My colleague Rick Rayl and I will be going toe-to-toe in a mock trial on the valuation of a gas station and the loss of business goodwill caused by a public project.  I'll be representing the business owner and teaming up with the "owner's" goodwill appraiser, Steve Zamucen.  Rick will be representing the agency with the "agency's" goodwill appraiser, Aaron Amster.  Steve and Aaron are some of the best eminent domain business appraisers out there, and they'll be sure to create some fireworks (and make Rick and I look good at the same time). 

The seminar is being held at Caltrans' San Diego Headquarters, and below is an outline of the topics:

• Fundamentals of Acquisition
• Resolution of Necessity and Order for Prejudgment Possession
• Relocation Appeal Process
• New Cases and Developments in Eminent Domain Law
• Real Estate Appraisal Mock Trial
• Business Goodwill Appraisal Mock Trial

If you're interested in attending, e-mail Cynthia Colburn at Overland, Pacific & Cutler.  We hope you'll join us, and we look forward to seeing you there!

If you have a moment, check out a great story in last week's Park La Brea Press, Eminent Domain Didn't Send Bernard's Packing, detailing a property owner's successful fight against redevelopment in Los Angeles.  The article provides a current update on a drawn out eminent domain battle between a mom and pop luggage shop in Hollywood who opposed making way for the new W Hotel. 

The story begins back in the 1950's, when Bernard's luggage shop began renting the location they ultimately purchased 20 years later.  It was a family-owned business, a staple in the community.  Then, the owners heard news that their property, along with 31 others, were potentially going to be condemned for a new hotel. 

While Suzette Kelo was battling for her property rights on one side of the country, the mom and pop luggage shop owners led a strong grass roots movement of their own to stop the redevelopment acquisitions.  Shortly after the Resolution of Necessity hearing, a billboard went up:  "Murder on Vine Street:  Eminent Domain Kills Small Businesses."  Amidst a media frenzy, legal threats, and community complaints, the parties ultimately reached a settlement whereby the W Hotel would be built around the business, with the store reconstructed allowing the developers to install subterranean parking.  

Like any happy tale, there must always be bumps in the road.  In this case, unfortunately, the battle was quite taxing on the family, and the luggage shop is no longer in business.  However, the family continues to own the property, and it apparently has some high hopes for a bright future.  Store owner Bob Blue hopes to have a restaurant tenant within the year, and hopefully an eatery to complement Hollywood's history.

Mr. Wonderful's it's-all-about-the-numbers concept also holds true in the valuation of businesses in the eminent domain context:  the jury's task is supposed to be a sober inquiry into values, ignoring personal worth or attachment.  It's a tough issue, especially for smaller businesses where an individual runs the day-to-day operations of the business and makes a nice living doing so.  The owner-operator feels the business has substantial value, as it provides a good, steady income for the owner.  The difficulty of this situation from the valuation standpoint, however, is that one must assume the owner is not running the business, but is instead paying someone else to do so.  Thus, once someone else is paid for running the day-to-day operations, the business may not make much else and therefore has little goodwill value.  I've had this discussion with business owner clients before, and it's not easy to explain this concept.

Nevertheless, we still find wide spreads when it comes to valuing a business in eminent domain.  Unlike real estate, business valuations seem to be more art than science and small numbers can be easily manipulated to make huge differences in value.  If you're interested in learning more about business valuation concepts, I'd suggest taking a look at the blog Just Elementary run by Pramod Patel.  There's some pretty cool concepts on business valuation techniques and some of the issues one may run into when buying or selling a business.  In particular, take a look at the post Business Valuation Too High Using Wrong Methodologies and Books & Records and Your Lease Two Factors That Impact The Attractiveness Of Your Business To Potential Buyers.

The case, People ex rel. Department of Transportation v. Scotti, deals with a dispute as to whether the right of way purchase agreement covered payment of the property owner's attorneys' fees.  Caltrans' property negotiator could not reach a voluntary acquisition of the owner's property, and an eminent domain case followed.  After the exchange of expert appraisals, the parties entered into a right of way contract and the condemnation action was dismissed.  

The owner then filed a motion for attorneys' and expert fees pursuant to Code of Civil Procedure section 1268.610, which entitles a defendant in an eminent domain action to recover litigation expenses any time the action is dismissed.  Caltrans argued that the owner was not entitled to attorneys' fees because the right of way contract provided that the purchase price was "inclusive of interest, fees and costs."  The trial court entered judgment finding the owner was not entitled to an award of costs and attorneys' fees.  

On appeal, the Court explained that the statute is clear and the owner is entitled to attorneys' fees given Caltrans' dismissal of the case; however, there was a contractual interpretation dispute as to whether the owner had already recovered those fees as part of the purchase agreement.  The Court concluded that the right of way contract was ambiguous as to attorneys' and expert fees, and therefore it was appropriate to look outside of the four corners of the agreement to determine whether these fees were included in the purchase price.  Caltrans' right of way agent declared that the "fees" provision of the contract included the owner's attorneys' and expert fees, and the Court interpreted the provision in this manner.  Therefore, the trial court decision was upheld.

The Scotti case is why attorneys like to avoid dismissals in eminent domain actions, and prefer to have a judgment entered by the court.  The case also serves as a good reminder to agencies, right of way agents, and property owners to carefully review voluntary purchase agreements.  Make the terms explicitly clear:  if the purchase price is inclusive of attorneys' and expert fees, say so.

Obviously, most purchase agreements are utilized before a condemnation action is filed, and therefore the dismissal statute does not come into play.  Regardless, be careful using a standard purchase agreement for every situation; carefully review those agreements and make sure they take into account the particulars of the deal.  

The details:  we'll be speaking to the San Diego Chapter of the International Right of Way Association on April 18, 2012.  The meeting will take place at the Handlery Hotel, located at 950 Hotel Circle North, and it usually starts around 11:30 am.  Yes, you'll hear about the backdrop of the events leading up to the adoption of AB1X 26 and 27, the ensuing litigation and the Supreme Court's opinion in Matosantos, and the aftermath of the decision on redevelopment agencies across California.  But we'll also get into what's been playing out over the last few months on the ground.  We hope to see you there!

I was a bit surprised by the assessor's explanation, so I went to look it up.  Sure enough, the regulation (Property Tax Law Guide section 462.500) provides that an owner is only entitled to transfer the Proposition 13 base year value if the owner is displaced (1) as a result of an eminent domain action or (2) under threat of eminent domain by a public entity.  In other words, if a property owner faces condemnation by a non-public entity, the owner loses the ability to transfer the Proposition 13 base year value to a replacement property if the owner sells before the condemnation action is filed.

Based on the plain language of the statute, this likely is the correct analysis.  And a new published decision, Duea v. County of San Diego, confirms this interpretation.  But it doesn't make it right.  This language does not match the parallel income tax provision which allows for owners to accomplish a "1033 exchange" when selling as a result of eminent domain or under threat of eminent domain -- regardless of the identity of the condemnor.  And, such an interpretation simply doesn't make sense, as it serves no legitimate purpose, and will only force unnecessary litigation with non-public entities just to avoid unfavorable tax treatment. 

If you're interested in a more detailed explanation of the rules, the Duea decision, and our thoughts on why a legislative fix is necessary, give our E-Alert, "The Unpreservation of the Base Year Value Transfer Under Threat of Eminent Domain," a read.  And, if you ever have issues working through a Proposition 13 base year value transfer or a 1033 exchange to preserve your property tax basis or defer your income tax gains, feel free to give us a call.  We'll do our best to walk you through these hyper-technical rules. 

• The Base Year Transfer Rule Under Threat of Eminent Domain:  A new published California Court of Appeal decision -- Duea v. County of San Diego -- came out yesterday addressing whether a property owner can transfer their base year value to a replacement property when the owner sells its property to a private developer under threat of eminent domain.  The Court held that the owner had some procedural missteps which doomed the case, but also went on to hold that this type of transfer does not qualify for a base year value transfer.  We'll have more on the opinion shortly, but in the meantime, take a look at our colleague Robert Thomas' inversecondemnation.com blog post on the case.  
• Eminent Domain in Placer County:  According to an article in the Sacramento Bee, Eminent domain process OK'd for road widening in Placer County, Placer County Supervisors authorized the use of eminent domain to acquire pieces of five properties needed to complete the widening of Auburn Folsom Road.  While the property owners argued that the County failed to negotiate in good faith, the County responded that the road widening project had been on the books for years and it had successfully negotiated with 13 other impacted owners.
• Condemnation for Hesperia Interchange:  According to an article in the Hesperia Star, City officials could use eminent domain to acquire interchange land, the City of Hesperia may turn to eminent domain to complete the Ranchero Interchange, a $59 million project that would connect Ranchero Road to Interstate 15.  The City has apparently obtained rights to all necessary properties but one.  The City hopes to begin construction work on the project in late 2012 or early 2013 and have the interchange open by July 2014.
• Redevelopment Updates:  Looking for an update on redevelopment in California?  There's a nice, simple opinion piece in the Bakersfield Californian, Redevelopment work may have a place after all, which gives a concise update on some bills making their way through the legislature.  SB 1585 would clean-up the dissolution process and better defines "enforceable obligations," while SB 654 would restore some funds for low and moderate income housing.  SB 986 would require bond proceeds specified for specific developments to be used for those projects as opposed to throwing the money into the city or county's general fund.  And SB 1186 would allow agencies to establish community development authorities to oversee affordable housing projects.  

 Keep on the look-out for our E-Alert on the Duea opinion.  

To provide some context to the "moving target" reference, on one side of the aisle we observed in Inglewood Redevelopment Agency v. Aklilu the court's permitting an opinion of loss of business goodwill under the cost-to-create method, which resulted in the finding of goodwill depsite the nonexistence of any profits.  On the other side, we observed in Redevelopment Agency of the City of San Diego v. Mesdaq the court's refusal to admit an opinion of goodwill loss based upon a hypothetical business that did not operate on the property being condemned.  We were left scratching our head a bit on where to draw the line on the admissibility of goodwill opinions.

This new opinion, S&M Auto Sales, falls in line with the Mesdaq case, suggesting a narrower approach to the admissibility of goodwill opinions.  In S&M, the City condemned a property on which S&M operated a used car dealership.  The business was forced to relocate.  The business retained a goodwill appraiser who valued the business using the discretionary earnings methodology.  While the appraiser relied upon the business' actual sales, he did not rely upon the business' actual expenses, instead using a hypothetical expense figure based on only a three-month sample that was projected out over the entire year.  If actual expenses were used, the appraiser conceded the business had no goodwill in the before-condition.

At trial, the court concluded that it was not reasonable for the business' appraiser to rely on hypotheical expense figures, especially where the actual expese figures existed.  The court also held that this method of valuation was essentially valuing a hypothetical business in violation of Mesdaq.  On appeal, the court agreed that the opinion was properly excluded.  While the court noted that while adjustments to expenses can be appropriate in some circumstances, there was no evidence it was appropriate here.  The court concluded that while "courts at times have permitted experts to estimate future anticipated profits, [there are no cases providing] that an expert may reject actual cost data in favor of hypothetical cost data." 

Kudos to our colleagues Keith McCullough and Kevin Day at Alvarado Smith on the victory.

National Redevelopment Update:

We've been following H.R. 1433 -- the "Private Property Rights Protection Act of 2011" --  a bill that would limit the power of eminent domain on a national platform.  We last reported in January that the bill was finally adopted by the House Judiciary Committee, and would next make its way to the House for approval.  According to an article on The Hill by Pete Kasperowicz, House votes to overturn Supreme Court decision on eminent domain, that next step has now occurred and the House approved the bill as well.  Now, the bill will move to the Senate.  Can it clear the last hurdle?  We shall see.

California Redevelopment Update:

While the redevelopment battle wages on nationally, here's a quick update on what's taking place here in California with the wind-down process.  There have been three bills introduced by the CRA to clean-up or otherwise alter the effects of AB1X 26:

1. SB 1151:  instead of throwing all the redevelopment agency assets on the market now (which would likely flood the market and further reduce the return on assets), this bill would require the successor agency to prepare a long-range asset management plan that outlines a strategy for maximizing the long-term value of the real property and assets of the former redevelopment agency.  The agency would submit the plan on December 1, 2012 to the Department of Finance (DOF), and the DOF and oversight board would approve the plan by December 31.
2. SB 1156:  this bill would enable cities and counties to establish a "community development and housing joint powers authority" to assume successor agency responsibilities and create an additional sales tax to fund sustainable economic development and affordable housing.
3. SB 1220:  this bill, titled the "Housing Opportunity Trust Fund Act of 2012," would establish a permanent source of funding for afforable housing.  The funding would come through the imposition of a $75 fee on the recordation of each real-estate document, and such funds would be used to support the development, acquisition, rehabilitation, and preservation of afforable housing.

We'll let you know if these bills gain any traction.

• Eminent Domain for New School in Foster City?  According to a Mercury News article, Charter Square owners resistant to selling property to school district, the San Mateo-Foster City School District is looking for a site for a new school, and it may turn to eminent domain to acquire the Charter Square Shopping Center.  Moving forward with the new school depends on the passage of a $130 million bond measure in June.  If it goes forward, more than a dozen businesses will need to be relocated.
• Orinda to Condemn for Storm Drain Project:  According to an article in the Lamorinda Weekly, Orinda City Council Initiates Eminent Domain Proceedings to Keep Glorietta Project on Track, the City of Orinda is moving forward with the condemnation of easements over two properties in order to construct the Glorietta Storm Drain Improvement Project.  Several other properties were required, but one particular property owner declined any compensation for the easement (that's a new one), instead suggesting that the City use the savings towards repaving some of its roads.  One of the other owners, however, simply wants additional time to complete an independent appraisal and obtain a report from an arborist to understand the project's impacts to some of the owner's trees (including a 75-foot redwood tree -- that could get expensive).
• Redding Also Needs Sewer Easement:  According to an article in the Record Searchlight, Redding OK's eminent domain to get land; sewer easement needed for subdivision plan, the City of Redding has also approved using eminent domain to acquire sewer easements to benefit a developer's proposed subdivision plan.  It was a hotly contested Board decision that lasted about two-and-a-half hours.  About 13,000 square feet of property is needed, and an offer was made in the amount of $5,700.  The property owner claimed the offer was "pennies on the dollar."  Eminent domain can be a private developer's best friend or its worst enemy.
• Federal Takings Claims Do Exist!  Check out our colleague Robert Thomas' blog post, There, That Wasn't So Hard, Was It? Third Circuit Actually Lets Landowner Raise Federal Constitutional Claims In Federal Court, where he explains that finally a federal court has allowed a takings claim to proceed without knocking it out on procedural grounds.  A rarity, indeed.
• Kelo Apology:  According to an article on NewsBusters, Well-Kept Secret: New London, Conn. Mayor Has Apologized for Kelo Property Seizures, the newly elected Mayor of New London, Connecticut, has apologized to the property owners impacted by the condemnation involved in the infamous Kelo v. City of New London decision.  The Mayor confirmed he issued a "formal apology," and is quoted as saying, "I think our development strategy was flawed. We are moving forward with new strategy that will embrace a new vision." 

Stay tuned for next week's updates.

Legislative Update:  With respect to the legislative fix, we reported a few weeks ago that Senator Padilla had proposed legislation -- Senate Bill 659 -- that would delay the dissolution of redevelopment agencies until April 12, 2012.  This would, of course, not only clean-up the wind-down process, but also give the CRA time to come up with other potential budget fixes that would allow redevelopment to continue in some form.  Friday delivered the news that SB 659 would not be taken up by the legislature.  According to the CRA Executive Director's Update, the bill "appears to have died and will not move through the legislature."  The CRA has identified a number of issues that still need to be fixed, including legal bond obligations, loss of staff, and stranded public infrastructure projects.  

Judicial Update:  With respect to the full court press through the judicial system, the Supreme Court challenge was not the only litigation challenging the adoption of AB1X 26.  We reported some time ago that 12 other cities had filed a lawsuit in superior court challenging some of the technical, procedural issues as to how the bill was adopted.  Friday brought a preliminary hearing on those claims, and it was once again bad news for redevelopment agencies.  According to an article in the Sacramento Bee, Judge rejects efforts to halt elimination of California redevelopment agencies, The superior court refused to stave off their elimination, and while it is not a final ruling, the preliminary ruling is likely a good indicator of the ultimate outcome.  

Are there any bullets left?  Is redevelopment finally over?  With the February 1 dissolution date quickly approaching, the end may finally be near. 

According to an article by Lawrence Hurley in the E&E Reporter, "House panel approves bill limiting federal eminent domain power," the House Judiciary Committee finally approved the bill by an overwhelming 23-5 vote. Now, the legislation will move its way to the House for approval.

As a quick refresher, H.R. 1433 would do the following: 

1.  Prevent states and municipalities from using eminent domain for economic development purposes (such as redevelopment) if the agency receives federal economic development funds.
2. Penalize any state or municipality that violates (1), above, by making the agency ineligible for federal economic development funds for 2 years.
3. Prohibit the federal government from using eminent domain for economic development purposes. 
4. Allow for enforcement of these provisions by (i) a property owner or tenant subject to eminent domain or (ii) the attorney general.
5. Prevent any state or federal agency from using eminent domain to acquire property of a religious or non-profit institution by reason of that entity's non-profit or tax exempt status, or any quality related thereto.

With the elimination of redevelopment agencies in California, the bill -- if ultimately passed by the House and Senate -- likely will not have much impact here.  But for other states across the country, this is big news.   We'll see if the momentum continues and let you know what happens next.

• City of Visalia Can't Negotiate With Property Owner:  Here's an interesting story.  According to an article in the Visalia-Delta Times, "Visalia moves to take land near St. Johns," the City of Visalia is using eminent domain to acquire property necessary for a walking trail.  So what makes the story interesting?  The property is apparently owned by a governmental agency -- the Tulare County Levee District One -- whose managing agency has been inactive since 2005.  As a result, the City has no one to negotiate with to acquire the property, and therefore intends to serve the condemnation complaint by publication and thereafter acquire the property by default judgment.
• ALI-ABA Conference This Weekend:  For those of you who are eminent domain practitioners, just a reminder that the ALI-ABA Annual Eminent Domain Conference will be taking place this Thursday through Saturday in San Diego.  I know my colleague Rick Rayl will be attending, and our friend Robert Thomas from Hawaii will also be presenting.  Check out his blog, www.inversecondemnation.com, for more details on the conference.
• Updated Appraisal Institute Book for Appraising Convenience Stores:  For our appraiser friends, just a quick note that the Appraisal Institute has finalized its second edition of the treatise, “Convenience Stores and Retail Fuel Properties: Essential Appraisal Issues.”  There's a significant focus on gas station properties, so if you have or anticipate assignments involving these issues, be sure to grab yourself a copy from the Appraisal Institute. 

If you like this type of weekly, short-story update, let us know.  We'll continue to provide more substantive posts on important topics, but if this type of update seems to go over well, stay tuned for similar weekly updates.

Prop 13 Background:  By way of background, Proposition 13 -- enacted in 1978 -- provides that real property taxes shall be based on the property's acquisition price (the "base year value"), and such amount cannot be increased more than 2 percent per year.  It essentially changed our real property tax system from one based on the current market value of the property to one based on the acquisition value of the property, plus an allowable increase over time.  Shortly thereafter, Proposition 8 was adopted to amend Prop 13 and make clear that if property values decline below the taxable indexed value, the taxable value may be adjusted down to reflect the property's fair market value.

Valuation of Land, Improvements & Fixtures:  In order to implement Prop 13, the State Board of Equalization (SBE) then adopted Rule 461, which provides that land and improvements shall constitute an appraisal unit, and fixtures, equipment and other improvements pertaining to the realty shall constitute a separate appraisal unit.  Ignoring our recent real estate recession, this valuation methodology created a perfect world for industrial property owners:  on the one hand, as property values continued to rapidly increase, property taxes were subject to the Prop 13 cap; on the other hand, as fixtures and equipment continue to depreciate over time, property taxes on these items had no floor.  Thus, industrial property owners could actually see their property taxes decline despite a surging real estate market.

The Litigation:  Not too happy with this valuation approach, in 2007 (the market peak), the SBE adopted Rule 474, which directed county tax assessors to start treating land, improvements, and all fixtures and equipment as a single appraisal unit for petroleum refineries.  This would, of course, mean that all the depreciation of the fixtures and equipment would be wiped out by the increasing property tax values (meaning refineries' property taxes would increase).  Petroleum refineries fought back and filed a lawsuit challenging the SBE's new regulation.

The trial court declared that the SBE's new regulation did not pass constitutional muster, as it violated Prop 13 and contradicted the SBE's own regulations.  On appeal, the Court agreed, holding that the SBE's proposed regulation would

allow for the adoption of new valuation formulas by which the framework governing real property could be manipulated to avoid the restrictions on real property taxes imposed by the voters when they approved Prop. 13 and Prop. 8.

So, petroleum refineries win.  This is good news for industrial property owners across the State; if the court had upheld this regulation, it's probably not much of a stretch to think the SBE might turn to other types of properties in another effort to collect more taxes.

• City of Covina Condemnation:  According to an article in the San Gabriel Valley Tribune, Covina using eminent domain to take property from Alhassen-controlled company, the City of Covina has filed an eminent domain action to acquire a vacant, half-acre property owned by West Covina-based developer Ziad Alhassen.  The City intends to utilize the property for parking for police department employees and County firefighters.  The condemnation action was necessary after the City and the owner apparently had a "huge gap" in their appraised values for the property.  
• Pasadena Sees Impact of Elimination of Redevelopment:  Curbed Los Angeles is reporting in its article, Post-Eminent Domain Seizure, Pas Doesn't Have the Cash to Fix Up Old Julia Morgan YWCA Building, that after the City of Pasadena filed an eminent domain action to acquire the old Julia Morgan YWCA Building (see our previous post), the City is now in a quandry in deciding what to do with the property once the action is resolved.  With the elimination of redevelopment in California, the City won't have the money it needs to restore the building.
• Lake County Moves Forward with Sewer Project:  The Lake County Record-Bee is reporting in its article, Sewer pipeline project approved, that the Lake County Sanitation District has adopted a resolution of necessity to acquire property necessary for a wastewater sewer pipeline project in Clearlake.  The condemnations will involve partial acquisitions, and the construction contractor has been directed to work with property owners to minimize impacts.  
• Battle For Brooklyn Screening:  For those of you up in Nor. Cal. who haven't had a chance to catch the screening of "Battle For Brooklyn," here's your chance:  it's playing tonight at the Roxie Theater.  Check out our good friend Robert Thomas' blog, inversecondemnation.com, for details on the movie time and where to grab tickets.  Robert will actually be there to answer any questions you may have.  

In Ridge Properties, a property owner planned to develop an industrial park in Riverside County.  The conditions of approval for the project required the owner to dedicate some of its property and construct a drainage or flood control facility to protect downstream properties.  The facility would benefit the County and other owners, so the parties entered into a reimbursement agreement so the owner would only be responsible for its fair share of the costs of construction.  Like many construction projects, plans changed and costs escalated, and the owner ended up footing a bill six times larger than initially anticipated.  The County then declined to provide reimbursement for the additional costs incurred by the owner.

Because the flood control district participated in the design of the drainage facility and ultimately took ownership and operated the facility, the owner sued the flood control district for inverse condemnation, claiming the district "took its property without just compensation" when the owner was required not only to develop the regional drainage facility but also to dedicate its property.

The trial court sustained the flood control district's demurrer to the complaint, and the Court of Appeal agreed, holding that the owner's claim is against the County for breach of contract, not against the flood control district for inverse condemnation: 

the fact that the flood control district "took" [the owner's] property when it took ownership of the storm drain facility does not . . . give rise to a claim for inverse condemnation.

The Court explained that a claim for inverse condemnation does not arise when one public entity contracts for infrastructure but fails to pay as agreed, and another public entity ultimately takes control of the infrastructure.  While it is true that the second public entity has obtained property without compensation, it was not the action of that entity which caused any damage that the owner suffered; rather, the owner's damages resulted from the contracting agency's breach of contract. Under those circumstances, the developer's recourse is against the contracting public entity, not against the public entity which ultimately took possession of the property.

The Court differentiated past cases where a government agency has extorted property or improvements without offering to pay for either, as in this case, the county offered compensation, which the owner accepted, but then refused to pay once the facility was completed.

• Senator Alex Padilla (D-LA) has introduced a bill to delay the dissolution of the redevelopment agencies until April 15, 2012.  It's unclear if this is a delay tactic to give RDAs a chance to come up with an alternative solution to California's budget problem, or if it is just to do some clean-up work on the dissolution bill.  But it appears this proposal is not being met with much support, as law makers are concerned it would mean local schools would miss out on a portion of the redirected property taxes.
• In an effort to save afforable housing, Senate Leader Darrell Steinberg has introduced Senate Bill 654, which would allow dollars already earmarked for low and moderate income housing, perhaps as much as $2 billion, to remain in place.  This bill seems to be getting more legislative support, but who knows whether Governor Brown will use his veto power.
• Many of us thought that sponsoring cities and counties across the State would simply assume the role of "successor agency" for the dissolved RDAs.  This may not, in fact, be the case.  The City of Los Angeles has already voted to not assume the sucessor role of the LA CRA, finding it would cost $109 million to take on the agency's responsibilities and 192 employees.

We'll be watching as more stories continue to unfold.  In the meantime, many agencies across the State are starting to comply with the RDA shutdown.  It will be interesting to see whether a consensus can be reached on a post-redevelopment proposal, or whether the discussion of keeping RDAs alive will start to dwindle. 

This logic may work with any typical private-market tenant.  But this is the government.  What power does the government have that others do not?  You got it:  the power to condemn.  But could the government condemn a temporary leasehold interest in a building just because it can't negotiate a rental rate with the landlord?  This exact story is unfolding as I type in Sacramento.  

According to a News 10 story, "Feds use rare tool in Sacramento landlord dispute," the General Services Administration has been embroiled in a bitter dispute with its landlord in attempting to negotiate an eight month extension of its lease that just expired for its Military Entrance Processing Station.  The government had been paying $32 per square foot pursuant to its lease, but it doesn't want to pay more than $19 for its short-term extension as it prepares for a move.  Unable to negotiate an extension, the government has filed a federal condemnation action to acquire the needed 8 month lease.  It's made a deposit of $342,000, which it claims is the fair market value of the leasehold interest it seeks to acquire.  

You rarely see a story like this, but it appears there's a bit more behind the story.  The landlord recently sued the government, claiming its search for a relocation site had been "subversive, noncompetitive and secretive," which prevented the landlord from bidding to retain the government as a tenant.  So, perhaps the government's condemnation action is a trump card, or if nothing else, some sort of leverage to get the overall dispute resolved.

We'll see how this all shakes out.

Let us know your thoughts.  And, if you have any follow-up questions, feel free to give us a call or shoot us an e-mail. 

IRWA Chapter 57's monthly luncheons typically begin at 11:30 a.m., and they take place at Canyon Crest Country Club at 975 Country Club Drive, Riverside, California.  Here's the e-vite to register.  My colleague Rick Rayl and I will be the guest speakers, covering the events leading up to the adoption of AB1X 26 and AB1X 27, the ensuing litigation and the Court's opinion, and the aftermath of the decision on redevelopment agencies across California. 

Bring your questions, and we'll do our best to answer them.  If you're not already a member of Chapter 57, but you want to attend, let us know in advance and we'll pay the cover charge for your lunch (how's that for a deal!).