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

I wanted to provide a quick update on a couple of cases we've reported on earlier. 

The first case is the dispute between the City of Seal Beach and Bay City Partners over 10.7 acres of waterfront property.  The city wanted the property preserved for the public, while the owner wanted to use it as part of a new oceanfront development.  According to a March 29 article in the Orange County Register by Roxana Kopetman, Seal Beach and developer agree on waterfront property, the parties agreed this week to a settlement that will result in leaving about 70 percent of the property open to the public. 

In return, the city will pay the developer $2 million, far less than the amount the owner thought it was worth.  But the agreement may be a win-win if it opens the door to the owner's planned development of 48 homes on the remaining property.   

The second case is the ongoing court battle over National City's redevelopment plan and the youth boxing facility that could stand in its way.  In that case, the Institute for Justice is representing the boxing gym's owners, claiming that the city failed to meet the post-Kelo requirements for making blight findings when it extended its redevelopment plan.  The city, in turn, claims that it made proper blight findings.  And in response to the owner's claims that the lawsuit is all about stopping eminent domain abuse, the city argues that it has no plans to condemn the property.

Trial commenced March 14, and closing arguments took place last week.  The parties are now waiting for a ruling from Judge Steven R. Denton.  We'll let you know what happens when the judge issues his ruling.  (Meanwhile, of course, as the overall fate of redevelopment agencies in California hangs in the balance of the ongoing budget dispute, the potential importance of this decision is unclear.)  

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We've blogged a lot in the past two months about redevelopment issues and the Governor's plan to help right California's budget by, among other things, eliminating redevelopment agencies.  But most of what we've written has viewed redevelopment from the 30,000 foot level. 

For policy-making decisions, viewing the big picture is hugely important.  But a case making news this week out of National City reminds us that the redevelopment fight is also quite personal. 

The Community Youth Athletic Center has been fighting what it perceives as an attack on its very existence for nearly four years.  The battle began not as a right to take challenge in an eminent domain case, but as a challenge to the overall redevelopment plan for the area and, in particular, its determination that about 700 properties - including the CYAC's boxing gym - qualify as blighted. 

This week, CYAC's lawsuit is finally reaching the trial court for a decision on the merits, after years of procedural wrangling that includes a 2009 decision by the Court of Appeal in CYAC's favor.  CYAC claims that the agency failed miserably in its efforts to justify an extension of its 1995 redevelopment plan.  Part of its complaint arises from changes to California law that followed 2005's infamous Kelo decision, providing additional scrutiny and procedural hurdles to the way agencies make blight findings.  According to CYAC, in 2007 the agency simply did things the same half-hearted way it always had, ignoring completely the newly enacted requirements. 

CYAC is represented by the Institute for Justice, self-described as the "nation's only libertarian public interest law firm" - and the firm that pushed the Kelo case to the U.S. Supreme Court in 2005.  Among other things, they've prepared a short video about the CYAC, its mission to help at risk kids, and its fight with the city.  If nothing else, it's really well done:

So what's going to happen?  It depends on the outcome of the current trial.  If the CYAC prevails, it may get the agency's redevelopment plan invalidated, removing the threat of eminent domain to build planned luxury condominiums - at least until such time as the agency adopts a new, properly documented redevelopment plan. 

Moreover, regardless of whether the agency prevails in the current lawsuit, it claims that it has no plans to condemn the CYAC's property.  But if the agency wins, it could change its mind.  And if it does, it's probably safe to assume CYAC will fight the government's right to take its property.  

Turning back to the big picture, if the Governor gets his wish and abolishes redevelopment agencies, the whole issue may evaporate into thin air.  With no redevelopment agency, there's no redevelopment plan, no blight finding, and no (even hypothetical) plan to turn the CYAC's gym into condos. 

Finally, one might wonder why this battle is taking place now, if the agency says it has no plans to condemn the property.  Doesn't it make more sense to have this fight only when (and if) the government decides to condemn?  Probably, but that's not the way the law works. 

Under California law, if someone like CYAC wants to challenge the government's blight findings, it has to do it within a limited period of time after the plan is adopted (or, as here, amended).  Failure to challenge the blight findings now could make it difficult - or even impossible - to challenge them later as part of a right to take challenge. 

So the parties are in court this week fighting about a possible eminent domain action that may never even have happened in a dispute that may be rendered moot if the Governor's plan is adopted.

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In a report issued in advance of today’s Senate Subcommittee hearing on the issue, the Legislative Analyst's Office reiterated its support for the Governor’s call for an end to redevelopment in California.  While acknowledging that redevelopment does lead to economic development within redevelopment project areas, the report asserts that there is no reliable evidence that it attracts business to the state or increases overall regional economic development. 

This may all be well and good, but analyzing the issues this way creates a subtle - but important -shift in the argument.   Redevelopment agencies' statutory charge is to eliminate blight, a cause that seems lost in the LAO's report and its focus on whether redevelopment constitutes an effective engine for statewide economic development.

Indeed, the report suggests that a redevelopment agency might attract businesses to a redevelopment project area that were previously located elsewhere in California.  While this results in an increase in property tax revenue in the project area, the report suggests that this is a zero sum game, as the project area’s gain is some other region’s loss.  Once again, the statutory purpose of redevelopment, the elimination of blight, is given short shrift in the analysis.

Interestingly, the report suggests that the Governor’s proposal does not go far enough.  While the Governor proposes to use redevelopment funds to offset state General Fund and K-12 education costs for 2011-2012, thereafter, redevelopment funds would not be used to offset the state’s payments for K-12 and junior colleges.  The LAO assessment suggests that if future revenues are treated generally as property taxes, the state’s ongoing share of costs for K-12 costs could be gradually phased out.

The LAO report acknowledges that “dissolving redevelopment will be complicated and disruptive.”  Ordinarily, it would recommend that the state phase out this program over several years or longer to minimize the disruption and abrupt ending it would likely engender.  However, given the state’s extraordinary fiscal difficulties, the report suggests that such a gradual phase out may not be the best option.

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Over the weekend, Chlorinated Liberty posted a pretty good article that articulates the primary reasons people cite as the basis for abolishing redevelopment agencies.  The article, "How Eliminating California's Redevelopment Agencies Spurs Economic Growth," takes a reasoned approach to why the free market is better equipped to handle redevelopment and blight remediation than the government - and its redevelopment agencies. 

The article walks through some statistics that show that many of California's redevelopment agencies did not report any job creation generated by their projects over a multi-year period.  It talks about allegations of corruption, mismanagement, and failed projects.  It even cites data showing that strong private property rights are a key component of private investment, concluding

private property is necessary for economic growth and to achieve prosperity. Government infringement through redevelopment's use of eminent domain powers undermines private property rights in California. This distorts incentives, discourages the use of assets as collateral, and forfeits the benefits of capitalism. By eliminating redevelopment and the use of eminent domain, municipal leaders will witness the economic growth they so desperately desire.

I actually agree with much of what the article says, but it only glosses over the other side of the coin - and it's an important other side.  Before starting down the path towards articulating why we should abolish redevelopment agencies, the article concedes:

Places such as Pasadena's Old Town, Stockton's water front plaza and San Diego's Gaslamp Quarter have rightfully been touted as models of success.

The article then glosses over these to pursue its anti-redevelopment agenda.  But what about these "models of success"?  Without redevelopment agencies - and, yes, the use of eminent domain - what would have become of these areas and others like them throughout the state?

I'm all for allowing the free market to address redevelopment where possible, and I agree that the government's involvement may hinder, rather than facilitate, timely growth.  On the other hand, I believe that there are places where the market cannot, or will not, react to situations in desperate need of redevelopment.  Where that occurs, government involvement can turn miserable, blighted areas into vibrant communities.  And to do this, the government sometimes needs to use eminent domain to assemble the necessary property to make these redevelopment projects feasible.

In the end, I think the Chlorinated Liberty article serves to highlight just how complicated this issue is.  Both sides of the debate have good points to make, and no solution will be perfect.  Ultimately, a solution that provides greater oversight of the redevelopment process - generating more "models of success" and fewer corruption scandals - probably makes sense. 

But if the "solution" goes so far as to abolish redevelopment agencies (as Governor Brown proposes) or to eliminate their eminent domain powers, I imagine we'll all look back many years later and wonder why some of California's worst areas still have seen no viable market-driven redevelopment. 

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A January 27 article in California Watch, "Eminent domain battles rage on despite Prop. 99," reflects the ongoing confusion that surrounds the efforts to reform eminent domain in the aftermath of the Supreme Court's 2005 Kelo decision. 

The article's premise is that Proposition 99, approved by California's voters in 2008, did not stop what the author describes as "eminent domain abuse."  But the case example that underlies the article reflects a fundamental misunderstanding about what Proposition 99 does (or does not do), and what people typically mean when they talk of "eminent domain abuse." 

Proposition 99 was one of many responses to the Kelo decision, which involved a redevelopment effort by the City of New London, Connecticut, in which the city sought to condemn some single-family homes in order to redevelop them into a commercial use that would generate more tax revenue. 

What really outraged people was that the city did not even pretend that it was acting to eliminate blight (a traditional justification for condemning property for redevelopment purposes).  Instead, the city simply felt like it could generate more taxes by tearing down the houses for a more profitable use - a plan the Supreme Court said qualified as a public purpose sufficient to justify the condemnation.

Proposition 99 targeted this specific type of "abuse," limiting eminent domain authority involving (1) redevelopment, and (2) residential properties.  I've written in the past about Proposition 99's narrow scope, but the fact is that it was intended to address a Kelo-type situation - not to stop all eminent domain. 

The "abuse" example in the California Watch article misses both of the Kelo/Proposition 99 prongs:  it is not an eminent domain use involving redevelopment; and it is not a condemnation of residential property.  Instead, the City of Laguna Woods condemned a commercial property to use for its own government offices (a space the city had already been leasing for that use for years). 

Sure, the parties had a substantial dispute over the property's value, and in that case, the jury's conclusion of value was much higher than the city thought it would be.  But I have trouble seeing valuation disputes like this as "eminent domain abuse," and nobody should be surprised that Proposition 99 fails to protect against such things.   

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The City of Rancho Cordova's Redevelopment Agency has been working to implement plans to eliminate blighted conditions along Folsom Boulevard.  As part of those efforts, the RDA filed an eminent domain action to acquire a 9-acre site owned by Lily Company.

Lily Company challenged the RDA's right to take on numerous grounds, including lack of proper blight findings and allegations that the RDA was colluding with the Los Rios Community College District.  We initially reported on the case in an August post, Rancho Cordova Eminent Domain Case Involves Allegations of Contractual Interference.

The court has now upheld the Rancho Cordova RDA's right to take the property.  According to an article by Helen Brewer in the Rancho Cordova Post, Superior Court Affirms Rancho Cordova Redevelopment Agency in Eminent Domain Case, the court ruled that the RDA's Resolution of Necessity:

contains ample evidence of the blighted condition of the subject property and the surrounding area, of the need to acquire the subject property in order to further the objectives of the City’s Redevelopment Plan…to lead to the greatest public good and the minimum of private injury.

This does not mean, of course, that Lily Company has lost the entire case.  In most eminent domain cases, the real fight is over the amount of just compensation to be paid; that fight is still ahead of the parties.  But with the right to take challenge defeated, the RDA should have the option of seeking prejudgment possession, which would allow it to proceed with the project while the trial on compensation is still pending. 

As one interesting side note (and a sign of the times), it appears that anyone really interested in this case can relive the entire thing on line.  The Courtroom View Network has posted links to the entire trial on its website. 

I have never actually used the CVN site; I only stumbled onto it looking for more information about this case.  And, as entertaining as it would be to watch two experts in the field, Norm Matteoni and David Skinner, battle it out in court, I'm not willing to pay the money for the video and the bucket of popcorn I'd need. 

That said, if you have used the CVN services, please let me know what you think of them.  I'm intrigued. 

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In an all-too-familiar tale these days, a redevelopment agency is seeking to acquire property as part of its efforts to alleviate blighted conditions in the city, and owners are reacting strongly to the agency's plans to utilize the power of eminent domain where owners are reluctant to sell. 

According to a November 5 article in the Signal Tribune, "Property owners condemn Signal Hill RDA’s use of eminent domain," the situation in Signal Hill pushes all the buttons on both sides of the issue:

1. The redevelopment agency touts numerous successful projects, including converting "many contaminated oil-production and industrial sites into successful retail centers and thriving residential communities";
2. The agency's claim of success in its redevelopment efforts have been well documented; the agency's "Las Brisas" project received the California Redevelopment Agency's 2006 Award of Excellence for turning an area "characterized by a high crime rate, vacant and boarded up buildings, and mismanagement by absentee landlords" into a " neighborhood consist[ing] of 90 attractive affordable residential units, courtyards, a park, and a community center that includes an on-site police substation, a childcare facility, a public meeting area, social services offices, and a computer lab";
3. The redevelopment agency might not, in a perfect world, be at the stage where it really wants to condemn the properties now, but its power of eminent domain expires on November 17;
4. One of the properties being condemned actually lies outside the redevelopment area, but (according to the city), its acquisition "will benefit housing in the city’s redevelopment project area";
5. The properties being sought include a number of operating businesses that may not themselves appear blighted at all;
6. The acquisitions are taking place under horrible market conditions, causing at least one owner to claim it is "unfair to offer him fair market value for the property at a time when the real estate market is depressed and causing his property to have a 50-percent diminished value"; and
7. Even though the acquisitions will happen now, in this down market, the agency apparently does not intend to use the properties for five years or more, leaving business owners and property owners wondering why they should be forced out now (see item 2 above).

Does the agency need to acquire these properties for much-needed redevelopment?  Perhaps.

Will it use the properties to improve the city?  Hopefully. 

But for the imminent expiration of the agency's power of eminent domain, does the agency need to acquire these properties now?  Almost certainly not. 

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West Oakland has some notoriously tough neighborhoods, including the large ACORN project area where Black Panther co-founder Huey Newton was killed and an area known unflatteringly as "Ghost Town."  Over the years, it has been the subject of some controversial public works projects, facilitated through extensive eminent domain.  This includes the West Oakland BART station, a major postal facility, and the ACORN housing project.  

An October 4 article in the Contra Costa Times by Brian Beveridge, "'Eminent domain' draws shudders in West Oakland" describes the development of the postal facility as follows:

Hundreds of homes and at least two popular black-owned nightclubs, Slim Jenkins Club and Ester's Orbit Room, were destroyed or relocated when the Postal Service used eminent domain to acquire the land at Seventh and Willow streets.

Now, as we initially reported a few weeks ago, the City is considering expanding its eminent domain powers in an attempt to accelerate efforts to remediate blight and, in particular, in an effort to facilitate a proposed Kroger facility.  Mr. Beveridge's article explains:

[D]espite objections from both businesses and some residents, Oakland Community and Economic Development Agency staff will recommend Tuesday night that the City Council expand its eminent domain powers to accelerate redevelopment in West Oakland.

The article notes an ongoing effort to acquire property for a 72,000 square foot Kroger facility, though there appears to be some dispute as to what is actually going on.  The City claims Kroger and the property's owner are in active negotiations, and that eminent domain would only be used as a last resort.  The owner, however, claims that no negotiations are taking place.  

Current policies prohibit the use of eminent domain to acquire residential properties or for any commercial projects larger than three acres.  The Kroger project involves about five acres, meaning the policy will need to change before eminent domain could be used to acquire property for it.

The City Council is expected to vote tonight on a policy amendment specifically tailored at allowing eminent domain in a small area that includes the property Kroger wants to acquire.  According to Councilmember Nancy Nadel, "The expansion of eminent domain is only for this grocery store project and that is why I support it."

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One of the most vexing aspects of eminent domain for many property and business owners is the fundamental fact that the owner does not get to decide whether to sell the property.  I cannot recall the number of initial client meetings I've had over the years that began with the client asking "How do I stop this from happening?"

In most cases, my clients are disappointed to hear my answer:  "You can't."  But this answer is overly simplified, because there are actually several grounds for preventing the government from condemning property. 

A recent post on the Biersdorf & Associates eminent domain blog, "The Right to Take in the Eminent Domain Process: A Brief Overview," walks through, in a fairly straight forward way, some of the ways in which an owner can challenge right to take.  I think the piece represents a good starting point for someone asking the "how do I stop them" question.   The post explains that right to take challenges typically revolve around the government's "public use and necessity" findings, which often these days turns on claims that the property being condemned is blighted.

Owners thinking of challenging right to take should review the Biersdorf piece, but should do so with some additional background in mind with respect to California eminent domain procedures. 

In particular, owners should always think about the reasons for challenging right to take.  Often, even a successful right to take challenge accomplishes little more than delay.  This is because the government can often correct whatever irregularities caused the successful right to take challenge and then simply file the eminent domain action again.  It is crucial to keep that in mind before embarking down an expensive right to take fight. 

Does the fact that the government may fix the problem mean that challenging right to take is a fool's game?  Not necessarily.  Consider these possibilities:

• In some cases, the mere fact of delay can defeat an entire project, meaning even a temporary victory may for practical purposes be permanent. 
• In some cases, the costs of a delay may be so massive that the government will offer a substantial settlement in order to avoid the risk of fighting right to take, making this a good tactic if the ultimate goal is to obtain the highest compensation, not necessarily to prevent the taking from occurring. 
• In a rapidly rising real estate market, delay can result in a much more favorable date of value (of course, in a falling market, "winning" the delay associated with a right to take challenge may ultimately prove costly for the owner).
• And, of course, in some cases, the flaw in the government's right to take simply cannot be cured, meaning a victory really does prevent the taking.

Thus while, I rarely recommend them to my clients, with the right combination of facts and circumstances, right to take challenges can be pivotal to an overall litigation strategy, and no property owner should waive its ability to challenge a taking without having a discussion with a qualified eminent domain attorney.  

(Note that in California, many right to take challenges are waived by the owner's failure to object at the hearing on the government's precondemnation Resolution of Necessity, and all right to take challenges are waived if the owner withdraws the funds the government typically places on deposit at the outset of an eminent domain case.)

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On its face, the City of Rancho Cordova's eminent domain action to acquire a vacant parcel for redevelopment purposes is a familiar story. The government wants to seize private property in order to turn the property over to a third party for redevelopment.  This is the basic fact pattern that caused the national eminent domain uproar that started when the Supreme Court issued its 2005 Kelo decision.

Unlike in Kelo, however, in California the government typically cannot take such steps without making appropriate findings that the property being condemned is "blighted."  This requirement may not actually apply here, as the property's intended use may qualify as a public use.   But in any event, the property exists as a vacant, overgrown weed patch, so a blight finding doesn't seem to be much of a stretch.

Why, then, is the case getting so much media attention?  The controversy lies in the fact that the city intends to turn the property over to the Los Rios Community College District for construction of a satellite campus.  And even that might not raise eyebrows were it not for the fact that the property's owner had a signed contract to sell the property to Los Rios for the very same purpose. 

Specifically, Los Rios entered into a contract to buy the property for $8.6 million.  Then, allegedly just weeks after Los Rios walked away from the deal, the City moved forward with its plans to acquire the property in order to turn it over to Los Rios.  And (here's the important part), the city offered only about $4 million -- less than half the contract price. 

According to an August 10 Sacramento-area CBS news story by Mike Luery, On The Money: Land Grab?: Multi-Million Dollar Fight in Rancho Cordova, the courts will now need to sort out whether the city meets the requirements to condemn the property in light of the underlying facts. 

Not surprisingly, the property's owner is crying foul: 

"I had a contract with Los Rios," said Sam Fong. "And they (Rancho Cordova) interfered with the contract and they're taking the property for half the contract price."

I don't know nearly enough about the real facts here to offer a meaningful prediction about what might happen, but I do know that if the city in fact induced Los Rios to walk from its deal under a promise to get them the property for less than half the price, the owner may well have a legitimate complaint.

That said, even if the owner's allegations prove true, I'm not convinced it trumps the city's right to take the property.  Assuming that (1) the area is in fact blighted, (2) the city made a proper offer at the property's current fair market value, and (3) the city met the other procedural requirements for initiating an eminent domain action, they should get to proceed with the eminent domain action. 

And, unless the owner can prove a precondemnation damages claim, no reason exists that the city should have to pay more than the property's fair market value on the date of value.  (Note that a precondemnation damages claim is not out of the question here.  If the owner can prove the city's conduct qualifies as "unreasonable precondemnation conduct," this could support a precondemnation damages claim, even though the facts are not what one generally thinks of when analyzing precondemnation damages.) 

Apart from all of that, the city's potential liability outside the context of eminent domain is an entirely different question.  I see no reason the city could not be liable for tortious interference, for example, even if the court upholds its right to take.   In such case, the damages are pretty easy to identify:  the difference between the compensation awarded in the eminent domain case and the $8.6 million contract price.

And what about Los Rios?  I haven't seen any discussion about whether the owner might possess a breach of contract claim, but one could easily surmise that if Los Rios backed out of the deal simply because it knew the city would condemn it at a lower price, any stated basis for canceling the deal could be viewed as an ineffective pretext. 

On the other hand, Los Rios will presumably offer an explanation for why it was justified in backing out of the deal that has nothing to do with the city or eminent domain, and the city will argue that it is taking the property for unquestionably legitimate purposes, and that it should not penalized because it happens to be condemning at a time when market conditions have deteriorated. 

This will be a fun one to follow.

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We have reported several times on the City of Barstow's efforts to renew its Redevelopment Agency's eminent domain authority, but Barstow residents apparently remain skeptical.  A public meeting in April left many dissatisfied with the City's efforts, and the City's Council's effort to address the issue in May led to a deadlock. 

Now, the City has scheduled an additional public meeting for this week in anticipation of the City Council's August 5 special meeting on the issue. 

According to a July 25 article in the Desert Dispatch, "City to attempt second eminent domain meeting Wednesday," the City seeks to renew eminent domain authority

for the area encompassing the outlet malls, the area south of Rimrock Road between Barstow Road and Montara Road and the area west of Avenue L on West Main Street. The agency also seeks to reinstate eminent domain powers for the area between Interstates 15 and 40 near Walmart.

Residents want assurances, in writing, that the Redevelopment Agency will not use eminent domain to condemn residences or churches.   Others want a better understanding of how the City defines blight before supporting additional eminent domain rights. 

The meeting will be held at 6:00 p.m. on Wednesday, July 28, at the Barstow Church of God in Christ at 1375 Sage Dr.

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According to an article in the Californian, "Salinas mayor: Beat blight, grow tax base," the City of Salinas is slated to vote tonight on whether to expand three Salinas redevelopment zones.  The city is considering such a move in order to grow property tax revenues as assessed property values in the area rise.

The Mayor of Salinas, Dennis Donohue, believes business created in the redevelopment zones could bring an influx of between $5 million and $15 million annually in sales and occupancy taxes.  He is quoted as saying:  "We have to expand our tax base, and this is a possible tool to do it."  He goes on:  "This is an opportunity to attract investment into the community and then take part of the tax base that's created, put it back in the community and create a cycle of growth." 

Community members, on the other hand, are skeptical.  The President of the Salinas United Business Association said certain areas hadn't benefited enough from the program's dollars, and other city council members believe too few projects have been completed.

A feasibility study commissioned by the city also recommends reinstituting the power of eminent domain for some of the redevelopment areas, which has not been allowed since 2003.  Expansion of the zones' areas would require official blight findings and environmental reviews.  If the city decides to go down that route, it better make sure its blight findings are sufficient so as to avoid having them struck down, as was recently the case with the City of Glendora.

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One of the big issues in eminent domain over the past five years has been the role of blight in justifying eminent domain for redevelopment purposes.  The seminal decision (that started all the ruckus) -- Kelo v. City of New London -- involved the use of eminent domain for redevelopment purposes where the city did not even pretend it was acting to eliminate blight.

Kelo had little direct impact on California's eminent domain law, because even before the Supreme Court issued its opinion in 2005, California's law allowed eminent domain for redevelopment purposes only upon a proper showing of blight.  In other words, California law did not allow eminent domain for pure economic development. 

Following Kelo, however, public scrutiny on eminent domain and, in particular, eminent domain for redevelopment purposes, created a nationwide backlash.  Most states enacted some form of eminent domain reform.  In California, the reforms included SB 1206, which contained some tweaks to the law involving blight findings.  More importantly, however, it seemed clear that courts would be way more likely to examine critically an agency's blight findings in the wake of the Kelo backlash. 

Yesterday, the Sixth District California Court of Appeal issued its decision in County of Los Angeles v. Glendora Redevelopment Project.  There, the county sued Glendora, claiming that Glendora had not made proper blight findings in enacting its redevelopment plan.  The opinion describes the trial court's ruling as follows:

“Glendora’s findings of blight are not supported by substantial evidence” in the administrative record. Furthermore, the court concluded, given the absence of blight, “Glendora is without eminent domain authority in this instance.”

The Court of Appeal examined the four requisites for a proper blight finding:

1. The area must be “predominantly urbanized";
2. The area must be “characterized by” one or more conditions of physical blight;
3. The area must be “characterized by” one or more conditions of economic blight; and
4. These “blighting conditions must predominate in such a way as to affect the utilization of the area, causing a physical and economic burden on the community.”

In a painstaking analysis, the Court held that Glendora had not met the "physical blight" test.  The court analyzed each of four statutory bases for a physical blight determination:  (1) unsafe or unhealthy buildings; (2) code violations; (3) dilapidation and deterioration; and/or (4) defective design or construction.  Finding no substantial evidence in the record of any of these conditions, the court invalidated the redevelopment plan. 

The significance of this opinion lies not just in the holding itself, but in the court's willingness to scrutinize the blight findings, rather than merely deferring to the agency's determination.  This is precisely the type of analysis that seemed likely in Kelo's wake.  Whether this is the start of a trend remains to be seen. 

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We've previously reported on several cities contemplating the renewal of their redevelopment agencies' powers of eminent domain.  In the cities of San Pablo and Barstow, it appears that public outcry may have derailed those renewal efforts, at least for now.  Here's a brief update:

• We previously reported that the City of San Pablo was contemplating renewing its eminent domain powers for an additional 12 years.  According to a Mercury News article, "San Pablo dumps eminent domain plans," the City has dropped its redevelopment renewal plans after residents turned up with "a racous groundswell of mistrust and resentment of city government that included threats of a recall."  While City officials attempted to demonstrate the accomplishments of the redevelopment agency, such as the development of shopping centers, athletic fields and parks, commercial corridors and new housing developments, the citizens were not buying it.  After a study declared 90-percent of the City blighted, one resident went so far as to describe giving the redevelopment agency the power of eminent domain would be like "having your chicken house guarded by a pack of very hungry wolves."
• We also previously reported that the City of Barstow was deciding whether to reinstate its redevelopment agency's power of eminent domain.  According to a Desert Dispatch article, "Barstow Council deadlocks over eminent domain," the City has been unable to reach a decision, with its council members currently deadlocked on the issue.  Citizens voiced concerns, and complained that their questions regarding redevelopment and blight had not been answered.  So what happens next?  Apparently, no future meeting has been scheduled, as the council remained deadlocked on whether to table the issue indefinitely or whether to bring the item back for discussion at a future meeting.  However, one council member was absent, and his vote will ultimately break the deadlock.  It will be interesting to see how that council member votes, especially if there is strong public opposition.

If nothing else, these examples demonstrate that public opposition can influence government decision-making. 

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According to a Contra Costa Times article, "Bellflower may expand redevelopment area, hopes to add $42 million to city coffers," the City of Bellflower has approved proceeding with a study to potentially expand its redevelopment area to include an additional 271 acres.  The City hopes that the proposed redevelopment -- through increased property tax revenues -- could generate over $40 million for the City over the next 45 years.

The article reports that a number of hurdles must be cleared before the expansion area is approved.  For example, the City would need to obtain approval from the County of Los Angeles, and the City would also need to make certain blight findings.   With respect to blight, the article notes:

The county's conditions of blight can include depreciated or stagnant property values, abnormally high business vacancies, a high number of abandoned buildings, an excess of bars and liquor stores, a high crime rate and overcrowding.

If the redevelopment expansion occurs, will eminent domain be involved?  Perhaps, but it may be limited:  the City of Bellflower has adopted an ordinance that restricts acquiring residential property for redevelopment purposes through the use of eminent domain.

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The City of Milpitas plans to expand its redevelopment area to encompass more than 600 additional acres.  The County of Santa Clara, however, claims that the proposed expansion area has very little "blight."  Because of the potential for diversion of tax dollars and the significant financial impact the expansion may cause, this apparently has led to a brewing dispute between the County and the CIty.

According to a Milpitas Post article, "County to Milpitas: revisit RDA expansion plan or face lawsuit," the County has threatened the City with a lawsuit if the City moves forward with its planned expansion of its redevelopment area.  The County claims that the City's proposed expansion violates redevelopment laws and the California Environmental Quality Act in that the City has not sufficiently supported its "blight" findings in the proposed expansion area.  Thus, the County feels there has been no showing as to why the City needs to extend its eminent domain powers.

Apparently, the County has become involved because the City's proposed redevelopment area expansion would "divert an estimated $343 million away from the County over a more than 50-year period," and it would also "divert about $1.23 billion over the same period away from Milpitas public schools."  The County claims that the City is proposing this expansion in order to justify the need for more tax monies.  The City, on the other hand, points out that any tax revnue collected would not be a tax increase, but instead would divert collected property tax revenues toward greater redevelopment activities.

The City's proposed expansion will be decided at its April 20 City Council meeting.  If it is approved, the County has between 30 and 90 days to challenge the decision depending on whether it sues under the redevelopment laws or CEQA.  Stay tuned.

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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 December, we reported on Sierra Madre's decision to allow voters to decide whether the City should possess the power to condemn property for redevelopment purposes.  On April 13, 2010, voters will decide the issue by ratifying or rejecting City Ordinance 1304, but for now, the measure has triggered some colorful debate. 

On February 27, Susan Henderson offered a Mountain View News article "Eminent Domain Measure -- Yes or No?"  She purports to analyze the measure in the broader context of recent eminent-domain-reform efforts, including California's Proposition 99, passed in 2008 in the wake of the U.S. Supreme Court's much-maligned 2005 Kelo decision.  She ultimately concludes that the measure is irrelevant, and amounts to mere political "grandstanding" by Sierra Madre's Mayor MaryAnn MacGillivray.

On March 1, "Eric Maundry," aka City Council candidate John Crawford, responded in a Sierra Madre Tattler piece entitled "Has The Mountain Views News Come Down On The Side Of Eminent Domain?"  In addition to several somewhat silly attacks on Ms. Henderson and her analysis, Mr. "Maundry" contends that the measure has real teeth, prohibiting the City from all eminent domain for redevelopment purposes -- i.e., eminent domain where the goal is to turn the condemned property over to another private owner for redevelopment. 

The dispute appears to be part of a larger political controversy in Sierra Madre, where an ongoing debate over growth issues has apparently become the cornerstone of the upcoming election.  I'm smart enough to stay out of that larger debate, but I do want to comment on the eminent domain issue.

As to eminent domain and the impact of Ordinance 1304, I have to side with Mr. "Maundry."  The ordinance goes well beyond the limited restrictions Proposition 99 offers state-wide, and should, if approved, create a real barrier against eminent domain for redevelopment purposes.  Especially with respect to businesses, no current federal or state prohibition exists on condemning property for redevelopment purposes, as long as the condemning agency makes proper blight findings.  Ordinance 1304 would change that, at least in Sierra Madre.   

Is prohibiting all eminent domain for redevelopment purposes a good thing?  I'll leave that to Sierra Madre residents to decide on April 13. 

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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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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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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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 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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In June 2005, the United States Supreme Court issued its now infamous decision in Kelo v. City of New London.  That decision made eminent domain and condemnation household terms (imagine my shock at hearing my previously unknown, niche area of practice discussed in normal, day-to-day conversations).  The decision sparked tremendous controversy, as the Court ruled that the City of New London, Connecticut could condemn properties for redevelopment purposes for purely economic reasons. 

In other words, the City did not even pretend that it was acting to eliminate blight (the typical justification for condemnation for redevelopment purposes).  Instead, the City proclaimed that the new development would generate more tax revenues than the existing development (largely, single-family homes), and that the increased tax revenue was, in and of itself, a "public use" justifying the takings.  The Supreme Court agreed. 

What followed around the country was a wave of eminent domain reform, designed to protect against the "evil" that Kelo allowed.  Most reformers never bothered to realize that what happened in Kelo was already illegal in most states, including California.  Specifically, even before Kelo, California law prohibited the condemnation of property for redevelopment purposes unless the property was blighted. 

Now, four years later, many states have enacted at least some form of Eminent Domain reform; California has passed several moderate reforms that have narrowed somewhat condemnation for redevelopment, and that have added some procedural protections for property owners.  In 2008, California voters approved Proposition 99, the more moderate of two proposed eminent domain initiatives. 

And as for Susette Kelo and her famous pink house?  She moved across the Thames River to Groton, and her house was moved about two miles for preservation. 

And the economic boom the massive redevelopment project would create?  It hasn't happened.  Though some of the redevelopment area has been re-built, much of it lies as an abandoned wasteland, with no immediate plans to build anything. 

Associated Press writer Katie Nelson describes the area in her October 4 article "EMINENT DOMAIN: Poetic justice, or sour economy?":

Weeds, glass, bricks, pieces of pipe and shingle splinters have replaced the knot of aging homes at the site of the nation's most notorious eminent domain project.

There are a few signs of life: Feral cats glare at visitors from a miniature jungle of Queen Anne's lace, thistle and goldenrod. Gulls swoop between the lot's towering trees and the adjacent sewage treatment plant.

Who knows whether New London will ever reap the financial rewards promised.  In the meantime, Eminent Domain reform seems to have died down (especially in California) and the Eminent Domain lawyers of the world are once again fading into relative obscurity.

Photo credit: Historic Buildings of Connecticut

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