment Project Areas.

Corona's current plans do not involve any immediate plans to condemn property, even if the extension is approved.  A public hearing is set for November 18 [PDF] (the hearing is item 7.A., on page 3 of the agenda). 

The only opposition to the extension noted by Ms. Parrilla was by Bridgestone Tires, which sought an exemption from the project area, claiming that the area is not predominantly blighted -- and, therefore, is ineligible for inclusion in a redevelopment planning area.  The City denied Bridgestone's request. 

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According to the November 13, 2009, Desert Dispatch article "City seeks to reinstate eminent domain powers," the Barstow city council will decide next month whether the Barstow Redevelopment Agency's power of eminent domain should be reinstated after expiring last year.  The Redevelopment Agency believes the use of eminent domain may be necessary to remove blight in the area along East Main Street bordering the Marine Corps Logistics Base. 

The article reports that the Redevelopment Agency's chair, Tim Silva, believes eminent domain is a valuable tool, although he'd hate to see it used frequently by the government.  Silva comments:

There’s many things we can and can’t do, but we’ve got to keep those laws there so they can be used.  I would never approve eminent domain, which isn’t going to be (used for) the public benefit.

Reinstating the Redevelopment Agency's eminent domain power may simply be form over substance, as the Agency has never resorted to such use since it was established in 1973.

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 In an October 31 article for the North County Times, "VISTA: City wants to redevelop motel property," reporter Cigi Ross writes about the City of Vista's plans to acquire a motel property as part of a plan to redevelop the area:

The owner of a downtown Vista motel is accusing the city of trying to kick him out of his business and his home.

City officials announced Monday they're trying to purchase the Vista Riviera Motel as part of a redevelopment project along Vista Village Drive and Vista Way that could include a new car dealership. 

While the City's efforts currently involve a voluntary acquisition, the owner has already said that he does not want to sell, raising the possibility that the City could acquire the property through eminent domain.   Though this situation raises the specter of the often criticized Kelo decision, the situation is different, in that Vista's stated motivation in acquiring the property is to eliminate blight, a motivation missing in the Kelo case. 

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